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On June 13, the CFPB's Office of Servicemember Affairs (OSA) released its annual report, which provides an overview of OSA’s activities in fulfilling its statutory responsibilities for fiscal year 2021. The report highlights issues facing military consumers based on approximately 42,700 complaints submitted by servicemembers, veterans, and their families (collectively “servicemembers”). Key takeaways from the report include the following:
- Credit or consumer reporting. In 2021, servicemembers submitted over 17,000 credit or consumer reporting complaints, making it the most complained about financial product or service. The report found that the most common issue that servicemembers noted in their credit or consumer reporting complaints concern problems with incorrect information on a report.
- Medical billing. The report found that over half of medical debt collection complaints from servicemembers were about debts the individuals reported they did not owe. Many of these complaints stemmed from breakdowns in communication between private health care providers and TRICARE, the health insurance program for active-duty military. The report also discussed how frequent moves can increase the difficulty in receiving information or resolving the matter.
- Policy developments. The report noted that earlier this year, the VA published a final rule in the Federal Register amending its regulations around the conditions by which VA benefits debts or medical debts are reported to consumer reporting agencies (CRAs), and creating a methodology for determining a minimum threshold for debts reported to the CRAs (covered by InfoBytes here). According to the report, the final rule by the VA “set a clear and important precedent for the health care industry.”
- Recommendations. Among other things, the report recommended that there should be “more robust data” on the scope and impact of medical debt on servicemembers, and that “[m]edical providers and third-party billing companies should have adequate systems in place to serve servicemembers.”
On June 9, the CFPB filed a stipulated final judgment and order in the U.S. District Court for the Southern District of California resolving allegations that the operator of a student-loan debt relief company engaged in unfair debiting of consumer accounts, in violation of the CFPA. According to the complaint, in 2016, the defendant founded a student debt relief company, which “did not solicit new consumers, but instead obtained student-loan account and billing information for hundreds of former [student debt relief operation] consumers without the knowledge or consent of those consumers.” As previously covered by InfoBytes, in 2016, the CFPB filed a consent order against a San Diego-based student debt relief operation for alleged violations of the CFPA, the TSR, and Regulation P by deceiving borrowers into paying fees for federal loan benefits and misrepresenting to consumers that it was affiliated with the Department of Education. The CFPB alleged that the defendant led a debt collection scheme by withdrawing $39 per month, and collecting hundreds of thousands of dollars in total fees from student borrowers’ bank accounts, without authorization, after previously obtaining their names and account information from the former student loan debt relief business. According to the CFPB, “under this scheme, [the defendant’s] company had unlawfully debited more than $240,000 from hundreds of student borrowers’ accounts.” Under the terms of the settlement, the defendant is permanently banned from engaging in debt relief services and must pay a $175,000 penalty to the CFPB.
On May 5, the FTC released a report updating Congress on the agency’s FCRA education and enforcement efforts. The report, titled “Efforts to Promote Consumer Report Accuracy and Disputes,” was requested by Congress as part of the 2020 spending bill that funds the FTC. The report details the agency’s efforts to inform consumers and businesses regarding their rights and obligations under the FCRA, including educating consumers on disputing errors and identity theft. For businesses, the report discusses the guidance provided by the FTC for furnishers and users, including the 2016 publication Consumer Reports: What Information Furnishers Need to Know. The report notes that over the last decade. the FTC has brought over 30 enforcement actions under the FCRA against consumer reporting agencies (CRAs), users of consumer reports, and furnishers of information to CRAs. The FTC notes that once supervisory authority over the nationwide CRAs was transferred to the CFPB in 2011, the FTC has focused its FCRA enforcement on other entities in the credit reporting area, noting that 14 of its FCRA cases involved allegations related to handling consumer disputes of inaccurate information or procedures for ensuring the accuracy of information furnished in reports. A complete list of the 14 cases can be found in the report’s Appendix B. The FTC states that it will continue to look for education and enforcement opportunities, citing a joint workshop with the CFPB held last December, which discussed current trends in consumer reporting accuracy and sought public comments to assist the agency in targeting its efforts in the future.
On April 21, the CFPB announced the release of a video—aimed at consumers who do not file taxes—that describes the steps those consumers should take in order to receive their economic impact payments. The video explains that most Americans will automatically receive their economic stimulus payments from the IRS, but those who do not may need to submit their information and specify how they would like to receive their payments. Consumers are informed that if they do not submit their information, they will be mailed paper checks, which will take longer to receive than a direct deposit. In the announcement, Bureau Director Kathleen Kraninger states that the video “is intended to help consumers navigate the economic impact payments as well as helping them avoid scams related to the payments.” The announcement also provides eligibility guidelines for the stimulus payments, a link to frequently asked questions about the payments, and a link to additional Bureau information related to Covid-19.
