Appraisal standards must include federal prohibitions against discrimination
The CFPB and leaders from across the federal government submitted a joint letter to The Appraisal Foundation (TAF), the private, nongovernmental organization that sets appraisal standards. The letter urges TAF to revise its draft Ethics Rule for appraisers to include a detailed statement of federal prohibitions against discrimination that exist under the Fair Housing Act and Equal Credit Opportunity Act. We are concerned that some appraisers may be unaware of these prohibitions and, in particular, that the draft Ethics Rule emphasizes that “[a]n appraiser must not engage in unethical discrimination,” implying that appraisers may engage in “ethical” discrimination, a concept foreign to current law and practice.
The letter marks the second time we have raised these concerns with TAF. On February 4, 2022, we urged TAF to provide clear guidance on existing legal standards related to appraisal bias in response to a prior draft of its Ethics Rule included in the Uniform Standards of Professional Appraisal Practice. In a blog post released with the letter, the CFPB noted that we are deeply troubled by the discriminatory statements the Federal Housing Finance Agency identified in some home appraisals, and the appraisal disparities for communities and borrowers of color described in both Freddie Mac and Fannie Mae studies. Moreover, the CFPB continues to see reports of appraisers who fail to follow the law and who base their value judgments on biased, unfounded assumptions about borrowers and communities.
For more than 50 years, federal law has forbidden racial, religious, and other discrimination in home appraisals. It is imperative that TAF provide appraisers clear, detailed, and unambiguous warnings about the requirements of federal law covering appraisal standards.
CFPB Finds One-Third Decline in Collections Items on Consumer Credit Reports
The Consumer Financial Protection Bureau (CFPB) released a report examining trends in credit reporting of debt in collections from 2018 to 2022. The report found the total number of collections tradelines on credit reports declined by 33%, from 261 million tradelines in 2018 to 175 million tradelines in 2022. The share of consumers with a collection tradeline on their credit report decreased by 20% in the same timeframe. The CFPB also released today additional analysis examining factors that increase the likelihood of inaccurate medical collections reporting and may contribute to the decline in medical collections tradelines.
Collections tradelines are furnished to credit reporting companies by third-party debt collectors. Commonly reported collection items include medical, rental and leasing, credit card, and utility accounts. Some third-party collectors work on behalf of original creditors for a fee (“contingency-fee-based debt collectors”) and others purchase accounts outright from creditors (“debt buyers”).
Unlike most other tradelines, debt collection tradelines rarely report positive information like on-time payments, and result in reporting of collections tradelines being almost entirely harmful to consumers. Collections tradelines are visible to potential lenders, employers, landlords, and others who run credit inquiries or background checks. Collections tradelines can limit people’s access to jobs and housing, as well as decrease credit scores and increase the cost of credit. Given the potential damaging impacts of collections tradelines, reporting of inaccurate data is especially harmful.
This report is drawn from the CFPB’s Consumer Credit Panel, a nationally representative sample of approximately 5 million de-identified credit records maintained by one of the three nationwide credit reporting companies. Key findings of this report include:
- The decline in collections tradelines was driven by fewer reports by contingency-fee-based debt collectors, who primarily collect on medical bills. Contingency-fee-based debt collectors reported 38% fewer collections tradelines from Q1 2018 to Q1 2022, while the number of collections reported by the subset of debt buyers increased by 9% over the same period. The number of unique contingency-fee-based debt collectors also declined by 18% (from 815 to 672). Medical bills account for 68.9% of furnished collections by contingency-fee-based debt collectors.
- Concerns about data integrity and the associated costs that would come with furnishing disputed information may explain some of the decrease in collections tradelines on credit reports. CFPB market monitoring indicates that contingency-fee-based debt collectors are moving away from furnishing collections information to credit reporting companies in part due to their concerns about data integrity and their ability to comply with the Fair Credit Reporting Act, including dispute processing. CFPB’s analysis on medical debt reporting describes the difficulty of assuring the accuracy of medical bills, including the lack of timely access to healthcare providers’ billing and payment information.
- Medical collections tradelines still constitute a majority of all collections on consumer credit reports. Despite the decline in collections reporting, medical collections tradelines still represent 57% of all collections items on credit reports. Upcoming changes to medical collections reporting, as previously announced by the nationwide consumer reporting companies, will remove small dollar (less than $500) and paid medical collection tradelines from consumer credit reports. While this will reduce the total number of medical collections tradelines, an estimated half of all consumers with medical collections tradelines will still have them on their credit reports, with the larger collection amounts (representing a majority of the outstanding dollar amount of medical collections) remaining on credit reports.
