By Andrew A. Turner, J.D.
The latest salvo from the Consumer Financial Protection Bureau on medical debt collection comes in the form of an enforcement action ordering Syndicated Office Systems to pay over $5.4 million to consumers and pay a $500,000 penalty based on findings the company had no policies or procedures in place to investigate consumer credit report disputes. The mishandling of disputes by a debt collection agency that primarily collects medical debt on behalf of hospitals, doctors, and other healthcare providers constituted a violation of the Fair Credit Reporting Act, according to the CFPB.
In a consent order, Syndicated Office Systems neither admitted nor denied the CFPB’s findings which also included violations of the Fair Debt Collection Practices Act for failing to send debt validation notices that prevented consumers from exercising their rights and correcting errors. Commenting on the settlement, CFPB Director Richard Cordray had strong words, saying that the violations were "particularly egregious given the challenges many consumers already face who are attempting to navigate the medical debt maze."
Judging from the remedy for the violations, a primary concern of the CFPB is the need for medical debt collectors to have policies in place to comply with credit reporting and debt collection requirements. Besides the monetary relief, Syndicated Office Systems was ordered to change business practices and establish consumer safeguards.
During the past two years, there has been a string of CFPB activity touching on medical debt issues. A May 2014 research report found that medical debt can overly penalize consumer credit scores. The Bureau expressed concern that the complex processes by which medical bills are incurred, collected by a wide range of debt collectors, and reported to credit reporting agencies can create unique challenges for consumers.
A December 2014 medical debt study found medical debt has a significant impact on consumer credit, as 43 million Americans have overdue medical debt on their credit reports. At that time, the CFPB announced that the major consumer reporting agencies will be required to provide regular reports to the Bureau on how disputes from consumers are being handled. Commenting on the action to improve credit report accuracy, Cordray said "getting medical care should not make your credit report sick."
The CFPB is also in the process of developing proposed rules concerning debt collection after receiving more than 23,000 comments in response to an Advanced Notice of Proposed Rulemaking. Consumer groups and industry groups have staked out opposing views. The American Hospital Association (AHA), an organization that represents nearly 5,000 member hospitals, health systems, and other health care organizations, requested that the CFPB consider "the unique attributes of medical debt in the hospital setting" when issuing future regulations. On the other hand, the National Consumer Law Center urges the CFPB to examine the larger medical debt collection agencies, as well as taking other regulatory actions.
As to what the CFPB will do next to address concerns over medical debt collection practices, stay tuned.
For more information about medical debt collection issues, subscribe to the Banking and Finance Law Daily.
Thursday, July 2, 2015
Wednesday, July 1, 2015
Cordray shuts out PHH motion for stay: Ball in PHH court
By Katalina M. Bianco, J.D.
The Consumer Financial Protection Bureau has fired the latest salvo in the ongoing battle between the bureau and mortgage lender PHH Corporation. CFPB Director Richard Cordray denied PHH’s motion to stay a decision and final order entered against PHH pending appellate review of its case. In response, PHH filed a petition for review with the D.C. Circuit Court of Appeals.
Battle background. On Jan. 29, 2014, the CFPB filed an administrative complaint against PHH and its affiliated companies charging that the companies carried out a scheme under which mortgage insurers paid kickbacks in exchange for referrals. According to the CFPB, the arrangement persisted over approximately 15 years and allowed the companies to collect “hundreds of millions of dollars in kickbacks.” PHH issued a response stating it would “vigorously defend against the CFPB's allegations.” Since that time, the CFPB and PHH have gone toe-to-toe in a series of legal maneuvers.
On Nov. 25, 2014, Administrative Law Judge Cameron Elliot issued a recommended decision in the action, finding that the mortgage company accepted reinsurance premiums in violation of Sections 8(a) and 8(b) of the Real Estate Settlement Procedures Act. The RD includes imposition of an injunction and disgorgement of almost $6.5 million as to all respondents jointly and severally. The proposed order against PHH enjoined the corporation from violating RESPA Sections 8(a) and 8(b) and engaging in the business of providing captive insurance for a period of 15 years from the date of the order. PHH and its affiliated companies also were ordered to disclose to the bureau’s Office of Enforcement within 30 days of the order all services provided to any of them by any mortgage insurance company since Jan. 1, 2004. PHH filed a notice of appeal following the RD, becoming the first to appeal a CFPB administrative enforcement action.
