Consumer Financial Protection Circular 2023-03
Adverse action notification requirements and the proper use of the CFPB’s sample forms provided in Regulation B
Question presented
When using artificial intelligence or complex credit models, may creditors rely on the checklist of reasons provided in CFPB sample forms for adverse action notices even when those sample reasons do not accurately or specifically identify the reasons for the adverse action?
Response
No, creditors may not rely on the checklist of reasons provided in the sample forms (currently codified in Regulation B) to satisfy their obligations under ECOA if those reasons do not specifically and accurately indicate the principal reason(s) for the adverse action. Nor, as a general matter, may creditors rely on overly broad or vague reasons to the extent that they obscure the specific and accurate reasons relied upon.
Analysis
The Equal Credit Opportunity Act (ECOA), implemented by Regulation B, makes it unlawful for any creditor to discriminate against any applicant with respect to any aspect of a credit transaction on the basis of race, color, religion, national origin, sex (including sexual orientation and gender identity), marital status, age (provided the applicant has the capacity to contract), because all or part of the applicant’s income derives from any public assistance program, or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act…
CFPB Announces Advisory Committee Appointments
The Dodd-Frank Wall Street Reform and Consumer Protection Act charges the CFPB with establishing a Consumer Advisory Board to provide advice on a variety of consumer finance issues. Members of the Consumer Advisory Board represent the various districts of the Federal Reserve System. Each member appointed to the Consumer Advisory Board was recommended by a president of a Federal Reserve Bank.
The Community Bank Advisory Council and Credit Union Advisory Council advise and consult the CFPB on financial issues related to community banks and credit unions. The Academic Research Council engages on the strategic research planning process and research agenda, and it provides feedback on research methodologies and collection strategies.
Members of the advisory boards and councils do not receive a salary, nor are they eligible to officially represent the CFPB or the Federal Reserve System. Their selection does not connote endorsement of their organizations…
The law requires companies to delete disputed unverified information from consumer reports
Credit reports are used to make decisions that affect every facet of peoples’ lives. Credit reports compiled by consumer reporting companies are used by lenders, insurers, employers, landlords, and others—yet these reports frequently contain errors. By one estimate, one in five Americans has an error on at least one credit report. Accordingly, it is critical that people have a meaningful opportunity to correct inaccuracies on their reports. That’s why Congress—when it passed the Fair Credit Reporting Act (FCRA)—required credit reporting companies, and the companies that give them information, to respond appropriately when notified of errors.
As the federal government agency charged with implementing and administering the federal consumer financial laws, the CFPB is committed to ensuring that companies meet the obligations put on them by Congress in the law. For that reason, yesterday the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC), which both enforce fair credit reporting laws, filed an amicus brief in the U.S. Court of Appeals for the Second Circuit in Suluki v. Credit One Bank, to help ensure that companies that provide information to credit reporting companies comply with the law. Specifically, they must tell credit reporting companies to remove information that they cannot verify after someone identifies the information as wrong…
The Consumer Financial Protection Bureau (CFPB) issued guidance about certain legal requirements that lenders must adhere to when using artificial intelligence and other complex models. The guidance describes how lenders must use specific and accurate reasons when taking adverse actions against consumers. This means that creditors cannot simply use CFPB sample adverse action forms and checklists if they do not reflect the actual reason for the denial of credit or a change of credit conditions. This requirement is especially important with the growth of advanced algorithms and personal consumer data in credit underwriting. Explaining the reasons for adverse actions help improve consumers’ chances for future credit, and protect consumers from illegal discrimination. Read more
Kentucky Federal District Court Issues Order Enjoining the CFPB From Enforcing the Small Business Data Collection Rule as to All Companies Effected by the Rule
Banks Warn CFPB to Back Off on Scrutiny of Medical Credit Cards
Banks, debt collectors, and other companies said the Consumer Financial Protection Bureau lacks the authority to make specific rules governing medical credit cards and other financial products patients use to help pay health-care bills.
