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CFPB studies criminal justice financial ecosystem
On January 31, the CFPB published a report studying the criminal justice financial ecosystem, which addressed financial challenges people and families face at every stage of the criminal justice process. According to Justice-Involved Individuals and the Consumer Financial Marketplace, contact with the criminal justice system is very common in the U.S. In 2019, 2.1 million adults were in jail or prison, 4.4 million were under community supervision, and 77 million adults (1 in 3) had a criminal record. These statistics, the Bureau stated, do not account for family members or friends who are often responsible for providing financial support for incarcerated individuals, and who often encounter financial impacts as a result. The Bureau reported that individuals often struggle to pay criminal justice debt and often face steep fines, including additional fees tacked on by third-party debt collectors that, if not paid, may result in incarceration. Additionally, the Bureau reported that the choice of financial service providers is limited within the criminal justice system, and that faced with little or no choice as to how to receive funds upon release from prison or jail, individuals often incur high fees to access their money and may experience difficulties resolving errors. Last October, the Bureau issued a consent order against a provider of financial services to prisons and jails, which alleged that the company engaged in unfair, deceptive, and abusive acts or practices in violation of the CFPA by charging consumers fees to access their own funds on prepaid debit cards that they were required to use (covered by InfoBytes here). The report also found that governments are increasingly shifting incarceration costs to the incarcerated individuals and their families. These costs, the Bureau said, are often sourced to private companies that inflate prices above typical market costs, and raise serious concerns about the transparency, fairness, and availability of consumer choice in markets associated with the justice system.
FTC bans auto marketer over deceptive mailings
On January 28, the FTC announced that it had banned a marketing services company and its owner from the auto industry for allegedly misleading consumers that their websites were affiliated with a government stimulus program and sending consumers deceptive mailings regarding prizes they had supposedly won. According to the opinion, the respondents violated the FTC Act by utilizing deceptive and unfair practices such as sending misleading mailings to persuade consumers to visit auto sales sites by suggesting that these sites were affiliated with a government Covid-19 stimulus program when in fact the sales were not part of any such program. The respondents also allegedly quoted monthly payments to purchase vehicles on credit, but did not provide key financing terms required by law that consumers need to determine the true cost of the advertised loans. Additionally, the respondents allegedly sent direct mail advertisements that deceptively indicated that consumers had won specific, valuable prizes that could be collected upon visiting the car dealership. The FTC noted that the respondents conducted such mailings, despite entering into three prior consent orders with state authorities identifying the ads as deceptive. According to the order, the respondents, are, among other things, banned from advertising, selling, or leasing automobiles for 20 years, and are prohibited from misrepresenting any material fact while marketing any product or service of any kind, as well as from any further violations of TILA’s disclosure requirements.
CFPB publishes list of consumer reporting companies
On January 27, the CFPB released its annual list of consumer reporting companies, which identifies reporting companies that collect and sell access to people’s data. According to the CFPB, the list can be used “to see what information these firms have, dispute inaccuracies, and file lawsuits if the firms are violating the Fair Credit Reporting Act.” The list also, among other things, permits people to identify which companies provide this information at no cost, as well as search for those that provide specialized reporting by certain markets, including employment, tenant, insurance, and medical. According to a blog post published by the CFPB, features of the list include, among other things: (i) information on how to request a report; (ii) tips for checking specialty reports; and (iii) identity verification information. The CFPB also noted that it previously highlighted consumer complaints concerning nationwide reporting companies. As previously covered by InfoBytes, the CFPB released a report, pursuant to Section 611(e)(5) of the FCRA, covering certain consumer complaints transmitted by the Bureau concerning the three largest nationwide consumer reporting agencies.
District Court grants final approval of $12 million class action settlement
On January 25, the U.S. District Court for the Southern District of Ohio granted final approval to a $12 million class action settlement resolving allegations that a calculation error in a national bank’s (defendant’s) software wrongly assessed the plaintiffs’ eligibility for loan modifications. The settlement class, which includes the defendant’s customers who, between 2010 and 2018, allegedly qualified for a home loan modification or repayment plan as required by government-sponsored enterprises or other federal agency requirements, but did not receive an offer for those services from the defendant. The plaintiff class accused the defendant of failing to “adequately test, audit, and verify that its software was correctly calculating whether customers met threshold requirements for a mortgage modification.” Additionally, the plaintiff alleged the bank discovered the issues in 2013, but did not make the issue public until 2018. According to the plaintiffs’ unopposed motion for preliminary approval, the deal will provide $9.1 million to class members with each class member receiving between $1,000 to $19,000, and 22.7 percent of the total settlement sum going towards attorney costs and fees.
CFPB is monitoring for PSLF waiver compliance
On January 26, the CFPB encouraged consumers to take advantage of the Public Service Loan Forgiveness (PSLF) limited waiver program before the October 31 application deadline. As previously covered by InfoBytes, last October the Department of Education announced several changes to its PSLF program, including a time-limited PSLF waiver for qualifying borrowers, which allows all payments to count towards PSLF regardless of loan program, payment plan, or whether the payment was made in full or on-time. However, the Bureau noted that consumers are complaining of servicers not providing the support they need to get the full benefit of the PSLF limited waiver. The Bureau stated that it is monitoring servicers for illegal practices to ensure public service employees are able to access PSLF relief. Consumers who experience issues with servicers providing the necessary information, support, and processing are encouraged to submit a complaint to the Bureau.
