Tag Archives: cfpb

January Rings in New Federal Laws Protecting Homeowners

ring in the new yearIn early January, a number of new federal rules in the foreclosure and mortgage context became effective. The changes came out of the Dodd–Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) which provided authority to the Consumer Financial Protection Bureau (CFPB) to issue rules to implement the changes. The changes were many; below are just a few of the highlights.

No Dual Tracking

In recent years, dual tracking was a frequent practice among many mortgage lenders and servicers. With dual tracking, a bank would consider a homeowner’s application for a loan modification while simultaneously continuing to foreclose on the homeowner’s home.

A number of states passed laws prohibiting this practice in 2013, and the signatories to the National Mortgage Settlement agreed to stop this practice as well. But even better, as of January 10, 2014, federal law prohibits dual tracking. For details on the new rule, see New Laws Prohibiting Dual Tracking in the Foreclosure Context.

Ability to Pay Standards for Mortgages

In the 2000s, mortgage lenders often approved loans without running numbers or inquiring into whether the homeowner could actually afford the mortgage. Lenders signed people up for mortgages with “teaser rates” that later increased dramatically or low rate loans that had a large balloon payments after a few years. The homeowner would inevitably default and lose the home through foreclosure.

The new CFPB rules, which became effective January 10, 2014, require mortgage lenders to consider specific factors and make a good faith determination that the borrower has an ability to repay the loan. The “ability to repay” (ATR) requirements apply to almost all closed-end residential mortgage loans. (A closed-end loan is one that must be repaid by a certain date. Most mortgages are closed-end loans.) However, there are a number of loan types that are exempt from these requirements. For details on what the lenders must do under the new rule, and which loans it does and does not apply to, see New Mortgage Rules on Ability to Pay.

More Protections for Borrowers of High-Cost Home Loans

The Home Ownership and Equity Protection Act (HOEPA) provides protections to borrowers taking out certain types of loans with high interest rates or high fees. The Dodd-Frank Act expanded those protections and the CFPB’s rules implementing those changes became effective on January 10, 2014.

Among other things, the new rules:

  • require lenders offering high cost loans to provide more disclosures to borrowers
  • prohibit lenders from including certain types of onerous loan terms in the loans, like balloon payments, and
  • restricts fees that lenders can charge for these loans.

For details on which loans the new CFPB rule applies to, and what is required and prohibited, see New Protections for High-Cost Mortgages.

Other Mortgage Servicer Requirements

The CFPB implemented a whole host of other rules that protect mortgage holders, people shopping for mortgages, and those facing foreclosure. These new rules require mortgage servicers to:

  • provide monthly billing statements to borrowers (there are exceptions for some types of loans) that include specific information
  • notify borrowers when the interest rate changes on adjustable interest rate loans
  • promptly credit mortgage payments
  • provide alternatives to force placed insurance
  • quickly resolve errors and respond to borrowers’ information requests, and
  • contact any borrower who falls behind in payments.

To get details on these new rules, see Federal Rules Protecting Homeowners With Mortgages.

Private Student Loan Servicers Undercut Borrowers’ Payment Efforts

StudentLoans_iStockLast week, the Consumer Financial Protection Bureau (CFPB) released its annual CFPB Student Loan Ombudsman Report on Private Student Loans.  The report documents numerous pitfalls with the way that private student loan servicers process payments. Because of these problems, borrowers sometimes cannot figure out who to pay, end up paying more late fees, encounter difficulty when trying to pay off loans early, and more.

The Private Student Loan Industry

In previous decades, most students got federal student loans (loans made or guaranteed by the federal government). But because of increased tuition rates and other changing factors, more and more students are forced to take out student loans from private banks and lenders. Those loans, sometimes called private label loans, have interest rates that are much higher than those of federal loans, less favorable loan terms, and are not eligible for the flexible federal repayment programs for borrowers in financial distress. (Learn about the disadvantages of private student loans.)

