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CFPB Draws Mixed Reactions in Response to Request for Comments on Proposed Student Lending Information Collection
Back in February, the CFPB proposed information collection on the student loan servicing market, since then two trade associations have submitted comment letters, one in support of the information collection and one believing that the information collection would be unduly burdensome. According to the Bureau, the proposed information collection was intended to provide the Bureau “with a broader and deeper look into the student loan market.” The comment period for its request closed earlier this month.
Americans for Financial Reform (AFR). On April 24, the AFR and 31 other organizations sent a sign-on letter to the CFPB expressing support for the CFPB’s proposed student loan servicing data collection initiative. The letter argues, among other things, that “compiling such metrics and borrower outcomes would benefit market participants, federal and state agencies, policymakers, and borrowers,” by allowing each to “[o]btain[] a clearer view of the student loan market overall” while also “inform[ing] all market participants on how best to serve student loan borrowers.” The AFR letter also offers several suggests as to how the Bureau can best ensure the “quality and transparency of the data.” The letter emphasized, among other things, that “transparency is critical to having a servicing system that works for borrowers,” especially given the large number of student loan defaults.
Consumer Bankers Association (CBA). In an April 24 comment letter, the CBA expressed agreement with the CFPB’s ultimate goal of creating a private student loan market that is both transparent and fair, but argues that its consumer bank members already “effectively tailor[]” their loan products “to meet their customer’s needs” and strive to make loans only “to customers who are judged highly likely to repay them.” Specifically, the CBA believes, among other things, that the CFPB information collection would require unnecessarily duplication of existing publicly reported private loan data. CBA also raised additional concerns, including: (i) whether the CFPB could collect the same data effectively, and with greater protection afforded to loan holders and servicers, through the supervisory process; (ii) whether the CFPB has “grossly underestimate[d]” the burden on servicers to collect the requested data, and (iii) whether the CFPB’s stated market monitoring objectives could be met through less burdensome methods.
CFPB Deputy Director Addresses Community Bank Advisory Council on Financial Data Usage
On April 25, CFPB Deputy Director David Silberman addressed the Community Bank Advisory Council (CBAC) in Washington, D.C. on the Bureau’s work involving the use of data in the financial marketplace. CBAC was established almost five years ago to ensure that the Bureau had a direct line of communication with community banks. The Bureau is focused on understanding “how consumers are exercising control over their personal financial data, including the data that is maintained by their financial institutions.” In November of last year, the CFPB issued a Request for Information (RFI) regarding ways to “address the risks and technological challenges posed when consumers seek ready access to this data and seek to share it electronically with third parties.” The Bureau’s goal is to evaluate how to balance consumer needs without exposing the providers that maintain this data to undue costs and risks, while also making sure consumer data is not misused.
Silberman discussed the use of new types of data to assess the creditworthiness of consumers when applying for credit. The Bureau is exploring the possibility that “thoughtful and responsible use of alternative data—that is, data that is not part of the traditional credit reporting system—could expand the credit available to underserved consumers.” (See previous InfoBytes summary.) In February 2017, the CFPB issued another RFI to seek feedback about the “potential benefits and risks of using, applying, and analyzing unconventional sources” such as rent or utility payments to “assess people’s creditworthiness.” Silberman acknowledged community banks’ skill and “willingness to go beyond the numbers” in order to make lending decisions based on the totality of information they have available about their customers. The Bureau is exploring ways to combine the objectivity and rigor of automated underwriting with the community banks approach.
CFPB Fines Servicemember Auto Lender for Violating Consent Order
On April 26, the CFPB issued a second consent order against an Ohio-based auto lender, specializing in extending credit to servicemembers, for violating an earlier 2015 consent order issued by the Bureau (see previous InfoBytes summary). The 2015 order required, among other things, that the lender to pay restitution of over $2 million to affected consumers in addition to a $1 million civil money penalty for allegedly engaging in unfair, abusive, and deceptive debt collection practices. The 2017 consent order claims the lender violated the earlier order by failing to provide the required consumer redress or the redress plan consistent with the 2015 consent order. The Bureau contends that the lender issued worthless account “credits” to settled-in full accounts and to consumers whose debts were discharged in bankruptcy, and failed to provide the appropriate redress to consumers making payments under settlement agreements. The consent order requires that the lender: (i) pay an additional $1.25 million civil money penalty; (ii) pay $718,900 to the Bureau, which will be sent as refunds to consumers; (iii) issue $372,157 in account credits to consumers who have account balances, in addition to properly crediting consumers making payments under settlement agreements; and (iv) pay $75,000 in redress-administration costs to the Bureau.
