CFPB Monthly Complaint Report Confirms Increased Scrutiny on Depository Accounts

The CFPB issued its MonthlyReport last week. The report is a high level snapshot of trends in consumer complaints and provides a summary of the volume of complaints by product category, by company and by state.  The Report breaks down complaint volume by product looking at a three month average and comparing the same to the prior year.  As has been the case in prior months, the Report continues to indicate that the three products yielding the highest volume of complaints are debt collection, mortgage and credit reporting.

This month’s report highlights bank account or service complaints and re-emphasizes the increased scrutiny that banks are likely to see from their regulators concerning information furnished to consumer reporting agencies concerning deposit accounts.  The Report notes that bank account or service complaints comprise approximately 10% of the total complaints received by the CFPB.  Consistent with the Fall SupervisoryHighlights, the Report notes that:

• The most common complaint involved account management and many of the complaints both with respect to account openings and closings involved potential for credit reporting issues. Account management issues comprise about 44% of all complaint received. Specifically: 

• Consumers complained they were unable to open accounts and often uncertain as to why a company refused to open an account. 
• Consumers also complained that their inability to open accounts was often related to inaccurate credit reporting.
• Consumers also complained about companies’ decisions to close deposit accounts, noting that no reason was provided for the action.    

• Another issue highlighted by the Report involved deposit and withdrawal issues.  Consumers complained about restricted access to funds, early cut off times for same day deposits, holds placed on deposits and holds placed on checks.  Complaints involved deposits and withdrawals comprised 25% of the complaint in this category.

The significance of this month’s Complaint Report, coupled with the attention provided to credit reporting in the Fall Supervisory Highlights, is that depository banks should be on notice that their handling of adverse actions credit reporting disputes with respect to depository accounts is likely to be a point of emphasis in upcoming examinations.

CFPB Pushes Back its Timetable for Debt Collection Rulemaking

Last week, the CFPB published its Fall 2015 Rulemaking Agenda.  While very few definitive dates were provided, the Agenda does give some insight as to an expected time frame for several hot button issues:


 Arbitration:  In the spring, the CFPB has not committed to rule making only indicating that they were reviewing feedback that they have received and “considering whether rules governing arbitration clauses may be warranted.”  It now appears that rulemaking is imminent as the CFPB acknowledges that it is “beginning a rulemaking process to address concerns related to the use of arbitration agreements in connection with credit cards, deposit accounts, payday loans, and various other consumer financial products or services.  The CFPB recently convened a Small Business Advisory Review Panel to discuss potential rulemaking and indicates that the prerule activities are expected to be completed by the end of the year.


 Payday Lending:   The CFPB remains on target to release a proposed rule soon and indicates that it will issue a Notice of Proposed Rulemaking in early 2016 and has provided a target date of February 2016.


Prepaid Financial Products:  The CFPB remains on target to issue a final rule in early 2016.


 Overdrafts:  In the spring, the CFPB indicated that they were continuing to conduct additional research to assess whether rulemaking is warranted and did not issue a time table for rulemaking.  The CFPB ow anticipates continuing its prerule activities through at least the first part of 2016.

Debt Collection:  One of the bigger stories that remains is when a proposed rule as to debt collection will be issued in 2015.  The CFPB has not committed to a time line. Prerule activities are now anticipated to continue into the first quarter of 2016. The CFPB indicates that they are engaged in consumer testing initiatives to “determine what information would be useful to consumers to have about debt collection and their debts and how that information should be provided to them.”

Women owned, Minority owned and Small Business Data Collection: The CFPB is in the early stages of developing rules to require financial institutions to report information about their lending to women-owned, minority owned and small businesses.  The CFPB has indicated a desire to model any data collection after their recently released HMDA Rules.  Prerule activities are in the initial stage and expected to continue through the third quarter of 2016.


 





 

Guest Post: Tilting at Windmills

By: Mark J. Dobosz

November 24, 2015

 

The behavior of literary character Don Quixote is a great example of what the U.S. House of Representatives voted this week to curb at the CFPB – quixotism and idealism.

 

The dictionary defines quixotism as – “a tendency to absurdly chivalric, visionary, or romantically impractical conduct; and idealism as “ the tendency to represent things in their ideal forms, rather than as they are.”

 

According to the Wall Street Journal, “By a vote of 332-96, lawmakers voted to roll back the bureau’s campaign to prevent car dealers from negotiating rates on auto loans. The feds have been justifying their power grab—and extracting settlements from the banks that provide auto financing—by claiming that dealers are discriminating against minority borrowers. But the bureau isn’t presenting actual victims who have suffered harm. The regulators are simply guessing the race of borrowers based on their last names and addresses in the loan files and then claiming racism if the people they guessed were minorities seemed to be paying higher rates.”

 

Once again, the CFPB’s research that leads to broad actions is often based on flawed data or having “the tendency to represent things in their ideal forms rather than as they are.”

 

Democrats and Republicans were in agreement that this was another example of an agency enforcing an action that ultimately harms the consumers the CFPB has vowed to protect.

