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Inside the CFPB

August 18, 2014

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CFPB Orders Amerisave to Pony Up $19.3 Million Over Alleged Scheme

In its first case regarding deceptive mortgage advertising, the CFPB has ordered Atlanta-based Amerisave Mortgage Corp., an online mortgage lender, and its affiliate, Novo Appraisal Management Co., to pay $19.3 million in damages and a fine. The consent order settles charges the firms engaged in a deceptive bait-and-switch mortgage-lending scheme said to have harmed tens of thousands of consumers. Of the total payout, $14.8 million will be in the form of refunds to harmed consumers. The companies also agreed to pay a $4.5 million fine. Patrick Markert, the owner of both companies, as an individual, will pay an additional $1.5 million penalty. According to the CFPB, between mid-2011 and 2014, Amerisave advertised its interest rates and terms using online banner ... Read More

CFPB Tags Finance Company For Alleged Scam of Military Personnel

The CFPB late last week said it shut down what it called a service member fee scam allegedly run by USA Discounters, Ltd., a consumer finance company that operates a chain of retail stores, most of which are near military bases, and offers in-store and online financing for purchases. USA Discounters tricked thousands of American military personnel into paying fees for legal protections they already had under the Servicemembers Civil Relief Act, and for certain services that the company failed to provide, the bureau alleged. The CFPB said it obtained more than $350,000 in refunds for military personnel harmed by the practices in question, and the company will pay an additional $50,000 civil penalty. The company cannot deduct the penalty ... Read More

CFPB Mortgage Rule Having More Effect on Jumbo, Nontraditional

The Federal Reserve’s latest senior loan officer survey found the CFPB’s ability-to-repay/qualified mortgage rule is not having much of an effect on the conforming mortgage market but is being felt in the jumbo and nontraditional spaces. The July survey included a set of three special questions on the effects on the approval rates for home-purchase loans of the ATR and QM standards under the Truth in Lending Act, which came into effect early this year. The first question asks respondents to indicate the extent to which the ATR/QM rule is affecting the likelihood of their banks approving applications from individuals for mortgage loans to purchase homes for each of four categories of residential real estate loans. [includes one exclusive data chart] ... Read More

Most Lenders Expect Increased Costs as a Result of QM Rules

Nearly three-fourths (74 percent) of senior mortgage executives surveyed by Fannie Mae’s Economic and Strategic Research Group in June indicated that they expect operational costs to increase as a result of the CFPB’s ability-to-repay/qualified mortgage rule. Most lenders (80 percent) said they “do not plan to pursue non-QM loans” or prefer to “wait and see”. “Larger lenders are more likely to pursue non-QM loans to increase their market share,” Fannie said. Also, most firms (84 percent) reported that they expect at least 90 percent of their single-family mortgage origination dollar volume to still be considered qualified mortgages. Further, “Lenders, on net, expect to tighten credit standards as a result of QM rules,” according to the government-sponsored enterprise, with 36 percent ... Read More

CFPB Rule Impeding Return of Private Capital to Housing Finance

A number of mortgage finance industry groups have expressed concern about how the CFPB’s ability-to-repay rule is interfering with the return of private investor capital back into the sector – mostly because of the rule’s assignee liability provisions. The industry comments came in response to a request from the Treasury Department in June for suggestions to encourage private capital to return to the non-agency mortgage-backed securities space. The Association of Institutional Investors said the ATR rule’s assignee liability provision “unfairly punishes investors who have nothing to do with the origination of loans and oftentimes have limited insight into the origination practices.” The assignee liability provision therefore introduces a risk that is almost impossible to price for those not directly involved in ... Read More

Incorrect Info Leads the Way in Complaints About Credit Reports

Inaccurate information stands head, neck and torso above any other complaints consumers have about credit reporting, a new analysis of CFPB data by Inside the CFPB finds. Of the big three credit reporting firms – Experian, Equifax and TransUnion – gripes about incorrect data represented 68.7 percent of their combined total of 28,698 submissions. (See chart on following page.) Experian had the highest total of consumer criticisms about inaccurate information, followed by Equifax. But of the three, TransUnion had the largest percentage, 72.2 percent. This category of complaints included sub-issues such as account status, account terms, “information is not mine,” personal information, public record, and “reinserted previously deleted information.” The second largest credit report gripe had to do with “investigation procedure.” This ... Read More

CFPB is Pressing Banks to Disclose Campus Marketing Agreements

CFPB Student Loan Ombudsman Rohit Chopra is raising the headline risk for banks that fail to be transparent about the campus financial product marketing agreements they have with colleges and universities. In a recent blog post alerting colleges and students about “secret banking contracts,” Chopra indicated the bureau has been mailing out letters to such educational institutions “to make sure they know that their bank partner has not yet committed to transparency when it comes to student financial products” because the financial institution has not yet posted its marketing agreement with the school on its website. Last year, the CFPB launched an inquiry into financial products marketed to college and university students to determine whether the market is working for... Read More

Rulemaking More Likely After Critical Report on Overdraft Fees

Industry insiders think it’s more likely the CFPB will promulgate a final rule on bank overdraft protection after the bureau released a report that found small debit card purchases often lead to expensive overdraft charges. The study found that the majority of debit card overdraft fees are incurred on transactions of $24 or less and that the majority of such overdrafts are repaid within three days. Put in lending terms, if a consumer borrowed $24 for three days and paid the median overdraft fee of $34, such a loan would carry a 17,000 percent annual percentage rate, according to the CFPB. The report “shows that consumers who opt in to overdraft coverage put themselves at serious risk when they use ... Read More

CFPB Warns Consumers About Virtual Currencies Like Bitcoin

Last week, the CFPB warned consumers about the potential risks associated with “virtual” currencies such as Bitcoin, and indicated it is now accepting consumer complaints about such products and services. Potential issues with virtual currencies identified by the bureau include unclear costs, volatile exchange rates, the threat of hacking and scams, and the possibility that companies may not offer help or refunds for lost or stolen funds. “Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions,” said CFPB Director Richard Cordray. “Virtual currencies are not backed by any government or central bank, and at this point consumers are stepping into the Wild West when they engage in the ... Read More

OIG Reviewing CFPB Coordination With Joint Supervisory Activities

The Office of Inspector General for the CFPB, the Federal Deposit Insurance Corp., the National Credit Union Administration, and the Treasury Department are evaluating the coordination between the CFPB and other regulatory agencies in conducting supervisory activities, according to the CFPB OIG’s latest work plan. In June 2012, the CFPB and the prudential regulatory agencies issued a memorandum of understanding to clarify how the agencies will coordinate their supervisory activities. “The objective of the evaluation is to confirm that the required coordination is occurring and has been effective in avoiding conflicts or duplication of efforts,” the bureau’s OIG said. The evaluation is currently expected to be completed sometime during the third quarter of 2014. There are a handful of other ... Read More

Worth Noting/Comments Due This Week/Vendor Update

CFPB Making Its Presence Felt Among Fannie Mae and Freddie Mac Servicers. Fannie Mae’s latest earning filing indicates the CFPB and/or the New York State Department of Financial Services have been reviewing the activities of Fannie Mae’s three largest non-depository servicers (which would be Nationstar, Ocwen and possibly Quicken Loans, according to the latest ranking by Inside Mortgage Finance, an affiliated publication). The scrutiny of Quicken Loans seems to be a new development. The bureau would not comment. Meanwhile, during the first half of 2014, Freddie Mac said in its second quarter earnings announcement that it implemented requirements for its seller/ servicers in response to some final rules from the CFPB, including rules concerning the requirements for borrowers’ ability to ... Read More

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