CFPB Monthly Complaint Snapshot Highlights Issues Related to Student Loans
On April 25, the CFPB released its monthly complaint report highlighting consumer complaints year-to-date April 1. The Bureau has handled approximately 1,163,200 consumer complaints across all categories since it began collecting complaints. Of the roughly 28,000 received in March, 2,033 focused on private and federal student loans. Common problems raised by student borrowers included:
- lost documentation, extended application processing time, and unclear guidance when enrolling in income-driven repayment plans;
- misapplied payments, such as overpayments being applied to all accounts instead of being applied to a specific account;
- confusion over Public Student Loan Forgiveness programs and other loan forgiveness programs, specifically regarding enrollment issues, payment problems, and issues due to inaccurately reported employment data; and
- credit reporting companies receiving incorrect data, resulting in negative scores or collection companies contacting consumers about accounts that were paid in full or for debts that were not owed.
Similar to past CFPB-issued complaint snapshots, the report identifies the top 10 most common complaint categories with respect to all financial products, as well as the top 10 companies for which they received the most student loan complaints. The report spotlighted Nevada, noting that (i) Nevada consumers have submitted 14,600 of the 1,163,200 complaints received; (ii) debt collection complaints accounted for 29 percent of complaints received from Nevada, exceeding the national average by 2 percent; and (iii) mortgage-related complaints accounted for 23 percent of all complaints submitted by Nevada consumers, a rate equal to the national rate of mortgage complaints.
CFPB Provides Resources for Consumers During Money Smart Week
On April 22, the CFPB highlighted a series of consumer education resources as part of its participation in Money Smart Week—(April 22-29)—and Financial Literacy Month. The CFPB blog post is here. Among the financial decision-making resources are: (i) Ask CFPB—an online tool that the Bureau states will provide “clear, unbiased” answers to common financial questions; (ii) Owning a Home—a tool that provides resources for homebuyers; and (iii) Money as You Grow—a resource center where parents can find activities and conversation starters to help children build money skills. In addition, the Bureau also advised consumers that there are numerous free financial education classes and seminars conducted by local and regional organizations covering a variety of money-management topics such as buying a house, credit management, saving for college, and financing retirement. Consumers should visit Money Smart Week to find events and online resources.
CFPB Orders Law Firm to Comply with CID
On April 10, the CFPB issued a Decision and Order denying a law firm’s petition to set aside a civil investigative demand (CID) asking for information about the firm’s business practices to determine whether debt relief providers or lead generators engaged in “unlawful acts or practices in the advertising, marketing, or sale of debt relief services or products, including but not limited to debt negotiation, debit elimination, debt settlement, and credit counseling.” Specifically, the Bureau determined that none of the objections raised by the law firm warrant setting aside or modifying the CID.
On March 19, the firm filed a petition to set aside the CID (issued on February 27, 2017), offering four key reasons why the CID should not be enforced:
- the CFPB’s structure is unconstitutional and the CID should be stayed pending the PHH Corp. v. CFPB case;
- the CFPB lacks supervisory and enforcement authority with respect to the law firm;
- the CID’s requests are “excessively vague and overly broad”; and
- the CID was issued after the Bureau failed to prevail on a contempt order before the district court.
In responding to these arguments, the CFPB took the following positions. First, the Bureau contended that the law firm had waived its objection to the Bureau’s authority by failing to raise it during the meet-and-confer process with Bureau enforcement counsel. Second, the CFPB noted that under the Consumer Financial Protection Act, the Bureau has the authority to issue CIDs to “any person” who may have relevant information. Third, the Bureau disagreed that the requests in the CID were “excessively vague and overly broad,” and stated that the time to have raised this challenge was during the meet-and-confer process. However, the Bureau stated it is willing to engage in further discussions to determine if modifications may be appropriate. Fourth, the Bureau determined that the mere fact that the law firm in question was never held in contempt by a court of law does not preclude the CFPB “from issuing a CID or investigating whether it violated federal consumer financial law.” Pursuant to the Decision and Order, the law firm is required to produce documents and provide answers to interrogatories within 10 calendar days.
Credit Unions, Small Banks Encourage Fed Payments System Operational Role
On April 18, three industry organizations representing community banks and credit unions—the Credit Union National Association (CUNA), the Independent Community Bankers of America (ICBA), and the National Association of Federally-Insured Credit Unions (NAFCU)—sent a letter urging the Federal Reserve System (Fed) to provide central bank settlement services in support of private sector development of future payment systems, rules, and standards. The letter also urges the Fed to take on three operational roles in addition to settlement capabilities: (i) to serve as an “on-ramp” to real-time payments; (ii) to serve as a real-time payments operator, much as it currently is an operator for checks, automated clearinghouse payments, and wire transfers; and (iii) to maintain a “payments directory” that would link together financial institutions and private-sector payments directories. The organizations argue, among other things, that the Fed’s commitment to these operational roles is critically important to achieving the “much-needed goals of safety, equitable access, and ubiquity” in developing an improved payments system. The letter emphasizes that the organizations are not requesting that the Fed develop rules or standards for real-time payments, but rather take the position that such efforts “should be left for private sector rules and standards organizations.”
