Payday lenders get big win after contributions to Trump pick

A consumer agency taken over by an appointee of President Donald Trump who took more than $62,000 in contributions from payday lenders while in Congress said it will suspend landmark rules aimed at alleged predatory abuses in that industry.

Mick Mulvaney serves as the Trump administration’s budget director and acting consumer bureau director. (CNBC).

Florida consumers paid more than $2.5 billion in fees that amounted to an average 278 percent annual interest rate on payday loans over a decade, groups calling for regulatory changes said in 2016.

The move announced by the Consumer Financial Protection Bureau Tuesday represented welcome relief for an industry that insisted the previous administration was going too far, but it came under immediate fire from consumer advocacy organizations.

“As a Congressman, Mick Mulvaney took thousands of dollars from the payday industry,” said Karl Frisch, executive director of Washington, D.C. -based Allied Progress. “Now, as ‘acting director’ of the CFPB, he is returning the favor by sabotaging these important protections that would have guarded against predatory lenders and protected struggling consumers from falling into the cycles of debt with sky-high interest rates.”

The consumer bureau said in a statement Tuesday it will engage in a rulemaking process to “reconsider” the “Payday, Vehicle Title, and Certain High-Cost Installment Loans” rule. That rule would have started Tuesday, though some provisions would not kick in until August.

Payday lenders gave more than $62,000 in campaign contributions to Mulvaney when he was a congressman, according to gift-tracker opensecrets.org. That included more than $31,000 in the 2016 election cycle, when the South Carolina Republican ranked among the top 10 congressional candidates in contributions from the sector. Also in the top 10 in that cycle: Florida Democrats Alcee Hastings and Patrick Murphy, though GOP candidates got about 70 percent of the giving nationally.

While in Congress, Mulvaney called the CFPB a “sick, sad” joke. Trump made Mulvaney his budget director and then asked him to serve as acting director of the consumer bureau last year.

Improper influence or conflict of interest? “I don’t think so, because I am not in elected office anymore,” Mulvaney said in December. He noted different administrations often diverge on key issues.

Industry groups have fought against the rule they slam as a prime example of over-stepping by the CFPB, the consumer agency created by financial reform laws passed during the administration of former president Barack Obama.

“Millions of American consumers use small-dollar loans to manage budget shortfalls or unexpected expenses,” Dennis Shaul, CEO of the Community Financial Services Association of America, said in October. “The CFPB’s misguided rule will only serve to cut off their access to vital credit when they need it the most.”

Payday loans often run between $200 and $1,000, due when a borrower receives the next paycheck. Borrowers average a $15 fee for every $100 borrowed, industry officials have said.

Officials in the Obama administration said payday lenders collected $3.6 billion a year in fees on the backs of low-income people who frequently became trapped in endless cycles of debt. About four out of five borrowers soon took out additional loans with mounting fees, officials said. For many, costs soon approached the equivalent of a 390 percent annual interest rate, they said.

The proposed rules would have required lenders to take greater pains to “vet” borrowers, limit how many loans they could take out in succession and cap penalty fees.

As Frisch sees it, “The CFPB thoroughly and thoughtfully considered every aspect of this issue over the course of several years. There is no reason to delay implementation of this rule – unless you are more concerned with the needs of payday lenders than you are with the interests of the consumers these financial bottom-feeders prey upon.”

 

Equifax tops Florida gripes. Knives are out for credit-freeze fee

Florida officials are pushing to eliminate a $10 fee to freeze a credit report after hacked credit reporting agency Equifax emerged as the most complained-about company in the state in 2017,  in beefs to the federal Consumer Financial Protection Bureau.

RELATED: Advice to freeze your own credit aims at hot problem in Florida

This fall Equifax acknowledged a data breach that exposed the personal data of more than 145 million U.S. consumers, including Social Security numbers, birth dates, addresses and more.