This report updates CFPB research published in 2019, which covered consumer credit records from 2004 to 2018. This report builds on prior work by the CFPB to analyze consumer credit reporting trends and to better understand the role of medical bills on credit reports.
- Read the report, Market Snapshot: An Update on Third-Party Debt Collections Tradelines Reporting.
- Read the accompanying analysis, Debt Collectors Re-Evaluate Medical Debt Furnishing in Light of Data Integrity Issues, which spotlights the data integrity challenges inherent in furnishing medical debt.
PUBLISHED
Today, the CFPB published the Regulatory and Reporting Overview Reference Chart for HMDA Data Collected in 2023. Resources to help industry understand, implement, and comply with the Home Mortgage Disclosure Act and Regulation C.
- Related reading: Final rule – Home Mortgage Disclosure Act (Regulation C)
Third quarter of 2022 is down more than 40% compared to third quarter of 2019, suggesting $5B reduction in fees on annual basis.
Since late 2021, several banks have announced changes to their overdraft programs that have been expected to reduce overdraft/non-sufficient fund (NSF) fee revenue. Our most recent analysis finds that bank overdraft/NSF fee revenue:
- was 43% lower in the third quarter of 2022 than in the third quarter of 2019 before the COVID-19 pandemic onset – suggesting $5.1 billion less in fees on an annualized basis;
- was 33% lower over the first three quarters of 2022 compared to the same period in 2019; and
- has trended downward in each quarter since the fourth quarter of 2021.
At the same time, we have not observed correlating increases in other listed checking account fees, which suggests that banks are not replacing overdraft/NSF fee revenue with other fees on checking accounts.
This analysis of bank call report data follows our previous analyses of trends in checking account fee revenue published in December 2021 and July 2022.
The Consumer Financial Protection Bureau (CFPB) issued an advisory opinion to protect Americans from double dealing on digital mortgage comparison-shopping platforms. Companies operating these digital platforms appear to shoppers as if they provide objective lender comparisons, but may illegally refer people to only those lenders paying referral fees. When shoppers use a lender that is not the best option for their needs, they may end up with a lower quality lender or paying thousands more in closing costs or interest. The advisory opinion outlines how companies violate the Real Estate Settlement Procedures Act (RESPA) when they steer shoppers to lenders by using pay-to-play tactics rather than providing shoppers with comprehensive and objective information.
- Read the advisory opinion, Real Estate Settlement Procedures Act (Regulation X); Digital Mortgage Comparison-Shopping Platforms and Related Payments to Operators.
- Read Director Chopra’s Statement on Mortgage Comparison Shopping in a Time of Higher Interest Rates.
- Learn about the CFPB’s tools and resources for homebuyers.
Proposed rule seeks to close loophole exploited by companies to hike fees with inflation
Today, the Consumer Financial Protection Bureau (CFPB) proposed a rule to curb excessive credit card late fees that cost American families about $12 billion each year. Major credit card issuers continue to profit off late fees that are protected by an expansive immunity provision. Credit card companies have also relied on this provision to hike fees with inflation, even if they face no additional collection costs. The proposed rule would help ensure that over the top late fee amounts are illegal. Based on the CFPB’s estimates, the proposal could reduce late fees by as much as $9 billion per year.
Read today’s Notice of Proposed Rulemaking.
Comments must be received on or before April 3, 2023, or within 30 days after publication of the Notice of Proposed Rulemaking in the Federal Register, whichever is later.
Read Director Chopra’s remarks on credit card late fees and the Notice of Proposed Rulemaking.
When someone misses a payment due date, even if they paid a few hours after the deadline, the cardholder may be hit with an exorbitant late fee that far exceeds the credit card company’s costs to collect late payments. These excessive late fees may not be needed to deter late payments, nor be justified based on the consumer’s conduct in paying late. These late fees also may be on top of other consequences of paying late, such as a lost grace period on paying interest or a lower credit score, depending on how long the missed payment lasts.
Companies currently charge people as much as $41 for each missed payment, and these fees result in billions of dollars in annual junk fee revenue for credit card companies. The CFPB’s proposed changes, which would amend regulations implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), would ensure that late fees meet the Act’s requirement to be “reasonable and proportional” to the costs incurred by issuers to handle late payments. Specifically, the proposed rule would lower the immunity provision for late fees to $8 for a missed payment as well as end the automatic annual inflation adjustment. The proposed rule would also ban late fee amounts above 25% of the consumer’s required payment.
