Read the latest on the Consumer Financial Protection Bureau (CFPB).
- CFPB Releases Exam Manual for Student Loan Supervision
American Banker 18 Dec 2012
A new Consumer Financial Protection Bureau guide covering student loan supervision made its debut on Dec. 17. The Student Lending Examination Procedures manual will be used to evaluate banks and non-banks that offer student financing on their compliance with applicable consumer financial laws. Examiners will look at such areas as truth in advertising, product disclosures, borrower qualifications and collections. "For many borrowers, a student loan may be their first major financial decision," notes CFPB director Richard Cordray. "With student debt topping a trillion dollars, we will be working to ensure consumers are treated fairly and lenders are held accountable."
- CFPB to Share Mortgage Complaint Data With State Regulators
Reverse Mortgage Daily 17 Dec 2012
The Consumer Financial Protection Bureau (CFPB) will share consumer complaint data with state regulatory bodies, hoping to further protect the public from fraud. Sharing the information could help alleviate the trouble of filing grievances with multiple government agencies. After a complaint is securely filed, the CFPB will screen it to make sure that it is complete and not a duplicate of a previous gripe from that consumer. The CFPB then will send it to the offending company, requesting a reply within 15 days. Companies should close all but the most complicated complaints within 60 days, under the CFPB guidelines. Without disclosing information about the consumer's personal identity, the regulator will then publish a selection of the data in its public Complaint Database. Real-time access to a database of complaints could provide state government agencies with a more complete picture of consumer markets. Complaints to the CFPB have covered mortgages, credit cards, student loans, bank services, and consumer loans.
- Errors on U.S. Consumer Credit Reports Getting Tougher Oversight
BusinessWeek 13 Dec 2012
Consumers could face fewer roadblocks in resolving credit report errors now that the Consumer Financial Protection Bureau has assumed oversight of the three major credit reporting firms: Experian, Equifax, and TransUnion. A report from the agency said the three credit bureaus could do more to settle errors on consumer's credit reports. Credit reporting firms resolve an average of 15 percent of items that consumers dispute internally, the report found, transferring the other 85 percent on to so-called furnishers such as banks, card issuers, and other companies with information on a borrower's behavior. CFPB director Richard Cordray said, "The documentation consumers mail in to support their cases may not be getting passed on to the data furnishers for them to properly investigate and report back to the credit reporting agency."
- Restraints to Be Put on Debt Collectors
Fox Providence 12 Dec 2012
Beginning next year, the Consumer Financial Protection Bureau's jurisdiction will include large collection firms. About 30 million Americans -- many of whom do not even owe a debt -- are being harassed by collectors. The bureau is cracking down on harassing calls and other situations in which consumers are being pursued for a debt that is not theirs. Attorneys for consumers say that some collectors have left people threatening, intimidating, and even abusive messages. In a Federal Trade Commission lawsuit, one grieving mother said that a debt collector threatened to have the funeral home dug up her son's body if she did not pay the debt. The Debt Collection Trade Association has voiced support for weeding out companies that use extreme tactics.
- CFPB Warning and Bulletin for Nationwide Specialty CRAs
Mondaq 11 Dec 2012
The Consumer Financial Protection Bureau (CFPB) has dispatched warning letters to several nationwide specialty consumer reporting agencies (CRAs) over their need to comply with Fair Credit Reporting Act (FCRA) provisions. Nationwide specialty CRAs include those that maintain files related to medical records or payments, tenant history, check writing history, employment history, and insurance claim history. The FCRA requires such entities to provide consumers with a free annual credit report and to establish a "streamlined process" for consumer access to those reports. That process must include a toll-free phone number, posted on the CRA's Web site and in the telephone directory. CRAs also must have "reasonable procedures" in place for the volume of consumers who will use the streamlined process, with clear instructions on how to request reports. Letter recipients must review their disclosures and informational listings to ensure compliance and contact the CFPB within 30 days.
- CFPB Legal Action Halts Two Alleged California Mortgage Scammers
Credit Union Times 11 Dec 2012
The Consumer Financial Protection Bureau has announced actions to stop two alleged mortgage modification scams the reportedly swindled thousands of struggling homeowners. According to the agency, the scheme took in more than $10 million total by charging customers for services that falsely claimed to stop foreclosures or renegotiate at-risk mortgages. "We are taking on schemes that prey on consumers who are struggling to pay their mortgages or facing foreclosure," said director Richard Cordray. "We are especially concerned with those who misrepresent government programs or websites to divert distressed homeowners from needed assistance. At the behest of the CFPB, federal judges in California have ordered both the Los Angeles-based Gordon Law Firm and the Santa Ana-based National Legal Help Center to cease operations and have frozen their assets while the CFPB takes actions on both cases.