 

Working with a regulatory body is meant to be a collaborative process where all sides can trust in the third-party data and research used to develop a level-playing field for consumers and creditors. That is very difficult to accomplish when one-side provides data that is reflective of both quixotism and idealism.

About the Author:  Mark Dobosz currently serves as the Executive Director for NARCA – The National Creditors Bar Association. Mark is a one of NARCA’s speakers on many of the creditors rights issues impacting NARCA members. 

The National Creditors Bar Association (NARCA) is a trade association dedicated to creditors rights attorneys. NARCA's values are: Professional, Ethical, Responsible

Guest Post: NARCA Supports Eliminating “Bad Players”

By: Mark Dobosz, Executive Director - NARCA
November 24, 2015


The Federal Trade Commission’s announcement of its coordinated efforts with other law enforcement agencies against deceptive and unscrupulous debt collectors is hailed by NARCA as a positive move to rid the industry of the “bad apples” that tarnish reputable and legal debt collection businesses.

 NARCA supports the efforts of both industry entities and other agencies to root out the businesses that harm consumers through truly deceptive practices. The industry and consumers are much better off by collaborative and complementary practices to insure that “bad players” are eliminated from practicing debt collection.

 NARCA has been at the forefront of insuring that its members abide by a Code of Ethics and Professional Conduct that is separate and in addition to the rules in their respective states which govern their law licenses. .  Harvey Moore, NARCA Board President commented, “Collaboration, communication and cooperation between industry groups and the regulatory bodies which enforce laws to eliminate those who consciously harm consumers through deceptive practices is key to keeping the credit eco-system for this country strong.”

About the Author:  Mark Dobosz currently serves as the Executive Director for NARCA – The National Creditors Bar Association. Mark is a one of NARCA’s speakers on many of the creditors rights issues impacting NARCA members. 

The National Creditors Bar Association (NARCA) is a trade association dedicated to creditors rights attorneys. NARCA's values are: Professional, Ethical, Responsible

Collection of Subrogration Claims is Not Subject to the FDCPA

A district court in Florida has held that an insurance company’s efforts to collect subrogation claims are not subject to the FDCPA.  Relying upon the Eleventh Circuit’s recent decision in Davidson v. Capital One Bank, the district court granted summary judgment in favor of the insurance company.  Arencibia v. Mortgage Guaranty Insurance Corporation, 2:15-cv-00248, 2015 U.S. Dist. LEXIS 153851 (M.D. Fl., Nov. 13, 2015). 

The insurance company in question, Mortgage Guaranty Insurance Corporation, issues insurance policies to insure lenders from losses due to defaulted mortgage loans. After Arencibia defaulted on her mortgage, Mortgage Guaranty paid the lenders’ claims and then proceeded to seek collection from Arencibia.  The borrowers contended that the insurance company’s efforts violated the FDCPA. On summary judgment, Mortgage Guaranty contended that it was not a debt collector and sought dismissal of the claims.

More specifically, Mortgage Guaranty contended that it was not a debt collector because it was not seeking to collect a debt owed or due another.  Instead Mortgage Guaranty was seeking to collect on debts it owned.  The Court relied on the Eleventh Circuit’s decision in Davidson in which the court concluded that the appropriate inquiry as to whether a party is a debt collector is whether the party regularly collects on debts owed or due another at the time of collection.  In this case, Mortgage Guaranty was seeking to recoup money owed to it pursuant to subrogation law.  “Because Defendant stepped into the shoes of the lenders under subrogation law, Defendant’s collection efforts in this case relate only to debts owed to it – and not “to another.” Arencibia at *11-12.

Arencibia is consistent with other cases in which insurers seeking to collect on tort claims via subrogation have not been held subject to the FDCPA and provides the defense bar with an additional grounds to dismiss such cases.

 

CFPB Issues Annual Fiscal Report

The CFPB issued its annual fiscal report yesterday, touting its ability to exceed goals and collect money.  Here are our quick takeaways.  If you want to see all the pie charts and candid color photographs, you'll have to read the 125 page Report for yourself:

GENERAL OBSERVATIONS

• The Bureau continues to increase in size steadily.  In 2011, the Bureau had 663 employees.  In 2015, it had 1529 employees.
• The Bureau met or exceeded each of the 12 measures set forth in its 2013-2017 Strategic Plan.  These measures include:
  • Timely resolving rulemakings
  • Successfully resolving all cases filed either through litigation, default judgment or settlement
  • Expanding its capacity to handle consumer complaints
  • Exceeding its goal as to the number of reports generated about specific consumer financial products or regulations.

FINANCIAL OBSERVATIONS:

• Monetarily, the Bureau also deems 2015 a success:
• Its cash collections more than doubled in 2015.  According to the Report, the Bureau collected over $183 million in cash.
• Its compensation to victims showed a 700% increase from $20.8 million in 2014 to $158.8 million in 2015.
• Similarly, 2015 was a good year for the CFPB is civil penalty fund collections with the Bureau collecting $183.1 million.
• The Report also notes that the net costs of operation for the Bureau increased 29% in 2015 and is attributed to overall growth of the agency and continued activity in each of its strategic goals.