Read the latest on the Consumer Financial Protection Bureau (CFPB).
- Chief of New Consumer Finance Agency Says It Is Ready to Investigate, Sue for Illegal Lending
Washington Post 24 Jan 2012
The Consumer Financial Protection Bureau is ready to take to court companies that offer predatory or deceptive mortgages and credit cards, director Richard Cordray said on Jan. 24. Speaking before a congressional panel, he defended his appointment to lead the bureau and assured critics that the agency will partner with financial companies whenever possible. However, he emphasized, "we will not hesitate to use enforcement actions to right a wrong." Cordray was addressing Congress for the first time since his recess appointment by President Barack Obama earlier in January. He faces questions about the watchdog's actions and the legitimacy of his appointment. Republicans say the appointment is illegal because the Senate technically was not in recess. Republicans were holding minutes-long sessions during their vacation to block the president from making any appointments. Part of why the CFPB might lack credibility is because it is led by a director whose "appointment was constitutionally questionable," said Rep. Patrick McHenry (R-N.C.), chairman of the House Oversight Committee panel that Cordray addressed. McHenry is a major beneficiary of political donations from the payday lending sector, which will face much stricter oversight due to Cordray's appointment. Cordray said that he knows about the objections to his appointment, but "I'm in the job, it's an important job, it's a big job, it commands all of my time and attention, and all I can do is try to carry out the responsibilities."
- CFPB Imposes New Rules on Remittance Disclosures
American Banker 23 Jan 2012
The Consumer Financial Protection Bureau issued a final rule Friday that will impose new disclosure requirements for remittance transfers. Under the rule, remittance transfer providers must disclose the fees, the exchange rate and the amount of money to be received by the recipient. Providers must disclose the information when the customer first requests the transfer, and again when the payment is made. Consumers will generally have 30 minutes after payment is made to cancel a transaction. The new rules, required by Dodd-Frank, provide for a one-year implementation period. CFPB is also seeking comment on whether to make a few final adjustments to the rule, including setting a threshold that would minimize the impact of the regulation on community banks, credit unions and other companies that do not normally process the transactions.
- Payday Lending Is Focus of Consumer Bureau Alabama Hearing
Bloomberg 20 Jan 2012
The U.S. Consumer Financial Protection Bureau recently held its first public hearing, with regulators focusing on payday lending facilities. The Alabama meeting was the first under the leadership of newly appointed head Richard Cordray. "The purpose of all our research and analysis and outreach on these issues is to help us figure out how to determine the right approach to protect consumers and ensure that they have access to a small-loan market that is fair, transparent and competitive," Cordray said at the session. While no mention was made of specific new regulations or restrictions for the industry, the director assured the agency is "thinking hard about these issues." He also said that the public and consumer advocates should not grow complacent now that the bureau is operating, but should continue to work with local and state officials to combat such problems. According to Cordray, the CFPB will dig deep into the short-term loan industry to figure out what needs to change and how that can be accomplished. In that respect, he explained that the regulator will use its examination powers to audit the books of payday lenders, ask probing questions, and cooperate with them to rectify any wrongs. On the enforcement side, Cordray said the watchdog will focus in particular on unauthorized debits to consumer accounts as well as aggressive debt collection practices.
- Richard Cordray, CFPB Chief, Promises New Scrutiny of Banks That Make Payday Loans
Huffington Post 19 Jan 2012
Consumer Financial Protection Bureau director Richard Cordray, speaking in Birmingham, Ala., this week at the agency's first public hearing, pledged to turn the heat up on payday lenders -- including a select few traditional banks that have started to offer their own version of the short-term advances. Those banks have tried to differentiate their cash-advance products from those of payday lenders because of the way in which they are structured, but consumer advocates do not buy that argument. Based on its data, the Center for Responsible Lending finds that bank payday lenders are bound to fall victim to the same cycle of debt that befalls traditional payday customers. The statistics, purchased by CRL from an independent vendor, show that bank payday borrowers take out 16 loans and are mired in debt 175 days out of the year -- or twice as long as the Federal Deposit Insurance Corp. considers healthy. "The very structure of a bank payday loan makes it likely to trap customers in long-term debt even while the bank claims that the loans are meant for short-term use," noted CRL senior policy analyst Rebecca Borne. Moreover, because the bank model requires the borrower to have a checking account and to have pay and/or benefits deposited directly into that account, the risk of default is relatively low -- meaning that the rates banks charge for this service are strictly for profit. "We recognize the need for emergency credit," Cordray acknowledged at the Jan. 18 event. "At the same time, it is important that these products actually help consumers, rather than harm them."
