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A snapshot of financial complaints from the military
A snapshot of financial complaints from the military
Source: Consumer Financial Protection Bureau
Did you know we’ve received more than 5,000 complaints from servicemembers, veterans, and their families? By and large, statistics for complaints submitted by the military track with those of the population at large. But these complaint statistics aren’t just numbers to us: they represent military members and their families and we know the impact consumer financial issues can have on their quality of life.
In one complaint, an active-duty airman received permanent change of station orders in April 2012 – meaning he had no choice but to move – and tried to get approval from his mortgage servicer to sell his house in a short sale. In August, the company denied his request. He contacted his judge advocate to find out his rights; the judge advocate contacted the CFPB and learned about the guidance we had issued to clarify what mortgage servicers should do when contacted by a servicemember who has received PCS orders.
Based on that guidance, the judge advocate advised the airman to submit a complaint to us. We monitored the complaint and helped address the issues raised in the complaint. After previously denying the short sale, the company re-reviewed the airman’s request and approved it.
In another complaint, an active-duty army officer had been told by her student loan servicer that they were going to terminate her SCRA rights unless she provided a new set of orders that contained an end date. As an officer, she did not have orders with an end date, so the servicer terminated her interest-rate protection while she was still serving on active duty. The consumer complained to the CFPB and even before the complaint was routed to the relevant enforcement agency, a representative from the Office of Servicemember Affairs was able to communicate with the servicer and ensure the rate was reinstated.
Consumer Financial Protection Bureau report details how the nation’s largest credit bureaus manage consumer da ta
Source: Consumer Financial Protection Bureau
Today the Consumer Financial Protection Bureau (CFPB) released a report on the consumer experience with the three largest nationwide credit reporting companies: Equifax Information Services, LLC; Experian Information Solutions Inc.; and TransUnion LLC. Among the key takeaways in the report, which is one of the most comprehensive studies of credit reporting to date, are that credit card history dominates the information in consumer reports and that debt collection items generate the highest rate of disputes.
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Credit reporting companies, also called credit bureaus, are businesses that track a consumer’s credit history. The credit reports they generate – and the three-digit credit scores that are based on those reports – play an increasingly important role in the lives of American consumers. Most decisions to grant credit and set interest rates for loans are made using information contained in credit reports as a key decision factor.
Equifax, Experian, and TransUnion each have more than 200 million files on consumers. In a typical month, they receive updates from approximately 10,000 information “furnishers,” which are the entities that supply data on consumers. The furnishers do this on more than 1.3 billion “trade lines,” which are individual information sources on a consumer report such as a consumer’s accounts for a car loan, mortgage loan, or credit card.
The report is the result of the CFPB analyzing U.S. information from 2011, including information submitted by TransUnion, Equifax, and Experian. Among the key takeaways in the report:
- More than half of the trade lines in the credit bureau databases are supplied by the credit card industry: Credit reporting companies get their information from a variety of industries but more than half of the account information is supplied by credit card companies. Specifically, 40 percent comes from bank cards, such as general credit cards, and 18 percent comes from retail credit cards. Only 7 percent comes from mortgage lenders or servicers, and only 4 percent comes from auto lenders.
- More than a third of disputes have to do with collections: In 2011, consumers reached out to the credit reporting companies roughly 8 million times, resulting in disputes of 32 to 38 million items in their credit files. Almost 40 percent of the disputes relate to debt in collections, and debt in collections is five times more likely to be disputed than mortgage information. According to the industry, some of this may have to do with consumers’ incentive to dispute any negative information on their reports.
- Fewer than one in five people obtain copies of their credit report each year: The most effective way for consumers to identify errors in their reports is to obtain copies and review them. But only about 44 million consumers per year, or about one in five, obtain copies of their files.
- Most information contained in credit reports comes from a few large companies: Most information contained in credit files comes from a small number of large banks and other financial institutions. In fact, the top 10 data furnishers provide 57 percent of the trade lines coming into the credit reporting companies. The top 50 furnishers provide 72 percent. And the top 100 furnishers provide 76 percent.
