Editor's Note: This article, authored by Justin B. Hosie, Eric L. Johnson and Laura J. Bacon previously appeared in Hudson Cook’s Insights Blog and is re-published here with permission. This article is provided for informational purposes and is not intended nor should it be taken as legal advice. The views and opinions expressed in this article are those of the authors in their individual capacity and do not reflect the official policy or position of the partners of Hudson Cook, LLP or clients they represent.
The CFPB had a busy October. In this article, we'll share some of our top CFPB "bites" of the month so you can stay on top of recent developments.
Bite 10: New Report on NSF Fees at Banks and Credit Unions
On October 11, 2023, the CFPB issued a data spotlight on nonsufficient fund fees ("NSF fees") showing that many NSF fee practices have been eliminated by banks and credit unions. NSF fees are charges that some financial institutions impose when they determine that accounts lack sufficient funds and therefore reject to pay funds from a consumer's account for a check or electronic authorization. These are distinct from overdraft fees, which financial institutions charge when they pay a payment from an account that lacks sufficient funds, rather than reject the payment.
Bite 9: Consumer Advisory on Credit Repair Services
On September 22, 2023, the CFPB published a consumer advisory reminding consumers that they have the right to cancel credit repair services. This advisory followed a recent settlement involving several large credit repair companies. The CFPB says that these consumers have received notices that they can cancel their services with no penalties, at any time, and for any reason or no reason at all. The CFPB is also advising credit repair consumers who contracted for repair services through telemarketing that the credit repair service must achieve the promised results in the promised time frame, and that the consumer must receive a consumer report that shows the promised results, that was generated at least six monthsafter the promised results were achieved. The CFPB's advisory says that only then can a credit repair company that used telemarketing charge any fees or accept payment. The CFPB further advised consumers that they don't need to hire anyone to dispute mistakes in their credit reports; they can do so on their own using tools available for free online.
On October 12, 2023, the CFPB launched an initiative on immigrant access to fair credit, and started investigating the financial experiences of immigrants. The CFPB noted that immigrant borrowers, including those protected under the Deferred Action for Childhood Arrivals Program have been denied credit based on their immigration status. These include denials for credit cards, vehicle financing, and student loans.
On October 11, 2023, the CFPB published a special edition of its Supervisory Highlights, focused on fees the CFPB (and FTC) call "junk fees." The CFPB took issue with organizations charging fees for: (1) multiple payment re-presentments returned unpaid; (2) authorized positive, settle negative overdraft; (3) printing and mailing undelivered statements; (4) depositing unpaid checks; and (5) add-on products in auto finance (including miscalculating add-on product refunds). This special edition also referenced program developments, a circular on overdraft fees, a bulletin on returned deposit fees, and an advisory opinion on pay-to-pay fees.
On October 11, 2023, the CFPB issued an advisory opinion regarding a statute prohibiting large banks and credit unions from imposing unreasonable obstacles on customers related to basic information about their own accounts. Specifically, Section 1034(c) of the Consumer Financial Protection Act requires large banks and credit unions to provide account information upon request to customers when the information is in their control or possession. This includes information about a consumer's accounts for financial products or services, such as balances, interest rates, and transaction history.
Bite 5: CFPB and FTC File Amicus Brief on Credit Reports
On September 29, 2023, the CFPB and FTC together filed an amicus curiae brief in the U.S. Court of Appeals for the Second Circuit. The brief argued that companies reporting consumer data must delete data that the company cannot verify after someone identifies the information as wrong. According to the CFPB, some companies have argued that if they are unable to determine that the disputed information is false, then they may continue providing the disputed information on reports. According to estimates cited by the CFPB, one in five Americans has incorrect information on at least one of their credit reports. As a result, the CFPB claims the FCRA requires companies to respond appropriately when notified of errors.
On September 21, 2023 the CFPB announced that it is beginning a rulemaking process to remove medical bills from credit reports. The CFPB says these efforts will help families financially recover from medical crises, stop debt collectors from coercing people into paying bills they may not even owe, and ensure that creditors are not relying on data that is often plagued with inaccuracies and mistakes. The CFPB cites to a 2022 report indicating that approximately 20% of Americans have medical debt. The CFPB also noted its research indicating that medical billing data on a credit report is less predictive of future repayment than reporting on traditional credit obligations, and that inaccuracies in billing are common and often compounded by disputes over bills and complex billing practices.
Bite 3: CFPB Sues Another Alleged "Repeat Offender"
On October 4, 2023 the CFPB announced that it filed a lawsuit in federal court against a mortgage company. The CFPB claims that this company is a "repeat offender" as it sued the company earlier this year, and entered a 2019 consent order with this company. According to the CFPB, this company allegedly submitted erroneous mortgage data, which the CFPB says violates both the Home Mortgage Disclosure Act ("HMDA") and a 2019 consent order. In its lawsuit against the company earlier this year, the CFPB sued the company for allegedly paying illegal kickbacks for referrals. The 2019 consent order concerned the company's HMDA reporting, after the CFPB claimed that the company misreported data about applicant race and ethnicity.
Bite 2: CFPB Takes Actions against International Money Transfer App
On October 17, 2023, the CFPB announced that it had taken action against an international money transfer app, claiming that it violated the Electronic Funds Transfer Act ("EFTA") and Remittance Transfer Rule. The CFPB claimed that the operator of the mobile app allegedly deceived customers about the speed and costs of remittance transfers, forced consumers to waive legal rights, failed to provide required disclosures and receipts, and failed to properly investigate disputes. According to the CFPB, the company violated the EFTA when it required users to waive the company's liability for losses incurred through the app, as the EFTA provides that the rights conferred by the EFTA cannot be waived. The CFPB's Remittance Transfer Rule requires that consumers receive timely receipts, specific disclosures about funds availability and correctly calculated exchange rates- all of which the company allegedly failed to do.
Bite 1: CFPB and FTC Take Action Against Rental Screening Organization
On October 12, 2023, the CFPB and the FTC announced actions against a rental screening subsidiary of a large consumer reporting conglomerate, for violations of the Fair Credit Reporting Act. The CFPB and FTC have alleged that the subsidiary failed to take steps to ensure the rental background checks were accurate and withheld the names of third parties providing the inaccurate information from renters. Together, the agencies have requested that a federal court order the company to pay $15 million and make changes to how it reports evictions. The CFPB separately ordered the conglomerate to pay $8 million for allegedly lying to consumers about timely placing or removing security freezes and locks on the credit reports.
Extra Bite: FTC Announces Proposed Rule on "Junk Fees"
On October 11, 2023, the FTC released a notice of proposed rulemaking that would prohibit junk fees, which it described as "hidden and bogus" fees that harm consumers. The FTC said that these fees can cost consumers tens of billions of dollars per year. The rulemaking comes after the agency requested public input (via an Advance Notice of Proposed Rulemaking) last year on whether a rule would help to eliminate these unfair and deceptive charges. After receiving more than 12,000 comments, the FTC is now requesting a new round of comments on a proposed junk fee rule.
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