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CFPB Director to Testify Before Financial Services Committee on April 5 to Discuss Semi-Annual Reports
On March 31, the Financial Services Committee announced it will hold a hearing on Wednesday, April 5 at 10:00 a.m., entitled “The 2016 Semi-Annual Reports of the Bureau of Consumer Financial Protection.” According to the Committee Memorandum, the hearing—which will be held in room 2128 of the Rayburn House Office Building—will examine the Bureau’s Ninth and Tenth semi-annual reports covering the period of October 1, 2015 through March 31, 2016 and April 1, 2016 through September 30, 2016 respectively. Director Cordray, the only scheduled witness, will provide testimony on the reports.
House Subcommittee Holds Hearing to Discuss the Impact of Regulations on Access to Credit
On March 28, the House Subcommittee on Financial Institutions and Consumer Credit held a hearing that examined recent trends in lending and how the current regulatory climate impacts the availability of credit for consumers and small businesses. According to a memorandum issued prior to the hearing by the House Financial Services Committee, the hearing sought to address the decline in “[l]ending by community financial institutions . . . since the passage of the Dodd-Frank [Act].” Specifically, the memo notes that in the six years prior to the Dodd-Frank Act, small bank lending was more than 150 percent above large bank lending. In the more than six years after Dodd-Frank, small bank lending has been nearly 80 percent below large bank lending. A witness list for the single-panel hearing (along with links to prepared remarks submitted by each witness) included the following stakeholders:
- Scott Heitkamp, President and Chief Executive Officer, ValueBank Texas, on behalf of the Independent Community Bankers of America;
- Holly Wade, Director, Research and Policy Analysis, National Federation of Independent Businesses;
- J. David Motley, President, Colonial Companies, on behalf of the Mortgage Bankers Association; and
- Michael Calhoun, President, Center for Responsible Lending.
In a press release issued by the Financial Services Committee following the hearing, majority members of the subcommittee identified the “Key Takeaways from the Hearing,” as (i) “Dodd-Frank has left Americans with fewer choices, higher costs and less freedom”; (ii) “Financial institutions are exiting entire lines of business, limiting the availability of products and services for consumers”; and (iii) “[t]he Financial CHOICE Act will increase access to credit for consumers and capital for small businesses.”
An archived webcast of the hearing may be accessed here.
FDIC Releases List of Enforcement Actions Taken Against Banks and Individuals in February 2017
On March 31, the FDIC released its list of administrative enforcement actions taken against banks and individuals in February. Several of the consent agreements included on the list seek civil money penalties for, among other things, violations of the Flood Disaster Protection Act of 1973 and its flood insurance requirements. Other violations cited in the enforcement actions relate to unsafe or unsound banking practices, breaches of fiduciary duty, and violations of the Bank Secrecy Act. There are no administrative hearings scheduled for April 2017. The FDIC database containing all of its enforcement decisions and orders may be accessed here.
CFPB Director Speaks at National Community Reinvestment Coalition Conference; Discusses Regulatory Review at Chamber of Commerce 11th Annual Capital Markets Summit
On March 29, CFPB Director Richard Cordray spoke at the National Community Reinvestment Coalition Conference in Washington, D.C. to discuss, among other things, the Equal Credit Opportunity Act and the difficulties faced by individuals who cannot obtain mainstream credit. As previously covered in InfoBytes, the CFPB is exploring the risks and benefits of using “alternative data” to assist consumers whose limited credit histories prevent them from accessing many lending opportunities. Cordray stated that one of the CFPB’s priorities “is [to increase] the availability of responsible financial products and services, especially for those who have been underserved or shut out.”
The next day, on March 30, Cordray spoke at the U.S. Chamber of Commerce’s 11th Annual Capital Markets Summit in Washington, D.C. In prepared remarks, Cordray discussed the regulatory compliance challenges and burdens that financial organizations face, as well as the CFPB’s efforts to assist with regulatory implementation, the development of clearer guidance, and methods to streamline and modernize regulations based on effectiveness. Cordray noted the CFPB’s efforts to improve and adapt regulations based on the needs of the industry. “We learn from the comments we receive and our final rules are helpfully informed by that input on a consistent basis,” Cordray stated. “But even after we issue a final rule, if the data shows over time that any of our substantive calls need to be reconsidered, we can and will face the issue frankly and address it. We will not let pride of authorship interfere with the serious task of policymaking in the interests of consumers and the American public.” As mandated by Congress, the CFPB must review any significant rules after five years have passed. The CFPB plans to review remittance rules followed by a review of the mortgage rules. Cordray also noted efforts to address ambiguities and conflicts in other areas such as debt collection and payday lending.
