Read the latest on the Consumer Financial Protection Bureau (CFPB).
- CFPB: Essential Reverse Mortgage Counseling Needs Work
Reverse Mortgage Daily 17 Jul 2012
The Consumer Financial Protection Bureau (CFPB) recently published a report on the reverse mortgage industry, in which it underscored the critical nature of counseling. "Counselors provide a line of defense, dispelling misconceptions and explaining fundamental concepts underpinning these products," according to the report. "Their services become increasingly important as borrowers face more complex choices as a result of new product offerings. However, the agency said that even after counseling, there still may be some confusion. The CFPB cited a 2009 Government Accountability Office report, which found that counseling agencies were not complying with the counseling protocol. But counseling firms said some of the concerns identified in the report have been addressed and are now moot; others they will continue to seek solutions for. "A lot of these challenges are not new," acknowledges John McCosh of CredAbility. "How can the counseling agencies have skin in the game? It's a question."
- New Agency Is Targeting Errors in Credit Files
Wall Street Journal 16 Jul 2012
The Consumer Financial Protection Bureau is scheduled on July 16 to finalize plans to oversee about 30 credit reporting firms. As part of its new authority over these companies, which previously were unregulated at the federal level, the agency will focus on the accuracy of information that lenders report to credit firms as well as the performance of those firms in compiling the data. The CFPB also will look into complaints by consumers who say it is difficult to get errors in their files corrected. These inaccuracies "deny Americans the ability to become homeowners and build wealth," said Bill Sermons, research director at the Center for Responsible Lending. He added that such mistakes also keep lenders from extending credit to good customers.
- House Holds Another Hearing on Impact of Dodd-Frank Mortgage Requirements
Mortgage News Daily 11 Jul 2012
A House Financial Services subcommittee recently held a hearing on proposed changes under the Dodd-Frank financial reform law, in particular the parameters for a qualified mortgage (QM) that would be exempt from ability-to-pay mandates and other proposed requirements. Testimony was heard from experts representing various industry and consumer groups, including the Center for Responsible Lending. Speaking on behalf of CRL, Senior Vice President Eric Stein stressed the need for a broad definition of QM so as not to block borrowers with solid credit from the mortgage market. The definition should include the use of specific "bright-line" standards, he said, so that both lenders and prospective borrowers fully understand which loans qualify as QMs and which do not. Stein also recommended that borrowers be empowered to take legal action if a supposed QM product falls short of the appropriate standards from the outset.
- Consumer Financial Protection Bureau Got Off to a Good Start in Its Inaugural Year
Washington Post 11 Jul 2012
"We need a pit-bull-type agency to protect consumers," writes columnist Michelle Singletary. "In its inaugural year, the Consumer Financial Protection Bureau is doing a pretty good job of being just that." The agency, which will reach its one-year anniversary on July 21, has spent much of its first year on “fact-finding” missions, asking the public for input on various issues -- including credit cards, credit reporting agencies, student loans, and mortgages. The bureau's “Know Before You Owe” initiative is focused on helping people understand the consequences of debt. As part of that campaign, it recently proposed a redesign of federal mortgage forms to highlight interest rates, monthly payments, the loan amount, and closing costs; and it also is proposing specific rules for high-cost mortgages, such as banning balloon payments, capping late fees, and prohibiting lenders from charging prepayment penalties and financing points and fees. Also in its first year, the CFPB opened a consumer complaint line; in the last 11 months, the agency received more than 45,000 gripes -- often regarding credit cards and mortgages.
- Bill Would Curb Oversight of Payday Loans
Washington Times 11 Jul 2012
Several lawmakers are lobbying to strip the Consumer Finance Protection Bureau (CFPB) of its authority over pawn shops, payday lenders, check cashers, and installment lenders. They believe oversight by the agency would restrict credit and economic opportunities for lower-income and inner-city consumers. Advocacy groups, however, warn that the move could undermine one of the CFPB's key powers and leave many borrowers vulnerable to risky, high-interest loans. The bill is sponsored by Rep. Joe Baca (D-Calif.) and a bipartisan group of lawmakers from more than a dozen other states. It would create a new federal charter for non-bank lenders that would bypass the CFPB and effectively block many state-level consumer protection laws. Sponsors say the proposal is meant to establish a “vibrant, safe, and commercially viable market for underbanked and unbanked individuals to gain access to financial services and products.” Groups including the Center for Responsible Lending and the Consumer Federation of America oppose the proposal, arguing that the Office of the Comptroller of the Currency -- which would issue the new charter under the bill -- does not have the same primary mandate to protect consumer interests.
