In December, the CFPB got major results for the consumers it is charged with protecting from unfair financial practices. Here's a quick rundown of the CFPB's enforcement and other actions this holiday month.
- On December 10, the CFPB Ordered GE Capital Retail Bank to repay consumers $34 million over deceptive marketing by doctors and dentists of its CareCredit medical debt credit card. As we noted to the press: "Somebody you're expecting to provide you with treatment steps in and acts as your bank and you just think, oh, they're here to help me," [Mierzwinski] said. "You're shopping for health care, you're not shopping for credit, and that's what the CFPB's message is here today."
- On December 12, CFPB held an important field hearing in Dallas to announce preliminary results of its study of forced arbitration clauses in consumer contracts. After it completes the study, and issues a report to Congress, the CFPB gains statutory authority to ban or regulate these small print boilerplate contractual provisions that limit your right to go to court to redress unfair practices. The report issued by CFPB found that 9 out of 10 clauses requiring arbitration of claims also limit consumer rights to band together in class actions.
- On December 16, the CFPB, joined by several states, filed its first online lending lawsuit, against a loan servicing company known as CashCall. The CFPB rejected the firms's various defenses of its activities, such as " seeking to collect on loans that were completely void or partially nullified because the loans violated either state caps on interest rates or state licensing requirement laws." Among the rejected defenses was the firm's claim that its relationship with Western Sky, a lender allegedly connected with a Native American Indian reservation, gave it some sort of "rent-a-tribe" sovereign immunity from state or federal law.
- On December 17, the CFPB publicly backed U.S. PIRG's long-time position that financial institutions should publicly disclose all of their campus card agreements with colleges and universities. Currently, institutions only need to disclose agreements regarding credit cards, but not debit, checking, or prepaid cards. Statement from my U.S. PIRG colleague Ethan Senack has more details on the CFPB's report and on campus card problems.
- On December 19, the CFPB and 49 states settled claims with the nation's largest non-bank mortgage servicer, Ocwen in a case resulting in $2 billion in loan modifications and $125 million in direct consumer refunds. As CFPB Director Cordray explained: "We believe that Ocwen violated federal consumer financial laws at every stage of the mortgage servicing process."
- The next day, December 20, CFPB and the U.S. Department of Justice imposed $80 million in penalties for illegal auto lending practices on Ally Financial Inc. and Ally Bank for "markup policies that have resulted in illegal discrimination against over 235,000 African-American, Hispanic, and Asian and Pacific Islander borrowers." Ally is formerly GMAC.
- On December 23, CFPB and "the Department of Justice (DOJ) filed a joint complaint against National City Bank [through successor PNC Bank] for charging higher prices on mortgage loans to African-American and Hispanic borrowers than similarly creditworthy white borrowers between the years 2002 and 2008.The bank will repay consumers $35 million.
- And, that same day, December 23, CFPB also ordered American Express to "refund an estimated $59.5 million to more than 335,000 consumers for illegal credit card practices" associated with credit card add-on products. CFPB and other regulators also imposed a total of $16.2 million in penalties. For those of you not keeping score at home, in 2012 CFPB and other regulators had already slammed AmEx for $85 million in consumer refunds plus $27.5 million in additional penalties. In 2012, regulators "found that at every stage of the consumer experience, from marketing to enrollment to payment to debt collection, American Express violated consumer protection laws."
Well, it's been a good month for consumers and a bad month for corporate crime. The CFPB is getting results and making markets work better by better aligning the interests of sellers with consumers. We know that the trade press paper The American Banker noticed. Let's hope other banks and financial firms get the message in the New Year. Unfair or deceptive financial practices will not be tolerated by the CFPB, the first federal financial agency with just one job, protecting consumers. If you get caught with ill-gotten consumer gains, CFPB will make you pay them back.