The Consumer Financial Protection Bureau
The Consumer Finance Protection Bureau (CFPB) is responsible for consumer protection in the financial sector. CFPB’s jurisdiction includes credit unions, banks, securities firms, payday lenders, mortgage-servicing operations, foreclosure relief services, debt collectors and other financial companies operating in the United States.
NASCUS closely monitors CFPB developments and responds to request for comments on rules impacting the credit union system.
2022 Updates (see archives at the bottom for previous years)
Today, the Consumer Financial Protection Bureau (CFPB) took action against Loan Doctor to resolve the CFPB’s claims that the company and its founder, Edgar Radjabli, broke the law by deceiving consumers into thinking they were depositing funds into a guaranteed return savings product within a commercial bank.
The Bureau has announced the annual adjustment to the maximum amount consumer reporting agencies may charge consumers for making a file disclosure to a consumer under the FCRA. The ceiling on allowable charges under Section 612(f) of the FCRA will increase to $14.50, effective for 2023.
This adjustment is effective on January 1, 2023.
You can access the FCRA notice at: www.consumerfinance.gov/policy-compliance/rulemaking/final-rules/fair-credit-reporting-act-disclosures/.
The CFPB is working with municipal and county governments to identify and address financial harm to their constituents.
Company wrongly charged fees and inaccurately reported homeowner credit information despite pandemic-era housing protections.
Today, the Consumer Financial Protection Bureau (CFPB) issued two reports on the tenant background check industry. The reports describe how errors in these background checks contribute to higher costs and barriers to quality rental housing. Too often, these background checks – which purport to contain valuable tenant background information – are filled with largely unvalidated information of uncertain accuracy or predictive value. While renters bear the costs of errors and false information in these reports, they have few avenues to make tenant screening companies fix their sloppy procedures.
Crypto-assets are increasingly offered and marketed to consumers, including being incorporated into other products. Even large financial firms have begun offering and marketing crypto-asset custodial services to certain customers. As these offerings have increased, so too have consumers’ complaints to the Consumer Financial Protection Bureau (CFPB) related to crypto-assets. “Pig butchering” and other scams lead list of crypto-asset complaints.
PUBLISHED NOV 02, 2022
Office of Research blog: Update on student loan borrowers during payment suspension
Delinquencies on non-student-loan credit products continue to rise for student loan borrowers. This rise could signal payment difficulties when scheduled payments resume, but potential debt cancellation may reduce the number of borrowers at-risk.
PUBLISHED OCT 31, 2022
CFPB seeks further public input on big tech payment platforms
The CFPB is seeking additional public input on companies’ acceptable use policies and their use of fines, liquidated damages provisions, and other penalties.
The CFPB issued guidance about two junk fee practices that are likely unfair and unlawful under existing law. The first, surprise overdraft fees, includes overdraft fees charged when consumers had enough money in their account to cover a debit charge at the time the bank authorizes it. The second is the practice of indiscriminately charging depositor fees to every person who deposits a check that bounces. The penalty is an unexpected shock to depositors who thought they were increasing their funds.
PUBLISHED OCT 20, 2022
CFPB Takes Action to Address Junk Data in Credit Reports
Effort seeks to address false information on the credit reports of children in foster care and the general public.
PUBLISHED OCT 18, 2022
CFPB Sues Payment Platform Used by YMCA Camps and Charity Race Organizers for Illegally Cramming Consumers With Junk Membership Fees
ACTIVE Network generated more than $300 million in membership fees using digital dark patterns and online trickery.
Agencies Announce Threshold for Smaller Loan Exemption from Appraisal Requirements for Higher-Priced Mortgage Loans
The Consumer Financial Protection Bureau, the Federal Reserve Board, and the Office of the Comptroller of the Currency today announced that the 2023 threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans will increase from $28,500 to $31,000.
PUBLISHED OCT 13, 2022
Agencies Announce Dollar Thresholds in Regulation Z and Regulation M for Exempt Consumer Credit and Lease Transactions
The Federal Reserve Board and the Consumer Financial Protection Bureau today announced the dollar thresholds used to determine whether certain consumer credit and lease transactions in 2023 are exempt from Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing).
CFPB Report Finds High Fees Charged on Student Banking Products Endorsed by Colleges
Some financial institutions and colleges may be steering students to more expensive financial products.
Mortgage Borrowers Can Challenge Inaccurate Appraisals Through the Reconsideration of Value Process
Lenders must ensure all borrowers have equal access to available reconsideration of valuation processes.
PUBLISHED SEP 29, 2022
CFPB Sues MoneyLion for Overcharging Servicemembers and Trapping Consumers in Costly Memberships
The online lender allegedly required customers to pay hefty fees to access loans and often refused to cancel memberships.
PUBLISHED SEP 29, 2022
CFPB Supervisory Examinations Find Violations of Federal Law by Student Loan Servicers and University-Owned Lenders
Blanket withholding of academic transcripts to pressure borrowers to pay cited as unlawful.
PUBLISHED SEP 28, 2022
CFPB Orders Regions Bank to Pay $191 Million for Illegal Surprise Overdraft Fees
Repeat offender will refund at least $141 million to customers and pay $50 million penalty.
PUBLISHED SEP 22, 2022
Request for Information Regarding Mortgage Refinances and Forbearances
The Consumer Financial Protection Bureau (Bureau or CFPB) is seeking comment from the public about (1) ways to facilitate mortgage refinances for consumers who would benefit from refinancing, especially consumers with smaller loan balances; and (2) ways to reduce risks for consumers who experience disruptions in their financial situation that could interfere with their ability to remain current on their mortgage payments.
PUBLISHED SEP 22, 2022
CFPB Launches Effort to Spur New Opportunities for Homeowners in the Mortgage Market
The Consumer Financial Protection Bureau (CFPB) is asking for public input on ways to spur new mortgage products that help households.
PUBLISHED SEP 19, 2022
CFPB Annual Report of 2021 Mortgage Market Activity Reveals an End to the Refinancing Boom and an Increase in Home Purchase Loans
Asian, Hispanic white, and Black shares of home purchase loans increased
PUBLISHED SEP 15, 2022
CFPB Study Details the Rapid Growth of “Buy Now, Pay Later” Lending
Business model relies on data collection, and loans serve as close substitute for credit cards
PUBLISHED SEP 15, 2022
Director Chopra’s prepared remarks on the release of the CFPB’s Buy Now, Pay Later report
Director Chopra delivered prepared remarks on a press call discussing the release of a report on market trends and consumer impacts from Buy Now, Pay Later loans.
If you used U.S. Equity Advantage’s auto loan Payment Accelerator Program, a check may be on the way
More than 120,000 consumers will receive checks in the mail after the Consumer Financial Protection Bureau’s enforcement action against USEA for its misleading practices.
The Consumer Financial Protection Bureau (CFPB) has issued the first in a series of reports focusing on the finances of consumers living in rural areas. Today’s report focuses on rural Appalachians, who tend to earn less than consumers in other rural areas and have higher rates of subprime credit. In particular, medical debt collections are a much more prevalent issue among rural Appalachians, and consumers with medical debt collections often experience difficulties making ends meet on other financial obligations.
PUBLISHED AUG 24, 2022
Exploring the connection between financial assistance for medical care and medical collections
Consumers, including those with insurance, incur significant charges related to medical care. Nonprofit healthcare providers are required to establish financial assistance policies for consumers who cannot afford services. In this blog, we explore the connection between eligibility for these financial assistance programs and the prevalence of medical collections using our Making Ends Meet Survey.
PUBLISHED AUG 19, 2022
Why we’re modernizing how we collect credit card data
By gathering better price and availability data for more credit card products and making it publicly available, the CFPB seeks to empower consumers to choose the best card for their unique situation and to encourage issuers to compete more on rates.
PUBLISHED AUG 12, 2022
Examining the factors driving high credit card interest rates
As credit card profitability increases, a new analysis looks at why credit card interest rates continue to rise despite historically low charge-offs and cost of funds alongside a stable share of subprime accounts.
PUBLISHED AUG 10, 2022
CFPB Warns that Digital Marketing Providers Must Comply with Federal Consumer Finance Protections
Today, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule laying out when digital marketing providers for financial firms must comply with federal consumer financial protection law.
PUBLISHED AUG 10, 2022
CFPB Takes Action Against Hello Digit for Lying to Consumers About Its Automated Savings Algorithm
The Consumer Financial Protection Bureau (CFPB) is taking action against Hello Digit, LLC, a financial technology company that used a faulty algorithm that caused overdrafts and overdraft penalties for customers. Hello Digit was meant to save people money, but instead the company falsely guaranteed no overdrafts with its product, broke its promises to make amends on its mistakes, and pocketed a portion of the interest that should have gone to consumers.
