Read the latest on the Consumer Financial Protection Bureau (CFPB).
- Consumer Watchdog Has Been Aggressive
Columbus Dispatch (OH) 16 Sep 2012
In its 14-month life, the Consumer Financial Protection Bureau (CFPB) has proven to be a formidable regulator. The agency has launched dozens of enforcement probes and issued over 100 subpoenas for data, testimony, and marketing materials from credit card lenders, for-profit colleges, and mortgage servicers. Its crackdown on the financial industry has been even more aggressive than previously thought. In response, banks, payday lenders, and credit card companies are tightening their recordkeeping and budgeting for defense attorneys. Some industries, including mortgage insurers and for-profit colleges, are pushing back against the CFPB, saying it is redefining laws and scrutinizing practices that previous regulators allowed. Still, the bureau’s aggressive approach has led to one high-profile win: getting Capital One Financial to refund $150 million in fees directly to the accounts of 2.5 million customers. The company was accused of tricking customers into buying add-on services that were marketed as free, mandatory, or more beneficial than they really were. Bureau officials are examining at least three other companies: card issuers American Express and Discover Financial Services; and Intersections Inc., which provides add-on services that many banks sell. The CFPB cannot indict people or companies criminally but instead refers possible criminal cases to the Department of Justice. However, its office of enforcement wields the threat of civil charges against violators of consumer laws involving financial services.
- Drowning in Student Loan Debt? Here's Help
NBC News 05 Sep 2012
Millions of college graduates and dropouts are struggling to pay off a total of over $1 trillion in education debt, according to the Student Loan Debt Clock. College seniors who graduated with student loans in 2010 owed an average of $25,250, up 5 percent from 2009. The U.S. Department of Education found that over 320,000 borrowers had defaulted on their student loans as of September 2010, meaning they were at least 360 days late in making their payments. For those looking to pay off their loans, the Student Debt Repayment Assistant on the Consumer Financial Protection Bureau (CFPB) Web site can help students and families find the best repayment options. The site also features a link to the National Student Loan database so that students can determine what kind of loans they have. “Options vary by lender, but many private student loan programs offer borrowers a partial forbearance during which the borrower makes interest-only payments for a short period of time until the borrower can get back up on his or her feet,” said Mark Kantrowitz, publisher of FinAid.org and Fastweb.com. “This keeps the loan balance from growing bigger and digging the borrower into a deeper hole.” The CFPB also recommends that students first take advantage of all federal loans available to them before applying for private loans, particularly those with variable rates.
- Students Finding Out What It Means to Be Underwater
Chicago Tribune 29 Aug 2012
The U.S. economy faces a number of challenges, such as millions of houses that are "underwater," or worth less than the outstanding mortgage balances. Further hindering economic prospects is the massive amount of student loans weighing down millions of Americans. "The growing student loan debt crisis (is seen by many) as the next potential threat to our country's financial stability," Illinois Attorney General Lisa Madigan said at a recent congressional field forum. "Students enrolled in colleges here in Chicago and across Illinois are on track to become part of a generation burdened by debilitating debt, limited career prospects, and therefore long-term financial insecurity." Some private student loans do not boast the current low interest rates and cannot be discharged through bankruptcy. Rohit Chopra, the Consumer Financial Protection Bureau's student loan ombudsman, pointed out that college is still considered a good investment for most Americans; but borrowers who are underwater on their student loans are experiencing an unprecedented drop in standard of living for college graduates. According to the Census Bureau, the number of Americans aged 25 to 34 who are living with their parents has spiked, while the rate of homeownership has dropped for those between the ages of 25 and 29. The current troubles with student loans could cut into demand for mortgage credit. A recent analysis of Fed data by the Wall Street Journal found that the greatest student-loan impact has been on families with annual incomes between about $95,000 and $205,000; this income bracket owed an average of $32,869 in college loans in 2010, up from $26,639 in 2007 after being adjusted for inflation.
