CFPB Report - April 10, 2015

Bureau Issues Consent Order for Mortgage Advertisements
On Thursday, April 9, 2015, the CFPB entered into a consent order with RMK Financial Corporation, also doing business as Majestic Home Loans, to resolve allegations of deceptive mortgage advertising. As a result of the order, RMK will be prohibited from falsely implying government affiliation in future advertisements and pay $250,000 in civil penalties to the Bureau. According to the consent order, the company mailed print advertisements to over 100,000 consumers across the country – including tens of thousands of U.S. servicemembers and veterans – and using the names and logos of the U.S. Department of Veterans Affairs (VA) and the Federal Housing Administration (FHA) in a way which falsely implied the advertisements were sent or endorsed by the VA or FHA. Moreover, RMK's ads also contained misrepresentations about the loans' interest rates and estimated monthly payments, including whether the interest rate was fixed or variable.

In a press release, CFPB Director Richard Cordray said, "Deceptive advertising has no place in the mortgage marketplace, and the Consumer Bureau will continue to take action against companies that mislead consumers with false claims of government affiliation. Today's action sends a clear message that misleading consumers is illegal, unacceptable, and will not be tolerated."


CFPB Announces Meeting on Credit Scores
Earlier this week, the CFPB announced the next meeting of its Community Bank Advisory Council will be held at 3 p.m. on Wednesday, April 22, 2015, and will focus on credit scores and consumer reporting, as well as implications for small financial institutions. Director Cordray and Assistant Director for Credit Information and Deposits Markets Corey Stone will speak during the meeting, which is open to the public. RSVP is required to attend. A recording of the meeting will be available on the CFPB's blog.


CFPB Takes Action Against Robo-Call Debt Collection Operation
On Wednesday, April 8, 2015, the CFPB announced a pending lawsuit against a robo-call phantom debt collection operation, alleging numerous violations of the Consumer Financial Protection Act (CFPA) and Fair Debt Collection and Practices Act (FDCPA) and asks the court for an injunction, damages, and civil monetary penalties. In the complaint, the CFPB claims the leaders of the operation – Marcus Brown and Mohan Bagga – coordinated and oversaw a group of entities which threatened and harassed consumers to collect phantom debt, which is debt neither owed by the consumer nor is payable to the entities attempting to collect it. Due to these misrepresentations, the Bureau alleges consumers paid millions of dollars to the Debt Collectors.

Among other allegations, consumers were threatened with arrest, wage garnishment, and "financial restraining orders" and were tricked into paying because the callers verified the consumers' personal information, which the Debt Collectors allegedly purchased from debt brokers and lead generators. Allegedly, the payment processors involved facilitated the fraud by accepting payments when they knew or should have known the debt collectors were engaging in illegal conduct. In turn, the payment processors allegedly gave the debt collectors an "air of legitimacy." Increasing the scale of the operation, the debt collectors hired the telemarketing firm – Global Connect – to automatically robo-call millions of consumers. Global Connect allegedly provided the service even though it knew or should have known the messages were unfair or deceptive.


CFPB Announces Financial Education Initiative
On Tuesday, April 7, 2015, the CFPB announced a nationwide effort to advance financial education in schools. The CFPB published: "Advancing K-12 Financial Education: A Guide for Policymakers," a resource guide containing strategies for furthering the development and implementation of financial education in states.

"We have watched too many Americans struggle to manage their affairs within our complex financial system," said Director Cordray in a press release. "Financial education in our schools is critical to the financial well-being of future generations. The resource guide will allow the CFPB to serve those policymakers looking to make progress on K-12 education."

The guide focuses on three main areas: laying the groundwork, building the initiative, and extending the impact. Each section contains questions for policymakers to consider, case studies, and a resource directory with additional information. While the Bureau notes each state's unique circumstances may require different approaches, the agency hopes policymakers find the guide helpful as a resource.

Federal Open Market Committee Releases March Minutes
On Wednesday April 8, 2015, the Federal Reserve released minutes from the most recent Federal Open Market Committee meeting, held March 17-18, 2015. In the prepared statement, the Committee reaffirmed current interest rates, asserted it "continues to monitor inflation developments closely," and made the following conclusions about the state of the economy:

  • Labor market conditions have improved further, with strong job gains and a lower unemployment rate. A range of labor market indicators suggests underutilization of labor resources continues to diminish.
  • Household spending is rising moderately; declines in energy prices have boosted household purchasing power.
  • Business fixed investment is advancing, while the recovery in the housing sector remains slow and export growth has weakened.
  • Inflation has declined further below the Committee's longer-run objective, largely reflecting declines in energy prices. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

The Committee assured it will take a balanced approach to changes, ensuring inflation stays below two percent. It will likely keep interest rates below levels the Committee views as normal in the long run, even as the economy improves.


OCC Names New Deputy for Strategic Management Office
On Monday, April 6, 2015, the OCC named Roy Madsen Deputy Comptroller for Strategic Management, where he will lead coordinating, managing, and measuring the agency's strategic planning process, as well as the agency's employee engagement process. Madsen joined the OCC in 1979 as a Budget Analyst and has served in a variety of managerial roles, including Assistant Chief Financial Officer for Financial Policy, Planning, and review; Deputy Chief Financial Officer; Director for Operations Research; and Director for Performance Improvements.


Banking Agencies Schedule EGRPRA Meeting
Earlier this week the Board of Governors of the Federal Reserve System, the OCC, and the FDIC announced they will hold an outreach meeting on Monday, May 4, 2015, at the Federal Reserve Bank of Boston as part of their regulatory review under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). The meeting is the third in a series of outreach sessions the agencies are holding throughout the country.

The agencies also said they have decided to expand the scope of the EGRPRA review to cover more recent regulations. At the Boston outreach meeting and in other venues, the agencies will take comment on all regulations issued in final form up to the publication date of the last EGRPRA notice, which is expected by year end.


Senate, House Caucuses on Payment Technology Innovation
Members of the U.S. Senate and House of Representatives recently announced formation of two bipartisan caucuses to focus on new technologies in the electronic payment industry.

The Senate Payments Innovation Caucus, chaired by Sens. Tom Carper (D-DE), Johnny Isakson (R-GA), Gary Peters (D-MI), and Mike Rounds (R-SD), will provide information to policy makers on issues such as data security, consumer protection, innovative technologies, and consumer access to electronic financial services. According to the newly formed caucus, nearly 70 percent of consumer spending is done using electronic payment methods, and spending is expected to reach $7.3 trillion by 2017.

A similar caucus in the House held its initial stakeholder meeting this week. The Congressional Payment Technology Caucus, led by Reps. Randy Neugebauer (R-TX), David Scott (D-GA), Kyrsten Sinema (D-AZ), and Lynn Westmoreland (D-GA), will also explore new and innovative technologies in the payments industry and provide policy discussions on data security and unbanked users' access to electronic payments.