In the wake of that episode, state officials including Chief Financial Officer Jimmy Patronis are pushing legislation to eliminate the $10 fee to freeze credit reports. Such freezes can make it more difficult for fraudsters to establish new credit in a victim’s name.

Indiana, South Carolina, Maine and North Carolina “do not charge this fee and we want to add Florida to that list this year,” Patronis said last week.

Florida law allows credit reporting agencies to charge a fee of up to $10 to freeze credit reports, he noted, “and data breach victims are required to submit paperwork to prove their identity is in jeopardy to avoid paying the fee. No one should have to jump through hoops to get a fee waived.”

Bills including SB 1302 and HB 953 aim to make it so.

Equifax did not respond to a request for comment, but the head of an industry trade group raised concerns.

“We in general oppose the removal of all fees from credit freezes,”  said Francis Creighton, president and CEO of the Consumer Data Industry Association, which represents credit reporting agencies. “This is a process that costs the credit reporting agencies money. They have to have call centers and staff to do that.”

A security freeze placed on your credit file will block most lenders from seeing your credit history, as Consumer Reports has described it. That does not eliminate all fraud but makes it harder for a bad guy to get credit in your name, making a freeze “the single most effective way to protect against fraud,” the publication figured.

But it has drawbacks. Unless you are prepared to do a lot of unfreezing and refreezing on the fly, it also shuts out companies you may want to see your report to get a used car or a new smartphone, buy insurance or get approved as tenant.

Another option is a fraud alert, a notice placed on your credit report warning prospective lenders that you are a victim of or concerned about identity theft. That means they should take “reasonable extra steps to verify your identity,” according to Consumer Reports.

The terminology can get confusing, as there are also a variety of “credit monitoring” services companies offer, sometimes with monthly fees.

In any case, credit reporting and repair companies represented the top category of CFPB complaints from Florida, according to lendedu.com, which calls itself a marketplace for finance products including student loans, personal loans and credit cards. The next biggest categories were debt collection and mortgages.

Creighton said complaint numbers should be kept in perspective, because sometimes consumers are unhappy with other parties involved in the process, not necessarily or exclusively credit reporting  agencies like EquifaxExperian and TransUnion.  These can include lenders who deny credit or charge more. Or they can include outside “credit repair” firms that may offer to improve credit scores by challenging adverse information in a consumer’s report, not always with lasting success if the smudges have a legitimate basis.

Meanwhile the CFPB itself, created by financial reform laws enacted during the administration of former President Barack Obama, faces an uncertain future under President Donald Trump.

The bureau oversees rules for banks and other financial companies. It has produced $12 billion for 29 million consumers in refunds and canceled debts.

Big companies have complained the agency goes too far, has too much independent power and hurts the economy.  U.S. Rep. Jeb Hensarling, R-Texas, has called it “a rogue agency.” Trump has named his budget director Mick Mulvaney as its acting director. Uncertainty extends to the continued public availability of its complaint database.

“For quite possibly the last time ever (because of rumors of President Trump’s shutting it down), LendEDU has downloaded and analyzed every consumer complaint that was filed with the CFPB in 2017,” lendedu.com said.

Florida 2017 complaints to Consumer Financial Protection Bureau

Total Complaints: 21,905
Top Company: Equifax Inc. (2,716 complaints)
By Category
Credit Reporting/Repair Services: 8,701
Debt Collection: 4,819
Mortgage: 2,600
Credit Card/Prepaid Card: 1,850
Bank Deposit or Checking/Savings Account: 1,790
Student Loans: 1,074
Source: lendedu.com

Credit card debt jumps 9%. Bad sign? Depends on your credit score

The average debt on U.S. credit cards has climbed 9 percent in two years after a big pullback following the financial crisis nearly a decade ago, a new federal report says. Total revolving debt has increased very close to pre-recession levels of about $1 trillion.

Slouching toward a new debt crisis? Depends on where you fall in the great credit-score dividing line around 720. If you’re above it, on a typical industry scale that runs up to 850, a close look shows not all of the increased charging likely means “new” debt.

