Entries in Consumer Financial Protection Bureau (10)


CFPB Unveils New Mortgage Rules to Protect Borrowers

Digital Vision/Thinkstock(WASHINGTON) -- The Consumer Financial Protection Bureau (CFPB) announced on Thursday new rules for mortgages designed to protect consumers and banks from the kind of lending that contributed to the 2008 housing collapse.

The new rules, which will go into effect next year, say people who want to buy houses have to prove they have the ability to repay their mortgages, providing complete financial information banks can verify.

"Lenders must look at a consumer’s financial information" and "evaluate and conclude that the borrower can repay the loan," the CFPB said in a statement.

"Lenders can’t base their evaluation of a consumer’s ability to repay on teaser rates.  Lenders will have to determine the consumer’s ability to repay both the principal and the interest over the long term -- not just during an introductory period when the rate may be lower," the agency added.

Lenders will have to offer loans that don't trap home buyers.  That means no more excessive points and fees, and no more "toxic" loan features like interest-only payments or negative-amortization payments that drive up the principal amount.

How much of a borrower's income can go towards paying a mortgage will also be taken into consideration.

"Qualified Mortgages generally will be provided to people who have debt-to-income ratios less than or equal to 43 percent.  This requirement helps ensure consumers are only getting what they can likely afford," the CFPB said.

The agency says under these rules borrowers won't be set up to fail and banks will be protected against lawsuits over bad lending practices.

Copyright 2013 ABC News Radio


Feds Release First Report on Credit Reporting Agencies

Zoonar/Thinkstock(WASHINGTON) -- If you’re reading this, you probably have a credit file.  Nearly every American is the subject of a unique credit report, detailing credit cards, loans, and bank accounts.

But for the first time, the federal government is taking a look at how the three big credit reporting companies – Equifax, Experian, and TransUnion – handle consumer data.

The Consumer Financial Protection Bureau (CFPB) says there are several things Americans can learn from its report: namely that how you manage your credit cards accounts for more than 50 percent of your credit score.

Big banks also play a disproportionately large role in credit reporting, meaning even a single account could dramatically affect your chances of securing a mortgage or car loan.

Richard Cordray, president of the CFPB, says it’s a lesson too many credit card users learn the hard way.

“Especially around this holiday season, consumers may take out a retail credit card in order to save 20 percent off their purchases on a given day,” Cordray said in a statement.  “If they are not responsible with that one card, it could end up costing them a lot more down the line when they go to take out a mortgage and that credit card is a black mark on their credit report.”

He added that the data showed only one in five Americans checks their credit report in a given year – a shame, he says, since a correctable error could have devastating consequences.

“If consumers are not checking their reports, these errors can persist and pop up when a consumer can least afford them,” he said.

The CFPB said that since it only began tracking credit reporting agencies recently, this report serves more as a baseline for knowledge than an indictment of a particular practice.

The report estimates that Experian, Equifax and TransUnion each maintain files on about 200 million Americans, and make 36 billion adjustments to their files each year.

Copyright 2012 ABC News Radio


American Express Will Reimburse $85 Million to About 250,000 Customers

Justin Sullivan/Getty Images(WASHINGTON) -- The Consumer Financial Protection Agency (CFPB) has announced yet another enforcement action.  American Express will reimburse $85 million to about 250,000 customers to resolve accusations that the company violated federal law in its marketing.

CFPB announced the decision after a federal investigation found that at various periods between 2003 and spring 2012 American Express had violated consumer protection laws "at every stage of the consumer experience," according to a CFPB release.

“Several American Express companies violated consumer protection laws and those laws were violated at all stages of the game -- from the moment a consumer shopped for a card to the moment the consumer got a phone call about long overdue debt,” CFPB Director Richard Cordray said in Monday. “Today’s orders require the American Express companies to fully refund about $85 million to consumers and it requires them to make specific changes in their business practices. The American Express companies will identify the harmed customers, notify them, and make sure they get back their money.”

Customers owed in the action are expected to receive their payments by March 15, 2012.
This action is similar others against Capital One and Discover Financial, announced earlier this year. Discover agreed to pay $200 million to more than 3.5 million cardholders. Capital One agreed to refund about $150 million to more than two million customers.

