Professor Amy J. Schmitz joined forces with other consumer law experts Prof. Pamela Foohey of Indiana University Maurer School of Law and Prof. Angela Littwin of University of Texas School of Law to serve as the primary drafters of a response to the Consumer Financial Protection Bureau (CFPB)’s request for information regarding the CFPB’s reporting practices of consumer complaint information. The response explains how publicly releasing information about consumer complaints is essential to the CFPB’s primary purpose of ensuring that “markets for financial products and services are fair, transparent, and competitive.” The response primarily focuses on the benefits of the CFPB’s public consumer complaint database. The response also details the benefits of adding more data to the database, of continuing to publish reports based on complaint data, of publishing more tailored reports based on the complaint data, and of evaluating the design of the online interfaces through which consumers lodge complaints and access the database. These improvements will further enhance the operation of a fair, transparent, and efficient marketplace. The response has been submitted to the CFPB, but is also available to the public at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3190797.”
Dodd-Frank Act
CONSUMER FINANCIAL PROTECTION BUREAU ISSUES REQUEST FOR INFORMATION ON CONSUMER COMPLAINT REPORTING
This is from the cfpb press release:
“WASHINGTON, D.C. — The Consumer Financial Protection Bureau (Bureau) today issued a Request for Information (RFI) about the Bureau’s public reporting of consumer complaints. The Bureau is seeking comments and information from interested parties on the usefulness of complaint reporting and analysis, as well as specific suggestions or best practices for complaint reporting. This is the sixth in a series of RFIs announced as part of Acting Director Mick Mulvaney’s call for evidence to ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers. This RFI will provide an opportunity for the public to submit feedback and suggest ways to improve outcomes for both consumers and covered entities. The next RFI in the series will address the Bureau’s rulemaking processes, and will be issued next week.
The RFI on complaint reporting is available at:https://files.consumerfinance.gov/f/documents/cfpb_rfi_complaint-reporting_032018.pdf
The CFPB will begin accepting comments once the RFI is printed in the Federal Register, which is expected to occur on March 7. The RFI will be open for comment for 90 days.
The Bureau anticipates issuing RFIs on the following topics in the coming weeks:
- Rulemaking Processes
- Bureau Adopted Rules
- Inherited Rules
- Guidance and Implementation Support
- Consumer Education
- Consumer Inquiries
More information about the call for evidence is available at: http://www.consumerfinance.gov/policy-compliance/notice-opportunities-comment/open-notices/call-for-evidence/
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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations; by making rules more effective; by consistently enforcing federal consumer financial law; and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.”
CFPB is Fighting the Good Fight
The Consumer Financial Protection Bureau (CFPB) today announced that its recent work resulted in $14 million in relief to more than 104,000 harmed consumers from January through June 2017. The Press release read in part:
“Today’s report, the 16th edition of Supervisory Highlights, covers CFPB supervision activities from January through June 2017, and shares observations in the areas of auto loan servicing, credit card account management, debt collection, deposits, mortgage origination, mortgage servicing, remittances, service providers, short-term small-dollar lending, and fair lending. Among the findings:
- Banks deceived consumers about checking account fees and overdraft coverage: One or more institutions deceived consumers by inaccurately describing when checking account service fees would be waived. One institution told consumers it would waive the fee if the customer met certain qualifications, including making 10 or more payments from the checking account during a statement cycle. In fact, only debit card purchases and debit card payments qualified toward the fee waiver. One or more institutions also misrepresented opt-in deposit overdraft services as extending to consumer payments by check, electronic funds transfers through the Automated Clearing House payment network, or recurring payments, when those transactions were not actually covered.
- Credit card companies deceived consumers about the cost and availability of pay-by-phone options: The Bureau’s examiners found that customer service representatives of at least one credit card company disclosed only costly pay-by-phone fees while omitting mention of much cheaper payment options. Failing to disclose less costly options can result in consumers being charged for services they don’t need.
- Auto lenders wrongly repossessed borrowers’ vehicles: Many auto loan servicers give borrowers options to avoid repossession of their vehicle if a loan is delinquent or in default. But the CFPB’s examiners found that one or more companies were repossessing vehicles after the repossession was supposed to be cancelled. Some lenders wrongfully listed the account as delinquent. In other instances, customer service representatives did not cancel the repossession order when feasible after borrowers made sufficient payments. Also, some repossession agents did not check the documentation beforehand to see if the repossession had been cancelled.
- Debt collectors improperly communicated about debt: Generally, debt collectors must get consent of the person owing the debt before discussing it with other parties. The Bureau’s examiners found that one or more third-party collectors did not confirm they had contacted the right person before starting collections, or wrongly attempted to collect from consumers who were not responsible for the debt. Also, one or more payday lenders, in collecting a debt, repeatedly called third parties, including personal and work references listed on the borrowers’ loan application. In some instances, even after being told to stop, these collectors called borrowers at work or asked third parties to relay messages to them. Such calls can lead to negative job consequences for the borrower, and risk improperly disclosing the default or delinquency to third parties.