- As CFPB Studies Arbitration, Lobbying Intensifies
American Banker 11 Dec 2012
With the Consumer Financial Protection Bureau currently in the midst of a study that will help it determine whether to abolish or more tightly regulate mandatory arbitration requirements, lobbyists are lining up in full force on either side of the issue. It is not unusual for banks and credit unions to compel arbitration for checking account agreements; and the practice also is commonly applied in cases involving insurance policies, credit card contracts, and debt collection. Banks insist it is less expense, more efficient, and more beneficial to the consumer; but consumer attorneys say financial providers often structure arbitration clauses in a way that makes it difficult to pursue a claim. Consumer advocates also complain that financial contracts often bind consumers to the arbitration process without placing the same restriction on the bank. To date, the courts have tended to side with the industry in disputes with consumers over arbitration; but a recent Pew Charitable Trusts report concluded that 68 percent of consumers "want a choice between court and arbitration" while just 21 percent believe forced arbitration should be the norm. CFPB's take on the study, along with its own research, could turn the tide in consumers' favor.
- Federal Budget Cuts Would Hit Consumer Protection Agencies
Hispanic Business 10 Dec 2012
The automatic spending cuts connected to the so-called fiscal cliff would remove about $69 million total from the annual budgets of the Consumer Product Safety Commission, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission. If Congress and the president cannot reach a compromise, across-the-board federal spending reductions of $109 billion will take effect on Jan. 2. Consumer advocates warn that this "sequestration" would weaken the watchdog agencies and make Americans vulnerable to scams and sketchy business practices. The CFPB is the newest of these three agencies, created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 to have oversight and regulatory powers over mortgages, credit reporting, debt collection, and payday loans. It would lose about $34 million as a result of sequestration. "The CFPB may weather the storm better than the others only because it is still ramping up to full size and may be more flexible in its choices on how to take the cut," speculated Ed Mierzwinski of the U.S. PIRG, "although obviously some consumer protection will be delayed."
- Consumer Bureau Signs Data Deal With Justice Department
Bloomberg 06 Dec 2012
The U.S. Consumer Financial Protection Bureau and the Department of Justice are planning to share data with each other to facilitate enforcement of fair-lending laws. Both agencies have the authority to fight discrimination in lending under the Equal Credit Opportunity Act, which forbids discrimination in lending because of race, religion, or national origin. The two agencies have pledged to share confidential information and notify each other of enforcement work to avoid unnecessary duplication.
- 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.
- 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.
- 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.
- 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."
- 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.
- CFPB's Proposed Mortgage Reforms Not Enough Say Some Consumer Activists
Huffington Post 16 May 2012
In April, the Consumer Financial Protection Bureau (CFPB) published a proposal to create permanent mortgage servicing reforms that would be in place by the time the $25 billion foreclosure settlement between the country's biggest lenders and state attorneys general expires in three-and-a-half years. While it is still early in the process, some consumer advocates already are saying that the proposed reforms are not adequate. The CFPB said the goal of the reforms is to eliminate two of homeowners' biggest grievances: costly errors and the endless runaround many have experienced when trying to avoid foreclosure. But the National Consumer Law Center's Diane Thompson says the federal agency needs to broaden the reforms even more, in part by also taking a look at costly force-placed home insurance policies. The CFPB stressed that the rules it outlined in April were not part of a formal proposal. The agency said it is seeking public feedback and will issue a formal proposal this summer.