PUBLISHED JUL 29, 2022
CFPB and Justice Department Caution Auto Finance Companies about Servicemember Protections
The Department of Justice and the Consumer Financial Protection Bureau (CFPB) issued a joint letter today reminding auto finance companies of their responsibilities to recognize important legal protections for military families under the Servicemembers Civil Rights Act (SCRA). While servicemembers have the same rights as non-military borrowers, the SCRA provides additional rights to protect servicemembers and their families against unique financial challenges.
PUBLISHED JUL 28, 2022
CFPB Fines U.S. Bank $37.5 Million for Illegally Exploiting Personal Data to Open Sham Accounts for Unsuspecting Customers
The Consumer Financial Protection Bureau (CFPB) took action against U.S. Bank for illegally accessing its customers’ credit reports and opening checking and savings accounts, credit cards, and lines of credit without customers’ permission. U.S. Bank pressured and incentivized its employees to sell multiple products and services to its customers, including imposing sales goals as part of their employees’ job requirements.
PUBLISHED JUL 27, 2022
CFPB issues new Debt Collection FAQs
The CFPB has added a new section to the Debt Collection Rule Frequently Asked Questions (FAQs). The new FAQs address questions related to electronic communication and unusual or inconvenient time and place provisions in the Debt Collection Rule.
Today, the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ) took action to end Trident Mortgage Company’s intentional discrimination against families living in majority-minority neighborhoods in the greater Philadelphia area.
PUBLISHED JUL 27, 2022
CFPB Publishes Analysis of Potential Impacts of Medical Debt Credit Reporting Changes
Today, the Consumer Financial Protection Bureau (CFPB) published an analysis of how actions announced by the three largest national consumer reporting companies – Experian, Equifax, and TransUnion — will affect people who have allegedly unpaid medical debt on their credit reports.
PUBLISHED JUL 26, 2022
CFPB Orders Hyundai to Pay $19 Million for Widespread Credit Reporting Failures
Today, the Consumer Financial Protection Bureau (CFPB) penalized Hyundai Capital America (Hyundai) for repeatedly providing inaccurate information to nationwide consumer reporting companies and failing to take proper measures to address inaccurate information once it was identified between 2016 and 2020.
PUBLISHED JUL 14, 2022
Federal Regulators Fine Bank of America $225 Million Over Botched Disbursement of State Unemployment Benefits at Height of Pandemic
The Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) have fined Bank of America $225 million for botching the disbursement of state unemployment benefits at the height of the pandemic.
PUBLISHED JUL 12, 2022
CFPB Sues ACE Cash Express for Concealing No-Cost Repayment Plans and Improperly Withdrawing Consumers’ Funds
The Consumer Financial Protection Bureau (CFPB) filed a lawsuit today accusing payday lender ACE Cash Express of concealing free repayment plans from struggling borrowers. Because of ACE’s illegal practices, individual borrowers paid hundreds or thousands of dollars in reborrowing fees, when they were in fact eligible for free repayment plans.
PUBLISHED JUL 07, 2022
CFPB Issues Advisory to Protect Privacy When Companies Compile Personal Data
Today, the Consumer Financial Protection Bureau (CFPB) issued a legal interpretation to ensure that companies that use and share credit reports and background reports have a permissible purpose under the Fair Credit Reporting Act.
PUBLISHED Accepting applications for CFPB advisory committees
Beginning on Tuesday, July 5, we’re accepting applications to serve on our four advisory committees, which provide insight and advice as we carry out our work. Applications are due by July 24, 2022. Credit Union Advisory Council, Community Bank Advisory Council, Consumer Advisory Board, Academic Research Council.
PUBLISHED JUN 29, 2022
CFPB Moves to Reduce Junk Fees Charged by Debt Collectors
Today, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion affirming that federal law often prohibits debt collectors from charging “pay-to-pay” fees. These charges, commonly described by debt collectors as “convenience fees,” are imposed on consumers who want to make a payment in a particular way, such as online or by phone.
PUBLISHED JUN 28, 2022
CFPB Affirms Ability for States to Police Credit Reporting Markets
Today, the Consumer Financial Protection Bureau (CFPB) issued an interpretive rule affirming states’ abilities to protect their residents through their own fair credit reporting laws.
PUBLISHED JUN 23, 2022
CFPB Helps Survivors Mitigate the Financial Consequences of Human Trafficking
Today, the Consumer Financial Protection Bureau (CFPB) issued a final rule to help survivors avoid some of the financial consequences of human trafficking. The CFPB has established, among other things, a method for survivors of trafficking to submit documentation to credit reporting companies that identifies any adverse item of information that resulted from human trafficking. The rule prohibits credit reporting companies from providing a report containing the adverse items of information.
PUBLISHED JUN 22, 2022
CFPB Initiates Review of Credit Card Company Penalty Policies Costing Consumers $12 Billion Each Year
The Consumer Financial Protection Bureau (CFPB) is taking the first step toward addressing credit card company penalty policies costing consumers $12 billion each year, starting by looking at excessive late fees. In an Advance Notice of Proposed Rulemaking published today, the CFPB asks for information on the Federal Reserve Board of Governors’ 2010 immunity provision for excessive late fees that allows credit card companies to escape enforcement scrutiny.
PUBLISHED JUN 22, 2022
Prepared Remarks of Director Chopra on Credit Card Late Fees ANPR Press Call
CFPB Director Rohit Chopra’s statement on credit card late Fees ANPR. Today the Consumer Financial Protection Bureau is taking a critical step to address the billions of dollars that Americans pay in penalties to credit card companies. We are publishing an Advance Notice of Proposed Rulemaking to review provisions originally developed by the Federal Reserve Board that allow credit card companies to sidestep Congressional mandates on reasonable penalty fees. Our effort is particularly timely, given that the rule currently allows credit card companies to hike late fees by the rate of inflation.
PUBLISHED JUN 21, 2022
Statement of CFPB Director Rohit Chopra, Member, FDIC Board of Directors, on the Amended Deposit Insurance Fund Restoration Plan and Notice of Proposed Rulemaking Regarding Revised Deposit Insurance Assessment Rates
CFPB Director and FDIC Board Member Rohit Chopra’s statement on the amended Deposit Insurance Fund restoration plan and notice of proposed rulemaking regarding revised deposit insurance assessment rates.
PUBLISHED JUN 16, 2022
FFIEC Announces Availability of 2021 Data on Mortgage Lending
The Federal Financial Institutions Examination Council (FFIEC) today announced the availability of data on 2021 mortgage lending transactions reported under the Home Mortgage Disclosure Act (HMDA) by 4,338 U.S. financial institutions. Covered institutions include banks, savings associations, credit unions, and mortgage companies.
PUBLISHED JUN 15, 2022
Deputy Director Zixta Martinez’s Keynote Address at the Consumer Federation of America’s 2022 Consumer Assembly
Deputy Director Martinez delivered keynote remarks at the 2022 Consumer Assembly on June 15, 2022.
oday, I would like to talk to you about CFPB’s latest research on payday loans, rent-a-bank schemes, the changing market environment for overdraft and other banking fees, and I will close with remarks about medical debt and credit reporting.
But, first, I want to share with you a little bit of my story. I don’t believe you just fall into consumer protection as a career – it is rather a calling built up from our life experiences and family histories. The experiences and histories become our sculptor’s wheel – helping us to shape the future of consumer protection in a way that supports all people, families, communities, and law-abiding businesses.
June 14, 2022 — The Consumer Financial Protection Bureau (CFPB) is seeking public input on how bank customers can assert their rights to better customer service with big banks. A 2010 federal law specifies that consumers have rights to obtain timely responses to requests for information about their accounts from large depository institutions. In today’s Request for Information, the CFPB seeks data about, and consumer experiences with, the obstacles that may prevent people from receiving high standards of customer service and high-quality human interactions with their banks or credit unions.
June 14, 2022 — Good morning. Thank you to Great Falls College MSU for hosting the Consumer Financial Protection Bureau and thank you to everyone who has joined us. On this trip to Montana, we’ve been lucky to meet with local bank employees, small businesses in the region, and military families at Malmstrom Air Force Base.
Today, we are here to talk about relationship banking, particularly in rural communities. As always, my remarks reflect the views of the CFPB and do not necessarily represent the views of any other part of the Federal Reserve System.
In 1984, the United States had nearly 18,000 banking institutions. Last year, that number declined to fewer than 5,000. What was once a decentralized consumer finance landscape, primarily populated by local financial institutions, is now dominated by large banks that have gobbled up many of those small players.
Banking has changed significantly and today, what we have are, essentially, several different business models. Let me run through these for context.
