CFPB Report March 21, 2014

CFPB Report on Debt Collection Complaints

On Thursday, March 20, 2014, the CFPB issued a report outlining numerous unverified consumer complaints it received about the debt collection market. According to the Bureau, as many as one third of consumers who filed complaints on debt collection activities did not owe the debt in question. Other top complaints included use of aggressive communication tactics and threats of illegal actions by debt collectors.


The CFPB began accepting debt collection complaints in July 2013. According to the agency, the top complaints included: 

  • Collectors “hounded” consumers about a debt they do not owe: More than one-third of complaints were about a debt collector continually attempting to collect a debt the consumer did not believe was owed. Of these complaints, two-thirds reported the debt was not theirs, while others reported the debt was paid, was the result of identity theft, or was discharged in bankruptcy.
  • Aggressive communication tactics used by debt collectors: Nearly a quarter of the complaints received by the CFPB were about debt collectors who used inappropriate communication tactics. More than half of these complaints cited frequent or repeated calls from a collector, often calling the wrong phone number, calling their places of employment or using obscene, profane, or abusive language.
  • Taking or threatening illegal actions: About 14 percent of consumers reported a company took or threatened to take illegal actions against them.

“Consumers should never be hounded about debts they do not owe,” said CFPB Director Richard Cordray in a press statement. “We will not tolerate companies harassing consumers or threatening illegal actions in the debt collection market. We will continue to work hard to ensure that consumers are treated with dignity and fairness.”


CFPB Releases Draft Prepaid Disclosures

On Wednesday, March 19, 2014, the CFPB released two model forms of prepaid card packaging disclosures via a blog post, and asked consumers to share their opinions. First tested in Baltimore, MD in February 2014, the two disclosures are currently being tested in Los Angeles, CA. Testing is due to conclude in April 2014, prior to a prepaid proposal, which the CFPB expects to issue sometime in late spring of 2014.


In its blog post, the CFPB solicits feedback from the public on the model forms, directing consumers to focus on the following questions:

  • Do you understand how much each of these cards will cost to use?
  • What would you like to see added or changed? Is there some way to make the information clearer?
  • Is there anything you find confusing?

The CFPB asked consumers to weigh in via social media outlets, such as Twitter and Facebook, or toemail the Bureau directly and choose which model provides better information. CBA’s Prepaid Working Group will review and provide feedback to the CFPB.


House Financial Services Chairman Calls for CFPB Transparency

On Sunday, March 16, 2014, Chairman of the House Financial Services Committee, Jeb Hensarling (R-TX), called for more transparency from the CFPB in a video message. Chairman Hensarling cited examples of where the CFPB could be more transparent by opening up Bureau advisory group meetings, such as its Consumer Advisory Board, to the public. He also referenced a story by The Washington Free Beacon which claimed the CFPB instructed its employees to keep details on their work calendars to a minimum.


“Instead of operating behind closed doors, it’s time for the CFPB to live up to its oft-stated commitment to transparency and openness. In the interest of true, genuine transparency and open government, Director Cordray can and should use ‘Sunshine Week’ to take immediate steps that bring the CFPB into the sunlight,” said Chairman Hensarling.


Just prior to release of his video message, Chairman Hensarling requested information from the CFPB regarding its use of disparate impact in indirect auto lending, as well as information about a story published by American Banker which reported caucasian employees are more likely to received better performance reviews.

Merchants Dealt Blow in Interchange Case

On Friday, March 21, 2014, The U.S. Court of Special Appeals in Washington D.C. overturned a lower court decision in the debit card interchange case - NACS v. Board of Governors of the Federal Reserve System. The lower court originally ruled a Federal Reserve rule capping debit card swipe fees violated congressional intent because it didn’t go far enough. However, the three-judge panel for the appeals court said the Fed rule “generally rests on reasonable constructions” of the 2010 Dodd-Frank law’s Durbin Amendment. 


Below is a brief summary of the appellate decision

  • The Court of Appeals reversed the district court’s grant of summary judgment in favor of the merchants and remanded the case for further proceedings in accordance with its opinion.
  • As to the interchange fee rule, the Court of Appeals rejected the district court’s analysis and concluded the Board reasonably interpreted the Durbin Amendment as allowing issuers to recover some costs in addition to incremental authorizing, clearing and settling costs.
  • The Court remanded “one minor issue” - that is, the Board’s treatment of so-called transactions-monitoring costs. On that issue, the Court noted that the “Board may well be able to articulate a reasonable justification for determining that transactions-monitoring costs properly fall outside the fraud-prevention adjustment,” but “has yet to do so.”
  • As to network exclusivity, the Court of Appeals again rejected the district court’s analysis, deferring “to the Board’s reasonable interpretation of section 920(b) and reject[ing] the merchants’ challenge to the anti-exclusivity rule.”
  • The Merchants may petition the Court of Appeals for rehearing or rehearing en banc, or they may petition the Supreme Court for certiorari.