As previously covered by InfoBytes, the Fed created the Faster Payments Task Force and the Secure Payments Task Force in June 2015 to lead industry efforts toward a speedier and better payments system. The CFPB also issued a set of guiding principles aimed to help private industry better protect consumers as new, faster electronic payment systems continue to emerge. (See InfoBytes coverage) The April 18 letter “applaud[s] the formation of both [Task Forces]” and “strongly encourage[s] the ongoing commitment of the [Fed] to lead and catalyze payments industry activities until the desired outcomes stated in the 2015 Strategies for Improving the U.S. Payments System paper are achieved.”
CFPB Issues Final Rule Delaying Effective Date for Prepaid Accounts Rule to April 1, 2018
On April 20, the CFPB released a final rule delaying the general effective date of its rule governing prepaid accounts by six months, to April 1, 2018. As previously covered in InfoBytes, the Bureau, after reviewing comments, decided last month to delay the effective date of the rule—which, among other things, provides consumers with additional federal protections under the Electronic Fund Transfer Act on prepaid financial products, mobile wallets, person-to-person payment products, and other electronic accounts with the ability to store funds. The CFPB explained that the six-month extension “provides for an appropriate balance between the interests of the consumers who will receive the benefits of the rule and the needs of industry for an adequate implementation period.” For additional background information, please see our earlier InfoBytes coverage of the Prepaid Rule.
CFPB Releases Updates to Rulemaking Ex Parte Policy
On April 18, the CFPB issued a release revising its Policy on Ex Parte Presentations in Rulemaking Proceedings. The Policy, originally posted on the Bureau’s website on August 16, 2011, generally requires public disclosure of ex parte communications made to the CFPB’s decision-making staff about pending rules. Per the release, the Bureau asserts that the updates are based on feedback from the public as well as the Bureau’s experiences in implementation and are intended to ensure “fairness and transparency in [the Bureau’s] rulemaking proceedings while also encouraging candid input from state entities.” The majority of the revisions are non-substantive and serve to “clarify the Policy’s provisions and requirements, ensure consistency in terminology . . ., make technical amendments, and facilitate compliance with the procedures in the Policy.” However, the revision includes two key updates. First, it adds an exemption for state entities, similar to the exemption that exists for Federal agencies. These state entities include state attorneys general or their equivalents, state bank regulators, and “state agencies that license, supervise, or examine consumer financial products or services.” The Bureau states that due to the sometimes sensitive nature of the communications from the entities, it “believes that these entities are likely to provide more frank and robust feedback if communications are not subject to the disclosure requirements of the Policy.” A second key update to the Policy specifies that outside parties no longer bear responsibility for both sending ex parte communications to the Bureau and posting them to regulations.gov. Rather, stakeholders are instructed to send communications directly to the Bureau, and Bureau staff will post the communications to the public docket. The updated Policy also extends the time period for outside parties to summarize meetings and presentations from three to ten business days.
CFPB Takes Action Against Law Firm for Alleged FDCPA Violations Concerning Claims of Attorney Involvement in Debt Collection
On April 17, the CFPB announced that it was seeking a permanent injunction and fines against a law firm for allegedly engaging in illegal debt collection practices by making false representations regarding attorney involvement in debt collection calls and in “millions of collection letters sent to consumers.” In a complaint filed in the United States District Court for the Northern District of Ohio, the Bureau claims, among other things, that the firm violated the Fair Debt Collection Practices Act and Dodd-Frank by sending “demand letters” and making collection calls to consumers falsely implying that the consumer’s account files had been reviewed by an attorney. The complaint alleges that a majority of the demand letters were created through an automated process and, in most cases, no attorney had reviewed the account file to determine whether sending such a letter was accurate and appropriate. These letters included payment coupons through which consumers made millions of dollars in debt payments to the law firm. The complaint also alleges that a majority of the collection calls made to consumers were handled by non-attorney collectors who conveyed the impression that the matters had been reviewed by attorneys even though no attorney had in fact reviewed the account files. The complaint seeks a permanent injunction prohibiting the firm from committing future violations as well as other legal and equitable relief including restitution to affected consumers, disgorgement of ill-gotten revenue, and civil money penalties.