Read the latest on the Consumer Financial Protection Bureau (CFPB).
- State Regulators Praise CFPB
Housing Wire 09 Nov 2012
State regulatory bodies are pleased with efforts by the Consumer Financial Protection Bureau to streamline common mortgage disclosure forms. The agency has spent the last year developing, reviewing, and testing documents that ultimately will merge the Real Estate Settlement Procedures Act and Truth in Lending Act forms. In a letter to the CFPB, the Conference of State Bank Supervisors, the American Association of Residential Mortgage Regulators, the American Council of State Savings Supervisors, and the National Association of Consumer Credit Administrators applaud the bureau for its work to clarify disclosures. Like industry groups, however, they also caution that any new requirements in the mortgage finance sector must be carefully crafted to avoid reducing access to credit.
- CFPB Releases Annual Report on College Credit Agreements
BankCreditNews.com 07 Nov 2012
The Consumer Financial Protection Bureau (CFPB) recently released its 2012 yearly report on college credit card agreements, which found that most college credit card deals are between issuers and affiliates of colleges and universities. In 2011, about 42 percent of all college card agreements were between an issuer and an alumnus of an institution of higher education; 33 percent of agreements were between an issuer and an institution of higher education; and 18 percent of contracts were between an issuer and another organization connected to a college or university. Between 2009 and 2011, the number of credit card issuers jumped; while the number of agreements, amount of payments by issuers, total number of accounts open at year's end, and number of new college credit card applicants fell.
- CFPB Begins Reverse Mortgage Exams, Tells Lenders to Prepare
ReverseMortgageDaily 29 Oct 2012
During a session at the recent National Reverse Mortgage Lenders Association (NRMLA) conference in San Antonio, industry insiders and compliance experts discussed the role of the Consumer Financial Protection Bureau (CFPB) in auditing reverse mortgage lending firms. According to an NRMLA member in attendance, the agency scrutinizes current loans as well as "dead deals," or those that never closed. NRMLA legal counsel Jim Milano said the CFPB may conduct horizontal reviews or products and services as well a lender's geographic footprint and prior history with state regulators. "Risk assessment, consumer complaints, and the patterns of complaints will drive their examination," Milano said. Although the CFPB has yet to issue any formal enforcement actions against reverse mortgage lenders, it is likely to do so.
- This Week in Credit Card News: New Federal Rules for Debt Collectors
Forbes 29 Oct 2012
Starting on Jan. 2, 2013, the Consumer Financial Protection Bureau (CFPB) will have oversight over debt collection agencies. Already, the aggressive tactics of some collectors have attracted scrutiny from consumer protection groups and state regulators. The federal agency will monitor companies that specialize in collecting money for consumer debt, as well as collectors that contract with the Education Department to pursue overdue student loans. Officials say the department has more than $850 billion in student loans outstanding. The CFPB will examine companies to make sure they properly identify themselves to consumers and properly disclose the amount of debt owed. Collectors also must have a process in place for resolving disputes and communicating “civilly and honestly” with consumers.
- Student Debt Debacles
New York Times 25 Oct 2012
Student loans obtained through private lenders are not set up the same as federal loans. Most government student loans carry interest of about 6.8 percent or below and feature consumer protections that allow borrowers who lose their jobs to make lower, affordable payments or to defer payment for a period of time. Private student loans, by contrast, usually have variable interest rates and fewer protections. Private loans now represent $150 billion of the $1 trillion in total outstanding U.S. student loan debt, the Consumer Financial Protection Bureau (CFPB) reports. Many loan servicers make it difficult for borrowers to find out exactly how much they owe, obtain their payment histories, or get their loan modified. Sometimes, borrowers making late or partial payments have had money withdrawn from their checking accounts without their permission, triggering overdrafts. The New York Times editorial staff recommends that the federal government offer refinancing and debt relief opportunities for struggling student borrowers, as the government did for some mortgage holders. They also say the CFPB should set national standards for loan servicers regarding disclosure of conditions.
- Will Foreclosure Abuses Ever End?