Decision and order. The CFPB issued a decision and final order in the PHH action on June 4, 2015. The Director’s decision concludes that PHH illegally referred consumers to mortgage insurers in exchange for kickbacks. He also issued a final order that prohibits PHH from violating the law and requires it to pay $109 million to the bureau.
Motion to stay decision and order. On June 16, 2015, PHH moved for a stay of the decision and final order pending appellate review. PHH contends in its motion that a stay is appropriate because:
- PHH is likely to succeed on the merits;
- the injunctive provisions of the final order are "impermissibly vague, are beyond the scope of the Notice of Charges, and violate" PHH's due process rights;
- there is no need for injunctive relief because no mortgage loans have been placed in reinsurance books since 29009;
- any payment before PHH has had the opportunity to seek judicial review is unwarranted and would cause irreparable harm; and
- public interest lies with allowing PHH to "have their day in court."
The motion concludes by requesting that should the CFPB Director deny PHH’s request for a stay, the implementation of the final order be delayed by an additional 30 days.
Proposed orders. On June 16, Cordray entered a proposed order granting a temporary stay until Aug. 3, 2015. A second proposed order dated the same day granted a stay of the final order pending judicial review by the U.S. Court of Appeals for the District of Columbia Circuit.
Enforcement Council position. The Enforcement Council weighed in against the stay, stating that “PHH seeks the extraordinary remedy of a stay of a final administrative order that already contains within it all the relief to which a litigant is normally due.” The EC further stated that PHH is “unpersuasive” in its arguments. Specifically, the EC found that PHH failed to establish a likelihood of success on appeal and would not be irreparably harmed if the stay was not granted. Further, the non-money injunctive relief will not cause irreparable harm, and PHH's contention that it is unlawful is "both plainly wrong and irrelevant."
PHH support of its motion. PHH defended the motion, stating that it should be granted because Cordray’s decision and order “is legally flawed in multiple respects.” Putting the order into effect would “irreparably harm” PHH “with no offsetting benefit to the public interest.”
Director’s decision and final order. On June 24, 2015, Director Cordray entered a decision and final order denying PHH’s motion to stay the June 4 final order. Cordray noted in the decision that the relevant CFPB rule for adjudicative proceedings states that an order "becomes effective at 30 days after the date of service" unless the order is stayed (12 C.F .R. § 1081.407(a)) which means the order is to take effect on July 6, 2015. The rule also sets out the standard for a stay motion, which must address four factors: "the likelihood of the movant's success on appeal; whether the movant will suffer irreparable harm if a stay is not granted; the degree of injury to other parties if a stay is granted; and why the stay is in the public interest." (12 C.F.R. § 1081.407(c)). PHH's motion addresses these factors, the Director said, but PHH “fails to make any showing that would warrant a stay pending appellate review.”
Cordray denied the motion to the extent it seeks a stay pending judicial review. However, the CFPB director also granted a 30-day stay of the order. The order now will take effect on Aug. 5, 2015, to “allow a more orderly process of review” and “give PHH time to seek a stay from the D.C. Circuit.”
Cordray reasoned that PHH's motion fails because PHH did not meet its burden with respect to the second factor, which addresses irreparable harm. “This factor is so crucial to a stay that a failure to show irreparable harm is grounds for denial, even if the other three factors favor such relief (Chaplaincy of Full Gospel Churches v. England, 454 F.3d 290, 297 (D.C. Cir. 2006)). “Accordingly, it is not necessary for me to address the other three factors here.”
As to the harm that would result from the order, the Director responds that PHH’s arguments do not show that the provisions of the injunction would cause PHH harm that would justify a stay.
Final provision. The final provision of the order requires PHH to pay approximately $109 million in disgorgement. Even though the provision permits PHH to make its payment into an escrow account pending appellate review, PHH nonetheless claims that making the payment into an escrow account will cause it irreparable harm. The CFPB answered that claim by stating that PHH failed to provide any evidence as to how this would cause “severe” consequences to its business operations, “yet that is the critical consideration here.”
Petition for review. PHH already made the next move by filing a Petition for Review in the U.S. Court of Appeals for the District of Columbia Circuit on June 19, prior to the Director’s decision and final order. In the petition, PHH states that it is seeking a review of the bureau’s final action “on the grounds that it is arbitrary, capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act (5 U.S.C. § 701 et seq.); violates federal law, including, but not limited to, the United States Constitution, RESPA, and the Consumer financial Protection Act of 2010, as well as regulations promulgated under those statutes; and is otherwise contrary to law.”