- Consumer Bureau Wants to Open a Window on Home Appraisals
Los Angeles Times 26 Aug 2012
The Consumer Financial Protection Bureau is pushing for people to see full appraisal reports on the homes they are purchasing or refinancing as early in the mortgage process as possible. This means early disclosure of all the comparable homes the appraiser chose, adjustments for location or property condition and any additional data that was used to peg the final value. In addition, it means the applicant would get to see who performed the appraisal and whether he or she carries a professional designation or is merely licensed in the state.
- Alaska Military Members Get Financial Advice
Anchorage Daily News (AK) 22 Aug 2012
After an unfortunate experience as a young military couple stationed in Italy, Holly Petraeus, the wife of the CIA director and former top U.S. commander in Iraq, now visits U.S. military installations to provide advice about finances and scams to service members. In her role as the director of the Office of Service Member Affairs at the federal Consumer Financial Protection Bureau (CFPB), Petraeus recently spoke to service members at Joint Base Elmendorf-Richardson in Anchorage. One of the missions of the CFPB is to educate military families so they can make better financial decisions. For example, a soldier in South Carolina took out a $1,600 auto-title loan, spread out over 32 months, that had a 400 percent interest rate that amounted to over $15,000. "That is what I don't want anybody to sign up for," said Petraeus.
- Study: Middle Class Poorer, Earned Less in 2000s
USA Today 22 Aug 2012
According to a study by the Pew Research Center's Social and Demographic Trends project, middle-class families finished the first decade of the 21st century poorer and with lower incomes than they had 10 years earlier -- the first time this has happened since at least World War II. Researchers found that 85 percent of those polled say that it was harder than before to maintain a middle-class lifestyle in the 2000s. Median household income declined almost $3,500 for a three-person middle-class household to $69,487 a year after adjusting for inflation, the Pew study determined. Meanwhile, the median household's net worth dropped 28 percent to $93,150. Paul Taylor, a Pew executive vice president, remarks, "That the middle class always enjoys a rising standard of living is part of America's sense of itself, and it has always been true -- until now. He went on to describe the 2000s as a "lost decade" for the middle class, adding, "It's been 11 years since the peak in household incomes, and that covers the early part of the decade as well." Finally, the results show even a weakening of Americans' traditional faith that their children will be better off than their parents. Indeed, 43 percent of respondents think their children will be richer than they are, down from 51 percent just four years ago.
- Aggressive Debt Collection Tactics Are Drawing Federal Scrutiny
Los Angeles Times 20 Aug 2012
The recession pushed millions of Americans into debt, subjecting many of them to an unending stream of collection agents, aggressive lawyers, and companies that profit if they pay up. The debt collection industry, which makes about $12 billion a year, is built on the misfortunes of those who have fallen behind on their bills. The Great Recession led to a sharp increase in the number of people facing debt collectors to an estimated 30 million this year, up nearly 50 percent over 2003. Recent lawsuits and numerous complaints have lead many states to investigate the actions of debt collection firms over aggressive tactics that officials say are becoming commonplace. The unsavory practices include intimidating phone calls, threats of arrest, harassment of relatives, and a slew of lawsuits aimed at getting customers to pay. Now, regulators at the Federal Trade Commission are taking action. Last year, the agency received 180,928 complaints about debt collectors, which does not include lawsuits for such collections. Additionally, the Consumer Financial Protection Bureau is considering new regulations for debt collectors. Consumer advocates say the majority of the problems stem from problem debt that is sold to debt collection firms eager to make a profit.
- Consumer Protection Agency Takes Heat on Mortgage Plan -- From Consumer Groups
The Hill 16 Aug 2012
While the Consumer Financial Protection Bureau (CFPB) is accustomed to criticism from the financial industry and GOP lawmakers, complaints from the pro-consumer camp are unusual. But after the agency proposed rules aimed at helping homeowners who are struggling with their mortgages, consumer groups did indeed protest. While the new requirements would streamline the mortgage servicing industry, consumer advocates say the CFPB missed an opportunity to help keep homeowners in place. That is because it did not outright abolish the practice of "dual tracking," which occurs when a lender moves forward with foreclosure proceedings even as a borrower is in talks for a possible mortgage workout -- although it does take some steps to crack down on the practice. "If somebody is sending in their paperwork and applying ... the servicer can continue going ahead with the foreclosure process -- like having the court declare a person is in default, setting the date for the foreclosure sale," said Center for Responsible Lending President Michael Calhoun. "That just cuts it way too close." He explains the foreclosure processing often is farmed out to companies that specialize in that area and that it can be difficult to stop the wheels on a foreclosure once they start turning. "We need more cushion," according to Calhoun. While the consumer groups are pushing for stricter reforms, they acknowledge the hard work the agency is putting into the requirements. "I don't know if there's another issue that director Cordray has singled out as much as this one to be a priority," said Calhoun.
