CFPB Issues Report Showing Many Americans Are Surprised by Overdraft Fees
CFPB Orders U.S. Bank to Pay $21 Million for Illegal Conduct During COVID-19 Pandemic
The Consumer Financial Protection Bureau (CFPB) today ordered U.S. Bank to pay nearly $21 million for keeping out-of-work consumers from accessing unemployment benefits at the height of the COVID-19 pandemic. U.S. Bank froze tens of thousands of accounts. However, it failed to provide people a reliable and quick way to regain access. The bank also failed to provide provisional account credits, while investigating potentially unauthorized transfers. Today’s order requires U.S. Bank to pay $5.7 million to consumers harmed by its actions and to pay a $15 million penalty.
The Office of the Comptroller of the Currency (OCC) separately find U.S. Bank $15 million. The CFPB and OCC coordinated during their investigations into U.S. Bank’s illegal conduct. Read more
CFPB Report Finds Many College-Sponsored Financial Products Charge High and Unusual Fees
PUBLISHED
The CFPB has issued two annual threshold adjustment final rules.
First, the CFPB has announced the asset-size exemption thresholds for depository institutions under Regulation C. Second, the CFPB has announced the asset-size exemption thresholds for certain creditors under the escrow requirements and small creditor portfolio and balloon-payment qualified mortgage requirements, and the small creditor exemption from the prohibition against balloon-payment high-cost mortgages under Regulation Z.
These adjustments are effective on January 1, 2024, consistent with relevant statutory or regulatory provisions.
You can access the Regulation C notice at: http://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/home-mortgage-disclosure-regulation-c-adjustment-asset-size-exemption-threshold/.
You can access the Regulation Z notice at: http://www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/truth-lending-act-regulation-z-adjustment-asset-size-exemption-threshold/.
CFPB Shuts Down Commonwealth Financial Systems for Illegal Debt Collection Practices
The Consumer Financial Protection Bureau (CFPB) today took action against a medical debt collector, Commonwealth Financial Systems, for illegally trying to collect unverified medical debts after consumers disputed the validity of the debts. Under the order issued today, the company will cease operations and pay a $95,000 penalty to the CFPB’s victims relief fund.
Commonwealth Financial Systems is a nonbank corporation with its principal place of business in Dickson City, Pennsylvania. Commonwealth is a third-party debt collector that specializes in the collection of past-due medical debts and furnishes information about consumer collection accounts to consumer reporting companies.
Commonwealth’s actions violated the Fair Credit Reporting Act because the company failed to conduct reasonable investigations of disputed debts and failed to inform consumer reporting companies that certain information was being disputed. Commonwealth also violated the Fair Debt Collection Practices Act because it continued to attempt to collect disputed debts without substantiating documentation. Read more
The holiday season has offered little reprieve from the rising prices of goods and services still weighing on consumers’ wallets. Many consumers use credit cards as a cash flow management tool. As of November 2023, 62% of consumers lived paycheck to paycheck, with 20% struggling to pay their monthly bills. These shares are virtually unchanged from last year, indicating that consumers have adjusted to the current economic environment, even as their financial obligations continue to exceed incomes.
Among consumers living paycheck to paycheck, 40% report having super-prime credit scores. Eighty percent of those living paycheck to paycheck use credit cards and hold two cards, on average. Data shows that financial distress is closely associated with a higher frequency of reaching one’s credit limit and carrying balances from month to month. It may come as no surprise that paycheck-to-paycheck consumers value features such as higher credit limits and split payment plans when choosing a card.
These are just some of the findings detailed in this edition of “New Reality Check: The Paycheck-to-Paycheck Report,” a PYMNTS Intelligence and LendingClub collaboration. “The Credit Card Use Deep Dive Edition” examines the financial lifestyles of U.S. consumers and explores how they use credit cards to manage their cash flows to get by. This edition draws on insights from a survey of 3,252 U.S. consumers conducted from Nov. 6 to Nov. 22 and an analysis of other economic data.
Other key findings from the report include:
Financially struggling consumers hold fewer credit cards.