- Mortgage companies failed to follow Know Before You Owe mortgage disclosure rules: CFPB examiners found that one or more companies overcharged closing fees to consumers and one or more companies wrongly charged application fees before consumers had agreed to the mortgage transaction. Examiners did find that in general, both banks and nonbanks were able to effectively implement and comply with the Know Before You Owe mortgage disclosure rule changes.
- Mortgage servicers failed to follow the Bureau’s servicing rules: Servicers are responsible for reviewing borrowers’ initial loss mitigation applications to determine what documents are missing. They must then tell borrowers what documents are missing, so that consumers can get a full evaluation of options they have available. One or more mortgage servicers offered a forbearance option to consumers to help them prevent foreclosure, but did not let the borrower know of their right to complete an application to be considered for other options. In addition, they did not exercise reasonable diligence in collecting information needed to complete the borrower’s application. Additionally, one or more servicers, through a vendor, also provided borrowers mortgage statements that failed to specifically list fees charged.
Today’s report shares information that companies can use to comply with federal consumer financial law. When CFPB examiners find problems, they alert the company and outline necessary remedies. These steps may include paying refunds or restitution, or taking actions to stop illegal practices and assure future compliance such as implementing new policies, or improving training or monitoring. When appropriate, the CFPB opens investigations for potential enforcement actions.”
For more information, see: today’s edition of Supervisory Highlights is available at: http://files.consumerfinance.gov/f/documents/201709_cfpb_Supervisory-Highlights_Issue-16.pdf
CFPB ORDERS TRANSUNION AND EQUIFAX TO PAY $23.1 MILLION FOR DECEIVING CONSUMERS
On Jan. 3, the the Consumer Financial Protection Bureau (CFPB) took action against Equifax, Inc., TransUnion, and their subsidiaries for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers. The companies also lured consumers into costly recurring payments for credit-related products with false promises. The CFPB ordered TransUnion and Equifax to truthfully represent the value of the credit scores they provide and the cost of obtaining those credit scores and other services. Additionally, TransUnion and Equifax must pay a total of more than $17.6 million in restitution to consumers, and fines totaling $5.5 million to the CFPB.
“TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises,” said CFPB Director Richard Cordray. “Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them.”
Consumers are again advised to be aware of the terms when they sign up to receive a credit score or other credit-related products. All credit reports are not free, and credit scores are generally not provided free of charge directly from these companies. However, some credit card companies to provide scores to their customers without charge, and thus consumers would be wise to ask their credit card companies if they provide such information for free.
CFPB warnings regarding college-sponsored accounts
Notably, some of the nation’s largest colleges and universities continue to maintain deals with large banks that allow for the marketing of products that may not be in the best financial interests of their students and that contain costly features. Key findings from the Bureau’s report and analysis of college marketing deals for prepaid and debit accounts include:
- Dozens of bank deals with colleges fail to limit costly fees: The Bureau found that dozens of deals with banks for school-sponsored accounts, including deals at some of the nation’s largest colleges and universities, do not place limits on account fees, such as overdraft fees, out-of-network ATM fees, or other common charges. These costly fees remain a concern at dozens of campuses, even as safer and more affordable alternatives are widely available at many other schools across the county.
- Some students may pay hundreds of dollars per year in overdraft fees: College students may pay hundreds per year in overdraft fees when using student banking products. This is particularly concerning given that a growing body of evidence suggests that small financial shocks—such as a few hundred dollars— can cause significant financial hardship for students and even deter college completion. Further, the Bureau’s analysis found that fees associated with school-sponsored accounts can collectively cost a college student body hundreds of thousands of dollars per year.
- Deals provide financial benefits for banks and schools but offer few, if any, financial benefits for students: The Bureau found marketing agreements between colleges and banks often contain extensive details about how the school and the bank can profit. Contracts frequently include details on revenue sharing and other payments made in exchange for exclusive marketing access to colleges’ student population. At the same time, many of these agreements do not require banks to offer safe and affordable accounts—and may drive students to high-cost products.
- Some schools fail to disclose key details of marketing deals with banks: Most colleges were required by the Department of Education to publicly disclose marketing contracts by Sept. 1, 2016. However, the CFPB found that some agreements publicly announced by banks or colleges were not included in the Department of Education’s public database of agreements, suggesting that some schools did not submit their agreements to the Department before the agency’s disclosure website launched.
This is a good time to remind readers that the CFPB published a Safe Student Account Toolkit to help colleges evaluate whether to co-sponsor a prepaid or checking account with a financial institution. The Safe Student Account Toolkit is available at: http://files.consumerfinance.gov/f/201512_cfpb_safe-student-account-toolkit.pdf
Economy not always the reason small banks are closing
I do most of my banking with a very large national bank but I do have a couple of accounts with local banks as well. In the last couple of years I noticed that I have to travel farther and farther to bank with the smaller banks due to so many local branches closing. I assumed that the economic crisis played a big role. Some recent studies and reports reveal that regulation under Dodd Frank is putting immense strain on community banks.
Overall, Dodd-Frank is a tremendous piece of legislation. The Committee on Financial Services reports the act spans about 2,300 pages with more than 400 rules and mandates, about 250 of which still to be determined.
