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The CFPB Ombudsman’s Office issued its midyear update for 2022, which “provides an independent, impartial, and confidential resource to informally assist individuals, companies, consumer and trade groups, and others in resolving issues with the CFPB.” The Ombudsman received 1,108 individual inquiries—the most it has received in a six-month period for the past ten years. The Ombudsman noted that the CFPB had processed certain incoming consumer correspondence as inquiries rather than as consumer complaints, and as a result, they were not forwarded for company response. Based on the feedback, the Bureau added FAQs to the “Submit a complaint” webpage. In addition, later this year the Ombudsman plans to provide a summary of the feedback and recommendations from its post-examination survey of supervised entities, along with a further summary of the findings in its annual report. The update also discussed suggestions on draft CFPB materials, noting that “some of our feedback centered around clarity for the public as well as consideration of the public’s expectations in engaging with the CFPB.” Finally, the update noted that the Ombudsman’s Office intends to host a virtual Ombudsman Forum with organizations assisting consumers in the Midwest region. Feedback will be summarized in its annual report.
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.”
DFPI issues NPRM to implement process for handling consumer complaints and inquiries under the CCFPL
Recently, the California Department of Financial Protection and Innovation (DFPI) issued a notice of proposed rulemaking (NPRM) to adopt regulations to implement and interpret certain sections of the California Consumer Financial Protection Law (CCFPL) related to consumer complaints and inquiries. (See also text of the proposed regulations here.) As previously covered by a Buckley Special Alert, AB 1864 was signed in 2020 to enact the CCFPL, which, among other things: (i) establishes UDAAP authority for DFPI; (ii) authorizes DFPI to impose penalties of $2,500 for “each act or omission” in violation of the law without a showing that the violation was willful, arguably representing an enhancement of DFPI’s enforcement powers in contrast to Dodd-Frank and existing California law; (iii) provides DFPI with broad discretion to determine what constitutes a “financial product or service” within the law’s coverage; and (iv) provides that administration of the law will be funded through the fees generated by the new registration process as well as fines, penalties, settlements, or judgments. While the CCFPL exempts certain entities (e.g., banks, credit unions, certain licensees), DFPI’s oversight authority was expanded to include debt collection, debt settlement, credit repair, check cashing, rent-to-own contracts, retail sales financing, consumer credit reporting, and lead generation.
The NPRM proposes new rules to implement section 90008, subdivisions (a), (b), and (d)(2)(D), of the CCFPL related to consumer complaints and inquires. According to DFPI’s notice, section 90008 subdivisions (a) and (b) authorize DFPI to promulgate rules establishing reasonable procedures for covered persons to provide timely responses to consumers and DFPI concerning consumer complaints and inquiries. Additionally, subdivision (d)(2)(D) “permits covered persons to withhold nonpublic or confidential information, including confidential supervisory information, in response to a consumer request to the covered person for information regarding a consumer financial product or service.”
Among other things, the NPRM:
- Identifies entities exempt from the consumer complaints and inquiries requirements;
- Requires covered persons to respond to consumer complaints and to establish policies and procedures for receiving and responding to complaints, including providing a complaint form, acknowledging receipt of complaints, tracking complaints, the timeline for responding to complaints, the contents for such a response, and recordkeeping of such complaints;
- Sets forth requirements for responding to complaints, including documenting when complaints do not require further investigation, performing an investigation of a complaint if warranted, and requiring corrective action to resolve a complaint such as an account adjustment, credit, or refund, and appropriate steps to prevent recurrence of the issue, which may include policy changes and employee training;
- Requires designation of an officer with primary responsibility for the complaint process;
- Requires covered persons to submit to DFPI a quarterly complaint report, which will be made public, and an annual inquiries report;
- Sets forth requirements for covered persons to respond to inquiries from consumers and develop and implement written policies and procedures for responding to such inquiries;
- Provides that covered persons must develop and implement written policies and procedures for responding to requests from DFPI regarding consumer complaints; and
- Exempts certain information, such as nonpublic or confidential information, including confidential supervisory information, from disclosure to consumers.
Written comments on the NPRM are due by July 5.
On April 20, the CFPB released a report analyzing complaints submitted to the Bureau in 2021 regarding medical billing, collection, and consumer reporting practices. The report describes the difficulties that consumers face in identifying, verifying, or eliminating the debt. The report also noted that most of the complaints could be sorted into two main themes: (1) the debt was already paid, does not belong to the consumer in question, or is otherwise incorrect, and (2) that information included in collection notices raised concerns. According to the Bureau, key findings of the report include, among other things: (i) from 2018 to 2021, complaints regarding collection attempts on medical bills that were not owed increased by 31 percent; (ii) approximately 15 percent of debt collection complaints in 2021 were about attempts to collect a medical bill; and (iii) “consumers often expressed surprise and frustration about finding out about old or small medical debts when checking their credit report.” The report is the most recent among statements and reports from the CFPB regarding medical debts and credit reporting. As previously covered by InfoBytes, in March the CFPB released a report, Medical Debt Burden in the United States, that cited research finding that $88 billion in medical debt on consumer credit reports, accounting for 58 percent of all uncollected debt tradelines reported to credit reporting agencies.