According to the CFPB, of those borrowers graduating at the time of the financial crisis with more than $40,000 in student loan debt, a whopping 81% had loans from private student loan lenders. According to the CFPB, the private student loan market was worth $6 billion in 2011. The industry often targets students attending for-profit schools. In 2008, 42% of students at for-profit institutions took out private loans, compared to just 14% at public universities.

Less Than Stellar Payment Processing Practices

The CFPB report was based on 3,800 complaints made through its online complaint system between October 1, 2012 and September 30, 2013. In analyzing those complaints, the CFPB noted many pitfalls with the way that private student loan servicers process payments, including:

  • Losing checks and then charging borrowers late fees on the account.
  • Processing excess funds in order to maximize interest rates for the servicer, to the detriment of the borrower.
  • Processing partial payments so as to maximize late fees for the borrower.
  • Failing to provide accurate payoff information for those borrowers seeking to repay their loans early.
  • Failing to notify borrowers when their accounts are transferred to a new servicer, resulting in frustration, late fees, and risk of delinquency.

You can get details on these incompetent and unfair processes in Nolo’s article Repaying Private Student Loans: Watch Out for These Pitfalls.

CFPB Provides Advice and Help

Along with the report, the CFPB issued a consumer advisory, Stop Getting Sidetracked by Your Student Loan Servicer, which provides a sample letter for borrowers to send to their servicers when processing certain types of payments. The advisory also reminds consumers that if they have trouble with a private student loan lender, they can file a complaint with the CFPB at www.consumerfinance.gov/complaint.

Got a Consumer Complaint?

If you have a complaint about your credit card company, student loan holder, mortgage lender, car loan lender, or bank, you can log your grievances on the new Consumer Financial Protection Bureau  (CFPB) website.

The CFPB is now fielding complaints in the areas of:

  • credit cards
  • student loans
  • mortgages
  • car loans
  • bank accounts or services

To file a complaint, visit the complaint center on the CFPB website at (www.cfpb.gov/complaint.)

Once a complaint is lodged, the CFPB confirms that the lender has in fact done business with the consumer. The lender then has 15 days to respond to the complaint and 60 days to address the problem. To learn more about the complaint process, see the CFPB’s Consumer Reports: A Snapshot of Complaints Received.

The CFPB has already created a database that compiles credit card complaints, and has made this information public. The database doesn’t disclose the consumer’s name, but does disclose how the credit card company dealt with the issue. The CFPB plans to have similar databases for the other types of complaints in the future.

Problem With a Private Student Loan? Tell the CFPB

In February, the newly formed federal Consumer Financial Protection Bureau (CFPB) put out a call to student loan borrowers:  If you have a beef regarding a private student loan, file a complaint on the CFPB website.

What Is a Private Student Loan?

If a bank or other financial institution loaned you money to attend school, and that loan is not backed by the federal government (that is, it’s not federally guaranteed), you have a private student loan.

The CFPB Now Oversees Private Student Loans

Prior to the formation of the CFPB, there was no one agency that oversaw and regulated the private student loan industry. (Public student loans, on the other hand, are regulated by the Department of Education.) Since July 2011, the CFPB has taken over that role. As part of its oversight, the CFPB has created an ombudsman program. The ombudsman will review complaints about private student loans and assist those borrowers.

Types of Complaints

The CFPB ombudsman is urging students and former students to file complaints of any nature. Some examples of complaints it anticipates receiving include:

  • trouble making payments
  • confusing advertising or marketing terms
  • billing disputes
  • deferment and forbearance issues, and
  • debt collection and credit reporting problems.

You can find the online complaint form, here.

Or, if you don’t want to file a formal complaint, but just want to tell your story, you can do that here.

What Will the CFPB Do?

The CFPB states that it will help all student loan borrowers who are having trouble:

  • getting a private student loan
  • repaying a private student loan
  • managing a student loan that has gone into default, or
  • dealing with a student loan that has been referred to a debt collector.