The uncertainty inherent in such a massive regulation has required banks to hire compliance officers, a budget expense that some smaller banks simply cannot afford. But many of the challenges for smaller banks are in the regulation itself. American Banker reported that Comptroller Thomas Curry is concerned with “a number of provisions that … many in the industry thought would not apply to community institutions.” Specifically, the act encourages a move away from institutional reliance on credit ratings agencies. This will have “a profound impact on community banks, which lack the institutional structures and analytical resources to undertake independent due diligence,” reports Louise C. Bennetts of American Banker. These banks have to find new ways to make money as well. The low interest rate environment means that the traditional business of lending is not especially lucrative so banks have to figure out other ways to bring in revenue. Such measures will most likely hurt consumers as they will need to pay more for loans and basic banking services, predicts Bennetts.
But community banks are fighting back and informing regulators of the need for changes. The Hill reported the Independent Community Bankers of America (ICBA) smaller banks were not responsible for the financial crisis and they should be carved out of the many new restrictions stemming from Dodd-Frank. So far, regulators are receptive to the message. Federal Reserve Chairman Ben Bernanke told ICBA members that regulators were looking to achieve a “clear distinction” between large and small banks in drafting their rules.
This is just one more indicator that there is still lots to do and lots to learn from Dodd Frank.
How the CFPB is trying to keep the student loan debt bubble from bursting
On Thursday, the CFPB called for the public’s input on how private student loans could be more affordable and repayment options could be improved.
As reported by the Huffington Post, outstanding student loan debt has ballooned to more than $1.1 trillion as of 2012. Private student loans make up about 15% of that debt. The federal government backs most of the student loan debt. However, private student loans are more problematic. In a press release, the CFPB reported that private student loans generally have higher and variable interest rates and may not allow borrowers any flexibility to manage payments in times of hardship.
The CFPB is accepting comments on the repayment issue through its website until April 8th of this year and will make the responses available to the public shortly thereafter.If you have ideas, you may comment through the website here.
The CFPB acknowledges that the private student loan market is a small piece of this puzzle. CFPB’s Student Loan Ombudsman, Rohit Chopra theorizes that unsustainable student loan debt is holding back a full economic recovery and is actually dragging the economy down. Sources show that young consumers are having to hold off on buying homes and cars after graduation. A study from the Fair Isaac Corp. (FICO) showed that from 2005 to 2011, average student loan debt grew 58%, from $17,233 to $27,253. The Atlantic reported that the rate of adults in their late twenties who own homes has slipped since 1980. A study from the Federal Reserve found that only 9% of 29-34 year olds took out a first mortgage from 2009 to 2011, Bloomberg Businessweek reported. Data from the Pew Research Center revealed 32% of households headed by adults younger than 35 were paying off auto loans in 2010, down from 44% in 2007. Data from Huffington Post.
Student loans are designed to provide opportunities to borrowers to improve their way of life but it can also be incredibly stifling in the same way. Students must be informed consumers when deciding to borrow. The CFPB and the Department of Education collaborated to make information easily attainable and understandable. If you are planning on pursuing a higher education, ask schools for the financial aid shopping sheet or similar data. Knowledge is power and student loan debt is not necessarily “good debt.”
Consumers hold the power with CFPB’s Complaint Database
I, like most of us, have been dissatisfied with service provided by my credit card company or my bank and the first thing I want to do is express my frustration. Most times, I complain to the institution directly. While it is tempting to sometimes take my complaint to a regulatory agency, I have always declined to do so thinking that my complaint will just end up in a stack of papers on someone’s desk not to be seen for months. The new Complaint Database created by the Consumer Financial Protection Bureau (CFPB) may have changed my mind.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act led to the creation of the CFPB. One of its responsibilities is to accept complaints from consumers about credit cards, mortgages, banking products and services private student loans, and other consumer loans.
Since launching the database, the CFPB has received tens of thousands of complaints that the general public can browse through a searchable online complaint database. The data can be searched using the company name, the zip code, the complaint issue, and more.
The CFPB published a report on complaints received from the database launch on July 21, 2011 to June 1, 2012. Key findings from the report include:
- CFPB received about 45,630 consumer complaints
- 16,840 credit card complaints
- 19,250 mortgage complaints
- 6,490 bank products and services complaints
- 1,270 private student loan complaints
- How complaints reached the CFPB
- 44% submitted through the website
- 39% referred from other regulatory agencies
- 11% through telephone calls
- 6% by mail, email, and fax
Consumer Response: A Snapshot of Complaints Received, p.4. June 19, 2012.
The report explains the complaint process and shares various stories of consumers who achieved success through the database. What I found most appealing is that the CFPB’s Consumer Response Team will follow up on all complaints that are sent to the companies. The complaints receive priority if the company does not timely respond or the consumer disputes the company’s response. Consumers have support throughout the process.
So the next time you feel like your financial service company is giving you the run-around, you have another resource available to you. The CFPB’s U.S.-based contact centers take calls with little-to-no wait times and provides services in 187 languages and for hearing- and speech-impaired consumers via a toll-free telephone number. If you have a complaint about financial products or services, visit http://www.consumerfinance.gov/complaint/.