Tag Archives: Consumer Financial Protection Bureau (CFPB)

Newswire : Nation’s credit card debt passes $1 Trillion 

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By Charlene Crowell

(TriceEdneyWire.com) – For the first time since the Consumer Financial Protection Bureau (CFPB) began collecting credit card data, the nation’s related debt reached an all-time high of $1 trillion in 2022. New research released in late October examines how and why this debt grew, but also how emerging trends in card usage affect the day-to-day lives of consumers.  
While companies charged consumers more than $105 billion in interest and more than $25 billion in fees, average credit card balances per cardholder returned to about $5,300, about the same as before the pandemic. At the same time, more cardholders are being charged late fees, falling behind on payments, and facing higher costs on growing debt.  
Today nearly one in 10 consumers is caught in what CFPB terms ‘persistent debt’, charged more in interest and fees than they pay toward the principal owed, a pattern that makes each passing month’s charges increasingly harder to avoid. Average credit card minimum payments on revolving credit accounts now reach over $100 per month and are also a contributing factor to rising late fees and overall debt. 
“With credit card debt crossing the trillion- dollar mark, we will be working to prevent bait-and-switch tactics when it comes to rewards and to increase refinancing activity so consumers can get lower rates,” said CFPB Director Rohit Chopra.  
Increased indebtedness also translated into record industry profits, now higher than those reached in pre-pandemic years. Two key factors, according to the report, significantly contributed to industry profitability: an average APR margin of 15.4 percentage points above the prime rate in 2022, and only 10 credit card companies dominating the marketplace.  
Although the nation has nearly 4,000 credit card issuers, four-fifths – 80 percent – of the card activity was with one of the firms in the top10.  
The highest credit card APRs are, as with other consumer financial products, among consumers who carry high credit card balances, missed payment(s), or delinquent accounts, and have subprime credit ratings, scores of less than 670 in a range of 300- 850.  Consumers who have filed bankruptcies can also expect that action to affect their credit scores for seven years thereafter.  
A 2019 report by Experian, one of the nation’s three credit card bureaus, found that more than a third of consumers – 34.8 percent – were classified as subprime. Millennials comprised the largest number of subprime borrowers.   
According to Experian, “Prime consumers tend to have more mortgages and credit card accounts, while subprime consumers have more student loans and personal loans…Subprime consumers have twice as many personal loan accounts as prime consumers on average. That said, their average balance is less than half of prime consumers’ average balance.” 
CFPB’s new credit card report found that many cardholders with subprime scores paid 30 to 40 cents in interest and fees per dollar borrowed each year. Further, consumers using reward cards that earn bonus points for frequent usage, earned just 27 percent of rewards at major credit card companies, but paid 94 percent of total interest and fees for carrying debt from month to month.   
Last year, and for the first time since 2015, CFPB found a spike in over-limit transactions. According to the report, “Recent changes in incidence are also driven by accounts with subprime scores. Over-limit transactions tend to be more common among lower-score cardholders since these cardholders typically have lower credit limits and higher credit utilization than higher-score cardholders, making it more likely that even a modest purchase might exceed their credit limit.” 
Along with high profits, CFPB’s new report documents a growing consumer shift toward digital communications, websites and mobile apps now used by nearly 80 percent of cardholders to manage card usage and make payments. Among consumers ages 25 and younger, 95 percent used mobile apps for card transactions.    
Consistent with consumer practices, credit card companies and debt collectors are now relying more on text messaging and email to contact borrowers about past-due balances, in addition to phone calls or postal mail.  
In separate and independent findings, the New York Federal Reserve’s Liberty Street blog also noted changing credit card practices earlier this year.  
“[T]here were 18.3 million borrowers behind on a credit card at the end of 2022 compared to 15.8 million at the end of 2019. Instead, the evidence suggests that higher prices and higher interest rates are the more likely culprits driving delinquencies… [O]n a person-level, this financial distress is real, and the delinquent marks will impact their access to credit for years to come.”  
Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.  

