Source: Consumer Financial Protection Bureau
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Director of the Consumer Financial Protection Bureau and the Secretary of Education to submit a Report on private student loans.
This Report addresses the following topics, as set forth in the Act:
- The private lenders, their market and their products, as they have evolved and performed over time,
- The consumers of these products, their characteristics, and shopping, usage and repayment behaviors,
- Consumer protections, including recent changes and possible gaps,
- Fair lending compliance information currently available and its implications, and
- Statutory or legislative recommendations to improve consumer protections.
The Consumer Financial Protection Bureau (CFPB): A Legal Analysis (PDF)
Source: Congressional Research Service (via Federation of American Scientists)
In the wake of the worst U.S. financial crisis since the Great Depression, Congress passed and the President signed into law sweeping reforms of the financial services regulatory system through the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), P.L. 111- 203.
Title X of the Dodd-Frank Act is entitled the Consumer Financial Protection Act of 2010 (CFP Act). The CFP Act establishes the Bureau of Consumer Financial Protection (CFPB or Bureau) within the Federal Reserve System (FRS) with rulemaking, enforcement, and supervisory powers over many consumer financial products and services, as well as the entities that sell them. The CFP Act significantly enhances federal consumer protection regulatory authority over nondepository financial institutions, potentially subjecting them to analogous supervisory, examination, and enforcement standards that have been applicable to depository institutions in the past. The act also transfers to the Bureau much of the consumer compliance authority over larger depositories that previously had been held by banking regulators. Additionally, the Bureau acquired the authority to write rules to implement most federal consumer financial protection laws that previously was held by a number of other federal agencies.
Although the powers that the CFPB has at its disposal are largely the same or analogous to those that other federal regulators have held for decades, there is a great deal of uncertainty in how the new agency will exercise these broad and flexible authorities, especially in light of its almost exclusive focus on consumer protection. As a result, the CFP Act has proven to be one of the more controversial portions of the financial reform legislation.
The 112 th Congress is actively involved in conducting oversight of the implementation of the CFP Act. Additionally, the 112 th Congress has considered a number of bills that would significantly alter the structure of the Bureau. For example, H.R. 2434, the Financial Services and General Government Appropriations Act, 2012, would make the CFPB’s primary funding subject to the traditional appropriations process, and H.R. 1315, the Consumer Financial Protection Safety and Soundness Improvement Act, would convert the CFPB’s leadership structure from a sole directorship to a commission and would allow the newly established Financial Stability Oversight Council (FSOC) to overturn CFPB-issued regulations with a simple majority vote, as opposed to the current super majority requirement. H.R. 2434 was reported favorably out of the House Committee on Appropriations, and H.R. 1315 was referred to the Senate Committee on Banking, Housing, and Urban Affairs after passing the full House by a vote of 241 to 173. Additionally, 44 Senators signed a letter to the President expressing support for the Bureau-related objectives of H.R. 2434 and H.R. 1315.
This report provides an overview of the regulatory structure of consumer finance under existing federal law before the Dodd-Frank Act went into effect and examines arguments for modifying the regime in order to more effectively regulate consumer financial markets. It then analyzes how the CFP Act changes that legal structure, with a focus on the Bureau’s organization; the entities and activities that fall (and do not fall) under the Bureau’s supervisory, enforcement, and rulemaking authorities; the Bureau’s general and specific rulemaking powers and procedures; and the Bureau’s funding.
A total of 9,307 consumer complaints regarding credit cards and 2,326 regarding mortgages were filed with the Consumer Financial Protection Bureau in 2011, the CFPB says in its first annual report on its consumer response operation.Of total credit-card-related complaints, 1,278, or 13.7 percent, were related the billing disputes, the CFPB reports. Another 1,014 (10.9 percent) and 950 (10.2 percent) had to do with identity theft/fraud/embezzlement or APR/interest rate.Of total mortgage-related complaints, 889, or 38.2 percent, were related to problems face by consumers unable to pay. These can address loan modification, collections or foreclosure. The second-most-frequent complaint about mortgage was just about making payments. A total of 501 such complaints, or 38.2 percent of all mortgage-related complaints, were filed in the month of December, the report shows.These are the only categories of complaints the CFPB addressed during 2011. It began taking credit-card complaints July 21, when the bureau commenced operation. The CFPB began taking mortgage-related complaints since Dec. 1.
