On March 19, Illinois Attorney General (AG) Lisa Madigan announced a suit against a lender for allegedly offering a short-term credit product designed to evade the state’s usury cap. The AG claims the lender offers a revolving line of credit with advertised interest rates of 18 to 24%, and then adds on “account protection fees.” The AG characterizes those fees as interest substantially in excess of the state’s 36% usury cap. According to the AG, after a borrower takes out the short-term loan, the lender allegedly provides a payment schedule and instructs the borrower to make minimum payments, which consumers who filed complaints with the AG’s office believed was a timeline to pay off the full debt. The complaint is the AG’s first under the Dodd-Frank Act and claims that the lender’s practices take unreasonable advantage of consumers and constitute abusive practices. The complaint also alleges violations of the state Consumer Fraud and Deceptive Businesses Practice Act and seeks restitution, civil penalties, disgorgement, and an order nullifying all existing contracts with Illinois consumers and prohibiting the company from selling lines of credit and revolving credit in Illinois.
On March 31 the CFPB published its Consumer Response Annual Report, providing a review of the CFPB’s complaint process and a description of complaints received during January 1 through December 31, 2013. According to the report the Bureau received approximately 163,700 complaints in 2013. Mortgage complaints outpaced all others (37%), followed by complaints regarding debt collection (19%), bank accounts (12%), and credit cards (10%). Complaints related to consumer loans, student loans, payday loans, money transfers, and “other” each comprised 3% or less of the total. The report also breaks down the types of complaints for each category and summarizes companies’ responses. The majority of closed complaints for all categories were resolved with an explanation by the company, i.e. without monetary or other relief, and companies responded to complaints in a timely fashion 99% of the time, or better. The report also stated that the CFPB “continues to evaluate, among other things, the release of consumer narratives, the potential for normalization of the data to make comparisons easier, and the expansion of functionality to improve user experience.”
On March 20, the CFPB released its third annual report summarizing its activities in 2013 to implement and enforce the FDCPA. The report describes the CFPB’s and the FTC’s shared FDCPA enforcement authority, incorporates the FTC’s annual FDCPA update, and reiterates the intention of both the FTC and the CFPB to exercise their authority to take action—both independently and in concert—against those in violation of the FDCPA.
The report highlights the debt collection-related complaints the Bureau has received—over 30,000 since the CFPB began accepting and compiling consumer complaints in July 2013, making the third-party debt collection market the largest source of consumer complaints submitted to the CFPB. The report states that the majority of the complaints the CFPB has received involve attempts to collect debts not owed and allegedly illegal communication tactics. The report also identifies several changes within the debt collection industry over the past year that will remain points of emphasis for the CFPB, including the expansion of the debt buying market, the growth of medical debt and student loan debt in collection, and the use of expanded technologies to communicate with debtors.
On March 6, the CFPB released a “snapshot” of servicemember complaints prepared by the Office of Servicemember Affairs (OSA), which analyzes the military consumer complaints received since July 2011. According to the report, servicemembers, veterans, and their families have submitted 14,100 complaints to the Bureau since its opening and have recovered more than $1 million. The volume of servicemember complaints has continued to increase over time, rising 148% from 2012 to 2013.
Notably, although “debt collection” was not added as a complaint category until July 2013, approximately 3,800 complaints received relate to collection practices. Nearly half of these complaints concern attempts to collect non-existent debts, with the remainder concerning improper collection tactics and procedural issues related to collection. The category that received the most complaints—approximately 4,700—was mortgage. Concerns raised relate primarily to practices undertaken when a borrower defaults, but also to loan origination and making payments. The remainder of the complaints received relate to consumer loans, private student loans, payday loans, credit cards, credit reporting, banking services, and money transfers. Along with debt collection practices, the report identifies payday loans—and specifically, compliance with the Military Lending Act’s interest-rate restrictions—as a point of focus for OSA.