 

Newswire: Supreme Court decision jeopardizes CFPB’S

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By Charlene Crowell, NNPA Newswire Contributor



A June 29 U.S. Supreme Court split decision represents a major setback to both the Consumer Financial Protection Bureau (CFPB) and the consumers who have come to rely upon the agency. Since 2010, more than 25 million consumers were helped by the agency’s efforts that returned over $11 billion.
Although the case known as Seila Law v. Consumer Financial Protection Bureau, was argued on March 3 of this year, its origins date back to 2017 when Seila Law, a California-based debt relief firm, asked the CFPB to set aside a civil investigative demand (CID) that sought information to determine whether it was engaged in illegal debt relief practices.
CFPB declined to set aside the CID and turned to a California federal court to pursue its interests. In response, Seila Law restated its challenge of the independence of the agency’s Director who could only be removed by a President for cause, seeking to have the entire agency abolished as unconstitutional.”
The Supreme Court’s 5-4 decision refuted CFPB’s hallmark: its independent Director. By allowing for an agency Director to be removed for any reason, it now becomes possible for partisan interests to influence whether or not a full, 5-year term of office enshrined in the law will occur, or that powerful corporations will be held accountable.
The Court majority argued that CFPB is “unique.” “The CFPB Director has no boss, peers, or voters to report to,” wrote Justice Roberts in the majority opinion and was joined by Associate Justices Sam Alito, Neil Gorsuch, Brett Kavanaugh and Clarence Thomas.
“Yet the Director wields vast rulemaking, enforcement, and adjudicatory authority over a significant portion of the U. S. economy. The question before us is whether this arrangement violates the Constitution’s separation of powers…“We therefore hold that the structure of the CFPB violates the separation of powers,” continued the Chief Justice …The agency may therefore continue to operate, but its Director, in light of our decision, must be removable by the President at will.”
The creation of an independent consumer agency was the legislative intent defined in the Dodd-Frank Wall Street Reform Act. Enacted in the aftermath of the worst financial crisis since that of the 1930s Great Depression, CFPB assumed direct responsibility for financial oversight and enforcement on a range of consumer issues that included mortgages, small dollar loans, student debt, credit cards and more.
This agency authority included the rights to conduct investigations, issue subpoenas and civil investigative demands, initiate administrative adjudications, prosecute civil actions in federal court, and issue binding decisions in administrative proceedings.
The dissenting opinion written by Justice Elena Kagan was joined by Associate Justices Ruth Bader Ginsburg, Stephen Breyer, and Sonya Sotomayor.
“Throughout the Nation’s history, this Court has left most decisions about how to structure the Executive Branch to Congress and the President, acting through legislation they both agree to. In particular, the Court has commonly allowed those two branches to create zones of administrative independence by limiting the President’s power to remove agency heads… If precedent were any guide, that provision would have survived its encounter with this Court—and so would the intended independence of the Consumer Financial Protection Bureau.”
“The Court today fails to respect its proper role,” continued the dissenting opinion. “It recognizes that this Court has approved limits on the President’s removal power over heads of agencies much like the CFPB. Agencies possessing similar powers, agencies charged with similar missions, agencies created for similar reasons… Congress and the President established the CFPB to address financial practices that had brought on a devastating recession and could do so again. Today’s decision wipes out a feature of that agency its creators thought fundamental to its mission—a measure of independence from political pressure.”
It is noteworthy that while the case was under Supreme Court review, the current CFPB Director, made no effort to explain or defend the agency.
In the remaining few months in the current Congress, consumer advocates must now heighten their watchful role to ensure that as many other agency responsibilities can be preserved and pursued as legislatively intended.
“The CFPB was created after the Great Recession to protect Americans from unscrupulous businesses that have too much power to wreak havoc on the public,” said Ed Mierzwinski, U.S. PIRG Education Fund’s Senior Director of Federal Consumer Programs  “Now, the Supreme Court has agreed with the CFPB’s director, who actively worked with the Trump administration and a debt collection law firm, of all things, to undermine the Bureau’s independence from politically-connected special interests.”
“The Seila decision therefore leaves the CFPB intact but weakens the Director’s independence, making it more likely that the Director will hesitate to cross the financial industry players that have the ear of the President — as has happened repeatedly under the current leadership of the CFPB,” noted Lauren Saunders, the Associate Director of the National Consumer Law Center.

