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We made the ABA Top 100 Blawg list… for the third year in a row!

Posted in CFPB General

For the third year in a row, CFPB Monitor has made the American Bar Association’s Blawg 100 list, the ABA’s annual list of the best blogs about lawyers and the law. We are honored to have once again received so many recommendations from our readers and thank you for helping CFPB Monitor make the 2014 list.

CFPB Monitor continues to be the only blog focused on the CFPB in the ABA’s top 100. In describing CFPB Monitor, the ABA quotes a reader who said that our blog serves as an “‘ear on the ground’ to know what’s coming next”.   We hope our readers agree that our blog provides an insightful and direct perspective on CFPB developments.

The editors of the ABA Journal have asked readers to weigh in and vote for their favorites in each of the Blawg 100′s 13 categories. We have been placed in the “torts/consumer” category with 7 other excellent blogs. If you are a fan of CFPB Monitor, we humbly ask that you cast your vote for us in the “torts/consumer” category by clicking here (you will be prompted to register before voting by creating a username and password).

Thank you again for your support!

Banking trade groups comment on CFPB’s proposed no-action letter policy

Posted in CFPB General, Technology

The American Bankers Association, American Bankers Insurance Association and Consumers Banking Association have submitted a joint comment letter on the CFPB’s proposed policy on issuing “no-action” letters for innovative financial products or services.

The trade groups expressed the overall concern that the proposal will not “serve as a viable approach to alleviating regulatory uncertainty” because it is “limited in its applicability and yet fraught with perils for the requester.”  The specific concerns raised in their comment letter included the following:

  • The information required by the process for requesting a no-action letter puts the requester “at the risk of providing a roadmap for inventive legal attack against the proposed product” by asking the requester to describe any creative liability that might attach to the new product.  The trade groups believe the process should be re-cast to emphasize how the new product’s features vary from products described by the existing rules and why its features achieve the consumer protections pursued by existing rules.
  • In its proposal, the CFPB stated that it plans to issue no-action letters “only rarely and on the basis of exceptional circumstances.”  The trade groups are concerned that this approach will discourage requests and believe the CFPB’s staff should instead pledge to provide a timely response to all requests, giving reasons for their action to grant or deny the request.
  • As proposed by the CFPB, a no-action letter would not provide an interpretation of a statute or regulation nor a safe harbor from the CFPB’s supervisory and enforcement authority.  It also could be modified or revoked by the CFPB at any time.  In the trade groups’ view, the extremely limited scope of a no-action letter “creates virtually no incentive for innovators to undertake the request process.”  The changes they recommend include an expansion of a letter’s scope “to assure against not only Bureau enforcement or supervisory criticism, but to preclude enforcement or supervisory criticism by any agency authorized to conduct such activities under the DFA with respect to institutions in its respective jurisdiction.”
  •  The CFPB indicated in the proposal that its disclosure of a no-action letter request and any data received from the requester in connection with a request is governed by the CFPB’s rule regarding disclosure of records and information.  As the CFPB observed, that rule generally requires the CFPB to disclose records unless they are subject to a FOIA exemption or exclusion.  The trade groups seek improved assurance of confidentiality for information submitted by requesters, commenting that the CFPB’s disclosure of the detailed information and legal analysis that the proposal would require requesters to provide could enable competitors to exploit the idea or add compliance or litigation risk.


CFPB sues company for alleged credit card sham

Posted in CFPB Enforcement

A new lawsuit filed by the CFPB alleges that a Texas-based company, Union Workers Credit Services, deceived consumers into paying fees to sign up for a “platinum card” that purported to be a general-use credit card but, in actuality, could only be used to buy products from the company.  The CFPB’s complaint, filed in a Texas federal district court, seeks restitution for victims, a civil penalty, and an injunction against the company.

The complaint alleges that the company engaged in deceptive conduct in violation of the CFPA prohibition of unfair, deceptive or abusive acts or practices by representing, expressly or impliedly, in its advertising and marketing that consumers would receive a general-use credit card if they enrolled and paid the membership fee.  The CFPB claims the company also engaged in deceptive conduct by falsely advertising an affiliation with labor unions.  According to the complaint, the company’s website contained a banner that included images of police, firefighters, and medical workers and its online application form sought information on applicants’ union affiliation and allowed them to select their union membership from a drop-down list.

The complaint also alleges that the company used consumer reports in violation of the Fair Credit Reporting Act and Regulation V.  According to the complaint, the company sent direct-mail prescreened credit offers that did not include the requisite prescreen opt out notice.