New York Times 23 Oct 2012
The Consumer Financial Protection Bureau's recent proposal to regulate the foreclosure process is a letdown, according to a New York Times editorial. Since the housing bubble burst, there have been millions of wrongful foreclosures that failed to give borrowers an adequate opportunity to modify their loans and save their homes. Earlier this year, a settlement over foreclosure abuses included curbs on conflicts of interest that caused banks to favor foreclosures and safeguards for borrowers’ legal rights in a foreclosure. While the Obama administration established specific tests for banks to use in evaluating borrowers for loan workouts, the CFPB must write permanent new rules for the whole industry. Although consumer advocates expected the agency to work from the reforms in the foreclosure settlement, the CFPB's new proposal largely fails to do so. It does not impose any meaningful standards for loan modifications except those already required by federal programs, and it allows the highly controversial practice of dual tracking. Rather than concrete standards, the proposal largely involves procedural reforms -- like requiring servicers to establish reasonable policies for managing paperwork, answer phone calls from borrowers, and meet deadlines for responding to borrowers in need. The newspaper says the CFPB needs to set requirements that ensure all troubled borrowers are considered for loan modifications according to specific, publicly available criteria. According to the editors, dual tracking should be prohibited; and, in the event of a foreclosure, servicers must verify with borrowers their legal right to foreclose before starting the process.
- Consumer Bureau Opens Credit Report Complaint Line
The Hill 22 Oct 2012
The Consumer Financial Protection Bureau -- which already fields consumer complaints on credit cards, mortgages, bank accounts, consumer loans, and private student loans -- on Oct. 22 announced that consumers now may approach it with grievances about credit reporting as well. Consumers can call the CFPB if they have problems with a credit reporting agency or believe there is an error on their credit reports -- but only after failing to resolve the issue with the reporting agency that produced the report. "Credit reporting companies exert great influence over the lives of consumers," said CFPB director Richard Cordray. “Consumers need an avenue of recourse when they feel they have been wronged.” A study released by the agency just last month revealed that, 20 percent of the time, consumers receive different credit scores than the one provided to creditors.
- Candidates Differ on Consumer Protections
The State (SC) 17 Oct 2012
Just 15 months after launching, the future of the Consumer Financial Protection Bureau (CFPB) may lie in the presidential election. While incumbent Barack Obama touts the agency as a signature accomplishment of his term and his administration's commitment to financial reform, Republican opponent Mitt Romney has condemned the bureau as "perhaps the most powerful and unaccountable bureaucracy in the history of our nation." The candidates' visions for the CFPB highlight the stark differences in their approaches to financial regulation and consumer protection following the 2008 economic crisis. If elected, Romney says he will "repeal and replace" the Dodd-Frank Act, which likely would mean a restructuring of the consumer bureau. But consumer advocates say changes proposed by Romney would gut the regulator, stripping it of its power to protect American consumers. "After years of banks engaging in all sorts of bad behavior that essentially broke our economy, the notion that this agency that's just getting started would be broken up and its powers turned over to the regulatory agencies that failed miserably in the lead-up to the economic crisis is just absurd," according to National Association of Consumer Advocates executive director Ira Rheingold.
- The CFPB's First Three Actions Against the Credit Card Companies
Daily Beast 05 Oct 2012
The Consumer Financial Protection Bureau announced on October 1 its third significant enforcement action, against American Express. The new regulatory agency said the credit card company violated consumer protection laws "at every stage of the consumer experience, from marketing to enrollment to payment to debt collection." The CFPB found that American Express companies had told customers they would receive $300 for signing up with a certain program; charged illegally high late payment fees; used different credit ratings for customers based on age, a violation of federal lending laws; failed to fully report customer disputes to credit bureaus; and told customers that paying off old debt would improve their credit scores when, in fact, American Express was not reporting the payments at all. The enforcement ordered mandated that American Express end the illegal practices, repay $85 million to some 250,000 customers, and pay $27.5 million in civil penalties to various federal agencies.
- Mortgage Brokers to CFPB: We Do Not See a Level Playing Field
Reverse Mortgage Daily 04 Oct 2012
In a letter to Consumer Financial Protection Bureau Director Richard Cordray, a major mortgage brokers association stressed the need for broker representation on the agency's consumer advisory board. The National Association of Independent Mortgage Professionals said the boards lack representation from mortgage brokers, real estate appraisers, mortgage bankers, credit reporting agencies and settlement agents. "As you are aware, these groups are small business, Main Street professionals, who are involved with consumers on a day to day basis, with respect to the home mortgage process," wrote NAIHP President Marc Savitt. "These are the very groups who are currently facing an onslaught of new rules and regulations and as licensed professionals -- have been denied a seat at the table." The board advises the agency on topics regarding mortgages, appraisals, banking and credit reporting. The group requested that the agency create an additional council, on which industry professionals will be represented.