Copyright 2012 ABC News Radio


CFPB Launches Online Credit Card Complaint Database

Hemera/Thinkstock(WASHINGTON) -- Do you have a gripe with your bank about credit cards?  Well, starting on Tuesday you can see if others feel the same way.

The Consumer Financial Protection Bureau is launching a new online database that will allow consumers to see what kind of complaints others have filed on credit card-issuing banks. Visitors will be able to search complaints by ZIP code, time and issue. They will also be able to see how banks have responded.  
The Consumer Complaint Database, which is currently in the beta stage of development, will not include personal information.


Copyright 2012 ABC News Radio


How Safe Are Prepaid Cards? CFPB Seeks to Find Out

Hemera/Thinkstock(NEW YORK) -- Prepaid cards may face new federal regulations.

The Consumer Financial Protection Bureau has taken the first step Wednesday morning, asking for comments on how to make sure prepaid cards are safe and come with transparent terms.

Bureau Director Richard Cordray says the cards have fewer protections than bank accounts and debit cards.

Banks have been criticized for the expensive fees that come with prepaid cards.

Copyright 2012 ABC News Radio


US Consumer Financial Protection Bureau to Propose New Mortgage Rules

iStockphoto/Thinkstock(WASHINGTON) -- Even the most sophisticated home buyer can find mortgages daunting. And that’s precisely why the U.S. Consumer Financial Protection Bureau is planning to propose new rules that will simplify things like mortgage points and fees, and bring greater transparency to the mortgage origination loan market, the agency said in a statement this week.

These rules, which the CFPB expects to propose this summer and finalize by January 2013, would make it easier for consumers to understand mortgage costs and compare loans so they can choose the best deal.

“Mortgages today often come with so many different types of fees and points that it can be hard to compare offers,” bureau director Richard Cordray said in the statement. “We want to bring greater transparency to the market so consumers can clearly see their options and choose the loan that is right for them.”

The agency, created by the Dodd-Frank Act of 2010, is considering proposals that would, among other things, require lenders to offer consumers a no-discount-point loan option, which means homebuyers can compare competing offers from various lenders. Brokerage firms and creditors would no longer be allowed to charge origination fees (known as “points”) that vary with the size of the loan. Instead, brokerage firms and creditors would only be allowed to charge flat origination fees.

In addition to regulating origination points and fees, the CFPB will also propose regulations on what kind of qualifications and compensation are necessary for mortgage originators, which includes mortgage brokers and loan officers.

An overview of the rules under consideration can be found here.

Copyright 2012 ABC News Radio


Obama Appoints Cordray to Serve as Top Consumer Watchdog 

MANDEL NGAN/AFP/Getty Images(SHAKER HEIGHTS, Ohio) -- In a defiant start to the election year, President Obama used his executive authority Wednesday to bypass Senate Republicans and appoint Richard Cordray to serve as the nation’s top consumer watchdog -- a move his opponents are calling an, unconstitutional "power grab."

“Without a director in place, the consumer watchdog agency that we’ve set up doesn’t have all the tools it needs to protect consumers against dishonest mortgage brokers or payday lenders and debt collectors who are taking advantage of consumers.  And that’s inexcusable.  It’s wrong,” Obama said in Ohio with Cordray at his side.

Obama nominated Cordray for the position last summer, but Senate Republicans have held up his appointment to force structural changes to the agency. On Wednesday the president said he refused to take “no” for an answer and appointed Cordray to serve as the first director of the new Consumer Financial Protection Bureau (CFPB) while the Senate is in brief recess.

“The only reason Republicans in the Senate have blocked Richard is because they don’t agree with the law setting up the consumer watchdog. They want to weaken it. Well that makes no sense at all.  Does anyone think the reason we got in such a financial mess was because of too much oversight?  Of course not,” Obama said.

The president cast his move to install Cordray as yet another step he is taking to protect the interests of the middle class. “When Congress refuses to act and as a result hurts our economy and puts people at risk, I have an obligation as President to do what I can without them,” Obama said. “I will not stand by while a minority in the Senate puts party ideology ahead of the people they were elected to serve.  Not when so much is at stake.  Not at this make-or-break moment for the middle class.”

