CFPB Report July 11, 2014

CFPB Takes Action Against Payday Lender

On Thursday, July 10, 2014, the CFPB took enforcement action against a large payday lender, ACE Cash Express, for allegedly pushing payday borrowers into a cycle of debt. The CFPB found ACE, headquartered in Irving, TX, used illegal debt collection tactics, including harassment and false threats of lawsuits or criminal prosecution, to pressure overdue borrowers into taking out additional loans they could not afford. ACE will provide $5 million in refunds and pay $5 million to the CFPB Civil Penalty Fund.


“ACE used false threats, intimidation, and harassing calls to bully payday borrowers into a cycle of debt,” said Director Cordray in a press statement. “This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back. The CFPB was created to stand up for consumers and today we are taking action to put an end to this illegal, predatory behavior.”


CFPB Announces Field Hearing on Consumer Complaints

On Thursday, July 10, 2014, the CFPB announced it will conduct a field hearing in El Paso, TX concerning consumer complaints. The hearing will take place on Thursday, July 17, 2014 at 10:30 a.m. MDT, and will feature remarks from Director Cordray, as well as consumer groups, industry representatives, and members of the public. As has been the case with past hearings, the CFPB may make a policy announcement concerning its consumer complaint portal.


The field hearing is open to the public and available via livestream on the CFPB’s website.


CFPB Issues Interpretive Rule for QM when a Borrower Dies

On Tuesday, July 8, 2014, the CFPB issued an interpretive rule clarifying when a borrower passes away, the Ability-to-Repay (ATR) rule is not automatically triggered for heirs who may take over the mortgage. Following the issuance of the qualified mortgage rules, both industry and consumer advocates have raised questions about the application of the ATR rule in situations where a successor, such as an heir or family member, seeks to take over an existing mortgage. As the named borrower, the heir may more easily obtain account information, pay off the loan, or seek a loan modification.


“Losing a loved one should not mean also losing your home. Today’s interpretive rule makes it clear that when family members inherit property, they can take over the mortgage without jumping through unnecessary hoops,” said CFPB Director Richard Cordray in press statement. “This gives heirs an opportunity to work with the lender to pay off the loan or seek a loan modification.”


In October 2013, the CFPB also provided clarification through a bulletin on the role of mortgage servicers when a borrower dies. The bulletin outlines servicers must have procedures and policies to identify and communicate with family members and those who may have a legal interest in the property.


CFPB Publishes Report on Remittance Use and Credit Scoring

On Thursday, July 3, 2014, the CFPB released a report on the "Use of Remittance Histories in Credit Scoring." The Dodd-Frank Act directed the CFPB to study the potential for remittance transfers information to enhance consumer credit scores, and the CFPB issued a report to Congress on this subject in July of 2011.


In the 2011 report, the CFPB said it would conduct additional research to better explore the potential for remittance information to enhance credit scores, either by improving the ability of the credit scores to more accurately predict credit risk, or by raising the scores of those consumers who send remittance transfers. In the report released on Thursday, the CFPB found remittance histories have little predictive value for credit scoring purposes, and are unlikely to improve the credit scores of consumers who send remittance transfers.


CFPB Blog Post: What happens to your student loans if your school is shut down?

On Wednesday, July 2, 2014, CFPB Private Student Loan Ombudsman Rohit Chopra published a blog post on the Bureau’s website entitled: “What happens to your student loans if your school is shut down.” Chopra covers scenarios including a school being sold or closing. He contrasts the different protections available for both federal and private student loans, implying federal loan borrowers may be able to discharge the debt, while this is not likely an option for private loan borrowers. Chopra does note private loan borrowers may have options through state programs for assistance in such circumstances.


OIG Responds to Inquiry on CFPB Headquarters Renovation

On Monday, June 30, 2014, the Office of the Inspector General (OIG) for the Federal Reserve and CFPBresponded to a letter from the Chairman of the House Financial Services Subcommittee on Oversight and Investigations. The letter from Chairman Patrick McHenry (R-NC) requested the OIG to evaluate the budgeting process for renovations, whether competitive procedures were used, and requested an answer on whether the increases to the renovation budget were justified. The Bureau’s renovations, and costs associated with temporarily moving its offices during renovations, have been a recurring subject between Director Cordray and Republicans on the House Financial Services Committee. The OIG’s report lends some credibility to Republicans’ concerns.