Still, consumers living paycheck to paycheck own nearly 60% of credit cards in the U.S. PYMNTS Intelligence finds that paycheck-to-paycheck consumers with issues paying monthly bills hold 17% of credit cards. Those without issues paying bills hold 40%. Paycheck-to-paycheck consumers are more likely to use debit cards than credit cards for everyday transactions. Just 20% of credit card holders in this group reported using a one for their last purchase. This usage shows that though paycheck-to-paycheck consumers have access to credit, they aim to live within their means and preserve that flexibility.
Paycheck-to-paycheck consumers are just as likely to value a good credit score.
Living paycheck to paycheck does not stop consumers from having high credit scores. Forty-nine percent of consumers living paycheck to paycheck without issues paying their monthly bills report having super-prime credit scores. Twenty-two percent of paycheck-to-paycheck consumers with issues paying their bills say the same. Paycheck-to-paycheck consumers are managing their card use to stay creditworthy, and many are successful even as those struggling the most tend to find it more challenging.
Different consumers value different aspects when choosing credit cards.
Paycheck-to-paycheck consumers choose credit cards for their financing features, while those not living paycheck to paycheck value them more for their security and rewards options. Struggling paycheck-to-paycheck consumers are more likely to cite interest rates and credit limits as very or extremely important when choosing a primary credit card. This choice implies that struggling consumers may rely on credit cards for emergencies. Those not living paycheck to paycheck view credit cards as just another payment method.
U.S. consumers continue to live on tighter budgets due to ongoing inflation. Credit cards are a tool that many use to manage cash flows. Download the report to learn how consumers living paycheck to paycheck use credit cards to manage spending while remaining creditworthy.
The UK’s Payment Systems Regulator (PSR) has confirmed plans to improve protections for victims of authorised push payments (APP) fraud, which will come into force in October 2024.
In what it describes as a “step-change” in fraud protection that will see the vast majority of money lost to APP frauds reimbursed to victims, the watchdog has set a £415,000 maximum reimbursement level. Sending payment firms can – but do not have to – apply a claim excess of up to £100 if they choose to. This does not include claims made by vulnerable consumers.
Meanwhile, the cost of reimbursement will be split 50:50 between sending and receiving firms – putting incentives in at the receiving end for the first time.
APP fraud has quickly become one of the most significant types of fraud in the UK, with losses totaling nearly £500 million in the last year. Consumer groups and politicians have been clamoring for banks to tackle a growing epidemic and to speed up the process of reimbursement for blameless victims.
Under the new rules, most APP fraud victims will be reimbursed within five business days and additional protections will be offered for vulnerable customers.
The PSR stresses that “consumers still need to take care when making payments,” but “the onus will be on the bank to prove that they acted with gross negligence”.
Chris Hemsley, managing director, PSR, says: “Our approach incentivises banks and other payment firms to prevent APP fraud from happening in the first place while ensuring victims are protected in a consistent way.”
A Pay.UK spokesperson says: “We welcome the publication of the PSR’s finalized legal instruments for the APP reimbursement regime, which place requirements on payment service providers to reimburse victims of APP fraud. We are playing our part, as directed by the PSR, in implementing the regime next year.
Courtesy of Andrew Smith, FinExtra
The Financial Crimes Enforcement Network (FinCEN) has updated its Beneficial Ownership Information (BOI) Frequently Asked Questions to include new questions related to general questions, the reporting process, reporting companies, reporting requirements, initial reports, updated reports, compliance and enforcement, FinCEN identifiers, and third-party service providers.
Beginning on January 1, 2024, many companies in the United States will have to report information about their beneficial owners—the individuals who ultimately own or control the company. Companies will be able to begin reporting beneficial ownership information to FinCEN at that time. FinCEN will continue to provide guidance on how to submit beneficial ownership information.
Frequently Asked Questions: https://www.fincen.gov/boi-faqs
FinCEN’s BOI Webpage: https://www.fincen.gov/boi
NASCUS Resources:
- Final Rule Summary FinCEN: Beneficial Ownership Information Reporting Deadline Extension for Reporting Companies Created or Registered in 2024
- All FinCEN Summaries
The National Flood Insurance Program is drowning in a sea of debt and policymakers have been unable, or unwilling, to enact a long-term rescue of the program.