The Federal Reserve Board, by regulation, created the immunity provisions to allow credit card companies to avoid scrutiny of whether their late fees met the reasonable and proportional standard. Over time, those provisions have risen with inflation to $30 for an initial late payment and $41 for subsequent late payments. The CFPB estimates that the income generated by the largest issuers from late fees is approximately five times greater than the collection costs that the companies incur for late payment violations. In 2020, for example, credit card companies charged approximately $12 billion in late fees, which represented more than 10% of all credit card interest and fees charged to consumers.
The proposed rule follows a request for comment on junk fees, a research report, and an advance notice of proposed rulemaking on credit card late fees that the CFPB issued last year. The CFPB’s proposed changes would, if finalized:
- Lower the immunity provision dollar amount for late fees to $8: The CFPB has preliminarily found that late fee income exceeds associated collection costs by a factor of five. Because the immunity provision currently allows issuers to charge late fees of up to $41, the CFPB believes that a late fee of $8 would be sufficient for most issuers to cover collection costs incurred as a result of late payments. The $8 immunity provision would apply to any missed payment. Companies would be able to charge above the immunity provision so long as they could prove the higher fee is necessary to cover their incurred collection costs.
- End the automatic annual inflation adjustment: The CFPB’s proposal would eliminate the automatic annual inflation adjustment for the immunity provision amount. This adjustment is not required by law, nor is it necessarily reflective of how collection costs change over time. The CFPB would instead monitor market conditions and the immunity provision amount for potential adjustments as necessary.
- Cap late fees at 25% of the required minimum payment: The current rule allows a card issuer to potentially charge a late fee that is 100% of the minimum payment owed by the cardholder. The CFPB proposes to restrict any late fee charge to 25% of the minimum payment to be more consistent with Congress’s intent to authorize only reasonable and proportional late fee amounts.
The proposal also seeks comment on other potential changes to CARD Act regulations. For instance, it requests comment on whether the CFPB’s proposed changes should apply to all credit card penalty fees, whether the immunity provision should be eliminated altogether, whether consumers should be granted a 15-day courtesy period, after the due date, before late fees can be assessed, and whether issuers should be required to offer autopay in order to make use of the immunity provision.
Mortgage servicers have direct communication with homeowners. Servicers may remind homeowners that one option to avoid foreclosure is selling the home. Servicers may recommend homeowners speak with a real estate agent for a free estimate of the home’s current value. Servicers can also direct struggling homeowners to HUD-approved housing counseling agencies.
New circular addresses dark patterns and other tricks used by companies to confuse and deceive consumers enrolled in subscription services.
The Consumer Financial Protection Bureau (CFPB) issued a new circular affirming that companies offering “negative option” subscription services must comply with federal consumer financial protection law. Negative option programs include subscription services that automatically renew unless the consumer affirmatively cancels, and trial marketing programs that charge a reduced fee for an initial period and then automatically begin charging a higher fee. Companies risk violating the law if they do not clearly and conspicuously disclose the terms of their subscription services and obtain consumers’ informed consent, or if they make it unreasonably difficult for consumers to cancel. Drawing from the Federal Trade Commission’s (FTC) recent policy statement and the CFPB’s past enforcement cases, the circular highlights examples of unlawful behavior by companies that have used dark patterns and other manipulative tactics to trick consumers into paying recurring charges for products and services they do not want.
Negative option marketing refers to a term or condition under which a seller may interpret a person’s silence or failure to cancel an agreement as continued acceptance of the offer. The CFPB has received complaints from consumers about being charged for products or services they did not intend to purchase or had sought to cancel, and has brought many enforcement actions involving unlawful negative option marketing practices.
The CFPB took action against Transunion for repeatedly breaking the law by violating a CFPB consent order and for deceptive marketing when selling credit scores, reports, and credit monitoring products. The CFPB sued ACTIVE Network for tricking consumers into enrolling into a costly membership club through the use of digital dark patterns. The CFPB has also entered into consent orders with numerous credit card issuers for deceptively marketing optional “add-on” products that charged recurring fees until consumers affirmatively cancelled.