FTC Returning More Than $2.7 Million to Consumers Scammed in Debt Collection Scheme
On March 30, the FTC announced that it is mailing checks to 5,232 consumers who lost money as part of a debt collection scheme that cheated consumers out of more than $2.7 million. The compensation follows a 2011 complaint filed by the Commission that was settled in 2014, in which the two principal owners (Defendants) of the debt collection company were ordered to surrender more than $3.3 million worth of assets to be paid to the victims. Defendants were also permanently banned from the debt collection business and prohibited from falsely representing any financial products or services. The charges in the complaint allege Defendants (and others) violated the FTC Act and FDCPA by: (i) calling consumers and posing as process servers attempting to “deliver legal papers . . . purportedly related to a lawsuit”; (ii) threatening consumers with arrest if they did not respond to the calls; and (iii) masquerading as attorneys or law office employees demanding consumers pay legal fees where, in many instances, “consumers did not even owe the debt the defendants were trying to collect.” According to the Commission’s March 30 announcement, consumers who lost money will receive the full amount of fraudulent fees Defendants added to their debt.
Bank Holding Company and Nonbank Auto Lender Subsidiary Sign New Written Agreement with Boston Fed
On March 21, the Federal Reserve Bank of Boston (Boston Fed) and a national bank holding company and its nonbank subsidiary (a Dallas-based auto lender) entered into a Written Agreement to address concerns related to their July 2015 Written Agreement, which required a detailed description of the holding company’s efforts to strengthen board oversight specifically with regard to committees, executive positions, and lines of reporting (see July 2015 InfoBytes summary). The 2017 Written Agreement is a result of deficiencies identified by the Boston Fed in the subsidiary’s compliance risk management program. The terms of the current Written Agreement require, among other things, the board of directors of the subsidiary to submit a revised compliance risk management plan addressing, among others: (i) comprehensive compliance risk assessments to identify “risks associated with applicable consumer compliance laws”; (ii) enhanced written policies and procedures to address risks arising from noncompliance; and (iii) a revised code of conduct for employees that outlines rules governing compliance and reporting processes for known or suspected violations of consumer compliance laws, regulations, and supervisory guidance. Furthermore, the company must submit written revisions to its firmwide internal audit program with respect to auditing its revised compliance risk management program.
CFPB Issues Companion Guide to Your Money, Your Goals Toolkit, Targets “Justice-Involved” Individuals
Earlier this month the CFPB published its Focus on Reentry companion guide to the Your Money, Your Goals toolkit introduced in 2014. The companion guide, intended to assist organizations and their staff on how to address the unique financial challenges facing individuals pre- and post-release from incarceration as well as encourage financial empowerment and consumer financial protection education, also contains tools designed to aid “justice-involved” individuals. In particular, Focus on Reentry helps frontline staff teach these individuals to:
- Assess financial goals and understand their current financial situation to identify financial challenges to successful transition;
- Set “SMART” goals (Specific, Measurable, Able to be reached, Relevant, and Time bound) and identify steps to achieve them;
- Understand potential issues they may face when trying to secure documents related to identification to help ease the transition process;
- Identify and prioritize debt—both debt arising from the individual’s involvement in the criminal justice system (criminal justice debt) as well as consumer debt—in order to set debt management goals;
- Understand the process for accessing and reviewing credit reports and how to dispute errors to credit reporting agencies; and
- Understand individual rights to obtain and review criminal background screening reports and how to dispute and correct errors in criminal background checks.
In addition, Focus on Reentry provides information and resources on the impact of incarceration on student loans, access to financial aid, tax obligations, as well as many other categories.