The CFPB, along with the the Treasury Department and the Department of Health and Human Services, in July sent out a request for information on the prevalence of medical payment products in the health-care market, and the potential problems they pose for patients and their families.
But health-care credit cards and other targeted products operate much in the same way as financing products in other sectors, so there’s no need for new rules, trade groups representing banks and debt collection agencies said in comment letters to the CFPB ahead of a deadline last week. Health-care providers groups also warned that overregulating such products could lead to people postponing necessary but expensive procedures.
What’s more, the CFPB doesn’t have the power to bring new regulations for medical payment products, the financial services industry said in its letters. Read more
CFPB Report Finds College Tuition Payment Plans Can Put Student Borrowers at Risk
The Consumer Financial Protection Bureau (CFPB) issued a new report finding that students face risk when entering into agreements with colleges to spread the upfront cost of tuition into several, interest-free loan payments. The report, which looks at tuition payment plans offered by nearly 450 institutions, finds that many plans have inconsistent disclosures and confusing repayment terms, putting students at risk of missing payments, incurring late fees, and accumulating debt. The report also finds that many institutions withhold transcripts from students as a debt collection tool, a potentially illegal practice that can have severe consequences for students trying to begin their careers or finish their education.
The report, Tuition Payment Plans in Higher Education, finds that some schools are partnering with third-party service providers to facilitate their tuition payment plans. The schools act as lenders, and commonly include enrollment fees, late fees, and other fees as part of the tuition payment plan. Nearly 4 million students each term are in some form of tuition payment plan arrangement with their school. The CFPB’s report finds that while these payment plans can be a good option for some students, the plans can carry risk. And because of the unique circumstances in which schools offer tuition payment plans — sometimes making no other option available for meeting tuition payment obligations — students might represent a captive market in some situations.
*click on the titles for links to the article
Prepared Remarks of CFPB Director Rohit Chopra at the Better Markets Conference on the 15th Anniversary of the Collapse of Lehman Brothers and the Onset of the Global Financial Crisis
Director Chopra delivered remarks discussing the implosion of Lehman Brothers and the regulatory framework implemented by the CFPB.
“Fifteen years ago, in mid-September, Lehman Brothers collapsed, and the financial system crashed. Troubles in the United States mortgage market infected the entire globe, and American families and businesses lost trillions of dollars and experienced an incalculable level of pain. The story is not just one of an out-of-control financial industry, but it is also a story about a series of the worst failures by regulators in modern history…”
Prepared Remarks of CFPB Director Rohit Chopra at The Mortgage Collaborative National Conference
Director Chopra delivered prepared remarks on the CFPB’s mortgage rules.
“In my remarks today, I want to first touch on a defunct mortgage giant that is well-known to you, but less known to the public: IndyMac. I then want to share a bit more details on the post-crisis reforms, including the establishment of the Consumer Financial Protection Bureau and the mortgage rules required by Congress. I’ll close by addressing some of the mortgage industry’s concerns about the legal validity of those rules…”
CFPB Orders Leasing Company Tempoe to Provide $36 Million in Penalties and Relief for Tricking Consumers and Hiding Contract Terms
The Consumer Financial Protection Bureau (CFPB) today took action against Tempoe, LLC for tricking consumers into expensive leasing agreements by concealing the contract terms and costs, and failing to provide legally required disclosures. Forty-one states and the District of Columbia are entering into a parallel multi-state settlement addressing the same conduct. Tempoe offered financing at the point of sale to customers at major retailers such as Sears and Kmart. By hiding the true nature of the agreements, Tempoe tricked consumers into signing the leases, and consumers found themselves unable to return products and on the hook for unexpectedly large payments. The CFPB is permanently banning Tempoe from offering consumer leases, requiring the company to close each of its outstanding consumer accounts, and ordering the company to let customers keep leased merchandise with no further payment, representing approximately $33.6 million in released payments. Tempoe is also paying a $2 million penalty, with $1 million deposited into CFPB’s victims relief fund and $1 million paid to the states entered into the settlement.