Why? People with good credit scores are increasingly likely to put more things on plastic that they would pay anyway, like routine shopping formerly paid by cash or check or monthly charges for utilities, consumer services, and so on. That’s because it’s a golden age for credit card rewards, and those with the good fortune and discipline to pay it off monthly can come out ahead.

Average credit balances topped $4,800 by the end of 2016, a high since the last recession, according to the Consumer Financial Protection Bureau.

But that does not mean all of it is “new” spending, CFPB figured.

“This high is driven in substantial part by an increase in the average debt level of consumers with superprime credit scores,” meaning 720 or above, the CFPB report released Wednesday said. “Given that these consumers are very likely to transact on their credit cards, this likely represents less a shift in consumer indebtedness patterns than in purchase behavior.”

For example, the report said, “consumers who cease making purchases with cash or check, instead migrating their purchase volume to a credit card that they pay off in full each month, may double their average monthly credit card balance without actually altering their personal balance sheet meaningfully.”

Consumers with “prime” scores, 660 to 719, actually carry the most credit card debt, more than $8,000 per cardholder in the four most recent quarters.

But they pay a steep price if they don’t pay off balances each month. At a typical 19% interest rate, they pay about $127 in interest charges each month.

In contrast, the “superprime” cardholders hover around $4,000 in debt (that they often pay off each month) and folks with “deep subprime” scores, 579 or less, average less debt, about $2,700.

Delinquency and charge-off rates are ticking upward slightly, even with the unemployment rate low and no obvious signs of problems in the larger economy.

“Total outstanding credit card debt has continued to grow since our last report and is now at pre-recession levels,” the report notes.

Whether that’s a problem seems to be a tale of two pools of credit scores.

For folks with scores above 720 — about 56 percent of the scored population, according to this report — the growing debt isn’t necessarily a worry and may not even represent new debt, but a shift in how they pay for things.

Those with “prime” or lower scores, however, run the greatest risk of paying sky-high interest charges and sinking into trouble when debt loads rise.

Credit score tiers

Group/Share of U.S. population with a credit score

Superprime (scores of 720 or greater) 56%
Prime (660 to 719) 17%
Near-prime (620 to 659) 9%
Subprime (580 to 619) 7%
Deep subprime (579 or less) 11%

Source: Consumer Financial Protection Bureau

Thousands of older Floridians turn to ‘rogue’ consumer agency

Problems with home-finance deals including reverse mortgages, threats from collectors on debt including health charges, and mistakes on credit reports rank among the top complaints from consumers 62 and older to a federal agency taking heat in Congress, a new report out today says.

Florida’s older residents have filed more than 8,400 complaints to the Consumer Financial Protection Bureau, second only to almost 11,000 from California seniors, according to the U.S. Public Interest Research Group, a group that advocates for consumer protections.

The CFPB, created in 2011, has taken controversial action against companies including a record $100 million fine against bank Wells Fargo for ginning up phony accounts and fees. That has angered some big industry players who say the Obama-era agency has gone too far. They want a Republican-led Congress to clip its wings.

Texas Republican Rep. Jeb Hensarling has called it “this rogue agency, the Orwellian-named CFPB.”

Legislation that has passed the House and awaits Senate consideration would roll back the powers, funding and independence of the agency and weaken efforts to help older folks, groups like U.S. PIRG argue.

“The Consumer Bureau has already taken numerous major enforcement actions against financial firms targeting older consumers,” said Ed Mierzwinski, consumer program director at U.S. PIRG. “Gutting the CFPB makes it easier for financial scammers to move against older consumers, threatening their homes and retirement savings.”

Mortgages account for 31 percent of complaints by seniors, his group’s study said. Other leading categories: credit reporting  and debt collection, both 17 percent.

One older consumer told the agency, “I received a false statement saying that my recently deceased husband owed a third party some debt. My husband owed no one anything.”

To file a complaint with the Consumer Financial Protection Bureau, visit  consumerfinance.gov/complaint or call (855) 411-2372.

