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CFPB launches monthly complaint report

Posted in CFPB General

The CFPB has issued a complaint report which it describes as “the first in a new series of monthly reports to highlight key trends from consumer complaints submitted to the Bureau.”  In addition to providing overall data on complaint volume, each monthly report will spotlight a particular product and geographic location.  The July 2015 report spotlights debt collection complaints and complaints from consumers in Milwaukee, Wisconsin.

As described by the CFPB, the monthly reports will use “a three-month rolling average, comparing the current average to the same period in the prior year where appropriate, to account for monthly and seasonal fluctuations.”  In some cases, it will  use “month-to-month comparisons to highlight more immediate trends” and, for company-level complaint data, it will use” a three-month rolling average of complaints sent to companies for response.”  The CFPB states that the company-level complaint data “lags other complaint data in this report by two months to reflect the 60 days companies have to respond to complaints, confirming a commercial relationship with the consumer.”

The section of the July 2015 report on complaint volume displays information by product, state and company.  With regard to company data, it identifies the “top 10 most-complained-about companies.”  The section on debt collection complaints displays information by type, state and company.  In addition to identifying the top 20 “most-complained-about companies for debt collection,” the company data identifies the five companies with the “largest percent increase in debt collection complaints,” the five companies with the  largest percent decrease in debt collection complaints,” the five companies with the “highest rate of untimely responses to debt collection complaints,” and the five companies with the “lowest  rate of untimely responses to debt collection complaints sorted by the most timely responses.”

In the section spotlighting Milwaukee complaints, the CFPB displays information showing complaints by product, volume trend over time, and company, identifying the ten “most-complained-about companies by Milwaukee consumers.”  The report also includes an appendix showing total complaints by month and product from July 2011 through June 2015, by state and product, and by the 30 “most-complained- about companies for debt collection” in comparable periods.

In its press release, the CFPB claims that “the reports will provide insight for the public into the hundreds of thousands of consumer complaints on financial products and services handled by the CFPB.”  In reality, without any normalization of the data that allows consumers to make meaningful comparisons, the CFPB’s lists of top “most-complained-about companies” can only serve to mislead consumers.  For example, larger companies may have more complaints simply because they have many more customers, not because their practices are more deserving of criticism.  The CFPB has recognized that lack of normalization is a problem, requesting “feedback on best practices for “normalizing” the raw complaint data it makes available via the Database so they are easier for the public to use and understand.”  Comments on normalization are due by August 31, 2015.

Even if the CFPB addresses the normalization issue, however, the monthly reports still can mislead consumers by failing to disclose that the CFPB has not vetted any of the complaints, let alone excluded complaints that have no basis in fact.  The CFPB refers to complaints as “submissions that express dissatisfaction with, or communicate suspicion of wrongful conduct by, an identifiable entity related to a consumer’s personal experience with a financial product or service.”  As we have often observed, however, many complaints arise not from wrongful company conduct, but rather from attempts to gain leverage over a company or simply from personal economic frustration.  If future monthly reports include excerpts of complaint narratives, the unfairness of the complaint portal will be magnified even further.



CFPB to host forum on eClosing

Posted in CFPB General

On Wednesday, August 5 at 1p.m. EDT, the CFPB will be hosting a forum on the “Know Before You Owe Initiative” on eClosing. The forum will feature remarks from Director Richard Cordray, and include a panel discussion with consumer groups, industry representatives, and members of the public.

The event is open to the public and requires an RSVP. The forum will also be live streamed on the CFPB blog.

While the announcement contains little details on the specific topics to be discussed, presumably the CFPB will address their eClosing pilot project to improve the closing process through the use of technology.  If so, this meeting will likely be a follow-up to the April 2014 eClosing forum where the CFPB presented its plan to shift the mortgage industry toward an electronic mortgage closing process.

Deputy Director Antonakes to leave CFPB

Posted in CFPB People

According to the American Banker and Politico, Deputy Director Steven Antonakes is leaving the CFPB to pursue opportunities in Massachusetts, his home state.  Mr. Antonakes, the CFPB’s second-in-command, has been with the agency since 2010 and has also been serving as the CFPB’s Associate Director for Supervision, Enforcement, and Fair Lending.

Director Cordray appears before Senate Banking Committee

Posted in Arbitration, CFPB General, Military Issues, Mortgages, Payday Lending

On Wednesday, July 15, CFPB Director Richard Cordray appeared before the Senate Committee on Banking, Housing, & Urban Affairs to answer questions regarding the Bureau’s Semi-Annual Report to Congress and the President, which it published on June 15, 2015.

Dir. Cordray observed that during the six month period covered by the report, from October 2014 through March 2015, the CFPB helped obtain more than $19 million in restitution for consumers through enforcement actions, including $2.5 million in relief for servicemembers for illegal debt collection practices, and more than $32 million in civil money penalties.  The report noted that during the same six month period CFPB supervisory actions resulted in financial institutions providing more than $114 million in redress to over 700,000 consumers.