The OIG’s report addressed three areas of inquiry, including the budgeting and approval process; scope and justification for estimates; and, the use of competitive procedures for major contracts. The OIG found the approval of funding for the renovation was not in accordance with the Bureau’s policies for major investment. The Bureau said it saw this as a formality because the renovation decisions came before these policies were in place. The OIG did find competitive bidding prices have been used, and expects this will continue.


The House Financial Services Committee issued a press statement critical of the Bureau’s handling of its renovations. The Committee highlights findings from the OIG such as, the CFPB’s inability to “locate any documentation of the decision to fully renovate the building,” and said “a sound business case is not available to support the funding of the renovation.”


CFPB OMWI Director to Industry: “Start Now” to Comply with Standards

At the Thursday, June 26, 2014 MBA Strategic Markets and Diversity Summit, Stuart Ishimaru, the CFPB’s Assistant Director for the Office of Minority and Women Inclusion (OMWI), asserted the industry should “start now” to comply with OMWI standards even though the Bureau does not expect to release final guidelines until later this year.

Government Accountability Office Calls for CFPB Oversight of Virtual Currencies

On Thursday, June 26, 2014, the Government Accountability Office (GAO) released a report, entitled: “Virtual Currencies: Emerging Regulatory, Law Enforcement, and Consumer Protections Challenges,” detailing federal agency efforts to regulate virtual currency with regards to anti-money laundering and Bank Secrecy Act (BSA) concerns. The report noted the lack of consumer protection oversight and stressed the need for CFPB involvement. The GAO stated: “Without CFPB’s participation, interagency working groups are not fully leveraging the expertise of the lead consumer financial protection agency, and CFPB may not be receiving information that it could use to assess the risks that virtual currencies pose to consumers.” Specifically, GAO called on the CFPB to identify and participate in pertinent interagency working groups addressing virtual currencies; and decide, in conjunction with the other agencies, the efforts in which the CFPB will participate.

Agencies Issue Guidance for HELOCs Entering their End-of-Draw Period

On Tuesday, July 1, 2014, the federal financial institutions regulatory agencies in conjunction with the Conference of State Bank Supervisors (CSBS) issued guidance for home equity lines of credit (HELOC) nearing their end-of-draw periods. The guidance describes: 

  • Core operating principles for governance of HELOCs nearing end of draw;
  • Components of a risk management approach;
  • Effective responses to consumers who may not be able to meet the new obligations; and
  • Concepts related to financial reporting of HELOCs.

The release notes financial institutions and borrowers will benefit from working together to avoid unnecessary defaults, and describes compliance approaches for promoting repayment. The guidance describes core principles, and notes it should be applied in a manner “commensurate with the size and risk characteristics of a financial institution’s HELOC portfolio.”


Richard Hunt, President and CEO of the Consumer Bankers Association, released the following statement:

 “CBA’s member institutions have been notifying and diligently working with their customers well in advance of the end of their loan’s draw period in order to help prepare them to enter the repayment phase. Consumers and banks share the responsibility of a loan. Our banks are taking all steps to help their customers and we look forward to continuing to work with consumers as they enter the repayment phase of their HELOC.”

Merchants File for Additional Time on Interchange

On Wednesday, July 9, 2014, the merchants coalition in NACS v. Board of Governors of the Federal Reserve System filed an application for an additional 28-day extension to file their petition for writ of certiorari, which would extend the date to August 18, 2014. CBA anticipates the request will be granted and will provide additional information once the Court rules.


On January 17, 2014, the U.S. Court of Appeals for the District of Columbia Circuit heard oral arguments in the case and, on Friday, March 21, 2014, overturned a lower court decision. On May 30, 2014, the merchant coalition filed an application with the U.S. Supreme Court seeking an additional 30 days within which to file a petition for writ of certiorari. That petition was granted, extending the date to July 21, 2014.