For more information about the CFPB and PHH, subscribe to the Banking and Finance Law Daily.
Car dealers could post privacy notices online under FTC proposal
By J. Preston Carter, J.D., LL.M.
For more information about privacy notices, subscribe to the Banking and Finance Law Daily.
The Federal Trade Commission is proposing to amend its Gramm-Leach-Bliley Act (GLBA) rules to allow auto dealers that finance car purchases or provide car leases to provide online updates to consumers about their privacy policies, rather than sending yearly updates by mail. The FTC proposal is consistent with the rule finalized by the Consumer Financial Protection Bureau in October 2014 for financial institutions.
Background. The GLBA requires financial institutions to provide their customers with initial and annual notices regarding their privacy policies. If financial institutions share certain customer information with particular types of third parties, the institutions are also required to provide an opportunity to opt out of the sharing. The FTC issued its rule implementing these provisions in 2000.
The Dodd-Frank Act transferred most of the GLBA privacy notice rulemaking authority to the CFPB; however, the FTC retained authority over motor vehicle dealers. In October 2014, the CFPB finalized a rule allowing companies that limit their consumer data-sharing and otherwise meet certain requirements to post their annual privacy notices online. The FTC stated that its proposed changes are consistent with those issued by the CFPB.
Proposed amendment. Under the proposed revision to the FTC’s privacy rule (16 CFR Part 313), auto dealers that do not engage in certain types of information-sharing activities would be able to provide consumers with the privacy policy solely online, as long as the company notifies consumers on a yearly basis that the policy is viewable online. The rule change would require this notification to be part of some other legally required document provided to consumers.
The revised rule still would require dealers to provide consumers with a written copy of the notice upon request. In addition, if a dealer’s privacy policy has changed since a consumer was last provided a written notice, the consumer must be provided a copy of the new policy in writing. Dealers who share consumers’ personal data with third parties in a way that requires a consumer to have the ability to opt-out would not be allowed to provide their privacy policy only online. The amendments also include clarifications to the language of the rule to reflect the Commission’s authority under the Gramm-Leach-Bliley Act.
The proposed changes will be subject to public comment through Aug. 31, 2015, after which the FTC will decide whether to make the proposed changes final.
For more information about privacy notices, subscribe to the Banking and Finance Law Daily.
Tuesday, June 30, 2015
End of Supreme Court term leaves two appeals undecided
By Richard A. Roth, J.D.
The Supreme Court ended its October 2014 term on Monday with several significant decisions, including one that, while interpreting the Fair Housing Act, strongly implies the continued viability of the disparate impact theory under the Equal Credit Opportunity Act (Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc.). However, the Court deferred until its next term two appeals from decisions on financial services laws. One appeal asks the Court to examine who is entitled to protection under the ECOA, and the other presents a broader question about who has standing to sue under the U.S. Constitution.
ECOA. In Hawkins v. Community Bank of Raymore, two individuals have asked the Court to consider whether spousal guarantors are applicants for credit who are entitled to the protection of the ECOA and Reg. B—Equal Credit Opportunity (12 CFR Part 1002). The individuals claimed that the bank required them to guarantee loans to their spouses’ real estate development business and that requiring a spousal signature violated the equal credit laws. However, the U.S. Court of Appeals for the Eighth Circuit decided that guarantors are not credit applicants, so requiring the individuals to sign did not constitute credit discrimination.
The U.S. Court of Appeals for the Sixth Circuit has reached the opposite conclusion. In RL BB Acquisition LLC v. Bridgemill Commons Development Group, LLC, the Sixth Circuit decided that the ECOA was ambiguous about whether a guarantor was an applicant. The regulatory agencies’ interpretation that guarantors are applicants, which is contained in Reg. B, was reasonable and thus was entitled to judicial deference, the Sixth Circuit said.
The Eighth Circuit’s reply was that “We find it to be unambiguous that assuming a secondary, contingent liability does not amount to a request for credit. A guarantor engages in different conduct, receives different benefits, and exposes herself to different legal consequences than does a credit applicant.”
The Supreme Court granted certiorari in Hawkins v. Community Bank of Raymore, Dkt. No. 14-520, on March 2, 2015.
Standing to sue. Spokeo Inc. v. Robbins has the potential to affect suits under a broad group of federal statutes, not just the Fair Credit Reporting Act under which it arises. The question presented is whether a person who claims no injury other than a violation of a right created by a statute has suffered an injury that confers standing to sue under Article III of the Constitution.