- Most complaints are forwarded to the furnishers that provided the original information: The credit reporting companies resolve an average of 15 percent of consumer disputed items internally, without getting the data furnishers involved. The remaining 85 percent are passed on to the furnishers. Today’s report, however, found that the documentation consumers mail in to support their cases may not be getting passed on to the data furnishers for them to properly investigate and report back to the credit reporting company.
CFPB orders American Express to pay $85 million refund to consumers harmed by illegal credit card practices
Source: Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB) today announced an enforcement action with orders requiring three American Express subsidiaries to refund an estimated $85 million to approximately 250,000 customers for illegal card practices. This action is the result of a multi-part federal investigation which found that at every stage of the consumer experience, from marketing to enrollment to payment to debt collection, American Express violated consumer protection laws.
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The Federal Deposit Insurance Corporation (FDIC) together with the Utah Department of Financial Institutions discovered the illegal activities during a routine examination of an American Express subsidiary, the American Express Centurion Bank.The FDIC transferred portions of the investigation to the CFPB when the Bureau opened its doors last year and together the agencies pursued the matter. The CFPB later concluded that many of the same violations that occurred at American Express Centurion Bank also took place at American Express Travel Related Services Company, Inc. and American Express Bank, FSB.
The investigations found that the violations occurred at various points in time between 2003 and spring 2012. They occurred at every stage of the consumer experience, from shopping for cards, to applying for cards, to paying charges, and to paying off debt. More specifically, American Express subsidiaries:
- Deceived consumers who signed up for the American Express “Blue Sky” credit card program: Consumers were sometimes led to believe they would receive $300 in addition to bonus points if they signed up for this American Express Centurion Bank program. But consumers who met the qualifications did not receive the $300. This violates federal laws prohibiting deceptive practices.
- Charged unlawful late fees: American Express Centurion Bank and American Express Bank, FSB billed late fees on certain cards based on a percentage of the debt in violation of the Credit CARD Act.
- Unlawfully discriminated against new account applicants on the basis of age: American Express Centurion Bank used a credit scoring system that treated charge card applicants differently on the basis of age. For a period of time, the bank did not fully implement the system for applicants over the age of 35. This violated the Equal Credit Opportunity Act because it requires credit scoring systems that take age into account to be properly designed and implemented.
- Failed to report consumer disputes to consumer reporting agencies: American Express Centurion Bank and American Express Bank, FSB failed to report the existence of certain customer disputes to credit bureaus, which is a violation of the Fair Credit Reporting Act.
- Misled consumers about debt collection: All three of the American Express subsidiaries deceived consumers into believing there were certain benefits to paying off old debt. Consumers were wrongly told that if they paid off the old debt, the payment would be reported to credit bureaus and could improve their credit scores. In fact, American Express was not reporting the payments and the debts were so old that even if they had tried to report them, many of the payments would not have appeared on these consumers’ credit reports or affected their credit scores. American Express also told some consumers that a portion of their debt would be waived or forgiven if they accepted certain settlement offers. But for customers who applied for a new American Express card, the company was not really forgiving or waiving the debt.
Consumer Financial Protection Bureau Study Finds Credit Scores Used by Consumers and Lenders Can Differ
Consumer Financial Protection Bureau Study Finds Credit Scores Used by Consumers and Lenders Can Differ
Source: Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB) released a study comparing credit scores sold to creditors and those sold to consumers. The study found that about one out of five consumers would likely receive a meaningfully different score than would a lender.