At the end of Fiscal Year 2022, the flood insurance program owed the federal treasury $20.5 billion.
“The NFIP is not built to handle this level of debt and its interest payments,” officials from the Federal Emergency Management Agency wrote in a report at the time. “FEMA will be unable to pay the debt as interest continues to consume revenue that would otherwise serve to grow the NFIP’s ability to pay claims to insured survivors.”
The NFIP’s main authorization legislation expired in 2017, and despite pleas from credit union and other financial trade groups, Congress has been unable to enact a long-term overhaul of the program. As a result, Congress has had to enact 27 short-term extensions of the program or risk having home sale closings grind to a halt. The latest extension expires on Feb. 2, when the short-term Continuing Resolution funding parts of the government is scheduled to expire.
In a series of reports issued last week, the Congressional Research Service provided details of the flood insurance program’s poor health. “FEMA has identified the need to increase flood insurance coverage across the nation as a major priority, with the recognition that neither the NFIP nor the private sector alone is likely to be able to write all of the policies needed to cover all of the flood risk in the United States,” the CRS said.
More than 22,000 communities in 56 states and other jurisdictions participate in the NFIP, with almost five million policies providing almost $1 trillion in coverage. The program collects about $4 billion in premium revenue each year.
For most of the NFIP’s history, the program was able to borrow small amounts from the Treasury to pay claims and repay the loans with interest, the CRS said. Following Hurricanes Katrina, Rita, and Wilma, Congress increased the NFIP’s borrowing level to $20.775 billion to pay claims. Congress increased the borrowing limit again following Hurricane Sandy to its current limit of $30.425 billion.
At the beginning of 2017, the NFIP owed the treasury $24.6 billion and in October of that year, Congress forgave $16 billion of NFIP debt.
“The NFIP’s debt is conceptually owed by current and future participants in the NFIP, as the insurance program itself owes the debt to the treasury and pays for accruing interest on that debt through the premium revenues of policyholders,” the CRS said.
Click here to read the full article
Courtesy of David Baumann, Washington Credit Union Daily
Filene publishes survey showing the average credit union on top of almost all bank brands.
A study commissioned by Filene Research Institute found credit unions scored ahead of most banks on innovation this year.
The 2023 study found credit unions scored 69 on a scale of 1 to 100 on innovation, just below the average of 70 for all 200 brands in the study. However, credit unions scored above most banks in the study despite credit unions being “stigmatized with the perception of falling behind on innovation.”
This study is the second of the Credit Union Innovation Success Study conducted in partnership with the American Innovation Index, which measures innovation in the overall U.S. economy by quantifying the experiences of customers from more than 200 brands.
The Credit Union Innovation Success Study measures the state of innovativeness in the credit union sector based on member experience, and identifies opportunities to differentiate themselves from banks and fintechs.
The second-highest score in the banking sector was 78 for the nation’s largest credit union: Navy Federal Credit Union of Vienna, Va. ($168.4 billion in assets, 13.2 million members). Navy Federal was treated separately in the study, so its results were excluded from the credit union average.
The study indicated that Navy Federal’s size allows it “to invest in systems and strategies to keep it at the forefront of the financial services sector. It may also benefit from broader name recognition compared to credit unions with a more local presence.”
Fintech brands were among the highest scorers: Chime (79), CashApp/Square (74), SoFi (73) and PayPal/Venmo (72).
The study was conducted by Lerzan Aksoy, a marketing professor at Fordham University in New York, and Gina Woodall, president of Rockbridge Associates, a marketing research firm in Great Falls, Va.
In the forward, Aksoy wrote that their research showed a surge in innovation among financial service providers during the pandemic.
Click here to read the full article
Courtesy of Jim DuPlessis, Credit Union Times
Various devices remain vulnerable to the bug, which has existed without notice for years and allows an attacker to control devices as if from a Bluetooth keyboard.