Spokeo runs a website that provides users with information about other individuals, including contact data, marital status, age, occupation, economic health, and wealth level, according to the U.S. Court of Appeals for the Ninth Circuit. A consumer claimed that information posted about him was incorrect and that he had been harmed, but his allegations of specific injury were “sparse,” the court said. Nevertheless, the court decided that his complaint was adequate to describe an “injury in fact” that conferred standing to sue because he had alleged a violation of his own statutory rights, as opposed to the rights of another person, and the law in question—the FCRA—was intended to protect against individual, rather than collective, harm.
Should the Supreme Court reverse the Ninth Circuit and require that plaintiffs demonstrate some type of pecuniary or personal injury to establish their standing to sue, consumers likely will have more difficulty asserting violations of a number of consumer protection statutes.
The Supreme Court granted certiorari in Spokeo Inc. v. Robbins, Dkt. No. 13-1339, on April 27, 2015.
Pending petitions. In addition, the Supreme Court left undecided whether to accept two other appeals of potential significance:
The Supreme Court ended its October 2014 term on Monday with several significant decisions, including one that, while interpreting the Fair Housing Act, strongly implies the continued viability of the disparate impact theory under the Equal Credit Opportunity Act (Texas Dept. of Housing and Community Affairs v. Inclusive Communities Project, Inc.). However, the Court deferred until its next term two appeals from decisions on financial services laws. One appeal asks the Court to examine who is entitled to protection under the ECOA, and the other presents a broader question about who has standing to sue under the U.S. Constitution.
ECOA. In Hawkins v. Community Bank of Raymore, two individuals have asked the Court to consider whether spousal guarantors are applicants for credit who are entitled to the protection of the ECOA and Reg. B—Equal Credit Opportunity (12 CFR Part 1002). The individuals claimed that the bank required them to guarantee loans to their spouses’ real estate development business and that requiring a spousal signature violated the equal credit laws. However, the U.S. Court of Appeals for the Eighth Circuit decided that guarantors are not credit applicants, so requiring the individuals to sign did not constitute credit discrimination.
The U.S. Court of Appeals for the Sixth Circuit has reached the opposite conclusion. In RL BB Acquisition LLC v. Bridgemill Commons Development Group, LLC, the Sixth Circuit decided that the ECOA was ambiguous about whether a guarantor was an applicant. The regulatory agencies’ interpretation that guarantors are applicants, which is contained in Reg. B, was reasonable and thus was entitled to judicial deference, the Sixth Circuit said.
The Eighth Circuit’s reply was that “We find it to be unambiguous that assuming a secondary, contingent liability does not amount to a request for credit. A guarantor engages in different conduct, receives different benefits, and exposes herself to different legal consequences than does a credit applicant.”
The Supreme Court granted certiorari in Hawkins v. Community Bank of Raymore, Dkt. No. 14-520, on March 2, 2015.
Standing to sue. Spokeo Inc. v. Robbins has the potential to affect suits under a broad group of federal statutes, not just the Fair Credit Reporting Act under which it arises. The question presented is whether a person who claims no injury other than a violation of a right created by a statute has suffered an injury that confers standing to sue under Article III of the Constitution.
Spokeo runs a website that provides users with information about other individuals, including contact data, marital status, age, occupation, economic health, and wealth level, according to the U.S. Court of Appeals for the Ninth Circuit. A consumer claimed that information posted about him was incorrect and that he had been harmed, but his allegations of specific injury were “sparse,” the court said. Nevertheless, the court decided that his complaint was adequate to describe an “injury in fact” that conferred standing to sue because he had alleged a violation of his own statutory rights, as opposed to the rights of another person, and the law in question—the FCRA—was intended to protect against individual, rather than collective, harm.
Should the Supreme Court reverse the Ninth Circuit and require that plaintiffs demonstrate some type of pecuniary or personal injury to establish their standing to sue, consumers likely will have more difficulty asserting violations of a number of consumer protection statutes.
The Supreme Court granted certiorari in Spokeo Inc. v. Robbins, Dkt. No. 13-1339, on April 27, 2015.
Pending petitions. In addition, the Supreme Court left undecided whether to accept two other appeals of potential significance:
- Wells Fargo Bank v. Gutierrez, in which the Court was asked whether a class of consumers could be certified if it included members who were not injured and who could not have sued successfully as individuals (Dkt. No. 14-1230); and
- Quicken Loans v. Brown, in which the Court was asked whether the West Virginia Supreme Court should have included a borrower’s attorney’s fees and costs, totaling $596,200, in the punitive-to-compensatory damages ratio when it decided that a punitive damages award of $2.17 million was not excessive (Dkt. No. 14-1191).
