CFPB Enforcement

  • Debt Relief: On October 3rd , the CFPB announced an enforcement action against Meracord LLC, a debt-settlement payment processor.  The CFPB alleges that Meracord violated the Telemarketing Sales Rule by facilitating debt settlement companies’ collection of approximately $11 million in upfront fees from more than 11,000 consumers in multiple states.  Subject to the approval of a federal district judge in Washington, the terms of the consent order stipulate that:
    • Meracord will pay a civil monetary penalty of $1.376 million;
    • Meracord will submit to CFPB monitoring and to filing compliance reports with the CFPB; and
    • Meracord will cease processing payments for debt settlement and mortgage settlement companies.

Deputy Director Steven Antonakes discussed the enforcement action during a press call stating, “Pursuing this action against Meracord as a centralized chokepoint represents an effective and efficient strategy for the Bureau that allows us to protect consumers who are being charged illegal fees by a broad array of debt-settlement companies that rely on Mercardo’s services.”

CFPB Supervision

  • Credit Cards: On October 2nd , the CFPB released, “CARD Act Report: A Review of the Impact of the CARD Act on the Consumer Credit Card Market,” which details the effects of the CARD Act on the credit card market from 2008 through 2012.  The CFPB concluded in its report that:
    • The total cost of credit declined;
    • Overlimit fees have been effectively eliminated;
    • The size of late fees declined;
    • Approximately $2 trillion of responsible access to credit remains available; and
    • Young consumers are better protected from credit cards they cannot afford.

The report also discusses the following CFPB concerns:

  • Add-on products, including credit monitoring services;
  • Fee harvester cards that exceed CARD Act limits;
  • Deferred interest products; and
  • Disclosures, specifically online disclosures and disclosures about rewards products and grace periods.

Also on October 2nd , the CFPB held a field hearing on the CFPB’s implementation of the CARD Act.  CFPB Director Richard Cordray delivered prepared remarks during the hearing and stated that the CARD Act, “eliminated many unfair fees, made some market practices more transparent, paved the way for easier comparison shopping, and created a market where consumers can see the costs upfront.”

  • Disclosures: On October 3rd, the CFPB announced a new policy to encourage companies to establish trial disclosure programs.  The new policy provides certain legal protections to companies that apply for a waiver to test potential consumer disclosure improvements on a trial basis.  The notice states that the CFPB, “recognizes that in-market testing, involving companies and consumers in real world situations, may offer particularly valuable information with which to improve disclosure rules and model forms.”  The policy will go into effect once the policy is published in the Federal Register.

CFPB & Congress

  • Mortgages: On September 28th, Rep. Bill Huizenga (R-MI) introduced H.R. 3211, the Mortgage Choice Act of 2013, which would clarify the Truth in Lending Act’s definitions of mortgage points and fees.  The bill would require the CFPB to issue regulations that would carry out the amendments made by the bill.
  • CFPB Rulemaking: On September 30th , the House Judiciary Committee’s Subcommittee on Regulatory Reform, Commercial and Antitrust Law held a hearing on the Office of Information and Regulatory Affairs (OIRA).  During the hearing, Subcommittee Chairman Spencer Bachus (R-AL) recommended to OIRA Administrator Howard Shelanski that the CFPB, “should be required to submit their rules to you for a review.  Presently, they are not.  They’re exempt, despite the huge impact that their rules will have on the economy and on consumers.  It is an agency in desperate need of oversight.”

CFPB Outreach

  • Students: On September 30th, the CFPB hosted a Banking on Campus Forum. During the Forum, the CFPB presented findings based on input received from students, schools, and financial institutions in response to the CFPB’s request for information about financial products used by and marketed to students.  Cordray delivered prepared remarks stating, “We are distressed to hear that some students feel pressured to use specific products and may be unaware that when they sign up for those products their schools are secretly making money.”  The CFPB also heard from speakers representing the New York Attorney General, the Department of Education, financial institutions, schools, students, and consumer advocates.
  • Financial Literacy: On October 3rd, Cordray delivered remarks at the Council for Economic Education’s Annual Financial Literacy and Economic Education Conference in Baltimore.
    • Cordray stated that, “Financial education should be as fundamental as the education we are all required to receive in U.S. history and government.”
    • Cordray called for incorporating financial literacy into the curricula across class subjects, both in classroom lessons and in standardized tests.