Attackers can exploit a critical Bluetooth security vulnerability that’s been lurking largely unnoticed for years on macOS, iOS, Android, and Linux device platforms. The keystroke injection vulnerability allows an attacker to control the targeted device as if they were attached by a Bluetooth keyboard, performing various functions remotely depending on the endpoint.
Tracked as CVE-2023-45866, the flaw exists in how in the Bluetooth protocol is implemented on various platforms. It works “by tricking the Bluetooth host state-machine into pairing with a fake keyboard without user confirmation,” Marc Newlin, principal reverse engineer at SkySafe, revealed in a blog post published Dec. 6.
“The underlying unauthenticated pairing mechanism is defined in the Bluetooth specification, and implementation-specific bugs expose it to the attacker,” he explained.
The vulnerability enables an attacker to pair an emulated Bluetooth keyboard with a victim’s phone or computer, implementing the keyboard as a Python script that runs on a Linux computer. The attacker can then inject keystrokes, typing on the target device as if they were a Bluetooth keyboard legitimately attached to the target.
This effectively allows someone to “perform arbitrary actions as the user” on exploited devices, Newlin explains. “On Android or iOS, this includes any actions the user can perform which do not require a password or biometric authentication,” such as installing apps and forwarding emails or text messages, he says. On Linux and macOS, the attacker could launch a command-prompt and run arbitrary commands as well as install apps, Newlin adds.
Hiding in Plain Sight
While the flaw has been present for at least a good 10 years, it has been hiding in plain sight likely because of its simplicity, Newlin tells Dark Reading. He only discovered the issue after first exploring potential keystroke-injection vulnerabilities in Apple’s Magic Keyboard — a wireless keyboard for iOS and macOS — and moving on to explore the potential for the flaws more broadly in Bluetooth from there.
“I think researchers tend to forget about the low-hanging fruit,” he says. “There has been plenty of research investigating weaknesses in the Bluetooth encryption schemes, but apparently nobody thought to look for simple authentication-bypass bugs.”
Indeed, while Bluetooth is an incredibly useful protocol that has changed how people interact with various devices, its cross-platform, multi-device nature is proving to be complex in terms of security, causing myriad issues that patches can’t keep up with.
Android has been vulnerable to the issue that Newlin’s discovered as far back as version 4.2.2, which was released in 2012. The same flaw was patched in Linux in 2020, but then the fix was left disabled by default, Newlin discovered.
Further, the vulnerability in macOS and iOS bypasses Apple’s security protections and works in Lockdown Mode, which is meant to protect devices from sophisticated cyberattacks, he said.
Bluetooth Exploit Forthcoming
A platform’s level of exposure depends on the state of the device in question, Newlin said. On Android, for instance, devices are vulnerable whenever Bluetooth is enabled, while exploitation on Linux/BlueZ requires that Bluetooth is discoverable/connectable. iOS and macOS devices are vulnerable when Bluetooth is enabled and a Magic Keyboard has been paired with the phone or computer.
In January, Newlin will release proof-of-concept exploit scripts demonstrating how an attacker can exploit the flaw from a Linux-based computer using a standard Bluetooth adapter. However, a Linux system is not required to exploit the flaw, he tells Dark Reading.
“Once the attacker has paired with the target phone or computer, they can inject keystrokes to perform arbitrary actions as the victim, provided those actions don’t require a password or biometric authentication,” he explained.
Disclosure and Mitigation
Newlin informed Apple, Google, and Canonical of the flaw in August, and informed Bluetooth SIG in September. There are patches for most affected devices, although some remain vulnerable, including Apple gear. At this time, there are no known active exploitation in the wild, Newlin says.
Newlin tested the following Android devices and found that they were all vulnerable: Pixel 7 running Android 14; Pixel 6 running Android 13; Pixel 4a (5G) running Android 13; Pixel 2 running Android 11; Pixel 2 running Android 10; Nexus 5 running Android 6.0.1; and BLU DASH 3.5 running Android 4.2.2.
There currently is no fix available for Android 4.2.2-10; however, an Android security update released this week mitigates the vulnerability in Android versions 11-14, although Newlin says he’s not sure which OEMs have so far implemented the patch.