- CFPB Five-Year Strategic Plan Highlights Fair Lending Enforcement
JDSupra 03 Oct 2012
The Consumer Financial Protection Bureau (CFPB) has issued a draft strategic plan with four goals and 11 desired outcomes for 2013 to 2018. The agency is seeking comment on the plan, with a deadline of Oct. 25, 2012. The outcomes and performance measures for enforcement success suggest the regulator will measure success by the number of enforcement actions it brings, with significant focus on the number of fair lending cases. The CFPB intends to prevent financial harm to consumers, promote good practices, empower consumers in their financial lives, and inform the public and policymakers with analysis of consumer finance markets. It also intends to supervise institutions to foster compliance with federal consumer financial laws. The bureau will assess its progress by tracking several enforcement-related performance measures against “specific targets.” However, the CFPB has not indicated how it plans to establish these targets.
- U.S. Credit-Card Lenders Shun Add-Ons as CFPB Cracks Down
Bloomberg BusinessWeek 02 Oct 2012
JPMorgan Chase, Bank of America, and American Express are among the credit card lenders retreating from a $2.4 billion market as regulators set their sights on deceptive marketing of products. "Scrutiny from the Consumer Financial Protection Bureau already has resulted in fines against several financial institutions, prompting them to curtail sales of add-on services that promise to help customers pay card bills if they become ill or lose their jobs or that offer to monitor their credit. "The fees are under pressure and the profitability model of a credit card business is in question," said Nomura Securities analyst Bill Carcache. "The CFPB further enforces what the CARD Act set out to do." Additional punitive action will be forthcoming, according to CFPB director Richard Cordray, who said, "We are signaling as clearly as we can that other financial institutions should review their marketing practices to ensure that they are not deceiving or misleading consumers into purchasing financial products or services."
- Lawyers Get Rich Off Consumer Bureau
CNNMoney 01 Oct 2012
As the Consumer Financial Protection Bureau cracks down on banks, debt collectors, student lenders and other financial players, law firms are stepping up to protect them, and profiting nicely as a result. Ballard Spahr, a national law firm with more than 500 employees, began creating a team of lawyers dedicated to learning about the CFPB and its powers as soon as the bureau was signed into law. The now 20-person team is part of the firm's Consumer Financial Services division, and CFPB-related work has increased the division's revenue by about 50 percent this year since its creation. Loeb & Loeb, another law firm that launched a CFPB task force in July, has seen CFPB-related business pick up so much that its new unit is expected to account for 30 percent of the Consumer Protection Defense department's revenue within the next year. Law firms Venable LLP and Pepper Hamilton have also recently launched special task forces to take on the CFPB.
- Study: U.S. Consumers to Add $43.5 Billion in Credit Card Debt During 2012
Huffington Post 01 Oct 2012
American consumers are projected to rack up $43.5 billion in credit card debt in 2012, for the second year in a row. Optimism about economic recovery has caused many consumers to return to pre-recession spending habits. However, the pre-crisis economy was buoyed by a real estate bubble, which created a "new normal" when it popped -- not a temporary setback. Therefore, writes Card Hub and Wallet Hub CEO Odysseas Papadimitriou, Americans should make a more concerted effort to cut back on spending. Consumers who are employed and still have access to credit are the ones with the largest credit card balances, rather than those who are suffering financial hardship and are in no position to spend less than they bring in each month. Much of this may be due to a widespread lack of financial literacy. Forty-two percent of people give their personal finance knowledge a grade of "C" or worse, reports the National Foundation for Credit Counseling's 2012 Financial Literacy Survey. Limited spending requires improved budgeting. Expenses should be listed in order of importance, and expenses that will go over an affordable amount should be eliminated. For existing debt, consumers with excellent credit should transfer their balances to a 0 percent credit card, giving themselves more than a year to pay down what is owed without interest. Using one credit card to revolve debt and another for everyday purchases can also help with budgeting.
- Simpler Checking Disclosures Remove Confusion, Eliminate Hidden Fees
The Financial Brand 01 Oct 2012
An analysis by the Pew Charitable Trusts concluded that financial institutions do not summarize policies and fee information in a uniform, concise, and easy-to-understand format for consumers. The study looked at the 12 largest banks and the 12 largest credit unions and a total of 274 different checking accounts. The median length of bank checking account disclosure statements is a staggering 69 pages, and 31 pages for credit unions. Pew says that variations in fee names and disclosure designs make it difficult for consumers to compare options. Bank mergers also can combine account policies, resulting in fees and terms added to fee schedules and account agreements that do not apply to new accounts. Pew found that the median number of additional service fees charged by banks was 26. Four of the 12 banks studied did not disclose the size of overdraft penalty fees on their checking account home page or on the pages that described specific accounts. Two banks -- Fifth Third and Town & Country -- combined disclosures for multiple checking accounts into one document. While it may be more convenient to work with a single document for all accounts, a multi-page and multi-account disclosure can still be cumbersome to navigate. Pew has developed a standardized fee disclosure form, which Sens. Dick Durbin and Jack Reed hope to make into law. They also have sent a letter to the Consumer Financial Protection Bureau, requesting that banks be required to post simpler disclosures on their Web sites.
