May 26: CFPB Updates This Week

May 24, 2023

Overdraft/NSF Revenue in Q4 2022 down nearly 50% versus pre-pandemic levels

Overdraft/NSF revenue for the fourth quarter of 2022 alone was approximately $1.5 billion lower than in the fourth quarter of 2019 – a decrease of 48% compared to before the pandemic, suggesting an annual reduction of over $5.5 billion going forward. This decrease suggests average annual savings of more than $150 per household that incurs overdraft or NSF fees; many households have saved much more.

Read the full report

May 24, 2023

Mortgage data shows that borrowers could save $100 a month (or more) by choosing cheaper lenders

The CFPB took a look at how mortgage rates paid by consumers vary across lenders. This phenomenon, called price dispersion, exists in virtually every segment of the mortgage market, including loans backed by Fannie Mae and Freddie Mac, Federal Housing Administration loans, U.S. Department of Veterans Affairs (Veterans Affairs) loans, as well as jumbo loans.1 We analyzed Home Mortgage Disclosure Act data from 2021 to quantify the magnitude of price dispersion.2

We found that price dispersion for mortgages is often around 50 basis points of the annual percentage rate. To put this number in context, the median loan amount in 2021 was close to $300,000 and the median interest rate was 3 percent.3 The monthly payment for such a 30-year fixed loan is $1,265. The monthly payment for a 3.5 percent interest rate loan on a loan of the same amount is $1,347 – a difference of $82 a month (a 6.5 percent higher payment). Interest rates have increased drastically since 2021, but the math remains similar in a higher-interest rate environment. Keeping the loan amount at $300,000, the monthly payments for a 30-year fixed loan with a 6.5 percent interest rate and a 7 percent interest rate are, respectively, $1,896 and $1,996 – a difference of $100 a month (a 5.3 percent higher payment). In a higher interest-rate environment, with monthly payments being much higher overall, this $100 a month difference might matter even more as borrowers potentially are more stretched to make ends meet. Read more

May 23, 2023

CFPB Action to Require Citizens Bank to Pay $9 Million Penalty for Unlawful Credit Card Servicing

Citizens failed to properly manage and respond to customers’ credit card disputes and fraud claims

Today, the Consumer Financial Protection Bureau (CFPB) reached a settlement to resolve allegations that Citizens Bank violated consumer financial protection laws and rules that protect individuals when they dispute credit card transactions. The CFPB alleges that Citizens Bank failed to properly manage and respond to customers’ credit card disputes and fraud claims. If entered by the court, the order, among other things, would require Citizens Bank to pay a $9 million civil money penalty.

Citizens Bank is a large bank headquartered in Providence, Rhode Island, with branches and ATMs in 14 states and the District of Columbia. Citizens Bank is a subsidiary of Citizens Financial Group (NYSE:CFG), which reported $222 billion in assets as of March 31, 2023, and is one of the 15 largest consumer banks in the country. The CFPB originally sued Citizens Bank in January 2020.

Federal law protects individuals from credit card billing errors and fraud. The Truth in Lending Act and the rules that implement it lay out specific steps that individuals must take to report credit card disputes and fraud claims. If a person reports a billing error or fraud, the credit card issuer is required to investigate the allegations, send certain notifications to the individual, and, when claims are valid, refund the error or fraud amount. Read more