- Watchdog Agency Hearing to Examine Payday Loans
AL.com 18 Jan 2012
The national debate over the controversial payday loan industry will take center stage in Alabama this week, when the government's fledgling Consumer Financial Protection Bureau holds its first field hearing at the Birmingham Civil Rights Institute. The CFPB said it chose the location because it is "a state with one of the highest number of payday lenders per capita in the country." Additionally, as noted by policy analyst Stephen Stetson of the Arise Citizens Policy Project in Montgomery, Birmingham just this month adopted a moratorium on new payday lending outlets in the city. "Payday lending in Alabama is a huge problem," he said. "It's basically a technology for stripping wealth from low-income communities." The CFPB's newly appointed director, Richard Cordray, is expected to attend the hearing -- which will including testimony from consumer groups, civil rights groups, industry representatives, and members of the public. While laws in the state are meant to regulate the industry, critics say they are not always effective. Despite regulations barring multiple, simultaneous payday loans to a single borrower, there have been numerous bankruptcy filings in the state by borrowers with as many as 20 outstanding payday loans. The agency said the hearing "will provide the CFPB with on-the-ground insight into the payday lending market."
- Some Lenders to Students Face Greater U.S. Scrutiny
New York Times 13 Jan 2012
Lead by its newly appointed director, Richard Cordray, the Consumer Financial Protection Bureau is turning up the heat on nontraditional lenders to students at for-profit colleges and trade schools that have high rates of default. Cordray drew a parallel between the practices employed by some private, non-bank student loans to those of the subprime mortgage lending business that lead to the housing collapse. "We're seeing some of the schools anticipating as much as a 50 percent default rate on their students, yet they're making those loans anyway," he said. In November, the CFPB and the Education Department issued a joint request for information from consumers on the private student loan market. But Cordray said the bureau already has seen evidence of problems in the market. "One of the things we see and have seen is lenders who market loans for borrowers knowing that those borrowers are unlikely to be able to pay those loans," the director said. The Association of Private Sector Colleges and Universities said the claims are "not substantiated."
- CFPB Gears Up to Examine Mortgage Firms
Wall Street Journal 11 Jan 2012
Now that the Consumer Financial Protection Bureau is up and running, thousands of non-bank mortgage lenders and brokers are being tapped for in-depth, government review of everything from their advertising practices to their loan volume. In its new "Mortgage Origination Examination Procedures" guide, the agency outlined how its examiners will evaluate the nonbank mortgage firms, beginning within a few weeks. The recent appointment of the bureau's first director, Richard Cordray, has set the wheels into motion to regulate the nonbank financial industry. Consumer advocates claim nonbank mortgage lenders contributed to the housing collapse in 2008. "The mortgage market cannot work well for consumers if the spotlight shines only on one part of it, while the rest is left in darkness," Cordray said. "Our supervision program will illuminate the entire marketplace by making nonbanks play by the same rules as the banks." Critics of the agency counter that banks and nonbanks should not be treated the same since nonbanks are not federally insured, nor do they use depositors' money to make loans.
- Consumer Bureau Gets Busy With Mortgage Probe
Wall Street Journal 11 Jan 2012
In its first publicly disclosed investigation, the Consumer Financial Protection Bureau is scrutinizing PHH Corp.'s mortgage insurance practices. Earlier in January, the regulator notified the mortgage lender that it had launched a probe to assess whether the firm was adhering to federal law banning kickbacks in realty transactions. The CFPB's newly appointed director, Richard Cordray, recently warned the financial industry that it had a number of open investigations -- some of which may "require enforcement actions to stop illegal behavior." The agency is investigating whether PHH influenced borrowers to use specific mortgage insurers with which it shared a business relationship.