Newlin tested Ubuntu Linux versions 18.04, 20.04, 22.04, 23.10; all were vulnerable. There is a patch available on Github for BlueZ devices.
The 2022 MacBook Pro with MacOS 13.3.3, the 2017 MacBook Air with macOS 12.6.7, and iPhone SE running iOS 16.6 were all tested and found vulnerable, even in Lockdown Mode.
“I reported the macOS and iOS vulnerabilities to Apple in August, and they confirmed my report, but have not shared their patch timeline,” Newlin says. “Apple is aware that I am publicly disclosing [this], and they have issued CVE-2023-42929.”
Sluggish global growth, a higher risk of borrowers defaulting on loans and pressure on profitability mean that banks face a negative outlook in 2024, credit rating agency Moody’s said on Monday.
Prior rate hikes by central banks and rising unemployment in advanced economies will weaken asset quality, Moody’s Investors Services said in an outlook report, adding that real estate exposures in the United States and Europe posed a growing risk.
Pockets of stress in property markets in the Asia-Pacific region were also likely to continue, the report said.
Global banks have reported mixed performances this year, as their consumer revenues have benefitted from higher rates set by central banks to curb inflation, at the same time as investment banking revenues have been dented by a deep dealmaking slump.
Moody’s said in its report that it expected money to remain tight next year, lowering economic growth even as central banks are expected to start cutting rates. China’s growth is also set to slow amid muted spending by consumers and businesses, weak exports and an ongoing property crunch, the report said.
Bank profitability is likely to be squeezed by high funding costs, lower loan growth and build-ups of reserves to cover potential defaults, Moody’s said. However, capital levels – which underpin the financial soundness of banks – are expected to broadly hold up, the report said.
“Funding and liquidity will pose challenges, but capitalization will remain stable, benefiting from organic capital generation and moderate loan growth and as some of the largest US banks build up capital,” said Felipe Carvallo, senior credit officer at Moody’s Investors Service.
CFPB Orders Atlantic Union Bank to Pay $6.2 Million for Illegal Overdraft Fee Harvesting
The Consumer Financial Protection Bureau (CFPB) today took action against Atlantic Union Bank for illegally enrolling thousands of customers in checking account overdraft programs. The CFPB found that Atlantic Union misled consumers who enrolled in this overdraft service by phone and failed to provide proper disclosures. The CFPB is ordering Atlantic Union to refund at least $5 million in illegal overdraft fees and pay a $1.2 million penalty to the CFPB’s victims relief fund.
Atlantic Union Bank (NYSE: AUB) is a subsidiary of Atlantic Union Bankshares Corporation, a bank holding company headquartered in Richmond, Virginia. As of March 31, 2023, Atlantic Union had over $20 billion in total assets.
The Electronic Fund Transfer Act and its implementing regulation require banks to describe their overdraft service in writing before getting a consumer to opt-in to overdraft coverage for ATM withdrawals and one-time debit card transactions.
The CFPB’s order describes the bank’s illegal conduct and how it improperly communicated with and enrolled consumers in its overdraft program. Specifically, the bank violated federal law by:
- Charging fees without proper consent: At Atlantic Union Bank branches, employees gave oral descriptions of the bank’s overdraft coverage to new customers who opened checking accounts. Employees sought oral confirmation from customers to enroll in overdraft coverage before providing them with the required written disclosures describing the terms of service.
- Misleading customers about the terms and costs of overdraft coverage: For customers who enrolled in overdraft coverage by phone, Atlantic Union Bank employees did not clearly explain which transactions were covered by the service, and made other misleading statements about the terms and conditions of the service. In some calls, bank employees also omitted key information about the cost of the service and the fact that consumers could incur a hefty overdraft fee for each transaction covered by the service.
Enforcement Action
Under the Consumer Financial Protection Act (CFPA), the CFPB has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices. The CFPB found Atlantic Union Bank violated the Electronic Fund Transfer Act’s opt-in requirements for overdraft services, and it found the bank engaged in deceptive acts or practices in violation of the CFPA.
