Tag Archives: CFPB

Pennsylvania AG’s new consumer financial protection unit’s watchdog is former CFPB enforcement lawyer

Housingwire:

According to Shapiro’s office, the state’s Consumer Financial Protection Unit will “focus on lenders that prey on seniors, families with students, and military service members, including for-profit colleges and mortgage and student loan servicers.”

While there is a serious push in Washington, D.C. to blunt, if not do away with the CFPB, Pennsylvania’s Consumer Financial Protection Unit will be led by one of the attorneys that helped found the agency.

According to Shapiro’s office, the state’s new financial watchdog will be run by Nicholas Smyth, who was the CFPB’s fourth employee and served as assistant director of the Office of Attorney General’s Bureau of Consumer Protection (the precursor to the CFPB).

Smyth also helped draft the Consumer Financial Protection Act of 2010 (Title X of the Dodd-Frank Act), which created the CFPB.

MORE TRUMP POPULISM: HIRING A BANK LAWYER TO ATTACK CFPB BANK RULES

The Intercept:

PRESIDENT TRUMP AND Republicans in Congress have broadcast their every intention to gut the Consumer Financial Protection Bureau. The president’s budget attempted to defund it and leading Republicans have called for its director to be fired and replaced with a more Wall Street-compliant regulator.

But much like the bulk of Trump’s agenda, that assault remains in the aspirational phase, and the agency continues to do its work. Earlier this month, the CFPB released a major new rule, flat-out barring financial institutions from using forced arbitration clauses in consumer contracts to stop class-action lawsuits.

Now, Trump has sent out his lead attack dog to overturn the arbitration rule — a former bank lawyer who has used the very tactic the CFPB wants to prevent.

Class-action lawsuits are often the only way abusive behavior is checked. Take one of the more flagrant examples relating to overdraft fees. Millions of Americans are painfully familiar with the little perforated postcard that kindly arrives in the mail, courtesy of your financial institution, informing you that you have overdrawn your bank account and have been assessed a fee. Or, sometimes, you get three of them in the mail.

In order to make sure you get three and not one, banks in the past would re-order your transactions. The case of Gutierrez v. Wells Fargo is instructive here: a federal class-action case in California, the suit charged the bank with debit card reordering, or altering the sequence of debit card withdrawals to maximize overdraft fees. So if a cardholder with $100 in their account made successive withdrawals of $20, $30, and $110 over the course of a day, instead of getting hit with one $35 overdraft fee, Wells Fargo would reorder the transactions from high to low, thus earning three fees.

The plaintiffs won a $203 million judgment in 2010. But in an appeal before the 9th Circuit in 2012, Wells’ lawyers argued that a U.S. Supreme Court ruling in 2011, AT&T Mobility v. Concepcion, gave Wells Fargo the right to compel arbitration and quash the case, even after the judgment was rendered.

The 9th Circuit ruled that Wells Fargo never requested or even mentioned arbitration for five years of litigating the case. Only after losing in court and getting a potential lifeline from the Supreme Court did the lawyers take the shot. “Ordering arbitration would … be inconsistent with the parties’ agreement, and contradict their conduct throughout the litigation,” the court ruled.

Wells Fargo eventually paid California customers, but only after six years of appeals. Yet the company is still trying to use arbitration to quash a similar class action on overdraft fees, which would affect consumers in the other 49 states. Over 30 banks have been sued for this conduct, and every one of them settled the case except Wells Fargo.

Banks have a lot riding on the CFPB rule. Luckily for Wells Fargo, a former senior attorney of theirs is now a top federal regulator. In fact, Keith Noreika worked on that class-action defense in Gutierrez v. Wells Fargo before becoming the acting chair of the Office of the Comptroller of the Currency.

In May, President Trump hired Noreika to take over OCC, in an unusual arrangement where he would serve as a “special government employee,” retained to perform “temporary duties” for not more than 130 days, and exempt from most ethics rules or Senate confirmation.

His first high-profile move is to insert himself into the CFPB rule-making process, the bureaucratic equivalent of laying down in the street in front of the bus.

Right before the CFPB released its final arbitration rule, Noreika charged in a letter that the rule could create “safety and soundness concerns.” On Monday, Noreika asked the CFPB to delay publishing the rule in the Federal Register until OCC could review it for safety and soundness concerns. Essentially, Noreika is saying that allowing consumers to band together to stop petty theft by banks threatens the ability of those banks to survive. The CFPB already sent the rule to the Federal Register, and called Noreika’s request “plainly frivolous.”

Noreika threatened to use Section 1023 of Dodd-Frank, which allows the Financial Stability Oversight Council (FSOC), composed of the major bank regulators, to halt CFPB rules if they put the safety, soundness, or stability of the banking system at risk. The chair of the FSOC, Treasury Secretary Steve Mnuchin, could stay the rule for 90 days pending a vote of the 10-member council. Seven votes would be needed to set aside the rule.

Consumer groups seek expansion of CFPB’s authority

Legislation would give CFPB power to enforce protections for military consumers

At a time when some in Congress are trying to reduce the power of the Consumer Financial Protection Bureau (CFPB), a coalition of consumer groups is trying to expand the agency’s authority.