On April 3, the CFPB Office of Servicemember Affairs (OSA) released its annual report, which provides an overview of OSA’s activities in fulfilling its statutory responsibilities for fiscal year 2019 and covers the period between October 1, 2018 and September 30, 2019. OSA’s responsibilities include monitoring complaints from military consumers, and the report highlights issues facing military consumers based on approximately 34,600 complaints submitted by servicemembers, veterans, and their families (collectively “servicemembers”). Key takeaways from the report include the following:
- Education and empowerment. OSA examined financial issues that impact military consumers and provided various educational tools on topics including the Servicemembers Civil Relief Act, the Military Lending Act, mortgage lending and foreclosure protections, and credit reporting and monitoring. These tools include in-person outreach and digital education and engagement resources.
- Consumer complaints. Thirty-six percent of servicemember complaints focused on credit or consumer reporting. Complaints related to debt collection were the second most frequent issue, with most complaints alleging that debt collectors were attempting to collect debt that the servicemember did not owe. In particular, OSA expressed concern about complaints where “the debt collector ‘took or threatened to take negative or legal action.’” With respect to mortgage debt, many servicemembers reported challenges in the payment process, as well as difficulties in being able to afford mortgage payments. With respect to credit cards, the greatest concentration of complaints focused on problems with purchases on statements. Checking or savings account complaints centered on issues related to account management, and more than two-thirds of student lending complaints related to challenges dealing with lenders or servicers. With respect to auto lending, complaints focused on managing the loan or lease. Other complaint categories included money transfers/services and virtual currency, personal loans, prepaid cards, credit repair, and title loans.
- Agency coordination. During the reporting period, OSA coordinated several consumer protection activities with federal and state government agencies, including the Departments of Defense, Veterans Affairs (VA), Education, and Treasury, as well as the FTC, SEC, and state attorneys general. OSA also noted its participation in interagency working groups focused on helping servicemembers.
- Military consumer research. Coordinated research efforts into the financial well-being of veterans and the increased use of home loans guaranteed by the VA are highlighted.
In February, CFPB Director Kathy Kraninger submitted a budget proposal seeking, among other things, a 13.7 percent increase for fiscal year (FY) 2020. Notably, the increase runs counter to President Trump’s FY 2019 and FY 2020 budgets, which sought budget cuts for the CFPB of $147 million and $23 million respectively (with a proposed $110 million budget cut for FY 2021). According to the Bureau’s budget proposal, the increase reflects costs associated with “recently approved staffing targets after the Bureau ended the hiring freeze previously in place since FY 2018 as well as additional funding for new initiatives in pursuit of the Bureau’s mission and strategic goals.” Included in these goals are budget increases to support (i) additional consumer education initiatives; (ii) “additional qualitative disclosure testing to evaluate consumer usability” related to the model validation notices that are currently under development as part of the Bureau’s proposed debt collection rule; (iii) field and economic laboratory studies intended to improve the understanding of issues related to consumer financial disclosures; (iv) processing and analyzing consumer complaints; and (v) “increased staffing levels in the Supervision, Enforcement, and Fair Lending program responsible for conducting examination activities.”
On July 18, Kathy Kraninger, Director of the CFPB, spoke before the Exchequer Club where she discussed the Bureau’s strategy for preventing consumer harm. Kraninger discussed her ongoing “listening tour”—in which she has met with and received feedback from “more than 600 consumer groups, consumers, state and local government officials, military personnel, academics, non-profits, faith leaders, financial institutions, and former and current Bureau officials and staff”—and commented on ways in which feedback received from these stakeholders has helped shape her approach. Kraininger highlighted four “tools” that the Bureau has at its disposal to execute its mission: education, rulemaking, supervision, and enforcement.
- Education. According to Kraninger, the Bureau’s focus reflects a “consumer-centric definition of financial well-being” designed to empower consumers when protecting their own interests and choosing the appropriate financial products and services. Specifically, Kraninger referred to the Bureau’s “Misadventures in Money Management” financial education tool for active-duty servicemembers, as well as its “Start Small, Save Up” initiative, which is designed to increase consumers’ ability to handle urgent expenses.
- Rulemaking. Kraninger commented that the Bureau will continue to comply with Congressional mandates to promulgate rules or address specific issues through rulemaking. However, where the Bureau has discretion, it “will focus on preventing consumer harm by maximizing informed consumer choice, and prohibiting acts or practices that undermine the ability of consumers to choose the products and services that are best for them.” Kraninger spoke of the need for increased transparency and deregulatory efforts and highlighted a recent change to the comment period for the Bureau’s Payday and Debt Collection rulemakings, as well as the consideration of potential changes to the existing Remittances Rule based on responses to a call for evidence.
