CFPB Report - September 18, 2015

CFPB Develops New Tools for Consumers Shopping for a Mortgage
On Thursday, September 17, 2015, the CFPB released new online tools under its "Know Before You Owe" initiative to help consumers shopping for a mortgage. The new tools are designed to help consumers decide if they are ready to purchase a home, how to get a mortgage, obtain an offer, and close the transaction.
 
"Our new mortgage forms reduce the information gap between lenders and consumers, shedding light on a process that often feels like a mystery," said CFPB Director Richard Cordray. "It is time consumers have more power in the mortgage process, and our new forms and online tools will help make that a reality."
 
The new tools offer information and guides for different parts of the mortgage process, including worksheets for monthly mortgage payments and interactive, sample Loan Estimate and Closing Disclosure documents.
 
CFPB Goes After Debt Relief Law Firm
On Tuesday, September 15, the CFPB announced it has obtained a preliminary injunction against World Law Group et al. to halt their operations and to freeze their assets while a civil enforcement action alleging violations of the Telemarketing Sales Rule (TSR) Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) makes its way through district court in Florida. In its complaint, the CFPB alleges World Law Group and the "interrelated maze of companies" operated by its senior leaders fraudulently offered legal and debt relief services to approximately 21,000 consumers and illegally collected $67 million.
 
"We took action today against World Law Group for an alleged debt relief scheme that lured consumers with false promises of help from lawyers and collected millions in illegal upfront fees," said Director Cordray. "We are seeking to put an end to this scheme and prevent more consumers from being harmed."
 
The CFPB claimed World Law Group violated the TSR, which prohibits the collection of fees from consumers before providing debt-relief services. These fees include a $199 "initial fee," an $84.95 "attorney monthly service fee," and 10-15 percent of consumers' outstanding debt balance. The Bureau also alleges a UDAAP violation where World Law Group promised consumers they would receive representation from an attorney when all debt-relief services were provided by non-lawyers. The CFPB is seeking refunds, disgorgement, civil money penalties and permanent injunctions against World Law Group.
 
OIG Issues Audit of Consumer Complaint Database
On Thursday, September 10, 2015, the Office of the inspector General (OIG) for the Federal Reserve Board and the CFPB issued an audit of the CFPB's Consumer Complaint Database, noting numerous issues for consideration. The OIG performed an audit of the database covering processes from January 1, 2014, through June 30, 2014, and complaints in the database through June 30, 2014. The OIG identified areas in which management controls could be improved in order to enhance the database's accuracy and completeness.
 
"We identified areas in which management controls should be improved to enhance the accuracy and completeness of the Consumer Complaint Database," the OIG stated. The report also noted the CFPB failed to establish "separate management controls to ensure the accuracy of data extracted from the system and included in the Consumer Complaint Database. We found several noticeable inaccuracies in our analysis of the 254,835 complaints in the Consumer Complaint Database as of June 30, 2014. Although the number of complaints with inaccuracies that we identified was relatively small, enhancing existing controls would help ensure that as the number and types of complaints published increase, overall reliability of the data is maintained."
 
Among other issues, the OIG found the CFPB Consumer Response does not: 

  • Review all closing responses posted by companies, which includes verifying whether the closing response the company selects is consistent with the definition; and
  • Consistently publish untimely closing responses posted by companies in the Consumer Complaint Database.

The audit also revealed consumers were allowed 60 days to dispute responses from the companies instead of 30 days, as was stated in Consumer Response publications. Additionally, consumers were not consistently offered the opportunity to dispute untimely responses from companies. Also, the OIG found the public was not being regularly notified by Consumer Response when the database was not updated, despite the website assertion indicating complaint data are refreshed daily.
 
The OIG made recommendations to improve the operational controls to improve the accuracy and transparency of the database.
 
CBA Asks Regulators for Details on TRID Enforcement
On Tuesday, September 8, 2015, CBA and 17 other financial services groups sent a joint letter to federal regulators asking for "precise policies for examining and supervising financial institutions" relating to enforcement of the October 3, 2015 implementation of the Truth in Lending Act/Real Estate Settlement Procedures Act (TILA/RESPA) mortgage disclosure rule.
 
