Read the latest on the Consumer Financial Protection Bureau (CFPB).
- CFPB Embraces Contentious 'Disparate Impact' Theory for Discriminatory Lending
American Banker 19 Apr 2012
On April 18, the Consumer Financial Protection Bureau (CFPB) took a hard line against lending abuses, saying it will pursue actions against lenders that discriminate -- even when that discrimination is inadvertent. Financial institutions can have a "disparate impact" when their policies put certain borrowers at a disadvantage, even if there is no intent to do so; and that impact can be just as damaging as overt discrimination, officials declared. "We cannot afford to tolerate practices, intentional or not, that unlawfully price out or cut off segments of the population from credit markets," said CFPB director Richard Cordray, speaking before the National Community Reinvestment Coalition. While he said financial institutions would be given some measure of flexibility, Cordray stressed the importance of ensuring fair lending practices. "Conduct that may seem benign -- what the lawyers call 'facially neutral' actions -- can create effects that are just as devastating for those marginalized communities," he said. As an example, Cordray said that giving loan officers too much latitude in deciding how much borrowers should pay can lead to minority or female consumers systemically being charged more than white or male borrowers with similar credit backgrounds.
- Industry, Consumer Groups Urge Broad QM Definition in Letter to CFPB
American Banker 17 Apr 2012
The National Community Reinvestment Coalition and other housing advocates teamed with banking interests to address concerns over what stipulates a "qualified mortgage" under a new rule expected from the Consumer Financial Protection Bureau this year. The rule will require lenders to verify a borrower's repayment ability, unless he or she is taking out a QM. The trade and industry organizations joined forces to dispatch a letter to the CFPB on April 16, urging the regulator to broadly define the term. A narrow definition applicable only to a fraction of products and borrowers, they warned, would make lenders skittish about non-QM loans and, in turn, inflate the costs and risks of those products. A broad definition "is the only way to help the economy and at the same time ensure that the largest number of credit-worthy borrowers are able to access safe, quality loan products for all housing types, as Congress intended" under the Dodd-Frank financial reform law, the letter declared.
- Agency Weighs In on US Housing Debt Cases
Financial Times 28 Mar 2012
The Consumer Financial Protection Bureau, in a March 26 court filing, argued the case for allowing distressed homeowners to more easily cancel some housing debts. The agency contended that borrowers seeking to rescind mortgages based on faulty disclosures should not have to file a lawsuit within the first three years of the loan, but simply provide the creditors with written notice. The action by the CFPB could mean even greater compliance costs for lenders that are already striving to improve their lending and servicing practices. However, consumer advocates say they also expect to see more loan modifications as lenders and homeowners try to hammer out a compromise before initiating litigation. "The consumer's right to cancel gives lenders a powerful incentive to provide the disclosures that consumers need to make good financial choices," said CFPB director Richard Cordray.
- In Considering Mortgage Rule, CFPB Focused on Access to Credit
American Banker 28 Mar 2012
The Consumer Financial Protection Bureau will issue a final rule by the end of June defining what constitutes a "qualified mortgage" that will be exempt from new rules compelling lenders to verify borrowers' repayment ability. Deputy director Raj Date says the agency is looking closely at consumer credit access as it finalizes the rule. The CFPB also plans to spend the coming months working on national servicing standards, monthly mortgage statement disclosures, and force-placed insurance notices, among other priorities.
- Prepaid Cards Set Good Example for Simpler Disclosures
US Banker (03/12) Tescher, Jennifer; Newville, David 28 Mar 2012
The Consumer Financial Protection Bureau (CFPB) continues to tout the benefits of simplified and standardized fee disclosures for financial products. "This kind of straightforward transparency promotes more informed and more responsible decision-making by consumers across a number of financial markets," according to CFPB director Richard Cordray. But to make a lasting impact, financial providers must perceive the disclosures as more than a requirement: they must view them as an opportunity to positively influence consumers' behaviors and choices. The Center for Financial Services Innovation (CFSI) recently published recommendations for a standardized fee box for general-purpose reloadable prepaid cards. The organization recommends clear and consistent placement of disclosures, as well as thoughtful design, to encourage consumers to actually read them. The CFSI also believes simple, clear, and straightforward language is critical.
