Mar. 1, 2024: CFPB Updates

The Consumer Financial Protection Bureau (CFPB) today issued a circular to law enforcement agencies and regulators explaining how companies operating comparison-shopping tools can break the law when they steer consumers to certain products or lenders because of kickbacks. Consumers use comparison-shopping tools to evaluate the costs, features, and terms of many financial products, including credit cards, loans, and bank accounts. However, consumers often encounter manipulated results or digital dark patterns, fueled by behind-the-scenes incentive payments from lenders. The circular explains how these practices may violate federal law and highlights examples of illegal arrangements.

Digital comparison-shopping tools are widely used in many product categories, from retail goods to travel and financial products. By allowing consumers to compare a variety of competing products quickly and efficiently, these tools have the potential to benefit individual consumers and drive competition across the larger market.

Comparison-shopping tools can help consumers evaluate and find financial products, especially credit cards and mortgages. Consumers often rely on the tools to navigate difficult financial decisions. However, some tool operators take advantage of that reliance and manipulate results. For example, some operators might accept financial kickbacks, sometimes referred to as “bounties” within the industry, to manipulate lists of results displayed to shoppersRead more


FPB joins efforts to stop data practices threatening national security

Today, President Biden signed an executive order to protect Americans’ sensitive personal data from exploitation by countries of concern.

Modern data broker practices have allowed companies to intrude into our digital lives, monetizing our most sensitive data. Corporate data brokers are selling sensitive financial data on American families to scammers, stalkers, and others seeking to spy on us. These data brokers even sell sensitive information about U.S. military personnel.

Research published by Duke University found that the sensitive personal data of U.S. military personnel and veterans—such as health data, financial data, and information about religious practices—can be easily purchased online for as little as 12 cents per record. The study cautioned that “access to this data could be used by foreign and malicious actors to target active-duty military personnel, veterans, and their families and acquaintances for profiling, blackmail, targeting with information campaigns, and more.”

The Consumer Financial Protection Bureau has already begun work to bring much-needed accountability the data broker market. Last year, the CFPB launched rulemaking to address business practices used by data brokers in the surveillance industry. The CFPB will continue to take action to protect the privacy and financial stability of American servicemembers and families.

Read CFPB Director Chopra’s statement on today’s Executive Order

Read the White House fact sheet


Unlawful fees in the mortgage market

The CFPB and FTC filed an amicus brief to help ensure that people can hold debt collectors accountable for unlawful fees.

Mortgage fees and other costs have risen significantly in recent years. The Consumer Financial Protection Bureau is focused on how these costs affect the affordability of home ownership as well as household balance sheets. And costs for homeowners are driven up if companies in the mortgage industry can pad their profits with illegal junk fees. The CFPB is working to combat the proliferation of junk fees in consumer financial markets and to ensure that mortgage companies don’t tack on unlawful fees.

The CFPB is the primary enforcer of the Fair Debt Collection Practices Act (FDCPA). We are committed to protecting consumers from debt collectors that break the law, including mortgage servicers which often act as debt collectors and must follow the same rules when they do. As the CFPB has advised, the FDCPA prohibits debt collectors from charging fees that borrowers didn’t agree to upfront unless Congress or a state has passed a law affirmatively allowing themRead more


CFPB Orders Federal Supervision for Installment Lender Following Contested Designation

The Consumer Financial Protection Bureau (CFPB) today published an order establishing supervisory authority over installment lender World Acceptance.

The CFPB is responsible for supervising a wide range of financial firms to ensure they are complying with federal consumer financial protection laws. The CFPB has supervised nonbank entities in certain industries like mortgage and payday lending, service providers to banks and credit unions, and larger players in particular markets as defined by rule.

In 2022, after conducting an assessment of its supervision program, the CFPB identified that the agency was failing to conduct oversight using a specific legal authority to supervise entities posing risks to consumers. The CFPB began to utilize this dormant authority and issued procedures to promote transparency about this tool.

The CFPB’s procedures require the CFPB to issue a notice to an entity not currently subject to a supervisory examination. The entity can either consent to supervision or contest the notice. Typically, the notices have pointed to consumer complaints and other indicators of risk to consumersRead more

The annual percentage rate (APR) margins, the amount of interest credit card issuers charge cardholders on top of benchmark rates, have reached an all-time high.

By some measures, credit cards have never been this expensive. For cardholders who carry a balance without paying it off in full each month, issuers generally charge interest based on annual percentage rates (APRs). In 2022 alone, major credit card companies charged over $105 billion in interest, the primary cost of credit cards to consumers. While the effects of increases to the target federal funds rate have received considerable attention, the average APR margin (the difference between the average APR and the prime rate) has reached an all-time high.

In this analysis, we show that higher APR margin drove about half of the increase in credit card rates over the last decade. In 2023, excess APR margin may have cost the average cardholder over $250. Major credit card companies earned an estimated $25 billion in additional interest revenue by raising APR margin. Increases to the average APR margin – despite lower charge-off rates and a relatively stable share of subprime borrowers – have fueled issuers’ profitability for the past decade. Higher APR margins have allowed credit card companies to generate returns that are significantly higher  than other bank activitiesRead more