Origination News Post 10/12/12

 

FOR PLANNING PURPOSES
Friday, October 12, 2012
TODAY: Congressman Barney Frank to Debate the Future of Housing Policy
Congressman Barney Frank today will take part in a moderated discussion on the future of housing policy in the United States.  As the former Chairman of the House Financial Services Committee, Frank was a leader in the passage of the 2010 Wall Street Reform and Consumer Protection Act.  Frank will engage in what is likely to be a spirited discussion with Keith Hennessy, former Assistant to President George W. Bush for Economic Policy, and former Director of the National Economic Council. WHEN:         Friday, October 12, 2012 -- 10:30 am CST, 11:30 am EST WHAT:            Opening remarks: Leo Melamed, CME Group Chairman Emeritus                    Moderator: Terry Savage, Chicago Sun-Times Financial Columnist                    Panelists: •·        Barney Frank, United States Representative of the 4th Congressional District of Massachusetts •·        Keith Hennessey, National Economic Council Former Director                        The forum will be webcast at:  www.cmegroup.com/msri2012        WHERE:         W Chicago - City Center 172 West Adams Street Chicago, IL                    CONTACT       For media access to Congressman Frank, please contact Harry Gural by phone at (202) 225-9400.                    For media access at the CME Group, please contact Michael Shore at (312) 930-2363

Dear Colleagues,

 

Today, the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) announced a joint public enforcement action with an order requiring Discover Bank to refund approximately $200 million to more than 3.5 million consumers and pay a $14 million civil money penalty. 

Please see the joint press release below.

 

Regards,

Bart

FEDERAL DEPOSIT INSURANCE CORPORATION AND CONSUMER FINANCIAL PROTECTION BUREAU ORDER DISCOVER TO PAY $200 MILLION CONSUMER REFUND FOR DECEPTIVE MARKETING

Discover Pays Additional $14 Million Penalty for Deceptive Marketing of Credit Card ‘Add-On Products’

WASHINGTON, D.C. – Today, the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) announced a joint public enforcement action with an order requiring Discover Bank to refund approximately $200 million to more than 3.5 million consumers and pay a $14 million civil money penalty.  This action results from an investigation started by the FDIC, which the CFPB joined last year.  The joint investigation concerned deceptive telemarketing and sales tactics used by Discover to mislead consumers into paying for various credit card “add-on products” – payment protection, credit score tracking, identity theft protection, and wallet protection.

The agencies jointly determined that Discover engaged in deceptive telemarketing tactics to sell the company’s credit card add-on products.  Payment Protection was marketed as a product that allows consumers to put their payments on hold for up to two years in the event of unemployment, hospitalization, or other qualifying life events.  Discover also sold its Credit Score Tracker, designed to allow a customer unlimited access to his or her credit reports and credit score.  The third product was Identity Theft Protection, which was marketed as providing daily credit monitoring.  Lastly, Discover’s Wallet Protection product was sold as a service to help a consumer cancel credit cards in the event that his or her wallet is stolen.

Discover’s telemarketing scripts contained misleading language likely to deceive consumers about whether they were actually purchasing a product.  Discover’s telemarketers also often downplayed key terms and spoke quickly during the part of the call in which the prices and terms of the add-on products were disclosed.  Because of the misleading language in the scripts and the actions of Discover’s telemarketers, consumers were:

•·        Misled about the fact that there was a charge for the products: Discover’s telemarketing scripts often used language implying that the products were additional free “benefits,” rather than products for which a fee would be applied to their accounts. 

•·        Misled about whether they had purchased the products:  The telemarketing scripts frequently suggested that consumers would not be charged for the products until after having a chance to review printed materials from Discover.  Discover, however, did not provide consumers with the information until after Discover had already initiated the consumer’s purchase of a product.

•·        Enrolled without their consent: Discover representatives processed the add-on product purchases without some consumers’ consent.  These consumers were then charged for the product on their Discover card.

•·        Withheld material information about eligibility requirements for certain benefits: Discover’s telemarketers typically did not disclose critical eligibility requirements for certain payment protection benefits, such as exclusions for pre-existing medical conditions and certain limitations concerning employment.

Enforcement Action

Under the order, Discover has agreed to:

•·        Stop deceptive marketing: Discover is required to institute certain changes to its telemarketing of these products that are designed to ensure that these unlawful acts do not occur again.  Discover has also agreed to submit a compliance plan to the FDIC and the CFPB for approval, and to take specific corrective actions related to the products. 

•·        Pay restitution to consumers who purchased the products: Discover will pay approximately $200 million in restitution to more than 3.5 million consumers who were charged for one or more of the products between December 1, 2007 and August 31, 2011.  Generally, all consumers affected by Discover’s deceptive practices regarding these products, except those who affirmatively made use of Payment Protection, will receive restitution, with amounts varying depending on when they purchased, and how long they held, the add-on products.  All consumers will receive at least 90 days’ worth of fees paid (minus any refunds they have already received), with approximately 2 million consumers receiving full restitution of all of the fees they paid (minus any refunds they have already received).