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The Dodd-Frank Wall Street Reform and Consumer Protection Act directed the CFPB to compare credit scores sold to creditors and those sold to consumers by nationwide credit bureaus and to determine whether differences between those scores harm consumers. Today’s study analyzes credit scores from 200,000 credit files from each of the following credit bureaus: TransUnion, Equifax, and Experian. It is a follow up to a study the Bureau released in July 2011 that described the credit scoring industry, the types of credit scores, and the potential problems for consumers that could result from differences between the scores they purchase and the scores creditors use.The study released today determined:
- One out of five consumers would likely receive a meaningfully different score than would a creditor: When consumers purchase their score from a credit bureau, the score they receive may be meaningfully different from the score that a lender would consult in making a decision. A meaningful difference means that the consumer would be likely to qualify for different credit offers – either better or worse – than they would expect to get based on the score they purchased.
- Score discrepancies may generate consumer harm: When discrepancies exist between the scores consumers purchase and the scores used for decision-making by lenders in the marketplace, consumers may take action that does not benefit them. For example, consumers who have reviewed their own score may expect a certain price from a lender may waste time and effort applying for loans they are not qualified for, or may accept offers that are worse than they could get.
- Consumers unlikely to know about score discrepancies: There is no way for consumers to know how the score they receive will compare to the score a creditor uses in making a lending decision. As such, consumers cannot exclusively rely on the credit score they receive to understand how lenders will view their creditworthiness.
The Bureau recommends that consumers consider the following in evaluating the credit score they receive:
- Shop around for credit. Consumers benefit by shopping for credit. Regardless of the scores different lenders use, they may offer different loan terms because they operate different risk models or face different competitive pressures. Consumers should not rule out of seeking lower priced credit because of assumptions they make about their credit score. While some consumers are reluctant to shop for credit out of fear that they will harm their credit score, that negative impact may be overblown. Inquiries generally do not result in a large reduction in a consumer credit score.
- Check the credit report for accuracy and dispute errors. Credit scores are calculated based on information in a consumer’s credit file. Inaccurate information may be the difference between a consumer being approved or denied a loan. Before shopping for major credit items, the Bureau recommends that consumers review their credit files for inaccuracies. Each of the nationwide credit bureaus is required by law to provide credit reports for free to consumers who request them once every 12 months.
Research updates on private student loans
Research updates on private student loans
Source: Consumer Financial Protection Bureau
Last month, we released a report to Congress with the Department of Education on the private student market. This report helped shed light on how the private student loan market works and where there are opportunities for improvement.
When we design a form or develop a regulation, we work to gather continuous feedback. The same goes for our reports. Since releasing the private student loan report, we’ve been talking to researchers, consumer groups, and industry players to share our results and get feedback. Based on this feedback, we developed ways to make better estimates on certain market statistics, particularly in areas where our data set was incomplete.
While there aren’t any changes to the key findings and recommendations, we released an update today to reflect new methodologies our research team used to calculate some statistics in the report: first, the proportion of private student loan borrowers who exhausted their Federal Stafford Loan options; and second, the extent to which schools certified a borrower’s need for a private student loan.
Compared to the original estimates, the update shows that the number of borrowers who exhausted their federal options is lower than our original estimate, and the level of school certification is higher.
CFPB — Private Student Loans Report
Source: Consumer Financial Protection Bureau
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Director of the Consumer Financial Protection Bureau and the Secretary of Education to submit a Report on private student loans.
This Report addresses the following topics, as set forth in the Act:
- The private lenders, their market and their products, as they have evolved and performed over time,
- The consumers of these products, their characteristics, and shopping, usage and repayment behaviors,
- Consumer protections, including recent changes and possible gaps,
- Fair lending compliance information currently available and its implications, and
- Statutory or legislative recommendations to improve consumer protections.
CRS — The Consumer Financial Protection Bureau (CFPB): A Legal Analysis
The Consumer Financial Protection Bureau (CFPB): A Legal Analysis (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
In the wake of the worst U.S. financial crisis since the Great Depression, Congress passed and the President signed into law sweeping reforms of the financial services regulatory system through the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), P.L. 111- 203.