June 13, 2022 — Today, the Consumer Financial Protection Bureau (CFPB) released its annual report on the top financial concerns facing service members, veterans, and military families, based on the complaints they submitted to the CFPB. Servicemembers told the CFPB about billing inaccuracies and that debt collectors used aggressive tactics to recover allegedly unpaid medical bills.
Servicemembers, veterans, and military families have now submitted more than 250,000 consumer complaints since the CFPB began collecting complaints in 2011. In 2021, they submitted more than 42,000 complaints to the CFPB. The most common types of complaints – more than 60% – were about credit reporting and debt collection.
As described in today’s report, servicemembers may be at particular risk from harm caused by coercive credit reporting tactics, given that negative items on a credit report can jeopardize a military career. As described in the report:
- Servicemembers have concerns about faulty credit reporting: In 2021, servicemembers submitted more than 17,000 credit or consumer reporting complaints, making it the top topic for complaints. When issues with credit reporting, debt collection, or medical billing are not appropriately resolved, the consequences for servicemembers and military families can include loss of housing, separation from service, denial of security clearances, or loss of access to affordable healthcare.
- Nationwide credit reporting companies fail to appropriately respond to servicemembers: Credit reporting companies were not responsive to servicemembers’ requests for investigations. Complaints indicated that investigations took too long and failed to correct errors on their credit reports. Servicemembers reported that they feared that inaccurate medical billing information on their credit reports could cause irreparable harm to their careers.
- Medical billing errors and inaccuracies are a driver of complaints about credit reporting and debt collection: Despite the widespread expectation that a core benefit of military service will be full coverage of medical expenses, servicemembers experienced a range of debt collection and credit reporting activity related to allegedly unpaid medical bills. In 2021 alone, more than half of medical debt collection complaints from servicemembers were about debts the individuals reported they did not owe. Many of these complaints stemmed from breakdowns in communication between private health care providers and TRICARE, the health insurance program for active-duty military.
June 9, 2022 — The Consumer Financial Protection Bureau (CFPB) has launched an inquiry into practices and financial products that may leave employees indebted to their employers. In today’s Request for Information, the CFPB seeks data about, and worker experiences with, these emerging practices and financial products referred to as employer-driven debt.
June 9, 2022 — Today the Consumer Financial Protection Bureau (CFPB) took action against the owner of a student-loan debt relief company for allegedly withdrawing hundreds of thousands of dollars from student borrowers’ bank accounts, without authorization. The CFPB alleges that Frank Gebase, Jr. controlled a company that took the borrowers’ money after obtaining their names and account information from a previous student-loan debt-relief scammer that the CFPB shut down.
June 8, 2022 — Today, the Consumer Financial Protection Bureau (CFPB) issued an order to terminate Upstart Network from its list of approved “no-action letters.” The CFPB had granted special regulatory treatment to Upstart by immunizing the lender from being charged with fair lending law violations with respect to its underwriting algorithm, while the “no-action letter” remained in force. Upstart requested an amendment to the “no-action letter” that would effectively seek an immediate termination.
CFPB Acts to Protect the Public from Black-Box Credit Models Using Complex Algorithms
Companies relying on complex algorithms must provide specific and accurate explanations for denying applications
May 26, 2022 — The Consumer Financial Protection Bureau (CFPB) confirmed that federal anti-discrimination law requires companies to explain to applicants the specific reasons for denying an application for credit or taking other adverse actions, even if the creditor is relying on credit models using complex algorithms. The CFPB published a Consumer Financial Protection Circular to remind the public, including those responsible for enforcing federal consumer financial protection law, of creditors’ adverse action notice requirements under the Equal Credit Opportunity Act (ECOA).
Data harvesting on Americans has become voluminous and ubiquitous, giving firms the ability to know highly detailed information about their customers before they ever interact with them. Many firms across the economy rely on these detailed datasets to power their algorithmic decision-making, which is sometimes marketed as “artificial intelligence.” The information gleaned from data analytics has a broad range of commercial uses by financial firms, including for targeted advertising and in credit decision-making.
Law-abiding financial companies have long used advanced computational methods as part of their credit decision-making processes, and they have been able to provide the rationales for their credit decisions. However, some creditors may make credit decisions based on the outputs from complex algorithms, sometimes called “black-box” models. The reasoning behind some of these models’ outputs may be unknown to the model’s users, including the model’s developers. With such models, adverse action notices that meet ECOA’s requirements may not be possible.
Today’s Circular makes clear that:
- Federal consumer financial protection laws and adverse action requirements should be enforced regardless of the technology used by creditors. For example, ECOA does not permit creditors to use technology that prevents them from providing specific and accurate reasons for adverse actions. Creditors’ use of complex algorithms should not limit enforcement of ECOA or other federal consumer financial protection laws.
- Creditors cannot justify noncompliance with ECOA based on the mere fact that the technology they use to evaluate credit applications is too complicated, too opaque in its decision-making, or too new. Creditors who use complex algorithms—including artificial intelligence or machine learning technologies—to engage in credit decisions must still provide a notice that discloses the specific, principal reasons for taking adverse actions. There is no exception for violating the law because a creditor is using technology that has not been adequately designed, tested, or understood.
May 23, 2022 — Recently, our research uncovered that only about half of the largest credit card companies contribute data to credit reporting companies about the exact monthly payment amounts made by borrowers. It also showed that over a short period of time, several of the largest credit card companies began to suppress actual payment amount information that they had previously provided or furnished on consumers.
Our mission is to ensure markets are fair, transparent and competitive, key pillars for consumer protection. This practice has potential for harm.
Today, — JP Morgan Chase, Citibank, Bank of America, Capital One, Discover, and American Express — asking them to explain this practice, which has the potential to impact you and your ability to access credit at the most competitive rates.
Importance of actual payment information
Being able to view a consumer’s actual payment amount history on their credit reports can be a valuable tool for lenders to ensure they’re offering competitive prices and the best loan terms for your money.
We know, for example, that credit card companies routinely rely on actual payment amount information when pricing or offering products to their own customers. Consumer advocates and market participants alike have flagged the distortionary impact of payment amount data suppression, particularly in hindering lenders’ ability to competitively underwrite credit. According to Fannie Mae, this information can also help , particularly for those customers that fully pay their credit card bills each month. Our monitoring of credit markets suggests that the inclusion of actual payment information in credit reports could impact consumers’ credit scores by 20 points or more.
Consumers reasonably expect that they will receive competitively priced credit based on their ability to manage and repay their credit obligations. But this is impaired if actual payment information is being suppressed by major credit card companies. This isn’t the first time the credit card industry has suppressed valuable account information from credit reports. Several years ago, , credit card companies had stopped furnishing credit limit amounts to the credit reporting companies, creating misleading impressions of creditworthiness and making it harder for competitors to offer lower rates to their customers. Today, the practice of withholding information about consumer credit card payments is even more out of step with market and regulatory trends.
Consumers should have confidence that their information is useful, accurate and complete. Today’s request to credit card companies is one part of that effort. We’ll share what we learn about why actual payment information has largely gone missing from the nationwide credit reporting system, and what the largest credit card companies might do to fix it.
CFPB Launches New Effort to Promote Competition and Innovation in Consumer Finance
New Office Will Identify Obstacles for New Market Entrants
May 23, 2022 — The Consumer Financial Protection Bureau (CFPB) is opening a new office, the Office of Competition and Innovation, as part of a new approach to help spur innovation in financial services by promoting competition and identifying stumbling blocks for new market entrants. The office will replace the Office of Innovation that focused on an application-based process to confer special regulatory treatment on individual companies. The new office will support a broader initiative by the CFPB to analyze obstacles to open markets, better understand how big players are squeezing out smaller players, host incubation events, and, in general, make it easier for people to switch financial providers.
The CFPB has a statutory mandate to promote fair, transparent, and competitive markets. Families, honest businesses, and the entire economy benefit when consumer finance markets are fiercely competitive, rather than dominated by a handful of firms. Digital technology is transforming the markets, including how payments, deposits, and lending are provided and who provides them. Big banks, fintech, big tech, incumbents, and small start-ups are all jockeying to be in front. The Office of Competition and Innovation will focus on how to create market conditions where consumers have choices, the best products win, and large incumbents cannot stifle competition by exploiting their network effects or market power.
The new office will support the CFPB’s general effort at increasing competition for the benefit of all consumers. Specifically, the CFPB will:
- Give consumers their walking rights to switch providers: Competition is more vibrant when people can switch to a new provider easily, creating pressure on incumbents to maintain high levels of service and giving new entrants an opportunity to win customers. The CFPB will be exploring ways to reduce the barriers to switching accounts and providers.