Tempoe, LLC is an Ohio-based nonbank consumer finance company that offered lease purchase agreements to consumers nationwide. Between 2015 and 2022, Tempoe entered into over 1.8 million financial agreements with consumers. Today’s enforcement action covers conduct by Tempoe from January 1, 2015 to the present.
CFPB Report Highlights Role of Big Tech Firms in Mobile Payments
Apple and Google set regulations on “tap-to-pay” which can impact innovation and competition
The Consumer Financial Protection Bureau (CFPB) published a new issue spotlight highlighting the impacts of Big Tech companies’ policies and practices that govern tap-to-pay on mobile devices like smartphones and watches. Apple currently forbids banks and payment apps from accessing the tap-to-pay functionality on Apple iOS devices and imposes fees through Apple Pay. Google’s Android operating system does not currently have such a policy. The issue spotlight explains how regulations imposed by mobile operating systems can have a significant impact on innovation, consumer choice, and the growth of open and decentralized banking and payments in the U.S.
“Regulations imposed by Big Tech firms have a big impact on whether consumers and businesses can make payments using third-party apps,” said CFPB Director Rohit Chopra. “We are carefully evaluating Big Tech’s role in our banking and payments system.”
As of the second quarter of 2023, Apple’s iOS operating system was on 55 percent of smartphones shipped in the U.S., and Google’s Android operating system was on 45 percent of smartphones shipped. Apple and Google set regulations that govern app developers’ ability to integrate near field communication (NFC) technology into their apps, which is needed to execute tap-to-pay transactions. The dominant market share of these two operating systems, coupled with the increasing shift toward mobile device payments, underscores the important role their policies and practices play in retail payments.
Today’s issue spotlight finds:
- Rapid growth of tap-to-pay usage: Consumers’ usage of tap-to-pay options in the U.S. has grown considerably in recent years, nearing an estimated $300 billion across Apple Pay, Samsung Pay, and Google Pay, with some analysts estimating that digital wallet tap-to-pay transactions will grow by over 150 percent by 2028. In 2021, there were an estimated 25 million Google Pay users and 16.3 million Samsung Pay users. An estimated 130 million people in the U.S. use an iPhone at least once per month, and three-fourths of them have activated Apple Pay. An estimated 55.8 million made an in-store payment using Apple Pay in April 2023, accounting for nearly half of iOS users.
- Dominant mobile operating systems impose different regulations on contactless payments: Apple’s iPhone and other iOS devices do not permit third-party payment apps to access the NFC technology that is necessary to execute tap-to-pay contactless payments. Apple’s proprietary payment app, Apple Pay, is the only option for tap-to-pay payments on iOS devices. While Google’s Android operating system does not currently restrict third-party payment app access to the NFC chip on Android devices, this policy could change in the future.
- Restrictive tap-to-pay practices may reduce consumer choice and hamper innovation: Restrictions on the use of tap-to-pay reduce consumer choice and inhibit progress toward a more robust open banking ecosystem, where consumers have more control over their personal financial information and developers provide payments solutions that better meet consumers’ needs. For example, Apple’s current NFC policy prohibits directly integrating tap-to-pay functionality into existing banking applications and other payment apps (e.g., PayPal, Venmo, Cash App).
The United States has a long history of recognizing the sanctity of protecting against unwanted intrusions into our homes and our lives. During a White House Roundtable today, Director Chopra announced that the CFPB will be developing rules to prevent misuse and abuse by data brokers that track, collect, and monetize information about people. Many of these firms assemble data to feed “artificial intelligence” (AI) that makes decisions about our daily lives.
After conducting a public inquiry into data brokers and assessing today’s uses of AI that are often powered by data from the surveillance industry, the CFPB will be issuing proposed rules under the Fair Credit Reporting Act to address business practices used by companies that assemble and monetize our data.
Small businesses interested in participating as a panelist should contact the CFPB within the next week: [email protected].
