CFPB Returns Focus to Debt Collection: CFPB in Action

The CFPB has covered a lot of ground since my last update three weeks ago. The agency has:

• pushed for student loan refinancing,

• released a whitepaper on payday loans calling them a debt trap,

• filed suit against two rogue debt settlement companies,

• fixed a prior rule that prevented stay-at-home moms from getting credit cards,

• begun a push in Congress to improve credit report accuracy,

• and released a civil penalty fund rule.

Stephanie Eidelman

In the world of debt collection, the CFPB, along with the FTC, announced a jointly sponsored workshop to be held in Washington D.C. on June 6th, on Data Integrity in the Debt Collection Process. insideARM.com will be there; look for our reports.

Oh, and you may have missed a new senior personnel announcement that doubled as an announcement that the CFPB is establishing a liaison office for financial institutions and trade groups.

Student Loans

On May 8th, the CFPB released a report on Student Loan Affordability, called “Analysis of Public Input on Impact and Solutions.” The paper is a summary of the analysis done following the CFPB’s public Request for Information in February 2013.

More than 28,000 comments were submitted, and the summary suggests that student loan debt is contributing to current or future problems all areas of our economy, including reduced homeownership, reduced consumer spending in general, reduced small business start-ups, lack of sufficient teachers, lack of nurses and doctors (especially in less lucrative primary care fields), and lack of new residents in rural areas.

The report details recent interventions in the student loan market, and then goes on to describe some of the suggestions submitted for spurring affordable loan repayment options. Among others, The Washington Post and The Huffington Post wrote about these options.

Also on May 8th, Sen. Elizabeth Warren (D-MA) introduced legislation to allow students to borrow from the government at the same rate that big banks get.

Payday Loans

On April 24, the CFPB released The Payday Loans and Deposit Advance Products report, a review of 12-months of activity generating over 15 million storefront payday loans. Key findings include the fact that payday and deposit advance loans can become debt traps for consumers, that the industry employs loose lending standards, risky loan structures, and high costs.

Three Members of Congress urged regulators to take actions on payday loans. Meanwhile, the Payday loan association was not happy with what he felt was a report that painted an incomplete picture, and issued this open letter in response.

Debt Settlement

On May 7th the CFPB filed a complaint in a federal district court in New York against two debt-relief service providers that allegedly charged consumers illegal advance fees for debt settlement services. The Bureau is seeking to halt the operations and to obtain both penalties and relief for victims.

Among other allegations, the CFPB says one of the firms, Mission Settlement Agency, sent letters containing the Great Seal of the United States and claiming to be from the “Office of Disbursement,” which does not exist. insideARM.com’s analysis of 2012 FTC complaint data revealed that this is a common type of practice among rogue entities.

Many have reported on this story, including Philly.com, The Blog of LegalTimes, Reuters, and BusinessWeek.

Credit Reporting

On May 7th, Corey Stone, the assistant director of the CFPB’s division of deposits, cash, collections, and reporting markets, presented the agency’s latest study on credit report accuracy before a Senate Committee. The report was issued in December, 2012. It seems this particular testimony was primarily an effort to educate lawmakers. He summarized the findings and promised more information as the agency learns more through research and supervisory activities.

Credit Cards

The CFPB issued a rule that fixed an unintended consequence of the Credit Card Accountabiity Responsibility and Disclosure Act (CARD Act) which was signed three years ago. The CARD Act required that issuers consider a person’s “independent” ability to pay. The intention was to curb excess credit issued to young adults. But it also caused difficulty for non-working spouses to obtain credit. CNBC reports that this could affect more than 16 million people.