FTC Settles with Debt Collection Company for Violations of FTC Act and FDCPA
On March 24, the FTC entered into an agreement with a debt collection company and its owners (Defendants) to resolve allegations that Defendants had engaged in deceptive acts or practices in violation of the FTC Act and the FDCPA. Earlier in the month, the FTC filed a complaint against Defendants, claiming that Defendants collected “court fines, parking tickets, and debts for utility bills and other services on behalf of more than 500 municipalities in various states, including Alabama, Arkansas, Illinois, Kansas, Louisiana, Mississippi, Oklahoma and Texas.” The complaint alleges that Defendants used government letterhead to mislead consumers into thinking the letter was coming from a government agency. The complaint further asserts that Defendants sent consumers an initial warning letter, followed by a “FINAL NOTICE PRIOR TO ARREST” document, which falsely claimed that due to nonpayment, the consumer was subject to arrest, suspension of his or her driver’s license, and reporting to consumer reporting agencies. The agreement enters a civil penalty of $350,000 that must be paid within seven days and prohibits Defendants from misrepresenting debt collection practices and making unsubstantiated claims.
CFPB Monthly Complaint Report Focuses on Credit Cards; 2016 Annual Report to Congress Highlights FDCPA Activities
On March 28, the CFPB released its monthly complaint report highlighting consumer complaints as of March 1 of this year. The report states that the Bureau has handled approximately 1,136,000 consumer complaints across all categories, of which 10 percent (116,200) relate to credit cards. A few of the most common findings raised by consumers are: (i) issues with fraudulent charges—both with respect to being billed for charges not initiated by them and experiencing difficulties having charges removed even after a dispute has been resolved in their favor; (ii) issues regarding reward program requirements and benefits; and (iii) issues regarding identity theft complaints, specifically with respect to “credit card accounts being fraudulently opened in their name even after an alert was placed on their credit file.” The report discloses that credit card complaints, along with complaints regarding debt collection practices, constituted the most prolific category of consumer complaints in February 2017. Credit reporting complaints and mortgage complaints are the second and third most common complaints, respectively. As previously reported in InfoBytes last month, student loan complaints continued to show the greatest increase year-over-year for the same three month time period of December to February—551 complaints from 2015/2016 versus 2,913 complaints in 2016/2017.
Furthermore, the report’s geographic spotlight this month, Massachusetts, represented 1.8 percent of the total number of complaints nationally handled by the CFPB, and while debt collection complaints were “significantly lower” than the national average (20 percent as compared to 27 percent), the rate of mortgage complaints was roughly at the national average.
Also this month, on March 6, the CFPB submitted to Congress its sixth annual report summarizing its efforts to administer the FDCPA and highlighting the work done by the CFPB and the FTC, both of whom “work closely to coordinate” FDCPA enforcement actions (see prior InfoBytes coverage on FTC letter summary). The report discusses consumer complaints and debt collection enforcement activity, amicus briefs filed in FDCPA-related cases, consumer education efforts, and initiatives regarding rulemaking, research, and policy. FDCPA examinations performed in 2016 “identified a number of violations of the law …including false representations made by debt collectors to consumers, unlawful fees charged by debt collectors, and illegal disclosure of debts to third parties.” Furthermore, the examinations “also found instances in which debt sellers sold accounts for collection that did not properly reflect that the accounts were discharged in bankruptcy, were fraudulent, or had already been paid . . . Additionally . . . [i]n the cases that were concluded in 2016, $39 million was paid in restitution for consumers who were impacted by illegal debt collection practices and $20 million in civil penalties.”
FTC Commissioners Testify Before Senate Committee on Enforcement Efforts to Combat Fraud
On March 21, Federal Trade Commission (FTC) Acting Chairman Maureen K. Ohlhausen and Commissioner Terrell McSweeny testified before the Senate Committee on Commerce, Science, and Transportation’s Subcommittee on Consumer Protection, Product Safety, and Data Security to describe the agency’s law enforcement work to combat fraud. The testimony noted that in the past year, the agency obtained judgments of more than $11.9 billion to consumers “harmed by deceptive and unfair business practices” and received more than three million consumer complaints. Commissioner Terrell McSweeny noted that the “top three categories of complaints were debt collection, impostor frauds, and identity theft,” and that for the first time “imposter scam complaints . . . surpassed the number of identity theft complaints.” FTC Acting Chairman Maureen K. Ohlhausen also presented testimony and emphasized two populations in particular—military consumers and small businesses—both of whom are attractive targets for fraudsters, and for whom the agency actively works with to provide fraud recognition tools to prevent future victims. Also discussed at the hearing was the creation of the Office of Technology Research and Investigation to help the agency “keep abreast of technology changes affecting consumers” as well as the agency’s fraud prevention and education outreach initiatives that impact “tens of millions of people and businesses each year.”