CFPB Report - June 19, 2015

CFPB Issues Mid-Year Update of Student Loan Market
On Thursday, June 18, 2015, the CFPB Student Loan Ombudsman issued a Mid-Year Update about complaints received regarding private student loans, and debt collection complaints about federal student loans. The report highlighted lenders policies regarding co-signer release, and found more than 90 percent of consumers who applied for co-signer release were rejected. The CFPB did not disclose the sample size upon which this percentage was based.
“Parents and grandparents put their financial futures on the line by co-signing private student loans to help family members achieve the dream of higher education,” said CFPB Director Richard Cordray in a press release.
The report underscored specific concerns including:

  • Consumers not able to access criteria for cosigner release;
  • Private student loan contracts have “auto-default” clauses (although they are not generally exercised) in the instance of a cosigner passing away or filing for bankruptcy;
  • Borrowers may lose some benefits when private loans are securitized;
  • Certain policies may permanently disqualify borrowers from cosigner release; and
  • Some private loans may contain “universal default” clauses.
  • View CBA President and CEO Richard Hunt's statement on this issue here.

CFPB Announces Enforcement Action Against Medical Debt Collection Company
On Thursday, June 18, 2015, the CFPB announced an enforcement action against Syndicated Office Systems, LLC. The company collects debt primarily on behalf of hospital, doctors, and other healthcare providers and is an indirect subsidiary of Conifer Health Solutions, and thus a subsidiary of Tenet Healthcare Corporation. The Bureau alleges mishandling of consumer credit reporting disputes, a violation of the Federal Credit Reporting Act, and failing to send debt validation notices in accordance with the Fair Debt Collection Practices Act.
“Syndicated Office Systems mistreated consumers and prevented them from exercising critical debt collection rights,” said Director Cordray in an press release. “These violations are particularly egregious given the challenges many consumers already face who are attempting to navigate the medical debt maze. Today we are putting a stop to these illegal practices and getting consumers the relief they deserve.”
The action requires the company to pay $5.4 million in relief to consumers and an additional $500,000 penalty, as well as correct its business practices.
Bureau Proposes Delay of TRID Deadline
On Wednesday, June 17, 2015, the Bureau proposed delaying the effective date of the TILA/RESPA Integrated Mortgage Disclosures (TRID) until October 1, 2015. In a press statement, Director Cordray noted an administrative error which would have delayed the effective date of the rule by two weeks. He also noted a longer delay would be in the best interest of consumers. The Bureau will consider comments for a short period with a “final decision expected shortly thereafter.”
View CBA President and CEO Richard Hunt's statement on this issue here.
CFPB Sues Auto Finance Company, Alleges UDAAP Violation
On Wednesday, June 17, 2015, the CFPB filed suit against Security National Automotive Acceptance Company, LLC, an Ohio-based auto finance company. The CFPB alleges the company used illegal threats and deceptive claims in its debt collection practices, and is seeking compensatory and punitive damages.
“Security National Automotive Acceptance Company took advantage of military rules to put enormous pressures on servicemembers to pay their debts,” said Director Cordray. “For all the security they provide us, servicemembers should not have their financial and career security threatened by false information from an auto loan company.”
The Bureau claims the company exaggerated potential disciplinary action servicemembers would face, contacted and threatened to contact commanding officers to pressure servicemembers into repayment, falsely threatened to garnish servicemembers’ wages, and misled servicemembers about imminent legal action.
CBA Files Comment Letter on CFPB’s Second CARD Act RFI
On June 17, 2015, CBA filed a joint comment letter in response to the CFPB’s request for information on the state of the consumer credit card market. This letter follows a previous submission on May 18, 2015, and focuses on the topics of online disclosures, grace periods, add-on products and debt collection.
CBA urged the CFPB to provide additional guidance on delivering clear and conspicuous online disclosures, identified steps the industry has taken to educate and protect consumers with respect to grace periods, and asked for guidance on how the industry can offer add-on products to consumers. CBA also provided information related to the industry’s debt collection and debt sale practices, while reiterating recommendations regarding the Bureau’s forthcoming debt collection rulemaking.
Private Education Loan Ombudsman to Leave CFPB
In a letter this week, Rohit Chopra, the CFPB Assistant Director in the Office of Students, and Private Education Loan Ombudsman, informed U.S. Department of Treasury Secretary Jack Lew of his intent to step down from his roles at the Bureau.
"I am proud of the progress that we have made together to assist borrowers, promote transparency and hold accountable those who break the law," wrote Chopra. "While more work is needed to correct the serious deficiencies in the student loan market, I have great confidence in the bureau’s ability to continue this important work on behalf of consumers."
Seth Frotman, the Deputy Assistant Director of the Office of Students, will lead the Office on an acting basis. Frotman has served as a Senior Advisor in the Bureau’s Office of Servicemember Affairs and worked on Capitol Hill for Congressman Patrick Murphy (D-FL), the Senate Committee on Health, Education, Labor, and Pensions, and worked in the New Jersey State Senate.

