CFPB News: Enforcement Actions, Card Report and Tax Study

Financial Services Law

The Consumer Financial Protection Bureau (CFPB) reached a pair of settlement agreements, the first with a debt collector and the second in its first enforcement action based on alleged violations of the Remittance Transfer Rule.

In other news, the CFPB released its biennial Card Report on the state of the credit card industry as well as the results of a pilot study on consumer savings at tax time.

What happened

Enforcement actions and research results were the news of the week at the CFPB.

Debt collector deal. In the first deal, the CFPB settled with an Illinois-based debt collection company that allegedly violated the Fair Debt Collection Practices Act as well as the Consumer Financial Protection Act (CFPA).

According to the CFPB, the debt collector “regularly and falsely” threatened consumers with arrest, lawsuits, liens on their homes, and garnishment of their bank accounts or wages, and represented that nonattorney company employees were attorneys and that consumers’ credit reports would be negatively affected if they did not pay, even though the debt collector did not report consumer debts to credit reporting agencies.

Without admitting or denying any of the charges, the debt collector agreed to a consent order with the CFPB that included payment of restitution of at least $36,800 and a $200,000 civil penalty.

In addition, the debt collector is prohibited from future misrepresentations about the challenged activities, must submit a compliance plan to ensure that its debt collection complies with all applicable federal consumer financial laws, and is required to record all consumer calls for the five years the consent order is in effect to help ensure collectors do not make false statements in the future.

First Remittance Transfer Rule case. The second enforcement action represented a first for the CFPB. After reviewing the money transfer and international bill payment services of a remittance transfer service provider based in Texas, the CFPB brought its first case based on violations of the Remittance Transfer Rule.

With six retail branches, a network of more than 1,600 third-party agent locations (in grocery stores and pharmacies, for example) and 19,500 third-party payment locations in Mexico and other countries in Central and South America, the remittance service provider allegedly used inaccurate language in the required consumer protections disclosures for approximately 14.5 million remittance transfers from October 2013 until May 2017.

Specifically, the remittance service provider supplied consumers with a disclosure form in both English and Spanish that stated it would not be responsible for errors made by payment agents, despite the fact that the Electronic Funds Transfer Act (EFTA) and the Remittance Transfer Rule specifically state that providers are responsible for errors by their agents, the CFPB alleged.

To settle the charges (without admitting to or denying any of them), the remittance service provider will pay a civil money penalty of $500,000 and refrain from future violations of the EFTA, the CFPA and the Remittance Transfer Rule. The consent order also requires the provider to establish a comprehensive written plan for ensuring compliance with the Remittance Transfer Rule.

Card report. The CFPB published its fourth biennial report on the state of the credit card market as mandated by the Credit Card Accountability Responsibility and Disclosure (CARD) Act, covering the period of 2017–2018. Market conditions remain stable and consumer satisfaction continues to be high, the CFPB found, with late payment and default rates experiencing a modest rise.

Total outstanding credit card balances have continued to grow, and at year-end 2018 were nominally above pre-recession levels (around $900 billion), while the rates of credit card delinquency and charge-off have declined “sharply” since their peak during the recession, the CFPB said.

The report also indicated that most measures of credit card availability have remained stable or decreased slightly since the 2017 report, while cardholders have increased their use of rewards cards, driving up the cost to the industry to fund these products as a result. Balance transfers also remain popular with consumers, with volume rising about 38 percent from 2015 through the end of 2018.

New technologies and advancements (such as machine learning and artificial intelligence) are increasing convenience and access for consumers, according to the report, with consumers obtaining credit cards through digital channels at a growing rate and applying for credit on their mobile devices more frequently.

Tax-time savings. The CFPB released the results of a pilot study it conducted with H&R Block to examine whether simple messages encouraging consumers to use their prepaid card to save at tax time increased the likelihood that they would do so.

During the 2017 tax filing season, a random subset of H&R Block’s prepaid card customers were assigned to one of three groups. One received an email with a message encouraging them to save using a savings feature on the prepaid card; a second group was sent an email offering a $5 incentive to save on the card and the third group did not get any savings message.

Both the encouraging message and small incentives were effective at inspiring some customers to save using the savings feature on the prepaid card, the CFPB found. While the incentive offer proved to be the most effective message, the email simply encouraging consumers to save also increased the number of customers who saved on the prepaid card as compared with those who received no savings message.

“The results from this study suggest that simple, timely messages and small incentives can be effective at encouraging consumers interested in non-traditional savings vehicles to save,” according to the study.

To read the consent order with the debt collector, click here

To read the consent order in the Remittance Transfer Rule case, click here

To read the Card Report, click here.

To read the pilot study, click here.

Why it matters

From enforcement actions with a debt collector and the first Remittance Transfer Rule case to reports on the credit card market and the results of a tax study, the CFPB has been busy over the past few weeks.



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