Another Financial Watchdog on Guard for You

How the CFPB protects you outside the investment world

consumer financial protection bureau, cfpb, consumer protection

You’re probably familiar with the acronyms FINRA and SEC.

I often mention the Financial Industry Regulatory Authority and the Securities and Exchange Commission because they are the top federal regulators of financial advisors, stockbrokers, brokerage firms and the mutual fund industry.

But you haven’t heard me talk much about the CFPB. There are two reasons: The Consumer Financial Protection Bureau has existed for only about five years, and its mission to date has been to protect you from financial wrongdoers outside the investment world.

For example, CFPB has helped those who have been misled or defrauded by mortgage lenders, credit card companies, cell phone carriers — even cable box providers. Over the past five years, CFPB enforcement actions have produced $11 billion in relief for 25 million victims of financial abuse.

CFPB Director Richard Cordray, a former Ohio attorney general, was a guest on my radio show recently. Here’s an edited transcript of our conversation.

Ric: Recently, you collected fines from several large companies, including some of the nation’s biggest banks, for bad behavior involving robo-signing of court documents. What is that?

Cordray: Let’s say you have a collector chasing you for a debt that you don’t owe or one that you paid off, but it’s not well substantiated. If they take you to court, as they often do, they might create falsified evidence. We call that robo-signing.

Ric: How can you protect yourself from that?

Cordray: Most consumers know the debts they actually owe. But debts change hands. One collector may sell a debt to another collector and things get mishandled, sometimes repeatedly.

We remind consumers that they have rights. On our website, consumerfinance.gov, you’ll find info on how to get debt collectors to stop harassing you at all hours — even calling you at work or calling your friends and family. We make sure that laws on the books are actually enforced.

Ric: Is it legal for debt collectors to call people at work?

Cordray: Not if you have indicated that they should stop calling you there. You have that right. But many collectors push the boundary because they’re paid on commission. Calling late at night, calling family members, threatening arrest and other forms of harassment are illegal under federal law.

Ric: It’s understandable why they would call you at work: the intimidation factor. Whether they say it or not, the intimation is, “I’m going to tell your boss that you owe me money.”

Cordray: The worst examples we’ve seen involved members of the military. Some collectors threatened to inform the soldiers’ commanders — in effect, their bosses. That’s very intimidating because it could affect the members’ security clearance and thus their pay status. It’s illegal, and we have pursued it aggressively. In fact, we have a whole office devoted to ensuring that service members’ rights are protected.

Ric: You also ordered several of our nation’s largest banks to pay millions of dollars in refunds for illegal credit card practices. Tell us about that.

Cordray: We took action against about a dozen credit card providers, including some of the biggest banks. Essentially, they would try to sell add-on products to consumers who obtained or renewed credit cards. The aggressive marketing overstated the value of these products. We had tapes proving that some marketers didn’t adequately inform people about the products or signed them up without permission. We believe we’ve pretty much rooted this practice out of the marketplace today.

Ric: What kinds of products were they pitching?

Cordray: They were called credit protection products. Supposedly, if you became unemployed you could still have your credit card bill paid. Some would sign you up but never activate the product. Later, if you tried to make a claim, they would say, “Oh, I’m sorry, you didn’t have the product,” even though you had paid $10 a month for it for the past three years. Because of these firms’ huge business volume, this added up to a lot of money.

Ric: I suspect that many of my listeners would say, “I have a college degree. I’m smart enough not to buy used cars from a guy standing next to a pawn shop. What CFPB is doing isn’t applicable to me.” But the CFPB ordered Sprint and Verizon to pay $120 million in refunds to consumers for illegal, unauthorized charges. This tells me we’re all vulnerable.

Cordray: Yes, this falls into the category of “You might be surprised.”

We found that some cell phone companies had become payment processors. On their bills they would allow certain third parties to charge for various products. When consumers paid their phone bills, they were also paying for some items they hadn’t signed up for and often didn’t even receive. We call this “cramming.” For example, one of the scammers called itself Data Processing Services, so on many itemized bills there would appear “Data Processing Services: $4.95.”

Ric: How clever.

Cordray: The cell phone companies argued that they hadn’t received complaints. That’s because most folks wouldn’t think to challenge that item: It sounds reasonable. But today the companies are under orders from us to be far more attentive to what goes on their bills.

Ric: Where do you stand relative to the Federal Trade Commission? Is there a jurisdictional overlap or redundancy there?

Cordray: Some of our jurisdiction is shared with the FTC. For example, the two of us split up the mobile phone cramming cases. We often divide work to maximize our limited resources.

Ric: Did someone at your agency wake up one morning and decide to look at Sprint and Verizon? Just how do you determine your priorities?

Cordray: Congress established some of our priorities by statute. For example, we were mandated to help reform the mortgage marketplace because of the abuses seen in the 2008 financial crisis.

But consumer complaints also influence our priorities. I suggest that your listeners think about whether they’ve ever been mistreated on mortgages, credit cards, student loans or auto loans. Did they get a lawyer and sue? Probably not. But they could file a complaint with us online at consumerfinance.gov, and we encourage that.

It takes only a few minutes. It could result in direct relief for them or at least an explanation. We’ve received over 800,000 complaints. With that many, you sometimes see a pattern, and that’s what led us to pursue the cell phone bill scammers and the aggressive debt collectors.

Ric: You’re talking about crowdsourcing. You’re basically saying to all of America, “Feed us your worries, concerns and complaints, and as the list grows we’ll set our priorities.”

Cordray: Yes, exactly. That’s far better than for me or my colleagues to sit in an ivory tower trying to guess what affects consumers. We want to hear from them, and they’re reaching us by the thousands.

Besides using consumerfinance.gov, consumers can also file complaints and talk to us by phone toll-free at 855-411-CFPB (2372). And our staff is multilingual.

Ric: One of your pet peeves — mine as well — is the lack of financial education in our society. What is the CFPB doing in that regard?

Cordray: It’s sad that so many young people go out into the world without guidance in financial matters. Each generation repeats the mistakes their parents made. It’s tragic.

We ought to have a mandate in all 50 states that high schools teach personal finance so that kids have at least a baseline of what to expect entering the adult world and how to manage their financial affairs. Our website has a lot of good educational tools — along with guidance on handling common situations like aggressive debt collecting and false marketing. We want to help people defend themselves intoday’s complex, often dangerous financial marketplace.

Ric: On behalf of consumers and investors everywhere, keep doing what you’re doing. You’re helping a lot of people. Thanks for being my guest.

Originally published in Inside Personal Finance July 2016

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