For everyday people who know what it means to be snookered financially, July 21 is a day worth noting. On this date, the federal Consumer Financial Protection Bureau (CFPB) becomes the official consumer cop on the beat, fighting predatory lending in its multiple forms. The office will craft important steps and procedures that together will promote transparency on the front end of transactions and enforcement in the aftermath of alleged violations.
“Consumers deserve the peace of mind that financial companies – both banks and nonbanks – are following the rules,” said Elizabeth Warren, Special Advisor to the Secretary of the Treasury. “The CFPB will be able to examine companies that have never been subject to federal oversight to ensure that no one is gaining an unfair advantage by breaking the law. This will ultimately create fair competition, better product offerings and more transparent markets for consumers.”
For the Center for Responsible Lending and other civil rights and consumer advocates, CFPB represents the best available opportunity to correct the current mismatch between the huge volume of consumer needs and borrower needs from a lack of transparency in many financial transactions as well as the lack of one-on-one contact – especially with mortgage servicers.
By the end of July, CFPB expects its staff to include more than 100 examiners operating in Washington and in satellite offices in Chicago, New York and San Francisco. One of the early bureau efforts will be examinations of the nation’s 111 depository institutions with total assets of over $10 billion. These institutions represent more than 80 percent of the banking industry’s assets. CFPB is also authorized to examine all sizes of nonbank mortgage companies, payday lenders and private education lenders; and monitor fair lending, fee structures and marketing practices.
Consumer issues with mortgage servicing were the topic of a July 7 House subcommittee hearing. Testifying in that forum was Raj Date, Associate Director for Research, Markets and Regulation at CFPB. He related the bureau’s concerns with mortgage servicing and the lack of opportunity for most consumers to even choose their mortgage servicer.
“Mortgage servicing rights can be, and quite frequently are, bought and sold among servicers irrespective of the borrowers’ consent. . . .I get to choose my pharmacist. I don’t typically get to choose my mortgage servicer,” said Date. “The current structure of servicing fees creates a strong incentive to under-invest in adequate technology, people, and processes to handle cyclical spikes in delinquencies.”
At the same hearing, Mike Calhoun, President of the Center for Responsible Lending was even more direct. “For at least a decade community-based organizations, housing counselors and advocates across the country have documented a shoddy, abusive, and illegal practices by many mortgage servicers, who staffs are trained for collection activities rather than loss mitigation; whose infrastructure cannot handle the present level of demand, and whose business records are a mess. The harm to which borrowers have been subjected cannot be overstated”, Calhoun concluded.
In another recent CFPB development, an ongoing alliance with the nation’s military is hoped to stem the illegal foreclosures and other predatory lending that the armed forces and their families confront.
In a joint statement, the military officials said, “Too often our Soldiers, Marines, Sailors, Airmen and Coast Guardsmen are targeted by predatory lenders and they become victims of unfair financial practices. This agreement recognizes the crucial role financial readiness plays in mission readiness and we look forward to partnering with the CFPB to vigorously protect service members and their families from unlawful acts or practices by providers of consumer financial products or services.”
With these and other activities begin implementation, the public is also being asked to provide input on a key element of the agency’s non-bank oversight program. Consumers who may have wished there was an office to listen and act on their pleas for financial fairness, now is the time to speak up.
CFPB needs to know how lenders have mistreated customers or misrepresented their products. Right now is the public’s chance to help shape the rules that affect a range of alternative financial services that operate in many urban neighborhoods.
For more information on how to comment, go to: http://www.consumerfinance.gov/notice-and-comment/defining-larger-participants-in-certain-consumer-financial-products-and-services-markets/.
Charlene Crowell is the Center for Responsible Lending’s communications manager for state policy and outreach.