What we’re hearing from consumers in New Mexico
New Mexicans submitted complaints about credit reporting, debt collection, and other products. This week, Consumer Financial Protection Bureau Director Rohit Chopra will visit Gallup and Albuquerque, New Mexico, to meet with elected officials, tribal leaders, community leaders, and consumer advocates to discuss issues New Mexicans are facing—particularly issues related to medical debt and junk fees.
The CFPB’s public Consumer Complaint Database lends valuable insights into these subjects. Since 2011, the CFPB has published more than 11,600 complaints from New Mexicans. Mirroring nationwide trends, complaints about credit reporting make up most of these complaints (42%), followed by debt collection (17%) and mortgage (13%) (Figure 1). New Mexicans also submit complaints about debt collection, mortgage, credit cards and checking or savings at greater rates than all consumers. Read more
The Consumer Financial Protection Bureau (CFPB) filed a lawsuit in federal court against auto-loan servicer USASF Servicing (USASF) for a host of illegal practices that harmed individuals with auto loans. These practices include wrongfully disabling borrowers’ vehicles, improperly repossessing vehicles, double-billing borrowers for insurance premiums, and failing to return millions of dollars in refunds to consumers. The CFPB is seeking to obtain redress for consumers and civil money penalties and stop any future violations.
“The CFPB is suing USASF for a range of misconduct, including illegally activating devices that prevented borrowers from starting their cars,” said CFPB Director Rohit Chopra. “Given the rising cost of cars during the pandemic and jump in auto loan debt across the country, the CFPB is working to root out illegal activity in this market.”
USASF is an auto-loan servicer headquartered in Lawrenceville, Georgia. USASF serviced auto loans that were originated by an affiliate, U.S. Auto Sales, Inc., which was a buy-here-pay-here auto dealer and lender with 31 dealerships in the Southeast. USASF offered both Guaranteed Asset Protection and collateral-protection insurance, which are products that consumers can buy when they buy or lease a car. In April 2023, U.S. Auto Sales wound down most of its businesses.
The CFPB alleges that USASF:
- Illegally disabled cars: Many auto lenders require that cars are installed with devices using GPS technology that allow the lender or servicer to prevent a borrower from starting a car. These devices are known as “kill switches” or “starter interrupters.” USASF incorrectly disabled vehicles at least 7,500 times and caused these devices to play warning tones in vehicles over 71,000 times during periods when the consumer was not in default or was in communication with USASF about upcoming payments. USASF remotely disabled vehicles at least 1,500 times after explicitly promising consumers it would not do so.
- Failed to refund premiums to consumers: USASF offered consumers Guaranteed Asset Protection, which covers some of the difference (or gap) between the amount a borrower owes on their auto loan and what the car insurance will pay if the vehicle is stolen, damaged, or totaled. When consumers paid off their loans early or USASF repossessed a car and charged off an account, consumers were entitled to refunds of any Guaranteed Asset Protection premiums paid in advance for periods where they would no longer have coverage. USASF failed to obtain millions of dollars in refunds from the Guaranteed Asset Protection administrator.
- Double-billed consumers and misapplied payments: When consumers were enrolled in collateral-protection coverage by a USASF affiliate, they were also charged for that same coverage by USASF. Approximately 34,000 consumers were double-charged for the insurance each billing cycle, in some cases for over a year, costing consumers millions of dollars. USASF also wrongfully applied consumers’ extra loan payments first to late fees or collateral-protection insurance instead of accrued interest. This misapplication of payments caused consumers to pay over a million dollars in interest and fees that they would not have paid if USASF had correctly applied their payments.
- Wrongfully repossessed vehicles: USASF illegally repossessed the vehicles of some consumers who never qualified for repossession or had taken action to stop the repossession. In some instances USASF sold the vehicles that it had wrongfully repossessed.
Auto loans are the third-largest category of outstanding consumer debt, after mortgages and student loans. In recent years, the cost of vehicles has risen substantially, leading to increased borrowing. The CFPB has increased its monitoring of the auto lending market, and has taken action against auto finance companies for wrongful repossessions, poor credit reporting practices, and misrepresenting the cost of credit.
