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

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.

The CFPB at Three: A Child Prodigy

(By Ed Mierzwinski, USPIRG) The Consumer Financial Protection Bureau (CFPB) turned just three years old Monday, July 21st, but when you look at its massive and compelling body of work, you must wonder: Are watchdog years like plain old dog years? Is the CFPB now a full-sized, 21-year-old adult?

The answer is no, not yet. The CFPB is still growing and developing and adding programs and projects. The CFPB is, however, at three years old, certainly a child prodigy.

The CFPB was established as an integral part of the Wall Street Reform and Consumer Protection Act enacted in 2010 to fix the mess created when banks ran amok, resulting in the Great Recession that began with the September 2008 economic collapse.

It is the nation’s first financial agency with just one job, protecting consumers. It’s also the first federal agency with authority over the full financial marketplace, so consumers are protected whether they shop at a bank, non-bank mortgage company or payday lender, or are harmed by credit bureau mistakes or debt collector abuses. It even has special offices to protect older Americans, servicemembers (and veterans) and students.

In poll after poll (new Lake poll for PIRG-backed Americans for Financial Reform), the American people overwhelmingly support the CFPB and ongoing Wall Street oversight. Nevertheless, the CFPB remains subject to withering attacks from the financial industry whose tricks and traps led our economy into collapse.

After you take a look at some of its successes and some of its work in progress, we think you’ll agree: the idea of the CFPB needs no defense, only more defenders.

The CFPB is protecting credit card customers: It has ordered five of the nation’s six biggest credit card companies — Capital One, Discover, American Express, Bank of America and JP Morgan Chase — to return a total of $1.5 billion dollars directly to the consumers they ripped off with fraudulently-marketed, junky add-on products. And in June, it ordered GE Capital (now Synchrony) to refund more than $225 million for illegal and discriminatory credit card practices (CFPB Enforcement blog page).

The CFPB is helping with complaints: The CFPB has established a Public Consumer Complaint Databasethat is already the nation’s largest collection of financial complaints, with more than 400,000 complaints about banks, credit bureaus, credit cards, debt collectors, private student lenders and mortgage companies received so far. Just last week, the CFPB proposed(and seeks comments for 30 days) an important enhancement to the database: By posting narrative contextual details of consumer stories, it will be easier for bank examiners, researchers, other consumers and even financial firms themselves to determine whether bad practices are isolated or common.

The CFPB is protecting students from unfair practices: Earlier this year, the CFPB filed a lawsuit against the for-profit college ITT Educational Services, arguing that they engaged in predatory student lending practices that push students into high-cost private student loans that inevitably will default. The CFPB has also investigated the growing use of high-fee debit cards to disburse student loans, and issued “Know Before You Owe” tools for student consumers.

The CFPB is helping stop fraud against servicemembers, veterans and their families:The CFPB’s Office of Servicemember Affairs targets financial frauds and scams aimed at military families and veterans. Sadly, it’s a big problem. In November, the CFPB obtained $14 million in servicemember refunds from Cash America, a payday lender that violated the Military Lending Act.

The CFPB is reining in debt collector abuses: As a 21st century, data-driven agency, the CFPB is keenly aware that debt collection complaints have rapidly eclipsed all others in its complaint database. Consequently it is looking very closely at debt collector practices. This month, the CFPB fined payday lender Ace Cash Express $5 million and ordered it to return an additional $5 million to its customers for illegal debt collection tactics. It also filed a lawsuit against a “debt collection lawsuit mill” for using “illegal tactics to intimidate consumers into paying debts they may not owe.”

The CFPB is forcing credit bureaus to do a better job: The often-lethargic credit bureaus are responding to the recommendations in the CFPB’s comprehensive report on the industry. In particular, the so-called Big Three bureaus — Experian, Equifax and Trans Union — have agreed to share full consumer complaint files with creditors during reinvestigations, instead of merely converting the details into a 2-digit code meaning, for example, “Consumer says not my account.” Without the details, how could the creditor determine whether the consumer had a valid dispute?

The CFPB is listening to consumers: In addition to taking consumer complaints, the CFPB is urging consumers to simply tell their financial stories, good or bad (Watch videos of stories or tell your own story here). The CFPB is helping consumers with its “Ask CFPB” tool. It’s been on the road all over the country, to hear from consumers and small bankers in the communities where they live and work, from El Paso and Long Beach to Des Moines, from Boston to Itta Bena, Mississippi.

Over the next six months, the CFPB is expected to take major steps in three important areas where powerful industry forces may challenge it. But already, the House of Representatives has passed appropriations amendments designed to eliminate the CFPB’s independent funding. No other bank regulator is subject to the politicized appropriations process, for good reason. Earlier this year, theHouse passed a broader package designed to cripple the bureau.