- New Consumer Chief Promises Strong Agenda
New York Times 06 Jan 2012
Newly appointed Consumer Financial Protection Bureau (CFPB) director Richard Cordray has encouraged consumers to contact the agency through its Website with complaints about banks, payday lenders, and other financial firms they believe have sold deceptive products or engaged in abusive behavior. The agenda outlined by Cordray on Jan. 5 was aggressive, with Cordray noting, "The consumer bureau will make clear that there are real consequences to breaking the law. We have given informants and whistle-blowers direct access to us. We took over a number of investigations from other agencies in July, and we are pursuing some investigations jointly with them. We also have started our own investigations. Some may be resolved through cooperative efforts to correct problems. Others may require enforcement actions to stop illegal behavior." Cordray said he would not hesitate to use the CFPB's rule making authority, despite concerns that his recess appointment could be challenged legally. He intends to work with lawmakers in both parties and said that his interests and that of lawmakers is the "same at heart." Nonbank financial firms will become a primary focus for the agency, including money transfer agencies, credit bureaus, and private mortgage lenders given that nearly 20 million Americans use their services and pay about $7.4 billion in fees annually. Cordray noted, "Many subprime loans during the housing bubble were made by nonbank mortgage brokers. Since most of these businesses are not used to any federal oversight, our new supervision program may be a challenge for them. But we must establish clear standards of conduct so that all financial providers play by the rules."
- Richard Cordray Should Go After Payday Lenders
San Francisco Chronicle 05 Jan 2012
With President Obama's unorthodox installation of Richard Cordray as the new head of the Consumer Financial Protection Bureau via recess appointment, the new watchdog finally is able to exercise its authority over nonbank entities -- including payday lenders. While this lending niche is a priority for many consumer advocates, they have not lost track of other key issues that they hope the regulator will address as well. Travis Plunkett of the Consumer Federation of America, for instance, hopes that the CFPB will rein in not only payday loan outfits but also mainstream banks that now are offering similar short-term, small-dollar loans. "Bank payday loans are slightly cheaper than traditional payday loans but can have steep late fees that payday loans do not," the National Consumer Law Center noted in a report. Plunkett also would like to see Cordray train the regulatory spotlight on financial abuses targeted enlisted persons, improper mortgage servicing and foreclosure, and unfair and expensive overdrafts. The National Association of Consumer Advocates' Delicia Reynolds Hand, meanwhile, is looking to CFPB leadership to "make the mortgage market safe again" by blocking lenders from steering borrowers into high-cost loans when they actually qualify for better terms. Other issues her group is pushing to the forefront of the CFPB agenda include abusive debt collection practices -- including new efforts to recover debt through social media and texting -- and a ban on mandatory pre-dispute arbitration clauses in contracts between financial service providers and their customers.
- Appointment Clears the Way for Consumer Agency to Act
New York Times 05 Jan 2012
On Jan. 4, President Barack Obama used his recess appointment powers to install Richard Cordray as head of the new Consumer Financial Protection Bureau (CFPB), effectively enabling the agency to monitor payday lenders, credit bureaus, and utilize all of the powers given to it under the Dodd-Frank law. Without a director at the helm, the agency was only able to monitor and enforce existing regulations on consumer financial products and not able to write new regulations for banking products. Cordray said, "Now, with a director, the CFPB can exercise its full authorities -- with respect to both banks and nonbanks -- to help those markets operate fairly, transparently, and competitively. [Most of the nonbank financial companies] had no regular federal oversight in the run up to the financial crisis. They led a race to the bottom that pushed aside responsible businesses, including community banks and credit unions, and greatly harmed consumers." The CFPB had begun its mission by placing regulators in the largest banks to review mortgage lending and consumer banking fees, and the CFPB director can now influence banking policy as a member of the Federal Deposit Insurance Corp., which is still waiting for the U.S. Senate to confirm its presidential nominees. While some applaud the recess appointment of Cordray, banking groups say that it places the future of the CFPB in constitutional jeopardy and could undermine its authority and credibility. Republicans have held up Cordray's confirmation because they want to reform the agency to include a five-member board rather than a single director, garner greater oversight and accountability for the agency, and ensure the budget for the CFPB goes through the congressional appropriations process.