Financial struggles in Puerto Rico bite deeper than the rest of the United States
Our research shows that people in Puerto Rico have lower financial well-being compared to people in the rest of the United States, and they struggle more to make ends meet and participate in mainstream financial services. The CFPB works to ensure fair and equal access to financial products and services, especially among those who have been historically left out of full participation in the marketplace. This includes making a concerted effort to ensure that Puerto Rico and the territories are being analyzed and served just as other regions of the United States. In a recent study, we looked at how people living in Puerto Rico use financial products and services, as well as their financial well-being.
When landlords use information from a rental background check that qualifies as a “consumer report” against a tenant, they are required to tell the tenant of their decision and how to contact the company that created the background check. The federal housing agencies encourage landlords to provide this information to renters in writing. The United States Department of Housing and Urban Development, the Federal Housing Finance Agency, and the United States Department of Agriculture are reminding landlords of their obligation to inform tenants and prospective tenants of their rights. When landlords use information from a consumer report, like a rental background check, against a tenant, the Fair Credit Reporting Act requires landlords to tell the tenant of their decision and how the tenant can contact the company that created the background check. This obligation, known as the adverse action notice requirement, applies to any action against a tenant based on information from the background check, including denying a rental application, increasing the rent charged or security deposit, or requiring a co-signer. As the agencies state, providing this information in writing is the best way to ensure that tenants get the information they need, and for landlords to demonstrate they are meeting their legal obligations.
Looking at credit scores only tells part of the story – cashflow data may tell another part
Cashflow data (regular savings, accumulated savings, paying bills on time) helps predict ability to repay and repayment risk, even when accounting for credit scores. Most loan underwriting in the United States makes use of credit reporting data to evaluate repayment risk. Lenders frequently use third party credit scores, and many also develop their own proprietary models. Credit reporting data include individuals’ performance on a variety of credit products, such as mortgages, credit cards, auto loans, and student loans, as well as certain public records and some other forms of lending.1
The Consumer Financial Protection Bureau (CFPB) released a new Supervisory Highlights report which found unfair, deceptive, and abusive acts or practices across many consumer financial products. For example, auto lenders have originated loan balances above the real value of the car being purchased and engaged in illegal collection practices while servicing these loans. The latest edition of the Supervisory Highlights report covers findings from CFPB supervisory examinations completed from July 2022 to March 2023.
Director Chopra provided prepared remarks at an event hosted by the U.S. Department of Housing and Urban Development on tenant rights.
PUBLISHED CFPB Report Shows Workers Face Risks from Employer-Driven Debt
The Consumer Financial Protection Bureau (CFPB) published a report highlighting the risks employer-driven debt poses to workers. After a review of responses to the CFPB’s public inquiry, the analysis describes the growing prevalence of employer-driven debt and challenges workers and consumers face when they become indebted to an employer or an employer’s affiliate as a condition of employment. The issue spotlight delves into the use of training repayment agreement provisions (TRAPs), which can impede worker mobility, particularly when it comes to obtaining higher wages. Read more
The Consumer Financial Protection Bureau (CFPB) today sued lease-to-own finance company Snap Finance for deceiving consumers, obscuring the terms of its financing agreements, and making false threats. In a lawsuit filed in federal district court, the CFPB alleges that Snap Finance has offered and provided millions of “lease-purchase” and “rental-purchase” financing agreements in ways that have harmed consumers, including through misleading advertisements, insufficient disclosures, and interfering with consumers’ ability to understand the terms and conditions of its financing agreements. The CFPB further alleges Snap Finance’s illegal conduct continued in its servicing of those agreements, including misrepresenting consumers’ payment obligations and making false threats in collections. Read more
Today, Rohit Chopra, Director of the United States Consumer Financial Protection Bureau, and Didier Reynders, Commissioner for Justice and Consumer Protection of the European Commission, announced the start of an informal dialogue between the CFPB and the European Commission on a range of critical financial consumer protection issues. Read more
PUBLISHED The CFPB’s 2022 Fair Lending Annual Report to Congress
The CFPB released its Fair Lending Annual Report to Congress , describing our fair lending activities in enforcement and supervision; guidance and rulemaking; interagency coordination; and outreach and education for calendar year 2022.In 2022, the CFPB’s fair lending work centered on the consumers and communities most affected by unlawful discrimination. These efforts included working with our federal and state partners to address redlining as well as confronting deep-seated discrimination in the home appraisal industry. The CFPB also released several reports shining a light on factors that may influence fair access to credit, including how medical debt affects tens of millions of consumers’ credit profiles, how people in under-resourced rural areas struggle to access financial services, and the challenges faced by justice-involved individuals and families. Read more
Office of Research blog: How are mortgages with a COVID-related forbearance performing in 2023?
