Read the latest on the Consumer Financial Protection Bureau (CFPB).
- Senators Should Confirm Cordray
Lakeland Ledger 29 Sep 2011
U.S. senators contemplating President Obama's preference to lead the Consumer Financial Protection Bureau have an easy decision before them, according to a pair of consumer advocates. The choice is clear, write Alice Vickers of Florida Legal Services and Brad Ashwell of the Florida Public Interest in their editorial: confirm Richard Cordray or give payday lenders an edge over other banks. The CFPB has been up and running since July 21, but the former attorney general for Ohio has yet to be confirmed by the Senate Banking Committee. Obama officially nominated him on July 18 as the new enforcement chief of the bureau, created to protect consumers against banks, nonbanks, and payday lenders. While Cordray has received strong support, 44 Republican senators wrote a letter to the president saying the would not confirm any nominee unless the bureau's powers were reduced significantly. Without a director, the bureau cannot fully protect consumers.
- Consumer Bureau Readies Its New Financial Rules
New York Times 20 Sep 2011
Temporary leader of the Consumer Financial Protection Bureau (CFPB) Raj Date indicates that a new string of regulations will be unveiled soon, including one that will require lenders to gauge whether homeowners can repay their mortgages. He says that while he believes in the power of free markets, "free markets need rules." Other possible changes could revamp mortgage disclosure forms, which could be revealed in 2012. Date said, "We're taking the required mortgage disclosure forms and streamlining them into a single form. We believe the final product will be more useful to consumers, and simultaneously reduce costs for lenders."
- Consumer Bureau Targets Checking Overdraft Fees
Chicago Tribune 19 Sep 2011
A controversial new federal agency is targeting a consumer pariah: checking account overdraft fees. The de facto head of the Consumer Financial Protection Bureau, Raj Date, said in a speech in Philadelphia in mid-September that the new regulator is going to begin scrutinizing overdraft programs with the goal of clarifying the cost of free checking accounts. "With these free checking accounts, much of the costs to the consumer were buried in overdraft fees," said Date, special adviser to the Treasury Secretary on the consumer bureau. "Going forward, the bureau will carefully assess how we can best ensure that the overall market for short-term credit is fair, transparent, and competitive." Date -- who is running the consumer bureau as it anticipates the confirmation of its first chairman -- said that one of the CFPB's first major decisions could be establishing guidelines for banks to make sure consumers understand what they are doing when they accumulate overdraft fees.
- New CFPB Leader Pledges 'Tough' Enforcement Regime
American Banker 16 Sep 2011
In his first speech since taking the reins at the Consumer Financial Protection Bureau, Raj Date cautioned that the agency will take a tough stance when it identifies products that are harmful for the public. On Sept. 15, he told a group of bankers and consumer advocates in Philadelphia, "Make no mistake: When we find unjustified practices that cause substantial consumer harm, we will take the necessary action to put an end to them." However, he emphasized that enforcement is only one tool the CFPB will have its disposal along with supervision, rulemaking, and research. While Date touched on the bureau's overall agenda, he intimated that specific products -- including bank overdraft programs and short-term cash advances -- will be given special attention. The CFPB is hamstrung from reforming the mortgage market, including through the introduction of loan servicing standards, until a permanent director has been appointed; but it does plan to flag problems in the student loan market and roll out additional rules for credit cards. Date stressed that all of the regulator's work will be grounded in product transparency, common-sense regulations, consistent oversight, and smart enforcement. By giving consumers the confidence to borrower for a home purchase or for higher education purposes while simultaneously giving banks the confidence they need to innovate and compete, Date said the new agency will stimulate the economy as a whole.
