Faith Leaders and Consumer Advocates Mobilize Against Debt-Trap Lending

For many years, payday lenders have taken advantage of citizens and the legislative process, charging triple-digit interest, engineering loans to draw people into unmanageable long-term debt, and carving out special exemptions in state laws to make that possible.  Many citizens and communities of faith, and many AFR members, have responded by insisting that ultra-high-cost consumer loans are unjust and immoral.

The coming year presents us with an important opportunity in the struggle to uphold economic dignity in our communities – by calling on the Consumer Financial Protection Bureau (CFPB) to enact strong rules against payday and other debt-trap loans.

On November 17 – 19, representatives from over 20 states will come to Washington D.C. for Faith & Credit Advocacy Days. This gathering is a launch-pad for a broad collective effort by faith and financial reform and consumer protection groups to support strong action by the CFPB. Faith advocates and leaders will come away armed with knowledge of what they will need to do in their states and communities to promote and protect the cause of ethical lending. Monday and Tuesday will be spent better understanding the problem of predatory lending and what faith advocates and leaders can bring to the effort to put a stop to it.

Throughout Faith & Credit Advocacy Days, faith advocates and leaders will use the hashtag #StopTheDebtTrap to reach out to people and organizations interested in Payday Lending Reform. Using #StopTheDebtTrap, they hope to engage event attendees and the public. Their collective narrative will help spread a message about why strong rules are needed and what citizens are doing and can do to convey their concern to their representatives in Washington D.C.

On the final day, faith advocates and leaders will meet with lawmakers and deliver that message directly. They will ask their communities to participate in the conversation by using the hashtag #StopTheDebtTrap. Everyone is encouraged to join the conversation.

– Marvin Silver

Consumer Advocates Praise CFPB Proposals on Prepaid Cards

The National Consumer Law Center released the following statement:

Consumer advocates today praised the Consumer Financial Protection Bureau (CFPB) for protecting consumers who use prepaid and payroll cards. “The proposal offers strong protections for prepaid and payroll cards that will help ensure that funds are safe, costs are transparent, and prepaid cards are free from abusive overdraft fee practices,” said Lauren Saunders, associate director of the National Consumer Law Center. “The rules will increase consumer and employee confidence when they use prepaid and payroll cards,” Saunders added.

The CFPB proposal restricts, but does not completely ban, overdraft features offered on a few prepaid cards, especially those sold by payday loan stores. “Some prepaid cards push overdraft ‘protection’ that makes it harder for families to make ends meet, draining scarce wages with fees and leaving a hole in the next paycheck.” Saunders said. “The proposed rule requires companies to be honest when they are offering credit and not disguise it as overdraft ‘protection’ that can balloon into hundreds of dollars of fees a year,” she explained. The CFPB proposal requires prepaid cards that function as credit cards to comply with credit card rules including ability to repay, sufficient time to repay, limits on fees in the first year, and a wall between the credit account and the prepaid card funds. “While these rules are a big improvement,” Saunders noted that “overdrafts should be prohibited entirely on prepaid cards. Consumers should be able to rely on a prepaid card being truly ‘prepaid’ and as a safe way to control spending.”

The rule would also protect consumers in case of errors, theft, or unauthorized charges and provide clearer information about fees. “Prepaid cards will be safer and more transparent with better fee disclosures and the same protections that bank account debit cards get in the case of identity theft,” Saunders emphasized, while noting that “all fees should be on the outside of the card’s package so you can easily see the full price before you buy.”

The prepaid card market is growing rapidly. “While banks must do more to make traditional bank accounts safe and affordable for all consumers and should not limit lower income consumers to prepaid cards, the cards can be a safer, cheaper, and more convenient way to manage money than paying bank account overdraft fees, relying on cash, or paying check cashing fees,” Saunders explained.

The public has 90 days to comment on the proposed rule, which will be available on the CFPB’s website under the regulations area.

See statement by Consumers Union and remarks by CFPB Director Richard Cordray.