In response to the COVID-19 pandemic, the federal government enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act, allowing millions of mortgage borrowers in the United States to enter public or private forbearance programs and temporarily pause their mortgage payments. In reports from May 2021 and March 2022 , the CFPB explored the characteristics and demographics of mortgage borrowers during the COVID-19 pandemic, with a focus on those who were in forbearance.In this post, we use recent data from the National Mortgage Database to compare the performance of mortgage borrowers in March 2023 to those in March 2021 that had COVID-related forbearance, were delinquent but not in forbearance, and those considered current on their payments. While we expressed concern in both 2021 and 2022 about borrowers’ ability to recover from periods of forbearance, our most recent analysis shows that the majority of borrowers in forbearance in 2021 – including Black and Hispanic borrowers – were largely able to become current on their payments by March 2023. Read more
The CFPB issues order against payment processor ACI Worldwide Corp. and its subsidiary ACI Payments Inc. (ACI) improperly initiating the Consumer Financial Protection Bureau (CFPB) issued an order against ACI Worldwide and one of its subsidiaries, ACI Payments, for improperly initiating approximately $2.3 billion in unlawful mortgage payment transactions. ACI’s data handling practices negatively impacted nearly 500,000 homeowners with mortgages serviced by Mr. Cooper (formerly known as Nationstar). By unlawfully processing erroneous and unauthorized transactions, ACI opened homeowners to overdraft and insufficient funds fees from their financial institutions. Today’s order requires ACI, among other things, to pay a $25 million civil money penalty. Read more
PUBLISHED Protecting consumers’ right to challenge discrimination
The Consumer Financial Protection Bureau (CFPB) is committed to ensuring fair, equitable, and nondiscriminatory access to credit for individuals and communities. The CFPB administers and enforces federal laws such as the Equal Credit Opportunity Act, a landmark civil rights law that protects people against discrimination in all aspects of credit transactions. Under the law, consumers targeted by race, religion, age, or any other prohibited basis with predatory lending products or practices also have the right to challenge that discrimination by bringing a lawsuit. Yet lenders engaged in discriminatory acts or practices sometimes unfairly try to make consumers sign away that right. Fortunately, many courts have rejected attempts to make people sign away crucial legal rights. Read more
Wednesday, June 28, 2023, 11:00 AM – 12:00 PM
EST
Bureau staff will provide information to help financial institutions determine whether they are covered financial institutions for purposes of the small business lending rule. This will include how to determine if transactions are covered credit transactions and whether businesses are small businesses.