- Elderly Suffer as Financial Abuse Grows
USA Today 15 Aug 2012
As financial abuse against seniors increases, many of America's elderly do not know where to turn for reliable financial help. A 2010 report by Investor Protection Trust (IPT) found that about 20 percent of Americans over age 65 were the victims of a financial scam. IPT conducted a survey after the Consumer Financial Protection Bureau requested more information about the issue. The most common type of abuse is when relatives steal or divert funds or property, followed by caregiver theft, and then financial scams by strangers. In 2011, MetLife reported that elderly victims of financial scams lost at least $2.9 billion in 2010, up from $2.6 billion in 2008. The problem may even be worse due to underreporting. Many elderly do not have the tools to find a trustworthy financial adviser, may not have the knowledge to understand financial advice, or may be susceptible to fraud because of reduced mental capacity. In response, IPT established the Elder Investment Fraud and Financial Exploitation prevention program, which has trained more than 3,000 U.S. medical professionals to help identify older Americans who are vulnerable to fraud.
- Prepaid Debit Cards Growing in Popularity
Las Vegas Review-Journal 12 Aug 2012
More large, traditional banks are entering the prepaid debit card industry, a business once dominated by alternative financial services companies. The amount loaded onto prepaid cards is expected to reach $81.8 billion in 2012 and $116.9 billion in 2013, predicts the Mercator Research Group. Mainstream banks like J.P. Morgan Chase and Wells Fargo are seeking new revenue sources to offset recent federal regulation that restrict fees on other consumer loan products. The Durbin Amendment, part of the Wall Street Reform and Consumer Protection Act of 2010, reduced the interchange fees that banks can charge merchants when a consumer uses a debit card. Many types of prepaid cards are exempted from these rules, however, and still earn higher fees from merchants. American Express is also using prepaid cards to broaden its customer base, partnering with companies like Target Corp. to offer prepaid cards in stores. More consumers are using prepaid cards because they can be used for transactions beyond basic purchases and ATM withdrawals. With some prepaid cards, customers can avoid traditional checking and saving accounts but still use services like online bill pay and paycheck direct-deposit. Javelin Strategy & Research found that 13 percent of U.S. adults used prepaid financial services in 2011, up from 11 percent in 2010. That gain has come with a decline in the use of traditional banking services. Javelin also found that 88 percent of consumers maintained checking accounts in 2011, down from 92 percent the year before. Because they are a relatively new financial product, prepaid cards have little regulation; and many customers complain about the fees attached. However, the Consumer Financial Protection Bureau is looking into possible regulations to make fees and terms of these cards more transparent.
- Consumer Bureau Seeks Sleuths for Bad Bankers
Washington Times 12 Aug 2012
The Consumer Financial Protection Bureau is recruiting investigators in ads that suggest the agency plans to go undercover to pursue cases against banks, credit card companies and other financial companies. “As needed,” one recent recruitment ad stated to potential investigators, “establish and conduct surveillance activity to develop both intelligence and evidence to further investigations. Utilize surveillance activities to identify subjects, their activities and their associates, corroborate source information and collect evidence.” The bureau also said that investigators, who would earn $98,000 to $149,000 per year, may have to arrange for and oversee contracts with private investigators. These private investigators “may know the players, culture, history in a specific geographic area in which a case is centered,” according to the advertisements, which outline a host of other responsibilities.