- CFPB Web Portal to Answer Consumer Questions
American Banker 23 Mar 2012
The Consumer Financial Protection Bureau recently announced the launch of its new interactive database, which allows consumers to obtain answers on common inquiries having to do with financial products. The "Ask CFPB" portal is just one of many efforts by the bureau to reach out to the public. CFPB director Richard Cordray said the goal of the portal is to provide consumers with clear, unbiased information. He added that the agency will steer clear of any fiduciary relationship with borrowers. "We're not giving personal, contextual advice for an individual who wants to decide whether they should open this bank account or do that," he clarifies. "We're providing general background for people to educate themselves and give them the availability to make those choices for themselves." The platform uses plain language to answer more than 350 questions, which fall into three categories: definitions, explanations, and situations. The bureau said it intends to add more questions and answers based upon user suggestions.
- Sights Set on Debt Collectors
NorthJersey.com 18 Mar 2012
In the absence of strong federal oversight, civil suits have been the primary outlet for enforcement of federal consumer protection laws such as the Fair Debt Collection Practices Act. However, the Consumer Financial Protection Bureau, set up under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, bolsters the U.S. government's enforcement of consumer debt-collection statutes. To that end, the agency has proposed regulations that will give it unprecedented authority to examine and supervise debt collectors. "It should be a dramatic change, in that until now the federal government has engaged in only a modest amount of enforcement of the Fair Debt Collection Practices Act," said attorney Charles Delbaum of the National Consumer Law Center, noting that private attorneys so far have been the ones to enforce the laws. CFPB director Richard Cordray has explicitly stated that his bureau intends to go after debt collection firms. "While debtors need to pay back their creditors, the methods used by some debt collectors are just unconscionable," he told attorneys general gathered in Washington earlier in March.
- Merkley Announces Fight Against Payday Lenders
Portland Business Journal (Oregon) 12 Mar 2012
Sen. Jeff Merkley (D-Ore.) recently announced plans to introduce federal legislation to combat predatory payday lending. Merkley was speaker of the Oregon House of Representatives in 2007 when the lawmakers passed the country's strictest restrictions on payday lending stores, limiting interest rates at 36 percent. "While Oregon is lucky to have state legislation in place to stop the worst practices, there are still loopholes and offshore websites that are dragging Oregon families into black holes of debt. We have to bring order to the Wild West of the lending market," Merkley said. He also announced that he sent a letter to the new director of the Consumer Financial Protection Bureau in attempt to seek his help in the fight against unscrupulous lenders.
- CFPB Now Accepts Bank-Fee Complaints
MarketWatch 01 Mar 2012
The Consumer Financial Protection Bureau (CFPB) has begun accepting consumer complaints about bank accounts, including concerns about fees related to bank withdrawals, ATM cards and debit cards, and payment issues. Consumers can file complaints using the CFPB's Website, by mail, fax, or phone. CFPB Director Richard Cordray says, "Consumers need someone on their side to keep banks and credit unions accountable -- that is our job at the Consumer Bureau." Once a complaint is filed, the bureau will work toward a speedy response for consumers, with firms expected to respond to complaints within 15 days. CFPB hopes to close all complaints within 60 days, and the agency also offers consumers a way to dispute banks' resolutions. Javelin Strategy & Research issued a report that estimates that consumers pay 26 percent more in checking account fees than they did in 2002. Meanwhile, Bank of America has said it would consider employing a monthly fee for basic checking account users that do not bank online, buy additional products, or maintain certain balances. As larger banks seek out ways to increase revenue through additional fees, many consumers are leaving larger banks for smaller community banks and credit unions.
- CFPB Shifts Gears on Revising Good Faith Estimate Form
American Banker 28 Feb 2012
The Consumer Financial Protection Bureau, which is assembling a panel of small businesses to review its mortgage application and closing disclosures, will look to merge Real Estate Settlement Procedures Act and Truth in Lending Act regulations before finalizing changes to the good-faith estimate. The agency wants to move from a 10 percent tolerance level to a zero-tolerance level on cost estimates when a lender recommends an independent settlement servicer provider, in order to make loan estimates more reliable for borrowers.