“The Supreme Court’s decision to defang the CFPB’s for-cause removal provision will render the agency less effective and leave consumers vulnerable to bad actors on Wall Street,” said Will Corbett, Litigation Director with the Center for Responsible Lending.
“Predatory lenders and their allies in Congress have consistently tried without merit to weaken CFPB’s independence for political reasons. Today, the majority of the U.S. Supreme Court has joined in that effort, ensuring financial damage for consumers for years to come,” Corbett concluded.
Charlene Crowell is a Senior Fellow with the Center for Responsible Lending. She can be reached at charlene.crowell@responsiblelending.org. 

Newswire: Federal Bureau helping predatory lenders instead of protecting consumers

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News Analysis by: Charlene Crowell

(TriceEdneyWire.com) – For most people, life feels better when there is something to look forward to. Whether looking forward to graduation, the arrival of a new baby, or retirement that affords a few years to just enjoy life – these kinds of things make going through challenging times somehow more manageable.

For payday loan borrowers and consumer and civil rights activists, this August 19 was supposed to be the end of payday lending’s nearly inevitable debt trap. No longer would consumers incur seemingly endless strings of loans that lenders knew they could not afford. Nor would lenders have unlimited and automatic direct access to borrower checking accounts; only two debits could be drawn on an account with insufficient funds. The days of unrestrained businesses recklessly selling payday and car-title loans as short-term financial fixes that grew to become long-term debt was set for
a shutdown.

Let’s say these borrowers were looking forward to financial freedom from the endless cycle of loan renewals and costly fees generated by triple-digit interest rates. In practical terms, the typical, two-week $350 payday loan winds up costing $458 in fees.
But just as seasons and circumstances can and do change, under a different administration, the Consumer Financial Protection Bureau (CFPB) has functioned more recently to help predatory lenders
than to fulfill its statutory mission of consumer protection.

Last summer, then-CFPB head Mick Mulvaney, joined the payday loan industry to challenge and win a delay in the implementation of the long-awaited payday rule. Mulvaney also withdrew a lawsuit filed by the CFPB against a payday lender ahead of his arrival.

Months later in in a West Texas federal court, U.S. District Judge Lee Yeakel granted a ‘stay’, the legal term for a court-ordered delay, to allow the current CFPB Director the chance to rewrite the rule adopted under the Bureau’s first Director. Even earlier and under Acting CFPB Director Mick Mulvaney, a lawsuit filed by CFPB
against a payday lender was withdrawn.

In response to these and other anti-consumer developments, consumer advocates chose to observe the August 19 date in a different way: reminding CFPB what it was supposed to do on behalf of consumers.
“[S]ince its 2017 leadership change, the CFPB has repeatedly failed to support the August 19, 2019 compliance date the agency established for these important provisions,” wrote Americans for Financial Reform Education Fund, National Consumer Law Center, Public Citizen, and the Center for Responsible Lending (CRL).
The August 12 joint letter to Director Kraninger called for “timely implementation” of the rule’s payment protections. While the CFPB continues to push for a stay of the rule’s ability-to-repay requirements, it has failed to offer any basis for its anti-consumer effort.

It took years of multiple public hearings, research, public comments, and a careful rulemaking process before Director Cordray, delivered a rule that would provide financial relief from one of the nation’s most heinous predatory loans.
Similar sentiments were expressed to the CFPB by 25 state attorneys general (AGs) whose jurisdictions included California, Illinois, Maryland, Michigan, New York, North Carolina, Oregon, Virginia,
and the District of Columbia. In written comments on CFPB’s plan to
rewrite the payday rule, these state officials also expressed serious
issues with the Bureau’s anti-consumer shift.

“T] he Bureau’s proposed repeal of the 2017 rule would eliminate an important federal floor that would protect consumers across the country, including from interstate lending activity that is challenging for any individual State to police,” wrote the AGs. “Extending credit without reasonably assessing borrowers’ ability to repay their loans resembles the poor underwriting practices that fueled the subprime mortgage crisis, which eventually led to an
economic tailspin and enactment of the Dodd-Frank Act.”