- FTC, CFPB Sorting Out Respective Roles in Reducing Financial Fraud
Law.com 15 Sep 2011
Just seven weeks after the new Consumer Financial Protection Bureau opened its doors, the Federal Trade Commission shows no signs of ceding any of its own overlapping jurisdiction over financial fraud. The agency recently brought suit against a payday lender that allegedly tried to garnish consumers' wages without obtaining the required court order. Earlier this month, the FTC also amended its complaint against U.S. Mortgage Funding, charging the company with falsely promising financially strapped consumers that they would get loan modifications to make their mortgages more affordable. Meanwhile, the CFPB is still gearing up and has yet to issue a single enforcement action. It is unclear how the two agencies will split up the responsibility. "The FTC and the CFPB will have joint enforcement over deceptive marketing of payday loans and a range of other financial products," according to FTC spokeswoman Betsy Lordan, who said details on how the agencies will split joint enforcement efforts will be made clear in a Memorandum of Understanding, set to be complete by Jan. 21, 2012. But one FTC commissioner, J. Thomas Rosch, has challenged why the CFPB is even necessary, as the two agencies have so much overlapping jurisdiction. "The proposed new agency has no track record in protection consumers from deceptive and unfair practices in the financial marketplace," he said.
- CFPB Launches Fourth Round of Mortgage Disclosure Form Testing
Housing Wire 12 Sep 2011
The Consumer Financial Protection Bureau continues to test various mortgage disclosure forms to compare the pros and cons of each. In its fourth round of testing, the agency this week will compare two identical forms with different loan information to see how clear the price differences are to consumers and lenders who read the documents. "Comparing two versions of a form is useful, but in the real world, consumers should be able to use disclosures to compare different loan offers, not different forms," according to a statement from the CFPB. "We want to make sure the disclosure actually helps consumers understand features of competing loan products, from the overall loan amount to estimates of taxes and insurance costs." The forms are designed to combine the Truth in Lending Act and Real Estate Settlement Procedures Act disclosures into a single, easy-to-read document; feedback gathered about the sample forms will enable the bureau to develop standard uniform lending documents for the industry.
- Consumer Bureau Reaches Out to Military Families
New York Times 07 Sep 2011
Regulators took note that military households were proving to be especially vulnerable to financial rip-offs following the financial crisis. After gathering information about unscrupulous mortgage lending practices, deceptive car loans, and other abusive financial products, the newly opened Consumer Financial Protection Bureau wants to hear from military families about what they found to be the best financial products and services tailored to them. According to the assistant director of the CFPB's Office of Servicemember Affairs, Holly Petraeus, the division is looking for information on homeowner assistance programs, such as loan modification services; financial education opportunities; and marketing and communication strategies. "Military families face unique challenges especially when it comes to their finances," Petraeus says. "By identifying the products and services that aim to assist their particular needs, our office will be able to better serve service members and their families." Comments from the public will be accepted via e-mail through Sept. 20.
- Consumer Pick Vows to Streamline Regulations
New York Times 07 Sep 2011
During a U.S. Senate Banking Committee hearing, Consumer Financial Protection Bureau (CFPB) nominee Richard Cordray said that if he was confirmed, he would use the agency's "bigger and more flexible toolbox" to enforce consumer financial laws, use litigation judiciously, and prioritize the streamlining of regulations. He noted that the number of regulations crafted over the last three decades have burdened some banks and has discouraged them from lending. Cordray's testimony aimed to assure lawmakers that as head of the CFPB, he and the agency would be accountable to Congress, but Republican lawmakers remained unconvinced saying that the bureau had too much unchecked power. Banking Committee Ranking Republican member Sen. Richard Shelby (Ala.) said, "Unless the bureau is reformed. It is only a matter of time before this concentration of power is abused or misused to the detriment of American consumers and the economy." Shelby is among the 44 Republicans who have pledged not to confirm the CFPB director unless the Obama Administration agrees to change the agency's structure. Among the changes republicans are seeking are changing the director's position to a board of directors and subjecting the agency to the Congressional appropriations process. The Financial Stability Oversight Council can overturn CFPB regulations by a two-thirds majority, which Cordray admitted was a high hurdle, but says that it would be unnecessary as the CFPB is required to "communicate and consult with our fellow banking agencies."