- Research structural problems blocking successes: The new office will be housed in the CFPB’s Research, Markets, and Regulation division, giving it greater access to resources to look at market-structure problems that create obstacles to innovation. For example, this could include greater explorations of the payment networks market or the credit reporting system, both of which are essential to our financial system but have only a few dominant players.
- Understand how bigger players can gain advantage over smaller players: Sometimes start-ups simply get runover by bigger players. For example, big companies can easily pitch new products to their large customer bases and stymie outside players who may have more favorable products. Big tech companies, with their huge reaches, are also seeking new ways to join consumer finance markets and may threaten fair competition.
- Identify ways to address commonplace obstacles: Innovators may not be getting their products or services to market because of more practical problems like access to capital or talent. Or they may not launch because they don’t have access to the large volumes of digital data stored by the big banks. A future rulemaking by the CFPB under Section 1033 of the Consumer Financial Protection Act will give consumers access to their own data.
- Host events to explore barriers to entry and other obstacles: The new office will convene events such as open houses, sprints, hackathons, tabletop exercises, and war games. Entrepreneurs, small business owners, and technology professionals will be able to collaborate, explore obstacles, and share frustrations with government regulators. Results will be shared publicly.
CFPB and New York Attorney General Shut Down Debt Collection Ring
Companies and individuals used social media to smear consumers and threaten them with imprisonment
May 23, 2022 — The Consumer Financial Protection Bureau (CFPB), in partnership with the New York Attorney General, filed a proposed stipulated judgment in federal court to settle its case against a debt collection enterprise and its owners and managers. The judgment would order all participants in the scheme, based in upstate New York, to exit the debt collection market after their history of deception and harassment. Their debt collection companies would also be shuttered and required to pay a total of $4 million in penalties.
The defendant companies are JPL Recovery Solutions; Regency One Capital; ROC Asset Solutions, which does business as API Recovery Solutions and Northern Information Services; Check Security Associates, which does business as Warner Location Services, Pinnacle Location Services, and Orchard Payment Processing Systems; Keystone Recovery Group; and Blue Street Asset Partners. The individual defendants are owners Christopher Di Re, Scott Croce, and Susan Croce, as well as Brian Koziel and Marc Gracie, who acted as managers of some or all of the companies.
The CFPB and the New York Attorney General allege that the network used deceptive and harassing methods, violating the Fair Debt Collection Practices Act and the Consumer Financial Protection Act. Specifically, the complaint alleges that the owners, managers, and companies used the following illegal tactics to collect debt:
- Falsely claimed arrest and imprisonment: The collection companies threatened people with arrest and imprisonment if they did not make payments. In fact, people are not subject to arrest or imprisonment for failure to pay debts.
- Lied about legal action: The companies falsely threatened people with legal action, including wage garnishment and property seizures. In reality, the network never sought or obtained any legal judgments.
- Inflated and misrepresented debt amounts owed: The defendants lied about debt amounts owed to convince people that paying the amounts they actually owed represented a substantial discount. To press people even further, collectors said it was the offers would only be available for a short period of time.
- Created “smear campaigns”: Using social media and other methods, the collectors pressured people to pay by contacting and disclosing the debts to their immediate and distant family members, grandparents, in-laws, ex-spouses, employers, work colleagues, landlords, Facebook friends, and other known associates. The network did this even after collectors were told by victims to stop contact. Victims described these tactics as “emotional terrorism.”
- Harassed people with repeated phone calls: The collectors repeatedly called people multiple times every day over periods lasting a month or longer. The network, in fact, instructed its collectors to let the person hang up on each call, so they can maintain a pretense in their call logs that they were disconnected, and then call back as soon as the next day. The collectors also used insulting and belittling language, and engaged in intimidating behavior when calling.
- Failed to provide legally mandated disclosures: The network did not provide people with statutorily-required notices, which detail their rights. When individuals asked for the notices, some collectors refused to provide them.
CFPB Bolsters Enforcement Efforts by States
Interpretive Rule Seeks to Clarify Scope of States’ Ability to Enforce Federal Consumer Financial Protection Laws
May 17, 2022 — The Consumer Financial Protection Bureau (CFPB) issued an interpretive rule that describes states’ authorities to pursue lawbreaking companies and individuals that violate the provisions of federal consumer financial protection law. Because of the crucial role states play in protecting consumers, the Consumer Financial Protection Act grants their consumer protection enforcers the authority to protect their citizens and otherwise pursue lawbreakers.
“In the years leading up to the financial crisis, federal regulators undermined states seeking to protect families and businesses from abuses in the mortgage market,” said CFPB Director Rohit Chopra. “Our action today demonstrates our commitment to promoting state enforcement, not suffocating it.”
When Congress passed the Consumer Financial Protection Act in 2010, it recognized the important role of states in protecting consumers from financial fraud, scams, and other wrongdoing. In the run-up to the Great Recession, federal banking regulators took numerous steps to undermine state regulators and enforcers, deteriorating protections for mortgage borrowers and setting the stage for the subprime crisis. Through the Consumer Financial Protection Act, Congress significantly restricted the ability of federal banking regulators to broadly preempt state consumer financial protections.
In addition, Congress sought to enhance states’ enforcement abilities, so states were empowered to enforce the Consumer Financial Protection Act’s consumer protection provisions. This authority was provided for both state attorneys general and state regulators. In the years since Congress granted this authority, states have used it in 33 public enforcement actions to protect consumers. States brought some of these actions in partnership with the CFPB, while others were brought by individual states or multistate groups that have included almost every state and territory in the country.
CFPB Takes Action to Protect Depositors from False Claims About FDIC Insurance
FDIC takes parallel action to combat misrepresentations
May 17, 2022 — The Consumer Financial Protection Bureau (CFPB) released an enforcement memorandum today that addresses prohibited practices on claims about Federal Deposit Insurance Corporation (FDIC) insurance. Specifically, firms cannot misuse the name or logo of the FDIC or make deceptive representations about deposit insurance. The issue has taken on renewed importance with the emergence of financial technologies – such as crypto-assets, including stablecoins – and the risks posed to consumers if they are lured to these or other financial products or services through misrepresentations or false advertising.
“People know and trust the FDIC name and logo, and firms must not prey on that trust by making deceptive representations about deposit insurance,” said CFPB Director Rohit Chopra. “Companies undermine competition, erode confidence in the deposit insurance system, and threaten our hard-earned savings when they engage in false marketing or advertising.”
The Consumer Financial Protection Act prohibits deceptive acts and practices, including deceptive representations involving the name or logo of the FDIC or deposit insurance, by covered firms. Deposit insurance has long been a means to promote confidence in the banking system, and misrepresentation of those protections undermines consumer confidence and market competition. The most common form of deposit insurance is administered by the FDIC. Currently, the FDIC insures deposits at FDIC-insured banks and savings associations up to $250,000 per depositor, per FDIC-insured bank, for each account ownership category.
May 16, 2022 — To promote consistency among enforcers and fair competition in the market, the CFPB is launching a new system to provide guidance to other agencies with consumer financial protection responsibilities on how the CFPB intends to enforce federal consumer financial law. The CFPB will issue Consumer Financial Protection Circulars to the broad set of government agencies responsible for enforcing federal consumer financial law.
The CFPB is the principal regulator responsible for administering the federal consumer financial laws, including the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Consumer Financial Protection Act, and many others. However, the CFPB is not the only enforcer of these laws. Enforcement responsibility is spread among a large set of state and federal government agencies to protect families and honest businesses together.
Given the broad variety of agencies responsible for enforcing federal consumer financial law, there is a risk that companies might encounter inconsistent enforcement strategies and approaches. One of the CFPB’s statutory objectives is to ensure federal consumer financial law is enforced consistently regardless of the status of a person as a chartered bank or nonbank. Many entities are subject to the jurisdiction of multiple agencies, and to maintain certainty of expectations for those companies with multiple regulators, it is important for state and federal government agencies to consistently enforce the laws that the CFPB administers. Consistency is also imperative to creating a level playing field between companies that compete in the same market but are subject to the jurisdiction of different enforcers.
CFPB Releases Report on Mortgage Servicing Metrics
Hundreds of thousands of borrowers are still behind on loans after COVID-19 mortgage protections, forbearance end
May 16, 2022 — The Consumer Financial Protection Bureau (CFPB) published a report examining mortgage servicers’ responses to the COVID-19 pandemic. The data, collected across 16 large servicers from May through December 2021, reveal homeowners continue to face significant risks and challenges connected to working with their mortgage servicers. This problem is particularly acute for those borrowers struggling to make their mortgage payments after exiting COVID-19 hardship forbearances.