+ Full Report (PDF)
On Tuesday, the Consumer Financial Protection Bureau (CFPB) will outline rules it is considering to help protect mortgage borrowers from being hit by costly surprises or getting the runaround from their mortgage servicer. The CFPB plans to formally propose rules this summer and finalize them in January 2013.“The mortgage servicing rules we are considering reflect two basic, common-sense principles – no surprises and no runarounds,” said CFPB Director Richard Cordray. “For too long, mortgage servicers have not been held accountable to their customers, and the result has been profoundly punishing to homeowners in distress. It’s time to put the ‘service’ back in mortgage servicing.”
+ Full Document (PDF)
Consumer Financial Protection Bureau adopts rule to protect consumers sending money internationally
Source: Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB) today adopted a rule that will increase protections for consumers who transfer money internationally. Under the new rule, remittance transfer providers will generally be required to disclose the exchange rate and all fees associated with a transfer so that consumers know exactly how much money will be received on the other end. The rule also requires remittance transfer providers to investigate disputes and remedy errors.
“People sending money to their loved ones in another country should not have to worry about hidden fees,” said CFPB Director Richard Cordray. “With these new protections, international money transfers will be more reliable. Consumers will know the costs ahead of time and be able to compare prices. Transfer providers will also be held accountable for errors that occur in the process.”
Consumers transfer tens of billions of dollars from the United States to foreign countries each year. These transactions can involve undisclosed fees and exchange rates that result in less money for the intended recipients. Those sending the money may not know how much the recipient will actually receive because the fees and exchange rates can be obscured in the transfer.
The impact of differences between consumer- and creditor-purchased credit scores (PDF)
Source: Consumer Financial Protection Bureau
A credit score is a numerical summary of a consumer’s apparent creditworthiness, based on the consumer’s credit report, and reflects the relative likelihood that the consumer will default on a credit obligation. Credit scores can have a significant impact on a consumer’s financial life. Lenders rely on scores extensively in decision making, including the initial decisions of whether to lend and what loan terms to offer, for most types of credit, including mortgages, auto loans, and credit cards. Credit scores also influence the marketing offers that consumers receive, such as offers for credit cards. Further, credit scores affect account-management decisions, like raising or lowering credit limits or changing interest rates. A good credit score can mean access to a wide range of credit products at the better rates available in the market, while a bad credit score can lead to greatly reduced access to credit and much higher borrowing costs.
Lenders use credit scores that are produced by many different scoring models. The most widely used scores are the “FICO scores” sold by FICO (the brand used to identify the Fair Isaac Corporation). There are a number of FICO score models in use by lenders, and many other credit score models besides the FICO scores. Consumers can also purchase a wide range of credit scores. Some scores sold to consumers are used by lenders, but others, referred to as “educational scores,” are either not used by lenders at all or are used only infrequently. It is important to note that many of the credit scores sold to lenders are not offered for sale to consumers.
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Consumer Financial Protection Bureau (CFPB) to “conduct a study on the nature, range, and size of variations between the credit scores sold to creditors and those sold to consumers by consumer reporting agencies (CRAs) that compile and maintain files on consumers on a nationwide basis,… and whether such variations disadvantage consumers.” Consumers can purchase scores from the CRAs in several ways. They can purchase scores when they request copies of their credit reports directly from the CRAs, or with their annual free credit file disclosure available through annualcreditreport.com. The CRAs or their marketing partners also sell scores as part of “credit monitoring” or “identify theft” products.
When a consumer purchases a score from a CRA, it is likely that the credit score that the consumer receives will not be the same score as that purchased and used by a lender to whom the consumer applies for a loan. This could occur if the score the consumer purchased is an educational score that is not used by lenders, but differences between the score a consumer buys and the score a lender buys can occur for other reasons as well. Since so many scores are in use in the marketplace, it could also be the case that the particular lender to which the consumer applies uses a different scoring model than the one purchased by the consumer, or that the CRA from which the consumer obtains a score is not the same CRA that the lender uses to obtain scores, or that the underlying data in the consumer’s credit report changes significantly between the time the consumer purchases a score and the time the lender obtains a score for that consumer. It is also possible that a consumer and a lender could access different reports from the CRA, if they were to use different identifying information about the consumer. Any of these differences could lead to differences between the credit score a consumer sees and the credit score a lender uses to assess that consumer.