PUBLISHED CFPB Releases Reports on Banking Access and Consumer Finance in Southern States
The Consumer Financial Protection Bureau (CFPB) issued two new reports on the financial opportunities and challenges facing Southern communities. The Southern U.S. is home to diverse populations, including many rural areas. Many areas of the Southern region are considered “banking deserts” because of the absence of sufficient bank or credit union options for local communities. The first report, “Consumer Finances in Rural Areas of the Southern Region,” compares consumer financial experiences and outcomes in rural communities in Southern states with other regions. A second report, “Banking and Credit Access in the Southern Region of the U.S.,” dives deeper into banking access and credit access, particularly mortgage lending, in both rural and non-rural areas in the region. Read more
CFPB Report Identifies Issues with Increased Servicemember Use of Digital Payment Apps
The Consumer Financial Protection Bureau (CFPB) released its annual report on the top financial concerns facing military families. The report highlights the growth of digital payment app usage in the servicemember community, the unique risks to servicemembers from these services, and the potential abuse from bad actors. Some servicemembers have also indicated in their complaints about incurring serious financial harm from scams and fraud when using these services, and their complaints suggest digital payment app providers often fail to provide timely and substantive resolutions. Read more
Wednesday, June 28, 2023, 11:00 AM – 12:00 PM
Eastern Time (US & Canada)
Bureau staff will provide information to help financial institutions determine whether they are covered financial institutions for purposes of the small business lending rule. This will include how to determine if transactions are covered credit transactions and whether businesses are small businesses.
The CFPB intends to identify ways to simplify and streamline the existing mortgage servicing rules
By Rohit Chopra
Borrowing to buy a home is one of the biggest financial decisions a family will make. Mortgage servicers are the companies responsible for processing payments and managing mortgage accounts, and they play a critical role in assisting homeowners with repayment. Borrowers don’t choose these companies – servicers are chosen by the lender or investor that owns the mortgage.
In the mid-2000s, predatory mortgage practices spread throughout the country. Many large financial institutions with mortgage servicing operations experienced serious breakdowns. This resulted in a crisis where 10 million homes ended up in foreclosure between 2006 and 2014.
The foreclosure crisis was an important catalyst for the creation of the Consumer Financial Protection Bureau. Congress required the CFPB to implement new rules to make the mortgage market work better. These new rules first took effect in 2014. During the COVID-19 pandemic, we saw how these rules worked when unemployment spiked. The CFPB observed that there were places where the rules could be revised to reduce unnecessary complexity.
Last fall, the CFPB asked the public for input on ways to reduce risks for borrowers who experience disruptions in their ability to make mortgage payments, including input on the mortgage forbearance options available to borrowers. In particular, we sought input on the features of pandemic-related forbearance programs and whether there are ways to automate and streamline long-term loss mitigation assistance. We received comments from housing organizations, homeowner advocates, mortgage servicers, and many others.
Many commenters noted that borrowers seeking help on their mortgages can face a paperwork treadmill that hurts both homeowners and mortgage servicers. According to commenters, the temporary pandemic-related changes we made to the mortgage servicing rules helped alleviate this problem and get borrowers accommodations more quickly. Click here to read more
Laying the foundation for open banking in the United States
By Rohit Chopra
New digital banking technologies have the power to expand and open market access for American consumers and emerging businesses. In a more competitive market, Americans will be able to earn higher rates on their savings, pay lower rates on their loans, and more efficiently manage their finances. But the new technologies, and the competition they can fuel, have not yet reached their full potential. Consumers continue to encounter all too familiar obstacles when trying to switch banks or apply for loans.
The CFPB is working to accelerate the shift to open banking through a new personal data rights rule intended to break down these obstacles, jumpstart competition, and protect financial privacy. To do this, the CFPB is formalizing an unused legal authority enacted by Congress in 2010. This authority gives consumers the right to control their personal financial data. These rights will become a practical reality after the CFPB implements a rule that sets expectations for the market. We expect to solicit comments on our formal proposal in a few months and finalize in 2024.
But the agency must not micromanage open banking. Fair standards developed by the market to leverage our rule will be critical to the creation and maintenance of an open banking system in which consumers can vote with their feet — and exercise their data rights without being trapped by powerful incumbents and without losing control of their data.
Our proposal will recognize that the CFPB must resolve certain core issues because system participants are deadlocked or because existing approaches do not put consumers fully in the driver’s seat. But many of the details in open banking will be handled through standard-setting outside of the agency. Properly pursued, such standards can allow open banking to evolve as new technologies emerge, new products develop, and new data security challenges arise. Click here to read more