Key findings from the report include:
- Many borrowers exited COVID-19 hardship forbearance with no loss mitigation solution in place. The 16 servicers reported that over 330,000 borrowers’ loans remained delinquent – with no loss mitigation solution in place – at the end of 2021. Delinquency rates were higher for private loans – between 25% and 39% – than for federally backed loans – between 11% and 17%. While servicers have made progress working through delinquent loans, exiting a COVID-19 hardship forbearance with no loss mitigation solution in place puts a borrower at a heightened risk of foreclosure.
- Some mortgage servicers significantly lag industry peers in call center response times. Call metrics showed average hold times of more than ten minutes and call abandonment rates exceeding 30% for some servicers. The call metrics indicate that some borrowers may have difficulty establishing live contact and obtaining assistance over the phone to resolve their mortgage questions or challenges. These metrics varied among servicers, with some servicers performing well and others poorly.
- Data on borrowers’ language preferences remained limited. While the CFPB consistently has recommended that servicers collect and maintain information on borrowers’ preferred language, several servicers marked that many of their borrowers’ preferred language was unknown. Among the servicers who provided language preference data, the percentage of borrowers in delinquency and who had a non-English language preference, increased during the reviewed period. Conversely, the percentage of borrowers in delinquency and who identified English as their preferred language, decreased. Recent action by the requiring mortgage originators to inquire about language preference at the time of origination could help close the gap in delinquency rates between English and non-English speakers.
- Some mortgage servicers relied on systems that could not provide information on key metrics. Some servicers did not track or were otherwise unable to provide several requested metrics. Additionally, some servicers reported inconsistent data. The report notes that some servicers are not fully able to track and report high-quality data. The CFPB is concerned about whether these servicers are able to ensure that all borrowers, and particularly those borrowers most in need of assistance, receive adequate and timely assistance in compliance with federal consumer financial protection law.
CFPB Issues Advisory Opinion on Coverage of Fair Lending Laws
Equal Credit Opportunity Act continues to protect borrowers after they have applied for and received credit
May 9, 2022 — The Consumer Financial Protection Bureau (CFPB) published an advisory opinion to affirm that the Equal Credit Opportunity Act (ECOA)—a landmark federal civil rights law protecting individuals and businesses against discrimination in accessing and using credit—bars lenders from discriminating against customers after they have received a loan, not just during the application process.
“The CFPB is ramping up its efforts to issue guidance and advisory opinions to assist entities with understanding their obligations under the law,” said CFPB Director Rohit Chopra. “Today’s advisory opinion and accompanying analysis makes clear that anti-discrimination protections do not vanish once a customer obtains a loan.”
In 2020, the CFPB an Advisory Opinion policy. Advisory opinions are one of many types of guidance documents that the agency issues to provide market participants with information about the application of federal consumer financial laws.
ECOA has helped people obtain credit on fair terms since 1974. Throughout its almost 50-year history, ECOA has protected people and businesses against discrimination when seeking, applying for, and using credit. ECOA bans credit discrimination on the basis of race, color, religion, national origin, sex, marital status, and age. It also protects those who are receiving money from any public assistance program or exercising their rights under certain consumer protection laws.
The CFPB issued today’s advisory opinion and accompanying analysis to clarify that ECOA protects people from discrimination in all aspects of a credit arrangement. The advisory opinion is consistent with a recent legal brief filed by the CFPB, the Federal Trade Commission, the Federal Reserve Board of Governors, and the U.S. Department of Justice. Among other things, the advisory opinion states that ECOA:
- Continues to protect borrowers after they have applied for and received credit: Lenders are prohibited from discriminating against borrowers with existing credit. For example, ECOA prohibits lenders from lowering the credit limit of certain borrowers’ accounts or subjecting certain borrowers to more aggressive collections practices on a prohibited basis, such as race.
- Requires lenders to provide “adverse action notices” to borrowers with existing credit: Adverse action notices explain why an unfavorable decision was made against a borrower. Credit applicants and borrowers receive these notices for reasons including that credit was denied, an existing account was terminated, or an account’s terms were unfavorably changed. “Adverse action notices” discourage discrimination, and they help applicants and borrowers learn the reasons for creditors’ decisions.
Throughout 2021, the CFPB worked to ensure that individuals, small businesses, and communities had fair, equitable, and nondiscriminatory access to credit. We carried out this work in accordance with our Congressional mandate through supervision and enforcement actions, research and market monitoring activities, rulemaking and guidance, amicus activity, and consumer education.
Most importantly, the CFPB is looking ahead to the future of financial services markets, which will be increasingly shaped by predictive analytics, algorithms, and machine learning. While technology holds great promise, it can also reinforce historical biases that have excluded too many Americans from opportunities.
In particular, the CFPB will be sharpening its focus on digital redlining and algorithmic bias. As more technology platforms, including Big Tech firms, influence the financial services marketplace, the CFPB will be working to identify emerging risks and to develop appropriate policy responses. In addition to focusing on specific financial products and services, the CFPB will also be analyzing how unfair and discriminatory practices harm specific population segments.
The agency will also continue its cooperation with other regulators and law enforcement agencies with responsibilities to ensure fair lending and equal opportunity. For example, yesterday, federal banking regulators updates to the framework for assessing chartered banks for compliance with the Community Reinvestment Act. This development has the potential to increase opportunities for Americans who have been historically excluded or left behind, including those in rural communities.
CFPB Orders Bank of America to Pay $10 Million Penalty for Illegal Garnishments
America’s second largest bank unlawfully garnished the accounts of thousands of its customers
May 04, 2022 — The Consumer Financial Protection Bureau (CFPB) finalized an enforcement action against Bank of America for processing illegal, out-of-state garnishment orders against its customers’ bank accounts. Bank of America unlawfully froze customer accounts, charged garnishment fees, garnished funds, and sent payments to creditors based on out-of-state garnishment court orders that should have been processed under the laws and protections of the states where the consumers lived. Bank of America also violated the law by inserting unfair and unenforceable language into customer contracts that purported to limit customers’ rights to challenge garnishments. The CFPB’s order requires Bank of America to refund or cancel imposed fees from unlawful garnishments, review and reform its system for processing garnishments, and pay a $10 million civil penalty.
“Bank of America imposed unlawful garnishment fees and injured its customers by inserting unenforceable clauses into contracts in an attempt to strip legal rights from families,” said Rohit Chopra. “The CFPB is ordering Bank of America to fix its systems, clean up its contracts, and make its victims whole.”
Bank of America (NYSE: BAC) is a very large national bank headquartered in Charlotte, North Carolina, with approximately 4,100 branches and 16,000 ATMs. It has been designated as a global systemically important bank by the Financial Stability Board, and as of December 31, 2021, the company had $2.5 trillion in consolidated assets, which makes it the second largest bank in the United States. The bank has previously been sanctioned by the CFPB. In 2014, the CFPB ordered Bank of America to pay $727 million in redress to its victims for illegal credit card practices.
CFPB Supervisory Report Finds Unlawful Auto Repossessions, Breakdowns in Credit Report Disputes
Agency examiners identify improper practices across consumer financial products and services
May 2, 2022 — Today, the Consumer Financial Protection Bureau (CFPB) released its Supervisory Highlights report on legal violations identified during the CFPB’s supervisory examinations in the second half of 2021. The report details key findings across consumer financial products and services.
“While most entities act in good faith to follow the law, CFPB examiners are identifying law violations that lead to real harm,” said CFPB Director Rohit Chopra. “We will continue to examine firms to proactively identify and mitigate harmful practices before they become widespread.”
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB has the authority to supervise large banks, thrifts, and credit unions with assets over $10 billion and their affiliates, as well as certain nonbanks, including mortgage companies, private student lenders, and payday lenders. The CFPB’s supervisory authority also covers large entities in certain markets, including consumer reporting, student loan servicing, debt collection, auto finance, international money transfer, and other nonbank entities that pose risks to consumers.
Supervisory examinations review whether companies are complying with federal consumer financial law. When CFPB examiners uncover problems, they share their findings with companies to help them remediate the violations. Typically, companies take actions to fix problems identified in examinations. For more serious violations or when companies fail to correct violations, the CFPB opens investigations for potential enforcement actions.
Today’s report highlights findings from examinations of practices in the auto servicing, consumer reporting, credit cards, debt collection, deposits, mortgage origination, prepaid accounts, and remittances markets.
CFPB Invokes Dormant Authority to Examine Nonbank Companies Posing Risks to Consumers
Bureau Seeks Comment on Updated Procedures
April 25, 2022 — The Consumer Financial Protection Bureau (CFPB) announced that it is invoking a largely unused legal provision to examine nonbank financial companies that pose risks to consumers. The CFPB believes that utilizing this dormant authority will help protect consumers and level the playing field between banks and nonbanks. The CFPB is also seeking public comments on a procedural rule to make this process more transparent.
