The Consumer Financial Protection Bureau is celebrating its two-year anniversary with much calmer waters ahead, according to Bill Hardekopf, CEO of LowCards.com, which covers the credit card industry from all perspectives.
"The new federal agency has been the center of a political firestorm since it was formed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, in response to the financial abuses that brought on the Great Recession," Hardekopf said in a summary of the CFPB's startup. "Republicans demanded structural changes before they would agree to vote on a permanent director. These included subjecting the agency to congressional budget appropriations and that it be operated by a five-person commission rather than by a single director."
Richard Cordray was approved as the CFPB's director on July 16, so the agency is primed to make headway in the coming year, Hardekopf said. He noted some of the CFPB's achievements so far:
Complaint database: CFPB fielded 175,000 consumer complaints on credit cards, mortgages, student loans, bank accounts and auto loans. These occupy a database prioritizing them for investigation, making them available to the public.
Benefits of this database can be seen with the credit card industry. Prior to CFPB, there was no way for consumers to see complaints or responses when comparing credit cards. The database shows which issuers have the most complaints and how they were handled. Data can be viewed online by company, consumer ZIP Code and type of complaint.
Complaint handling: CFPB reviews each complaint and forwards those meeting its criteria to appropriate companies for review and resolution. Companies have 15 days to respond to each and most complaints are resolved and closed within 60 days. Filers can track complaint progress and dispute the resolution provided. If CFPB finds legal violations, it works with other parts of the Bureau to deal with them.
Fines: CFPB ordered American Express, Capital One and Discover to return a combined $425 million to consumers, primarily for misleading sales tactics.
Lenders: The agency notified banks, payday lenders and finance companies they are accountable for unlawful conduct in collecting consumer debt. It also added bill collectors to its database and sends action letters consumers can use when contacting debt collectors.
Overdrafts: CFPB investigates bank overdraft practices, as consumers paid $32 billion in overdraft fees last year. A study by the agency showed overdraft coverage varies significantly, institution to institution, and that consumers who sign up for overdraft coverage have higher costs and more involuntary account closures.
Credit reports: CFPB now investigates inaccurate credit reports, improper report use, inability of consumers to obtain report copies or credit scores, and problems with identity-theft-protection services. It has updated existing regulations to make it easier for spouses or partners not working outside of the home to qualify for credit cards. Also, the agency encourages more affordable college loan options. It developed a "Know Before You Owe" initiative to help people understand the consequences of carrying large debt.
Bipartisan Student Loan Certainty Act is on president's desk
The Bipartisan Student Loan Certainty Act of 2013, designed to ease some of the financial burden heaped on student loan recipients, awaits the signature of President Barack Obama.
The Consumer Financial Protection Bureau predicted a 20 percent growth in student loan debt between the end of 2011 and May 2013, and that prediction is coming true. As of July, college students have amassed a staggering $1 trillion in federal student loan debt, with an extra $200 billion out in private loans,
LowCards.com reports.
These numbers are growing higher and faster than the national credit card debt, causing concerns for graduates of the future. Of all balances delinquent by 90-plus days in last year's third quarter, student loan balances passed credit card balances, according to the Federal Reserve Bank of St. Louis website.
Interest rates for federal student loans doubled July 1, from 3.4 percent to 6.8 percent, prompting members of Congress and Obama administration officials to try to find ways to lower that rate and combat the increasing debt for college students.
The Bipartisan Student Loan Certainty Act, endorsed by the Obama administration, was passed by Congress recently.
With Obama's signature, the new law would tie the interest rates on federal student loans - Stafford loans - to the 10-year Treasury note plus 2.05 percentage points, with an 8.25 percent cap. This fall, college students could expect Stafford loan rates of 3.86 percent. Obama had yet to sign the legislation by late afternoon Tuesday.
Some Democrats objected to the bill, pointing out that the Congressional Budget Office estimated that higher interest rates will cost students $4 billion in new loan interest charges compared to current law. With college debt topping $1.1 trillion, backers of the bill are adding billions to the debt already crushing college students and their families, the bill's opponents say.
Borrowers won't be able to take advantage of historic low rates, the opponents say. Under the bill, federally subsidized Stafford loans taken next year will be reset every year. By the time new freshmen graduate and start repaying loans in 2017, rates on freshman year loans will have doubled.
Democratic proposals would have allowed college students to reap historically low interest rates by freezing the 3.4 percent rate on subsidized loans for the next two years and keeping other education loan rates stable.
Student loans are not dischargeable in bankruptcy, and students have no way to escape them. They must pay off their balances soon or face high interest charges.
What's happening now is student loan holders are just not paying them - typically having no income to pay them - and going delinquent on them for 90-plus days.
Tulsa World consumer writer Phil Mulkins wants to know which topics interest you. Call 918-699-8888, email your suggestion to
phil.mulkins@tulsaworld.com or mail it to Tulsa World Consumer, PO Box 1770, Tulsa, OK 74102-1770.
Original Print Headline: CFPB looks out for consumer credit
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