- CFPB Issues Truth in Lending Interim Rule
ReverseMortgageDaily 29 Dec 2011
The Consumer Financial Protection Bureau has issued a final interim rule under Regulation Z that creates new requirements under the Truth in Lending Act. While the rule is the same as its predecessor under the Federal Reserve Board, which previously had purview over Reg Z, all reference to the Fed has been stripped and the CFPB has taken over as the governing body. "This interim final rule does not impose any new substantive obligations on regulated entities," CFPB officials said. Reg Z implements the Truth in Lending Act, which falls under Dodd-Frank, currently overseen by the CFPB. The watchdog is working to consolidate the Truth in Lending Act and RESPA mortgage disclosure documents in order to create a form that consumers can better understand. It has issued several new rounds of mortgage disclosure form drafts for consumer and industry feedback as it hones in on the new disclosures.
- US Watchdog Eyes Zero Interest Mortgage Plan
Financial Times 21 Dec 2011
The Federal Housing Finance Agency is considering a "principal paydown plan" that would allow bankruptcy judges to grant underwater mortgage borrowers in Chapter 13 proceedings a five-year reprieve from interest rates. Housing experts have underline principal balance relief as the best avenue for propping up the battered market, which is being dogged by $700 billion in negative equity. According to CoreLogic, about a quarter of homeowners owe more on their mortgage than the property is currently worth. And the National Association of Consumer Bankruptcy Attorneys estimates that half of all pending bankruptcy cases involve residential mortgage claims. Although the White House is not considering the plan, the FHFA does not need congressional approval to implement the initiative, which would target homeowners with government-insured loans.
- CFPB's Petraeus Targets Gaps in Financial Education, Services for Military
American Banker 19 Dec 2011
A recent forum hosted by the Consumer Financial Protection Bureau's Office of Servicemember Affairs focused on the gap in financial education among members of the military and indicated that the office will work with federal and state agencies to raise awareness about consumer protection issues, such as payday loans. In early 2012, servicemembers will have access to an education product via computer or smartphone that enhances the financial aid course provided during basic training. Military spouses, typically left in charge of household finances during deployments, may soon have access to a similar education product. Meanwhile, the office is promoting programs offered by banks and credit unions to servicemembers as alternatives to payday loans, allowing them to obtain short-term, small loans with 12 percent to 18 percent interest rates.
- CFPB Seeking Whistleblower Tips on Lending Violations
American Banker 16 Dec 2011
The Consumer Financial Protection Bureau has announced that it will start accepting information from whistleblowers about potential violations of federal consumer financial laws. The watchdog has launched a toll-free hotline and dedicated e-mail for tips, and it plans to launch an online tips portal on its Web site early next year. Under the Dodd-Frank Act, employees who report their firms for possible violations are protected from retaliation, termination, and discrimination. However, the bureau noted that it will penalize individuals who provide frivolous tips or those in bad faith. Employees can report suspicions anonymously or can request that their information is kept confidential if they do submit their names and contact information.
- Banks Press CFPB in Talks
Wall Street Journal 14 Dec 2011
The five largest mortgage banks -- Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co., and Wells Fargo & Co. -- the Obama Administration, and state attorneys general are working on an agreement to settle claims related to the use of "robo-signing," in which employees approved documents without proper review, and other questionable foreclosure practices. However, the settlement, which could be worth about $19 billion, could be held up as banks seek broad releases from state and federal authorities, including the Consumer Financial Protection Bureau, that would relinquish the authorities' right to sue over flawed mortgage originations. The CFPB is said to be resisting the banks' demands that it forgo the authority to sue, but banks say that without the release the deal is dead. Because Republicans have not confirmed the CFPB director nominee, Richard Cordray, he was unable to participate in negotiations and the agency would not have the authority to agree until mid-July. Negotiations with CFPB were halted when Congressional members objected.