- Consumer-Bureau Nominee on Hot Seat
Wall Street Journal 06 Sep 2011
President Barack Obama's nominee, Richard Cordray, to lead the new Consumer Financial Protection Bureau (CFPB) will testify at a U.S. Senate confirmation hearing on Sept. 6. He is expected to allay lawmakers fears that as head of the agency he would be quick to use litigation as an enforcement tool. In a prepared statement, Cordray noted, "I know from my own experience that lawsuits can be a very slow, wasteful, and needlessly acrimonious way to resolve a problem." Rather than discuss Cordray's background during the hearing, some expect lawmakers to focus primarily on the structure of the agency, which Republicans say has too much unchecked power. Forty-four Senate Republicans signed a pledge that said they would oppose any nominee to the CFPB unless the administration agreed to modify its structure. A U.S. Senate Banking Committee Senior Republican Richard Shelby (Ala.) spokesperson says, "Opposition to or support of Mr. Cordray's nomination will become relevant as soon as the president agrees to make the structural changes we've requested." Democrats have said they would oppose any changes to the CFPB, which should be politically independent. Cordray, meanwhile, has received some support from the business community, with letters of support issued by executives and leaders of the Ohio Bankers League, American Electric Power, and Limited Brands. The White House hopes to drum up support for the nominee through a series of meetings between Cordray and all 22 members of the Senate committee.
- Payday Lenders Prey on the Poor, Costing Americans Billions. Will Washington Act?
Christian Science Monitor 06 Sep 2011
The Senate Banking Committee gathered on Sept. 6 to discuss the confirmation of Richard Cordray, nominated to become the first head of the Consumer Financial Protection Bureau (CFPB). But as President Barack Obama prepares to address the nation on the job crisis, officials at the CFPB are urged to make regulating the payday loan industry a priority. The $30-billion-a-year industry is subject to minimal regulation and commands high interest from the most vulnerable consumers. In today's economically turbulent times, many Americans find themselves paying interest rates of up to 572 percent, as they seek small loans to help them make ends meet on a paycheck-to-paycheck basis. The payday lending industry's lobbying arm, the Community Financial Services Association, boasts that "more than 19 million American households count a payday loan among their choices of short-term credit products." But while the industry has customers of all races, backgrounds, and ages, a February 2011 National People's Action report found that the industry disproportionately affects low-income and minority communities. Overall, the Center for Responsible Lending estimates that predatory payday lending robs Americans of $4.2 billion annually -- largely from those who can least afford it. In recognition of the fact that a loan to cover a small expense should not be a first step down a road to financial ruin for anyone, 17 states -- including Cordray's home state of Ohio -- currently ban or severely limit the practice. Others are considering similar legislation.
- Congress Will Again Take Up Business Lending, Consumer Bureau, and Deficits
Credit Union Times 31 Aug 2011
Immediately after Congress returns from recess after Labor Day, lawmakers will consider the nomination of Richard Cordray, whom President Obama picked to be director of the Consumer Financial Protection Bureau. The Senate Banking Committee has scheduled a hearing on Sept. 6 on Cordray. The House Financial Services Committee will also reportedly hold a hearing on legislation to raise the cap on credit union member business loans.
- New U.S. Consumer Hotline Not Routing Some Complaints to Banks
Bloomberg 30 Aug 2011
Technical problems in a new system created by the Consumer Financial Protection Bureau have led to some consumer credit card complaints not reaching banks that issued the cards. The complaint response system has failed to properly route all inquiries, a problem the bureau says will be resolved within a matter of weeks. The system, mandated by Dodd-Frank, was launched on July 21. Its website invites consumers to file complaints about credit cards and will eventually cover other financial services. Some banks found that their volume of complaints dropped following its launch, says Richard Hunt, head of the Consumer Bankers Association. The banks were concerned they might be blamed for unanswered queries, he adds.
- CFPB Launches Foreclosure Prevention Campaign
ReverseMortgageDaily 29 Aug 2011
The Consumer Financial Protection Bureau (CFPB), which gained authority on July 21, has launched a foreclosure prevention campaign as it seeks to assist consumers. The campaign's new Web site provides step-by-step guidance to homeowners at risk of losing their property, lists Department of Housing and Urban Development-approved counseling agencies, and links reverse mortgage borrowers to counselors through the HOPE hotline. The effort also involves encouraging homeowners to call the CFPB if they need assistance or using the HUD's online list of foreclosure prevention resources. The bureau additionally is advocating for vigilance when it comes to foreclosure scams -- particularly those involving older Americans, who are the targets in 41 percent of foreclosure rescue schemes.