- CFPB Received 2,300 Mortgage Complaints in December: Official
American Banker 24 Feb 2012
The Consumer Financial Protection Bureau fielded roughly 2,300 grievances about mortgage service firms in December, the month it started taking complaints online, and has received about as many every month since then, a top agency official said. Christopher Haspel, a senior adviser for securitization and servicing at the CFPB, confirmed that borrowers' most common complaint is that servicers repeatedly request documentation even when borrowers already have submitted assorted forms multiple times. He said some of these types of issues are easily resolved, however, since many servicers can access documents electronically from a loan file. After a consumer files an online complaint with the CFPB, the bureau reviews the servicer and then forwards the complaint to the company, giving it 15 days to respond. The majority of complaints are settled within two months, Haspel noted.
- Bank of America Can Charge You $140 in Fees in One Day
Huffington Post 23 Feb 2012
The Consumer Financial Protection Bureau (CFPB) announced in late February that it is launching an investigation into how banks charge overdraft fees. It also is requesting public comment on a special disclosure box it wants to include on monthly bank invoices to ensure that customers clearly understand the penalties. Bank of America, for one, is making a killing from these fees; even though the bank caps the number of overdraft fees it charges daily on an account to four, at $35 per charge that amounts to as much as $140 per day. BB&T, meanwhile, caps the number of overdraft fees it can charge a day to eight -- which at $40 per charge can leave a bank customer out $280, and significantly more if the charges continue to roll over. Consumer advocates say nearly 85 percent of overdraft fees are charged to fewer than 10 percent of banking customers, but these charges give banks billions of dollars in annual revenue. Frequent overdraft perpetrators tend to be young bank customers who have less money than the average account holder, consumer advocates say. "Overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it," CFPB director Richard Cordray said in a statement. "We want to learn how consumers are affected and how well they are able to anticipate and avoid paying penalty fees."
- Consumer Inquiry Focuses on Bank Overdraft Fees
New York Times 22 Feb 2012
The Consumer Financial Protection Bureau (CFPB) has started inquiring about banks and the overdraft fees they charge to customers who bounce checks or withdraw more than they have in their accounts while using debit cards and ATMs. CFPB director Richard Cordray says the fact-finding exercise will focus on whether banks misled customers in 2010 about those fees after new U.S. Federal Reserve regulations for overdraft protection were implemented. Among the areas to be examined are whether banks systematically reordered customer transactions to maximize potential overdrafts and the impact of those fees on young and low-income bank customers. The examination could lead to additional regulations on consumer banking. Meanwhile, the CFPB already has created a "penalty fee box" where notifications would appear on checking account statements for customers who have overdrawn their accounts that details what fees were assessed.
- Consumer Agency Wants Oversight of Debt Collectors, Credit Bureaus
Washington Post 17 Feb 2012
The Consumer Financial Protection Bureau (CFPB) on Feb. 16 moved to bring debt collectors and credit bureaus under its authority, marking the first time the industries would fall under federal oversight. The watchdog proposed to oversee the country's largest debt collectors, the big three credit reporting agencies -- Equifax, Experian, and TransUnion -- and other smaller agencies. CFPB director Richard Cordray said the agency is prioritizing these firms because the role they play in Americans' financial lives increased greatly during the recession, with debt collectors pursuing more borrowers and generating more complaints than ever. Individuals who fall behind on their debts, blemishing their credit reports in the process, often have a difficult time lining up financing, renting a place to live, or even finding a job. Cordray said the credit industry is skewed because consumers do not have the freedom to choose a debt collector to work with and often they do not know which companies are collecting their data or what they are using it for. Industry groups say collection agencies are already subject to federal and state regulations, but the CFPB is the first U.S. agency to attempt to directly access these companies' records and study their business practices. The bureau announced the criteria it hopes to use to determine which companies will be under its purview, which in the case of debt collection agencies will be those with $10 million or more in annual receipts. For consumer reporting agencies, the CFPB proposed a minimum of $7 million in annual receipts.
- CFPB Eyes Overdraft Regs
Credit Union Times 15 Feb 2012
Consumer Financial Protection Bureau director Richard Cordray said his agency is talking about how to move forward on additional regulations that deal with overdraft protection and checking account disclosures. The regulator, which could propose rules later this year, is particularly concerned about the practice some banks have of manipulating the order in which checks are cleared in order to trigger more overdraft penalties. Cordray explained during a Feb. 8 virtual town hall meeting sponsored by the National Credit Union Administration that the CFPB will not duplicate current rules so that financial institutions will not have to juggle a bevy of rules. The overdraft and checking account rules will fall under the agency's "Know Before You Owe" initiative, which already covers mortgage cost disclosures, student loans, and credit card agreements.