Monday, June 29, 2015
Student loan servicer’s petition to attend employee exam: Denied
By Katalina M. Bianco, J.D.
Consumer Financial Protection Bureau Director Richard Cordray has entered a decision and order denying student loan servicer TransWorld Systems Inc.’s petition to attend a bureau investigatory exam of its former employee, Chandra Alphabet. Under the CFPB’s Civil Investigative Demand, Alphabet is to give oral testimony as to "whether loan holders, servicers, collectors or other persons have engaged or are engaging in unlawful acts and practices relating to the servicing and collecting of private student loan debt in violation of several federal consumer compliance laws, including the Consumer Financial Protection Act, Fair Credit Reporting Act, and Fair Debt Collection Practices Act.
Background. The CFPB scheduled Alphabet’s examination for March 12, 2015, at the United States Attorney’s Office in Atlanta, Ga. TSI counsel requested that the location of the exam be moved, according to TSI, but the bureau denied the request. The day before the examination, Alphabet retained separate counsel, and the examination was cancelled. On April 17, 2015, Alphabet resigned from TSI. Her last day of work was April 24, 2015.
Privileged communications. TSI petitioned the CFPB to attend the examination on the basis of safeguarding communications protected by the attorney-client privilege. TSI contended that in the course of her employment with TSI, Alphabet at times acted as corporate representative for the Trusts division of the company and, as such, was privy to confidential information. The company asserts that the bureau "bears the heavy burden" of proving that communications subject to the attorney-client privilege should be disclosed.
Legal determinations. The petition was denied for three reasons, according to the decision. The first reason is that Director Cordray found that TSI had no standing to petition for the order it is seeking. TSI petitioned under Section 1052(f) of the CFPA (12 U.S.C. § 5562(f)) which provides that a person served with a CID may petition to modify or set aside the demand within 20 days of service. Alphabet was served with the CID, not TSI, and therefore the servicer has no standing to petition.
Second, TSI’s petition was not timely, according to the decision. Alphabet was served, through TSI’s counsel, on or before Feb. 2, 2015. The statutory deadline to file a petition to modify or set aside the CID expired on Feb. 22, 2015, 20 days after service. TSI filed the petition on April 24, 2015.
Finally, the law is clear as to who may be present at an investigational hearing, Cordray said in the decision. Under CFPA 12 CFR 1080.7(c), in investigational hearings the bureau must exclude from the hearing all persons except the person being examined, the person’s legal counsel, the officer taking the testimony, any investigator or representative of an agency conducting the investigation with the bureau, and the person transcribing or recording the testimony. The CFPB Director said that TSI does not have the right to attend the hearing and that the investigators involved do not intend to exercise their discretion to permit TSI to attend.
For more information about the TransWorld petition, decision and order, and CFPB enforcement activity, subscribe to the Banking and Finance Law Daily.
Consumer Financial Protection Bureau Director Richard Cordray has entered a decision and order denying student loan servicer TransWorld Systems Inc.’s petition to attend a bureau investigatory exam of its former employee, Chandra Alphabet. Under the CFPB’s Civil Investigative Demand, Alphabet is to give oral testimony as to "whether loan holders, servicers, collectors or other persons have engaged or are engaging in unlawful acts and practices relating to the servicing and collecting of private student loan debt in violation of several federal consumer compliance laws, including the Consumer Financial Protection Act, Fair Credit Reporting Act, and Fair Debt Collection Practices Act.
Background. The CFPB scheduled Alphabet’s examination for March 12, 2015, at the United States Attorney’s Office in Atlanta, Ga. TSI counsel requested that the location of the exam be moved, according to TSI, but the bureau denied the request. The day before the examination, Alphabet retained separate counsel, and the examination was cancelled. On April 17, 2015, Alphabet resigned from TSI. Her last day of work was April 24, 2015.
Privileged communications. TSI petitioned the CFPB to attend the examination on the basis of safeguarding communications protected by the attorney-client privilege. TSI contended that in the course of her employment with TSI, Alphabet at times acted as corporate representative for the Trusts division of the company and, as such, was privy to confidential information. The company asserts that the bureau "bears the heavy burden" of proving that communications subject to the attorney-client privilege should be disclosed.
