Read the latest on the Consumer Financial Protection Bureau (CFPB).
- 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.
- White House Pushes for Confirmation of Consumer Watchdog Nominee
Washington Post 04 Dec 2011
The White House issued a new report to pressure U.S. Senate Republicans to support the Obama Administration's nomination of Richard Cordray as the first director of the new Consumer Financial Protection Bureau (CFPB). GOP lawmakers continue to block any CFPB nominee unless significant changes are made to the agency, but the White House is pushing for support as the full Senate is expected to vote on Dec. 8 on Cordray's nomination. Along party lines, members of the U.S. Senate Banking Committee voted to approve Cordray's nomination in October, but 45 of the chamber's 47 Republicans have issued a letter vowing to block his nomination, which would ensure that the Senate falls short of the 60 votes necessary to confirm Cordray's appointment. The National Economic Council's recent report said that the CFPB is "hamstrung" because it cannot exercise its full powers until a director is confirmed, noting the CFPB "cannot provide the kind of oversight and transparency that consumers need." Raj Date, who succeeded Elizabeth Warren as special adviser to the treasury secretary in charge of setting up the bureau, has said, "Independent funding of the CFPB and other bank supervisors ensures that we are not at the mercy of outside influences when it comes to protecting consumers or ensuring the safety and soundness of our nation’s financial institutions." If the nomination of Cordray fails to pass, President Barack Obama could appoint him during the winter recess.
- CFPB, Agencies Form Task Force to Crack Down on Mortgage Modification Scams
American Banker 02 Dec 2011
A new task force will investigate and shut down scams that specifically target homeowners attempting to complete loan workouts through the Home Affordable Modification Program. The Consumer Financial Protection Bureau, the Treasury Department, and the Special Inspector General for the Troubled Asset Relief Program created the joint task force to educate struggling homeowners and help them to recognize modification scams. The task force has issued a consumer fraud alert with tips for avoiding scams and will distribute it directly to homeowners eligible for HAMP. The alert informs borrowers where and how they can apply for the program and reminds them that only their mortgage servicer has the authority to approve a modification. Additionally, it cautions consumers to conduct due diligence if an upfront payment is requested, money-back guarantees are offered, or they are advised to cease mortgage payments or stop contacting their servicer.
- CFPB Begins Work to Streamline Consumer Financial Regulations
American Banker 30 Nov 2011
The Consumer Financial Protection Bureau is seeking input on ways to streamline regulations under the consumer financial laws it inherited from other regulators under Dodd-Frank. The bureau issued a notice and request for information asking the public to identify the regulations most in need of updating or elimination because they are outdated, overly burdensome or unnecessary. It also asked for suggestions on how to make complying with the rules easier. "Our goal is to make it easier for banks, credit unions and others to follow the rules," said Raj Date, the bureau's interim leader. "We're asking the public to help us identify and prioritize concrete ways that we can streamline the regulations we inherited so that they work better for consumers and the firms that serve them."
- Consumer Groups Urge CFPB to Impose Greater Protections for Prepaid Cards
American Banker 21 Nov 2011
Consumer advocates are pressing the Consumer Financial Protection Bureau to extend greater protections for prepaid debit card accounts. A letter released on Nov. 18 and signed by seven advocacy groups asked the fledgling agency to clarify that the definition of "account" under Regulation E includes the pooled accounts into which funds accessed by prepaid cards are placed. The organizations -- the Center for Responsible Lending, National Consumer Law Center, and Consumers Union among them -- said the clarification is essential to ensure that prepaid card users have full consumer protections under the Electronic Fund Transfer Act. "As the cost of bank accounts continue to rise, more and more consumers are turning to prepaid cards as an alternative," stated Consumers Union senior attorney Michelle Jun. "But prepaid cards offer weaker protections than bank accounts and can be loaded with hidden fees that make them costly to use." To correct that, Consumers Union and the other advocates are requesting that the CFPB limit how much money consumers can lose if their card is stolen or lost; that card issuers be required to clearly and conspicuously disclose all fees upfront; and that overdraft fees on all prepaid cards be banned, among other protections.
- CFPB Seeks Input for Joint Report on Private Student Loan Market
American Banker 17 Nov 2011
The Consumer Financial Protection Bureau is requesting information from consumers, schools, and industry players on the student loan market as it begins work on a joint report to Congress. It is seeking such information as underwriting criteria for student loans, repayment terms and behavior, servicing and loan modification, and default avoidance. The notice and request for information, published Nov. 16, follows a handful of student loan initiatives announced by the Obama administration in October aimed at relaxing the burden of student debt. It also highlights the priority that the agency is putting on this niche of the financial industry. "The bureau is particularly interested in learning what information would help students make informed decisions about which financial services and products are right for them and what approaches would best assist recent graduates facing (or about to face) difficulty making private education loan payments," the notice said.
- CFPB Official: Elder Financial Abuse 'Crime of the 21st Century'
American Banker 16 Nov 2011
Elder financial abuse and exploitation is a significant and growing financial problem facing the America's senior citizens, a prominent official from the Consumer Financial Protection Bureau told a Senate panel on Nov. 15. Hubert "Skip" Humphrey III, director of the bureau's Office for Older Americans, said the agency intends to partner with law enforcement and senior advocates to build awareness of elder abuse; address the underreporting of fraudulent or abusive practices aimed at this demographic; and coordinate more training on the matter for law enforcement and financial institutions. "It's been called a hidden epidemic or the Crime of the 21st Century, and it's a growing and serious problem that we need to address," Humphrey said. AARP Foundation Litigation senior attorney Julie Nepveu said more older Americans are reporting problems involving payday loans, debt collection, overdraft fees, and mortgage modifications. The CFPB's reach is limited, however, until permanent leadership is in place. "Too many seniors are struggling to meet the unfair terms of unscrupulous lenders looking to take advantage of their vulnerable state," explained Sen. Sherrod Brown, who chairs the Subcommittee on Financial Institutions and Consumer Protection. "Unfortunately, many of these activities are perpetrated by non-banks, and the CFPB does not have authority over these lenders until a full-time director is confirmed."
- CFPB Kicks Off Phase 2: Simplifying Mortgage Closing Forms
ReverseMortgageDaily 08 Nov 2011
Now that is has addressed the initial steps of the mortgage process, the Consumer Financial Protection Bureau is moving on to the other end of the deal: the disclosure forms for loan closings. The agency on Nov. 8 released two prototypes of the Truth in Lending Disclosure and the HUD-1 Settlement Statement -- the federal documents that list final loan terms and costs -- and it is working on amalgamating them and certain other federal disclosures into one simple-to-use form. "We believe the terms and costs on these disclosures should be similar to the ones you received when you first applied for the loan," the CFPB wrote in a recent blog post. "Being able to compare these terms and costs is what it means to 'know before you owe.'" The prototypes may not look shorter or easier to understand at first glance, the CFPB acknowledges, because they contain some new disclosures mandated under the Dodd-Frank Act. The regulator is accepting comment on the forms through Wed., Nov. 16.