Consumer Financial Protection Bureau Update

Report
CFPB Update – Enforcement
Activities, Debt Collection, and the
SCRA and the DOJ Settlement
June 4, 2014
NCHER Spring Convention
John L. Culhane, Jr.
Ballard Spahr LLP
Consumer Financial Services
Higher Education
(215) 864-8535
[email protected]
Copyright 2014 Ballard Spahr LLP. All rights reserved.
Stefanie Jackman
Ballard Spahr, LLP
Consumer Financial Services
Higher Education
(678) 420-9490
[email protected]
CFPB Enforcement Activities
Copyright 2014 Ballard Spahr LLP. All rights reserved.
Themes in Enforcement
•
Investigations generally go back 3-5 years
•
Touch all areas of consumer financial services industry,
including collections and student loans
•
Technical compliance often not a focal point – focus more
on UDAAP issues
•
Often apply “new” or “aspirational” standards
•
•
E.g., accept verbal disputes or DNC requests, no credit
reporting after state SOL runs
One consent order states that any violation of state law can
constitute a federal UDAAP violation
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Themes in Enforcement
•
Interest & fees (when charged, authority, how calculated)
•
Workout options for consumers
-
Loan rehabilitation/settlement/forbearance options
•
Consumer disclosures
•
Collection efforts
•
Credit reporting
•
SCRA and other military benefits and protections
4
Themes in Enforcement
•
Third party oversight
•
Report requests – data and numbers
•
Policies and procedures
-
•
Written documentation
Tone at the top
-
Internal controls and monitoring
-
Executive reporting
-
Follow up on initiative implementation
5
Future Themes for Student Loans?
•
Imposition of mortgage servicing standards
•
Cosigner release and other benefit programs
•
Partial prepayments and payment allocation
•
Treatment of so-called “good faith” payments
•
Procedures related to cosigner death and bankruptcy
•
SCRA rate reductions and other military benefits
•
Delivery of federal student loan benefits
•
Refinance or consolidation and loss of federal benefits
6
Debt Collection Developments
Copyright 2014 Ballard Spahr LLP. All rights reserved.
ANPR
•
Contained 162 questions, grouped into 8 substantive
categories
•
Major themes –to address persist consumer protection
problems, to provide definitive answers to questions raised
by technological developments, to adopt national
standards for first party collection, and to consider whether
to implement a centralized document repository and a
separate national debt collector registry
•
Comment period ended February 28, 2014
•
CFPB Semiannual Regulatory Agenda seems to signal
release of a proposed rule by year end
8
Likely Changes/Impact of Final Rule
• FDCPA protections apply to first party collections
• Limits on time, manner, and method of
communications (end of Foti, clarity on texts, etc.)
• Additional information in validation notice
• New disclosures (time-barred, servicemembers, debt
transfers, convenience fees, non-debtor liability, etc.)
• Increased documentation requirements (to collect,
validate, resolve disputes, etc.)
• Creation of national debt collector registry (but not a
centralized document repository)
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Supervisory Highlights
•
$70 million in consumer restitution; arising from payday
lending, debt collection, and credit reporting agencies
•
First Party Collections (Payday Lending)
-
Compliance management issues
-
Improper calls – call frequency and deceptive claims
-
Overly aggressive collection tactics – workplace visits
-
Third party collection calls – misrepresentations and
unspecified conduct deemed to be harassing, oppressive or
abusive
-
Failure to oversee service providers
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Supervisory Highlights
•
•
Third Party Collections (Debt Collectors)
-
Compliance management issues
-
Intentionally and illegally misleading consumers about
litigation – i.e., dismiss if consumer answers
-
Excessive, illegal calls – time and frequency issues
-
Failing to investigate credit disputes
Credit Reporting Agencies
-
Improper handling of disputes – i.e., not forwarding
information to furnisher, ignoring telephone/email disputes
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SCRA & DOJ Consent Order
DOJ Complaint
•
Alleged pattern or practice of SCRA violations:
-
Failing to lower rates after receiving written notice and
qualifying active duty orders
-
Failing to make acceptable efforts to obtain qualifying
active military duty documents from servicemembers who
requested benefits but did not provide orders
-
Failing to notify servicemembers that they might be eligible
for rate reductions when they provided their military
documents for other purposes
13
DOJ Consent Order
•
•
Accept as written notice (request):
-
Military orders
-
Request for military deferment or forbearance
-
Submission through new online process
Accept as military orders:
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Letter from commanding officer with specified information
-
Results of search of DMDC database (required if notice and
no orders; for positive result – send notice of right to
dispute eligibility dates; for negative result – send notice
requesting copy of documents establishing service)
14
Department of Education Statement
•
•
Accept as written notice (request) actual knowledge from:
-
Communication through online portal
-
Oral communication to call center representative
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Written communication to call center representative
-
Search of DMDC data base
Accept as military orders:
-
Letter from commanding officer
-
Certificate from DMDC data base
15
CFPB and SCRA
• 2012 CFPB servicemembers report:
-
Servicemembers face serious hurdles in accessing their
student loan benefits, including the 6% rate
• 2014 CFPB servicemembers report:
-
Servicemembers report that they are repeated asked to
submit documentation not required by law
-
Recurring requests for orders containing an end-date,
particularly with officers (officer orders are often indefinite)
-
Median amount of monetary relief from complaints through
complaint portal - $2,038 (likely from rate reductions)
16
CFPB and SCRA
• CFPB reaction to DOJ consent order (from the
statement by Holly Petraeus) :
-
Servicemembers were “given the runaround” and were
“denied ... the interest-rate reduction[s] required by law”
and “[t]his behavior is unacceptable”
-
The DOJ Consent Order “should serve as a warning not just
to the student loan servicing industry, but to all
institutions that provide or service loans to the
military.”
-
Federal regulators “will be vigilant about holding all
financial institutions accountable for providing the
protections that our servicemembers have earned”
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Thank you for joining us!
John Culhane
(215) 864-8535
[email protected]
Stefanie Jackman
(678) 420-9490
[email protected]
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