NEW: Controversial rule stops financial firms from blocking lawsuits

Sparking plenty of friction in the financial industry and Congress, a federal agency announced today a new rule that bans companies like banks and credit card issuers from using arbitration clauses to keep consumers from banding together to sue them.

Financial trade groups protest this oversteps the bounds of what the Consumer Financial Protection Bureau is supposed to to do, while some of the industry’s supporters in Congress have branded it a big wet kiss to class-action attorneys.

U.S. Sen. Al Franken, D-Minn., called it a “game-changing move” to restore power to American consumers.

The Consumer Federation of America applauded the move affecting credit card, auto loan, student loan, payday loan, and other financial contracts.  The group said it will help consumers who were unknowingly and illegally overcharged to get refunds.

“The rule will help to combat the culture of companies profiting from charging illegal fees and committing other crimes against their customers,” said Rohit Chopra, Senior Fellow at the Consumer Federation of America. “This is an important step of restoring law and order to the financial marketplace.”

CFPB said its rule bans companies from using mandatory arbitration clauses to “deny groups of people their day in court.”

As the agency explains it, many consumer financial products like credit cards and bank accounts put clauses in their contracts that force consumers to use arbitration outside of court to settle disputes. The result makes it very difficult for consumers to get together to sue a bank or financial company in a class-action suit.

“Arbitration clauses in contracts for products like bank accounts and credit cards make it nearly impossible for people to take companies to court when things go wrong,” said CFPB Director Richard Cordray in a statement. “These clauses allow companies to avoid accountability by blocking group lawsuits and forcing people to go it alone or give up. Our new rule will stop companies from sidestepping the courts and ensure that people who are harmed together can take action together.”

But the rule took immediate fire from a powerful Republican House chairman on Monday.

“This bureaucratic rule will harm American consumers but thrill class action trial attorneys,” said U.S. Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services committee. “In releasing this rule today, Director Cordray ignored a prior request by the acting Comptroller of the Currency that he work with the OCC to resolve its potential safety and soundness concerns.”

Hensarling continued, “As a matter of principle, policy, and process, this anti-consumer rule should be thoroughly rejected by Congress under the Congressional Review Act. In the last election, the American people voted to drain the D.C. swamp of capricious, unaccountable bureaucrats who wish to control their lives.  Congress must work with President Trump to make good on this mandate by fundamentally reforming the CFPB and dismantling the Administrative State.”

The rule would take effect in 60 days and apply to contracts drawn up 180 days after that.

Industry groups said it was misguided.

“We’re disappointed that the CFPB has chosen to put class action lawyers – rather than consumers – first with today’s final rule, ” said Rob Nichols, American Bankers Association  president and CEO.  “As Congress considers changes to the CFPB’s structure and accountability, we also urge lawmakers to overturn this rulemaking.”

Others including issuers of prepaid credit cards agreed.

The rule “will not only harm the prepaid industry, but will more critically deprive consumers of an efficient, inexpensive, and convenient manner to resolve disputes,” said Brian Tate, president and CEO of the Network Branded Prepaid Card Association.  He said it raises costs for card providers and maintained “arbitration has proven to be a faster and more affordable alternative to class action litigation.”

NEW: House votes to rein in agency that fined Wells Fargo $100M

The GOP-controlled U.S. House voted Thursday to roll back Dodd-Frank financial rules put in place after the nation’s last financial crisis and place tough new restrictions on the consumer protection agency that fined Wells Fargo $100 million for creating fake accounts.

Backers including U.S. Rep. Brian Mast, R-Palm City, called it a “great thing” that will ease excessive regulations and free up community banks to lend more, while opponents called that a phony cover story for a shameless wish list penned by powerful Wall Street donors and banking lobbyists.

U.S. Rep. Brian Mast, R-Palm City, speaking in Stuart Monday.

“Instead of protecting consumers, Republicans choose to protect those who cheat consumers,” House minority leader Nancy Pelosi said.