- Banks Declare Peace With Consumer Bureau Over Regulating Nonbanks
American Banker 25 Aug 2011
In an unexpected move, the financial services industry is coming to the defense of the Consumer Financial Protection Bureau. While still wary of the agency's initiatives, banks are solidly on its side in terms of regulating the competition. In comment letters on the new regulator's options for supervising nonbanks -- including payday loan providers and nonbank mortgage lenders -- banking trade groups uncharacteristically urge the bureau to be relentless with its nonbank supervision program and laud CFPB for starting the program early. The American Bankers Association "fully supports the bureau's preliminary efforts to define its nondepository supervisory scope as it prepares for the future exercise of that supervision authority," Virginia O'Neill, senior counsel for the ABA's Center for Regulatory Compliance, wrote in an Aug. 15 letter. "This approach has been a model effort to seek broad, careful, and thoughtful input in the important early stages of developing a rule proposal."
- Consumer Bureau Getting Cozy with State AGs
American Banker 19 Aug 2011
The new U.S. Consumer Financial Protection Bureau (CFPB) is working closely with state attorneys general to ensure the enforcement of consumer banking laws, as the Dodd-Frank Act opened the door for information sharing and consultation between state and federal regulators. The CFPB and state attorneys general released a joint statement about their coordinated efforts to protect consumers from abusive practices by banks and nonbanks, which was effectively underscored by the nomination of Former Ohio Attorney General Richard Cordray as the CFPB's first director. Many experts expect the agency to work more closely with state attorneys general in an effort to engage in a more nationwide impact on top priorities. White House Advisor Elizabeth Warren already laid the groundwork for the cooperative arrangement, noting, "While the value of shared law enforcement goals between federal and state officials is obvious to many of us in this room, we also know that federal banking regulators often have acted at cross-purposes with the attorneys general and state regulators in the past. Moving forward, consistent and effective enforcement of consumer financial laws will require our sustained collaboration." Cordray was considered one of he most aggressive state attorney generals in the recent past, with his efforts against large mortgage services for their foreclosure practices. "I think that on a number of levels," Cordray's nomination "sends a pretty important message . . . that it's going to be a meaningful partnership," says Kevin Petrasic, a partner with Paul Hastings Janofsky & Walker LLP. Meanwhile, questions of federal preemption must be decided through negotiations between the CFPB and the Office of the Comptroller of the Currency under Dodd-Frank. Moreover, the law enables state attorneys general to bring enforcement actions in the name of the state in federal district court to enforce consumer protections in Dodd-Frank and any of the CFPB's new regulations. The attorneys general and the CFPB plan to develop joint training programs and regularly consult with one another to identify mutual enforcement priorities and conduct joint or coordinated investigations and enforcement actions.
- New Consumer Financial Protection Bureau Should Regulate Online Advertising of Financial Products
Huffington Post 16 Aug 2011
One of the first priorities for the Consumer Financial Protection Bureau, which opened its doors this summer, is writing rules for regulating the activities of "non-banks" that still potentially affect the financial well-being of consumers. The CFPB's goals include creating a single regulator to define and guarantee basic consumer protections across a wide range of financial institutions -- and even many institutions that are not usually considered financial institutions but that play a key role in the U.S. financial system nonetheless. Under the Dodd-Frank Act, the CFPB can regulate larger non-bank "participants" in the financial system; and the agency has been seeking comments on what financial markets to cover, how to define a "large" participant, and what kinds of data it should be collecting to protect consumers. Google, Yahoo, Microsoft, and other online intermediaries are playing an increasingly integral role in the financial world; and the CFPB must first collect more data to measure what their impact is on consumers and, secondly, write rules to protect those consumers.