A 2019 CRL researchreport found that every year, payday and car-title loans drain nearly $8 billion in fees from consumer pockets. Although 16 states and the District of Columbia have enacted rate caps that limit interest to no more than 36%, 34 states still allow triple-digit interest rate payday loans that together generate more than $4 billion in costly fees. Similarly, car-title loans drain more than $3.8 billion in fees annually from consumers in the 22 states where this type of loan is legal.

Texas leads the nation in costly payday loan fees at $1.2 billion per year. Overall, consumers stuck in more than 10 payday loans a year represent 75% of all fees charged.

Car-title loan fees take $356 million out of the pockets of Alabama residents, and $297 million from Mississippi consumers. And among all borrowers of these loans, one out of every five loses their vehicle to repossession.

This spring before a Capitol Hill hearing, Diane Standaert, a CRL EVP and Director of State Policy summarized the choices now before the nation: “Policymakers have a choice: siding with the vast majority of voters who oppose the payday loan debt trap or siding with predatory lenders charging 300% interest rates.”

As Spike Lee advised years ago, “Do the right thing.”

Newswire :  Center for Responsible Lending calls for firing of fair lending official who used N-Word

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By Charlene Crowell ( TriceEdneyWire.com) – Recent and stunning disclosures of racially-offensive writings by a high-ranking official at the Consumer Financial Protection Bureau (CFPB) has unleashed an escalating barrage of criticisms, including calls for the official to be fired and more probing questions regarding the agency’s commitment to fair lending. Since a September 28 Washington Post article first reported how Eric Blankenstein, CFPB’s Policy Director for Supervision, Enforcement and Fair Lending, used a pen name in blogs dating as far back as 2004, a spate of fury has been unleashed. Disguising his authorship, Blankenstein claimed that the use of the N-word was not racist, and further alleged that most hate crimes were hoaxes. A subsequent New York Times article alleged that people who perpetuated the Obama birther conspiracy are not racist either, and noted that as late as 2016, Blankenstein’s personal Twitter account posted racially charged comments. Keep in mind that Blankenstein was hand-picked by CFPB head Mick Mulvaney. Patrice A. Ficklin, a CFPB career staff member and Director of its Office of Fair Lending and Equal Opportunity reports to Blankenstein and is quoted in the Post article. Ficklin said, “And while he has been collegial, thoughtful and meticulous, I have had experiences that have raised concerns that are now quite alarming in light of the content of his blog posts — experiences that call into question Eric’s ability and intent to carry out his and his Acting Director’s repeated yet unsubstantiated commitment to a continued strong fair lending program under governing legal precedent.” By October 1, Anthony Reardon, National President of the National Treasury Employees Union, advised CFPB of its dissatisfaction with the Blankenstein blogs. “There should be zero tolerance for comments that Blankenstein has admitted authoring and nothing less than swift and decisive action is called for,” said Reardon. “That someone with a history of racially derogatory and offensive comments has a leadership position at CFPB reflects poorly on CFPB management and your commitment to fulfilling the mandate of the agency to ensure that discriminatory and predatory lending practices are stopped.” Two days later, on October 3, the Center for Responsible Lending (CRL) publicly called for Blankenstein to be fired. “Mr. Blankenstein must be removed from his post and this must be combined with a demonstrable commitment by CFPB head Mick Mulvaney to