CFPB Report August 15, 2014

CFPB Takes Action against Mortgage Lender for Deceptive Practices

On Tuesday, August 12, 2014, the CFPB ordered Amerisave and its affiliate to pay $14.8 million in compensation to consumers, as well as a $4.5 million penalty for "engaging in a deceptive bait-and-switch mortgage-lending scheme." The Bureau claims Amerisave advertised misleading interest rates and illegally overcharged for affiliated "third-party" services. The Bureau has also fined the owner $1.5 million.


The Bureau found Amerisave advertised low interest rates which were not available; locked in consumers with expensive up-front fees; failed to properly disclose its affiliated relationship; and charged unfairly inflated prices for services through its affiliate.


"Amerisave lured consumers in with deceptive advertising, trapped them with costly upfront fees, and then illegally overcharged them for services from an undisclosed affiliate," said CFPB Director Richard Cordray in a press statement. "By the time consumers could have discovered the advertised low rates were too good to be true, they had already committed to pay hundreds of dollars to Amerisave. Today's action puts an end to Amerisave's unacceptable bait-and-switch scheme and holds Patrick Markert personally responsible for his illegal actions."


CFPB Turns its Sights to Bitcoin

On Monday, August 11, 2014, the CFPB issued a consumer advisory warning addressing the risks of virtual currencies, such as Bitcoin. Key points from the warning include:

  • Exchange rates: The advisory explains that consumers who buy virtual currencies should be prepared to weather its volatility. Consumers should also consider whether there are mark-ups or other fees when using an exchange or digital wallet provider. Companies may be charging consumers to buy, spend, or accept virtual currencies.
  • Hacking: Fraudsters are taking advantage of the hype surrounding virtual currencies and posing as Bitcoin exchanges, Bitcoin intermediaries, and Bitcoin traders in an effort to lure consumers to send money, which is then stolen. Also, if hackers access consumers' Bitcoin "private keys," which are 64-character codes that unlock the consumer's funds, the consumer can lose all their virtual currency.
  • Lost or stolen funds: If a consumer trusts a company to hold their virtual currencies and something goes wrong, the company may not offer the kind of help the consumer would expect from a bank, debit card, or credit card provider. In fact, some virtual currency companies disclaim responsibility for consumer losses if funds are lost or stolen.

The CFPB also announced it is now accepting Bitcoin-related complaints in its Consumer Complaint Portal.


CFPB Enters into Consent Order with Retailer

On Thursday, August 14, 2014, the CFPB announced it has entered into a consent order with USA Discounters, Ltd. for allegedly misleading servicemembers into paying fees for legal protections servicemembers already had, and for certain services the company failed to provide. The CFPB reported it has obtained more than $350,000 in refunds for servicemembers harmed by this scam, and USA Discounters will pay an additional $50,000 civil penalty.

Specifically, the CFPB found USA Discounters harmed servicemembers with unfair and deceptive acts and practices, including: 

  • Deceptively marketing its own legal obligation as a service to servicemembers: USA Discounters allegedly told servicemembers they would use Servicemember's Civil Relief Act (SCRA) Specialists to verify the servicemember's active military status for them so that the servicemember could receive certain protections. This verification was marketed as a benefit, when in fact, USA Discounters had to report on the servicemember's military status in order to obtain a default judgment against the servicemember.
  • Misleading servicemembers into believing they would have an independent representative: USA Discounters required servicemembers to pay the $5 fee in exchange for independent representation by a SCRA Specialists. However, the sole source of revenue for the SCRA Specialists was USA Discounters customers, and the disclosed services would have helped USA Discounters to advance its own interests against the servicemembers.
  • Failing to provide actual services to struggling borrowers: In its contracts, USA Discounters pledged servicemembers would receive benefits in exchange for the $5 fee, but many of the promised services were never performed.  

"Today we shut down USA Discounters' fee scam that was designed to exploit unsuspecting servicemembers," said Director Cordray in a press statement. "USA Discounters charged servicemembers for legal protections they were already entitled to, and for services that were never actually provided. Targeting servicemembers with scams disguised as legal benefits is unconscionable, and we will not allow this injustice to continue." 


NCRC Asks CFPB Expand Business Lending Data Collection Requirements

On Tuesday, August 12, 2014, the National Community Reinvestment Coalition (NCRC) issued a reportrecommending the CFPB require far more business lending data collection than mandated by the Dodd-Frank Act (Small Business Data Collection, Section 1071). In its report, the NCRC recommended the CFPB should collect more data on business lending to women and minorities than it is currently collecting on mortgages to comply with the Home Mortgage Disclosure Act (HMDA).

The report also recommended:

  • The collection of the data from large lenders, smaller banks, credit unions, and non-depository lenders in order to generate an accurate reflection of lending patterns;
  • The collection of more than just origination data, suggesting the Bureau also collect information on denied applications, pricing and creditworthiness;
  • An expansion of currently tracked racial and ethnic groups;
  • The collection of additional information about the small businesses applying for credit, including the number of employees, revenue, collateral pledged by borrowers, start-up status of the business and loan performance, and
  • The collection of information on personal loans entrepreneurs use for business purposes, and not just business loans.

CBA sent a list of concerns to the CFPB for consideration in September of 2012, and met with the CFPB on several occasions on this issue. CBA does not expect any policy decisions to be made by the Bureau until mid-2015.


CFPB Issues OMWI Report on Improving Employee Satisfaction at the Bureau

On August 12, 2014, the CFPB's Office of Minority and Women Inclusion (OMWI) released a "listening session" report, which presents the OMWI Director's recommendations for improving the culture of "diversity, inclusion, equality and fairness" at the CFPB. The listening sessions with CFPB staff were conducted in response to recent allegations of discrimination and retaliation at the agency. The House Financial Services Subcommittee on Oversight and Investigations held a hearing on the subject in April of 2014. Based on the feedback from the listening sessions, the report makes a number of recommendations, which can be described as improving organizational structures and management processes.

Senate Sends Letters to Education Secretary

On Wednesday, August 13, 2014, Ranking Member of the Senate Banking Committee Mike Crapo (R-ID), sent a letter to U.S. Department of Education (DOE) Secretary Arne Duncan questioning DOE's authority to regulate financial products outside of the Title IV disbursement process which already fall under prudential regulatory supervision.


Senate Banking Committee member Robert Menendez (D-NJ) also sent a letter to Secretary Duncan and CFPB Director Cordray requesting further protections for students departing for their first year in college. Sen. Menendez classifies the partnerships between schools and financial institutions as "cozy" and urged the DOE to protect students from this "trap." He continued to ask for clear disclosures and removal of all fees and penalties associated with these accounts, calling them "abusive." He expressed his desire to ensure students have a fair choice on how to receive their funds in a timely manner.

Homeland Security Cybersecurity Initiative

On Monday, August 11, 2014, the U.S. Department of Homeland Security (DHS) released a reportoutlining ways in which to increase collaboration between the public and private sector participants on the Enhanced Cybersecurity Services (ECS) initiative. The DHS Office of Inspector General (OIG) released the report, which suggested improvements including, ensuring resource availability for timely completion of the accreditation process; improving program outreach to all critical infrastructure areas; and developing systems to manage sensitive and classified cyber intel.


As the DHS moves towards a more streamlined ECS initiative approach, it will seek further industry participation in securing critical infrastructure and increasing collaboration between industry participants.