The exchanges between members of the committee and Dir. Cordray tread some familiar ground, such as concerns about renovations to the CFPB’s headquarters and CFPB data collection practices, but a few newsworthy points emerged:

  • Arbitration rulemaking to be commenced “in due course”: In response to Ranking Member Sherrod Brown’s questions about the rulemaking efforts he had encouraged the CFPB to undertake following publication of the Bureau’s arbitration study, Dir. Cordray said that the CFPB was “moving ahead” with rulemaking efforts that would address pre-dispute arbitration agreements in consumer financial products or services pursuant to its authority under section 1028(b) of the Dodd-Frank Act.  He noted that “in due course” the CFPB would convene “a small business review panel as the first step” in the rulemaking process.  (The American Bankers Association, the Consumer Bankers Association and The Financial Services Roundtable (“Associations”) have submitted a joint letter to the CFPB commenting on the arbitration study.  In the letter, the Associations assert that the study does not support rulemaking under section 1028 of Dodd-Frank.  Ballard Spahr served as counsel to the Associations in preparing the comment letter.)
  • Effective date for TILA-RESPA Integrated Disclosure (“TRID”) rule: As we’ve noted before, the CFPB proposed to delay the effective date of the TRID rule until October 3, 2015.  In response to concerns expressed by Sen. Tim Scott about requests from Congress for a grace period before industry will be expected to comply with the rule, Dir. Cordray noted that a delay to January, which had been requested by some members of Congress and some companies, would likely introduce new challenges given the “system freezes” that many companies schedule to occur at the end of each calendar year.  But he also stated that the CFPB had coordinated with other agencies to ensure an implementation grace period “which may last many months” would be afforded:

We went out and worked with the other agencies to get an agreement, which we have, that the early examination of this will be diagnostic and corrective. We don’t think people are out there, are going to be trying to exploit consumers on something like this. They’re just going to be trying to get it right. And so for the first period, which may last many months, the other agencies and ourselves as we look at this, if we see errors, we will point out what they are and how they should be corrected. We will not be looking to be punitive toward people. We have said that explicitly. I will say it again on the record here today to you that is how it will be. I can tell you that’s what we said about the mortgage rules two years ago and that is how it has been and nobody has said otherwise or complained and we’ve taken that to heart here as well.

  • Military Lending Act rulemaking by Department of Defense (“DoD”): In response to questions from Sen. Jack Reed regarding new rules under the Military Lending Act that were proposed by the DoD last year, Dir. Cordray telegraphed that he expects the new rules to be published by the DoD “very shortly”: “I believe that very shortly we’re going to have a new set of rules and servicemembers will have new important protections that they probably should have had several years ago.”
  • Rulemaking regarding payday loans and similar credit products: Several committee members addressed this pending rulemaking within their questions.  While no new details about the rules under consideration or the anticipated timeframe for publication of the proposed rules were disclosed, there was bipartisan agreement that the need for access to such credit would endure and that the rules under consideration by the CFPB should acknowledge that.  Sen. Heidi Heitkamp observed that the CFPB would need to strike a balance between protecting consumers and ensuring access to credit, noting that “sometimes people need diapers, and sometimes they need gas, and they have a flat tire and they can’t fix it.”  For such “folks that are living on the margin[,] I understand the need to protect people, but I also understand the need to have some form of small dollar, short-term lending.”  Chairman Richard Shelby agreed, noting that with the regulations under consideration, “we don’t want to drive the small, marginal consumer underground where there is no regulation, because that’s what we’ve had before . . . . [The thrust of the question is] how do we do this without overregulating this and how do we have access to some type of credit for these [consumers] because there will be credit, it’s a question is it going to be legal or illegal.”  Dir. Cordray affirmatively acknowledged Chairman Shelby’s comment.

The hearing failed to provide any news of note on other significant issues, including the evolution, if any, of the Bureau’s rulemakings on prepaid cards or the progress of pre-rulemaking activities on debt collection.


CFPB issues financial guides for new immigrants

Posted in Financial Literacy

The CFPB recently announced that it has developed “the Newcomer’s Guides to Managing Money to provide recent immigrants with straightforward information about basic money decisions.”

According to the CFPB, each guide features tips to help new immigrants, and people who may be new to the U.S. banking system, avoid financial pitfalls.  They also include information on how to submit complaints to the CFPB.  Consumers can download the guides in English or Spanish from the CFPB’s website or order printed copies.

The four guides deal with:

  • Ways to receive money
  • Checklist for opening a bank or credit union account
  • Ways to pay bills (by check or money order, direct debit, online, or in cash)
  • Selection of financial products and services (such as ATM cash withdrawals and debit card purchases)


Trade groups comment on CFPB final arbitration study results

Posted in Arbitration

The American Bankers Association, the Consumer Bankers Association and The Financial Services Roundtable (Associations) have filed a joint letter commenting on the final results of the CFPB’s arbitration study released in March 2015.  Ballard Spahr served as counsel to the Associations in preparing the comment letter.