fair lending,” said Yana Miles, CRL’s Senior Legislative Counsel. “Thus far, the Mulvaney approach has been worse than inaction – it has been an appalling retreat from enforcing anti-discrimination laws…. The enduring legacy and present-day experience of financial discrimination is the key driver of the racial wealth gap. Vigorously addressing this is a legal and moral imperative.” A second civil rights organization agreed with CRL’s call for Blankenstein’s termination. “Eric Blankenstein’s racist and sexist remarks show that he is not fit to lead the CFPB Office of Fair Lending,” said Vanita Gupta, president and CEO of The Leadership Conference on Civil and Human Rights. “Our nation’s history of financial discrimination is the key factor in the growing racial wealth gap.” “Entrusting Blankenstein given his history of racially derogatory remarks will undermine progress for fair lending efforts to close the gap,” continued Gupta. “If the CFPB is serious about eradicating discrimination, it must immediately remove Blankenstein, and must ensure that it is led by a person with a demonstrated commitment to civil rights enforcement. His writings make clear that Mr. Blankenstein is not that person.” The same day, another pivotal development occurred. A letter signed by 13 U.S. Senators representing 11 states wrote Mulvaney, demanding answers to a series of questions no later than October 22. The questions span Mulvaney’s personal awareness of the writings, the guidelines and procedures used to fill the position, whether a Member of Congress, or an executive branch employee recommended his hiring, what action he intends to take as Acting Director and more. In part, the Senators’ letter states, “We are deeply concerned that you have placed a person with a history of racist writing at a senior position within the Consumer Financial Protection Bureau…Mr. Blankenstein was not hired through the competitive service process like most CFPB employers; he is one of your hand-selected political appointees. Further, you have specifically tasked him with overseeing the CFPB’s fair lending supervision and enforcement work at a time when you have decided to restructure the Office of Fair Lending and Equal Opportunity.” The letter was signed by Senators Richard Blumenthal (D-CT), Cory Booker (D-NJ), Sherrod Brown (D-OH), Maria Cantwell (D-Washington State), Kirsten Gillibrand (D-NY), Kamala Harris (D-CA), Edward Markey (D-MA), Catherine Cortez Masto (D-NV), Jack Reed (D-RI) Mark Warner (D-VA), Robert Menendez (D-NJ), Elizabeth Warren (D-MA), and Ron Wyden (D-OR). Even before the Blankenstein scandal, Mulvaney’s actions and inactions at the CFPB have brought a series of concerns by civil rights and consumer advocates alike. Particularly noteworthy among their stated concerns under Mulvaney include: CFPB has yet to issue any violations of the Equal Credit Opportunity Act; The Bureau declared an intent to ignore the Disparate Impact standard, a long-standing legal test that holds the effects of discrimination, not the intent are legal violations; Personally praised the repeal of anti-discrimination auto lending guidance; Sided with payday lenders in their challenge of the Bureau’s payday rule promulgated under the previous director; Announced the Bureau’s fair lending office would be stripped of its supervisory and enforcement powers; and Relegated the development of regulation on fair lending for minority and women-owned businesses to a low-level concern. It took decades of vigilant struggle for civil rights, fair lending, and consumer protection to be codified in federal laws. It is time to remind the CFPB and all federal agencies that they have a duty to uphold the nation’s fair lending laws – regardless of personal beliefs. Charlene Crowell is the Center for Responsible Lending’s Communications Deputy Director. She can be reached at Charlene.crowell@responsiblelending.org.