- Consumer Watchdog Agency Proposes New Mortgage Disclosures
Washington Post 10 Jul 2012
On July 9, the Consumer Financial Protection Bureau (CFPB) issued new proposals that would require mortgage lenders to provide loan applicants with new disclosure forms that spell out the interest rate, monthly payment, any changes that will occur over time, and any maximums as well as highlight such risks as negative amortization. In addition to eliminating controversial expenses such as balloon payments and prepayment penalties, the proposals also would flag as "high cost" mortgages with interest rates 6.5 percentage points above the average prime rate or fees higher than 5 percent of the loan value and would mandate borrower counseling for those products. "We want a mortgage market that is fair -- one where people can get a fair shake and businesses can compete fairly with one another," said CFPB director Richard Cordray. The public has 60 days to submit feedback on the high-cost mortgage definition, which federal law requires to be finalized by January; while the comment period for the rest of the disclosure forms will remain open for 120 days.
- Bank of America, Regions Face Overdraft Fee Cliff
The Street 09 Jul 2012
Large banks -- including Bank of America, Regions Financial, and others -- could experience a substantial blow to their earnings due to anticipated new rules related to overdraft fees, according to a report by Deutsche Bank. The Consumer Financial Protection Bureau is expected to create new rules that would require banks to stop clearing customer transactions in an order that maximizes overdraft fee revenue. The Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency already have issued guidance that opposes this practice. Citigroup, BB&T, Comerica, and US Bancorp have changed their processing order to appease regulators. Many other banks have yet to do so. At least a dozen large banks still clear checking account transactions from largest to smallest dollar value in order to charge as many overdraft and related penalties as possible.
- What's 'Abusive'? A $34 Fee for a $5 Overdraft
American Banker 09 Jul 2012
Banks often charge consumers for overdrafts, no matter how small the infraction. In such instances, even a purchase of $5 that sends a bank account balance into the red could trigger an overdraft fee several times that amount. Up to July 22, JPMorgan Chase will continue its practice of charging a $34 overdraft fee for all purchases, despite criticism from consumer advocates. After that, the bank will not assess fees for purchases of $5 or below. The Dodd-Frank Financial overhaul bans banks from using abusive practices, and the Consumer Financial Protection Bureau (CFPB) is tasked with the job of determining how to define the word, which will likely have a significant impact on the financial industry. CFPB director Richard Cordray said bankers "should be thinking carefully about whether they're taking unreasonable advantage of their customer." JPMorgan Chase was among several big banks to pay monetary penalties last year for violations related to unfair and deceptive practices. As part of its settlement, the bank has agreed to change its practices. The change is expected to cost the megabank $170 million. Dodd-Frank says charging such fees can be banned by the CFPB as abusive if it "takes unreasonable advantage of the reasonable reliance by the consumer on a covered person to act in the interests of the consumer."
- New Agency Plans to Make Over Mortgage Market
New York Times 06 Jul 2012
As it nears its one-year anniversary, the Consumer Financial Protection Bureau is making mortgage reform a priority. Its aim is to create a fairer and more transparent home buying experience for consumers, so that they have a better understanding of the kind of loan they are taking out and the costs associated with it. While the CFPB also is taking a hard look at student loans and credit cards, among other issues, the mortgage market tops its agenda because, according to director Richard Cordray, "it's the market where consumers have the most at risk and they have the most at stake." Soon, the agency expects to introduce rules addressing the "good faith estimate" provided to consumers shopping for a home loan. The new one-page disclosure form will cover the terms of the loan -- including the interest rate, how it could change over the life of the loan, and how much borrowers will need to bring to the closing table -- will be more comprehensive and easier to understand the previous document. Additionally, mortgage servicers will have to offer clearer information, better service, and options for borrowers facing foreclosure. "If we do all of those things from beginning to end, I think the mortgage process will work better," Cordray remarks. "And that's good for the economy."
- The Credit Card Companies With the Most Consumer Complaints
Time 28 Jun 2012
The Consumer Financial Protection Bureau (CFPB) recently made its credit card complaint database public, to the delight of consumer advocates and to the dismay of the banking industry. Banking analyst Ken Thomas crunched the data to identify the card companies with the best and worst customer satisfaction. USAA and HSBC came out on top, with only 90 and 171 complaints each, respectively. These were the fewest gripes in proportion to the size of their customer bases. The top five also included Discover, American Express, and JPMorgan Chase. Large regional bank SunTrust was at the bottom in terms of the rate of complaints, followed in order by TD Bank, GE, Capital One, and Barclays. The analysis included 13,502 credit card complaints filed with the CFPB for the second half of 2011 and most of the first half of 2012.