 

How the CFPB Helps Military Families and All of Us (Ed Mierzwinski, US PIRG)

Columnist George Will recently (and not for the first time) urged Congress to “abolish the Consumer Financial Protection Bureau.” His reasons may seem to come from his conservative philosophy, but merely pander to the powerful Wall Street interests that left our economy in ruins just a few years ago. As a counterbalance, let’s discuss some recent speeches and statements by CFPB Director Richard Cordray on his vision for the bureau and some of its current work, including – on this Veteran’s Day – its efforts to protect military families from financial predators.

As I sit here taking the usual election year phone calls from reporters (but not George Will) asking me what threats face the CFPB in the next Congress, I’ve been looking at all the work that the young agency (it just turned three) has accomplished to make financial markets work better. Rather than focusing on numbers, such as “recovered over $4.6 billion in refunds to consumers from unfair financial practices,” I quickly realized I needed to look no further than two recent major speeches given this October by its director, Richard Cordray. Each talk deserves much more discussion and consideration in the media and review by editorial writers. Perhaps they have not been reported on because they were given in Michigan; it’s an important state but Ann Arbor is not New York City, nor is East Lansing Washington, DC. After discussing those important speeches, I will comment on the CFPB’s defense of military families.

On October 10, Director Cordray gave a speech at the Michigan State University explaining in thoughtful detail why the 40th anniversary of the Equal Credit Opportunity Act should be added to the university’s “60/50” celebration of the 60th anniversary of the Supreme Court’s landmark decision in Brown v. Board of Education and the 50th anniversary of the Civil Rights Act. As Cordray points out, of course, Dr. King’s campaigns for civil rights always included a call for economic justice. In East Lansing, Cordray goes on to explain the role of the ECOA in fighting discrimination:

“For the principle of “fair lending” that underlies this statute is crucial to upholding and enforcing the kinds of economic rights that ensure freedom and equality to the people who constitute our society. One of those rights is the right to access credit on fair and equal terms – to borrow money now for repayment at a future date, so as to have the use of it for purposes of one’s own choosing. Our pursuit of happiness is enhanced when the government helps to ensure that the opportunities that free markets and fair lending make possible are available to us all.”

Later in October, at the University of Michigan Law School, he explained the consumer bureau’s enforcement strategy against four obstacles that hurt consumers in the financial marketplace. He described the “4 D’s” that harm consumers: Deceptive marketing, Debt traps, Dead end markets, and, finally, circling back to the theme of the MSU speech, Discrimination.

Deceptive Marketing: We faced an epidemic of false or misleading information in the lead-up to the financial crisis. As a result, too many homebuyers ended up with complicated mortgage products that could not be made to work, products they often did not understand. These products were doomed to fail, and chances are that if consumers had known better, they would have avoided them.[…] But cleaning up deception in the marketplace also requires some tough action. So we have adopted a number of other regulations to protect consumers in the multi-trillion-dollar mortgage market.  […] We also have taken strong enforcement actions against a growing number of credit card companies that misled millions of consumers with deceptive sales pitches.

Debt Traps: Payday lending is one area we see as a potential debt trap for consumers. We issued a report earlier this year which found that payday loans put many consumers at risk of turning what is supposed to be a short-term, emergency loan into a long-term, expensive debt burden. […]This summer, we took action against ACE Cash Express, another large payday lender, for pushing payday borrowers into a cycle of debt. And, just last month, we sued an online payday lender, the Hydra Group, which was running an illegal cash-grab scam.

Dead Ends: These problems occur in markets where consumers cannot exert their influence by “voting with their feet” – markets like debt collection, loan servicing, and credit reporting. […] […] But some debt collection practices have long been a source of frustration for many consumers, generating a heavy volume of complaints at all levels of government. […]In the credit reporting industry, we have used our authority to improve practices that will better ensure the accuracy of information contained in people’s credit reports and their ability to get errors corrected. We also are pushing hard for the Open Credit Score Initiative, which is providing tens of millions of Americans with free credit scores and raising their awareness of how they are affected by a credit reporting system that judges their creditworthiness.

Discrimination: The fourth D we are taking on, perhaps the most damaging of them all, is discrimination. The greatest challenges some consumers face are rooted in unlawful treatment based on prohibited characteristics like race or national origin. So we are seeking economic justice and the right to equal treatment in the financial marketplace based on individual merit and responsibility.”

These are important speeches, worthy of a closer read. You can find them, and other remarks by Director Cordray, here.