“Given the rapid growth of consumer offerings by nonbanks, the CFPB is now utilizing a dormant authority to hold nonbanks to the same standards that banks are held to,” said CFPB Director Rohit Chopra. “This authority gives us critical agility to move as quickly as the market, allowing us to conduct examinations of financial companies posing risks to consumers and stop harm before it spreads.”
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB has authority to use traditional law enforcement to stop companies from engaging in conduct that pose risk to consumers; this can involve adversarial litigation. However, the law also gives the CFPB authority to conduct supervisory examinations to review the books and records of regulated entities. CFPB examiners typically provide a report to entities with problems that need to be addressed, and responsible institutions typically take prompt corrective action.
For decades before the Dodd-Frank Act, only banks and credit unions were subject to federal supervision. But after the 2008 financial crisis in which nonbank companies played a pivotal role, Congress tasked the CFPB with supervising certain nonbanks, in addition to large depository institutions with more than $10 billion in assets, and their service providers. Nonbanks do not have a bank, thrift, or credit union charter; many today operate nationally and brand themselves as “fintechs.”
CFPB Releases Report on Financial Challenges Facing Rural Communities
Many rural communities are “banking deserts”
April 19, 2022 — Today the Consumer Financial Protection Bureau (CFPB) issued a report on the challenges faced by Americans in rural communities. The report highlights that many of these communities lack access to physical bank branches, are more likely to seek credit from nonbanks, and are heavily affected by medical bills. The CFPB will be expanding its efforts to address these and other challenges facing the people and families of rural America.
“For decades, many government agencies have turned a blind eye to pressing problems facing families, farmers, and businesses in rural communities,” said CFPB Director Rohit Chopra. “The CFPB will be focusing on ways to ensure that rural communities can better access relationship banking services and achieve their economic potential.”
There are multiple ways to define rural communities. According to the definition of the , rural, or “non-metro,” counties are home to 46 million people, which is 14 percent of the U.S. population. People living in rural counties tend to have lower income and higher rates of poverty. The overwhelming majority of persistent poverty counties across the U.S. are located in rural areas.
While agriculture has historically been a pillar of rural economies, the number of farms has decreased over several decades. Today, less than of people in completely rural counties work in agriculture, and the farmers who remain earned only 16 cents for every dollar spent by consumers on agricultural products, . Another pillar of rural economies is small businesses, with people living in rural communities more likely to be employed by small businesses than people living in other parts of the country.
April 14, 2022 — More than 26 million student loan borrowers have had suspended payments for more than two years as a result of forbearance during the COVID-19 pandemic.
While the financial situation for some consumers has improved, a new CFPB report examines which types of student loan borrowers may continue to struggle after their monthly payments are reinstated. Using data from the CFPB’s Consumer Credit Panel, the study looked at five factors that could signal certain borrowers may be more at risk than others:
- Student loan delinquencies prior to the pandemic
- Payment assistance for student loans prior to the pandemic
- Multiple student loan servicers
- Delinquencies on other credit products during the pandemic
- Non-medical debts in collection during the pandemic
As of the most recent data, about 15 million borrowers have at least one of these risk factors and over 5 million have two or more. While potentially at-risk borrowers are found among all demographic groups, low-income and minority consumers – as well as those between the ages of 30 and 49 – are likely to be the most financially vulnerable once their payments restart.
March 25, 2022 — We have received a tremendous amount of feedback from our Request for Information on exploitive junk fees. The more than 25,000 comments we have received through mid-March show the high-level of public interest on this topic, and the number of people affected by exploitative junk fees. We are extending the deadline for the public to through April 11, 2022.
March 23, 2022 — Consumer Financial Protection Bureau Director Rohit Chopra issued a statement regarding the final report of the Interagency Task Force on Property Appraisal and Valuation Equity (PAVE).
“Today’s report underscores the critical importance of fair and accurate appraisals in residential real estate. Discriminatory home valuations, whether computed by an algorithm or conducted in-person, undermine longstanding goals for fair housing and fair lending across our country.”
“I appreciate the work by Secretary Marcia Fudge and Ambassador Susan Rice in leading this effort. The CFPB will be taking a number of actions to further the work of the task force.”
“First, the CFPB will be taking an active leadership role in the Appraisal Subcommittee of the Federal Financial Institutions Examination Council. Congress has assigned important responsibilities to the Appraisal Subcommittee, and it is important to live up to these expectations. In particular, we will be closely scrutinizing the work of The Appraisal Foundation, which wields enormous power to set standards and levy fees on the professional appraiser community.”
“In addition, along with other federal financial regulators, we will be working to implement a dormant authority in federal law to ensure that algorithmic valuations are fair and accurate. We have already begun to solicit input from small businesses in order to develop a proposed rule, and we are committed to addressing potential bias in these automated valuation models.”
CFPB ISSUES POLICY ON CONTRACTUAL ‘GAG’ CLAUSES AND FAKE REVIEW FRAUD
Financial companies will face consequences for illegally manipulating or suppressing consumer reviews
March 22, 2022 — Today, the Consumer Financial Protection Bureau (CFPB) issued policy guidance regarding potentially illegal practices related to consumer reviews. The CFPB seeks to ensure that customers can write reviews, particularly ones posted online, about financial products and services that accurately reflect their opinions and experiences. The guidance also highlights that practices such as posting fake reviews or inserting clauses that forbid a customer from publishing an honest review may violate the Consumer Financial Protection Act.
“In America, no corporation should be able to silence a customer from posting an honest review online,” said CFPB Director Rohit Chopra. “Corporate disinformation campaigns that suppress legitimate reviews or manufacture fake reviews are not only a threat to free speech and fair competition, they are also illegal.”
Many families learn about and shop for credit cards, mortgages, and other financial products online, including through third-party websites that include customer reviews and ratings. Customer reviews are an important way to promote competitive markets. However, if reviews are unreliable, it might reduce the incentive for companies to provide quality service.
CFPB Targets Unfair Discrimination in Consumer Finance
Discrimination or improper exclusion can trigger liability under ban on unfair acts and practices
March 16, 2022 — The Consumer Financial Protection Bureau (CFPB) announced changes to its supervisory operations to better protect families and communities from illegal discrimination, including in situations where fair lending laws may not apply. In the course of examining banks’ and other companies’ compliance with consumer protection rules, the CFPB will scrutinize discriminatory conduct that violates the federal prohibition against unfair practices. The CFPB will closely examine financial institutions’ decision-making in advertising, pricing, and other areas to ensure that companies are appropriately testing for and eliminating illegal discrimination.
The CFPB enforces several laws that can target discriminatory practices. Government regulators and private plaintiffs have commonly relied on the Equal Credit Opportunity Act (ECOA), a fair lending law which covers extensions of credit. However, certain discriminatory practices may also trigger liability under the Consumer Financial Protection Act (CFPA), which prohibits unfair, deceptive and abusive acts and practices (UDAAPs).
The CFPB published an updated exam manual today for evaluating UDAAPs, which notes that discrimination may meet the criteria for “unfairness” by causing substantial harm to consumers that they cannot reasonably avoid, where that harm is not outweighed by countervailing benefits to consumers or competition.
The CFPB will examine for discrimination in all consumer finance markets, including credit, servicing, collections, consumer reporting, payments, remittances, and deposits. CFPB examiners will require supervised companies to show their processes for assessing risks and discriminatory outcomes, including documentation of customer demographics and the impact of products and fees on different demographic groups. The CFPB will look at how companies test and monitor their decision-making processes for unfair discrimination, as well as discrimination under ECOA. Read more of the press release here.
New effort focused on financial issues facing rural communities
Courtesy of Shawn Sebastian, CFPB
March 10, 2022 — The Consumer Financial Protection Bureau has launched a new initiative to focus on financial issues facing rural America. Our effort will initially focus on rural banking deserts, discriminatory and predatory agricultural credit, and manufactured housing.
There is no single rural America–from Appalachia and the Deep South to rural Alaska, rural places have a wide range of diverse people, economies, and ways of life. Rural people are deeply committed to the places they live, but face real challenges in accessing reliable services and good jobs, keeping up with household expenses, maintaining farming, and finding affordable housing.
It is well known that larger economic trends have uniquely affected rural communities over the past several decades. The number of jobs in rural areas have still not fully recovered from the shock of the 2008 financial crash and job growth in rural areas of the rate of job growth in urban areas. Rural wages are , and rural poverty rates are higher than in non-rural areas . Increasing corporate consolidation across the economy has hit rural areas particularly hard, suppressing wages and leaving rural people with . In addition, the effects of the COVID-19 pandemic on rural populations have been severe, with .
We have a responsibility to pay attention to the particular challenges rural communities face as they work to build and maintain their financial resiliency. Last month, Director Chopra invited over 50 people from organizations representing rural people across the country to tell their stories and share their concerns. What we heard is that larger economic trends are affecting the financial resilience of rural families and their experiences with consumer finance.