To prevent Obama from making the appointment, the Senate has been in “pro forma” sessions -- gaveling in and out a few seconds later -- every few days in order to claim they are not in recess. Calling the move a “gimmick,” the White House determined the president had the legal authority to install Cordray because the Senate has effectively been in recess for weeks. The move infuriated Republicans who called it “unprecedented” and “arrogant.”

Before delivering his remarks at Shaker Heights High School, Obama visited the home of Endia and William Eason in Cleveland to illustrate why Americans need, “someone who will stand up for them” like Cordray.

The Easons almost lost their home and were left $80,000 in debt after falling victim to predatory lending by a mortgage broker. “It’s a good example of the kinds of trickery and abuse in the non-bank financial sector that we’re going to have to do something about,” Obama said as he sat around their dining room table. “And we’re so glad that we've got somebody like Rich Cordray who’s willing to take this on.”

Earlier in the day, Cordray told reporters that his first order of business will be to “begin working to expand our program to non-banks, which is an area we haven't been able to touch up until now.”

Obama's photo op notwithstanding, the Republican opposition to the CFPB is that it is a massive entity with virtually unchecked power -- which would all be in the hands of Cordray, who was personally appointed by the president. Opponents called Obama's appointment -- and his appointment of three new picks to head the National Labor Relations board -- an unprecedented "power grab." Senate Minority Leader Mitch McConnell (R-Ky.) said of the maneuvering, "President Obama, in an unprecedented move, has arrogantly circumvented the American people.”

Copyright 2012 ABC News Radio


Consumer Financial Protection Bureau to Protect Against Deception

Jupiterimages/Stockbyte/Thinkstock(WASHINGTON) -- You may never have heard of the Consumer Financial Protection Bureau but the new federal watchdog agency, which officially opens its doors Thursday, is huge news in Washington.

While many Republicans and banking industry lobbyists have been focused on killing the agency before it assumes its full power, many Democrats and consumer advocates have worked equally hard to make sure it takes effect just as envisioned under last year's Dodd-Frank financial reform act.

"It's a big fight in Washington," says Christopher Arterton, a professor of political management at George Washington University. "But I think it is not something that has really penetrated consciousness of people in the country."

Nevertheless, many have expressed support for the agency's stated mission, when it's been explained to them. Three-quarters of the likely voters polled recently by the Center for Responsible Lending support the idea of a single agency charged with protecting consumers from deceptive practices by financial institutions.

Nearly three-quarters (73 percent) want federal oversight of previously unregulated financial industries -- including payday lenders, mortgage brokers and prepaid debit cards -- which the bureau is empowered to do.

Even a majority of likely Republican voters, 63 percent, support federal oversight of unregulated financial companies, the poll found.

"There's still a populist view out there among the population that the banks are responsible for the economic downturn, and it's about time we start regulating for consumer protection," says Robert Clarke, former Comptroller of the Currency under Presidents Reagan and George H.W. Bush.

Not everybody sees it that way. Many Republicans, banking industry leaders and conservative activists believe that Wall Street didn't cause the crisis; rather, Wall Street is the best solution to a crisis created by Washington. Creating an entirely new regulatory agency just compounds the problems of bureaucratic inefficiency and micromanagement that led to the last crisis, they argue.

"The fact is that any attempt to manage the market is unlikely to work, and the cost of that management ends up being borne by the consumer," says David John, lead financial markets analyst at the Heritage Foundation, a conservative think tank.

Copyright 2011 ABC News Radio


Obama Sidesteps Elizabeth Warren, Picks Cordray to Lead CFPB

Atty General's Office, State of Ohio(WASHINGTON) -- After a year of planning and defending the new Consumer Financial Protection Bureau (CFPB), Elizabeth Warren has been tossed out of the running to lead it. President Obama officially announced Monday that Ohio Attorney General Richard Cordray will instead be his pick to run the agency, which begins operations this Thursday.

In a Sunday news release, Obama thanked Warren for her "extraordinary work" in standing up the agency that he said was her idea.

Now that she no longer has a shot to lead the CFPB, Warren may heed the cries for her to run for the U.S. Senate. Liberals have been pushing for Warren for months to run against Massachusetts Sen. Scott Brown in a bid for the seat Ted Kennedy once held.

Warren, who served as interim director of the CFPB for the past year, has taken considerable heat for the bureau, which is designed to prevent another financial crisis by policing the predatory lending practices that led to the housing bubble and widespread foreclosures.