FTC settles with remaining student debt relief defendants
On January 26, the FTC announced settlements with the remaining participants in a student loan debt relief operation. As previously covered by InfoBytes, the FTC filed a complaint against the defendants for allegedly using telemarketing calls, as well as media advertisements, to enroll consumers in student debt relief services in violation of the FTC Act and the Telemarketing Sales Rule (TSR). The defendants allegedly misrepresented that they were affiliated with the U.S. Department of Education and misrepresented “material aspects of their debt relief services,” including by promising to enroll consumers in repayment programs to reduce or eliminate payments and balances. Additionally, the defendants allegedly charged illegal upfront fees, and often placed the consumers’ loans into temporary forbearance or deferments with their student loan servicers, without the consumer’s authorization. A $43 million settlement was reached in 2020 with certain of the defendants that was partially suspended conditioned upon the surrender of at least $835,000, as well as additional assets.
The FTC entered two settlements against the remaining defendants. The first settlement imposes a roughly $7.5 million monetary judgment, which is partially suspended after the individual defendant pays $743,386. The second settlement includes a $22 million monetary judgment, which is also partially suspended based on the defendants’ inability to pay. The settlement also requires the defendants to forfeit all frozen funds held by the receiver. Monies recovered in the action will go towards consumer refunds. Additionally, the defendants are banned from providing any debt relief products and services in the future, and are prohibited from making misrepresentations in connection with the sale of any products or services or from making any unsubstantiated claims. Defendants are also enjoined from violating the TSR.
CFPB seeks input on “junk fees”
On January 26, the CFPB announced an initiative requesting comments from the public on fees that are associated with consumers’ bank accounts, prepaid or credit card accounts, mortgages, loans, payment transfers, and other financial products and that are allegedly not subject to competitive processes that ensure fair pricing. Bureau research found that back-end fees often hide a product’s true cost and can undermine a competitive market. The agency cited statistics showing that in 2019, major credit card companies charged more than $14 billion annually in punitive late fees, and that banks’ revenue from overdraft and non-sufficient funds fees exceeded $15 billion during this same time period. In a measure to reduce these “junk fees” the Bureau’s request for information (RFI) seeks input on (i) fees charged to consumers that they believed were covered by a product or service’s baseline price; (ii) unexpected fees charged for a product or service; (iii) fees that seemed high for the purported service; and (iv) fees that were unclear. The RFI also asks for examples of companies or markets that obtain significant revenue from these types of fees and seeks to explore, among other things, whether consumers understand fee structures disclosures and what “oversight and/or policy tools should be used to address the escalation of excessive fees or fees that shift revenue away from the front-end price[.]” The Bureau also asks small businesses, non-profit organizations, legal aid attorneys, academics and researchers, state and local government officials, and financial institutions, including small banks and credit unions, to submit feedback as well. The comment period opened February 4 and closes on March 31.
CFPB Director Rohit Chopra added that information gathered from the RFI will be used to (i) “issue new rules and guidance to spur competition and transparency” (the Bureau also intends to review some of the rules inherited from the Federal Reserve Board); (ii) identify reasons why financial institutions allegedly do not compete on certain types of fees and features; and (iii) create new rules to provide consumers more control over their data and more opportunities to move their money.
District Court approves $75 million overdraft settlement
On January 21, the U.S. District Court for the Western District of North Carolina granted final approval to a $75 million class action settlement to resolve allegations that a national bank improperly charged class members overdraft and insufficient fund fees (NSF). Class members include (i) individuals who held consumer checking and/or savings accounts at the bank who paid and were not refunded a retry transaction fee or one or more intrabank transaction fees; and (ii) checking and/or savings account holders who paid and were not refunded an overdraft or NSF fee on a transaction “that would not have been assessed if [the bank] had delayed the posting of previously assessed NSF/[overdraft] fees until the posting of a deposit that was sufficient to cover those fees, all outstanding debit transactions and any additional debit transactions made that day.” Under the terms of the settlement, the bank has agreed to pay $75 million into a settlement fund that will go towards class member payments, notice and administration costs, attorneys’ fee and expenses, and service awards. The bank must also stop assessing certain overdraft and NSF fees, improve its overdraft and NSF disclosures, and improve account disclosures and explanations related to circumstances where an account holder will incur an intrabank transaction fee, as well as disclosures for its fee accrual process.
FDIC joins Operation HOPE to promote financial education
On January 24, the FDIC announced a collaboration with Operation HOPE, Inc. to promote financial education. The collaboration will utilize the FDIC’s Money Smart curriculum and other resources to help educate minority- and/or women-owned businesses on how to do business with the agency. According to the FDIC, in 2001, the agency recognized “the importance of financial education, particularly for persons with little or no banking experience,” and created Money Smart. According to the FDIC and Operation Hope Collaboration Arrangement, the FDIC, among other things, will provide training for Operation Hope’s staff on how to teach the Money Smart curriculum and will help the nonprofit identify outreach initiatives to educate minority- and women-owned businesses on how to conduct business with the FDIC. According to FDIC Chairman Jelena McWilliams, the organization and the FDIC “share a common purpose to help every person belong to our nation’s financial system,” and together, “make certain our nation’s economy works for everyone.”
CFPB examines credit card rates and fees
On January 19, the CFPB released a blog on credit card interest and fees. The Bureau noted that credit card debt is rising, and that “from 2015 to 2019, the average assessed interest rate on credit cards increased by more than 20%.” The blog pointed out that the Bureau is examining ways to ensure that there is robust and fair competition in the credit card market. According to the blog, the Bureau “will focus on ensuring a more fair, transparent, and competitive credit card market” by (i) uncovering unfair, anticompetitive practices; (ii) making it easier for consumers to compare, switch, or refinance credit cards; and (iii) scrutinizing junk fees. The Bureau also noted that it is “looking to use a long-dormant authority to help spur better credit card shopping and switching by proposing rules that give consumers more control of their financial data,” and “considering options that will help Americans with credit cards escape high rates and lousy service.”