Newswire : Equifax data breach leaves at least 143 million consumers at risk

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By Charlene Crowell (Communications Director, Center for Responsible Lending)

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Record-breaking, back-to-back hurricanes in Houston and Florida brought unprecedented winds and rains affecting millions of Americans. Yet another storm just as brutal, but financial in nature, is raging and affects at least 143 million Americans: that’s the Equifax data breach that took place from mid-May to July of this year.
On July 29, Equifax, one of the three major credit reporting corporations, discovered that unauthorized data access had occurred. Yet it was not until September 7 when the multi-national data breach was announced publicly. This massive cybersecurity breach includes federal income tax records, as well as employee records for government employees and those of Fortune 500 firms. Even recipients of major government programs like Medicare, Medicaid, and Social Security are affected.
For consumers, the personal information exposed to fraud and identity theft could mean a lifetime of closely monitoring and defending personal data to fight theft, fines and more. For businesses, questions will emerge as to whether millions of credit accounts were fraudulently opened and additionally whether they will be held partially responsible for its perpetuation.
In reaction to this cybercrime, a surge of federal class action lawsuits are going after Equifax. As many as 50 have been filed in at least 14 states and the District of Columbia as of September 12. The Federal Bureau of Investigation is reportedly examining what went wrong from a criminal perspective. On the civil side of the law, the Consumer Financial Protection Bureau (CFPB) is beginning its own independent investigation.
Now a growing number of bipartisan inquiries from Capitol Hill are demanding to know why these breaches of personally identifiable information (PII) came about, what actions Equifax took, and what the global firm intends to do on behalf of consumers whose names, birth dates, addresses, Social Security numbers and drivers’ licenses are all in jeopardy. Equifax also knew that an estimated 209,000 credit card holders and some 182,000 consumers in the U.S. who have a dispute on file with a creditor also had comprised PII.
“This hack into sensitive information compiled and maintained by Equifax is one of the largest data breaches in our nation’s history and someone has to be held accountable,” said Congresswoman Maxine Waters, the Ranking Member of the House Financial Services Committee in an article for “Business Insider.”
“Given the important role credit scores play in the lives and financial futures of hardworking Americans, Congress must diligently examine the way our credit reporting agencies are operating and impose additional statutory and regulatory reforms to protect the integrity of the country’s credit reporting system,” Waters continued.
In a September 11 letter to Richard F. Smith, Equifax’s Chairman and Chief Executive Office, the Chair and Ranking Member of the Senate Finance Committee went further to pose a series of questions to be answered by September 26. Issues raised in the letter include binding arbitration clauses that deny affected consumers the right of class action lawsuits, the firm’s security systems and controls, how consumers can expect to be officially notified, and what, if any, protections Equifax will offer to affected consumers.
“The scope and scale of this breach appears to make it one of the largest on record, and the sensitivity of the information compromised may make it the most costly to taxpayers and consumers,” wrote Senators Orrin Hatch, Senate Finance Chair and Ron Wyden, the committee’s Ranking Member.
The following day, September 12, another letter to Equifax included questions on what data changes to Equifax’s security plans and procedures were made as this breach now becomes its third one in only two years; the letter was signed by 24 Members of Congress, who serve on the House Energy and Commerce Committee and represent 15 states. Three are also members of the Congressional Black Caucus: Representatives G.K. Butterfield of North Carolina, Brooklyn’s Yvette Clarke and Bobby L. Rush of Chicago.
“Your company profits from collecting highly sensitive personal information from American consumers—it should take seriously its responsibility to keep data safe and to inform consumers when its protections fail,” wrote the representatives.
“The massive Equifax data breach is one of the largest in our country’s history, affecting half of the United States population and nearly three-quarters of consumers with credit reports,” said Chi Chi Wu of the National Consumer Law Center. “A security freeze is the most effective measure against “new account” identity theft, because it stops thieves from using the consumer’s stolen information.”
To follow Wu’s advice, consumers will need to contact all three of the major credit reporting bureaus and request that no new accounts be opened in their names. Once requested, consumers will not be able to easily apply for new credit accounts or apply for a loan. An additional layer of precaution would be to contact every creditor and request that respective accounts be flagged for unusual or new credit activity. Detailed information on how consumers caught in the Equifax breach can take these and other steps to protect their credit is available on the Federal Trade Commission’s website.
The Consumer Financial Protection Bureau also has another consumer-friendly rule that Congress is currently fighting: preserving the right for consumers to file lawsuits when financial disputes could not be resolved otherwise. Announced on July 10, Richard Cordray, CFPB Director explained why the rule is important.
“Arbitration clauses in contracts for products like bank accounts and credit cards make it nearly impossible for people to take companies to court when things go wrong,” said CFPB Director Richard Cordray. “These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.”
Days later on July 20, Capitol Hill lawmakers turned to a seldom-used option, the Congressional Review Act, to deny the rule from taking effect. Sen. Mike Crapo, Chair of the U.S. Senate Committee on Banking, Housing and Urban Affairs Committee and Rep. Jeb Hensarling, Chair of the House Committee on Financial Services announced a coordinated legislative attack to roll back CFPB’s arbitration rule. The law allows Congress to fast track a veto of new federal regulation with limited debate and a simple majority vote in each chamber.
On July 25, the House passed its resolution on a highly-partisan vote of 231-190. To date, the Senate has yet to take a corresponding vote.
“The Equifax data breach is yet another reason to support the CFPB’s arbitration rule that would restore consumers’ day in court,” noted Melissa Stegman, a senior policy counsel with the Center for Responsible Lending (CRL). “When a company has injured consumers, it should not also decide whether those affected have a right to pursue justice. Although Equifax claimed it will not assert arbitration in the aftermath of its data breach, consumers must be able to challenge corporate wrongdoing in the courts and Congress should cease its efforts to quash the rule.”