The order requires Atlantic Union to end its unlawful practices and:
- Refund $5 million to thousands of consumers: The bank must pay at least $5 million in redress to thousands of affected consumers illegally charged overdraft fees.
- Pay a $1.2 million fine: Atlantic Union will pay a $1.2 million penalty to the CFPB’s victims relief fund.
PUBLISHED DEC 01, 2023
State Regulatory Developments on “Income-Based Advances”
The CFPB has submitted input on a proposal by the California Department of Financial Protection and Innovation explaining states’ critical role in oversight of providers of consumer financial products and services.
In our nation’s system of federalism, both federal and state governments play important roles in safeguarding the public’s interest. Consumer protection laws are a critical example of how that system works.
The CFPB carefully monitors developments in state law and regulation relating to consumer financial protection. The California Department of Financial Protection and Innovation (DFPI) recently proposed to undertake registration and examinations of companies that provide what the proposal refers to as “income-based advances.” Earlier this week, the CFPB submitted input on DFPI’s proposal.
The CFPB’s letter notes that income-based advances – products where repayment is related, at least in theory, to a worker’s next payday – have long been part of the U.S. consumer lending market. The letter explains that states have long provided critical oversight of companies that provide consumer financial products or services, like those typically offering income-based advances. This oversight is crucially important for ensuring that companies are meeting their legal obligations. The CFPB indicates that, by treating income-based advance products as loans and including a variety of charges that accompany the advance as “charges,” DFPI’s proposal takes a similar approach to federal law—the Truth in Lending Act and the regulation that implements it.
Given the many developments in this market, the CFPB plans to issue further guidance to provide greater clarity concerning the application of federal law to income-based advance products.
Read the letter here.
CFPB Orders Bank of America to Pay $12 Million for Reporting False Mortgage Data
The Consumer Financial Protection Bureau (CFPB) today ordered Bank of America to pay a $12 million penalty for submitting false mortgage lending information to the federal government under a long-standing federal law. For at least four years, hundreds of Bank of America loan officers failed to ask mortgage applicants certain demographic questions as required under federal law, and then falsely reported that the applicants had chosen not to respond. Under the CFPB’s order, Bank of America must pay $12 million into the CFPB’s victims relief fund.
Enacted in 1975, the Home Mortgage Disclosure Act (HMDA) requires mortgage lenders to report information about loan applications and originations to the CFPB and other federal regulators. The data collected under HMDA are the most comprehensive source of publicly available information on the U.S. mortgage market. The public and regulators can use the information to monitor whether financial institutions are serving the housing needs of their communities, and to identify possible discriminatory lending patterns.
The Home Mortgage Disclosure Act requires financial institutions to report demographic data about mortgage applicants. The CFPB’s review of Bank of America’s HMDA data collection practices found that the bank was submitting false data, including falsely reporting that mortgage applicants were declining to answer demographic questions. This conduct violated HMDA and its implementing regulation, Regulation C, as well as the Consumer Financial Protection Act. Specifically, the CFPB found that Bank of America:
- Falsely reported that applicants declined to provide information: Hundreds of Bank of America loan officers reported that 100% of mortgage applicants chose not to provide their demographic data over at least a three month period. In fact, these loan officers were not asking applicants for demographic data, but instead were falsely recording that the applicants chose not to provide the information.
- Failed to adequately oversee accurate data collection: Bank of America did not ensure that its mortgage loan officers accurately collected and reported the demographic data required under HMDA. For example, the bank identified that many loan officers receiving applications by phone were failing to collect the required data as early as 2013, but the bank turned a blind eye for years despite knowledge of the problem.
The CFPB has taken numerous actions against Bank of America for violating federal law. In July 2023, the CFPB and the Office of the Comptroller of the Currency (OCC) ordered Bank of America to pay over $200 million for illegally charging junk fees, withholding credit card rewards, and opening fake accounts. In 2022, CFPB and OCC ordered Bank of America to pay $225 million in fines and refund hundreds of millions of dollars to consumers for botched disbursement of state unemployment benefits. That same year, Bank of America also paid a $10 million penalty for unlawful garnishments of customer accounts. And in 2014, the CFPB ordered Bank of America to pay $727 million to consumers for illegal and deceptive credit card marketing practices.