Title X of the Dodd-Frank Act is entitled the Consumer Financial Protection Act of 2010 (CFP Act). The CFP Act establishes the Bureau of Consumer Financial Protection (CFPB or Bureau) within the Federal Reserve System (FRS) with rulemaking, enforcement, and supervisory powers over many consumer financial products and services, as well as the entities that sell them. The CFP Act significantly enhances federal consumer protection regulatory authority over nondepository financial institutions, potentially subjecting them to analogous supervisory, examination, and enforcement standards that have been applicable to depository institutions in the past. The act also transfers to the Bureau much of the consumer compliance authority over larger depositories that previously had been held by banking regulators. Additionally, the Bureau acquired the authority to write rules to implement most federal consumer financial protection laws that previously was held by a number of other federal agencies.
Although the powers that the CFPB has at its disposal are largely the same or analogous to those that other federal regulators have held for decades, there is a great deal of uncertainty in how the new agency will exercise these broad and flexible authorities, especially in light of its almost exclusive focus on consumer protection. As a result, the CFP Act has proven to be one of the more controversial portions of the financial reform legislation.
The 112 th Congress is actively involved in conducting oversight of the implementation of the CFP Act. Additionally, the 112 th Congress has considered a number of bills that would significantly alter the structure of the Bureau. For example, H.R. 2434, the Financial Services and General Government Appropriations Act, 2012, would make the CFPB’s primary funding subject to the traditional appropriations process, and H.R. 1315, the Consumer Financial Protection Safety and Soundness Improvement Act, would convert the CFPB’s leadership structure from a sole directorship to a commission and would allow the newly established Financial Stability Oversight Council (FSOC) to overturn CFPB-issued regulations with a simple majority vote, as opposed to the current super majority requirement. H.R. 2434 was reported favorably out of the House Committee on Appropriations, and H.R. 1315 was referred to the Senate Committee on Banking, Housing, and Urban Affairs after passing the full House by a vote of 241 to 173. Additionally, 44 Senators signed a letter to the President expressing support for the Bureau-related objectives of H.R. 2434 and H.R. 1315.
This report provides an overview of the regulatory structure of consumer finance under existing federal law before the Dodd-Frank Act went into effect and examines arguments for modifying the regime in order to more effectively regulate consumer financial markets. It then analyzes how the CFP Act changes that legal structure, with a focus on the Bureau’s organization; the entities and activities that fall (and do not fall) under the Bureau’s supervisory, enforcement, and rulemaking authorities; the Bureau’s general and specific rulemaking powers and procedures; and the Bureau’s funding.
Consumer Response Annual Report
A total of 9,307 consumer complaints regarding credit cards and 2,326 regarding mortgages were filed with the Consumer Financial Protection Bureau in 2011, the CFPB says in its first annual report on its consumer response operation.Of total credit-card-related complaints, 1,278, or 13.7 percent, were related the billing disputes, the CFPB reports. Another 1,014 (10.9 percent) and 950 (10.2 percent) had to do with identity theft/fraud/embezzlement or APR/interest rate.Of total mortgage-related complaints, 889, or 38.2 percent, were related to problems face by consumers unable to pay. These can address loan modification, collections or foreclosure. The second-most-frequent complaint about mortgage was just about making payments. A total of 501 such complaints, or 38.2 percent of all mortgage-related complaints, were filed in the month of December, the report shows.These are the only categories of complaints the CFPB addressed during 2011. It began taking credit-card complaints July 21, when the bureau commenced operation. The CFPB began taking mortgage-related complaints since Dec. 1.
+ Full Report (PDF)
Consumer Financial Protection Bureau outlines borrower-friendly approach to mortgage servicing
On Tuesday, the Consumer Financial Protection Bureau (CFPB) will outline rules it is considering to help protect mortgage borrowers from being hit by costly surprises or getting the runaround from their mortgage servicer. The CFPB plans to formally propose rules this summer and finalize them in January 2013.“The mortgage servicing rules we are considering reflect two basic, common-sense principles – no surprises and no runarounds,” said CFPB Director Richard Cordray. “For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress. It’s time to put the ‘service’ back in mortgage servicing.”