- Consumer Bureau Report Raises Concerns About Reverse Mortgages
Los Angeles Times 28 Jun 2012
A report being released June 28 by the Consumer Financial Protection Bureau raises a red flag over the increased use of reverse mortgages, given that 9.4 percent of such loans were in default as of February. One reason for the trend, CFPB officials fear, is that the complex nature of the product -- which allows homeowners aged 62 and older to tap into their equity without having to make monthly payments -- makes some senior citizens ripe for abuse from scam artists. "There may be circumstances where the reverse mortgage is inappropriate ... but the seniors I've talked to really are a bit confused about what it is all about," says Hubert H. Humphrey III, who directs the CFPB's Office of Older Americans. "They're told there's money out there that they can get, but there isn't always a description of the cost associated with the product. And the interest rates and other parts of this product are often confusing." Reverse mortgage borrowers also can face foreclosure if they fail to keep up with property taxes and insurance premiums. The CFPB could set new regulations that improve disclosure of reverse mortgage terms and impose restrictions on advertising. Fewer than 3 percent of eligible homeowners currently hold reverse mortgages, but the regulator is worried about greater use of the loans as the baby boomer population ages.
- Reverse Mortgage Reforms Needed to Protect Seniors
Consumer Reports 25 Jun 2012
Consumers Union -- the advocacy arm of Consumer Reports -- is calling for greater oversight of the reverse mortgage industry in order to curtail abuse against senior borrowers. Home equity makes up about 70 percent of the assets held by middle-income retirees, aside from Social Security and pension benefits. With reverse mortgages, homeowners aged 62 and older can tap their equity to receive income through cash payment or lines of credit. They must pay a loan origination fee, closing costs, and compounding interests on the loan principal -- which can add up. Consumers Union has asked the Consumer Financial Protection Bureau (CFPB) to make sure that loans are suitable for borrowers, to abolish deceptive marketing, to place greater restrictions on cross promotions, to improve counseling, and to protect non-borrowing spouses. The CFPB will hold a hearing on the topic on June 27. "Reverse mortgages should only be used as a last resort because they can carry huge costs that can quickly drain a homeowners equity," said Norma Garcia, senior attorney and manager of Consumers Union's financial services program. "The reverse mortgage industry insists that it can police itself but it's clear we need common sense oversight by the CFPB to protect seniors."
- Military-Member Mortgages
BusinessWeek 22 Jun 2012
Enlisted personnel will enjoy added protections under new mortgage servicing rules issued by the Consumer Financial Protection Bureau, Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, and National Credit Union Administration. According to the CFPB, the new protocol aims to give military members "clear accurate, and timely information about available options such as loan modification or short sale," when they receive relocation orders that cannot be appealed and must be executed on short notice. The agency added that a regulator will take "appropriate enforcement action" if it finds that a servicer has acted in an unfair or abusive manner.
- CFPB Launches Complaint Database
Washington Post 19 Jun 2012
The Consumer Financial Protection Bureau (CFPB), which has fielded more than 45,000 complaints in the 12 months since it began operating, is rolling out a database detailing information on Americans' complaints about credit cards. Banks have balked at the inclusion of specific company information in the complaints, arguing that the grievances could be inaccurate or unfounded. The database is expected to include information for large banks overseen by the CFPB. The agency is expected to only publish gripes after the relationship between consumers and companies has been verified and will include the name of the company involved, the nature of the complaint, and the consumer's Zip code. Additionally, the database will include information on whether the bank responded in a timely manner, how the complaint was resolved, and any disputes. The database, which will include credit card complaints beginning June 1, will add older complaints by the end of the year but not include complaints related to mortgages, consumer loans, and checking and savings accounts.
- Federal Agency Ramps Up Effort to Combat Financial Scams Against Elderly
Washington Post 15 Jun 2012
The Consumer Financial Protection Bureau (CFPB) has asked for public comment on the best way to find legitimate financial advisers as a way of preventing scams targeting the elderly. The agency also is requesting input on how effective and easy to understand financial counseling is for seniors, as well as information on scams against veterans. CFPB director Richard Cordray pointed to a 2009 study by MetLife, which found that Americans over 60 years of age were bilked out of at least $2.9 billion in 2010, a 12 percent increase from 2008. Other research has found that family members and caregivers were the most frequent perpetrators of financial abuse. Skip Humphrey, head of the CFPB’s Office for Older Americans, said the department is planning several projects to address the problem, such as creating a layman’s guide to explain financial responsibilities to seniors' family members and caregivers. The public can submit comments of financial abuse to the CFPB through Aug. 13.
