Read the latest on the Consumer Financial Protection Bureau (CFPB).
- 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.
- Chief of New Consumer Finance Agency Says It Is Ready to Investigate, Sue for Illegal Lending
Washington Post 24 Jan 2012
The Consumer Financial Protection Bureau is ready to take to court companies that offer predatory or deceptive mortgages and credit cards, director Richard Cordray said on Jan. 24. Speaking before a congressional panel, he defended his appointment to lead the bureau and assured critics that the agency will partner with financial companies whenever possible. However, he emphasized, "we will not hesitate to use enforcement actions to right a wrong." Cordray was addressing Congress for the first time since his recess appointment by President Barack Obama earlier in January. He faces questions about the watchdog's actions and the legitimacy of his appointment. Republicans say the appointment is illegal because the Senate technically was not in recess. Republicans were holding minutes-long sessions during their vacation to block the president from making any appointments. Part of why the CFPB might lack credibility is because it is led by a director whose "appointment was constitutionally questionable," said Rep. Patrick McHenry (R-N.C.), chairman of the House Oversight Committee panel that Cordray addressed. McHenry is a major beneficiary of political donations from the payday lending sector, which will face much stricter oversight due to Cordray's appointment. Cordray said that he knows about the objections to his appointment, but "I'm in the job, it's an important job, it's a big job, it commands all of my time and attention, and all I can do is try to carry out the responsibilities."
- CFPB: We Need More Data About Payday Lenders
MarketWatch 24 Jan 2012
In a subcommittee meeting of the House Oversight Committee, the newly appointed head of the Consumer Financial Protection Bureau said the agency needs to learn the ins and outs of payday lenders before it can regulate the non-bank entities. "We need to analyze this and think carefully about it, hear from people and then make judgments," said CFPB director Richard Cordray. When asked whether he would ban payday lenders, he said he does not consider these issues in terms of banning products. Cordray also said his agency is setting up two advisory panels with banks and credit unions but could add another for nonbank firms. GOP legislators at the hearing recommended that Cordray provide Congress with information on the watchdog's agenda for the next year. The lawmakers said the details would help alleviate uncertainty in the business community.
- CFPB Imposes New Rules on Remittance Disclosures
American Banker 23 Jan 2012
The Consumer Financial Protection Bureau issued a final rule Friday that will impose new disclosure requirements for remittance transfers. Under the rule, remittance transfer providers must disclose the fees, the exchange rate and the amount of money to be received by the recipient. Providers must disclose the information when the customer first requests the transfer, and again when the payment is made. Consumers will generally have 30 minutes after payment is made to cancel a transaction. The new rules, required by Dodd-Frank, provide for a one-year implementation period. CFPB is also seeking comment on whether to make a few final adjustments to the rule, including setting a threshold that would minimize the impact of the regulation on community banks, credit unions and other companies that do not normally process the transactions.
- Payday Lending Is Focus of Consumer Bureau Alabama Hearing
Bloomberg 20 Jan 2012
The U.S. Consumer Financial Protection Bureau recently held its first public hearing, with regulators focusing on payday lending facilities. The Alabama meeting was the first under the leadership of newly appointed head Richard Cordray. "The purpose of all our research and analysis and outreach on these issues is to help us figure out how to determine the right approach to protect consumers and ensure that they have access to a small-loan market that is fair, transparent and competitive," Cordray said at the session. While no mention was made of specific new regulations or restrictions for the industry, the director assured the agency is "thinking hard about these issues." He also said that the public and consumer advocates should not grow complacent now that the bureau is operating, but should continue to work with local and state officials to combat such problems. According to Cordray, the CFPB will dig deep into the short-term loan industry to figure out what needs to change and how that can be accomplished. In that respect, he explained that the regulator will use its examination powers to audit the books of payday lenders, ask probing questions, and cooperate with them to rectify any wrongs. On the enforcement side, Cordray said the watchdog will focus in particular on unauthorized debits to consumer accounts as well as aggressive debt collection practices.
- Richard Cordray, CFPB Chief, Promises New Scrutiny of Banks That Make Payday Loans
Huffington Post 19 Jan 2012
Consumer Financial Protection Bureau director Richard Cordray, speaking in Birmingham, Ala., this week at the agency's first public hearing, pledged to turn the heat up on payday lenders -- including a select few traditional banks that have started to offer their own version of the short-term advances. Those banks have tried to differentiate their cash-advance products from those of payday lenders because of the way in which they are structured, but consumer advocates do not buy that argument. Based on its data, the Center for Responsible Lending finds that bank payday lenders are bound to fall victim to the same cycle of debt that befalls traditional payday customers. The statistics, purchased by CRL from an independent vendor, show that bank payday borrowers take out 16 loans and are mired in debt 175 days out of the year -- or twice as long as the Federal Deposit Insurance Corp. considers healthy. "The very structure of a bank payday loan makes it likely to trap customers in long-term debt even while the bank claims that the loans are meant for short-term use," noted CRL senior policy analyst Rebecca Borne. Moreover, because the bank model requires the borrower to have a checking account and to have pay and/or benefits deposited directly into that account, the risk of default is relatively low -- meaning that the rates banks charge for this service are strictly for profit. "We recognize the need for emergency credit," Cordray acknowledged at the Jan. 18 event. "At the same time, it is important that these products actually help consumers, rather than harm them."
- Watchdog Agency Hearing to Examine Payday Loans
AL.com 18 Jan 2012
The national debate over the controversial payday loan industry will take center stage in Alabama this week, when the government's fledgling Consumer Financial Protection Bureau holds its first field hearing at the Birmingham Civil Rights Institute. The CFPB said it chose the location because it is "a state with one of the highest number of payday lenders per capita in the country." Additionally, as noted by policy analyst Stephen Stetson of the Arise Citizens Policy Project in Montgomery, Birmingham just this month adopted a moratorium on new payday lending outlets in the city. "Payday lending in Alabama is a huge problem," he said. "It's basically a technology for stripping wealth from low-income communities." The CFPB's newly appointed director, Richard Cordray, is expected to attend the hearing -- which will including testimony from consumer groups, civil rights groups, industry representatives, and members of the public. While laws in the state are meant to regulate the industry, critics say they are not always effective. Despite regulations barring multiple, simultaneous payday loans to a single borrower, there have been numerous bankruptcy filings in the state by borrowers with as many as 20 outstanding payday loans. The agency said the hearing "will provide the CFPB with on-the-ground insight into the payday lending market."
- Some Lenders to Students Face Greater U.S. Scrutiny
New York Times 13 Jan 2012
Lead by its newly appointed director, Richard Cordray, the Consumer Financial Protection Bureau is turning up the heat on nontraditional lenders to students at for-profit colleges and trade schools that have high rates of default. Cordray drew a parallel between the practices employed by some private, non-bank student loans to those of the subprime mortgage lending business that lead to the housing collapse. "We're seeing some of the schools anticipating as much as a 50 percent default rate on their students, yet they're making those loans anyway," he said. In November, the CFPB and the Education Department issued a joint request for information from consumers on the private student loan market. But Cordray said the bureau already has seen evidence of problems in the market. "One of the things we see and have seen is lenders who market loans for borrowers knowing that those borrowers are unlikely to be able to pay those loans," the director said. The Association of Private Sector Colleges and Universities said the claims are "not substantiated."