Today’s circular highlights that negative option programs can be particularly harmful when paired with dark patterns because consumers may be misled into purchasing subscriptions and other services with recurring charges and be unable to cancel the unwanted products and services or avoid their charges. Digital dark patterns are design features used to deceive, steer, or manipulate users into behavior that is profitable for a company, but often harmful to users or contrary to their intent.
Companies offering negative option programs risk violating the Consumer Financial Protection Act’s (CFPA) prohibition on unfair, deceptive, or abusive acts or practices where they:
- Fail to disclose, clearly and conspicuously, the material terms of the negative option offer to the consumer: Companies likely violate the law if they misrepresent or fail to disclose information likely to inform a consumer’s decision about whether to enroll in a negative option service, including the amount of all charges and the fact that charges will continue unless the consumer takes affirmative steps to cancel.
- Fail to obtain the consumer’s informed consent: Companies should ensure that consumers genuinely agree to the terms of a negative option program. The CFPB has found or alleged that companies engaged in unfair, deceptive, and abusive acts and practices when companies misrepresented or failed to disclose that they were offering negative option programs, which resulted in consumers not understanding that they were enrolling in services with recurring charges.
- Mislead or impede consumers wishing to cancel: A common practice of bad actors is requiring consumers to jump through complicated hoops to cancel subscription products or services, such as being forced to talk to customer service agents repeatedly, or for unreasonably long times, before granting a request to cancel.
Today’s circular continues the CFPB’s focus on raising awareness about the growing scourge of dark pattern practices and other harmful tactics that companies are using to trick consumers into paying for products or services they do not want. The CFPB is partnering with the FTC in its effort to combat the rise of digital dark patterns, and both agencies will continue to monitor these practices and bring agency actions where needed.
Read the Consumer Financial Protection Circular, Unlawful negative option marketing practices.
Read the FTC’s October 2021 policy statement on negative option marketing .
PUBLISHED
Companies can use terms and conditions in non-negotiable form contracts to try to hide consumer harm, to stifle criticism about products and services, and to undermine consumer financial protection law
The CFPB proposed a rule to establish a public registry of supervised nonbanks’ terms and conditions in “take it or leave it” form contracts that claim to waive or limit consumer rights and protections, like bankruptcy rights, liability amounts, or complaint rights. In some cases, terms and conditions in non-negotiable form contracts mislead consumers into believing the terms or conditions are legally enforceable. Under the proposed rule, nonbanks subject to the CFPB’s supervisory jurisdiction would need to submit information on terms and conditions in form contracts they use that seek to waive or limit individuals’ rights and other legal protections. That information would be posted in a registry that will be open to the public, including to other consumer financial protection enforcers.
CFPB Takes Action to Halt Debt Collection Mill From Bombarding Consumers with Junk Lawsuits
Forster & Garbus illegally sued borrowers on behalf of Citibank and Discover, among others
The CFPB has reached a settlement in its lawsuit against law firm Forster & Garbus, LLP for illegal debt-collection practices. If approved by the court, the proposed settlement would prohibit Forster & Garbus from filing any new lawsuit against a consumer unless it has specific documents supporting the debt and certifies that an attorney reviewed those documents. The order would also require the company to dismiss any pending lawsuit where it cannot satisfy these requirements. Forster & Garbus would also be required to pay a penalty of $100,000, which would be deposited into the CFPB’s victims relief fund.
Blog: Protecting People’s Access to Their Money
History has made it clear that when companies don’t have to compete for business, there is a risk that they’ll take unfair advantage of the situation. When the COVID-19 pandemic hit in early 2020, Congress and many states and localities provided additional unemployment assistance and other benefits. The Consumer Financial Protection Bureau (CFPB) found that many companies took advantage of the limited choices that people have for accessing public benefits like unemployment assistance. Some banks may have unlawfully seized this money to satisfy negative account balances or pay entirely different debts. And one institution automatically and unlawfully froze people’s accounts with a faulty fraud detection program, and then gave them little recourse when there was, in fact, no fraud. In 2022, the CFPB reported a 673% increase in consumer complaints about government-benefit prepaid cards , in large part due to government programs that distribute funds to consumers through such cards. In fact, of all types of prepaid cards, the CFPB receives the most complaints about government-benefit prepaid cards.
Join the Federal Financial Institutions Examination Council’s Appraisal Subcommittee (ASC) for a hearing about appraisal bias. Invited witnesses representing key stakeholder groups will share their views with the ASC during the hearing.