She weathered two fierce Senate Oversight Committee hearings where she and committee members sparred about everything from the bureau’s authority to ban financial products to when she could leave the hearing.

But it was unlikely that Warren could have drawn enough support to get beyond a filibuster for her nomination in the U.S. Senate.

“Professor Warren has done an outstanding job at standing up this agency and has been a tremendous asset to us all during the bureau’s first year,” Treasury Secretary Timothy Geithner said in a statement.

In 2010, just after passage of the Dodd-Frank financial regulation act, which officially created the CFPB, Obama named Warren as a special assistant to both the president and the Treasury Department. This type of appointment allowed Warren to bypass a Senate confirmation.

Soon after her appointment as interim director, Sen. Bob Corker, R-Tenn., a member of the Senate Banking Committee, spoke out against the president’s choice.

“The individual who heads this bureau will be able to make rules, with ultimately no checks and balances, that could have broad reaching implications for the U.S. economy as it relates to accessing credit, social justice and the safety and soundness of the U.S. banking system,” Corker wrote in a letter to the president. “The job is disproportionately reliant on the decisions of one individual with access to large sums of taxpayer monies to carry out the agency agenda."

In May, 44 of the 47 GOP senators expressed similar concerns. The group sent a letter to the president saying the Senate would not confirm any nominee unless the director position was replaced by a board, in order to diffuse power to more Senate-confirmed positions.  

The 44 senators could now effectively prevent Cordray’s appointment, which they have vowed to do, because Democrats would not be able to overcome a filibuster.

"I remain hopeful that those who want to cripple this consumer bureau will think again and remember that the financial crisis -- and the recession and job losses that it sparked -- began one lousy mortgage at a time,” Warren said Sunday in a statement after the president’s announcement to appoint Cordray.

Warren said Cordray, whom she chose as the CFPB’s chief of enforcement in 2009, “will make a stellar director."

Cordray, 52,  “has spent his career advocating for middle class families” and “looking out for ordinary people in our financial system,” Obama said in his Sunday statement.

Cordray earned his master’s degree from Oxford University and his law degree from University of Chicago Law School, where he was the editor of the law review. He has argued seven cases before the U.S. Supreme Court.

Copyright 2011 ABC News Radio


Credit Card Industry Praised on Anniversary of Credit CARD Act

Photo Courtesy - Getty Images(WASHINGTON) -- Elizabeth Warren, assistant to the president and special advisor to the secretary of the treasury on the Consumer Financial Protection Bureau, kicked off a conference Tuesday for the anniversary of the Credit Card Accountability, Responsibility and Disclosure Act, by praising the credit card industry for going beyond the requirements of the law to ensure clarity and transparency for consumers.

“A year later, the CARD act has brought about major changes in the way the industry operates,” Warren said in the keynote address.   “Much of the industry has gone further than the law requires in curbing repricing and over limit fees.   A number of issuers have eliminated some of the practices that can confuse customers and cost them money they reasonably did not expect to pay.   Lenders in the industry deserve credit for moving in the right direction.”

Implemented last year, the Credit CARD Act aims to protect consumers from predatory lending practices, penalties and interest rate hikes instituted by credit card companies.   Under the act, credit card companies must give borrowers a 45-day notice before raising interest rates or making other significant changes, must adhere to limiting fees on credit card holders’ accounts, and make it more difficult for students to obtain credit cards, requiring a co-signor for people under the age of 21.

“When the act was signed into law in May 2009, it was clear that the credit card market was in need of serious reform,” Warren said.   “The CARD Act was designed to reduce surprises in the repricing of accounts and to take a major step in improving the overall transparency of credit card costs.   As a result of the CARD Act, consumers now have better information about how much they're paying for credit and how much they might save on interest if they pay down their balances more quickly.” 

Warren also lauded the work of the CFPB but assured that more work needs to be done to ensure clarity for consumers to understand the costs and benefits associated with various credit cards.

“In the credit card market, we have more work to do and the task is formidable,” she said.   “It is still difficult for many consumers to understand the costs and risks of each individual credit card or to compare cards directly.   Our next challenges will be about further clarifying price and risks and making it easier for consumers to make direct product comparisons.”

Copyright 2011 ABC News Radio

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