•·        Provide refunds or credits without any further action by consumers: Consumers are not required to take any action to receive their credit or check. If an affected consumer is still a Discover customer, he or she will receive a credit to his or her account.  If an affected consumer is no longer a Discover credit card holder, the consumer will receive a check in the mail or have any outstanding balance reduced by the amount of the refund. 

•·        Submit to an independent audit: Compliance with the restitution terms of the order will be assured through the work of an independent auditor, who will report to the FDIC and the CFPB on Discover’s compliance with the joint FDIC-CFPB Consent Order.

•·        Pay a $14 million penalty: The FDIC and the CFPB imposed civil money penalties of $14 million.  Discover will pay $7 million of that penalty to the U.S. Treasury and $7 million to the CFPB’s Civil Penalty Fund. 

The full text of the Joint FDIC-CFPB Consent Order with Discover is available at: http://files.consumerfinance.gov/f/201209_cfpb_consent_order_0005.pdf

A factsheet on the Consent Order is available at: http://consumerfinance.gov/f/201209_cfpb_factsheet_settlement-with-discover-bank.pdf

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Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 7,246 banks and savings associations and it promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars – insured financial institutions fund its operations.

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.ConsumerFinance.gov.

Below please find Director Cordray’s written testimony before the Senate Committee on Banking, Housing, and Urban Affairs earlier today.

Regards,

Bart

Written Testimony of Richard Cordray

Director, Consumer Financial Protection Bureau

United States Senate Committee on Banking, Housing, and Urban Affairs

Washington, D.C.

September 13, 2012

Chairman Johnson, Ranking Member Shelby, and Members of the Committee, thank you for inviting me to testify today about the Semi-Annual Report of the Consumer Financial Protection Bureau.

Just over one year ago, the Consumer Bureau became the nation’s first federal agency focused solely on protecting consumers in the financial marketplace.  The Semi-Annual Report we are discussing today covers our activities from January 1 through June 30 of this year.

As the report shows, we have been using all of the tools at our disposal to help protect consumers across this country.  We pledge to continue our work to promote a fair, transparent, and competitive consumer financial marketplace.

Through our regulatory tools, we have proposed smarter rules that will help fix the broken mortgage market with common-sense solutions.  We are writing rules that simplify mortgage disclosure forms and rules that make sure consumers do not receive mortgages that they do not understand or cannot afford.  Our rules will also bring greater transparency and accountability to mortgage servicing.  And our careful process is that before we propose a rule, a team of attorneys, economists, and market experts evaluates its potential impacts, burdens, and benefits for consumers, providers, and the market.

Our push for accountability extends beyond mortgage servicing.  We are holding both banks and nonbanks accountable for following the law.  Prior to my appointment, nonbanks had never been federally supervised.  The financial reform law specifically authorized us to supervise nonbanks in the markets of residential mortgages, payday loans, and private student loans.  We also have the authority to supervise the “larger participants” among nonbanks in other consumer finance markets as defined by rule.  So far, we have added credit reporting companies to this group.

It is important for us to exercise sensible oversight of the consumer finance markets, but it is also important that we empower consumers themselves to make responsible financial decisions.  Our “Know Before You Owe” campaign involves us working to make mortgages, credit cards, and student loans easier to understand.  We also developed “AskCFPB,” an interactive online database with answers to consumers’ frequently asked questions.  We also launched the first-ever database of individual complaints about financial products, starting with credit cards.  Consumers can use the website to review and analyze information and draw their own conclusions about the customer service provided with these financial products.

We also think it is important to engage directly with consumers so we know more about the struggles and frustrations they encounter in their daily lives.  The Bureau has held numerous field hearings across the country so we can talk face to face with consumers on a variety of topics.  Our website has a feature called “Tell Your Story,” which encourages consumers to share with us their personal stories to help inform our approach in addressing issues in the financial marketplace.  And, perhaps most significantly, we help to resolve consumer disputes with lenders by taking complaints on our website at consumerfinance.gov, as well as by mail, fax, phone, and by referral from other agencies.  As of September 3, we have received 72,297 consumer complaints about credit cards, mortgages, and other financial products and services, and the pace of complaints has been increasing over the past year.

All of these processes – rulemaking, supervision, enforcement, and consumer engagement – provide us with valuable information about consumer financial markets.  We engage in extensive outreach to large and small institutions, including banks and nonbanks, to gather the best current information as we make policy decisions.  We pride ourselves on being a 21st-century agency whose work is evidence-based.  So we also conduct our own in-depth studies on consumer financial products, such as reverse mortgages and private student loans.  We have issued public requests for information that seek input from consumers, industry, and other stakeholders on issues such as overdraft fees, prepaid cards, and the financial exploitation of seniors.

The new Consumer Bureau has worked on all of these projects while being fully engaged in start-up activities to build a strong foundation for the future.  The Bureau has worked to create an infrastructure that promotes transparency, accountability, fairness, and service to the public.  Our first year has been busy and full, and this report reflects considerable hard work done by people whom I greatly admire and respect.  They are of the highest caliber and they are deeply dedicated to public service.  We look forward to continuing to fulfill Congress’s vision of an agency that helps all Americans by improving the ways and means of their financial lives. Thank you.

