In celebration of the CFPB's fourth birthday last month, the agency published a blog post with a graphic highlighting $10.8 billion secured by it in consumer relief. The CFPB is proud of its scorecard. What the CFPB is doing is truly unprecedented. Of course, whether it is a good or a bad thing depends on your perspective. In today's post, we take a closer look at the $10.8 billion and the companies that have contributed to the CFPB's coffers.
The CFPB enforcement list reads like a ‘who's who' in the financial services world. As we have noted, smaller companies are not exempt from enforcement actions, but it certainly appears that the CFPB gives special attention to the largest companies in each of the regulated industries.
This is most apparent in the banking industry, and we know the CFPB is focused on big banks. Using the Federal Reserve's list of the largest insured U.S. chartered commercial banks as of December 31, 2014, not surprisingly, the four largest banks have each been subject to at least one CFPB action.
To highlight a few of the recent orders, in April 2014, the CFPB fined Bank of America (together with FIA Card Services) $727 million in consumer relief and another $20 million in penalties for illegal credit card practices. In January 2015, the agency brought enforcement actions against Wells Fargo and JPMorgan Chase for violating mortgage kickback laws. At the beginning of July 2015, the CFPB also ordered JPMorgan Chase to pay $50 million in consumer refunds and $136 million in penalties for illegal debt collection practices. And, in the last few weeks, Citibank and subsidiaries were ordered to pay $700 million in consumer relief and $35 million in penalties for illegal credit card practices.
And, what about other industries?
Recently, the CFPB began focusing on mobile telephone carriers. In the last year, two of the four largest carriers in the United States were subject to enforcement actions. In May, the CFPB ordered Sprint and Verizon to pay $120 million in consumer redress and another $38 million in penalties for allowing third parties to “cram” unauthorized charges on customers' bills. The other two largest carriers, AT&T and T-Mobile, may have escaped the CFPB's wrath (for now) because of recent FTC and FCC actions for the same violations— $105 million from AT&T and $90 million from T-Mobile.
This trend is the same in other regulated industries. The CFPB has brought actions against other companies at, or towards, the top of the list in their respective areas: Sallie Mae in student loan servicing(this was actually a Department of Justice and FDIC action), Corinthian Colleges in for-profit education, Ocwen Financial in mortgage servicing, Ace Cash Express in payday lending, and DriveTime Automotive Group, Inc. in buy-here, pay-here auto sales.
For those in the consumer finance industry, it is no secret that World Acceptance Corp., one of the largest traditional installment lenders, is currently the subject of a CFPB investigation.
Are all of these companies really breaking the law to the extent claimed by the CFPB? Consumer advocates would say the answer is yes—and that is why our financial system is so broken and why the CFPB is so necessary. The CFPB is the good cop finally coming in to clean up the dirty streets.
But others, especially those on the industry-side, feel that the CFPB is yet another unchecked federal agency furthering its policy agenda and circumventing Congressional oversight. After all, if every company in the country is breaking the law, isn't that a problem with the way the laws are being interpreted and enforced?
The bottom line is that large companies need to be prepared for the CFPB, because it certainly looks like the CFPB is preparing for large companies.