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.
(Jan. 7, 2022) Sarah Bloom Raskin, a former Maryland financial institution regulator who also served as a deputy Treasury secretary and member of the Federal Reserve Board, is under consideration for another stint at the central bank: as Federal Reserve Board vice chair for supervision. Washington news outlets this week were reporting that Raskin is under consideration for the post by President Biden. If confirmed, Raskin would be only the second occupant in post, succeed Randal Quarles (the first), who resigned late last year after his term in that role ended … Reports this week indicated that the Nebraska Department of Banking and Finance rejected the purchase of a Nebraska bank by an Iowa credit union. The agency said that GreenState Credit Union of North Liberty, Iowa, could not purchase the assets of Premier Bank, based on Omaha. According to the agency’s ruling, the bank did not carry its burden of proof to show “that there is express power under federal law for a national bank to sell substantially all of its assets,” at least in this case. Premier Bank is reportedly appealing the decision … The three big credit bureaus “failed to fully respond to consumers with errors,” a report released this week by the CFPB charged. The bureau said its report, which represented a new analysis, showed that 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. The report looks at errors in credit reports as recounted by consumers to the credit reporting agencies. According to CFPB, consumers submitted more than 700,000 complaints to the bureau regarding Equifax, Experian and TransUnion from January 2020 through September 2021. Those complaints, the bureau said, represented more than 50% of all complaints received by the agency for that period.
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(Nov. 5, 2021) A consumer reporting agency that uses “name-only” matching procedures is not using reasonable procedures mandated under federal consumer protection laws, the CFPB said this week.
In an “advisory opinion,” the bureau said that matching information to a particular consumer who is the subject of a consumer report based solely on whether the consumer’s first and last names are identical or similar to the names associated with the information falls outside of the Fair Credit Reporting Act (FCRA). The agency termed the practice as “inadequate matching procedures to match information to consumers.”
CFPB said it issued the advisory opinion to remind consumer reporting agencies that their matching practices must comply with their FCRA obligation to ”follow reasonable procedures to assure maximum possible accuracy.”
The advisory opinion notes that consumer complaints CFPB has received – particularly about “incorrect information on your report” – reflect “significant consumer concern” about inaccuracies in consumer reports. Last year, the bureau said, companies provided responses to more than 191,000 such complaints, which represents approximately 68% of credit or consumer reporting complaints responded to by companies that year.14
“Name-only matching,” the bureau asserted, is particularly likely to lead to inaccuracies in consumer reports. “Name-only matching occurs when a consumer reporting agency uses only first and last name to determine whether a particular item of information relates to a particular consumer, without using other personally identifying information such as address, date of birth, or Social Security number,” CFPB said.
The opinion asserts that matching information to a consumer who is the subject of a consumer report by name alone creates “significant accuracy concerns” because most names are shared with other consumers and, in some cases, with thousands of other consumers. “In preparing consumer reports, it is not a reasonable procedure to assure maximum possible accuracy to use insufficient identifiers to match information to the consumer who is the subject of the report,” the agency opined.
LINK:
Fair Credit Reporting; Name-Only Matching Procedures
(March 26, 2021) More than a half million complaints – up 54% from the previous year – were fielded in 2020 by the CFPB, reflecting the financial impact of the coronavirus crisis, the agency said this week. In a release, the bureau said it handled 542,300 complaints last year, with well more than half of those (58%) emanating from credit and consumer reporting objections. Debt collection (15%), credit card (7%), checking or savings (6%), and mortgage complaints (5%) were other major areas of complaints, the agency said.
Starting in April 2020, the bureau said, the month after the financial impact of the coronavirus crisis became apparent, consumers began to submit more than 3,000 complaints each month mentioning “coronavirus” keywords. Ultimately, by year’s end, more than 32,000 complaints mentioning the effects of the COVID-19 disease (or related keywords) were submitted last year, the CFPB said.
Complaints received about consumer and credit reporting claiming inaccurate information on their reports, the bureau said, outdistanced the total from the year before. The CFPB said consumers mostly submitted the complaints about Equifax, Experian, and TransUnion, the three largest Nationwide Credit Reporting Agencies (NCRAs).
The reporting companies, according to CFPB, provided closure responses noting that a dispute would be filed on the consumer’s behalf, but otherwise failed to address the issues consumers raise in their complaints. The bureau also said the NCRAs mentioned suspected third-party activity in their responses to consumers, but did not detail steps taken to authenticate consumers or to address the issues raised in their complaints.
“While the NCRAs typically provided substantive and comparatively detailed responses to the majority of complaints in prior years—including providing details of dispute investigations and outlining steps taken for consumers that are attempting to address identity theft—this year, the CFPB observed that the NCRAs stopped providing complete and accurate responses in many of these complaints,” the agency said.
Later this year, the agency said, it will release a separate report on complaints submitted about the NCRAs that are related to incomplete or inaccurate information on the consumers’ credit reports. The report, CFPB said, will be in keeping with reporting requirements under the Fair Credit Reporting Act (FCRA).
LINK:
CFPB 2020 Consumer Response annual report
(Nov. 13, 2020) The NCUA Board has scheduled a 2020 budget update and reprogramming, as well as an item on the agency’s rules and regulations, “Capitalization of Interest” as agenda items for its Nov. 19 regular monthly meeting. Other items on the agenda for the meeting, set to begin at 10 a.m. ET and to be streamed live via the Internet, are board briefings on the quarterly performance of the National Credit Union Share Insurance Fund (NCUSIF) and on the state of credit union diversity, including the 2019 Credit Union Diversity Self-Assessment … The FL Office of Financial Regulation recently approved Nov. 1 the conversion of Panhandle FCU of Panama City to a state charter; the institution holds more than $263 million in assets … Controversial Federal Reserve Board NomineeJudy Shelton – criticized by some for her past views on reinstituting the gold standard, questioning the effectiveness of federal deposit insurance, and the Fed’s independence from political influence – will receive a confirmation vote as early as next week. Sen. Lisa Murkowski (R-Alaska) said Thursday she would vote for Shelton, meaning there are now enough votes among Republicans to approve her confirmation; all Democrats have vowed to reject her nomination. A vote for fellow Fed Board Nominee Chris Waller has not been scheduled, although his nomination has received little if any opposition. There is no word, yet, on a vote for NCUA Board Nominee Kyle Hauptman … Actual payment “furnishing” (or information on payments sent to consumer credit reporting agencies from financial institutions) grew steadily for mortgage, auto and student loans between 2012 and 2020, according to a report issued Thursday by the CFPB, reaching more than 90% of credit accounts. On the other hand, over the same period, the bureau said payment furnishing for credit card and retail revolving loan accounts fell to 40% of accounts. The bureau said the information in its report is used to determine whether consumers are approved for credit and the interest rates and terms consumers receive. “Financial institutions’ decisions regarding which data elements within a consumer’s credit account to furnish to consumer reporting agencies have important implications for which factors lenders can use to evaluate potential and existing borrowers,” the report states. It added that “describing trends in furnishing practices can help deepen policymakers’ and market participants’ understanding of the consumer reporting system’s key role in consumer access to credit, especially in the wake of the COVID-19 pandemic when credit standards have tightened and there has been increased strain on consumer finances.”
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New report explores the prevalence of actual payment information in consumer credit reporting