The House Financial Services Financial Institutions and Consumer Credit Subcommittee will hold a hearing today at 1 p.m. ET titled “Short-term, Small Dollar Lending: The CFPB’s Assault on Access to Credit and Trampling of State and Tribal Sovereignty.” Click here for the witness list and the committee memo on the hearing.
The Justice Department, the Department of Housing and Urban Development (HUD) and the Consumer Financial Protection Bureau, along with 49 state attorneys general and the District of Columbia’s attorney general, have reached a $470 million agreement with HSBC Bank USA NA and its affiliates (collectively, HSBC) to address mortgage origination, servicing and foreclosure abuses, according to a Justice Department press release on Friday. The settlement reflects a continuation of enforcement actions by the department and its federal and state enforcement partners to hold financial institutions accountable for abusive mortgage practices. The settlement parallels the $25 billion National Mortgage Settlement (NMS) reached in February 2012 between the federal government, 49 state attorneys general and the District of Columbia’s attorney general and the five largest national mortgage servicers, as well as the $968 million settlement reached in June 2014 between those same federal and state partners and SunTrust Mortgage Inc. “Even as the mortgage crisis recedes, the U.S. Trustee Program will continue to combat mortgage servicer abuse of the federal bankruptcy laws so that homeowners are given their legal right to try to save their homes,” said Director Cliff White of the Justice Department’s U.S. Trustee Program. “This settlement holds HSBC accountable for its actions and helps to protect the most vulnerable homeowners.”
Collection law firm Frederick J. Hanna & Associates on Wednesday agreed to pay $3.1 million to settle a Consumer Financial Protection Bureau lawsuit that alleged the firm illegally operated a debt collection lawsuit mill, CollectionsCreditRisk.com reported yesterday. The CFPB’s proposed order, filed yesterday in federal court, accuses the Georgia-based firm and its three principal partners, Frederick J. Hanna, Joseph C. Cooling and Robert A. Winter, of using deceptive court filings and faulty evidence to churn out debt collection lawsuits. The CFPB's lawsuit was filed in July 2014 in federal court in the Northern District of Georgia. The order, if approved by the court, would bar the firm and its partners from filing lawsuits without being able to verify the consumers’ debt is owed and from intimidating consumers with allegedly deceptive court filings — including those that appeared like they were signed by an attorney when they actually involved the work of non-attorney staff. "This process allowed the firm to generate and file hundreds of thousands of lawsuits," the CFPB said. "One attorney at the firm, for example, signed over 130,000 debt collection lawsuits over a two-year period." The agency also accused the law firm of filing sworn statements from its clients who attested against a consumer with outstanding debt even though some of the clients could not have known such details.
When federal regulators launched a crackdown on alleged discrimination in auto lending two years ago, they knew their methodology would be questioned, but they calculated they could secure a market-shaping settlement by going after a company unlikely to fight the charges because it needed to avoid a complaint to clinch government approval for a broader restructuring, the Wall Street Journal reported today. That is the conclusion of a report, based on internal documents and emails written by the staff of the Consumer Financial Protection Bureau, released yesterday by congressional Republicans who have long criticized the discrimination probe. “Some of the claims being made in this case present issues…that would pose litigation risks…,” CFPB staff members wrote in one 2013 memo addressed to the bureau’s director, Richard Cordray, which was included in the report. But such concerns, the officials said in the same 23-page document, would be offset by the likelihood of a settlement by the target company, Ally Financial Inc. The $98 million settlement with Ally was the government’s biggest case involving alleged discrimination in the auto-loan market and the first case for the CFPB in the industry. The regulators accused the auto lender, formerly known as GMAC, of offering a pricing system that resulted in 235,000 minority borrowers being charged higher interest rates than white customers by auto dealers. The report released yesterday was put together by the Republican majority staff of the House Financial Services Committee, which has led the political charge by conservatives trying to defang the CFPB, created by the 2010 Dodd-Frank Act following the financial crisis. The report was released days after the House passed legislation that would rescind the bureau’s 2013 guidance aimed at protecting minority borrowers from being charged higher rates by auto dealers. The bill received bipartisan support, with 88 Democrats joining 244 Republicans. Read more. (Subscription required.)
To read the full report, please click here.