The semi-annual report can be found online here: http://www.consumerfinance.gov/reports/semi-annual-report/

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.ConsumerFinance.gov.

 

 

NAMB signs joint letter on Reg X and Reg Z. We question the use of an "all-in" APR, request the CFPB simplify its approach to rulemakings, and push for a single version of Regulation Z changes so the industry does not have to navigate through overlapping proposals.

 

Click Here for more inforamtion

Proposed Rule:

http://files.consumerfinance.gov/f/201208_cfpb_tila_mlo_compensation_proposed_rule.pdf

 

How to Submit a Comment:  You can submit a comment by mail or electronically.  Please see the instructions under “Addresses” at the beginning of the proposed rule.  Please note that comments should be identified by Docket No. CFPB-2012-0037 or RIN 3170-AA13

 

Deadlines for Submitting Comments:  The comment period begins today.  Comments must be received by October 16, 2012 

 

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) released a proposed rule that would require mortgage lenders to provide home loan applicants with copies of written appraisals and other home value estimates developed in connection with the application. The rule would ensure that consumers receive information prior to closing about how the property’s value was determined.

“When looking to buy a home or refinance a mortgage, consumers need the best available facts and data,” said CFPB Director Richard Cordray. “This rule would guarantee consumers receive important disclosures on how a lender determines the value of the home, making it easier for loan applicants to make informed decisions.”

In response to the mortgage crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act requires that creditors provide mortgage applicants with a copy of written appraisals and home value estimates developed in connection with the application.  Today’s proposed rule would require that creditors inform consumers within three days of applying for a loan of their right to receive a free copy of appraisal reports and home value estimates. Creditors would then be required to provide the reports to consumers as promptly as possible, but in no case later than three days before closing, regardless of whether credit is extended, denied, incomplete or withdrawn.

Appraisals and other home value estimates are used by creditors to inform lending decisions for most home sales. Consumers are typically charged for the costs related to conducting an appraisal; however, currently consumers must request appraisal reports from creditors and may be charged a fee to obtain the report.  Under the proposed rule, creditors could still charge reasonable fees associated with conducting appraisals and home value estimates; however, the rule would prohibit creditors from charging consumers fees for obtaining the reports. 

The proposed rule would amend the Equal Credit Opportunity Act (ECOA)’s Regulation B, which require certain disclosures and prohibits lenders from discriminating on the basis of race, national origin, sex, or other protected bases. Under the Dodd-Frank Act, the Bureau is authorized to issue regulations implementing ECOA and supervise compliance with ECOA and Regulation B for certain lenders. 

The CFPB welcomes comments on the proposed rule. The public will have 60 days, or until October 15, 2012 to review and provide comments on the proposed rule. The CFPB will review and analyze the comments before issuing a final rule in January 2013.

The CFPB’s proposed rule is available at: http://files.consumerfinance.gov/f/201208_cfpb_ECOA_proposed_rule.pdf 

A summary of the CFPB’s proposed rule is available at: http://files.consumerfinance.gov/f/201208_cfpb_ECOA_plain_language_summary.pdf

This is one of several rulemakings governing mortgage practices currently underway at the Bureau in order to implement requirements of the Dodd-Frank Act. Today, in partnership with several other federal regulatory agencies, the Bureau is also issuing a proposed rule to establish special requirements concerning appraisals for higher-risk mortgage loans, which would require creditors to use a licensed or certified appraiser to prepare the written appraisal report based on a physical inspection of the property.

The interagency proposed rule is available at: http://files.consumerfinance.gov/f/201208_cfpb_HRM_proposed_rule.pdf

A summary of the interagency proposed rule is available at: http://files.consumerfinance.gov/f/201208_cfpb_HRM_plain_language_summary.pdf

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.ConsumerFinance.gov.

 

On June 15, 2012, World Elder Abuse Awareness Day, Director Cordray announced a Request for Information (RFI) to learn more from the public about the growing issue of financial exploitation of older Americans and best practices for elder financial management. A recent study suggests elder financial abuse cost seniors more than $2.9 billion in 2010, a 12 percent increase from 2008.

 

The goals of the RFI are:

• •1.      To help us understand the senior financial advisor market so we can improve protections for older Americans.
• •2.      To help make the work of the office for Older Americans more effective.

 

Read and respond to the RFI:

http://www.regulations.gov/#!documentDetail;D=CFPB-2012-0018-0001

 

The RFI poses the following questions:

• •·        How seniors can best determine the legitimacy of the credentials of financial planners and advisors.
• •·        What financial education, counseling, or management programs are tailored to the needs of older Americans, their families, and their caregivers.
• •·        Asks for information about power of attorney and guardian abuse, affinity frauds, and the exploitation of older veterans.

Please share what you are seeing and experiencing.

 

The information you provide us will help us better understand the issues of elder financial abuse and other forms of exploitation.

 

Thank you,

Skip Humphrey

Assistant Director for Older Americans

The Consumer Financial Protection Bureau

P.S. -- For more information on the Office for Older Americans and to read our blog, go to http://www.consumerfinance.gov/older-americans/