- Consumer Protection Bureau Proposes to Tighten Rules on Mortgage Servicers
New York Times 10 Aug 2012
The Consumer Financial Protection Bureau on Aug. 9 formally proposed stricter rules for mortgage servicers that aim to provide transparent and timely disclosure to consumers about their loans as well as spell out requirements for handling customer accounts, fixing mistakes, and assessing borrowers. The new rules would require servicers to give borrowers monthly statements, inform them of impending interest rate adjustments, and provide more options to prevent foreclosure. "From processing payments to evaluating struggling homeowners and helping them avoid foreclosures, the bottom line is to treat consumers fairly by preventing surprises and runarounds," said CFPB director Richard Cordray. Public comments on the proposal will be accepted through Oct. 9, with the final rules expected in January. The rules would amend the Truth in Lending Act and the Real Estate Settlement Procedures Act.
- CFPB Sues California Law Firm Over Alleged Debt-Relief Scam
American Banker 02 Aug 2012
The Consumer Financial Protection Bureau (CFPB) recently filed its first civil enforcement order against a Los Angeles law firm that charged homeowners for loan modification services that were never provided. According to the regulator, attorney Chance Gordon, his law firm and two subsidiaries preyed on financially strapped borrowers by promising to lower their monthly mortgage payments in exchange for upfront fees of between $2,500 and $4,500. The CFPB said that after the fee was paid, consumers saw "little, if any, meaningful assistance to modify homeowners' mortgage loans or prevent foreclosure." The July 18 complaint in the U.S. District Court for the Central District of California also asked to halt the firm's operations. The judge granted the request to issue a temporary restraining order against the firm and appointed a receiver to take possession of it and its affiliates. The CFPB joins several other regulators, including the Federal Trade Commission, that are targeting lawyers in debt-relief scams.
- ABA Urges Consumer Bureau to Exercise Caution in Regulating Prepaid Debit Cards
Reuters 26 Jul 2012
The Consumer Financial Protection Bureau should expand the disclosure protections granted on debit and credit cards to general purpose reloadable prepaid cards as well, but it should provide flexibility on the disclosures that prepaid card issuers have to make to consumers, the American Bankers Association has recommended. In a comment letter, ABA agreed that general purpose reloadable (GPR) prepaid cards should be given the same protections as prepaid cards such as gift cards -- including adequate disclosure of fees and blocking of unauthorized transfers from the account -- however, the CFPB should recognize that there are a variety of GPR cards and that the market will continue to evolve. The agency, worried that the lack of an industry standard for GPR fee disclosures will prevent consumers from comparison shopping and making informed decisions, is exploring the possibilities.
- Dealing With Your Credit Report Just Got a Lot Easier
Daily Finance 25 Jul 2012
With lenders carefully vetting potential borrowers these days, good credit is vital. Credit reports and credit scores can be difficult to understand, though, and it can be even more intimidating to try to contact credit bureaus to have inaccurate information stricken from the record. The Consumer Financial Protection Bureau (CFPB) recently announced that, starting in September, it will supervise the companies that collect and report credit information. "[T]he credit reporting market is not one where consumers can shop around among different providers, for people have no choice about whether to have any of the credit reporting companies keep track of their credit history," commented CFPB director Richard Cordray earlier in July. "That is why the Consumer Bureau's new authority is so important." The bureau cites about 400 different agencies that collect information related to credit, some for specific industries. It plans to oversee about 30 of the agencies that account for roughly 94 percent of the industry's revenue. The CFPB's Web site provides information for consumers on protecting their credit, including step-by-step instructions on how to get a copy of their credit report free.
- 1 in 5 Considered Changing Banks, But Many Were Hindered, Poll Says
Los Angeles Times 24 Jul 2012
About 20 percent of consumers thought about moving their checking account to another bank in the past year -- largely because of increased fees -- but more than half said the hassle and complications of doing so ultimately deterred them from switching. Based on those findings from a Consumers Union poll conducted in May, the organization urged the Consumer Financial Protection Bureau to make it easier for spenders to move their money. The group recommended such changes as requiring banks to transfer all automatic payments and direct deposits to a customer's new bank within two weeks, making same-day electronic fund transfers at no cost to the customer, and abolishing unfair fees charged for closing accounts.