Flood Insurance Bill Sent to President for Approval

On Thursday, March 13, 2014, the Senate voted 72-22 to pass The Homeowner Flood Insurance Affordability Act of 2014 (H.R. 3370), recently passed by the House. The bill is now before the president, who is expected to sign it into law. 


The bill makes a number of changes to the 2012 Biggert-Waters Act including: repeal of certain rate increases, restoration of grandfathered rates, caps on annual rate increases, and other important measures, such as exceptions to escrow requirements for flood insurance payments. CBA worked with members and industry colleagues to provide these exceptions and additional time for banks to come into compliance before the July 2014 statutory deadline.

Republicans Urge Chairman Camp to Reconsider Bank Tax

On Friday, March 14, 2014, Chairman of the House Financial Services Subcommittee, Patrick McHenry (R-NC), with 53 fellow House Republicans, sent a letter a letter to the Chairman of the House Committee on Ways and Means, David Camp (R-MI), urging him to reconsider a financial institution excise tax included in his proposal for comprehensive tax reform. Rep. Camp unveiled his long-awaited proposal on February 26, 2014, which included a quarterly tax on financial firms with assets greater than $500 billion. While the letter applauds Camp for his efforts to establish a simpler and fairer tax code, Members raised caution in isolating a particular industry for a tax increase, and expressed concerns about how such a tax may inhibit access to credit.

Senate Banking Committee Releases Housing Finance Reform Proposal

On Sunday, March 16, 2014, Senate Banking Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) released a long-awaited proposal to reform the housing finance system. Built upon a proposal introduced by Sens. Bob Corker (R-TN) and Mark Warner (D-VA) in 2013, the legislation would make a number of key changes to the government backed housing finance system, including: creating a Federal Mortgage Insurance Corp.; phasing out Fannie Mae and Freddie Mac; changes to the Housing Trust Fund; creating a new Market Access Fund; and creating a small lender mutual cooperative.


“There is near unanimous agreement that our current housing finance system is not sustainable in the long-term and reform is necessary to help strengthen and stabilize the economy. This bipartisan effort will provide the market the certainty it needs, while preserving fair and affordable housing throughout the country,” said Chairman Johnson. “This agreement moves us closer to ending the five-year status quo and beginning the wind down of Fannie and Freddie while protecting taxpayers with strong private capital, building the components for a stable secondary market and avoiding repeating the mistakes of the past,” Ranking Member Crapo said.


The bill is expected to be marked-up by the Senate Banking Committee in the coming weeks. Senate Majority Leader Harry Reid (D-NV) has not indicated whether the legislation will receive time for debate and a vote before the full senate.


detailed summary is available on the Senate Banking Committee's website.

CBA Comments on Death Master File

On Tuesday, March 18, 2014, CBA filed comments with the National Technical Information Service (NTIS) in response to their request for information seeking public comment regarding the establishment of an NTIS certification program for persons seeking access to the Social Security Administration’s Public Death Master File (DMF). Section 203(f) of the Bipartisan Budget Act of 2013 (Act), requires the Department of Commerce to establish a certification program for those wanting access to the DMF. Under the Act, the certification provisions take effect 90 days after the date of the enactment, on December 3, 2013. As a result, the date of required certification is March 26, 2014, well before a certification program could be established. In turn, all access to the DMF would be cut off for industries which use it for legitimate business purposes, whicb may lead to an increase in fraud, a reduction in compliance with state and federal law, and overall harm to the economy.


In its letter, CBA argued an abrupt shut-off of access to the DMF will produce negative outcomes while the need for uninterrupted access remains critical. With no adequate substitute for the DMF database, the financial services industry and others will be left with no solutions to properly identify deceased consumers, putting consumers at risk. CBA urged the NTIS to immediately adopt an interim final rule to ensure continued access while a certification program is developed and while certification applications are pending. CBA also asked the NTIS to adopt a certification regime incorporating the statutorily permissible purposes as outlined in the letter.