- Stay-at-Home Mom Fights New Credit Card Rule
CNN Money 16 May 2012
A grass-roots campaign is gaining momentum against a new provision of the 2009 CARD Act that, starting in October of last year, has made it more difficult for stay-at-home parents to qualify for their own credit cards. The Federal Reserve rule dictates that credit card issuers consider individual income, rather than household income, to determine eligibility. As a result, many parents who rely on their spouse's income feel shut out of access to credit. One Virginia mom whose application for a Target card was rejected has refused to acquiesce to the new guideline, recently launching an online petition to persuade the Consumer Financial Protection Bureau -- which assumed jurisdiction over the rule last summer -- to amend it. The petition at Change.org already has garnered in excess of 30,000 signatures. "I used to be CEO of a small software consulting business and am now staying at home to take care of a toddler and first grader," wrote one stay-at-home mother on the petition. "If you had to pay someone to do what I do now, it would cost you at least $120,000, which is a lot less than what I used to earn. ... Don't you think I should be allowed to get a credit card on my own?" Holly McCall, the 34-year-old mother of two who organized the petition, delivered the signatures to the CFPB on May 15, supported by a handful of petitioners. Some of the women dressed as 1950s housewives, to illustrate how the rule "feels like a flashback to the 1950s because of the way women aren't empowered financially."
- What Is Arbitration? You Sign Away Rights. Is That OK?
Christian Science Monitor 15 May 2012
Many consumers may not even realize that they have signed an arbitration clause with their cell phone carrier or credit card provider, under which they agree to forgo their right to a trial or lawsuit if a dispute arises. Instead, the case is heard by a private arbitrator who makes a binding decision. The corporate world insists the practice is fair and curtails litigation costs. According to a 2010 study by the Pew Safe Checking in the Electronic Age Project, of the 265 different types of checking accounts offered by the country's 10 biggest banks, all but 10 require consumers to sign give up their right to a jury trial. Additionally, for 189 accounts, customers must agree to have the dispute settled by an arbitrator selected by the bank. The Consumer Financial Protection Bureau recently announced that it will investigate the use of such clauses in financial contracts. The agency is asking consumers to share their experiences with arbitration clauses by June 23, 2012.
- Consumer Knowledge of Credit Leaves a Lot to Be Desired
Housing Wire 14 May 2012
Americans are more knowledgeable about credit in 2012 than in 2011, but there are still gaps to close, according to a survey by the Consumer Federation of America. The results showed increased knowledge about which companies collect credit information and how to check it but a lack of knowledge about the negative impact of low credit scores. The majority of survey respondents knew who uses credit scores and that missed payments, personal bankruptcy, and high credit card balances can have affect the number. However, only 9 percent of respondents correctly knew that multiple inquiries within one or two weeks will not lower FICO scores or VantageScore credit scores. Thirty-four percent of respondents incorrectly believed that each inquiry lowers one's scores. More than half of respondents also incorrectly believed that a person’s age and marital status are used to calculate scores, and 21 percent incorrectly believed that ethnic origin matters. Only 44 percent of respondents were aware that a credit score measures risk of repaying loans rather than amount of debt or financial resources.
- Mortgage Brokers Face New Rules
Wall Street Journal 10 May 2012
On May 9, the Consumer Financial Protection Bureau said it may roll out new rules governing mortgage lending fees -- including one requiring lenders to charge flat origination fees, which borrowers pay as compensation to loan officers. The fees currently are calculated as a percentage of the loan size, but the CFPB hopes that a flat charge will deter loan officers from pushing borrowers into more expensive loans in order to trigger greater compensation for themselves. Another possible rule would restrict the amount by which borrowers can lower their interest rate through purchasing "discount points." The agency is not trying to end the practice but does want to ensure that borrowers who take this option actually see a meaningful reduction in their monthly mortgage obligation. The new rules, which would implement provisions of the Dodd-Frank Act, could be proposed this summer for targeted implementation in early 2013.
- U. Prof Joins Federal Consumer Financial Protection Unit
Salt Lake Tribune (UT) 09 May 2012
University of Utah law professor Chris Peterson, a vocal critic of payday lending, will take a leave from his position to join the enforcement unit of the new Consumer Financial Protection Bureau (CFPB). The agency is tasked with regulating everything from credit cards to mortgages. Peterson has called for a warning label on payday loans marking them as "predatory" and has criticized the Mortgage Electronic Registration System, which owns more than half of all U.S. home loans and has foreclosed on thousands of Americans. "He’s one of the leading scholars on consumer finance and predatory lending," according to Deepak Gupta, an appellate lawyer in Washington. "I think he’ll be a real resource for people in the agency." Peterson also has lobbied Congress and the federal government for tighter consumer lending policies on behalf of the U.S. Public Interest Research Group. Congress created the CFPB as part of the Dodd-Frank act in reaction to the housing bubble and financial collapse of 2007. It has been in operation since mid-2011.