CFPB Report May 23, 2014

CFPB Issues Supervisory Highlights for Nonbanks

On Thursday, May 22, the CFPB issued a report highlighting illegal actions uncovered by the agency’s supervision of payday, debt collection, and consumer reporting markets. The report noted recent non-public CFPB supervisory activities overall have resulted in more than $70 million in remediation to approximately 775,000 consumers. Under the Dodd-Frank Act, the CFPB has authority to supervise certain nonbanks entities, including mortgage companies, private student lenders, and payday lenders, as well as nonbanks defined by the Bureau as “larger participants.” To date, the CFPB has issued rules to supervise larger participants in the debt collection, consumer reporting, and student loan servicing markets.

 

“For the first time at the federal level, nonbank financial institutions are subject to supervisory oversight that holds them accountable for how they treat consumers,” said Director Cordray in a media release. “The CFPB’s oversight of banks and nonbanks alike is exposing risky practices and getting results for consumers. We are pleased that our supervision program has been able to return more than $70 million to consumers in recent months.”

 

CFPB Bills from House Financial Services Subcommittee

On Wednesday, May 21, 2014, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing entitled: “Legislative Proposals to Improve Transparency and Accountability at the CFPB.” Witnesses included representatives from Mayer Brown LLP, the Mercatus Center at George Mason University, the American Land Title Association, and the U.S. Public Interest Research Group (U.S. PIRG).

 

Subcommittee Chair Shelly Moore Capito (R-WV) said the hearing and proposals were “a continuation of this committee’s efforts to make the Consumer Financial Protection Bureau a more transparent and accountable agency. I would like to thank the sponsors of the legislation before us for their hard work in crafting common sense reforms to the Bureau.”

 

Several legislative proposals were considered, though few garnished bipartisan support, except the “Bureau of Consumer Financial Protection Small Business Advisory Board Act,” (H.R. 4384) which would create a new advisory board to consider impacts on small businesses.  In addition, the Bureau Advisory Commission Transparency Act (H.R. 4282) would require all Bureau advisory councils be open to the public. The CFPB changed its policy for meetings of its Consumer Advisory Board (CAB), making them public, in a blog statement on May 20, 2014.

 

Other bills discussed included:

H.R. 3389: "CFPB Slush Fund Elimination Act of 2013"

H.R. 3770: "CFPB-IG Act of 2013"

H.R. 4262: "Bureau Advisory Commission Transparency Act"

H.R. 4383: "Bureau of Consumer Financial Protection Small Business Advisory Board Act"

H.R. 4539: "Bureau Research Transparency Act"

H.R. 4604: the "CFPB Data Collection Security Act"

H.R. 4662: "Bureau Advisory Opinion Act"

Discussion Draft: “Bureau Arbitration Fairness Act”

Discussion Draft: “Bureau Guidance Transparency Act”

Discussion Draft: “Preventing Regulatory Abuse Act of 2014”

Discussion Draft: “Bureau Examination Fairness Act”

 

House Financial Services Subcommittee Holds Hearing on CFPB Discrimination

On Wednesday, May 21, 2014, the House Financial Services Subcommittee on Oversight and Investigation held a hearing entitled: “Allegations of Discrimination and Retaliation within the Consumer Financial Protection Bureau, Part Two.” This was the second in what could be a series of hearings, according to a memo from the House Financial Services Committee staff. The subcommittee voted 20-0 last week to subpoena CFPB employees Stacey Bach, Assistant Director for the Office of Equal Employment Opportunity, and Liza Strong, Director of Employee Relations. Witnesses for this hearing included Strong; and Mr. Benjamin Konop, Executive Vice President, National Treasury Employees Union, Chapter 335.

 

“The fact is that discrimination on the basis of race, sex or other prohibited factors is destructive, morally repugnant, and against the law. All government agencies, including the CFPB, must continue to combat discrimination in employment and punish those responsible for discrimination,” said Oversight and Investigations Subcommittee Chairman Patrick McHenry (R-NC).

 

A report commissioned by the CFPB and prepared by Deloitte Consulting in September 2013 was a major focus of the hearing. The report supports allegations made by CFPB employee Angela Martin, the original whistleblower in a March 6, 2014 American Banker article.

 

CFPB Finds Medical Debt Disproportionately Affects Credit Scores

On Tuesday, May 20, 2014, the CFPB released a research report showing consumer's credit scores may be overly penalized for medical debt placed in collections and appearing on their credit report. According to the study, credit scoring models may underestimate the creditworthiness of consumers who owe medical debt in collections. The scoring models also may not be crediting consumers who repay medical debt previously in collections.