- CFPB Outlines Plans for Mortgage Servicers
Washington Post 14 Feb 2012
As part of its plan to police mortgage servicers, the Consumer Financial Protection Bureau (CFPB) says that it will revise billing statements sent to homeowners. The new version will present not only the principal balance and interest rate but additionally will disclose the date that the interest could re-set as well as detailed information on late payment or penalty fees. The CFPB also will alter required disclosures for certain complex mortgages and draft new rules to ensure that servicers properly charge for homeowners' insurance. Servicers could not move borrowers into "forced-place insurance" unless they have fallen behind on insurance payments. The consumer watchdog also could propose changes that would allow consumers to find their own replacement insurance rather than rely upon the option provided by the mortgage servicer. The changes set forth by the CFPB on Feb. 13 apply to both servicing firms owned by banks as well as to nonbank servicers, which were excluded from a landmark settlement between servicers and state and federal agencies over improprieties. National Consumer Law Center staff attorney Alys Cohen called the moves by the CFPB a "strong first step," but she hopes that ultimately the regulator will force nonbank servicers to determine if borrowers qualify for a loan workout before they initiate foreclosure. Under the national settlement with servicers, they are only prohibited from moving forward with foreclosure at the same time that a modification is being considered.
- Foreclosure Claims Dominate CFPB Mortgage Complaints
Housing Wire 31 Jan 2012
According to the Consumer Financial Protection Bureau, more than 38 percent of the 2,300 mortgage complaints submitted to the agency in December were based on loan modification and foreclosure problems. Since its startup in July 2011, the agency has fielded nearly 10,000 grievances across its scope of monitored financial products, including payday loans, credit cards, and student loans. The CFPB reported that companies in question responded to 88 percent of the complaints, providing relief in more than half of the cases; almost 19 percent of the relief went to mortgage-related complainants. Out of the mortgage complaints, 889 were related to problems with loan workouts or foreclosures. Additionally, 501 complaints were tied to payments, escrow accounts, and loan servicing.
- CFPB Hears From Students About New Financial Aid Disclosure
American Banker 30 Jan 2012
According to the Consumer Financial Protection Bureau, students would find it useful to know exactly how much debt they will have when they graduate from college and how much they will owe in monthly loan payments. The agency asked students, parents, and educators to comment on its proposal for a new, streamlined financial aid disclosure. The CFPB released a prototype in October for the financial aid shopping sheet that colleges would provide to prospective students. Besides post-graduation payment expectations, the document would explain loan payments, identify other financial aid sources, and compare costs between private and public colleges. More than 22,000 individuals weighed in on the matter, with the majority saying the sheet would be helpful. Additionally, students said it would helpful to know a school's performance in terms of financial aid recipients being able to repay the debt.
- CFPB Outlines Regulatory Plans in First Semiannual Report to Congress
American Banker 30 Jan 2012
The Consumer Financial Protection Bureau released its first semi-annual report to Congress on Jan. 30, listing the steps it has taken to make the watchdog operational in its first six months. Those steps have included opening offices that focus on special issues such as fair lending, students, enlisted populations, and minorities; processing consumer grievances on credit cards and home loans; and recruiting more than 750 employees. In the next six months, the CFPB intends to release final rules requiring lenders to verify each borrower's ability to repay a mortgage; propose a rule combining disclosures required under the Truth In Lending Act and Real Estate Settlement Procedures Act; introduce a bevy of proposed new rules regarding the mortgage market, including new servicing guidelines, loan originator compensation rules, and limits on high-cost loans; and propose initial rules defining the range of its non-bank program.
- Consumer Bureau Taking a Closer Look at Appraisal Fees
San Diego Union Tribune 29 Jan 2012
The Consumer Financial Protection Bureau has until July to issue a revised HUD-1 settlement form to enhance disclosures about closing fees on home sales. With regard to appraisal fees, the agency could require two different disclosures -- one stating how much the appraiser is paid and another indicating how much of the fee is pocketed by the appraisal management company, which often is wholly owned by or affiliated with the lender. The National Association of Realtors has expressed concern about rising appraisal charges, with 70 percent of members reporting that consumers were hit with higher appraisal fees at the settlement table. Meanwhile, appraisers have seen compensation fall by upwards of 50 percent; and NAR is concerned that more appraisers are unfamiliar with the geographic area where they are performing valuations.