CFPB Moves to Thwart Illegal Auto Repossessions
High Car Prices Increase Risk of Improper Repossession by Lenders, Servicers, and Investors
February 28, 2022 —The Consumer Financial Protection Bureau (CFPB) is moving to thwart illegal repossessions in the heated auto market. A compliance bulletin issued today reveals conduct observed during CFPB examinations and enforcement actions, including the illegal seizure of cars, sloppy record keeping, unreliable balance statements, and ransom for personal property.
February 24, 2022 — The Electronic Fund Transfer Act (EFTA) provides, among other things, that no person may require a consumer to establish an account for receipt of electronic fund transfers with a particular financial institution as a condition of receipt of a government benefit. The Bureau of Consumer Financial Protection (Bureau) is issuing this Compliance Bulletin to reiterate that this prohibition in EFTA applies to government benefit accounts.
The bulletin became effective on February 24, 2022 and can be found here.
February 24, 2022 — Earlier this month, the Bureau of Labor Statistics released data regarding changes to the Consumer Price Index (CPI), which is one measure of inflation. The increasing cost of automobiles continues to be a major component of inflation, as many manufacturers face difficulties procuring chips that are a key component in cars and are therefore producing fewer new cars. While the chip shortage has caused new cars to grow more expensive, the price increase of used cars has been sharper. show that the CPI for used cars and trucks increased 40% percent since January 2021 while the CPI for new cars increased 12 percent. As car prices continue to rise, loan amounts are rising, and loan lengths are growing to make those larger loans seem affordable.
As a result, we expect that both the total amount of debt and the average loan size will continue to increase and that larger car loans will put increased pressure on some consumers’ budgets for much of the next decade. Auto loans are already the third largest consumer credit market in the United States at over , double the amount from 10 years ago and expected to grow further. We are also concerned that current high auto prices, especially for used cars, might create incentives for lenders to repossess cars more quickly than would have occurred before.
For many, their car or truck is essential to get to work or to do their work. Therefore, as the economic recovery continues, we will focus on ensuring a fair, transparent, and competitive auto lending market in the following ways.
Consumer Financial Protection Bureau Outlines Options To Prevent Algorithmic Bias In Home Valuations
Standards will help protect homebuyers and owners during the valuation process
February 23, 2022 — The Consumer Financial Protection Bureau (CFPB) today outlined options to ensure that computer models used to help determine home valuations are accurate and fair. The options will now be reviewed to determine their potential impact on small businesses.
“It is tempting to think that machines crunching numbers can take bias out of the equation, but they can’t,” said CFPB Director Rohit Chopra. “This initiative is one of many steps we are taking to ensure that in-person and algorithmic appraisals are fairer and more accurate.”
When underwriting a mortgage, lenders typically require an appraisal, which is an estimate of the value of the home. While traditional appraisals are conducted in-person, many lenders also employ algorithmic computer models. These models use massive amounts of data drawn from many sources to value homes. The technical term for these models is automated valuation models. Both in-person and algorithmic appraisals appear to be susceptible to bias and inaccuracy, absent appropriate safeguards.
Obtaining an accurate estimate of a home’s worth is one of the most important steps in the mortgage process for homebuyers. Inaccurate valuations, both too high and too low, can pose risks to consumers. Given their crucial role, the Dodd-Frank Wall Street Reform and Consumer Protection Act tasked the CFPB and other regulators with implementing rules on these models.
February 23, 2022 — The CFPB has released a factsheet on the interest rate that is used for calculating prepaid interest under the price-based General QM APR calculation rule for certain ARMs and step-rate loans.
You can access the Factsheet here:www.consumerfinance.gov/compliance/compliance-resources/mortgage-resources/ability-repay-qualified-mortgage-rule/.
February 22, 2022 — Far too many minority households and businesses continue to lack fair and equitable access to credit. This critical unmet need, coupled with historic and ongoing discrimination such as redlining, has exacerbated our racial wealth divide and continues to leave many communities shut out from and underserved by lenders.
The CFPB today joined seven other federal agencies in issuing a statement encouraging lenders to explore opportunities available to them to increase credit access through special purpose credit programs (SPCPs) to better serve historically disadvantaged individuals and communities.
Responding to the credit needs of individuals and communities
Under Federal law, lenders are permitted to design and implement SPCPs to extend credit to a class of persons who would otherwise be denied credit or would receive it on less favorable terms, under certain conditions.
In particular, the Equal Credit Opportunity Act (ECOA) and Regulation B permit creditors to offer or participate in SPCPs to meet special social needs through:
- Any credit assistance program authorized by federal or state law for the benefit of an economically disadvantaged class of persons;
- Any credit assistance program offered by a non-for-profit organization for the benefit of its members or an economically disadvantaged class of persons; or
- Any SPCP offered by a for-profit organization, or in which such an organization participates to meet special social needs, if it meets certain standards prescribed in regulation by the Bureau.
Previously, the CFPB issued guidance that helped to explain how lenders can offer or participate in a SPCP. In addition, the Department of Housing and Urban Development recently issued guidance confirming SPCPs for real estate loans or credit assistance, that are compliant with ECOA and Regulation B, generally would not violate the Fair Housing Act.
While the CFPB and other federal agencies don’t determine whether a specific program qualifies for special purpose credit status, lenders may consult their appropriate regulatory agencies with questions about any aspect of ECOA and Regulation B’s special purpose credit provisions.
February 16, 2022 — The Consumer Financial Protection Bureau (CFPB) today made it easier for the public to meaningfully engage with the agency and request regulatory changes. Starting today, members of the public can submit petitions for rulemaking directly to the CFPB. The petitions will be posted on public dockets for review and comment.
”Americans should be able to easily exercise their Constitutional rights without hiring a high-priced lawyer or lobbyist,” said CFPB Director Rohit Chopra. “Our new program will broaden access to the agency’s rulemaking process.”
The U.S. Constitution guarantees the public’s right to petition the government. While members of the public have long had the ability to comment on rules and other initiatives, many individuals and small businesses believe that they must hire former government officials, lawyers, or lobbyists in order to be heard by an agency.
The reforms announced today will make it easier for individuals to directly submit a petition for rulemaking to the CFPB. Members of the public can request that the agency pursue a new rule, amend an existing one, or repeal a rule. Former government employees and other individuals who are paid to influence the agency’s rulemaking agenda behind the scenes will be asked to submit their petition for public inspection instead.
February 15, 2022 — Section 913 of the Electronic Fund Transfer Act (EFTA) provides, among other things, that no person may require a consumer to establish an account for receipt of electronic fund transfers with a particular financial institution as a condition of receipt of a government benefit. The Consumer Financial Protection Bureau (CFPB) is issuing this Compliance Bulletin to reiterate that this prohibition in EFTA applies to government benefit accounts.
February 4, 2022 — Homeownership is one of the best paths for building intergenerational wealth. But for some homebuyers and owners, a home’s valuation may be skewed by one’s skin color or the demographics of the surrounding community. A biased home appraisal can worsen racial inequities and distort the housing market. That’s why, for more than 50 years, federal law has forbidden racial, religious, and other discrimination in home appraisals. But we still see reports of appraisers who don’t follow the law and base their value judgments on biased, unfounded assumptions about borrowers and the neighborhoods in which they live.
We have also seen the organization that sets the standards for appraisers, The Appraisal Foundation (TAF), fail to include clear warnings about the requirements of federal law in the standards it sets, and in the training it provides for appraisers. TAF is a private, non-governmental organization, and the only entity with the power to set professional standards for appraisers. However, TAF has yet to highlight these important laws even though it frequently revises its standards. These actions undermine a fair and competitive market free of bias and discrimination.
Today, we joined senior staff from across the federal government to submit a joint letter to TAF emphasizing that federal prohibitions against discrimination under the Fair Housing Act and Equal Credit Opportunity Act extend to appraisals.
CFPB Report Shows Criminal Justice Financial Ecosystem Exploits Families at Every Stage
Report Finds Products and Services Rife with Burdensome Fees and Lack of Choice
January 31, 2022 — The Consumer Financial Protection Bureau (CFPB) today published a review of the financial issues facing people and families who come in contact with the criminal justice system. The report, describes an ecosystem rife with burdensome fees and lack of choice, and where families are increasingly being forced to shoulder the costs. It walks through the financial challenges families encounter at every stage of the criminal justice process, and the ways in which providers – often for-profit private companies – are leveraging a lack of consumer choice and their own market dominance to impose hefty fees at families’ expense.
“Many incarcerated individuals and their families pay exorbitant fees for basic financial services,” said CFPB Director Rohit Chopra. “Today’s report describes how private companies undermine the ability for individuals to successfully transition from incarceration.”