Once the CFPB receives your compliant, it will give you a case number so you can track progress of the complaint.  It will forward your complaint to the financial institution involved and then keep track of progress. The CFPB says it expects to have cases come to resolution within 60 days. It’s unclear from the information on the CFPB’s website what role the ombudsman will take in resolving those issues.

The CFBP will use the information it gathers from borrowers’ complaints and stories to report to Congress on the private student loan industry.

Another Handy Tool

The CFPB also has a handy online tool, the Student Debt Repayment Assistant, to help you figure out your student loan repayment options. You can also find information about repayment in Nolo’s article Student Loan Repayment Options.

How to Contact the CFPB


Consumer Protection Bureau Has New Director, Finally

Recently, while Congress was not in session, President Obama appointed Richard Cordray as Director of the newly formed Consumer Financial Protection Bureau (CFPB).  Republicans had blocked Cordray’s nomination for over half a year, arguing that the CFPB should be run by a board, not a Director. Needless to say, Republicans were livid about the appointment. There’s a possibility that as Congress regroups today for its new session, they may use rules to block some of Obama’s recess appointments (there were 70 in all).

Meanwhile, Cordray dove right into his work. Although the CFBP has been in existence since July of 2011, the agency could not legally take certain actions without a Director. Within the few short weeks that he’s been at the helm, Cordray has already issued a “field guide” for its examiners to review the practices of payday loan companies and started the public comment process to simplify disclosures for credit cards, mortgages, and student loans.

To get a better sense of Cordray’s philosophy and goals for consumer protection, check out this interview with him. Cordray stresses that he wants to hear from everyone who has a complaint about a financial business, and to that end you can file a complaint on the new Bureau’s website at www.consumerfinance.gov. The website also has lots of information for consumers about credit cards, student loan repayment options, your options if you have trouble repaying your mortgage, and more.

Consumer Financial Protection Bureau Still Has No Director

In July, I blogged about the nomination of Bill Cordray as the Director of the Consumer Financial Protection Bureau (CFPB), the new federal agency created in the wake of the financial debacle on Wall Street that was responsible, in part, for the contraction of the U.S. economy. The CFPB is a government watchdog agency, overseeing consumer protection for all things related to lending, including credit cards, private student loan, pay day loans, and mortgages.

(You can learn more about consumer protection here.)

Since July, Republicans have continued to fight against the CFPB, vowing not to approve a Director until the agency is restructured. The U.S. Chamber of Commerce has also expressed its opposition to the CFPB, arguing that it would be too powerful as it currently stands.

Without a Director, the CFPB is prevented from performing some of its intended tasks, including overseeing some financial sectors that currently have no agency watching over them (like mortgage brokers and payday lenders).

Several days ago, the Senate Banking Committee approved Cordray as the Director of the CFPB. This is definitely a welcome move by consumer advocates. But Senate Republicans continue to promise to block the nomination of any director to the CFPB until the agency’s powers are diluted.


Launch of New Consumer Financial Protection Bureau

July 21, 2011 marked the official launch of the new Consumer Financial Protection Bureau (CFPB).  The CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 after the earlier financial debacles. The Bureau will be responsible for overseeing consumer protection compliance of banks and credit unions with assets over $10 billion – essentially serving as a government watchdog over all things related to lending, including credit cards and mortgages. It will also be able to write rules for a range of existing consumer protection statutes, and enforce those rules against banks and credit unions with $10 billion in assets.

Consumer advocates were thrilled that Obama tasked Professor Elizabeth Warren, a noted consumer protection expert, with setting up the Bureau. However, advocates were less than thrilled when the Republicans threw up road blocks to her nomination as director of the Bureau. Instead, Obama appointed Richard Cordray, a former Ohio attorney general, as director of the new agency. Although he’s no Elizabeth Warren, Cordray does have a good track record for consumer protection and many believe he was a good pick.