Specifically, the groups – including the Consumer Federation of American, Public Citizen, Americans for Financial Reform, and the National Consumer Law Center – are backing legislation to give the agency the power to protect military consumers from exploitation.

Senate Democrats have introduced legislation that would give CFPB direct oversight of the Military Consumer Enforcement Act, a 2003 law designed to protect military personnel from abusive financial practices and predatory loans.
Read on.

CFPB Is Probing Wells Fargo’s Mortgage Practices

The Consumer Financial Protection Bureau is conducting an investigation into alleged improprieties in Wells Fargo’s mortgage fee practices.

The CFPB is looking into allegations, first reported by ProPublica in January, that the bank inappropriately charged customers fees to extend their promised interest rates when their paperwork was delayed. The CFPB probe is in its early stages, according to a person familiar with it, and there is no certainty that the agency will take action. The CFPB has the power to levy fines and seek restitution if it finds a financial firm has violated the law. A CFPB spokesperson declined to comment.

Wells Fargo is also conducting its own internal review, overseen by the law firm Winston & Strawn. The inquiry was initially limited to the Los Angeles area, but has since widened. In a sign of its escalating scope and seriousness, Wells Fargo let three top mortgages executives go last week, including Greg Gwizdz, a 25-year veteran of the bank who most recently was the head of its retail sales division. Gwizdz oversaw the bank’s more than 7,900 loan officers.

Read on.

California district court upholds constitutionality of CFPB

A U.S. district court judge in the Central District of California defended the constitutionality of the Consumer Financial Protection Bureau after rejecting multiple challenges to the bureau’s authority to issue civil investigative demands (CID),according to a blog by James Kim and Daniel Delnero, published in the CFPB Monitor.

The decision comes amid a growing amount of cases disputing the constitutionality of the bureau, which includes the landmark case between the CFPB and PHH that started oral arguments this week.

The blog explained that the judge ordered the defendant, Future Income Payments, to comply with a CID within fifteen days of the decision after the company previously attempted a John Doe challenge to the CID in the U.S. District Court for the District of Columbia.

From the blog:

The opinion is a reminder of the CFPB’s broad authority to issue a CID and the heavy burden a recipient bears of challenging it. The court joined other courts in emphasizing that an agency subpoena is valid unless jurisdiction is “plainly lacking.” Under this standard, a CID will be upheld if “there is some plausible ground for jurisdiction.”

Constitutional issues aside, the primary takeaway is that companies should think strategically when they receive a CID.

Read on.

CFPB deepens probe into Zillow for RESPA compliance

Housingwire:

This is taken from the latest Zillow earnings report:

In April 2017, we received a Civil Investigative Demand from the Consumer Financial Protection Bureau (“CFPB”) requesting information related to our March 2017 response to the CFPB’s February 2017 Notice and Opportunity to Respond and Advise (“NORA”) letter. The NORA letter notified us that the CFPB’s Office of Enforcement is considering whether to recommend that the CFPB take legal action against us, alleging that we violated Section 8 of the Real Estate Settlement Procedures Act (“RESPA”) and Section 1036 of the Consumer Financial Protection Act.

They later add they believe they fully comply with RESPA:

We believe our response to the NORA letter addresses the CFPB’s concerns related to our co-marketing program under which a lender pays us to appear in advertising alongside a real estate agent. We are continuing to cooperate with the CFPB in connection with their most recent request for information. We continue to believe that our acts and practices are lawful and that our co-marketing program allows lenders and agents to comply with RESPA.

CFPB sues Ocwen, alleges total failure of mortgage servicing process

Ocwen is still repeated offenders. When are the execs and board members get charged???

April 20, 2017 is turning into D-Day for Ocwen Financial.

On Thursday, a group of state banking regulators issued a series of cease-and-desist orders to Ocwen that prohibit the acquisition of new mortgage servicing rights and the origination of mortgage loans by Ocwen Loan Servicing, a subsidiary of Ocwen, until the company is “able to prove it can appropriately manage its consumer mortgage escrow accounts.”

But that’s only one front. Ocwen now has a much bigger fight on its hands – with theConsumer Financial Protection Bureau.

The CFPB announced Thursday that it is suing Ocwen Financial for “failing borrowers at every stage of the mortgage servicing process.”

According to the CFPB, its lawsuit alleges that Ocwen cost borrowers money, and in some cases, their homes, with its years of “widespread errors, shortcuts, and runarounds.”

In its lawsuit, the CFPB says that Ocwen “botched basic functions like sending accurate monthly statements, properly crediting payments, and handling taxes and insurance.”

The lawsuit also claims that also “illegally foreclosed on struggling borrowers, ignored customer complaints, and sold off the servicing rights to loans without fully disclosing the mistakes it made in borrowers’ records.”

The CFPB claims that it uncovered “substantial evidence that Ocwen has engaged in significant and systemic misconduct at nearly every stage of the mortgage servicing process.”

Read on.