Contact with the criminal justice system is extremely common in the United States. In 2019, 2.1 million adults in America were in jail or prison, another 4.4 million were under community supervision (such as probation), and 1 in 3 adults – or 77 million Americans – had a criminal record. Those figures do not reflect the family members and friends who often provide financial support to people who have been arrested, incarcerated, or released from jail or prison, and who are also affected by shoddy financial products and services entwined in the criminal justice system. The burdens of the criminal justice system – and its financial impacts – fall most heavily on people of color, and women and people with lower incomes of all races and ethnicities. Surveys have repeatedly found women, and specifically Black women, disproportionately shoulder the costs of staying in touch with loved ones in prison and paying court-related debt for family members, sometimes spending up to a third of their income on such costs and even forgoing basic necessities for themselves.
CFPB Identifies Consumer Reporting Companies the Public Can Hold Accountable
Updated list names financial surveillance companies that people can use to access their own files and sue if they violate the Fair Credit Reporting Act
January 27, 2022 — Today, the Consumer Financial Protection Bureau (CFPB) released its annual list of consumer reporting companies. The list identifies dozens of specialty reporting companies that collect and sell access to people’s data, including individuals’ finances, employment, check writing histories, or rental history records, often without their knowledge. Using the list, people can exercise their right to see what information these firms have, dispute inaccuracies, and file lawsuits if the firms are violating the Fair Credit Reporting Act.
“Many companies assemble and sell detailed dossiers about us that can determine whether we can get a loan, job, or an apartment,” said CFPB Director Rohit Chopra. “Americans have limited legal rights they can use to keep tabs on these surveillance companies and hold them accountable when they violate the law.”
In the United States, the majority of landlords and employers rely on tenant screeners and employment background checks in the course of deciding whether to accept a rental application or offer someone a job. As families recover from the financial impact of the COVID-19 pandemic, seeking new jobs or places to live, errors in these databases can severely harm their financial lives.
While the three nationwide consumer reporting companies – Equifax, TransUnion, and Experian – allow people to check their reports for free once a week through December 2022, many of the specialty companies charge people a fee to access this data. The list published today allows people to see which companies provide this information for free, as well as search for those that provide specialized reporting by specific markets, including employment, tenant, insurance, and medical.
Consumer Financial Protection Bureau Launches Initiative to Save Americans Billions in Junk Fees
Agency Seeks Public Input on Fees on Bank Accounts, Credit Cards, and Other Financial Products
January 26, 2022 — The Consumer Financial Protection Bureau (CFPB) launched an initiative to save households billions of dollars a year by reducing exploitative junk fees charged by banks and financial companies. Today’s request is a chance for the public to share input that will help shape the agency’s rulemaking and guidance agenda, as well as its enforcement priorities in the coming months and years.
“Many financial institutions obscure the true price of their services by luring customers with enticing offers and then charging excessive junk fees,” said CFPB Director Rohit Chopra. “By promoting competition and ridding the market of illegal practices, we hope to save Americans billions.”
Companies across the U.S. economy are increasingly charging inflated and back-end fees to households and families. This new “fee economy” distorts our free market system by concealing the true price of products from the competitive process. For example, hotels and concert venues advertise rates, only to add “resort fees” and “service fees” after the fact. And fees purportedly charged to cover individual expenses, like paperwork processing, can often greatly exceed the actual cost of that service.
Consumer Financial Protection Bureau to Examine Colleges’ In-House Lending Practices
CFPB Publishes Oversight Protocols for Institutional Student Lending
January 20, 2022 — Today, the Consumer Financial Protection Bureau (CFPB) announced it will begin examining the operations of post-secondary schools, such as for-profit colleges, that extend private loans directly to students. The CFPB is issuing an update to its exam procedures including a new section on institutional student loans. As the CFPB begins its supervision, the exam procedures inform the industry about practices that CFPB examiners will review, including placing enrollment restrictions, withholding transcripts, improperly accelerating payments, failing to issue refunds, and maintaining improper lending relationships.
“Schools that offer students loans to attend their classes have a lot of power over their students’ education and financial future,” said CFPB Director Rohit Chopra. “It’s time to open up the books on institutional student lending to ensure all students with private student loans are not harmed by illegal practices.”
Private education loans are extensions of credit made to students or parents to fund undergraduate, graduate, and other forms of postsecondary education. Private education loans may be offered by banks, non-profits, nonbanks, credit unions, state-affiliated organizations, and institutions of higher education, including both for-profit schools and non-profit schools. These loans are typically not affiliated with federal student loan programs administered by the U.S. Department of Education. When the loans are made directly to students by the school they attend, they are often referred to as institutional student loans.
CFPB Releases Report on Diversity and Inclusion within Financial Services
By Office of Minority and Women Inclusion (OMWI)
January 19, 2022 — Today the Bureau’s Office of Minority Women and Inclusion (OMWI) released the CFPB Report on Diversity and Inclusion within Financial Services. As part of the mandate of Section 342 of the Dodd-Frank Act, the Bureau’s Office of Minority and Women Inclusion (OMWI) is charged with developing standards for assessing diversity and inclusion at the financial entities the Bureau regulates. To further that effort, CFPB engaged in analysis of public data to gain a better understanding of diversity and inclusion within the financial services sector and compiled a report to share its findings. The Report can help industry understand more about diversity and inclusion initiatives that their peers are undertaking and the various options available to entities of different sizes.
Dr. Martin Luther King Jr. had a dream of racial and economic equality. In his 1964 Nobel peace prize address he stated “There is nothing new about poverty. What is new, however, is that we have the resources to get rid of it.” The CFPB’s latest report on diversity and inclusion within financial services highlights the activities that financial institutions have engaged in to advance diversity, equity, and inclusion. Building a diverse team that reflects all consumers ensures that an organization has an understanding of the needs of the entire community. We encourage you to review the report and its data to gain an understanding of the public facing and reported internal diversity, equity and inclusion programming at financial institutions. Based on the research and analysis, the Bureau has outlined recommendations for large, midsize and small institutions.
January 13, 2022 — The No Surprises Act took effect on January 1, 2022. The Act provides additional protections for certain consumers from surprise medical bills under certain circumstances.
Today, the Bureau issued a Compliance Bulletin that reminds debt collectors of their obligation to comply with the Fair Debt Collection Practices Act’s prohibition on misrepresentations and unfair practices, including when collecting medical debts covered by the No Surprises Act. The Bulletin also reminds consumer reporting agencies and information furnishers to comply with the Fair Credit Reporting Act’s accuracy and dispute resolution requirements, including when furnishing information about or reporting medical debts covered by the No Surprises Act.
January 12, 2022 —Several weeks ago, we issued a market-monitoring inquiry into “buy now, pay later” (BNPL) products and business practices. Now we are inviting anyone interested in this market to submit comments — including families, small businesses, and international regulators.
Use of BNPL has seen astronomical growth. Companies like Affirm, Afterpay, Klarna, PayPal, and Zip (formerly Quadpay) have become almost ubiquitous in the retail market since the pandemic. This past holiday season, usage spiked even higher, especially among young people. Some analysts have suggested that BNPL has rerouted big holiday shopping money away from the credit card companies towards these companies, putting an enormous amount of consumer debt on their books.
People encounter BNPL credit at the point of sale either online or at traditional retail stores. The loans are presented as a type of deferred payment option that generally allows someone to split a purchase into smaller installment payments, often with a down payment of 25 percent. The application process is quick, involving relatively little information from the buyer, and the buyer usually pays no interest.
CFPB Releases Report Detailing Consumer Complaint Response Deficiencies of the Big Three Credit Bureaus Equifax, Experian, and TransUnion routinely failed to fully respond to consumers with errors
JAN 05, 2022 — A new analysis by the Consumer Financial Protection Bureau (CFPB) reveals how changes in complaint responses provided by nationwide consumer reporting companies resulted in fewer meaningful responses and less consumer relief. In 2021, Equifax, Experian, and TransUnion together reported relief in response to less than 2% of covered complaints, down from nearly 25% of covered complaints in 2019.
“America’s credit reporting oligopoly has little incentive to treat consumers fairly when their credit reports have errors,” said CFPB Director Rohit Chopra. “Today’s report is further evidence of the serious harms stemming from their faulty financial surveillance business model.”
Credit reporting plays a critical role in consumers’ lives and has an enormous reach beyond consumer financial services. More than 200 million Americans have credit files, and lenders rely on this information to decide whether to approve loans and on what terms. Consumer reporting also informs decisions about employment, insurance, housing, and even essential utilities. For consumers, inaccuracies on credit reports drive up the cost of credit and severely limit opportunities, such as starting a small business or buying a new home.