– Ed Mierzwinski

This piece, which is reprinted by permission of the author, was originally poublished by US PIRG.

For-Profit College Rule Has Important Weaknesses (and strengths)

Last week the Department of Education released a final rule on gainful employment, a rule that will impose some new limits on career education programs that have poor outcomes for their graduates. The final rule provides some new protections for students in the for–profit education system, but it is also significantly weaker than the draft proposal released by the Administration earlier this year, and still leaves taxpayer dollars flowing to programs that trap students in abusive debt without providing substantial educational outcomes.

For-profit colleges, such as ITT-Tech and Corinthian, are coming under growing federal and public scrutiny for their abusive lending practices and deceptive marketing techniques. In September, the CFPB sued Corinthian Colleges for luring students into taking out private loans to cover expensive tuition by providing them with false and inflated job placement rates, and also for using illegal debt collection practices to collect on those loans.  Corinthian is currently in the process of being shut down by the Department of Education, as it runs 25 of the 114 programs with more defaulters than graduates.

Because Corinthian and programs like it depend almost entirely on federal student aid dollars, it is important that the Department of Education ensure at the front end that these dollars are not wasted and do not cause harm. In May, Americans for Financial Reform joined 50 other groups in urging the Administration to strengthen its proposed draft gainful employment regulation, but unfortunately the rule moved in the opposite direction. The new rule fails to provide financial relief for students who enroll in programs that lose eligibility, and lets poorly performing programs continue to enroll students up until they lose eligibility.  See comments on the rule from AFR members and allies including TICASSEIU, a coalition of Civil and Human Rights groups, CRL and more.

Despite these weaknesses in the new rule, it does provide some new protections for students. In recent years, some for-profit colleges have offered programs that they have said would prepare students for a specific occupation, yet after taking out loans and completing the program, students have found they were unqualified to legally practice that occupation in their state. The new rule protects against programs that do not qualify students to get the certification necessary to practice their intended occupation. However it fails to protect online students, who may still find themselves, upon graduating, not legally qualified to get the licenses they would need to practice in the state in which they live.

The rule also fails to take into account the outcomes of students who withdraw from programs— unfortunately a very large proportion in some schools. The final rule dropped a provision that would have considered the default rates of all program attendees—whether or not they graduated—instead of just the default rates of those who graduated from the program. Instead, the rule considers a student’s debt burden relative to their income after having graduated from the program. Though the Department kept the debt-to-earnings metric strong, not including those who enrolled but didn’t graduate from programs weakens the rule, as many for-profit college students are unable to complete their degrees yet still have debt from having tried.

The new regulations are a modest step forward. As advocates on these issues have made clear though, much more work in this sphere remains to be done to prevent abusive and predatory practices. The Department of Education needs to do more to protect Corinthian students as the school shuts down, and to take on problems facing students in other poorly performing schools and programs.

– Rebecca Thiess

CFPB Sues Corinthian Colleges for Harmful and Illegal Predatory Lending Practices

On September 16th the Consumer Financial Protection Bureau announced that it is suing Corinthian Colleges over illegal predatory lending and debt collection practices. The CFPB’s lawsuit provides clear evidence that Corinthian used bogus job placement claims to induce students to enroll and take out costly private loans – loans the company knew most students would be unable to repay.  The lawsuit demands an end to these practices, and forgiveness of more than 130,000 private loans made to students since July 2011, including more than $500 million in outstanding debt.

Given the overwhelming evidence that students enrolled and took on debts based on the corporation’s false and misleading claims, AFR members, including TICAS and NCLC, have welcomed the lawsuit. We have also wondered why federal loans to these students should not also be forgiven – something that would require action by the Department of Education.

With more than 100 campuses across the country, Corinthian is one of the largest for-profit, post-secondary education companies in the U.S.  The CFPB’s investigation found that the school was making false and deceptive representations about career opportunities which led students to enroll and take out private loans with high interest rates. After loans were originated, the school was using illegal tactics to collect on those loans while students were still in school.