- Sallie Mae, CFPB Backs Student-Loan Changes at Senate Hearing
Bloomberg 24 Jul 2012
Borrowers struggling with private student loans would benefit from more refinancing options, Rohit Chopra -- student loan ombudsman for the Consumer Financial Protection Bureau -- recently told a Senate Banking subcommittee hearing. Lawmakers should focus more attention on expanding modification and refinancing options in the private market, he suggested. "Policy makers have paid significant attention to the conditions in the mortgage market," Chopra remarked, "but given the potential impact of student debt on the broader economy, the situation demonstrates the need for attention.” Sallie Mae President Jack Remondi, also speaking at the hearing, supported changes as well. He recommended that Congress consider allowing lenders to rehabilitate defaulted private loans by erasing defaults from the records of borrowers who resumed timely payments -- practice already allowed for federal student loan borrowers. Meanwhile, Senators already have introduced measures to reform private student financing: one that would reverse a 2005 bankruptcy law that blocks these loans from being discharged and another that would compel colleges to counsel borrowers to take out the maximum in federal loans before pursuing private-sector funding. However, Sen. Richard Durbin (D-Ill.) said the bills are "going nowhere."
- Capital One to Refund $150 Million to Credit Card Customers
Los Angeles Times 18 Jul 2012
In the Consumer Financial Protection Bureau's first major enforcement action since the agency went live last July, it has ordered Capital One Bank to refund $140 million to credit card consumers for questionable marketing of add-on products. At the same time, the federal Office of the Comptroller of the Currency hit Capital One with its own $10 million consent order tied to unfair billing practices from May 2002 to June 2011, for total refunds of $150 million. Additionally, Capital One must pay $60 million combined in civil penalties for the practices. CFPB director Richard Cordray said the bank's call center operators tricked customers with low credit scores or credit limits into buying "products they didn't understand, didn't want, or in some cases, couldn't even use" -- such as payment protection and credit monitoring -- when they activated their credit cards. As part of the consent orders, Capital One has agreed to refund the full amount of add-on products, plus interest, to customers who enrolled in them or tried unsuccessfully to cancel them on or after Aug. 1, 2010. Finance charges and other associated fees will be refunded as well. "We are putting companies on notice that these deceptive practices are against the law and will not be tolerated," Cordray declared.
- American Voters Favor Strong Oversight of Wall Street, Says Survey
Financial Advisor Magazine 18 Jul 2012
A national survey commissioned by AARP, the Center for Responsible Lending, Americans for Financial Reform, and the National Council of La Raza has found that three out of four U.S. voters firmly back federal reforms proposed two years ago to crack down on Wall Street after the 2008 financial crisis. The poll comes as the Dodd-Frank Act, which created the Consumer Financial Protection Bureau (CFPB), turns two years old. Two-thirds of respondents support a state's right to pass even stronger consumer protections, without preemption by federal law. Respondents also supported establishment of the CFPB by a 40-point margin. Support for the Dodd-Frank Act tended to cross party lines: Republicans were in favor by a 20-point margin, independents by 50 points, and Democrats by 83 points. Gary Kalman, director of federal policy for the Center for Responsible Lending, said that bipartisan support is not surprising. "Who hasn't been hurt by the economic downturn?" he asked. "People get that common sense oversight could have prevented it." The survey of 803 randomly selected respondents was conducted by Lake Research Partners July 5-10.
- Watchdog Agency Works Toward Clarity in Mortgage Lending
Louisville Courier-Journal 18 Jul 2012
The Consumer Financial Protection Bureau (CFPB) recently introduced a proposal on simplified mortgage disclosures. CFPB director Richard Cordray said consumers should really do their homework when consider a home loan. The agency is now seeking further review of the proposal as well as consumer testing before the disclosures could be required. As a result, the new "Loan Estimate" and "Closing Disclosure" forms may not actually be implemented until 2014. The proposed changes would show consumers their interest rates, monthly payments, loan amounts, and closing costs on the first page. Additionally, consumers would see how rates or payments could potentially change. "If consumers have a clearer understand of what the risks are in these products and what the actual pricing is, it's more likely they will end up with a sensible deal that they can maintain over the long term," said Cordray. The agency, seeking public comment on both disclosure forms, is holding a series of town hall events around the country.