NCLC Reviews the Agency’s Top Consumer Protection Hits and Next Steps
This week, the Consumer Financial Protection Bureau (CFPB) celebrates its third year. Thanks to your support of NCLC and our work with you and other advocates, it’s amazing what’s been accomplished by this precocious toddler. We’re proud to stand with you to encourage the agency to continue taking steps to improve consumer justice, especially for low-income and vulnerable families. Happy birthday, CFPB!
Here are some highlights of what the nation’s newest federal agency has accomplished in its short life and what lies ahead in the near future. This update is longer than most but please review it to see progress in many important consumer protection areas.
Mortgages and Foreclosure Prevention
Mortgage Lending. The CFPB has done an enormous amount of work in the mortgage origination area, including issuing detailed Dodd-Frank regulations addressing broker and loan officer kickbacks and compensation, ability-to-repay requirements for borrowers (including the Qualified Mortgage safer loan designation), amended high-cost mortgage rules, appraisals and escrowing, and integrated Truth in Lending Act/Real Estate Settlement Procedures Act disclosures on loan documents. Lenders are now required to reasonably assess whether a homeowner can afford a mortgage loan, will be limited in how they can incentivize employees and brokers to charge homeowners more, and will be required to provide streamlined disclosures. NCLC advocates have provided comments, testimony, and participated in face-to-face meetings with CFPB staff on these issues.
Next steps: The CFPB is in the early stages of updating data reporting requirements under the Home Mortgage Disclosure Act. Additional work to be done also includes reviews of existing Dodd-Frank regulations, including addressing loopholes in the broker and loan officer compensation rules and improved approaches for measuring loan affordability, such as the amount of income left over after debts are paid. NCLC advocates will continue to press for reform that will benefit low-income borrowers.
Mortgage Servicing. The CFPB took the initiative to issue broad regulations affecting all aspects of mortgage servicing, from initial notices borrowers receive when they are delinquent on a mortgage loan to timelines for various aspects of a foreclosure when a homeowner has requested a loan modification or other loss mitigation. The CFPB also has improved transfers of servicing and the treatment of successors-in-interest (such as widows or other surviving heirs) seeking loan modifications. These improvements make it easier for homeowners, including those who live in the home but were not on the original loan documents, to apply for and receive more affordable loan terms when they face hardship. NCLC advocates, working with other coalition members, were instrumental in making these positive changes become reality.
Next steps: NCLC is advocating for additional changes to the mortgage servicing rules to maximize access to the loan modification process for borrowers facing hardship, such as unemployment or loss of a spouse. Our work also is focused on borrowers with limited English proficiency and rights of surviving heirs.
Banking and Employment Issues
Prepaid and payroll cards. The CFPB has been collecting information on prepaid cards and is expected to issue a proposed rule by late summer or early fall that will expand protections for prepaid cards. The CFPB also issued a bulletin reminding employers that they may not require employees to accept their pay on payroll cards. And the agency just began accepting complaints from consumers about prepaid and payroll cards
Next steps: NCLC is urging the CFPB to:
- ban overdraft fees on prepaid and payroll cards,
- require deposit insurance for bank account substitutes,
- prohibit fees for balance inquiries and customer service,
- give consumers the right to opt in to monthly statements,
- give consumers clear information about all fees, and
- protect needs-tested benefits paid through prepaid cards.
We are also pushing for clearer rules to ensure that employees are not forced to use payroll cards and can easily access their full wages without fees.
Payday loans. The CFPB has been examining payday lenders and issued a study confirming the debt trap posed by these high-cost loans. The CFPB has also brought enforcement actions, including one against CashCall for collecting illegal payday loans that consumers do not owe, and another one against ACE Cash Express for pushing consumers into new loans that they cannot afford to repay in order to perpetuate the cycle of debt if they cannot repay a previous loan.
Next steps: The CFPB is expected to propose rules governing payday lenders later this year. NCLC has urged the CFPB to prohibit lenders from making loans that consumers cannot afford to repay, while meeting other expenses, without entering a cycle of debt. We will continue to keep a close eye on changes in the payday industry and urge the CFPB to ensure that payday lenders cannot evade consumer protection rules by tweaking the form of the loan.
For the first time, a federal agency is regularly examining debt collectors in order to spot unfair practices. The CFPB brought enforcement actions against a payday lender for robo-signing debt collection lawsuits and against a debt collection lawsuit mill that uses illegal tactics to intimidate consumers into paying debts they may not owe. The agency is preparing to issue the first set of regulations governing debt collection, and NCLC submitted extensive comments.