On January 30 the CFPB, the Department of Defense (DOD), the Department of Veterans Affairs (VA), the FTC, and other federal agencies announced the launch of a new online system designed to collect information from veterans, current servicemembers, and their families regarding negative experiences at education institutions and training programs administering the Post-9/11 GI Bill, DOD Military Tuition Assistance, and other military-related education benefit programs. The new system is modeled after the CFPB’s complaint system and is intended to help the government identify and address unfair, deceptive, and misleading practices. The complaint system, which is comprised of the DOD’s Postsecondary Education Complaint System and to the VA GI Bill Feedback System, was developed in accordance with the April 2012 Executive Order 13607, Establishing Principles of Excellence for Educational Institutions Serving Service Members, Veterans, Spouses, and Other Family Members. That order required, among other things, the Secretaries of Defense and Veterans Affairs to “create a centralized complaint system for students receiving Federal military and veterans educational benefits to register complaints that can be tracked and responded to by the Departments of Defense, Veterans Affairs, Justice, and Education, the CFPB” and other relevant agencies.
On January 28, the CFPB issued a consumer advisory in response to recent reports of data breaches at several large retailers. In addition to providing tips for consumers in the wake of a retail breach, the advisory encourages card holders to submit complaints about debit and credit card issuers’ inadequate responses to consumer charge disputes related to data breaches.
The advisory is the first public response from the CFPB on data breach issues. It follows a request last month from Senator Chuck Schumer (D-NY), a member of the Senate Banking Committee, that the CFPB conduct an investigation of the data breach and issue a “full report on the findings of its investigation — informing the public of how this breach occurred, how consumers can protect themselves from similar attacks, and any further recommendations the CFPB may have for retailers to minimize the occurrence of similar breaches.” Schumer also asked Director Cordray to “take a closer look at whether retailers systems should be required to transfer credit and debit card information as encrypted data. . . . The CFPB must ensure that necessary rules and standards for retailers are in place to validate consumers’ trust in the transaction process.”
Numerous congressional committees share jurisdiction over data breach issues. The Senate Banking Committee will be among the first to act with a hearing scheduled for February 3, 2014 that will feature governmental witnesses, as well as the views of the retailer and banking industries.
On November 12, the CFPB announced a partnership with the City of Columbus to provide local residents access to the CFPB’s consumer complaint hotline through the city’s existing constituent service hotline. Columbus residents who call the city hotline with a question or complaint about consumer financial products or services will be transferred directly to the CFPB for assistance. The CFPB announced a similar partnership with the City of St. Louis, Missouri on October 31, and has established relationships with numerous other localities in the past, including Newark, New York, Boston, and Jackson.
On November 6, the CFPB announced that it now will formally accept borrower complaints regarding payday loans through its online complaint portal and by phone. The CFPB’s complaint taking process launched with the Bureau in July 2011, and the CFPB began publishing complaints through its online complaint database in June 2012. The CFPB started with credit card complaints and has since expanded the complaint program and public database to cover mortgages, debt collection, credit reporting, student and other consumer loans, and other products and services. Read more…
On October 28, HUD issued two mortgagee letters related to the servicing of certain FHA-insured loans. Mortgagee Letter 2013-38 provides a list of the first legal actions necessary to initiate a foreclosure and the reasonable diligence timeframes for completing foreclosure and acquisition of title in each state. The letter also outlines acceptable delays in those timeframes due to mediation or bankruptcy, or when a separate legal action is necessary to acquire possession of the title. In addition, the letter provides a new schedule of allowable attorney fees by state for services performed in connection with a mortgage default. The updated reasonable diligence timeframes apply to all cases in which the first legal action to initiate foreclosure occurs on or after November 1, 2013. The updated attorney fees are effective for all cases in which certain actions occur on or after November 1, 2013. Mortgagee Letter 2013-39 updates the timelines servicers must follow for collection communications, advises servicers regarding early engagement in loss mitigation, outlines staffing requirements to support timely borrower communications, and provides guidance on the timing, content, and method of delivery for collection letters and other borrower communications. This letter also advises servicers to pay special attention to borrowers at risk of early payment default and re-default, and provides specialized collection techniques for such borrowers. Finally, this letter details the FHA’s expectations for escalating borrower inquiries and complaints that allege (i) improper analysis of borrower information or denials of loss mitigation options, (ii) foreclosures initiated or continued in violation of HUD’s policy, or (iii) any other violations of HUD collections and loss mitigation policies. This guidance is effective for all mortgages in default as of January 1, 2014.
