CFPB Enforcement

  • JPMorgan Chase: Yesterday, the CFPB announced an enforcement action against Chase Bank USA, N.A. and JPMorgan Chase Bank, N.A. (“Chase”) for allegedly engaging in unfair billing practices for credit card “add-on products” known as credit monitoring services.  The CFPB alleges that Chase charged many consumers for these products without or before having the written authorization necessary to perform the monitoring services and that Chase charged customers as soon as they enrolled for these products even if they were not actually receiving the services yet.

CFPB Director Richard Cordray stated that Chase must “fully refund” customers who were wrongly charged.  Under the terms of the CFPB consent order, Chase will be required to:

  • Pay $309 million to more than 2.1 million customers;
  • End its unfair billing practices;
  • Submit for “non-objection” a Compliance Plan to CFPB 90 days prior to marketing or offering Identity Protection Products;
  • Create a consumer compliance internal audit program for add-on products;
  • Submit to an independent audit;
  • Improve oversight of Chase’s third-party vendors;
  • Pay a $20 million civil penalty; and
  • Improve recordkeeping in regard to add-on products.

CFPB Litigation

  • Constitutionality: On September 13th , Morgan Drexen, Inc. filed a brief in a federal district court in the District of Columbia opposing the CFPB’s efforts to dismiss Morgan Drexen’s challenge to the constitutionality of the CFPB’s existence.  Morgan Drexen argued that, “There is no doctrine that requires Plaintiffs to wait like sitting ducks in CFPB’s crosshairs, unable to bring a constitutional challenge unless and until CFPB files an enforcement action.” The case was initially filed in response to a CFPB investigation into the company’s debt-settlement practices. 

CFPB Rulemaking

  • Mortgages: On September 13th , the CFPB finalized the amendments and clarifications to the January 2013 mortgage rules.  The amendments and clarifications are intended to help industry comply with the rules by providing answers to questions that have been identified during the implementation process.  Among the newly-released amendments and clarifications, the CFPB clarified:
    • The procedures for obtaining follow-up information on loss-mitigation applications, including that the servicer must notify the borrower of information gaps in the borrower’s loss mitigation application as well as how the regulations‘ foreclosure protections and various procedural rights apply to borrowers;
    • Clarify best practices for informing borrowers about the mailing address for submitting error resolution documents; and
    • Revise the effective dates of some of the January 2013 rule provisions.

CFPB Supervision

  • Payday Loans: On September 17th , the CFPB released an updated examination manual to be used by the CFPB examiners with regard to, “Short-Term, Small-Dollar Lending Procedures.” The guidance directs examiners to focus on identifying consumer harm and risks related to payday lending in violation of the Military Lending Act.  The CFPB emphasized that payday lenders must comply with the federal law for closed-end loans of $2,000 or less and with terms of 91 days or less.  The Military Lending Act prohibits:
    • Setting annual percentage rates at more than 36%;
    • Rolling over loans for servicemembers, unless the new transaction results in more favorable terms for the servicemember;
    • Making servicemembers waive their rights under the Service members Civil Relief Act, their rights under other state or federal laws that provide consumer protections, or their right  seek resolution of any legal claims in court; and
    • Requiring allotments for repayment (having payments directly deducted from their paycheck before their salary is deposited in their account).

CFPB & Congress

  • Data Collection: On September 17th , Sen. Chuck Grassley (R-IA) sent a letter to Attorney General Eric Holder expressing concern that the U.S. Trustee Program (USTP), which administers the federal bankruptcy system, “acted on behalf of the CFPB to collect personal financial data that the CFPB had otherwise been unable to obtain.”  Grassley requested that Holder address the nature of the relationship, including recent consultations and document requests, between the CFPB and USTP. 

Separately, on September 13 th , Rep. Spencer Bachus (R-AL) sent a letter to USTP Director Clifford J. White, III, criticizing CFPB Director Richard Cordray’s recent testimony on the issue of USTP data collection.  Bachus noted that it would be, “inappropriate if the USTP were cooperating in an effort to obtain such personal financial information under the guise of overly broad judicial requests.”  Bachus indicated that the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law, which Bachus chairs, plans to hold public hearings on the CFPB and USTP relationship.

CFPB Outreach

  • Financial Literacy: On September 18th , the CFPB announced that it now has a toolkit to help equip social services providers in advising low-income consumers.  As part of the announcement, the CFPB published a report entitled, “Financial Empowerment Training for Social Service Programs,” which captures the results of the CFPB’s effort to identify tools that local service providers may need to help consumers increase their financial capabilities.
  • Financial Literacy & the Military: On September 16 th , CFPB Assistant Director for Servicemember Affairs Holly Petraeus delivered remarks at the Air Force Association’s Spouse and Family Forum.  Petraeus discussed the need for financial education at the “bookends” of servicemembers’ careers: (1) before they enter the service, and (2) after they leave.  Petraeus stated that the CFPB will provide financial coaches at locations nationwide beginning in 2014 in order to provide financial literacy support for veterans.
  • Credit Cards: On September 16 th , the CFPB announced a field hearing that will be held on credit cards in Chicago, IL on October 2 nd .  The event will feature remarks from CFPB Director Richard Cordray, as well as testimony from consumer groups, industry representatives, and members of the public. 

CFPB Operations

  • Consumer Advisory Board: On September 18th , CFPB Director Richard Cordray delivered prepared remarks at the CFPB’s Consumer Advisory Board Meeting.  Cordray introduced two new CFPB initiatives: (1) a web-based tool to provide mortgage information collected pursuant to the Home Mortgage Disclosure Act (HMDA), and (2) a pilot training program called “Your Money, Your Goals” to improve consumers’ financial literacy.
    • The HMDA tool has been designed to put, “valuable information into the hands of the public in an accessible way, so they can understand what is actually happening in their local mortgage markets and over time they will be able to see trends and changes developing.” 
    • The CFPB will pilot the “Your Money, Your Goals” program by training 1,000 case managers in 21 states and the District of Columbia in order to assist front-line social services staff in helping consumers manage their financial affairs more effectively.
  • Consumer Complaints: On September 18 th , PennPirg, a consumer advocacy organization, released findings from its analysis of the CFPB’s consumer complaint function.  According to PennPirg, the CFPB has fielded approximately 19,000 complaints in the 18 months in which it has been accepting complaints and, of those 19,000 complaints:
    • Approximately 5,000 resulted in banks settling the dispute by making a payment;
    • The median payment was $110;
    • The CFPB assisted approximately 1,000 additional consumers in resolving complaints without monetary compensation; and
    • 78% of complaints concerned checking accounts. 

Based on its analysis, PennPirg recommended that the CFPB improve the complaint function to be more consumer friendly, including by developing a free smartphone application, and to detail more information about how it has resolved individual complaints.

  • Staff: On September 17th , the CFPB posted an item on the CFPB website introducing Nora Dowd Eisenhower as the incoming Assistant Director for the Office of Older Americans.  Eisenhower indicated that the biggest challenge facing the office is trying, “to engage older Americans to think about their future and plot a course that will provide them, their families, and loved ones with later-life economic security.”