The Financial Choice Act forces the Consumer Financial Protection Bureau to rely on Congress for funding and consent on enforcement actions, the national advocacy group Consumers Union said, “dramatically reducing its power to stop companies from breaking the law.”

It would leave the agency “as an unrecognizable husk incapable of doing its job to protect consumers, homeowners, older Americans, students, service members and veterans,” said Ed Mierzwinski, consumer program director at U.S. Public Interest Research Group.

With other rules designed to stop financial meltdowns rolled back, he said, “What could possibly go wrong if Wall Street banks and predatory payday lenders are allowed to run amok again?”

The legislation would have to pass the Senate and be signed by President Trump to become law.

Former Florida governor and now Democratic U.S. Rep. Charlie Crist opposed the bill on the floor.

“I was governor of Florida when the financial crisis rolled through my state like a hurricane,” Crist said. “I remember 2008 and 2009, the bailouts.”

Wall Street was allowed to gamble with Main Street’s future, he said: “Don’t put them in charge. Don’t let them do it again.”

Mast said before a town hall meeting in Stuart this week he looked forward to voting for the bill.

“This is going to be a good thing for lending, for Main Street, for people that want to be able to start businesses, people that want to go out there and get homes,” Mast told The Palm Beach Post.

The bill, he said, would help by “getting a little bit of that regulatory burden out of the way, and allowing them to get into endeavors or homes they want to get into. That’s a great thing.”

Democrats opposing the bill called it the Wrong Choice Act, saying it not only increases the chances of another financial crisis but also guts the Consumer Financial Protection Bureau. It even gets rid of the CFPB’s public database of consumer complaints, opponents said.

“This is the worst piece of legislation that I’ve seen since I’ve been a Member of Congress,” said Rep. Stephen Lynch, D-Mass.

Experian ‘deceived’ customers with credit scores, fined $3 million

You think you are getting your “credit score.” But what if it is not really the score lenders actually use?

A federal agency said Thursday it fined credit reporting firm Experian $3 million for passing off its own proprietary credit scoring model called a PLUS score as the real deal lenders use. Experian, based in California, is one of the nation’s three biggest credit reporting agencies.

“Experian deceived consumers over how the credit scores it marketed and sold were used by lenders,” said Consumer Financial Protection Bureau Director Richard Cordray. “Consumers deserve and should expect honest and accurate information about their credit scores, which are central to their financial lives.”

An attempt to reach Experian spokesmen for a statement was not immediately successful.

The CFPB said in some cases there were “significant differences” between the PLUS Scores and the various credit scores lenders actually use.

So how do consumers know what to believe? Scores like the one produced by Experian may have an “educational” use as an approximation of where you stand. There is no single score that 100 percent of lenders use, but a common one is a FICO score, produced by a company originally known as Fair Isaac that now just goes by its initials. Some credit cards offer a free look at your FICO score as a perk.

In addition, Experian unlawfully forced consumers to view advertisements until 2014 before getting a free credit report, federal officials said.

Consumers are allowed by law to see their credit report free from big agencies like Experian once a year. The report does not show a single credit score but information the scores are typically based upon, such as what loans and other credit have been reported about the consumer. It’s worth requesting to help detect mistakes — or somebody fraudulently using your name for credit — that could lower the scores lenders use.

The fine is an example of aggressive enforcement by the CFPB. A big question to watch in the months ahead: Will a GOP-controlled Congress and executive branch rein in the agency many see as representing excessive regulation? A number of big banks and financial companies have bristled at the CFPB and legislation that created it in the previous administration.

Update: Experian said in a statement:

 “While we do not believe our practices violated the law and did not admit to any of the allegations, in the interest of moving our business forward and staying focused on delivering an exceptional product and service experience to our clients and consumers, Experian has accepted the consent order. The consent order addresses past products and marketing disclosures and does not reflect current marketing practices. Experian will execute all actions directed by the CFPB; except for limited changes, our current marketing practices are already compliant with the order.”