- Now You Can Send Your Mortgage Horror Story Directly to the CFPB
Business Insider 12 Dec 2011
Months after its launch, the Consumer Financial Protection Bureau is now accepting complaints about mortgages. According to the agency, it has dedicated a special section of its Web site to the mortgage industry. Unlike its student loan section, which allows consumers to post complaints on a public message board, the watchdog will accept a form from consumers with mortgage grievances identifying the type of trouble that has been encountered. The CFPB said that all who submit a complaint will receive a tracking number to follow the status of their complaint, and the submissions will go directly to the lenders. According to a report by the Center for Responsible Lending, more than 2.7 million homeowners who obtained mortgages between 2004 and 2008 have lost their homes to foreclosures. However, the agency cannot regulate the industry until a director has been appointed.
- Both Parties Seek Edge as Nominee Is Blocked
Wall Street Journal 09 Dec 2011
U.S. Senate Republicans blocked White House nominee Richard Cordray, who was selected to serve as the director of the Consumer Financial Protection Bureau (CFPB). The vote was 53-to-45 in favor of Cordray's nomination, but short of the 60 votes necessary to force consideration of his nomination. Republicans have vowed to block any nominee until the bureau is modified, while Democrats say that the filibuster merely demonstrates Republicans political posturing at the expense of consumers. The White House could consider a recess appointment for the CFPB, though it is unclear if that move is technically possible. Republicans want the CFPB to be led by a board of directors rather than a single director, among other changes. Without a director, the agency cannot regulate nonbank financial firms, even though it can enforce current consumer protections. Democrats are hopeful that the public support for improved consumer protections will work against Republicans who opposed Cordray's nomination. Republicans, on the other hand, are hopeful that their vote against the nominee will demonstrate the party's willingness to dial back government bureaucracy. The White House had issued a media blitz in Maine, Indiana, Nevada, and Tennessee seeking the support of Republican senators that the administration thought were most likely to support Cordray, but the efforts did little to change those senators' votes. U.S. Sen. Scott Brown (R-Mass.) did vote with Democrats in favor of Cordray, keeping his word, while U.S. Sen. Olympia Snowe (R-Maine) did not vote either way, merely voting "present."
- Consumer Bureau Introduces 2-Page Credit Card Agreement
Plain Dealer 07 Dec 2011
The Consumer Financial Protection Bureau on Dec. 7 introduces its new credit card agreement, which is easier to understand. The abbreviated form decreases the lengthy credit card disclosures from 5,000 words to about 1,000 in a two-page document. The agency is unveiling its "Know Before You Owe" campaign in Ohio, just one day before the Senate is scheduled to vote on whether to confirm Richard Cordray as the bureau's first official director. Forty-four of 46 GOP senators have pledged to block confirmation of the director unless the bureau's structure and funding are dramatically scaled back. "Every day we go without a consumer watchdog in place is another day when a student, or a senior citizen, or member of our Armed Forces could be tricked into a loan they can't afford," warned President Barack Obama. He has promised to veto any measure that would delay, defund, or dismantle the new rules set up by the Dodd-Frank financial overhaul. A recent report by the bureau found that there is widespread confusion over credit card terms.
- Senators Wrangle Over Consumer Protection
Roll Call 06 Dec 2011
U.S. Senate Democrats are pushing for the confirmation of Richard Cordray as the first director of the new Consumer Financial Protection Bureau (CFPB) as they build campaign momentum to demonstrate they are "guardians of the middle class." One Democratic aide said, "We think this is a bellwether vote to determine if you are on the side of consumers." GOP aides suggest that the push is merely to score political points and not obtain confirmation for Cordray given that Democrats have not reached out to address Republican concerns about the CFPB. U.S. Senate Majority Leader Harry Reid (D-Nev.) could cut off debate on the nomination on Dec. 6, which could push for a vote on Dec. 8. It is unclear if Democrats will have enough Republican votes to reach the required 60 votes necessary to overcome the filibuster. A recent White House National Economic Council report said, "Without a director, the CFPB cannot fully supervise non-bank financial institutions such as independent payday lenders, non-bank mortgage lenders, non-bank mortgage servicers, debt collectors, credit reporting agencies, and private student lenders." Republicans say that the CFPB should be set up like other agencies with a board, of which no more than three commissioners could belong to the same political party. They also would prefer the funding for the agency go through the congressional appropriations process.