PUBLISHED Piloting Disclosures for Construction Loans
Today, the CFPB announced that it has approved an application that marks the first step for piloting disclosures for construction loans. Under this program, the CFPB authorizes parameters for in-market testing of alternatives to required disclosures. Real-world disclosure testing is often more accurate than lab testing, and this effort can help the CFPB by informing the need for possible regulatory changes.
The Independent Community Bankers of America (ICBA) applied under the program for a template covering the CFPB’s Know Before You Owe Disclosures. In particular, the ICBA asked to test certain adjustments to the existing mortgage disclosures in the unique context of construction loans, for which the CFPB’s disclosures were not primarily designed. The application noted that, in particular, many first-time homebuyers in rural areas build their homes instead of buying existing homes, and consequently, the challenges of using the current disclosures in the construction loan context may impact rural areas more acutely. The CFPB solicited comments on the ICBA’s application in February and made a decision to approve the template after reviewing the public feedback.
Individual lenders can apply for approval to test the alternative disclosures for construction loans. In deciding whether to approve individual lender applications, the CFPB will carefully evaluate a lender’s plan to test the effectiveness of these disclosures. The CFPB looks forward to reviewing any lender applications.
The Consumer Financial Protection Bureau (CFPB) and 11 states announced today that Prehired will provide more than $30 million in relief to student borrowers for making false promises of job placement, trapping students with “income share” loans that violated the law, and resorting to abusive debt collection practices when borrowers could not pay. The CFPB partnered with Washington, Delaware, California, Oregon, Minnesota, Illinois, South Carolina, North Carolina, Massachusetts, Virginia, and Wisconsin to bring the enforcement action against Prehired and two affiliated companies. The order approved by a federal court requires Prehired to cease all operations, pay $4.2 million in redress to consumers that were affected by its illegal practices, and voids all of its outstanding income share loans, valued by Prehired at nearly $27 million.
Prehired was a Delaware-based company that operated a 12-week online training program claiming to prepare students for entry-level positions as software sales development representatives with “six-figure salaries” and a “job guarantee.” Prehired offered students income share loans to help finance their costs of the program. Today’s order also names two affiliated companies, Prehired Recruiting and Prehired Accelerator, that pursued collection on defaulted income share loans.
In July 2023, the states and the CFPB sued Prehired to void the illegal loans and facilitate consumer redress. The states and the CFPB alleged that Prehired:
- Deceived borrowers by claiming its loans were not loans: Prehired’s marketing falsely claimed that its loans did not create a debt because the loan was contingent on job placement with a yearly salary over $60,000. But the company also deceptively buried terms in the loan that required graduates to pay even if they never got a job.
- Kept borrowers in the dark about key loan information: Prehired hid important loan terms from borrowers, including the amount financed, finance charges, and the loans’ annual percentage rate.
- Tricked consumers with deceptive debt collection practices: Prehired Recruiting and Prehired Accelerator pushed borrowers into converting their income share loan into a revised “settlement agreement” that required them to make payments even if they had not found a job, and which contained more burdensome dispute resolution and collection terms. Prehired Recruiting and Prehired Accelerator also falsely represented the amount of debt owed by consumers and stated Prehired could collect more than the consumer legally owed.
- Sued students in a faraway location: Prehired Recruiting filed debt collection lawsuits in a jurisdiction far away from where the consumers lived and were not able to be physically present when they executed the financing contract. Many consumers were unaware that Prehired Recruiting could file an action in Delaware because Prehired’s income share loans did not provide for venue in Delaware or the consumers had little or no opportunity to review or negotiate that provision.
The Consumer Financial Protection Bureau (CFPB) today ordered Toyota Motor Credit Corporation to pay $60 million in consumer redress and penalties for operating an illegal scheme to prevent borrowers from cancelling product bundles that increased their monthly car loan payments. The company withheld refunds or refunded incorrect amounts on the bundled products and knowingly tarnished consumers’ credit reports with false information. The CFPB is ordering Toyota Motor Credit to stop its unlawful practices, pay $48 million to harmed consumers, and pay a $12 million penalty into the CFPB’s victims relief fund.
