It’s no secret that President Donald Trump wants to blot out the Consumer Financial Protection Bureau. During the campaign, he said he’d dismantle Dodd-Frank, the financial regulatory law that birthed the agency. More recently, he met with former Representative Randy Neugebauer, who may be his replacement choice for current CFPB head, Richard Cordray. If appointed, Neugebauer’s top priority would be to tear apart the Bureau from the inside.
While ousting Cordray before his term expires next year may be more trouble than it’s worth, you’d think the Bureau would at least try to keep its head down in the meantime. Surprisingly, though, since Trump’s inauguration, the CFPB has been firing on all cylinders.
Maybe they know they’re on borrowed time and are trying to check a few more boxes off their bucket list. Or, they might be trying to sway public opinion. Or, there’s always the chance they’re just good people trying to do their jobs.
In any case, here’s a look at some of the major projects the CFPB is working on right now.
On Monday, the CFPB accused CitiFinancial Servicing and CitiMortgage, Inc. of hiding alternative options from homeowners trying to avoid foreclosure.
According to the CFPB, CitiFinancial Servicing:
The CFPB ordered CitiFinancial Servicing to pay restitution to its customers, update its disclosures policy, stop sending bad information to the credit reporting companies, and pay a penalty to the CFPB.
According to the CFPB, CitiMortgage responded to customers seeking help from foreclosure by asking them for dozens of forms and documents, many of which were extraneous and not needed for the relief application.
The CFPB said that this violated the Dodd-Frank Act and the Real Estate Settlement Procedures Act. The CFPB ordered CitiMorgage to pay back its customers, make it easier for customers to know what documents are needed for foreclosure relief, freeze any relevant foreclosures, reach out to affected customers, and pay a fee to the CFPB.
A spokesman for Citi stated, “We are pleased to resolve these matters.”
Last week, the CFPB announced that it was suing TCF National Bank for fooling customers into accepting expensive overdraft services. Currently, banks are not allowed to charge overdraft fees for ATM withdrawals and single, one-time debit charges without first getting the customer’s permission. The CFPB says that TCF National Bank conspired to obscure its application process and make the fees look like they were mandatory.
TCF National Bank issued a statement in response to the allegations. Part of the statement reads: “TCF rejects the Bureau’s claims and we believe we treated our customers fairly, we complied with all laws and regulations at all times, and our overdraft protection program is a valued product for our customers.”
Federal law prohibits banks from charging overdraft fees on ATM or one-time debit card transactions to customers who haven’t opted for the service. When a customer chooses not to opt in for overdraft coverage and attempts to make one of these transactions with insufficient funds, the charge is declined, which can result in a returned item fee or a nonsufficient funds fee. These fees can be similar in dollar amount to an overdraft charge, but one difference is the customer will know his or her account is out of money.
(Customers don’t need to opt into overdraft fees for recurring debit transactions or checks, as banks can cover these regardless.)
The rule launched in 2010. The year before, TCF estimated that it would lose 182 million in annual revenue because of the new rule. The CFPB claims that TCF investigated ways to get around the law. Through customer testing, TCF found that when it put the overdraft opt-in right next to mandatory account sign-up requirements, the opt-in rate doubled.
The bank also called customers and asked them if they would like their “TCF Check Card to continue to work as it does today?” If the customer said yes, he or she would unknowingly be opting in for overdraft fees.
These practices helped the bank achieve overdraft opt-in rates triple that of other banks. The CEO of the bank named his boat the “Overdraft,” and the company started throwing parties as they reached milestones for numbers of customers that had opted in.
TCF says that of its 2.6 million customers, only 341 have complained about the opt-in process. TCF also said it had adequately explained the overdraft program to customers.
The CFPB seeks restitution for the affected customers, an injunction to stop the current practice, and a fee to be paid to the CFPB.
Navient is the U.S.’s largest student loan company, and the CFPB is suing them for allegedly making it harder for borrowers to repay debt, incorrectly processing debt, and not properly responding to customers’ complaints.
Navient responded to the lawsuit saying it was politically motivated and unfounded.
“The timing of this lawsuit – midnight action filed on the eve of a new administration – reflects their political motivations,” Navient stated. “We cannot and will not accept agenda-driven ultimatums designed to get headlines rather than help for student borrowers. We will vigorously defend against these false allegations and continue to help our customers achieve financial success.”
According to the CFPB, when borrowers had difficulty repaying their loans, they would be encouraged to use forbearance, which would let them take a break from making payments while their interest continued to grow. Many of these borrowers would have benefited from a federal law that lets them apply for a lower monthly payment. From January 2010 to March 2015, Navient generated $4 billion in interest charges from borrowers enrolled in forbearances.
The Bureau said Navient also:
The CFPB seeks repayment to affected customers, and a change in Navient business policy.
Separate lawsuits were filed against Navient earlier this month by the attorney generals of Illinois and Washington, who had worked with the Bureau on the multiyear investigation.
We should note that the CFPB’s press releases about Navient and TCF National Bank both include this line: “The Bureau’s complaint is not a finding or ruling that the defendants have actually violated the law.”
It shouldn’t be surprising that a consumer protection agency with a $600+ million annual budget is trying to do its job. What’s unexpected is that the Bureau is doing so much at such a volatile time.
There’s a chance the agency is grasping at straws to try to prove its legitimacy. TCF and Navient suggested as much. Public opinion will play a significant role if the Trump administration attempts to clean out the agency. We’ll know more soon.
We’ll keep a keen eye on the agency over the coming months and let you know as soon as we hear anything to do with our industry.