The Bureau’s complaint against Corinthian details a number of remarkably abusive practices, including:

  • Corinthian’s business model has been to target vulnerable potential student prospects, and mislead them both about the school and about the loans. A 2011 survey of campus operations showed that over 57% of students had household incomes of $19,000 or less, while 35% had household incomes of $10,000 or less.
  • Under federal law, for-profit colleges cannot receive more than 90% of their revenue from U.S. Department of Education aid. In order to meet this requirement and continue to operate off of DOE revenue, the school deliberately inflated tuition prices to exceed federal loan and grant limits, which created a “funding gap” so that students had to take out private loans. Corinthian then steered students toward private loans to fill gap that the school essentially created. These private loans, known as Genesis loans, added significantly to students’ debt burdens.
  • In marketing these private loans, Corinthian did not tell students that the college had a financial interest in them, when in fact it did. Corinthian then took aggressive action to collect on the loans, including pulling students out of class to publicly shame them for not paying back loans.
  • The loans had extremely high interest rates. In 2011 interest rates for Genesis loans were 14.9% with an origination fee of 6%, while interest rates for federal student loans were 3.4% to 6.8%, with a 1% origination fee.  Corinthian continued to make these high-cost loans even though it knew that most students would have no way to repay them.  To date, more than 60% of students with Genesis loans have defaulted on them within three years.
  • Corinthian lied about its job placement rate, in order to maintain accreditation and eligibility for Title IV aid, and induce students to enroll and take out its private loans. The college cited these falsely reported their job placement rates in marketing materials and in documents submitted to accreditors. At a Decatur, GA campus, school employees created fake employers and reported students as having been placed with them, increasing placements rates substantially. Corinthian also paid employers to temporarily hire graduates, with one campus organizing a company to employ graduates for two days at a health fair, and then counting those students as “placed” in order to increase placement rates.
  • Corinthian misrepresented how well students would do after graduating from its program to entice students into enrolling and incurring debt. The college trained its admissions representatives to pressure students who were also parents by telling them that enrolling in a program was their best or only chance to help their children. It also trained admissions representatives to falsely tell prospective students that classroom seats might not be available in the future, pressuring students to sign up immediately for classes and take on Genesis loans.

The CFPB Has Been Hard at Work Protecting Servicemembers and Veterans

The Dodd-Frank Act of 2010 gave the new Consumer Financial Protection Bureau (CFPB) a special mandate to go after fraudsters who prey on members of the military, taking advantage of many servicemembers’ financial inexperience and frequent relocations, among other points of vulnerability. The agency created an Office of Servicemember Affairs to focus on this piece of work. 

In just three years since the agency has been up and running, the CFPB’s Office of Servicemember Affairs has racked up an impressive record of achievement:

  • In July 2014, as a result of a lawsuit filed by the CFPB and 13 state Attorneys General, service members won $92 million in refunds over the sale of computers, videogame consoles, televisions, and other expensive electronic products by a company, Rome Finance, which had concealed illegally high finance charges by artificially inflating the price of the goods.
  • In June 2013, the Consumer Bureau ordered U.S. Bank to refund $6.5 million to service members who had been cheated by a deceptive auto loan program. The bank had drawn active-duty soldiers to its Military Installment Loans and Educational Services program while purposefully hiding fees and payment schedules.
  • Just last month, the CFPB shut down an exploitative fee scam by USA Discounters, a retail chain located outside many military bases. The company was forced to return $350,000 to servicemembers who had been tricked into paying fees for legal protections they already had and for certain services that the company failed to provide.

Winning settlements with lawbreakers is just part of what the Office of Servicemember Affairs does. For a more comprehensive summary of its work, check out AFR’s new fact sheet, “The CFPB is Standing up for Servicemembers and Veterans.”

Big Finance’s Ploy to Keep Consumers in the Dark

The Consumer Financial Protection Bureau recently announced a plan to significantly expand the information that consumers can choose to make public when they file complaints. The bureau currently takes complaints involving credit cards, student loans, mortgages and checking accounts (among other financial products and services), posting a record of the company name and complaint category in each case. If the new plan goes forward, its public database will begin to include individual stories as well, minus identifying information.

The financial industry has let us know just how much it dislikes this proposal: enough to misrepresent it through and through.

The bureau has plainly said that it will continue forwarding every complaint to the appropriate company and giving the company 15 days to respond before a complaint is published. In addition, the bureau is now proposing to give both parties a chance to tell their stories, with the company’s account posted directly alongside the consumer’s.