+ Full Document (PDF)
Consumer Financial Protection Bureau adopts rule to protect consumers sending money internationally
Consumer Financial Protection Bureau adopts rule to protect consumers sending money internationally
Source: Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB) today adopted a rule that will increase protections for consumers who transfer money internationally. Under the new rule, remittance transfer providers will generally be required to disclose the exchange rate and all fees associated with a transfer so that consumers know exactly how much money will be received on the other end. The rule also requires remittance transfer providers to investigate disputes and remedy errors.
“People sending money to their loved ones in another country should not have to worry about hidden fees,” said CFPB Director Richard Cordray. “With these new protections, international money transfers will be more reliable. Consumers will know the costs ahead of time and be able to compare prices. Transfer providers will also be held accountable for errors that occur in the process.”
Consumers transfer tens of billions of dollars from the United States to foreign countries each year. These transactions can involve undisclosed fees and exchange rates that result in less money for the intended recipients. Those sending the money may not know how much the recipient will actually receive because the fees and exchange rates can be obscured in the transfer.
The impact of differences between consumer- and creditor-purchased credit scores
The impact of differences between consumer- and creditor-purchased credit scores (PDF)
Source: Consumer Financial Protection Bureau
A credit score is a numerical summary of a consumer’s apparent creditworthiness, based on the consumer’s credit report, and reflects the relative likelihood that the consumer will default on a credit obligation. Credit scores can have a significant impact on a consumer’s financial life. Lenders rely on scores extensively in decision making, including the initial decisions of whether to lend and what loan terms to offer, for most types of credit, including mortgages, auto loans, and credit cards. Credit scores also influence the marketing offers that consumers receive, such as offers for credit cards. Further, credit scores affect account-management decisions, like raising or lowering credit limits or changing interest rates. A good credit score can mean access to a wide range of credit products at the better rates available in the market, while a bad credit score can lead to greatly reduced access to credit and much higher borrowing costs.
Lenders use credit scores that are produced by many different scoring models. The most widely used scores are the “FICO scores” sold by FICO (the brand used to identify the Fair Isaac Corporation). There are a number of FICO score models in use by lenders, and many other credit score models besides the FICO scores. Consumers can also purchase a wide range of credit scores. Some scores sold to consumers are used by lenders, but others, referred to as “educational scores,” are either not used by lenders at all or are used only infrequently. It is important to note that many of the credit scores sold to lenders are not offered for sale to consumers.
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Consumer Financial Protection Bureau (CFPB) to “conduct a study on the nature, range, and size of variations between the credit scores sold to creditors and those sold to consumers by consumer reporting agencies (CRAs) that compile and maintain files on consumers on a nationwide basis,… and whether such variations disadvantage consumers.” Consumers can purchase scores from the CRAs in several ways. They can purchase scores when they request copies of their credit reports directly from the CRAs, or with their annual free credit file disclosure available through annualcreditreport.com. The CRAs or their marketing partners also sell scores as part of “credit monitoring” or “identify theft” products.
When a consumer purchases a score from a CRA, it is likely that the credit score that the consumer receives will not be the same score as that purchased and used by a lender to whom the consumer applies for a loan. This could occur if the score the consumer purchased is an educational score that is not used by lenders, but differences between the score a consumer buys and the score a lender buys can occur for other reasons as well. Since so many scores are in use in the marketplace, it could also be the case that the particular lender to which the consumer applies uses a different scoring model than the one purchased by the consumer, or that the CRA from which the consumer obtains a score is not the same CRA that the lender uses to obtain scores, or that the underlying data in the consumer’s credit report changes significantly between the time the consumer purchases a score and the time the lender obtains a score for that consumer. It is also possible that a consumer and a lender could access different reports from the CRA, if they were to use different identifying information about the consumer. Any of these differences could lead to differences between the credit score a consumer sees and the credit score a lender uses to assess that consumer.