The hearing will take place on Tuesday, January 24, 2023 from 10:00 a.m. – 12:00 p.m. EST. Members of the public are invited to listen to the hearing and provide written comments. Comments can be submitted to [email protected] until February 8, 2023.
The hearing will be held in-person at the Consumer Financial Protection Bureau (CFPB) Headquarters at 1700 G Street NW, Washington, DC 20552. For those that can’t attend in-person, the hearing will also be livestreamed.
This event is open to the public and requires an RSVP. Please register if you plan to attend or view the hearing. RSVP here.
If you require a reasonable accommodation in order to attend this event, please contact [email protected] 72 hours prior to the start of this event.
This announcement will be updated with more details as they become available.
More information about the Appraisal Subcommittee can be found here .
Link to CFPB posting can be found here.
Jan. 03, 2023 — The Consumer Financial Protection Bureau (CFPB) released an annual report that details improvements and deficiencies in the nationwide consumer reporting companies’ responses to consumer complaints transmitted by the CFPB. Today’s report includes considerations for the nationwide consumer reporting companies to improve compliance with consumer financial protection laws and, more broadly, to serve consumers better.
The Fair Credit Reporting Act requires the CFPB to submit an annual report about complaints submitted by consumers regarding the nationwide consumer reporting companies: Equifax, Experian, and TransUnion. Today’s report is based on the 488,000 consumer complaints the CFPB transmitted to Equifax, Experian, and TransUnion from October 2021 through September 2022. The findings follow last year’s report that detailed failures by the nationwide companies when responding to consumer complaints submitted to the CFPB. Equifax, Experian, and TransUnion have since acted to remedy some of the issues identified in last year’s report. Specifically, the CFPB found Equifax, Experian, and TransUnion have:
- Changed how they respond to complaints: Equifax, Experian, and TransUnion use of problematic response types described in last year’s report has declined. Most complaints now receive more substantive responses.
- Provided more tailored complaint responses: Across all three companies, most responses now describe the outcomes of consumers’ complaints. In September 2022, the nationwide companies provided a tailored response to more than 50% of complaints that were closed with an explanation or relief.
- Reported greater rates of relief in response to complaints: In 2022, TransUnion reported providing relief in most complaints. Experian reported providing relief in nearly half of complaints. Equifax reported that it did not provide relief, but its written complaint responses suggest that its rates of relief are comparable to the other two companies.
The CFPB expects the three nationwide consumer reporting companies to continue improving how they serve consumers. To that end, the CFPB recommends that Equifax, Experian, and TransUnion:
- Consider consumer burden when implementing automated processes: When companies consider introducing automated processes that will affect their customers, particularly those that relate to a legal right, they should consider consumer burden, especially whether a change will require consumers to do more work to exercise their legal rights.
- Recognize that technology is also improving for consumers: Advances in communications technologies mean consumers do not necessarily need to write complaints on their own. Instead, communications technologies may ease the writing burden. Such innovations, including ones that can generate letters for consumers, may create similar-sounding complaints that are, in fact, from unique individuals with independent concerns. The assumption that similar-sounding letters are from third parties will increasingly be wrong.
- Consider how to transition the market from control and surveillance to consumer participation: One potential reason there are so many reported inaccuracies in consumer reporting data is that consumers are several degrees removed from their own data. Enabling increased consumer participation on the data side of consumer reporting has the potential to create a fairer market with added benefits for consumers, consumer reporting companies, and lenders.
Jan. 04, 2023 — The Consumer Financial Protection Bureau (CFPB) and the New York State Office of the Attorney General sued a predatory auto lender, Credit Acceptance Corporation, for misrepresenting the cost of credit and tricking its customers into high-cost loans on used cars. The car-buying experience turns into a nightmare for many of Credit Acceptance’s borrowers, who face unaffordable monthly payments, vehicle repossessions, and debt collection lawsuits. The joint complaint alleges that, among other things, Credit Acceptance hides costs in loan agreements and sets consumers up to fail. The complaint also alleges that Credit Acceptance violated New York usury limits and other consumer and investor protection laws. The lawsuit seeks to force Credit Acceptance to stop its illegal practices, reimburse harmed consumers, pay back wrongfully earned gains, and pay a penalty.