You would never know this, however, from the massive media campaign launched on Monday by the Financial Services Roundtable, the trade association of the nation’s biggest banks, insurance, asset management, finance and credit card companies. In a blitz of public statements, blog posts, social media messages and attack ads on the walls of the Washington Metro system, the Roundtable paints a menacing picture of “bureaucrats” posting baseless complaints and giving companies “little opportunity to respond,” so that, as Roundtable CEO Tim Pawlenty wrongly put it, people see “only one side of the story.” The Roundtable has created an entire mini-website based on this falsehood.

What’s going on here? Were Pawlenty & Co. in such a rush to denounce the proposal that they forgot to read it? More likely, they’re playing fast and loose with the truth because they would rather not come right out and say that what they really object to is the whole idea of a public database where people can learn about specific consumer grievances and how they’ve been addressed by the companies the Roundtable represents.

The Consumer Bureau (the target of this and many previous industry attacks) is the agency originally proposed by Elizabeth Warren in 2007, and formally established by the Dodd-Frank financial reform law of 2010. Its mission is to bring basic standards of safety and transparency to a market that had become notorious for its abusive practices – practices that imposed huge hidden costs on consumers, besides contributing to the financial crisis of 2008 and the economic meltdown that followed.

The complaint system provides the bureau with valuable real-world insights to apply in its rule-making, supervision and enforcement. By making some of the data public, the bureau hopes to empower consumers and, at the same time, to inspire companies to seriously investigate and respond to complaints, since it would be impractical for the bureau to investigate them all. (There were 113,000 filed last year.)

That system is already making a difference. The bureau’s Office of Consumer Response has received more than 400,000 complaints since it got up and running in 2012. More than 30,000 consumers have gotten monetary relief. Tens of thousands more cases have been resolved by other forms of remedial action.

But the complaint database has the potential to be far more effective if, as consumer groups have long urged, it includes a record of the specific problems that consumers have encountered, and the specific ways in which companies have dealt with those problems. This additional information will make it easier for consumers to spread the word about unfair practices, to compare competing companies and products, and to avoid dangers and pitfalls. It will help spur a virtuous cycle in which more people decide to use the system, and their contributions make it more useful still.

Financial companies also stand to benefit from the ability to compare their experiences with those of competitors, spot opportunities for improvement, and correct problems before they get out of control, the way bad mortgage lending did in the runup to the financial crisis.

For now, though, the industry seems to be stuck on a course of no-holds-barred opposition, and willing to traffic in multiple untruths in service of the cause. The Roundtable would have us believe, for example, that the “vast majority” of complaints filed with the bureau are totally unfounded and thus unworthy of publication. Its evidence? The fact that 70 percent of last year’s complaints “were closed with a simple explanation or clarification.”

Several large factual problems lurk inside this assertion. First of all, a “simple explanation or clarification” can be just what a consumer wants and needs; take the case of someone struggling with a mortgage and trying to find out what can be done to avoid foreclosure.

The use of the word “closed” is misleading in its own right. As the Consumer Bureau admits, its ability to follow up on individual complaints is limited. Cases can be closed without any investigation or adjudication by the agency; and they can be closed with a simple explanation or clarification essentially because that’s what the company saw fit to do. By no means does “closed” equate with resolved, as the industry implies.

Legitimate issues are often raised in complaints even if they involve no clear violation of law. The bureau has already drawn on the complaint database to identify worrisome patterns of conduct in credit card, debt collection, mortgage servicing and other areas, sometimes leading to proposals for new rules or procedures to make the financial marketplace safer.

In its ads, the Roundtable suggests that there is something extraordinary or unprecedented about having a government agency publish consumer complaints. That, too, is inaccurate; the Consumer Bureau is proposing a system that resembles, among other existing databases, one on product safety maintained by the Consumer Product Safety Commission.

The financial industry will probably not stir a great wave of public sympathy with its attacks on this proposal. Then again, public sympathy is not what it’s after. The sympathy it seeks is from lawmakers and regulators, and we can be sure it has other techniques – both cruder and more artful – for reaching them. We’re talking about an industry that (as documented in a new report from Americans for Financial Reform) spends about $1.5 million a day on campaign contributions and lobbying, leaving aside the cost of such ancillary activities as the Roundtable’s ad campaign.