In our comments, we urged the CFPB to:
- adopt strong rules to clarify that injunctive relief and multiple statutory damages are available for multiple violations of the Fair Debt Collection Practices Act;
- ensure that collectors have all relevant information about the debt and prior communications with the consumer;
- prevent abuses by first party creditors;
- stop debt buyers and collectors from collecting stale debt;
- address credit reporting impacts;
- deal with the special issues posed by medical debt; protect students and service members from abusive debt collections; and
- prevent forced arbitration clauses from being used as a get-out-of-jail free card.
Forced Arbitration and Access to Justice
The CFPB has the authority to ban or restrict forced arbitration in consumer financial contracts, but it first must study the issue. The agency issued the first study last year, finding that few consumers file arbitration cases. This study confirms the contention of consumer advocates that arbitration clauses are used to suppress valid claims, not to provide a more efficient method of resolution. A second study is expected later this year.
Next steps: NCLC has urged the CFPB to take swift action following the studies to prohibit companies from using arbitration clauses as a get-out-of-jail-free card that bars consumers from access to the justice system and that prevents courts from ordering class-wide relief for class-wide violations.
Credit reporting was the first industry targeted by the CFPB using its “larger participant” supervisory authority, meaning that the CFPB will have the authority to examine the policies and procedures of these companies, to go deep in its supervision, and to require changes much more quickly through the supervision process than the FTC could. This will hopefully lead to better accuracy and a better credit reporting system. The CFPB also did an excellent study analyzing the differences between FICO scores (used by the vast majority of lenders), VantageScore and the in- house “educational” scores for Experian, Equifax and TransUnion (the “Big Three” credit reporting agencies). And though it seems obvious, CFPB issued a bulletin to companies that furnish information to consumer reporting agencies about their duty to investigate disputes. In testimony, formal comments, informal face-to-face meetings, and public advocacy, NCLC has actively engaged with the CFPB in ensure that the interests of low-income consumers are represented.
Next steps: NCLC will continue to urge the CFPB to:
- reform the system for disputing credit report errors,
- require all credit reporting agencies to register with the CFPB, and
- develop guidance and/or enact regulations to better regulate both credit reporting and background check agencies.
As required in Dodd-Frank legislation, CFPB has a dedicated Student Loan Ombudsman who has taken a lead in alerting the public and policymakers to the risks of growing student loan debt. The CFPB has also published alerts on student loan servicing, how to remove co-signers from private student loans, and the dangers of student loan debt relief companies. Borrowers can submit complaints about student loan lenders, servicers, and debt collectors to the CFPB, and the ombudsman office has issued regular reports documenting the complaints and advocating for reform. The CFPB has also requested comments about key student loan issues, including ways to provide relief for private loan borrowers. The CFPB has an extensive website with information for student loan borrowers, including assistance in shopping for financial aid, understanding the student loan process, and options for students in distress. The CFPB also has jurisdiction over debt collectors, including student loan debt collectors and private student lenders.
NCLC attorneys have worked closely with the CFPB on each of these improvements by submitting comments, giving testimony at Congressional or CFPB hearings, and/or meeting with CFPB staff and key legislators.
Next steps: NCLC is advocating that the CFPB work with other federal agencies, including the U.S. Department of Education, to exercise rigorous oversight over student loan servicers and be part of the process of creating strong consumer protections for student loan borrowers. NCLC is also focusing our advocacy on relief for private student loan borrowers and enforcement against for-profit student debt relief companies and student loan debt collection agencies.
We cannot possibly summarize all of the CFPB’s work, especially in the busy enforcement unit, but here are a few highlights in that arena.
- The CFPB, together with state Attorney Generals, forced the nation’s largest nonbank mortgage loan servicer, Ocwen, to provide $2 billion in principal reduction to underwater borrowers and to refund $125 million to nearly 185,000 borrowers who have already been foreclosed upon.
- The CFPB and bank regulators have obtained $1.5 billion in refunds for consumers for deceptive credit card add-on products like credit protection products.
- Together with the FTC and state attorneys general, the CFPB just announced numerous actions against bogus mortgage relief actions, including foreclosure rescue scammers.
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Industry lobbyists are working hard to undermine the CFPB and weaken its resolve to protect consumers. NCLC is fighting to keep the CFPB strong and to encourage the agency to use all of its tools to protect vulnerable consumers.
Your support of NCLC enables us to continue to play our important role. Thank you for your past and continuing support.
Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people, including older adults, in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training.