- New Oversight for Nonbanks
Philadelphia Inquirer 14 Aug 2011
Financial woes resulting from the practices of nonbank financial institutions have long plagued consumers but have been out of the reach of most federal and state regulatory agencies. There is good news for consumers who once saw their only course of action as contacting lawyer; it comes in the form of the new Consumer Financial Protection Bureau. The agency has begun implementing various parts of the Dodd-Frank financial legislation and is considering whether to begin supervising credit reporting, debt collection, the prepaid-card industry, loan servicers, check cashers, debt-relief services, money transmitters, and other nonbank financial services. Many of these nonbank entities shouldered much of the blame for the housing bubble and the 2008 financial crisis it spurred, necessitating new oversight. To prevent a repeat of the events that lead to the Great Recession, Congress created the bureau and instructed it to extend the kind of oversight already directed at banks to nonbanks -- specifically to payday lenders, mortgage lenders, and private education lenders, but also to other "larger participants" in the financial markets. The bureau is hoping to level the playing field, and it will work to address the various pitfalls that plague the financial system. The key to its power is the authority it has to supervise and examine a nonbank financial institution, which will make the bureau much better suited to understand how the institution functions and determine what kind of consumer protection is needed. The CFPB has promised to make consumer protection a priority.
- Don't Forget About the Under-Banked Consumer
The Hill 10 Aug 2011
Drew Edwards, CEO and founder of Chexar Networks, Inc., says in this blog posting that banks historically have been unwilling to change their product offerings to meet the legitimate needs of the underbanked -- a massive consumer group -- by adding services such as check cashing, money transfers, walk-up bill payments, and prepaid Visa/MasterCard debit cards. Now, banks are growing more and more focused on redefining their product set to meet the needs of these consumers by offering them the services they are purchasing today at the corner check casher or store. This change in mentality has been driven by recent legislative changes in Washington that will significantly lower the fee income these banks generate from deposit accounts, debit cards, and credit cards. Forced to re-examine their fee income models, banks have spent the past year performing internal analysis that has helped them to realize that as much as 25 percent of their current deposit account holders are actually going outside the bank to procure these services.
- The $169 Billion Hidden Market: People Without Banks
Strategy+Business 05 Aug 2011
According to FDIC data, an estimated $169 billion in income never flows through a bank or credit union. For years, banks have experimented with winning over "bottom of the pyramid" consumers in the U.S., and many have concluded that the effort was too risky and not lucrative enough. However, researchers from the University of Virginia Darden School of Business spent a year studying the issue and conclude that some different approaches could prove more successful in attracting deposits from the millions of households that have no relationship with a bank or credit union. The rapidly growing Latino population is particularly underserved, the researchers say. Several factors make the Latino population particularly attractive. Many Latino households feature more than one adult generating income, and the group's workforce participation is high. While some unbanked Latinos are undocumented aliens who would have trouble opening an account without a Social Security number, many others are just put off by deposit requirements and language barriers, and turn instead to check-cashing stores and payday lenders that cost more to use. Banks and credit unions could hire more employees who speak Spanish, educate staff members on cultural issues, and help customers with paperwork. Banks could also offer incentives to employers to bring staff members to the bank, or hold "sign-up" days in workplaces during which the benefits of banking — especially the absence of check-cashing fees — are promoted. Finally, the researchers argue that bank managers should get out the message that bringing large numbers of unbanked households into the system lowers the risk of crime. Because unbanked consumers carry cash or keep it at home, they are often the victims of violent robberies.
- House Republicans Block Recess Appointments by Obama
Los Angeles Times 04 Aug 2011
The Senate adjourned for more than a month without going into a formal recess, after congressional Republicans used procedural moves to block President Barack Obama from temporarily appointing heads to the new Consumer Financial Protection Bureau (CFPB) and other agencies through so-called recess appointments. The Senate cannot go on a formal recess without approval from the House, and the GOP majority there again has blocked one. In addition to the vacant director slot at the consumer agency, Obama would like to install nominees to head the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and numerous department and federal judicial posts. The most high-profile position Obama would like to fill is director of the CFPB -- the position for which he nominated former Ohio Attorney General Richard Cordray, who faces strong resistance from nearly all Senate Republicans. They vowed to block any nominee to head the agency unless Obama agrees to dilute its power. Until the consumer agency has a Senate-confirmed director or one put in place by a recess appointment, it cannot use some of the authority granted to it by last year's financial reform law. Those delayed powers include regulation of mortgage brokers, payday lenders, and other financial institutions outside the banking system. The Treasury Department is running the agency until it has a director.