CFPB Report - January 23, 2015

CFPB, Maryland Take Action on Alleged Mortgage Kickbacks

On Thursday, January 22, 2015, the CFPB and the Maryland Attorney General announced a joint action against Wells Fargo and JPMorgan Chase for an alleged illegal marketing-services-kickback scheme involving Genuine Title, a now-defunct title company. The agencies allege that Genuine Title gave the banks' loan officers cash, marketing materials, and consumer information in exchange for business referrals. The Real Estate Settlement Procedures Act prohibits giving a "fee, kickback, or thing of value" in exchange for a referral of business related to a real-estate-settlement service.
 
"Today we took action against two of the nation's largest banks, Wells Fargo and JPMorgan Chase, for illegal mortgage kickbacks," said CFPB Director Richard Cordray in a press release. "These banks allowed their loan officers to focus on their own illegal financial gain rather than on treating consumers fairly. Our action today to address these practices should serve as a warning for all those in the mortgage market."

Senate Banking Subcommittee Chairs Named

On Thursday, January 22, 2015, Senate Banking Committee Chairman Richard Shelby (R-AL) announced Subcommittee chairs for the 114th Congress, including: 

  • Sen. Mike Crapo (R-ID) - Securities, Insurance and Investment Subcommittee
  • Sen. Dean Heller (R-NV) - Economic Policy Subcommittee
  • Sen. Mark Kirk (R-IL) - National Security and International Trade and Finance Subcommittee
  • Sen. Tim Scott (R-SC) - Housing, Transportation and Community Development Subcommittee
  • Sen. Patrick Toomey (R-PA) - Financial Institutions and Consumer Protection Subcommittee

Supreme Court Hears Arguments in Housing Disparate Impact Case

On Wednesday, January 21, 2015, the U.S. Supreme Court considered oral arguments in Texas Department of Housing v. Inclusive Communities Project (ICP) – the long-awaited case to clarify whether disparate impact applies in the housing context. In 2008, ICP sued the Texas Department of Housing for "disproportionately allocating" tax credits to properties in minority-populated areas even if there was no intent to discriminate. Last year, the Texas Department of Housing asked the Court to clarify whether disparate impact is cognizable under the Fair Housing Act (FHA). Analysis of the oral arguments can be found on the Court's official blog.
 
As a recap, the FHA prohibits discrimination in all real estate related transactions and, in 2013, the Department of Housing and Urban Development finalized a rule stating FHA imposes liability for disparate impact. Unlike disparate treatment where intent must be shown, disparate impact can be present if there is a discriminatory effect even if there is no intent to discriminate. The Supreme Court previously agreed to hear this issue in two separate cases, Gallagher and Mount Holly, both of which were settled before the Court could consider them.

FTC Releases Study on Credit Reporting Accuracy

On Wednesday, January 21, 2015, the Federal Trade Commission (FTC) released the findings of its congressionally-mandated study of the U.S. credit reporting industry. The FTC found five percent of consumers had errors on one of their three major credit reports which could lead to them paying more for products such as auto loans and insurance.  Other key finding include:

  • One in four consumers identified errors on their credit reports, potentially affecting their credit scores;
  • One in five consumers had an error corrected by a credit reporting agency (CRA) after it was disputed, on at least one of their three credit reports;
  • Four out of five consumers who filed disputes experienced some modification to their credit report;
  • Slightly more than one in 10 consumers saw a change in their credit score after the CRAs modified errors on their credit report; and
  • Approximately one in 20 consumers had a maximum score change of more than 25 points and only one in 250 consumers had a maximum score change of more than 100 points.

"These are eye-opening numbers for American consumers," said Howard Shelanski, Director of the FTC's Bureau of Economics. "The results of this first-of-its-kind study make it clear that consumers should check their credit reports regularly. If they don't, they are potentially putting their pocketbooks at risk."

House Financial Services Committee Adopts Oversight Plan for 114th Congress

On Wednesday, January 21, 2015, the House Financial Services Committee met to finalize its oversight plan for the 114th Congress. Created with input from Republicans and Democrats, the plan will serve as an informal roadmap of the issues the Committee plans to address during the new Congress. The oversight plan includes a wide range of issues, including a long list under the category of Financial Institutions and Consumer Credit, such as "examining the governance structure and funding mechanism of the CFPB."
 
"If a program isn't working, if it does more harm than good, it is time to reform it or it is time to get rid of it. If policies or regulations don't make common sense, let's make them sensible. That will lead to a better economy," said Committee Chairman Jeb Hensarling (R-TX) in his opening statement. "Effective oversight is what makes it possible for us to craft responsible and effective solutions, and I look forward to working with members on both sides of the aisle to meet these challenges."
 
"I, for one, believe this Committee should be focused on ensuring that we do not repeat the mistakes of the past. After the vast destruction of wealth caused by the financial crisis, it is imperative that we protect American workers and taxpayers by minimizing the booms and busts of an unstable market. That's why we need strong rules that keep Wall Street stable and prevent their excessive risks from damaging Main Street," said Ranking Member Maxine Waters (D-TX).
 
The Committee approved the resolution to adopt the oversight plan by a voice vote.