- Supervision. Kraninger stressed that “[s]upervision is the heart of the agency,” as it helps to prevent violations of laws and regulations from happening in the first place. The Bureau’s approach will focus on ensuring supervision is effective, efficient, and consistent, and will explore ways to incentivize institutions to have in place good compliance management systems. Kraninger noted that, as chair of the Federal Financial Institutions Examination Council, she will focus on coordinating and collaborating with the other agencies to advance consumer protections.
- Enforcement. Kraninger noted that the Bureau will continue to enforce against bad actors that do not comply with the law, as “[a] purposeful enforcement regime can foster compliance, deter unlawful conduct, help prevent consumer harm, and right wrongs.” She referenced the Bureau’s history of collaborating with state and federal partners on enforcement actions, and stressed her commitment to ensuring enforcement matters are handled as expeditiously as possible. Kraninger also specifically drew attention to the Bureau’s collaborative approach in its recent advisory on elder financial exploitation (previously covered by InfoBytes here).
On June 6, the FTC announced that it submitted its 2018 Annual Financial Acts Enforcement Report to the CFPB. The report—which the Bureau requested for its use in preparing its 2018 Annual Report to Congress—covers the FTC’s enforcement activities regarding Regulation Z (the Truth in Lending Act or TILA), Regulation M (the Consumer Leasing Act or CLA), and Regulation E (the Electronic Fund Transfer Act or EFTA). Highlights of the enforcement matters covered in the report include:
- Auto Lending and Leasing. The report discusses two enforcement matters related to deceptive automobile dealer practices. The first, filed in August 2018, alleged that a group of four auto dealers, among other things, advertised misleading discounts and incentives in their vehicle advertisements, and falsely inflated consumers’ income and down payment information on financing applications. The charges brought against the defendants allege violations of the FTC Act, TILA, and the CLA. The FTC sought, among other remedies, a permanent injunction to prevent future violations, restitution, and disgorgement. (Detailed InfoBytes coverage of the filing is available here.) In the second, in December 2018, the FTC mailed over 43,000 checks, totaling over $3.5 million, to consumers allegedly harmed by nine dealerships and owners engaged in deceptive and unfair sales and financing practices, deceptive advertising, and deceptive online reviews. (Detailed InfoBytes coverage is available here.)
- Payday Lending. The report covers two enforcement matters, including the U.S. Court of Appeals for the 9th Circuit’s December 2018 decision upholding the $1.3 billion judgment against defendants responsible for operating an allegedly deceptive payday lending program. The decision is the result of a 2012 complaint in which the FTC alleged that the defendants engaged in deceptive acts or practices in violation of Section 5(a) of the FTC Act by making false and misleading representations about costs and payment of the loans. (Detailed InfoBytes coverage is available here.) The report also indicates that, in February 2018, the FTC issued over 72,000 checks totaling more an $2.9 million to consumers stemming from a July 2015 settlement, that alleged that online payday operators used personal financial information purchased from third-party lead generators or data brokers to make unauthorized deposits into and withdrawals from consumers’ bank accounts, regardless of whether the consumer applied for a payday loan. (Detailed InfoBytes coverage is available here.)
- Negative Option. The report covers six enforcement matters related to alleged violations of the EFTA and Regulation E for “negative option” plans, including three new filings against online marketers for allegedly advertising “free trial” offers for products that enrolled consumers in expensive, ongoing plans without their knowledge or consent. The report notes that, in 2018, the FTC reached a settlement with one entity and obtained a court judgment against another, both resulting in injunctive relief and monetary settlements (which were suspended due to the defendants’ inability to pay). The report also notes that the FTC mailed 2,116 refund checks totaling more than $355,000 to people who bought an allegedly deceptive “memory improvement” supplement.
Additionally, the report addresses the FTC’s research and policy efforts related to truth in lending and leasing, and electronic fund transfer issues, including (i) a study of consumers’ experiences in buying and financing automobiles at dealerships; and (ii) the FTC’s Military Task Force’s work on military consumer protection issues. The report also outlines the FTC’s consumer and business education efforts, which include several blog posts warning of new scams and practices.
On April 17, Kathy Kraninger, Director of the CFPB, spoke before the Bipartisan Policy Center where she reiterated the Bureau’s focus on prevention of harm and announced a symposium that will explore the meaning of “abusive acts or practices” under Section 1031 of the Dodd-Frank Act. In her remarks, Kraninger touched on the four “tools” the Bureau has at its disposal to execute its mission: education, rulemaking, supervision, and enforcement.
- Education. The Bureau wants to help consumers protect their own interests and choose the right products and service to help themselves. Specifically, the Bureau is focusing on ensuring that American consumers learn to save to be able to absorb a financial shock.