Congress votes unanimously to extend SCRA one-year foreclosure protection period

Posted in Military Issues

Congress has unanimously approved legislation to extend until January 2016 a provision of the Servicemembers Civil Relief Act (SCRA) that prohibits foreclosing on a servicemember’s house for one year following the servicemember’s return from active duty.  The CFPB has made SCRA compliance a priority issue.

Senator Sheldon Whitehouse proposed S.2404, known as the Foreclosure Relief and Extension for Servicemembers Act of 2014, last May.  The Senate approved the measure on December 11, and the House of Representatives approved the measure the following evening during a special 10-minute session.

“After fighting for our country overseas, our troops shouldn’t have to fight to keep a roof over their heads when they return home,” said Sen. Whitehouse in a press release. “Servicemembers returning from active duty often need time to regain their financial footing, particularly those in the National Guard and Reserves who give up their full-time jobs to fight for our freedom.  We should ultimately pass legislation to make this protection permanent, but I’m glad we were able to secure peace of mind for our veterans for one more year.”

Congress extended the protection period from three to nine months back in 2008 and then to one year in 2012.  Had Congress failed to act before the end of this year, the protection period would have reverted back to its pre-2008 level of three months.

In a letter dated December 4, the Financial Services Roundtable (FSR) encouraged congressional leadership to extend the protection for a minimum of one year, noting that a number of financial services companies had implemented a one-year protection period as a matter of company policy.  We, along with the FSR, applaud Congress for this legislation and fully expect President Obama to sign it into law.

CFPB announces pilot to promote consumer savings

Posted in Financial Literacy, Prepaid Cards

As part of its Project Catalyst, the CFPB’s initiative for facilitating innovation in consumer-friendly financial products and services, the CFPB has announced a new research pilot using insights from behavioral economics and an American Express trial program to evaluate the effectiveness of certain practices to encourage prepaid card users to develop regular saving behavior.  The CFPB hopes the pilot will help it better understand how to promote saving among consumers, particularly among low- and moderate-income prepaid card users who may not have traditional savings accounts.

According to the CFPB, American Express has agreed to share with the CFPB insights from a feature of one of its prepaid card programs that allows cardholders to create a subaccount within their main prepaid account dedicated for savings.  To spend money saved in the subaccount, a consumer must manually transfer funds back to his or her main account.  The card also has automatic transfer functions that allow consumers to schedule regular fund transfers from the main transaction account to the subaccount.

American Express plans to conduct a marketing campaign to educate cardholders about the benefits of saving and encourage use of the subaccount feature and will offer promotional incentives to encourage saving.  American Express will conduct a randomized controlled trial to assess results in a statistically meaningful way.

The research pilot is part of the CFPB’s efforts to carry out its Dodd-Frank mandate to improve the financial literacy of American consumers, and in particular, its charge to provide
consumers – especially low-to-moderate income consumers – with wealth-building strategies.  We continue to view this as one of the CFPB’s most worthwhile mandates and believe American Express should be applauded for agreeing to work with the CFPB in furtherance of this mandate.

CFPB announces lawsuits against student loan debt relief companies

Posted in CFPB Enforcement, Student Loans

On December 11, the CFPB announced lawsuits against two student loan debt relief companies alleged to have deceived borrowers into paying upfront fees for federal student loan repayment benefits that are available for free.

The action against College Education Services LLC and its individual owners, which was filed jointly by the CFPB and the Florida Attorney General in a Florida federal district court, alleged that the company violated the Telemarketing Sales Rule (TSR), the Consumer Financial Protection Act (CFPA) prohibition of unfair, deceptive or abusive acts or practices and the Florida Deceptive and Unfair Trade Practices Act.  The defendants’ alleged conduct included charging unlawful advance fees, falsely promising lower payments, and falsely claiming quick relief from default or garnishment.  The basis for the charge that the defendants made false claims of quick relief was that debt consolidation, the principal debt relief approach used, did not and could not ensure such quick relief in all cases and not in the short timeframe promised.

Simultaneously with filing the complaint, the CFPB and Florida AG submitted a proposed consent order to the court that would permanently ban the defendants from offering or providing any debt relief service or assisting any person offering such service.  The consent order also would require the defendants to pay a $25,000 civil money penalty to the CFPB.  (The CFPB stated in its press release that the penalty amount was based on the defendants’ inability to pay a more substantial amount.)