Section 1028 of the Dodd-Frank Act requires the CFPB to conduct a study of the use of arbitration in consumer financial services agreements and authorizes the CFPB to limit or prohibit the use of arbitration based on the CFPB’s findings.  In June 2012, the Associations submitted comments in response to the CFPB’s Request for Information Regarding Scope, Methods, and Data Sources for Conducting Study of Pre-Dispute Arbitration Agreements.  Ballard Spahr also served as counsel to the Associations in preparing that comment letter.

U.S. Senators urge expedited CFPB action on small business lending data collection rules

Posted in Fair Lending

We recently blogged about an American Banker article written by officials of three community groups that urged President Obama to publicly denounce Director Cordray for failing to issue regulations implementing the small business lending data requirements of Dodd-Frank Section 1071.  Section 1071 amended the ECOA to require financial institutions to collect and maintain certain data in connection with credit applications made by women- or minority-owned businesses and small businesses.  Such data includes the race, sex, and ethnicity of the principal owners of the business.

Last week, a group of 19 Democratic U.S. Senators sent a letter to Director Cordray in which they urged the CFPB “to expedite its rulemaking around publicly available small business loan data.”  The Senators want the CFPB “to move forward this year with its rulemaking without further delay.”

The Senators’ letter suggests that the CFPB is facing mounting pressure to issue Section 1071 regulations.  As we previously commented, given the CFPB’s numerous other pending regulatory initiatives, we hope the CFPB will resist such pressure and not move forward hastily on Section 1071 regulations.  Doing so will result in further burdens on the consumer financial services industry, which is already struggling to cope with the existing regulatory avalanche.



Video of CFPB arbitration field hearing now available

Posted in Arbitration, CFPB Rulemaking

On March 10, 2015, the CFPB held a field hearing on arbitration.  At the hearing, Alan S. Kaplinsky, Practice Leader of Ballard Spahr’s Consumer Financial Services Group, presented the industry’s perspective on arbitration agreements. (The hearing coincided with the CFPB’s release of the final results of its consumer arbitration study as mandated by Section 1028 of the Dodd-Frank Act.)

The CFPB recently released a video of the field hearing.  Alan’s remarks can be found at the following segments of the video:  23 to 33 minutes, 54 to 58 minutes and 70 minutes to 73 minutes.

CFPB official to be panelist at July 14 Dodd-Frank anniversary program

Posted in CFPB General

To mark the fifth anniversary of Dodd-Frank’s enactment, Americans for Financial Reform is sponsoring a program “Five Years Later, How Has the Financial System Changed (and Not)?” to be held in Washington, D.C. on July 14, 2015.

Senator Sherrod Brown will give the keynote address and Senator Elizabeth Warren will give the closing address.  There will be two panel discussions.  One panel will  feature regulators from federal agencies, including Zixta Martinez, CFPB Associate Director for External Affairs.  A second panel will feature academics and representatives of various interest groups.

CFPB releases “Consumer Protection Principles” for faster payment systems

Posted in Electronic Payments

The CFPB has released a list of nine “Consumer Protection Principles” that are intended to express the CFPB’s “vision of consumer protection in new faster payments systems.”  The CFPB has previously shown support for  the development of faster payment systems.  In his November 2014 remarks to the Clearing House, Director Cordray suggested that sooner, rather than later, the industry should invest the billions of dollars required to build a payment system with “faster and even real-time payments” where “the interests of consumers remain at the top of [bankers’] minds.”  In February 2015, CFPB Associate Director David Silberman sent a letter to NACHA indicating the CFPB’s support for same day ACH services.

In releasing the principles, the CFPB stated that it “wants to ensure that consumer protections are at the forefront as new and improved payment systems are developed.”  The CFPB’s principles deal with: (1) consumer controls over payments (such as allowing consumers to limit the time period for which an authorization is valid), (2) data protection, (3) fraud and error resolution procedures, (4) transparency in information about transaction status and disclosures about costs, risks, funds availability and security of  payments, (5) affordable cost and cost disclosure, (6) allowance of access through qualified intermediaries and non-depositories, such as mobile wallet providers and payment processors, (7) faster funds availability, (8) security protections and credential value limits, and (9) strong accountability mechanisms to curtail system misuse.

The CFPB’s “principles” may foreshadow another attempt by the CFPB to take an expansive approach to its jurisdiction.  Some payments firms, such as large banks that provide payments services, are subject to CFPB supervision and the CFPB also has the authority to enforce the Electronic Funds Transfer Act.  However, many payments firms are not subject to CFPB supervision, and the CFPB’s payments principles go beyond the requirements established by Congress in the EFTA and elsewhere.  Based on the CFPB’s history, we would not be surprised to see attempts to legislate through enforcement actions in this area.

In addition, someone will have to bear the substantial costs involved in building a faster payment system.  Given the low rates set for debit card interchange fees by the Durbin Amendment, many industry players will likely be uninterested in funding innovations whose costs they cannot recover.