The CFPB last week ordered Citibank and its subsidiaries to provide an estimated $700 million in relief to eligible consumers harmed by allegedly illegal practices related to credit card add-on products and services. Citibank and its subsidiaries also will pay $35 million in civil money penalties to the CFPB. Roughly 7 million consumer accounts were affected by Citibank’s deceptive marketing, billing, and administration of debt protection and credit monitoring add-on products, said the bureau. A Citibank subsidiary also deceptively charged expedited payment fees to nearly 1.8 million consumer accounts during collection calls. More specifically, the bureau’s allegations of deceptive marketing include charges that Citi misrepresented the cost and fees for coverage, misrepresented the benefits of some products, used illegal practices ...

The CFPB last week brought an $18.5 million enforcement action against Discover Bank and its student loan affiliates for engaging in allegedly illegal private student loan servicing practices. The bureau’s enforcement action “demonstrates how Discover failed at providing the most basic functions of adequate student loan servicing for a portion of the loans that were transferred from Citibank,” said the bureau. Thousands of consumers encountered problems as soon as their loans became due and Discover gave them account statements that overstated their minimum payment, the CFPB said. Also, “Discover denied consumers information that they would have needed to obtain tax benefits and called consumers’ mobile phones at inappropriate times to contact them about their debts.” The CFPB concluded that the ...

The CFPB and the Department of Justice resolved a $24 million enforcement action against American Honda Finance Corp. last week with a settlement that will put new measures in place to address discretionary auto loan pricing and compensation practices. The joint CFPB/DOJ investigation concluded that Honda’s policies resulted in minority borrowers paying higher dealer markups. “Honda violated the Equal Credit Opportunity Act by charging African-American, Hispanic, and Asian and Pacific Islander borrowers higher dealer markups for their auto loans than non-Hispanic white borrowers,” said the bureau. “These markups were without regard to the creditworthiness of the borrowers.” Honda’s policies also injured thousands of minority borrowers, according to the CFPB. “Honda’s discriminatory pricing and compensation structure meant thousands of minority borrowers ...

The CFPB has filed a complaint and a proposed $5.2 million consent order in federal court against Sacramento, CA-based Student Financial Aid Services for allegedly illegal sales and billing practices.The company has operated websites and related call centers where it offers fee-based assistance to consumers filling out the federal government’s Free Application for Federal Student Aid. According to the CFPB’s complaint, when consumers entered their payment information for certain financial advisory services, SFAS began to bill them for an annual subscription without their knowledge or consent. These recurring charges typically ranged from $67 to $85 each year and were renewed annually, according to the bureau. The company enrolled consumers in these annual subscriptions without adequate disclosures and imposed recurring ...

The CFPB recently won some and lost some when it comes to the debt-collection arguments it advanced in CFPB v. Frederick J. Hanna & Associates, which the bureau initiated in July 2014. According to the CFPB’s complaint, the firm and its three principal partners – Frederick Hanna, Joseph Cooling and Robert Winter – ran a debt-collection lawsuit mill that used illegal tactics to intimidate consumers into paying debts they may not have owed. Between 2009 and 2013, the firm filed more than 350,000 debt-collection lawsuits in Georgia alone, but the attorneys only spent less than a minute reviewing each suit, according to the CFPB. In its motion to dismiss, Hanna & Associates argued that the claims brought by the CFPB focus only...

Selling Source, LLC, a lead-generation company in Las Vegas, and Tim Madsen, a company employee and recipient of a civil investigative demand from the CFPB, recently petitioned the bureau to modify or set aside entirely the CID. First, the company argues that the CID should be set aside since it is not a “covered person” under the bureau’s authority because it does not offer or provide a “financial product or service” as spelled out in the Dodd-Frank Act. In its petition to the bureau, the company notes that a “covered person” is defined by Dodd-Frank as “any person that engages in offering or providing a consumer financial product or service,” or acts as a “service provider” and is a corporate ...

Three industry trade groups told the CFPB that the bureau’s own study of mandatory pre-dispute arbitration agreements back in March shows that arbitration has “significant, demonstrable benefits over litigation in general and class action litigation in particular.” In a joint letter to the bureau, the American Bankers Association, the Consumer Bankers Association and The Financial Services Roundtable said arbitration “is faster, less expensive and more effective than class action litigation.” Customers who prevail in an individual arbitration recover monetary benefits that, on average, are approximately 166 times greater than the sums received by the average class member in a class action settlement, they went on to note. “Simply put, there are insufficient data in the [CFPB] study to support a ...

The complaints that consumers filed with the CFPB about various aspects of their mortgages generally rose in the second quarter, as the mortgage market churned out new originations at elevated levels, a new analysis by Inside the CFPB found. Total consumer gripes rose 7.5 percent from the first quarter of 2015 to the second, the latest data from the bureau’s consumer complaint database show. The increase was largely driven by a surge of criticisms about the mortgage loan application and origination process, which climbed 11.8 percent during the period. Grumbling about loan modifications also increased during the period ending June 30, up 5.7 percent, a much higher rate of increase than the recent upward tick seen in default rates. Grievances ...

The CFPB recently launched the first in a new series of monthly reports to highlight key trends from consumer complaints submitted to the bureau, including data on company performance, complaint volume, state and local information, and product trends. The first installment in the series focuses on debt-collection complaints and complaints from consumers in Milwaukee. The bureau said it expects companies to respond to complaints within 15 days and to describe the steps they have taken or plan to take to resolve the complaint. “The CFPB expects companies to close all but the most complicated complaints within 60 days,” it said. “Complaints inform the bureau’s work and help to identify issues in the market, which feed into the bureau’s supervision and ...

A majority of Republican, Democratic and independent voters across the U.S. support the work and mission of the CFPB, according to a recent national poll sponsored by the Center for Responsible Lending and Americans for Financial Reform, both of which are strong supporters of the bureau. Support for the CFPB after voters hear a description of its purpose has held steady since last year at 75 percent, with 85 percent of Democrats, 74 percent of independents, and 66 percent of Republicans in favor. Voters’ support for the CFPB holds up after head-to-head arguments, with majority support for the pro-CFPB argument across party lines. Also, 72 percent support the CFPB’s enforcement actions against Bank of America and GE Capital, as opposed ...