The second action was filed by the CFPB against Student Loan Processing.US (a fictitious business name of Irvine Web Works, Inc.) and its individual owner in a California federal district court.  The complaint alleges that the defendants violated the TSR and CFPA by conduct that included falsely representing an affiliation with the U.S. Department of Education, charging unlawful advance fees, and deceiving borrowers about the costs and terms of the company’s services.  The complaint seeks an injunction barring future TSR and CFPA violations by the defendants, restitution to harmed consumers, and civil money penalties.

Given the vulnerability of those student loan borrowers who really are struggling with their debts, we were glad to see that the CFPB’s announcement of the lawsuits was accompanied by the issuance of a consumer advisory warning consumers about student debt relief scams.



CFPB’s proposed boarding form for online consumer complaint company portal now available

Posted in CFPB General

Last week, the CFPB published a Federal Register notice stating that it was developing a form to allow companies to “proactively participate” in its online company portal for viewing and responding to consumer complaints.  Although the CFPB’s proposed form, the “Company Portal Boarding Form,” was not available when the notice was published, the proposed form as submitted by the CFPB to the Office of Management and Budget can now be viewed.


CFPB requires credit bureaus to identify furnishers and industries with highest dispute rates and issues study of collections tradelines

Posted in Credit Reports, Debt Collection

In conjunction with its field hearing today on medical debt collection, the CFPB released a study that “describes characteristics of the medical and non-medical collections tradelines on consumers’ credit reports and the processes by which they appear and disappear.”  However, what deserves to be the headline grabber is the CFPB’s accompanying announcement that “the major consumer reporting agencies will be required to provide regular accuracy reports to the Bureau on how disputes from consumers are being handled.”  Although the CFPB did not specify what “major” consumer reporting agencies (CRA) means, presumably the CFPB is referring to the CRAs that are subject to CFPB examination because they qualify as “larger participants” under the CFPB’s larger participant rule for the credit reporting industry.

The  CFPB has labeled the “accuracy reports” which the CRAs must complete a “Consumer Reporting Agency Data Request.”  The information requested for the relevant reporting period includes:

  • Names of the 25 furnishers with the largest number of consumer disputes and the number of disputes received as to each such furnisher
  • Names of furnisher industries and the number of disputes received about furnishers in each such industry
  • Names of the 10 furnishers in each industry with the largest number of consumer disputes
  • Information about the outcome of disputes
  • Information about collection account disputes, consisting of the total number of such disputes and the percentage of collection disputes by portfolio types (e.g. medical, credit card, retail, telecom)

The CFPB is expecting CRAs to do more than just complete and submit the new form.  In its press release, the CFPB states that “[i]f a credit reporting company continuously experiences an outsized number of consumer disputes about information from a particular furnisher, the CFPB expects the credit reporting agency to investigate, identify if there is a problem, and take appropriate action.”

The CFPB’s study of collections tradelines focuses on information furnished distinctly to CRAs as collections tradelines, and observes that the vast majority of such tradelines are furnished by third-party debt collectors and debt buyers.  While the study’s discussion of medical collections tradelines is the focus of the CFPB’s press release and Director Cordray’s prepared remarks for the field hearing, a substantial portion of the study is devoted to a general discussion of collections tradelines, debt collectors and debt buyers who furnish information about debts in collection, and the varying practices of furnishers.

For the study, the CFPB used data in its Consumer Credit Panel (CCP) from December 2012 and over the period January 2013 through June 2014.  The study describes the CCP as a “longitudinal, nationally representative sample of approximately 5 million de-identified credit records” from one of the three nationwide CRAs.  The study also draws on consumer complaints to the CFPB and interviews with debt collection agencies, healthcare providers, and “other observers of the healthcare billing and payment processes.”

Key findings include:

  • 67.5 percent of all collection tradelines are reported on accounts that originated with a healthcare provider, utility company, or telecommunications company, with medical collection tradelines accounting for 52.1 percent of all collection tradelines
  • Collection tradelines appear on the credit reports of 31.6 percent of consumers with 19.5 percent of credit reports containing one or more medical collection tradelines and 24.5 percent containing one or more non-medical collection tradelines
  • The average and median amounts of medical collections tradelines ( $579 and $207) are lower than the average and median amounts of non-medical collection tradelines ($1000 and $366)
  • The large number of collectors furnishing information on collections tradelines and their indirect and short term ties to the underlying debt creates potential sources of error in collections reporting
  • Whether or not a collections tradeline appears on a consumer’s credit report, when it appears or disappears (i.e. “falls-off”), and whether an account is labeled as paid or deleted when it is settled reflects policies and strategies of creditors, debt collectors and debt buyers, with the variety in practices introducing a range of variability that is not present in the reporting of active tradelines for which payment status is the primary indicator of delinquency.  Such variability by industry, creditor and furnisher makes a collections tradeline an imprecise indicator of a consumer’s financial condition or willingness to pay
  • Medical collection tradelines present special concerns due to the complexity of the medical billing and reimbursement process which frequently makes medical bills a source of confusion for consumers and increases the likelihood that consumers will hesitate or delay paying medical bills due to uncertainty “about what they owe, to whom, when, or for what.”
  • Many more consumers with only medical collections tradelines demonstrate a tendency to pay their bills on time regardless of the number of collections tradelines as compared with consumers with only non-medical collections tradelines or those with both medical and non-medical collections tradelines.  Because consumers with only medical collections tradelines owe smaller amounts on their debts in collection relative to consumers in such other groups, consumers with only medical collections tradelines “presumably” have a higher capacity to repay such debts and their nonpayment of such debts suggests “there is something different” about their understanding of their debts and reasons for nonpayment.  (In his remarks, Director Cordray commented that this analysis “reinforces” the CFPB’s finding in its May 2014 report entitled “Data point: Medical debt and credit scores,” that credit scoring models may be overly penalizing consumers with medical debts that go into collection by producing credit scores that underestimate such consumers’ creditworthiness.)

The CFPB also released a consumer advisory that provides advice to consumers in dealing with medical debts, such as to carefully review medical bills and to act quickly to resolve or dispute medical bills.

Director Cordray provides update on CFPB’s public library partnerships

Posted in Financial Literacy

In his remarks last week at the Columbus Metropolitan Library, Director Cordray spoke about the partnerships that the CFPB is building with public libraries around the country to promote accessible financial education information for consumers.

Director Cordray noted that the Columbus Metropolitan Library system was one of the first nine public libraries from across the country that joined the CFPB’s national pilot project.  (Although Director Cordray stated in his remarks that the nine libraries joined the project “about a year and a half ago,” he announced the project’s launch and the nine libraries’ participation in remarks given in Chicago about nine months ago in April 2014.)  According to Director Cordray, more than 360 library systems in 48 states, with more than 1,700 branches, have now signed up for the project.

In his remarks, Director Cordray discussed the important role played by public libraries in our society and referred to a statistic showing that one out of four people who sign on to a library computer does so to take care of commercial needs or financial matters.  Director Cordray stated that the CFPB’s goal “is to help the library become the go-to place for people to learn more about how to deal with their financial affairs” through initiatives that include helping libraries (1) identify and connect with local partners in their own communities that can provide information and expertise, and (2) build online communities for librarians to learn and share more about financial education.  The CFPB is also providing training for library staff and managers.

As we have previously commented, the CFPB’s plan to help libraries become providers of financial education information makes eminent sense and deserves wide-spread support.  We are glad to learn that the CFPB is making steady progress in implementing that plan.


CFPB posts video of Nov. 18th webinar on new closing disclosure

Posted in Mortgages

The CFPB has posted a video of its November 18th webinar that addressed questions about the final TILA-RESPA Integrated Disclosure Rule that will be effective for applications received by creditors or mortgage brokers on or after August 1, 2015.  The webinar was the fourth in a series to address implementation of the new rule.  (To view the video, it is necessary to either have previously registered for the webinar or register when accessing the video.)

A detailed discussion of the webinar prepared by Marc Patterson, a member of Ballard Spahr’s Mortgage Banking Group, can be found here.

CFPB issues sixth Semi-Annual Report

Posted in CFPB General

The CFPB has issued its sixth Semi-Annual Report to the President and Congress covering the period from April 1 through September 30, 2014.

As we have found with previous CFPB semi-annual reports, despite its 188-page length, the latest report provides no noteworthy new information about CFPB activities.  Instead it recycles information in various previously-issued CFPB reports and reviews ongoing and past developments, all of which we have already covered in previous blog posts.

We did, however, find noteworthy the section of the report dealing with TILA, EFTA and CARD Act enforcement efforts of federal agencies other than the CFPB.  For example, the report indicates that in 2013, the FDIC issued (1) one civil money penalty and nine cease and desist orders for TILA violations, (2) seven civil money penalties and seven cease and desist orders for EFTA violations, and (3) 16 civil money penalties, seven cease and desist orders, and eight actions requiring restitution (including one with the OCC and CFPB) for violations of the CARD Act and related federal consumer protection laws.

Perhaps we will learn something new about the CFPB’s ongoing activities and future plans should the House Financial Services and Senate Banking Committees call Director Cordray to testify about the latest report as they have done in connection with previous semi-annual reports.