So we can depend on the financial lobby to go all-out in its effort to derail the Consumer Bureau’s plan. That means that others must work equally hard to keep this worthy proposal on track.

- Jim Lardner

Originally published on USNews.com

Fresh Evidence of the Political Power of Money

The proverb says that “money talks,” and it is widely assumed that financial companies make campaign contributions and spend money on lobbying in the expectation of exerting influence. But are their expectations fulfilled?

Building on previous studies of the corrupting power of money, a new research paper by Maria M. Correia, an assistant professor of accounting at the London Business School, finds a strong correlation between a financial company’s political expenditures and the frequency of accounting fraud enforcement actions taken against that company by the Securities and Exchange Commission (SEC).

Correia looked at some 4,000 cases in which companies had to correct their financial statements (an event that often triggers an SEC investigation) between 1996 and 2006. Her study showed that politically connected firms, as reflected by their PAC contributions and lobbying expenditures, were significantly less likely to be singled out for enforcement actions, and, when prosecuted, faced lower penalties.

Companies that made a point of contributing to elected officials with potential influence over the SEC (such as the members or, better still, the chairpersons of congressional oversight committees) were even less likely to face an enforcement action or penalty. An extra $1 million spent in PAC contributions over the previous five years correlated with a sharp reduction in the probability of an enforcement action, from 8.58% to 3.43%.

In one of her most remarkable conclusions, Correa found that a $100,000 increase in PAC contributions over a five-year period was associated with an 11% decrease in monetary penalties imposed by the SEC. The average penalty levied by the SEC during the time studied by Correia was slightly more than $20 million. By spending an additional $100,000 in contributions, then, a company could save a few million dollars – a remarkable return on investment.

Judging by their actions, financial firms appear to think political spending is worthwhile. In all, during the current election cycle, Wall Street banks and financial interests have spent more than $800 million on lobbying and campaign contributions, according to a recent AFR analysis. That works out to about $1.5 million a day.

From Correia’s research, we are increasingly confident that the industry’s money does indeed buy it influence, and that its influence can improve the corporate bottom line. We also know, more surely than ever, that the rest of us have a large stake in continuing to push for limits on the role of money in politics, and in keeping close watch over the triangle of relationships involving Congress, the regulators, and the regulated.

 — Alec Lee

See Big Connection Between Campaign Contributions and Lack of SEC Prosecutions

Paying Off for Consumers – the CFPB Is Getting the Job Done

Getting credit card companies to cough up more than $1.8 billion in refunds to consumers they had cheated. Directing mortgage lenders to limit charges and stop making loans that borrowers can’t afford. Cracking down on “last dollar” scams that collect up-front fees from financially desperate people for help that is never actually delivered. Establishing a consumer complaint database to track financial market trends and help consumers get individual problems addressed

All that and more is the doing, so far, of the Consumer Financial Protection Bureau, which was created just four years ago by the Dodd-Frank financial reform law, and could not begin to wield its authority until a year after that.

The idea for such an agency was put forward in 2007 by then-professor (now Senator) Elizabeth Warren. At the time, as she pointed out, consumer protection in the financial marketplace was a responsibility scattered across multiple agencies, and treated by none as a priority. Key regulators lost sight not only of consumer safety but of systemic safety too, tolerating and even encouraging many of the reckless and deceptive practices that fueled the financial and economic meltdown of 2008.

The big banks and financial companies opposed the bureau as a concept, and they don’t much care for the reality, either. From the start, the bureau has been the target of ferocious attacks from industry lobbyists and their too many friends on Capitol Hill, who have concocted a series of bogus controversies in an effort to depict the agency as out of control.

What it all boils down to is that, unlike some of the watchdogs the financial industry has faced in the past, the bureau has been energetically doing the job it was meant to do: bringing basic standards of safety and transparency to the markets for credit cards, mortgages, student loans, auto loans, checking accounts, debt collection and other common financial products and services.

The bureau has the authority to write rules, supervise a broad range of financial companies, carry out enforcement actions, educate consumers and analyze relevant patterns of industry behavior. In its work to date, it has made fruitful use of all these powers.