The implementation of the TILA/RESPA integrated disclosures (TRID) poses significant challenges for mortgage lenders, according to a letter signed by the 18 groups. The CFPB has indicated regulators will be "sensitive to the good-faith efforts" of lender efforts to comply with TRID. Though the CFPB wrote the rule, enforcement of the new disclosures is distributed among various regulators.
 
"We urge the Federal Financial Institutions Examination Council (FFIEC) to provide needed certainty by articulating precise policies for examining and supervising financial institutions for the initial months after the TRID implementation," the group wrote. "The FFIEC should formally implement a clearly articulated transition period that addresses how regulators will oversee and examine regulated institutions for TRID compliance during this transition period."
 
In related news, the CFPB has issued an update to its compliance readiness guide for lenders and the exam procedures for TILA and RESPA.

Fed Leaves Rate Unchanged
On Thursday, September 17, 2015, the Federal Reserve's Federal Open Market Committee (FOMC) concluded its two-day meeting without raising interest rate as expected. The FOMC last raised rates in 2006, marking nine years since the last rate hike. In a press release, the FOMC reasoned the economy remains in good health, but global risks have increased.
 
"Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term. Nonetheless, the Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced but is monitoring developments abroad. Inflation is anticipated to remain near its recent low level in the near term but the Committee expects inflation to rise gradually toward two percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely."

House Committee Examines Dodd-Frank Five-Years Later
On Thursday, September 17, 2015, the House Financial Services Committee held a hearing entitled: "The Dodd-Frank Act Five Years Later: Are We More Free?" Witnesses included Dr. Matthew Spalding from Hillsdale College, Honorable C. Boyden Gray from Boyden Gray & Associates, Professor David Skeel from University of Pennsylvania Law School, Deepak Gupta from Gupta Wessler PLLC, and Professor Todd Zywicki from George Mason University School of Law. Thursday's was the last in the committee's set of hearings examining the effects and consequences of the Dodd-Frank Act on the financial services industry, consumers, American competitiveness, and economic prosperity in the past five years.
 
Committee Chairman Jeb Hensarling (R-TX) stated:, "Dodd-Frank erodes the economic freedom and opportunity that empowers low income Americans to rise and generate greater shared prosperity. Dodd-Frank moves us away from the equal protection offered by the impartial rule of law towards the unequal and victimizing rule of political bureaucrats. Of all the harm Dodd-Frank inflicts, this is the most profound and disturbing."

FCC Takes TCPA Action
On Friday, September 11, 2015, FCC brought enforcement actions against First National Bank and Lyft for Telephone Consumer Protection Act violations. The FCC took issue with the requirement that consumers opt into receiving calls/ texts to use certain services. According to the press release, "First National Bank requires its online banking and Apple Pay customers to agree to receive autodialed telemarketing texts in order to use its services. Lyft purports to allow consumers who sign up for its ride-sharing service to opt out of receiving autodialed or prerecorded telemarketing calls and texts, but does not allow users to access the service if they do exercise their right to opt out of marketing calls and texts.

HFSC Chairman Aims to Study Fed Stock Ownership
On Thursday, September 10, 2015, the House Financial Services Committee Chairman Hensarling sent a letter to Government Accountability Office Comptroller Gene Dodaro to request a study and report on the implications of changing the requirement that all Federal Reserve member banks purchase stock issued by their regional Federal Reserve Bank. The request stems from controversy including a provision to reduce the dividend paid to Fed member banks for their required ownership of such stock to offset the costs of a Senate-passed highway funding bill. Currently, Fed member banks are paid a 6 percent dividend to compensate their required ownership of regional bank stock equal to 6 percent of their bank's capital plus surplus. The bill provides $17 billion in funding for highway programs by reducing the dividend payment to 1.5 percent for member banks with assets greater than $1 billion. In his request, Chairman Hensarling recommends the GAO study historical rationale for stock ownership and dividend payments, historic rates of return on government securities, and budgetary and policy implications of a change to the structure.