On September 20, the CFPB announced a partnership with the City of Jackson, Mississippi, to accept and respond to questions and complaints about financial products and services posed directly to the Bureau by local residents. The agreement will allow Jackson consumers to dial a local hotline and be connected with the CFPB’s Consumer Response team, which will screen complaints for completeness, jurisdiction, and non-duplication. This agreement is one of several the CFPB has entered with localities around the country and is at least the second time that the CFPB has partnered with a locality on a consumer complaint hotline. The CFPB is currently accepting complaints regarding credit cards, mortgages, deposit products and services, consumer loans, private student loans, credit reporting, debt collection, and money transfers.
On June 26, the CFPB announced that its next field hearing will focus on debt collection and will be held in Portland, Maine on July 10, 2013. The event, which is open to members of the public who RSVP, will feature remarks from CFPB Director Richard Cordray, as well as testimony from consumer groups and industry representatives. In the past, the CFPB has made policy announcements in connection with field hearings, and this time may announce, among other things, that it will begin accepting debt collection complaints through its public complaint database.
On June 18, the CFPB announced a partnership with the City of Boston to provide local residents access to the CFPB’s consumer complaint hotline through the city’s existing constituent service hotline. Boston residents who call the city hotline with a question or complaint about consumer financial products or services will be transferred directly to the CFPB for assistance.
CFPB Releases Consumer Reporting and Money Transfer Complaints, Expands Complaint Database Functionality
On May 31, the CFPB published for the first time consumer complaints about credit reporting, which the CFPB began accepting in October 2012, and money transfer complaints, which it began accepting in April 2013. The CFPB also announced that all complaints in its consumer complaint database now include a field for the state from which the complaint was filed. That field allows the CFPB to report, for example, that the top states for per capita mortgage complaints are (i) New Hampshire, (ii) Maryland, (iii) the District of Columbia, (iv) Georgia, and (v) Florida.
On May 1, the CFPB’s Office of Servicemember Affairs published its Semi-Annual Complaint Report, which states that the volume of complaints from servicemembers, veterans, and their families has steadily increased since the CFPB first started accepting complaints in July 2011. The report provides limited summary information about the complaints, noting that mortgage complaints predominate, followed by credit card and credit reporting complaints. In a related blog post, the CFPB states that it has received more than 5,000 servicemember complaints to date, and calls again for additional questions or complaints from the entire military community.
Today, the FHFA Office of Inspector General (OIG) issued a report on servicers’ handling of borrower complaints, following an audit to assess FHFA’s oversight of Freddie Mac’s controls over servicers’ handling of escalated cases. Under the Servicing Alignment Initiative (SAI), servicers are required to track the escalated cases they receive – specifically defined to include any of five categories of complaints – and resolve those cases within 30 days. In addition, Freddie Mac’s Servicing Guide requires servicers to report monthly on escalated cases status, including when received and how resolved. According to the report, the audit revealed that (i) most of Freddie Mac’s servicers are not complying with reporting requirements for escalated cases, (ii) Freddie Mac’s oversight of servicer compliance has been inadequate, and (iii) the FHFA did not identify the foregoing problems through its own examination of Freddie Mac’s implementation of the SAI. In response, the OIG recommends that FHFA (i) ensure that Freddie Mac requires its servicers to report, timely resolve, and accurately categorize escalated cases, (ii) ensure that Freddie Mac enhances its oversight of its servicers through testing servicer performance and establishing fines for noncompliance, and (iii) improve its oversight of Freddie Mac by developing and implementing examination guidance related to testing the implementation of directives. Following receipt of the report, House Oversight Committee Ranking Member Cummings (D-MD) called for a hearing on borrower complaint handling by servicers.