Specifically, the company allegedly harmed consumers by:
- Hiding the true cost of credit: Since 2014, Credit Acceptance’s loan agreements nationwide have said that consumers would pay interest at an average 22% APR. However, the true cost of credit offered is far higher than what borrowers are told. This is because Credit Acceptance’s business model pushes dealers to manipulate the prices of vehicles sold to Credit Acceptance borrowers, based on borrowers’ projected performance. This increases the principal balance of the loans. By hiding the true cost of the credit in inflated principal balances, Credit Acceptance evades state interest rate caps and deprives consumers of the ability to make informed decisions, to compare financing options, or to avoid high-interest charges.
- Setting up borrowers to fail: Credit Acceptance ensured its own profits by providing loans without regard to whether borrowers could afford them. For almost 4 out of 10 loans, Credit Acceptance predicted that it would not be able to collect the full amount financed by the loan. Credit Acceptance profits even when borrowers are unable to pay their loans in full by using aggressive debt collection methods. As a result of Credit Acceptance’s practices, customers faced late fees, repossessions, auctions, post-repossession collection efforts, lawsuits, and ruined credit profiles.
- Closing its eyes to practices that harmed consumers: The company created financial incentives for dealers to add extra products to loans and then shrugged off whether customers were misled into thinking the add-on products were required. Add-on products, such as vehicle service contracts, are a profit center for Credit Acceptance. They represented about $250 million in revenue in 2020 alone.
Annual survey of consumer financial health shows downtrends in ability to repay debts
The Consumer Financial Protection Bureau (CFPB) released a new Making Ends Meet report covering the financial health of American households. Since 2019, the annual Making Ends Meet consumer surveys showed improvement in financial health during the first few years of the COVID-19 pandemic, due in part to a tight labor market, reductions in consumer spending, and access to pandemic-related relief programs. However, data from early 2022 revealed a decline in several key measures, as well as a rapid deterioration in financial health for Hispanic consumers, consumers under the age of 40, and low-income renters. In addition, while unemployment remains low, more than 37% of households were unable to cover expenses for longer than one month if they lost their main source of income.
The 2022 survey was mailed to a sample of consumers in January, with responses collected between January and March. Utilizing data collected from the survey, as well as from the CFPB’s Consumer Credit Panel, today’s report focused on several measures of consumer financial health, including:
- The CFPB’s financial well-being score, which serves as a comprehensive measure of overall subjective financial well-being
- Whether households had difficulty paying bills and expenses in the previous year
- How long households could cover expenses if the main source of income was lost
Many consumers are not financially prepared for a disruption to their main source of income, even as unemployment remains low, according to report findings. Nearly 37% of households report that they could not cover expenses for longer than one month, even with accessing savings, borrowing money, selling assets, or seeking help from family and friends. The report also finds that, in 2022, 1 in 8 households also experienced lost income from unemployment or reduction in work hours, and roughly one-third of households experienced a major unexpected expense, including vehicle repair, unexpected medical expense, or a household repair.
The report discusses how consumers also faced frequent income uncertainties, as income variability increased sharply from 2021 to 2022. The increase was particularly large for Hispanic consumers and consumers under age 40. Also, while racial and ethnic groups applied for credit at similar rates, Black and Hispanic consumers were more likely to be turned down or not receive as much credit as they requested. Black and Hispanic consumers were also much less likely to apply for credit in the first place because they believed they would be turned down.
Among renters, 31% missed at least one rental payment in the previous year and approximately 8% were not current on their rent as of February 2022. Yet only 6% of renters had received rent payment or flexibility since the pandemic began.
Nearly 18% of student loan borrowers have annual incomes under $125,000 and loan balances under $10,000. Under the Department of Education’s proposal for student debt relief, currently on hold due to pending litigation, borrowers with federal student loans who meet these criteria would have their entire student debt balance forgiven.
Read the report, Making Ends Meet in 2022.
CFPB & FHFA news release announcing the publication of updated loan-level data for public use collected through the National Survey of Mortgage Originations
The Consumer Financial Protection Bureau (CFPB) and the Federal Housing Finance Agency (FHFA) today published updated loan-level data for public use collected through the National Survey of Mortgage Originations (NSMO). The data also provide updated mortgage performance and credit information for a nationally representative sample of mortgage borrowers from 2013 to 2020.
Key highlights from the updated data are:
- The COVID-19 pandemic shaped the mortgage borrower experience in 2020. A higher share of borrowers reported that a paperless online mortgage process was important to them in 2020 (48 percent) than in 2019 (42 percent). More borrowers reported that the mortgage closing did not occur as originally scheduled in 2020 (21 percent) than in 2019 (17 percent).