In the mortgage market, for example, the bureau has issued rules that discourage high fees and deceptively structured loans, in addition to requiring verification of every borrower’s ability to repay before a loan can be issued. Its new rules, which took effect in January, hold the potential to help save borrowers and the economy from another wave of dangerous and unsustainable lending.

The bureau has also taken a number of noteworthy enforcement actions, producing refunds and fines of more than $4.8 billion so far. These actions, often coming on the heels of multi-agency investigations, have targeted illegal kickbacks for mortgage referrals, unfair billing practices and deceptive telemarketing and sales tactics, among other offenses. More than 15 million consumers have received some restitution, while countless others have benefited from settlement provisions requiring companies to change their practices and from the deterrent effect of serious enforcement.

Another important bureau accomplishment has been to create a complaint system and database where consumers can go with problems involving credit cardsstudent loansbank accounts and servicesdebt collection and more. The agency’s Office of Consumer Response has already received more than 400,000 consumer complaints. Besides helping consumers get monetary relief (such as refunded fees) and non-monetary relief (such as errors fixed on credit reports or an end to harassing phone calls from debt collectors), the complaint system provides the bureau with a reservoir of precious information. Complaints can help highlight repeat problems or law-breaking, and identify important gaps in consumer understanding, letting the agency know where it needs to focus its educational, supervisory, enforcement or rulemaking efforts to improve specific markets, products or practices. Members of the public can use the complaint data both to evaluate different companies and to find out if their personal experiences reflect a wider pattern.

By law, the Consumer Financial Protection Bureau has a special duty to protect seniors, students and military personnel. In its efforts to fulfill that mandate, the bureau has released important reports on student lending and set up an online tool called “Paying for College,” which makes it easier for people to compare financial aid options and figure out a successful repayment strategy. Its Office of Older Americans has gone after scammers who prey on senior citizens. Its Office of Servicemember Affairs has worked with other agencies to add extra protections for military personnel in rules and enforcement actions involving mortgages, payday loans, student loans and debt collection.

In its short life, the bureau has already done much to vindicate the trust of the hundreds of consumer, civil rights, labor, faith and other groups that banded together to insist that such an agency be part of the Dodd-Frank package. But it’s just a start. Plenty of important work lies ahead on payday loans, student loans, prepaid cards and debt collection, among other trouble zones of the financial marketplace. And as the agency takes on industry self-interest in these areas, it will continue to face intense opposition from those in the financial world and from legislators under their sway.

new poll commissioned by Americans for Financial Reform and the Center for Responsible Lending shows overwhelming, bipartisan support for the concept of an agency focused on protecting financial consumers and cracking down on deceptive and abusive practices.

Now it’s important to raise public awareness of this still-young agency, so more people can benefit from its complaint system, educational tools and other resources – and so the voices of the many who value the bureau’s work can continue to be louder than the voices of the few who want it to go away.

- Rebecca Thiess

Originally published on USNews.com

CFPB Brings Action Against ACE Cash Express for Bullying Borrowers Into Borrowing Again

The CFPB has announced an action against ACE Cash Express for pushing borrowers into cycles of debt, and using harassment and false threats of criminal prosecution to do so. ACE is one of the largest payday lenders in the U.S., marketing loans and related services both online and through 1,500 retail storefronts in 36 states and the District of Columbia. Specifically, the CFPB found that ACE was guilty of:

  • Threatening to sue or prosecute consumers who did not make payments, using legal jargon even though the company did not actually sue for non-payment of debts.
  • Threatening to charge extra fees and report consumers to credit reporting agencies, even though as a matter of corporate policy ACE debt collectors could not do either of those things.
  • Harassing consumers with collection calls in an abusive manner, and calling consumers’ employers and relatives to share details about their debts.

The harassing coercion tactics used by ACE resulted in cash-strapped consumers being bullied into cycles of debt.  A striking graphic uncovered by the CFPB in the investigation, and made public, makes clear that this was deliberate company policy.  The graphic, which was a part of ACE’s training manual, puts application for a new short term loan as the step after collection efforts on the previous loan.

ACE Debt Cycle

With its outrageous conduct (and its training manual), ACE Cash Express provides a fresh reminder of why the CFPB needs to write strong rules to end payday lending abuses.

-  Rebecca Thiess

See CFPB announcement and consent order.