Data safe this season? Credit report firms lead agency gripe list

You might like to think credit reporting companies Equifax, Experian and TransUnion are the folks who are supposed to protect and keep your consumer data straight this holiday shopping season. But they lead all companies in the latest quarterly complaint list released Tuesday from the Consumer Financial Protection Bureau, outpacing banks led by Citibank.

Complaints from Florida increased 14 percent for June through August 2016, compared to same quarter a year earlier, ranking it among the top 20 states with the biggest increases in gripes.

credit reportCredit reporting firms compile information on more than 220 million U.S. consumers that can play a critical role in determining if people get favorable terms when they apply for loans and charge cards, apartments or even jobs or insurance. Some complaints are to be expected, but problems that consumers face in challenging or clearing up mistakes have proved persistent.

As The Palm Beach Post reported, the annual cost of ID theft has been tallied near $25 billion, more than burglary, vehicle and other forms of property theft combined.

Florida led the nation in identity theft complaints in 2015 to another federal agency, the Federal Trade Commission. The region including Miami and West Palm Beach topped the nation in reported identify theft per capita in 2014 and remained in the top three last year.

The Consumer Data Industry Association, whose members include big credit reporting companies, had no immediate comment.

Most Complaints by Company
1. Equifax
2. Experian
3. TransUnion
4. Citibank
5. Bank of America
6. Wells Fargo
7. JPMorgan Chase
8. Capital One
9. Ocwen
10. Navient Solutions Inc.

Source: Consumer Financial Protection Bureau, June-Aug. 2016

Payday, car-title lenders ‘prey’ on Floridians for $311M, groups say

moneyfistGroups backing federal rules proposed Thursday to crack down on payday and car-title loans say they cost Floridians more than $300 million a year, trapping people with interest rates that often top 300 percent.

“Current rules allow lenders to profit by pushing low-wage workers deeper into poverty,”  said the Rev. Dr. Russell L. Meyer, executive director of The Florida Council of Churches. “That means children go hungry, the sick can’t afford medicine, and families end up homeless. Temporary credit should give our neighbors a hand up, not make their lives harder.”

An association representing lenders warns the proposed rules from the U.S. Consumer Financial Protection Bureau are misguided and go too far, risking a cutoff in credit to many who need it.

“The CFPB’s proposed rule presents a staggering blow to consumers as it will cut off access to credit for millions of Americans who use small-dollar loans to manage a budget shortfall or unexpected expense,” said Dennis Shaul, chief executive officer of the Community Financial Services Association of America in Alexandria, Va. “It also sets a dangerous precedent for federal agencies crafting regulations impacting consumers.”

A summary of the proposed rules is here.

Federal officials said tougher rules are needed.

“The Consumer Bureau is proposing strong protections aimed at ending payday debt traps,” said CFPB Director Richard Cordray. “Too many borrowers seeking a short-term cash fix are saddled with loans they cannot afford and sink into long-term debt. It’s much like getting into a taxi just to ride across town and finding yourself stuck in a ruinously expensive cross-country journey. By putting in place mainstream, common-sense lending standards, our proposal would prevent lenders from succeeding by setting up borrowers to fail.”

The proposals would require new disclosures and options for consumers, and aim to make it harder for lenders to offer products that often result in continuous borrowing at high rates to pay off past loans, or the loss of title to a car.

Comments on the proposals are due Sept. 14 and “will be weighed carefully before final regulations are issued,” federal officials said.

Some advocacy groups say the proposals still contain loopholes and need further work to completely close what they call debt traps.

“It is a good beginning, but there is still much work to be done to ensure this rule truly protects consumers from the legalized loan sharks who prey on our communities in many states,” said Mike Litt, U.S. Public Interest Research Group’s national consumer program advocate.

The changes have the potential to save Florida residents millions of dollars if changes are made before the rule is finalized, said Alice Vickers, Director of the Florida Alliance for Consumer Protection.