- A New Watchdog for Credit Bureaus
Kiplinger's Personal Finance 01 Oct 2012
The Consumer Financial Protection Bureau plans to supervise 30 of the nation's largest credit-reporting agencies. CFPB director Richard Cordray confirms that the agency will examine the accuracy of the data the agencies receive, how the companies maintain and assemble the information in consumers’ credit reports, and how they handle dispute resolution. The new scrutiny is being delivered not a moment too soon, according to some, who point to estimates that as many as a quarter of credit reports are inaccurate. An investigation by the Columbus Dispatch newspaper, for example, discovered that credit reports on file with the Big Three credit bureaus -- Equifax, Experian, and TransUnion -- listed short sales as foreclosures, categorized paid-off vehicle loans as repossessions, and labeled closed credit card accounts as delinquent.
- American Express to Pay $112.5 Million in Settlement With Regulators
Bloomberg BusinessWeek 01 Oct 2012
American Express will pay $112.5 million to settle claims it violated consumer safeguards from marketing to collections in products sold to about 250,000 customers. Units of American Express allegedly deceived customers who signed up for the Blue Sky card, leading them to believe they would receive $300 plus bonus points, according to a statement from Consumer Financial Protection Bureau director Richard Cordray. Regulators also said the firm imposed illegal late fees, discriminated against some older applicants, led borrowers to believe they were repaying old debts, and failed to report consumer disputes to credit reporting companies, among other wrongdoing. The settlement involves state regulators from Utah, where American Express owns banks, and four federal agencies: the CFPB, the Office of the Comptroller of the Currency, the Federal Reserve, and the Federal Deposit Insurance Corp. Under the agreement, the company will refund about $85 million to customers and pay $27.5 million total in civil penalties to the four federal regulators, with $14.1 million of that amount going to the CFPB.
- Study Finds Discrepancy in Credit Scores
Washington Post 26 Sep 2012
A study by the Consumer Financial Protection Bureau reveals that as many as 25 percent of consumers receive credit scores from credit bureaus that differ from the ones used by lenders. These discrepancies may affect whether borrowers are approved for mortgages or other loans and what kind of terms they get for them. Consumer advocates say borrowers probably will not be aware of any discrepancy in their credit scores and argue that reporting firms should notify them if discrepancies to exist. "The report illustrates how opaque the process is in determining credit scores," notes Bill Sermons of the Center for Responsible Lending. "The deck is stacked against consumers because they don't know what information is being used to determine how much they pay for credit."
- CFPB Pursuing Higher Fines as Part of Enforcement Actions
American Banker 25 Sep 2012
With only two enforcement actions under its belt, the Consumer Financial Protection Bureau is already sending a clear message to institutions that run afoul of consumer protection laws: get ready to pay big. Discover Financial Services on Monday became the second firm in the past three months to pay more than $200 million in restitution and civil money penalties for using deceptive practices to market payment protection products. "We want to make it more expensive to break the law than to abide by it," CFPB Enforcement Director Kent Markus said on a conference call with reporters Monday.
- Discover to Make Refunds to Settle Probe of Credit-Protection Products
Wall Street Journal 23 Sep 2012
Discover Financial Services will pay $214 million -- about $200 Millie in cardholder refunds and $14 million in penalties -- to settle a federal probe into its sales of credit protection products. The proposed agreement also requires the card company to modify its marketing practices. It is the second pact this year between a credit card company and the Consumer Financial Protection Bureau, following a similar accord two months ago with Capital One Financial. Many other banks have ceased to offer the controversial add-on products, such as protection against identity theft and insurance to cover card payments in the event of a job loss, which consumer advocates say actually provide card users with very little financial benefit. Additionally, customers have said in court cases that marketers have misrepresented the features and costs of the products while, at times, enrolling them in the programs without consent. According to a report last year from the Government Accountability Office, consumers forked out $2.4 billion in fees for credit protection plans in 2009.