House Committee Votes on Financial Services Spending Bill
On Thursday, June 18, 2015, the House Appropriations Committee approved the fiscal year 2016 Financial Services spending bill on a party-line vote. The bill provides annual funding for the Treasury Department, the Judiciary, the U.S. Small Business Administration, the Securities and Exchange Commission (SEC), and several other agencies. During the markup, a number of amendments were considered including one from Rep. Steve Womack (R-AK) restricting the Bureau from issuing a rule on pre-dispute arbitration clauses before providing additional information on the methodology used for its studies on the topic.
“This bill covers a wide swath of programs that enable our federal government to do its job. From preserving an open and fair judicial system, to investing in small businesses that help our economy grow, this bill does a great deal of good work, and I am proud to support it today,” Committee Chairman Hal Rogers (R-KY) said. “The bill reduces funding for nonessential areas, and holds the Administration and the Internal Revenue Service more accountable to the taxpayer,” said Financial Services Subcommittee Chairman Ander Crenshaw (R-FL).
While there are a number of notable provisions in the spending bill, some changes would impact the work of financial services regulators. The bill keeps SEC funding at 2015 levels instead of increasing it $222 million at the request of the President. The bill also calls for subjecting the Bureau to the congressional appropriations process, and extensive reporting requirements of CFPB activities.

FCC Votes on TCPA Petition
On Thursday, June 18, 2015, the Federal Communications Commission (FCC) held an open meeting to vote on 21 Telephone Consumer Protection Act (TCPA) petitions, including the CBA petition filed on September 19, 2014. The Commission approved the proposal on party lines, three Democrat Commissioners to two Republican Commissioners. Though the proposal – now final policy – has not been released to the public, based upon statements of the Commissioners, the policy: 

  • Allows telecommunication companies to offer call blocking technologies.
  • Clarifies that consent must be obtained from the actual called party, subscribed party, or user of the phone, NOT intended recipient. There is one call permitted before liability attaches, but it is one attempt, not actual knowledge of reassignment. States callers can revoke consent using any reasonable means.
  • Confirms capacity means future capacity to become an autodialer, not present capacity. Smartphones are included in the definition due to its breadth. An example of phone not included is a rotary phone.
  • Confirms texts fall under the TCPA.
  • Asserts policy applies equally to telemarketing and informational calls.
  • Creates an exemption for time sensitive communications, such as fraud alerts and health care reminders, on a free to end user basis.
  • Carves-out inmate payphone providers.

View CBA President and CEO Richard Hunt's statement on this issue here.

Congress Weighs in with CFPB on Arbitration Clauses
On Wednesday, June 17, 2015, more than 80 House and Senate Republicans sent a letter to Director Cordray questioning the methodology of its study on the use of pre-dispute arbitration clauses in contracts for consumer financial products and services. Dodd-Frank requires the Bureau to conduct a study, and decide whether to pursue rulemaking based upon its results. According to the letter, “The flawed process produced a finally-flawed study. Rather than focusing on the critical question – whether regulating or prohibition arbitration will benefit consumers – and devising a plan to address the issues relevant to resolving that question, the Bureau failed to provide even the most basic comparisons needed to evaluate the use of arbitration agreements.”
A May 21, 2015 letter lead by Sen. Al Franken (D-MN) called for the Bureau to quickly pursue rulemaking to limit the use of pre-dispute arbitration clauses in consumer financial products or services contracts. The letter, which has the support of 59 House and Senate Democrats, states, “Forced arbitration clauses—often buried deep within the fine print of financial products and serve contracts—harm American consumers by depriving them of their day in court even when companies have violated the law."

House Subcommittee Examines Global Cyber Threats
On Tuesday, June 16, 2015, the House Financial Services Subcommittee on Oversight & Investigations held a hearing entitled: “A Global Perspective on Cyber Threats.” Featuring testimony from cyber security experts, the hearing explored the rise in cyber-attacks from nation-states, criminal organizations, terrorist groups, and “hacktivists.” The hearing is part of an ongoing series examining the threat of cyberattacks on the United States.
“Nearly every government agency has been a target of cyberattacks, and with the recent OPM breach, the federal government has now provided a channel for these criminals to access sensitive personal information. In the wake of these incidents, the CFPB continues to collect information on consumers and their financial practices, and Obamacare has created vast data hubs to collect and store scores of highly sensitive personal and health information on our citizens,” said Subcommittee Chairman Sean Duffy (R-WI).
According to Richard Bejtlich, Chief Security Strategist for FireEye, Inc., the total average cost paid by organizations due to a breach has risen from $5.9 million to $6.5 million. “Worse, the types of personally identifiable data being stolen increasingly include ‘permanent data,’ such as Social Security numbers and health care records,” Bejtlich said.