- Rulemaking. The Bureau will comply with Congressional mandates to promulgate rules or address specific issues through rulemaking, but when the Bureau has discretion, it will focus on “preventing consumer harm by maximizing informed consumer choice, and prohibiting acts or practices which undermine the ability of consumers to choose the products and services that are best for them.” In the coming weeks, the Bureau will release its proposed rules to implement the FDCPA, which will include (i) bright line limits on the number of calls consumers can receive from debt collectors on a weekly basis; (ii) clarity on how collectors may communicate through new technology such as, email and text messages; and (iii) requiring more information at the outset of collection to help consumers better identify debts and understand payment and dispute options. Kraninger stated, “the CFPB must acknowledge that the costs imposed on regulated entities absolutely affect access to, and the availability of, credit to consumers.”
- Supervision. This tool is the “heart of the agency,” according to Kraninger, as it helps to prevent violations of laws and regulations from happening in the first place. The Bureau will keep in mind that it is not the only regulator examining most entities and will focus on coordination and collaboration with the other regulators so as not to impose unmanageable burdens in examinations.
- Enforcement. The Bureau will continue to enforce against bad actors that do not comply with the law, as enforcement is “an essential tool that Congress gave the Bureau.” The Bureau will have a “purposeful enforcement regime” to foster compliance and help prevent consumer wrongs. Kraninger is “committed to ensuring that enforcement investigations proceed carefully and purposefully to ensure a fair and thorough evaluation of the facts and law… [and ensuring they] move as expeditiously as possible to resolve enforcement matters, whether through public action or a determination that a particular investigation should be closed.”
Kraninger also touched on how the Bureau plans to measure success going forward. Kraninger noted that in the past, the Bureau touted its outgoing statistics as a measurement, such as amount of consumer redress and number of complaints handled. However, according to Kraninger, if the Bureau succeeds in fostering a goal of prevention of harm, certain outputs like meritorious complaints would actually be lower. Therefore, the Bureau’s success should be based on how it uses all of its tools. Lastly, Kraninger announced a symposia series that would convene to discuss consumer protections in “today’s dynamic financial services marketplace.” The first will explore the meaning of “abusive acts or practices” under Section 1031 of the Dodd-Frank Act, specifically, to address issues with the “reasonableness” standard. There are no additional details on the date for the symposium but Kraninger noted that this would be the next step in exploring future rulemaking on the issue. The series will also have future events discussing behavioral law and economics, small business loan data collection, disparate impact and the Equal Credit Opportunity Act, cost-benefit analysis, and consumer authorized financial data sharing.
Additionally, on April 9, acting Deputy Director, Brian Johnson, spoke at the George Mason University Law & Economics Center's Ninth Annual Financial Services Symposium. In his prepared remarks, Johnson emphasized that regulatory rules should be “as simple as possible” when dealing with complex markets as they are easier for a greater portion of actors to understand and adapt to and also promote compliance, “which has the ancillary benefit of making it easier for consumers (not to mention regulators) to distinguish between good and bad actors.” Johnson argued that regulators should not try and dictate specific outcomes in rulemaking. Instead, Johnson stated that “financial regulators should recognize that complex market systems are not a means to accomplish their specific goals” and should “narrowly-tailor rules to address a discrete market failure.” Johnson also touched on the Bureau’s new Office of Innovation, noting that the Bureau’s proposed No Action Letter Program and Product Sandbox will offer firms “the opportunity to expand credit while still preserving important consumer protections,” while assisting the Bureau in learning about new technologies and potential consumer risks. As for the Bureau’s cost-benefit analysis, Johnson said that this activity will not be limited to future actions, but will also be used for “periodic retrospective analysis” because financial markets are “constantly changing, requiring constant reappraisal and verification of the rules that govern the system.”
On March 20, the CFPB and the FTC released (here and here) their annual report to Congress on the administration of the FDCPA, which highlights the 2018 efforts of the agencies. The agencies coordinate in enforcement; share supervisory and consumer complaint information; and collaborate on education under a memorandum of understanding that was reauthorized in February. (Covered by InfoBytes here.) In the report, the Bureau acknowledges its intent to release a Notice of Proposed Rulemaking on debt collection covering issues such as “communication practices and consumer disclosures” in spring 2019. In addition to highlighting the Bureau’s debt collection education efforts, the report also states that in 2018 the Bureau (i) received approximately 81,500 debt collection complaints related to first-party and third-party collections; (ii) initiated six public enforcement actions alleging violations of the FDCPA, one resulting in an $800,000 civil money penalty; and (iii) identified one or more violations of the FDCPA through supervisory examinations.
As for the FTC, in addition to education efforts, the report states that in 2018 the agency (i) initiated or resolved seven enforcement actions, three of which were related to phantom debt collection, obtaining more than $58.9 million in judgments; (ii) returned money to thousands of consumers who were targeted by phantom debt collection operations; and (iii) banned 32 companies and individuals from working in the debt collection market.