In the two weeks or so following the Consumer Financial Protection Bureau’s fourth birthday, the bureau has not sat back on accolades and criticism thrown its way and is steaming forward with using its powers to enforce provisions of the Dodd-Frank Act prohibiting unfair, deceptive, or abusive acts or practices.
Illegal credit card practices. Citibank entered into a consent order, on July 21, 2015, requiring it to pay $735 million for illegal credit card practices. The CFPB specifically found that Citibank or its subsidiaries deceptively marketed these various debt protection and credit monitoring add-on products during telemarketing calls, online enrollment, and “point-of-sale” application and enrollment at retailers, or when enrolled consumers later called to cancel certain products. The bureau’s enforcement action, joined by the Office of the Comptroller of the Currency, also found that Citibank or its subsidiaries billed consumers for the products without having the authorization necessary to perform the credit-monitoring and credit-report-retrieval services. Finally, the CFPB found that Citibank misled consumers when collecting payment on delinquent retailer-affiliated credit card accounts. For instance, a $14.95 fee associated with a pay-by-phone option was misrepresented as a “processing” fee, and Citibank did not explain that the fee was to post payment to the account on the same day it was made rather than a fee to allow payment.
Offshore payday lending. In a federal lawsuit, filed on July 31, 2015, the CFPB claimed that various actions taken by NDG Financial Corp., and its “maze of interrelated companies,” to collect loan amounts and fees that were void or that consumers had no obligations to repay, were in violation of the Dodd-Frank UDAAP provisions. Other allegations in the lawsuit stated that the companies:
- Made false representations to consumers that non-payment of debt would result in lawsuit, arrest, imprisonment, or wage garnishment, despite lacking the intention or legal authority to take such actions.
- Included unlawful, irrevocable wage-assignment clauses in loan agreements that allowed the companies to take payments directly from consumers’ employers’ payroll accounts.
Mortgage payment programs. The bureau also entered into consent orders with LoanCare, LLC, a Virginia-based residential mortgage servicer, and Paymap, Inc., a Colorado-based payment processing company, to resolve charges that they deceived consumers with advertisements for a mortgage payment program that promised tens of thousands of dollars in interest savings from more frequent mortgage payments. The companies agreed to pay more than $38 million to resolve the CFPB’s charges. In the consent order, the bureau found that Paymap was not making more frequent payments to loan servicers, but was holding the money it withdrew in custodial accounts and then making mortgage payments on the original monthly schedule.
Student loan servicing. Although recent UDAAP actions have targeted various consumer financial products or services, student loan servicing practices have garnered the most of the CFPB’s attention in the past few weeks.
Discover Bank and two of its affiliates—The Student Loan Corporation and Discover Products, Inc.—entered into a consent order with the bureau to settle claims that the companies violated the UDAAP provisions in connection with their student loan servicing activities that included more than 800,000 accounts acquired from Citibank. The CFPB claimed that the companies engaged in unfair and deceptive acts and practices relating related to: their failure to furnish clear information regarding the student-loan interest consumers paid; initiating collection calls to consumers at inconvenient times; and overstating the minimum amount due in student-loan billing statements.
The CFPB also sued Student Financial Aid Services, Inc. in a California federal court illegal sales and billing practices. The complaint alleged that unfair and deceptive acts or practices on the part of the company for luring in consumers with misleading information about the total cost of its subscription financial services and then charging them with undisclosed and unauthorized automatic recurring charges. Under the proposed consent order, SFAS would stop its illegal practices and pay $5.2 million to consumers.
Finally, Citigroup Inc. has indicated that its national bank subsidiary, Citibank, N.A., is currently subject to regulatory investigation concerning certain student loan servicing practices. Citigroup noted in its 10-Q, filed on Aug. 3, 2015, that Citibank, N.A., “is cooperating with the investigation” and that “[s]imilar servicing practices have been the subject of an enforcement action against at least one other institution.” The “similar servicing practices” alluded to by Citigroup were the subject of the enforcement action taken against Discover Bank.
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