When the Consumer Financial Protection Bureau put out its proposal to overhaul payday lending rules in March, the move was cheered by consumer advocates as a much-needed crackdown on an industry that preys on the poor, the Politico reported on Friday. The Center for Responsible Lending spent hours consulting with senior Obama administration officials, giving input on how to implement the rule that would restrict the vast majority of short-term loans with interest rates often higher than 400 percent. The group regularly sent over policy papers, traded emails and met multiple times with top officials responsible for drafting the rule. At the same time, the group’s financial services business, Self Help Credit Union, was pushing CFPB to support its own small-dollar loan product with a much lower interest rate as an alternative to payday loans. Companies and trade associations regularly spend tens of millions of dollars to lobby Congress and the executive branch to push their agenda, but the Center for Responsible Lending efforts to overhaul payday lending rules is a revealing example of how nonprofits and consumer groups also work back channels in Washington, D.C., to influence the outcome of laws and regulations. The proposal is of particular significance because it is expected to be a model for how the nascent consumer agency drafts rules. A “notice of proposed rulemaking” from CFPB is expected in the coming months.
The online payday lender Integrity Advance is being sued by the Consumer Financial Protection Bureau (CFPB) for allegedly deceiving consumers about its loan costs, American Banker reported yesterday. The CFPB charged Integrity Advance and its chief executive, James Carnes, for not fully disclosing that charges would continue to accrue after a borrower defaulted on a loan and for automatically debiting borrowers' bank accounts after they stopped authorizing withdrawals. The CFPB said yesterday that it filed the suit as an administrative law proceeding, which is a judicial process handled at the CFPB. The amount of redress and any civil money penalty will be determined by an administrative law judge and the CFPB director has final say. The CFPB claims Delaware-based Integrity Advance offered loans of $100 to $1,000 to consumers who applied by entering their personal information into a lead-generator website. Integrity had certain terms in its loan contracts that allowed a defaulted loan to roll over four times, accruing charges each time, before it applied any payment to the principal balance.
The Consumer Financial Protection Bureau (CFPB) has released its latest supervision report showing that CFPB supervisory actions resulted in $107 million in relief to more than 238,000 consumers, NationalMortgageProfessional.com reported yesterday. The report, the ninth edition of Supervisory Highlights, generally covers supervisory activities completed between May 2015 and August 2015. The CFPB often finds problems during supervisory examinations that are resolved without an enforcement action. Recent non-public supervisory actions in areas such as mortgage servicing, mortgage origination, deposits, and credit cards have resulted in $107 million in restitution to more than 238,000 consumers. The CFPB found violations in the student loan servicing, mortgage origination and servicing, consumer reporting, and debt collection markets.
Federal consumer regulators yesterday won a major court battle against Corinthian Colleges Inc., the former national for-profit chain that entered bankruptcy this year amid claims of defrauding students, Dow Jones Newswires reported yesterday. A federal judge in Illinois ruled that Corinthian "engaged in deceptive practices" by misleading students about their career prospects. The Consumer Financial Protection Bureau had filed the lawsuit. Corinthian had declined to contest the charges, and the ruling yesterday was a default judgment. The judge ordered Corinthian to pay $531 million in damages to former students. Corinthian operated three Everest College campuses in Aurora, Thornton and Colorado Springs. It also operated Heald College and WyoTech. Judge Gary Feinerman of the U.S. District Court for the Northern District of Illinois, in his ruling, said: Corinthian violated a federal "prohibition on deceptive acts and practices by its misrepresentations and omissions regarding prospective students' career opportunities."
A top financial regulator warned of risks in the fast-expanding auto-lending sector, raising the prospect of fresh regulatory pressure in an area that has been a bright spot for banks, the Wall Street Journal reported today. While policymakers have generally declared the U.S. banking system recovered from the financial crisis, Comptroller of the Currency Thomas Curry raised a rare red flag, saying in a speech that some activity in auto loans “reminds me of what happened in mortgage-backed securities in the run-up to the crisis.” “We will be looking at those institutions that have a significant auto-lending operation,” he said. The comments are likely to raise concerns in particular at firms like Wells Fargo & Co. and other national banks active in auto lending that are regulated by the comptroller’s office. Curry’s vow of closer scrutiny wouldn’t affect their competitors at lenders owned by large auto manufacturers.