The same lobbies that supported rolling back the CFPB’s independence are expected to oppose its pending efforts to protect consumers.

Soon, the CFPB is expected to propose rules regulating the exploding prepaid card market. Credit cards are heavily regulated, with debit cards, payroll cards and gift cards somewhat regulated, but the rapidly-growing general purpose prepaid card market is generally not regulated at all. The CFPB is also expected to propose rules governing high-cost, short-term payday loans that some, but not all, states have regulated. Finally, the CFPB was tasked by Congress to investigate whether small-print binding arbitration clauses in “take-it-or-leave-it” financial contracts encourage companies to ignore the law, because their customers cannot take them to court. If it so finds, the CFPB is authorized to ban or regulate the clauses.

Each of these projects threatens one or more powerful special interests that have long challenged the CFPB’s activities, and they are expected to escalate their attacks if the CFPB’s reforms go forward in a pro-consumer way. Consumers who depend on the CFPB to make markets work fairly, for both consumers and good actors, will need to step up and support the CFPB. After all, the idea of the CFPB needs no defense, only more defenders.


Originally published on US PIRG.

SunTrust Systematically Ignored Loan Modification Appeals, TARP Watchdog Finds

“SunTrust so bungled its administration of the program that many homeowners would have been exponentially better off having never applied through the bank in the first place.”

So said the Special Inspector General for TARP (SIGTARP), Christy Romero, regarding SunTrust Mortgage Inc.’s handling of dollars received through the Troubled Asset Relief Program (TARP) to go toward helping struggling homeowners.

Earlier this month, SIGTARP announced—along with the Department of Justice, the Federal Housing Finance Agency’s IG, the U.S. Attorney’s Office for the Western District of Virginia, and the U.S. Postal Inspection Service—a prosecution agreement resolving a criminal investigation into SunTrust’s administration of the Home Affordable Modification Program (HAMP). HAMP was created in 2008 as part of the Troubled Asset Relief Program (TARP), in order to help eligible homeowners with loan modifications on their home mortgage debt.

In documents that were filed along with this case, it was revealed that SunTrust, which received $4.85 billion in federal taxpayer funds through TARP, both misled mortgage servicing customers who sought mortgage relief through HAMP and failed to process HAMP applications. The company was so negligent that they put piles of unopened homeowners’ applications in a room, the floor of which actually buckled under the weight of unopened document packages.  Their practices meant that many homeowners were improperly foreclosed upon, as documents and paperwork were lost and applications were completely ignored.

The company has agreed to pay $320 million to resolve the criminal investigation into its HAMP program. Despite the egregious nature of what they did, it is worth noting that this is less than one half of one percent of its servicing portfolio (as of December 2013).Of the money SunTrust has agreed to pay:

  • $179 million will go toward restitution for borrowers to compensate for damage done by the company’s mismanagement. If more than $179 million is found to be needed, the bank has agreed to guarantee an additional $95 million for restitution on top of that.
  • $16 million will go toward forfeiture, to be available for law enforcement agencies working on waste, fraud, and abuse matters related to TARP.
  • $20 million will go to establish a fund that will be distributed to organizations that provide counseling and other services to distressed homeowners.

SunTrust is also required to implement corrective measures to prevent problems like the ones that led to this investigation, including increasing their loss mitigation staff, monitoring their mortgage modification process, and providing semi-annual reports on their compliance with this agreement.

– – Rebecca Thiess


The Outrageous Campaign Against "Operation Choke Point"

The job of government, some people say, is to protect life and property and maintain the rule of law, period. But even that much government may be too much for the opponents of a Justice Department initiative known as Operation Choke Point.

The idea behind Operation Choke Point is simple: stop banks and third-party payment processors from abetting fraud. Financial institutions have long been required to watch out for (and report) evidence of criminal activity. Yet they have long been tempted to look the other way, since criminals can also be highly profitable customers. (The $8.9 billion fine against BNP Paribas this week for transferring money to Sudan and other blacklisted countries is just the latest case in point.)

In recent years, scammers of many sorts have developed ways of systematically extracting money from people’s bank accounts. In doing so, they have benefited from the rise of online commerce and automatic debiting, and also, in too many cases, from the complicity of banks, which have sometimes lent a hand even when the warning signs were staring them in the face.

In April, federal prosecutors announced a settlement with Four Oaks Bank & Trust of North Carolina. Four Oaks and a Texas-based payments company had processed roughly $2.4 billion in transactions benefiting illegal payday lenders, money laundering of Internet gambling operations and, in one case, a thinly disguised online Ponzi scheme.