 

“Getting sick or injured can put all sorts of burdens on a family, including unexpected medical costs. Those costs should not be compounded by overly penalizing a consumer’s credit score,” said CFPB Director Richard Cordray in a press release. “Given the role that credit scores play in consumers’ lives, it’s important that they predict the creditworthiness of a consumer as precisely as possible.”

 

The study found credit scoring models have not considered medical debt as well as could be possible. If the credit scoring models accounted separately for medical debt in collection, and medical debt that is repaid by the borrower, the models could be more precise. The Bureau found credit scores may underestimate creditworthiness by 10 points for consumers who owe medical debt, and creditworthiness by up to 22 points after medical debt had been paid off.

 

CFPB Opens CAB and Other Council Meeting to Public

On Tuesday, May 20, 2014, the CFPB announced it will begin opening meetings of its Consumer Advisory Board (CAB) and councils to the public. The meetings will apply to the CAB, the Community Bank Advisory Council, the Credit Union Advisory Council and the Academic Research Council. The move follows calls to the Bureau from Capitol Hill for greater transparency. Meetings will be open to the public beginning with its meeting on June 18, 2014 in Reno, NV.

 

CBA President and CEO Richard Hunt issued a statement in response: “We agree with Director Cordray – ‘Sunlight can be the best disinfectant, and electric light the best policeman.’ Opening these meetings to the public is a natural decision to help meet this goal. Transparency is the hallmark of good government and is vital to securing the trust of the American people.”

 

CFPB to Compensate Employees Impacted by Poor Performance Reviews

On Tuesday, May 20, 2014, the CFPB announced it will distribute up to $5.5 million in additional pay to employees who were negatively affected by inconsistencies in performance reviews. An internal review found the agency consistently gave higher performance ratings to whites, younger employees and higher-paid workers. Director Cordray informed employees via email that the CFPB “determined that there were broad-based disparities in the way performance ratings were assigned” across its employee base.



NY Financial Services Superintendent Concerned About Mortgage Serving

On Tuesday, May 20, 2014, Benjamin Lawsksy, Superintendent of the New York Department of Financial Services, said, during a speech at a Mortgage Bankers Association conference, he will continue to investigate the business relationships between mortgage servicers and their partners delivering ancillary services. He specifically pointed to continued concerns over how such firms are using auctioning, technology and other services from affiliated businesses.



EBay Reports Data Breach

On Tuesday, May 21, 2014, eBay announced it experienced a cyberattack and breach of customer data including names, encrypted passwords, email and physical addresses, phone numbers and dates of birth. The company says financial information was not subjected to the attack. According to a statement, the breach occurred between late February and early March as the result of compromised employee log-in credentials allowing unauthorized access to the company’s corporate network. EBay urged its 145 million customers to change their passwords.



CBA and Trades Asks Education for Flexibility on SCRA Benefits

On Wednesday, May 21, 2014, CBA and other trade groups sent a letter to U.S. Department of Education Secretary Arne Duncan requesting additional flexibility for lenders and servicers to provide benefits under the Servicemember Civil Relief Act (SCRA). The letter outlined a conflict between the Higher Education Act (HEA) and SCRA which creates confusion for lenders and servicers trying to provide benefits to servicemembers. The Department’s standing policy has been to require military orders and a separate written notice for SCRA benefits to be applied. In a recent consent issued by the U.S. Department of Justice against Sallie Mae/Navient, the Education Department appears to change this policy and allow for a more flexible documentation requirement.

 

CBA also requested clarification for reservists who have been called to activity duty. The HEA only recognizes SCRA benefits for activity duty personnel, while the SCRA caps interest rates at six percent during periods of military service.



Stanley Fischer Confirmed to Federal Reserve Board of Governors

On Wednesday, May 21, 2014, the Senate voted 68-27 to confirm Stanley Fischer as a member of the Federal Reserve Board of Governors. Fischer served as Governor of the Bank of Israel from 2005 to 2013, and has served as Chief Economist at the World Bank. A separate vote to confirm his appointment as Vice Chairman of the Board has yet to be scheduled.



House Financial Services Committee Passes 11 Bills

On Thursday, May 22, 2014, the House Financial Services Committee continued a markup of a number of bills intended to stimulate the economy, create jobs and offer regulatory relief to community financial institutions. Mark up of the bills began on May 7, 2014, during which, Committee Chairman Jeb Hensarling (R-TX) offered opening remarks, saying, “When we, as a Committee, have the opportunity…to help put Americans back to work, to help create jobs, we have the responsibility to do so and hopefully to do so on a bipartisan basis. This is why our Committee has already guided 22 regulatory relief bills to House passage. The vast majority of those bills, once again, have received strong -- not just token -- but strong bipartisan support.” A total of 11 bills were passed out of the Committee.