The U.S. Consumer Financial Protection Bureau was part of a recent overhaul by Congress in the financial sector designed to make banks and other financial institutions more accountable while also protecting the American consumer. It has many roles, from accepting consumer complaints on a myriad of financial products to overhauling various sectors in the industry.
Part of its role includes bi-annual reports to Congress on its progress, changes and expectations; and this week, Richard Cordray, who is the agency’s director, reports fewer complaints than his agency expected. In fact, he says, CFPB has seen a steady decline since the site went live last year.
The agency officially began accepting complaints on July 21, 2011. It opened with a healthy flow of concerns and complaints from consumers on things such as unfair interest rate hikes to rude customer service members to refusals to accept partial payments. At that time, its sole focus was on credit cards. Since then, bank accounts, student loans and consumer loans have been added to its foundation. Payday loans and prepaid debit cards are up next and will likely result in big changes within the two sectors. So far, the new additions are occurring about every three months. The question is, why the drop off in credit card complaints?
One reason, said Cordray, is due to the Credit Card Accountability, Responsibility and Disclosure Act of 2009. This law bans many practices exclusive to the sector. Congress deemed them abusive and as a result, made them illegal. This has played a significant role in limiting the number of consumer complaints.
The numbers Cordray reported included a grand total of 72,297 complaints in all categories. He described it as “a significant number and a number that is increasing over time.” The annualized rate, he continued, means about 120,000 complaints per year with the vast majority being mortgage complaints at this time. That could shift with time and will likely fluctuate between credit cards, student loans, mortgage complaints and others. It just so happens it’s the mortgage complaints that are taking front and center at this time. He said he has no idea of when those shifts will happen, how often or where it might “level off”.
A lawsuit has already been filed and settled on behalf of consumers who had registered problems with their credit card companies. CFPB recently closed a case with Capital One Financial Group that garnered more than $200 million in settlement monies. The suit also included the Office of Comptroller of the Currency as a co-plaintiff. Cordray said about Capital One,
(it) responded extremely responsibly to the problem when it was identified. They were as distressed and concerned as we were.
A Stronger Government Agency
Could it be a federal agency finally got it right? Maybe – and consumers who have had experience with the bureau say they finally feel as though someone is listening and change can really occur. Cordray reminded attendees that his agency is the one that began the suit and he hopes other credit card companies will see it as the warning it’s intended to be. The goal, he said, was to avoid a repeat,
We very much want and intend for them to do that.
Mortgage loans took front and center ahead of student loans and other specific areas because the demand was greater there. Among the proposed changes are revamped billing statements where lenders will be required to provide a clearer and more detailed picture regarding balances, payments and interest rates. Like the credit card overhaul, there’s a specific mention of providing ample warning before a homeowner is hit with an interest rate hike. In fact, CFPB is recommending at least a six month head’s up before any changes are made to a homeowner’s interest rate.
It also hopes to find a way for lenders to provide earlier interventions for those falling behind in their mortgage payments. Ideally these outreach efforts will result in fewer foreclosures and better relationships between mortgagees and lenders. It also wants mortgage payments applied to homeowner’s accounts the day they are received. Finally, issues regarding policies and procedures, bank errors and information management were also addressed and will be affected once the new rules are finally published.
In terms of what to expect in the near future, Cordray said the bureau is currently working on new regulations for the prepaid debit card market. Currently, CFPB is asking for public opinions and comments and so far, the comments are running the gamut – everything from praise for prepaid cards to accusations of exploitations. He told Congress that new rules for prepaid cards are currently being written and that he fully expects to continue to move forward in that area.
Have you filed a complaint with CFPB? If so, let us know about your experience. Was it resolved? Did you hear from your credit card company following the complaint?