Legal determinations. The petition was denied for three reasons, according to the decision. The first reason is that Director Cordray found that TSI had no standing to petition for the order it is seeking. TSI petitioned under Section 1052(f) of the CFPA (12 U.S.C. § 5562(f)) which provides that a person served with a CID may petition to modify or set aside the demand within 20 days of service. Alphabet was served with the CID, not TSI, and therefore the servicer has no standing to petition.
Second, TSI’s petition was not timely, according to the decision. Alphabet was served, through TSI’s counsel, on or before Feb. 2, 2015. The statutory deadline to file a petition to modify or set aside the CID expired on Feb. 22, 2015, 20 days after service. TSI filed the petition on April 24, 2015.
Finally, the law is clear as to who may be present at an investigational hearing, Cordray said in the decision. Under CFPA 12 CFR 1080.7(c), in investigational hearings the bureau must exclude from the hearing all persons except the person being examined, the person’s legal counsel, the officer taking the testimony, any investigator or representative of an agency conducting the investigation with the bureau, and the person transcribing or recording the testimony. The CFPB Director said that TSI does not have the right to attend the hearing and that the investigators involved do not intend to exercise their discretion to permit TSI to attend.
For more information about the TransWorld petition, decision and order, and CFPB enforcement activity, subscribe to the Banking and Finance Law Daily.
CFPB opens public floodgates to thousands of consumer complaints
By Katalina M. Bianco, J.D.
The Consumer Financial Protection Bureau has published its first wave of consumer complaint narratives via the bureau’s new initiative to reveal consumer complaints stemming from its consumer complaint database. More than 7,700 consumer stories about problems they’ve encountered concerning mortgages, bank accounts, credit cards, debt collection, and more now are live and available to the public. The bureau simultaneously issued a request for comments on whether there are ways to enable the public to more easily understand and make comparisons of the complaint information.
"Publishing these consumer stories today is a historic milestone that we believe will lead to better outcomes for everyone," CFPB Director Richard Cordray said. He added that the CFPB’s work is improved by hearing from consumers.
Collection of complaints. The CFPB began accepting complaints as soon as it opened its doors for business in July 2011. The bureau currently accepts complaints on consumer financial products, including: credit cards; mortgages; bank accounts; private student loans; vehicle and other consumer loans; credit reporting; money transfers; debt collection; and payday loans. As of June 1 of this year, the CFPB has handled more than 627,000 complaints, with mortgages and debt collection being the most frequent subjects of the complaints.
Consumer Complaint Database. The CFPB’s Consumer Complaint Database was unveiled in June 2012. According to the bureau, it is the largest public collection of consumer financial complaints in the U.S. The bureau describes the database as including "basic, anonymous, individual-level information about the complaints received, including the date of submission, the consumer’s zip code, the relevant company, the product type, the issue the consumer is complaining about, and how the company handled the complaint."
Bureau policy. The CFPB finalized a policy in March 2015 that is intended to empower consumers to share their stories to the public when they submit complaints to the bureau. According to the CFPB, since the launch of this added feature to its database, more than half the consumers who submitted complaints to the bureau have "opted in" to share their stories with the public. Starting immediately, consumer narratives that have been "scrubbed of personal information," will be added to the complaint database on a daily basis.
The policy outlines the specific procedures and safeguards the bureau has put in place to publish narratives in the database and includes safeguards for removing a consumer’s personal information and ensuring the informed consent of any consumer who participates, the CFPB said. Under the policy, companies have 180 days to select an optional public-facing response to be included in the public database. These company responses now are included in the database.
Comment request. The CFPB simultaneously issued a notice requesting comments from the public on ways to make the data gathered in its complaint database more useful to the public. Specifically, the bureau is requesting feedback on best practices for "normalizing" the raw complaint data it makes available via the database so they are easier for the public to use and understand. According to the notice, to normalize data is to transform "raw" data so that they may be compared in meaningful ways.
Reviews. The Americans for Financial Reform called the publishing of the narratives "a breakthrough for consumers" and said that the bureau’s action will "vastly expand the value of its complaint system." AFR noted that banks and lenders have opposed publishing the narratives, but AFR believes that "financial companies also stand to benefit from the ability to hear about consumer experiences at other firms as well as their own, 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."
The Consumer Bankers Association, on the other hand, disagreed with the CFPB’s publishing of “unverified complaint narratives.” The CBA said that the association agrees with the need to “normalize the complaint data” and is pleased that the bureau is requesting comments on the best way to go about doing that. However, the CBA stated that it is “profoundly disappointed the Bureau is releasing the public narratives.” CBA President and CEO Richard Hunt said that he believes that the majority of banks will not respond publicly “but will continue the long held tradition of speaking with their customers in confidence.”