Four Oaks employees suspected something was amiss. One tipoff: charge reversal rates of 30 percent to 70 percent, compared to what regulators say is a normal rate of 1.5 percent. Despite complaints from attorneys general and other warning signals, however, the bank did nothing except go on taking its cut. “I’m not sure ‘don’t ask, don’t tell’ is going to be a reasonable defense,” one bank manager commented in a cautionary email that colleagues chose to ignore.

Mass-market consumer fraud, in all its forms, is a huge law enforcement problem, costing people tens of billions of dollars a year, by the FBI’s estimate. Older Americans, a prime target, are bilked out of $2.9 billion a year, according to a study by MetLife. A few weeks ago, a payment processor agreed to surrender its claim to $1.1 million in earnings from what the Federal Trade Commission said was the company’s knowing alliance with a bogus credit-card interest rate reduction service that had defrauded tens of thousands of consumers out of more than $10 million in all.

So who would object to a crackdown on this sort of scam? Who, that is, other than the scammers who are being cracked down on?

Well, the objectors turn out to be surprisingly numerous, and surprisingly righteous. Some of them, moreover, hold seats in Congress. Rep. Blaine Luetkemeyer, R-Mo., for one, just last week introducedlegislation to, in his words, “stop these backdoor efforts by government bureaucrats to blackmail and threaten businesses simply because they morally object to entire sectors of our economy.”

That is the theme of the anti-Choke Point crusaders, whose congressional spokespeople also include Sen. David Vitter, R-La., and Rep. Darrell Issa, R-Calif., chairman of the House Oversight and Government Reform Committee. Issa’s committee, in a recent report, claimed that Operation Choke Point had “forced banks to terminate relationships with a wide variety of entirely lawful and legitimate merchants.”

The committee could not, however, point to any real-life example of a bank being told to behave this way. The best evidence it could muster was a 2011 guidance memo in which the Federal Deposit Insurance Corporation (making no reference to Operation Choke Point) identified 30 lines of business, including get-rich products, drug paraphernalia and escort services, with a high potential for fraud. The point of the memo, though, was simply to highlight areas where banks and payment companies should be looking for signs of trouble – for, say, an unusually “high volume of consumer complaints” or “a large number of returns or charge backs.”

How, then, to explain the protest and indignation? One obvious factor is the political power of the financial industry. Many bankers work hard to avoid the legal and reputational problems that come from doing business with lawbreakers. Others, though, seem to angrily reject the notion that they have a responsibility to exercise due diligence; and, as often happens in Washington, the banking establishment has decided to stick up for its worst elements rather than its best. “When you become a banker, no one issues you a badge, nor are you fitted for a judicial robe,” American Bankers Association CEO Frank Keating argued in a recent Wall Street Journal op ed, summing up the “we can’t be bothered” attitude of some of his constituents and allies.

In addition to the banks and payment processers and their respective trade associations, the forces of opposition appear to include online gamblers and payday lenders. The payday lending industry has come under mounting criticism for a business model that depends on getting borrowers stuck in triple-digit-interest debt for months on end. Twenty-two states have banned or sharply limited such loans. Some lenders have responded by moving online or engaging in other subterfuges, and a crackdown on the processing of illegal payments clearly poses a threat to their ability to make loans that violate the law. (And even licensed payday lenders and money transmitters have sometimes been unable to get bank accounts; but that’s an old industry complaint – one that long predates the 2013 launch of Operation Choke Point.)

Undoubtedly, there is money to be made – campaign money – by legislators who decide to join the attack. And if some of them seem to have let their rhetoric get out of control, perhaps that can be attributed to a combination of reflexive government-bashing and the need to find moral cover for a position that would otherwise sound a lot like shilling for an especially smarmy collection of special interests.

Fortunately, this strange cause has not gained traction in the Senate, and the Justice Department appears to be standing behind the program. Two banks, Zions and PNC, have disclosed that they are currently under investigation for facilitating fraud. The Department has announced similar investigations into more than 10 additional (but as yet unnamed) banks and payment processing companies. Last week, Attorney General Eric Holder issued a statement vowing to “enforce the law against both the fraudsters who prey on consumers and the financial institutions who choose to allow these crimes to occur.”

As the Operation continues, and word gets out, most people will probably respond well to the phenomenon of Uncle Sam challenging (rather than enabling) the unlawful conduct of banks. Perhaps, in time, we will hear fewer lawmakers railing against what ought to be viewed as a normal and uncontroversial exercise of law enforcement.

 — Jim Lardner
Originally published on