On April 15, the CFPB and the FTC released their annual report to Congress on the administration of the FDCPA (see announcements here and here). The agencies are delegated joint FDCPA enforcement responsibility and, pursuant to a 2019 memorandum of understanding, may share supervisory and consumer complaint information, as well as collaborate on education efforts (covered by InfoBytes here). Among other things, the annual report provided a broad overview of the debt collection industry during the Covid-19 pandemic and highlighted enforcement actions taken by, and education and outreach efforts, policy initiatives, and supervisory findings of, the CFPB and FTC. With respect to enforcement, the report noted that: (i) the FTC resolved three FDCPA cases against 17 defendants and banned all 17 companies and individuals who engaged in serious and repeated violations of law from engaging in debt collection; (ii) there was one new public enforcement action brought in 2021 related to unlawful debt collection conduct; (iii) the Bureau resolved two pending lawsuits with FDCPA claims and also filed an action to recover a fraudulent transfer to enforce a prior judgment that penalized a defendant’s FDCPA violations, which resulted in judgments for $2.26 million in consumer redress; and (iv) by the end of 2021, the Bureau had three FDCPA enforcement actions pending in federal court. The report also noted that the CFPB handled roughly 121,700 debt collection complaints in 2021, of which the Bureau sent approximately 73,600 (or 60 percent) to companies for their review and response. Finally, the report also noted that the U.S. Supreme Court’s decision in AMG Capital Management v. FTC “made it much more difficult for the FTC to obtain monetary relief for unfair or deceptive debt collection practices that fall outside the scope of the FDCPA.” As previously covered by InfoBytes, in that decision the Court unanimously held that Section 13(b) of the FTC Act “does not authorize the Commission to seek, or a court to award, equitable monetary relief such as restitution or disgorgement.”
On March 31, the CFPB published its Consumer Response Annual Report for 2021, providing an overview of consumer complaints received by the agency between January 1 and December 31, 2021. According to the report, the Bureau handled approximately 994,000 consumer complaints last year. Among other trends, the agency found that complaints about credit or consumer reporting continue to increase, accounting for more than 70 percent of all complaints received last year. Debt collection complaints are also increasing, accounting for more than 10 percent of all complaints. Consumers also reported difficulties with financial institutions failing to adequately address consumer complaints, giving consumers the runaround, and described issues with reaching companies to raise concerns about digital assets, mobile wallets, and buy-now-pay-later credit. The Bureau noted that during the second year of the Covid-19 pandemic, complaint data showed that the volume of complaints from consumers struggling to pay their mortgages is increasing as borrower protections have expired. While complaints related to vehicle loans have also increased, the Bureau reported that student loan complaints remain lower than pre-Covid levels due to the implementation of temporary relief programs. The top products and services—representing approximately 94 percent of all complaints—were credit or consumer reporting, debt collection, credit cards, checking or savings accounts, and mortgages. The Bureau also received complaints related to money transfers and virtual currency; vehicle finance; prepaid cards; student, personal, and payday loans; credit repair; and title loans.
On September 23, the CFPB released its first in-depth report analyzing complaint submission patterns by U.S. Census tract, titled “Consumer complaints throughout the credit life cycle, by demographic characteristics.” The report is based on approximately 1 million consumer complaints submitted to the CFPB between 2018 and 2020 and classifies complaints by matching the relevant consumers to census tract-level U.S. Census demographic data. The report finds, among other things, that: (i) loan origination complaints increased by nearly 50 percent in 2020, driven by mortgage complaints; (ii) “[n]eighborhoods with the highest share of white, non-Hispanic consumers submit complaints about loan originations at more than twice the rate of neighborhoods with the highest share of Black consumers”; (iii) lower-income and communities of color are more likely to submit complaints regarding credit reporting, identity theft, and delinquent servicing than higher-income and majority white, non-Hispanic communities; (iv) Asian American and Pacific Islander communities had higher rates of submitting credit reporting complaints compared to predominantly white, non-Hispanic communities; and (v) census tracts with the greatest share of Black residents have complaint rates that are double the rates for tracts with the lowest share. According to the CFPB, the report’s findings will help the CFPB’s work, and the Bureau “will continue its research into consumer complaint data as part of its larger commitment to put consumers, and their varying experiences with consumer financial products and services, at the foundation of all its work.”
On August 18, the California Department of Financial Protection and Innovation (DFPI) released a new invitation for comments on proposed rulemaking to implement the California Consumer Financial Protection Law (CCFPL). As previously covered by InfoBytes, last September the California governor signed AB 1864, which enacts the CCFPL and authorizes DFPI to establish rules relating to the covered persons, service providers, and consumer financial products or services outlined in the law. The newest invitation for comments builds on responses to initial comments received from a request for comments made in February (covered by InfoBytes here), and seeks comments on draft language implementing certain subdivisions of section 90008 related to consumer complaint regulations.