For more information about the CFPB's consumer complaint narratives, subscribe to the Banking and Finance Law Daily.
The Consumer Financial Protection Bureau has published its first wave of consumer complaint narratives via the bureau’s new initiative to reveal consumer complaints stemming from its consumer complaint database. More than 7,700 consumer stories about problems they’ve encountered concerning mortgages, bank accounts, credit cards, debt collection, and more now are live and available to the public. The bureau simultaneously issued a request for comments on whether there are ways to enable the public to more easily understand and make comparisons of the complaint information.
"Publishing these consumer stories today is a historic milestone that we believe will lead to better outcomes for everyone," CFPB Director Richard Cordray said. He added that the CFPB’s work is improved by hearing from consumers.
Collection of complaints. The CFPB began accepting complaints as soon as it opened its doors for business in July 2011. The bureau currently accepts complaints on consumer financial products, including: credit cards; mortgages; bank accounts; private student loans; vehicle and other consumer loans; credit reporting; money transfers; debt collection; and payday loans. As of June 1 of this year, the CFPB has handled more than 627,000 complaints, with mortgages and debt collection being the most frequent subjects of the complaints.
Consumer Complaint Database. The CFPB’s Consumer Complaint Database was unveiled in June 2012. According to the bureau, it is the largest public collection of consumer financial complaints in the U.S. The bureau describes the database as including "basic, anonymous, individual-level information about the complaints received, including the date of submission, the consumer’s zip code, the relevant company, the product type, the issue the consumer is complaining about, and how the company handled the complaint."
Bureau policy. The CFPB finalized a policy in March 2015 that is intended to empower consumers to share their stories to the public when they submit complaints to the bureau. According to the CFPB, since the launch of this added feature to its database, more than half the consumers who submitted complaints to the bureau have "opted in" to share their stories with the public. Starting immediately, consumer narratives that have been "scrubbed of personal information," will be added to the complaint database on a daily basis.
The policy outlines the specific procedures and safeguards the bureau has put in place to publish narratives in the database and includes safeguards for removing a consumer’s personal information and ensuring the informed consent of any consumer who participates, the CFPB said. Under the policy, companies have 180 days to select an optional public-facing response to be included in the public database. These company responses now are included in the database.
Comment request. The CFPB simultaneously issued a notice requesting comments from the public on ways to make the data gathered in its complaint database more useful to the public. Specifically, the bureau is requesting feedback on best practices for "normalizing" the raw complaint data it makes available via the database so they are easier for the public to use and understand. According to the notice, to normalize data is to transform "raw" data so that they may be compared in meaningful ways.
Reviews. The Americans for Financial Reform called the publishing of the narratives "a breakthrough for consumers" and said that the bureau’s action will "vastly expand the value of its complaint system." AFR noted that banks and lenders have opposed publishing the narratives, but AFR believes that "financial companies also stand to benefit from the ability to hear about consumer experiences at other firms as well as their own, 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."
The Consumer Bankers Association, on the other hand, disagreed with the CFPB’s publishing of “unverified complaint narratives.” The CBA said that the association agrees with the need to “normalize the complaint data” and is pleased that the bureau is requesting comments on the best way to go about doing that. However, the CBA stated that it is “profoundly disappointed the Bureau is releasing the public narratives.” CBA President and CEO Richard Hunt said that he believes that the majority of banks will not respond publicly “but will continue the long held tradition of speaking with their customers in confidence.”
For more information about the CFPB's consumer complaint narratives, subscribe to the Banking and Finance Law Daily.
Friday, June 26, 2015
Scammers ‘Googling’ for victims? CFPB gives Google a heads up
By Katalina M. Bianco, J.D.
Former Consumer Financial Protection Bureau Assistant Director & Student Loan Ombudsman Rohit Chopra alerted Google management that student debt relief scammers may be using the company’s search products to target student loan borrowers. Shortly after contacting Google, Chopra left the CFPB and signed on with the Center for American Progress, thus the "former" added to his recently-held title as Student Loan Ombudsman.
Representing the bureau, Chopra told Google that it is concerned that “unscrupulous companies may be using aggressive advertising through search products to lure distressed borrowers.” In a letter to Susan Molinari, Google Vice President, Americas Public Policy and Government Relations, Chopra explained the student loan debt situation, stating that a “substantial portion” of the more than 40 million Americans owing more than $1.2 trillion in debt are “in distress.” The CFPB estimates that more than 8 million borrowers are in default on a federal or private student loan.