- Mortgage borrowers, particularly those refinancing a loan, responded to the low-interest rates in 2020. The share of borrowers who rated themselves very familiar with available interest rates increased from 55 percent in 2019 to 69 percent in 2020. The share who reported being very satisfied that they got the lowest interest rate for which they could qualify increased from 67 percent in 2019 to 75 percent in 2020.
- Borrowers who refinanced in 2020 were more well off financially than those who refinanced in 2019:
- A higher share reported their household income was $175,000 or higher in 2020 (29 percent) than in 2019 (20 percent).
- Similarly, a higher share indicated that they owned stocks, bonds, or mutual funds in 2020 (53 percent) than in 2019 (43 percent).
- Relatedly, 76 percent of borrowers who refinanced were not at all concerned about qualifying for a mortgage in 2020, up from 66 percent in 2019.
Watch The Consumer Financial Protection Bureau’s Semi-Annual Report to Congress
December 15, 2022
CFPB Amendment to the HMDA Rule
Home Mortgage Disclosure (Regulation C); Judicial Vacatur of Coverage Threshold for Closed-End Mortgage Loans
In April 2020, the Consumer Financial Protection Bureau issued a final rule (2020 HMDA Rule) to amend Regulation C to increase the threshold for reporting data about closed-end mortgage loans. The 2020 HMDA Rule increased the closed-end mortgage loan reporting threshold from 25 loans to 100 loans in each of the two preceding calendar years, effective July 1, 2020.
On September 23, 2022, the United States District Court for the District of Columbia vacated the 2020 HMDA Rule as to the increased loan-volume reporting threshold for closed-end mortgage loans. As a result of the September 23, 2022 order, the threshold for reporting data about closed-end mortgage loans is 25, the threshold established by the 2015 HMDA Rule. Accordingly, this technical amendment updates the Code of Federal Regulations to reflect the closed-end mortgage loan reporting threshold of 25 mortgage loans in each of the two preceding calendar years.
You can access technical amendment here: www.consumerfinance.gov/rules-policy/final-rules/hmda-reg-c-judicial-vacatur-of-coverage-threshold-for-closed-end-mortgage-loans/.
The CFPB is proposing:
- Covered nonbanks would report certain agency and court orders connected to consumer financial products and services: Generally, nonbanks would have to report final agency and court orders and judgments, including consent and stipulated orders, brought under federal consumer financial protection laws or state laws regarding unfair, deceptive, or abusive acts or practices.
- Larger supervised nonbanks would designate a senior executive to attest regarding the firm’s compliance with covered orders: Larger nonbanks that are supervised by the CFPB would be required to designate a senior executive to submit an annual supervisory written statement attesting to the steps taken to oversee the activities subject to the order and whether the executive knows of any violations of, or other instances of noncompliance with, the covered order.
Prepared Statement of Director Rohit Chopra before the House Committee on Financial Services
The CFPB’s market monitoring and supervision of financial institutions provides one lens into the state of the economy. Consumer demand has rebounded as our country transitions out of pandemic conditions. While the labor market remains strong, household debt has increased rapidly. The rise in household payment burdens from auto loans and credit cards has been particularly pronounced, given rising interest rates, the cost of vehicles, and the impact of inflation on other goods and services in the economy.
As consumers continue to navigate the economic impacts and ripple effects of the pandemic, their financial patterns have adapted and responded to changing conditions – as have the companies that serve them. For example, the CFPB has observed a notable increase in use of Buy Now, Pay Later products over the past few years. As interest rates on credit cards increase – and correspondingly, outstanding balances – a low- or no-interest Buy Now, Pay Later product that spreads the cost of goods over four payments can be particularly appealing. The CFPB’s recent study on Buy Now, Pay Later noted a significant increase in use of these products to fund essential goods and services. The CFPB is working to ensure that Buy Now, Pay Later lenders adhere to the same protocols and protections as other similar financial products to avoid regulatory arbitrage and to ensure a consistent level of consumer protection.
2022 CFPB Research Conference
In person registration is open until December 11th.
Livestream registration is now open.
On December 15–16, 2022, the CFPB will host its sixth research conference on consumer finance. The conference will be held in person at CFPB headquarters at 1700 G Street NW, Washington DC.