Toyota Motor Credit Corporation is the United States-based auto-financing arm of the Toyota Motor Corporation, and is headquartered in Plano, Texas. It is one of the largest indirect auto lenders in the United States, with nearly five million customer accounts and more than $135 billion in assets as of October 2022.
Toyota Motor Credit provides financing for consumers buying cars through Toyota dealerships, and also offers optional products and services sold with the vehicles. Dealerships often sell the products and services as a bundled package to consumers and then add them onto car loan contracts. Bundled products include Guaranteed Asset Protection (GAP), which covers the difference (or gap) between the amount a consumer owes on an auto loan and what their insurance pays if the vehicle is stolen, damaged, or totaled. Toyota Motor Credit also offers Credit Life and Accidental Health (CLAH) coverage, which covers the remaining balance if a borrower dies or becomes disabled, and vehicle service agreements, which reimburse borrowers for parts and service beyond what is covered by the manufacturer warranty.
The cost of the bundled products, financed by Toyota Motor Credit, averaged between $700 and $2,500 per loan. Including these products in a vehicle sale or lease can significantly increase the loan amount, monthly payment, and finance charge. Toyota Motor Credit profits from the sale of these products by collecting more finance charges on the increased loan amount.
How might, and might not, generative AI make a difference when it comes to the political landscape?
Unless you’ve been living under a rock, you’ve probably heard a great deal over the last year about generative AI and how it’s going to reshape various aspects of our society. That includes elections. With one year until the 2024 U.S. presidential election, we thought it would be a good time to step back and take a look at how generative AI might and might not make a difference when it comes to the political landscape. Luckily, Matt Perault and Scott Babwah Brennen of the UNC Center on Technology Policy have a new report out on just that subject, examining generative AI and political ads.
On this episode of Arbiters of Truth, our series on the information ecosystem, Lawfare Senior Editor Quinta Jurecic and Lawfare’s Fellow in Technology Policy and Law Eugenia Lostri sat down with Matt and Scott to talk through the potential risks and benefits of generative AI when it comes to political advertising. Which concerns are overstated, and which are worth closer attention as we move toward 2024? How should policymakers respond to new uses of this technology in the context of elections?
A global watchdog on Wednesday proposed that, starting in January 2026, banks publish detailed information about the impact of climate change on their business to help investors and regulators check on how the risks are being managed.
The Basel Committee of banking regulators from G20 and other economies proposed climate-related disclosures by banks to make it easier for investors to also compare climate exposures at lenders, and ensure banks hold enough capital to remain stable.
The watchdog, which writes high-level rules that its members commit to applying in national handbooks, said such disclosures could help accelerate availability of climate related data, which is evolving, with patchy coverage in some cases.
“For this reason, the committee aims to incorporate a reasonable level of flexibility into a future framework,” the watchdog said in a statement.
Based on feedback from the public consultation on the proposals, the committee would decide which disclosures should be mandatory, and which could be at the discretion of national banking regulators.
The proposals provide more detailed banking sector climate-related disclosures to supplement broader corporate disclosures agreed at the global level by the International Sustainability Standards Board.
Not all countries will apply ISSB disclosures, however, and it is unclear how Basel’s disclosures would dovetail with corporate climate disclosures the European Union has finalised.
Draft U.S. corporate climate disclosures from the Securities and Exchange Commission face heavy pushback from companies which want to ditch the inclusion of so-called Scope 3 greenhouse gas emissions produced by a company’s customers.
The proposed Basel framework includes Scope 3, as well as Scope 1, covering direct emissions from a bank, and Scope 2, or indirect emissions from purchases of energy, such as for heating or cooling premises.
“Financed emissions commonly refer to the greenhouse gas (GHG) emissions associated, in the case of banks, with loans and investments, and that are part of their Scope 3 emissions,” the watchdog said. “For banks, financed emissions are often the most significant part of their total GHG emissions.”
The committee said it recognises the challenges banks may have in obtaining data from their counterparties.