The CFPB is concerned that federal student loan borrowers are “left in the dark” by loan servicers that do not advise them of their options. Borrowers with federal student loans are able to avoid or get out of default through various income-driven repayment and rehabilitation plans, Chopra said.
Increase in illegal practices. Chopra wrote that the bureau has seen an increase in the number of companies that charge large upfront fees to help borrowers enroll in a plan that can be done for free. He noted that federal and state law enforcement has taken action to stop “the illegal and harmful practices of these companies,” and the CFPB has warned consumers about them.
Google trend analysis. In his letter, Chopra told Molinari that the CFPB is aware that Google has policies in place to protect consumers against misrepresentations in advertisements, but there may be companies that do not meet Google’s requirements. The CFPB’s analysis of Google Trends data suggests that struggling borrowers are indeed searching for help using keywords such as “student loan default,” “student loan forgiveness,” and “Obama student loan relief.”
This process “bears a close resemblance” to what happened during the foreclosure crisis, Chopra wrote. Borrowers were given conflicting information about their options and found scammers who made false promises on loan modifications in exchange for upfront fees. In 2011, Google helped to stop these scammers through its cooperation with the Office of the Special Inspector General for the Troubled Asset Relief Program. Now, the bureau is asking for help in stopping scammers from preying on student borrowers in trouble.
Work with authorities. Chopra urged Google to work with federal and state agencies to ensure that the company’s search products are not being used by individuals and companies “seeking to prey on the most vulnerable student loan borrowers by implying an affiliation with the federal government.” He suggested that Google could give greater value to its users and help shut down scammers if the company would closely monitor advertising on key search terms and help drive traffic toward unbiased sources of information.
For more information about student loan-related scams and the letter to Google, subscribe to the Banking and Finance Law Daily.
Former Consumer Financial Protection Bureau Assistant Director & Student Loan Ombudsman Rohit Chopra alerted Google management that student debt relief scammers may be using the company’s search products to target student loan borrowers. Shortly after contacting Google, Chopra left the CFPB and signed on with the Center for American Progress, thus the "former" added to his recently-held title as Student Loan Ombudsman.
Representing the bureau, Chopra told Google that it is concerned that “unscrupulous companies may be using aggressive advertising through search products to lure distressed borrowers.” In a letter to Susan Molinari, Google Vice President, Americas Public Policy and Government Relations, Chopra explained the student loan debt situation, stating that a “substantial portion” of the more than 40 million Americans owing more than $1.2 trillion in debt are “in distress.” The CFPB estimates that more than 8 million borrowers are in default on a federal or private student loan.
The CFPB is concerned that federal student loan borrowers are “left in the dark” by loan servicers that do not advise them of their options. Borrowers with federal student loans are able to avoid or get out of default through various income-driven repayment and rehabilitation plans, Chopra said.
Increase in illegal practices. Chopra wrote that the bureau has seen an increase in the number of companies that charge large upfront fees to help borrowers enroll in a plan that can be done for free. He noted that federal and state law enforcement has taken action to stop “the illegal and harmful practices of these companies,” and the CFPB has warned consumers about them.
Google trend analysis. In his letter, Chopra told Molinari that the CFPB is aware that Google has policies in place to protect consumers against misrepresentations in advertisements, but there may be companies that do not meet Google’s requirements. The CFPB’s analysis of Google Trends data suggests that struggling borrowers are indeed searching for help using keywords such as “student loan default,” “student loan forgiveness,” and “Obama student loan relief.”
This process “bears a close resemblance” to what happened during the foreclosure crisis, Chopra wrote. Borrowers were given conflicting information about their options and found scammers who made false promises on loan modifications in exchange for upfront fees. In 2011, Google helped to stop these scammers through its cooperation with the Office of the Special Inspector General for the Troubled Asset Relief Program. Now, the bureau is asking for help in stopping scammers from preying on student borrowers in trouble.
Work with authorities. Chopra urged Google to work with federal and state agencies to ensure that the company’s search products are not being used by individuals and companies “seeking to prey on the most vulnerable student loan borrowers by implying an affiliation with the federal government.” He suggested that Google could give greater value to its users and help shut down scammers if the company would closely monitor advertising on key search terms and help drive traffic toward unbiased sources of information.
For more information about student loan-related scams and the letter to Google, subscribe to the Banking and Finance Law Daily.
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