The goal of the conference is to connect the core community of researchers and policymakers, with a focus on research from a wide range of disciplines and approaches that can inform both groups on the topic of consumer finance.
Agenda
The two-day conference will feature a keynote address and eight sessions of researchers presenting their work with members of CFPB’s Office of Research serving as discussants.
Call for papers
For this conference, we welcome and encourage the submission of a broad range of research work.
NASCUS Member Benefit: Recent CFPB Resource Summaries
CFPB Consumer Financial Protection Circular 2022-07: Reasonable Investigation of Consumer Reporting Disputes
12 CFR Chapter X
The Consumer Financial Protection Bureau (CFPB) issued this circular to respond to two questions regarding the responsibilities of consumer reporting agencies.
- Are consumer reporting agencies and the entities that furnish information to them (furnishers) permitted under the Fair Credit Reporting Act (FCRA) to impose obstacles that deter the submission of disputes?
- Do consumer reporting agencies need to forward to furnishers consumer-provided documents attached to a dispute?
The Bureau released this circular on its website on November 10, 2022, and the circular can be accessed here.
CFPB Consumer Financial Protection Circular 2022-06: Unanticipated Overdraft Fee Assessment Practices
12 CFR Chapter X
The Consumer Financial Protection Bureau (CFPB) has issued Consumer Financial Protection Circular 2022-06, titled “Unanticipated Overdraft Fee Assessment Practices” to respond to a question posed about whether the assessment of overdraft fees under certain instances would be considered an unfair act or practice under the Consumer Financial Protection Act (CFPA), even if the entity complies with the Truth in Lending Act (TILA) and Regulation Z and the Electronic Fund Transfer Act (EFTA) and Regulation E.
The circular became effective on October 26, 2022 and can be found here.
Notice of Intent to Make a Preemption Determination
The CFPB issued a Notice of Intent to Make a Preemption Determination under TILA. In the Notice, the Bureau explains it has preliminarily determined that TILA does not preempt a New York State law governing commercial financing with respect to certain provisions. Additionally, the Bureau is providing notice that it is considering whether to make a preemption determination regarding State laws in California, Utah, and Virginia that are potentially similar to the New York law.
The Bureau is soliciting public comment on this preliminary preemption determination.
You can access the Notice here: www.consumerfinance.gov/rules-policy/notice-opportunities-comment/open-notices/notice-of-intent-to-make-preemption-determination-under-truth-in-lending-act/.
Blog: Update on state laws on lending to businesses
The CFPB received a request from an industry trade association to determine whether New York’s commercial financing disclosure law is preempted by the federal Truth in Lending Act. Congress has expressly authorized the CFPB to determine whether state laws are preempted by the Truth in Lending Act. The public can request such a determination, or the CFPB can raise the issue on its own. The Truth in Lending Act’s implementing regulations require the CFPB to request public comment before determining whether a state law is preempted.
After carefully considering the request, the CFPB’s preliminary determination is that the New York law is not preempted by the Truth in Lending Act because the New York law regulates commercial financing transactions rather than consumer-purpose transactions. The CFPB is requesting comment on whether it should finalize its preliminary determination that the New York law – as well as potentially similar laws in California, Utah, and Virginia – are not preempted.
Blog: Changes to HMDA’s closed-end loan reporting threshold
On September 23, 2022, the United States District Court for the District of Columbia issued an order vacating the 2020 Home Mortgage Disclosure Act (HMDA) Final Rule as to the loan volume reporting threshold for closed-end mortgage loans. The decision means that the threshold for reporting data on closed-end mortgage loans is now 25 loans in each of the two preceding calendar years, which is the threshold established by the 2015 HMDA Final Rule, rather than the 100 loan threshold set by the 2020 HMDA Final Rule.
The CFPB recognizes that financial institutions affected by this change may need time to implement or adjust policies, procedures, systems, and operations to come into compliance with their reporting obligations. In these limited circumstances, in allocating the CFPB’s enforcement and supervisory resources, the CFPB does not view action regarding these institutions’ HMDA data as a priority. Thus, the CFPB does not intend to initiate enforcement actions or cite HMDA violations for failures to report closed-end mortgage loan data collected in 2022, 2021, or 2020 for institutions subject to the CFPB’s enforcement or supervisory jurisdiction that meet Regulation C’s other coverage requirements and originated at least 25 closed-end mortgage loans in each of the two preceding calendar years but fewer than 100 closed-end mortgage loans in either or both of the two preceding calendar years.