- New Consumer Financial Protection Bureau Faces Growing Pains
USA Today 14 Jun 2012
Examining 42,922 complaints filed with the Consumer Financial Protection Bureau (CFPB), 38 percent of credit card consumers received a monetary settlement from their credit card company -- an average $127 taken off their bill -- while 11 percent of mortgage customers received about $400 after filing a complaint. About 39 percent of customers say they are not happy with the process, even though banks respond within the 15-day period 95 percent of the time. CFPB says that the numbers do not reflect those consumers who are given non-monetary help, such as foreclosure alternatives, an end to debt collection calls, and corrected submissions to credit bureaus. Some suggest that despite the new consumer complaint system, consumers are still at the mercy of banks when it comes to resolving their problems. A number of credit card complaints are related to billing disputes, and others are related to identity theft and fraud, but the CFPB only gets involved if there is a pattern of dissatisfied customers or non-responsive companies.
- Private Student Loans Often Confuse and Frustrate Borrowers: CFPB
Los Angeles Times 13 Jun 2012
According to information published on the Consumer Financial Protection Bureau's Web site, many Americans are confused by and frustrated with the process of dealing with private student loans. On June 13, the agency published nearly 2,000 comments from borrowers, advocacy groups, and other agencies. The remarks showed that many were angry with lenders for not providing borrowers with clear loan terms. Additionally, the majority of comments revealed frustration about the higher interest rates charged for private loans compared to those for government-backed student loans. As the cost of a college education continues to rise, more students have had to rely on private student loans, leading outstanding student debt to mushroom. "Not surprisingly, we heard a lot about the challenges borrowers have faced in periods of unemployment and financial hardship," said Rohit Chopra, the CFPB's student loan ombudsman. The bureau intends to delve deeper into the issue; it is calling on state governments, schools, and advocacy groups to submit any borrower inquiries or grievances they have fielded.
- Bank Overdraft Fees Creeping up Again, Consumer Monitors Say
Philadelphia Inquirer 08 Jun 2012
The Consumer Financial Protection Bureau is considering whether to address bank overdraft fees, which totaled nearly $30 billion in 2011. Some of these fees are on the rise, according to new reports by the Pew Charitable Trusts and the Consumer Federation of America. The average overdraft fee at large U.S. banks has been about $35 for two years. However, Pew's Safe Checking Project recently reported that median fees for an extended overdraft rose 32 percent from October 2010 to October 2011. The Consumer Federation of America said that U.S. Bank and Fifth Third Bank are planning to increase their overdraft fees later this month. U.S. Bank will charge $35 for overdrafts more than $15, an increase from $33 for overdrafts over $20. Under fee rules at the largest U.S. banks, consumers could see overdraft charges of up to $370 in one day. Although Pew has called on banks to simplify fee disclosures, some banks' policies still potentially expose customers to high and unexpected costs. Organizations such as Pew have said that consumers face unexpected or unreasonable costs since opting in to overdraft protections was made mandatory. The American Bankers Association reported in 2010 that about half of checking-account customers opted in to overdraft programs, even when told about lower-cost alternatives.
- New House Spending Bills Target Funding for Dodd-Frank Financial Reforms
The Hill 05 Jun 2012
GOP members of the House Appropriates Committee have introduced appropriations bills that target funding for the Wall Street reform law. The 2013 Financial Services bill includes a measure that would make the Consumer Financial Protection Bureau subject to the appropriations process beginning in fiscal year 2014, instead of allowing it to receive money from the Federal Reserve. Meanwhile, the 2013 Agriculture bill allocates $128 million less in funding than the Obama administration said was necessary for the Commodity Futures Tradition Commission to implement the Dodd-Frank Act. The author of the reform law, Rep. Barney Frank (D-Mass.), blasted the committee. "The Republican appropriations bills defining spending levels for agencies in charge of critical financial regulations is a declaration of unilateral surrender to the forces of irresponsibility that wrecked our economy several years ago and, as we have seen from recent events, might be poised to do it again," he said. The Financial Services bill has reduced funding for its agencies to just $21.15 billion, $2 billion less than the president requested.
- CFPB Requests Public Input on Checking Account Overdraft Programs
BankCreditNews.com 31 May 2012
The Consumer Financial Protection Bureau (CFPB) has requested information related to checking account overdraft programs, hoping to better understand how the policies of these programs affect American consumers. The CFPB is seeking public comment on banks' overdraft programs, their pros and cons, and their risks to consumers. The agency also is reviewing banks' overdraft policies to find if further regulation is needed. Rep. Carolyn B. Maloney (D-N.Y.) recently introduced the Overdraft Protection Act of 2012, which would require the CFPB to examine pre-paid overdraft programs and would limit the amount of overdraft fees issued to each consumer. In 2005, the Federal Deposit Insurance Corp. "reaffirmed" a best-practices document that recommended risk-mitigation techniques for U.S. banks, such as the use of technology to alert consumers of a low balance and elimination of overdraft fees for smaller transactions.