Among other things, the draft regulations would (i) require covered persons to create a complaint form accessible via their website and at each physical location, as well as maintain a toll-free number for consumers to orally file complaints; (ii) outline instructions for how covered persons must investigate and respond to complaints, including tracking complaints and communicating with consumers (covered persons will be required to provide written decisions to consumers within 15 calendar days of receiving a complaint); (iii) require covered persons to maintain a written record of each complaint for a minimum of five years from the date the complaint was initially filed; (iv) prohibit discrimination during the complaint process on any basis prohibited by law; (v) require complaint reports to be filed quarterly with DFPI describing the volume and types of complaints; (vi) outline requirements for determining whether a consumer inquiry should be handled as a complaint; and (viii) define nonpublic or confidential information. Comments on the draft regulations must be received by September 17.
On July 1, the CFPB released a new bulletin analyzing consumer complaints and responses related to actions taken by Congress or the Bureau to provide relief for consumers impacted by the Covid-19 pandemic. The bulletin expands upon the Bureau’s 2020 Consumer Response Annual report (covered by InfoBytes here) and specifically focuses on consumer complaints related to: (i) suspended monthly federal student loan payments; (ii) Economic Impact Payments (EIPs); and (iii) the Bureau’s interim final rule supporting the CDC’s eviction moratorium. With respect to student loans, the bulletin noted a significant decrease in federal student loan complaints following the suspension of payments, but identified complaints related to potential customer service issues concerning repayment options or available relief and discussed servicers’ ability to respond timely to complaints. With respect to EIPs, the bulletin discussed complaints about overdraft fees charged to consumers after advances made by financial institutions to allow consumers access to all of their EIP funds were reversed, and highlighted steps taken by institutions to refund these fees. According to the bulletin, consumers who received EIPs via prepaid debit cards also reported issues accessing funds, while some consumers claimed their accounts were locked following the second and third disbursements. The bulletin also described the various types of consumer complaints related to the eviction moratorium, including complaints related to collection activities and credit reporting.
On May 6, 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 2020 and covers the period between January 1, 2020 to December 31, 2020. The report also addresses concerns raised by military consumers based on approximately 40,000 complaints submitted by servicemembers, veterans, and their families (collectively “servicemembers”). Key takeaways from the report include the following:
- Financial help due to the Covid-19 pandemic. In response to Covid-19, the Bureau released an online resource “to highlight tools and information that consumers can use to protect themselves and manage their finances, including information on topics such as mortgage and housing assistance, student loans, and avoiding scams.” For servicemembers, the page connects to an OSA blog detailing resources that military personnel can use for immediate financial assistance and to sustain long-term financial well-being.
- Misadventures in Money Management (MiMM). MiMM serves as an online educational tool that provides young servicemembers with an important “baseline of financial education through the power of storytelling and gamification.”
- Consumer Financial Protection Week and Military Consumer Protection Month. OSA took part in a joint webinar with the CFPB’s Office of Older Americans and the Office of Community Affairs, which highlighted initiatives for vulnerable populations and emphasized the “importance of research in understanding the financial well-being of military consumers.” The webinar also unveiled the Bureau’s “first research report that studied how the credit records of young servicemembers coevolve with military service.”
- National Veterans and Military Families Month. During November 2020, OSA organized with other agencies and organizations to encourage the military community to leverage available resources to help improve their financial well-being. These initiatives included, among other things: (i) publishing OSA’s Debt and Delinquency after Military Service research report; (ii) participating in the Bureau’s Financial inTuition Repayment Podcast Series; and (iii) convening “a virtual military consumer webinar with partner agencies and organizations to discuss financial challenges facing servicemembers, veterans, and their families in the financial marketplace.”
- Education and empowerment. The Bureau also “deployed and amplif[ied] [its] financial education tools through partners, engaging servicemembers and military families at townhall-style listening sessions at military installations.”
- Kathryn L. Ryan to host the affiliate members meeting at AARMR’s 2022 Annual Regulatory Conference & Training
- Kathryn L. Ryan and Jedd R. Bellman to discuss “Risk and compliance management: Are you covered?” at a Mortgage Bankers Association webinar
- Melissa Klimkiewicz and Daniel A. Bellovin to discuss “Things to know about flood insurance” at a NAFCU webinar
- Hank Asbill to discuss “Ethical issues at sentencing” at the 31st Annual National Seminar on Federal Sentencing
- Max Bonici will moderate a panel on “Enforcement risk and other regulatory and compliance issues related to crypto and digital assets” at the American Bar Association’s 2022 Annual Meeting
- John R. Coleman to provide a “CFPB Update” at MBA’s 2022 Regulatory Compliance Conference
- Amanda R. Lawrence to discuss “The shifting data privacy and data protection landscape” at MBA’s 2022 Regulatory Compliance Conference
- Benjamin W. Hutten to discuss “Fundamentals of financial crime compliance” at the Practicing Law Institute
- Benjamin W. Hutten to discuss “Ongoing CDD: Operational considerations” at NAFCU’s Regulatory Compliance & BSA Seminar