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January 19, 2023

On the web

CFPB Issues Guidance to Root Out Tactics Which Charge People Fees for Subscriptions They Don’t Want

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) issued a new circular affirming that companies offering “negative option” subscription services must comply with federal consumer financial protection law. Negative option programs include subscription services that automatically renew unless the consumer affirmatively cancels, and trial marketing programs that charge a reduced fee for an initial period and then automatically begin charging a higher fee.

December 21, 2022

On the web

CFPB Orders Wells Fargo to Pay $3.7 Billion for Widespread Mismanagement of Auto Loans, Mortgages, and Deposit Accounts

Consumer Financial Protection Bureau

“The Consumer Financial Protection Bureau (CFPB) is ordering Wells Fargo Bank to pay more than $2 billion in redress to consumers and a $1.7 billion civil penalty for legal violations across several of its largest product lines. The bank’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes. Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank.”

November 30, 2022

On the wires

Fraud, Transaction Problems Highlight US Consumer Complaints Over Crypto

Reuters

“Fraud and transaction problems were leading factors in a surge of US consumer complaints related to cryptocurrencies & other digital assets. The report from the US Consumer Financial Protection Bureau (CFPB) comes as the high-profile failure of the FTX crypto exchange has seized the attention of regulators and shaken the crypto industry. “Our analysis of consumer complaints suggests that bad actors are leveraging crypto-assets to perpetrate fraud on the public,” said CFPB Director Rohit Chopra.  Even before the collapse of FTX, complaints from consumers who were hit by other types of digital currency losses have been rising at an alarming rate, the CFPB reported. The CFPB report said the crypto market has become a magnet for fraudsters who see little chance that their schemes will be detected due to the absence of investor protection and the opaque nature of the market.”

October 4, 2022

On the web

Why The US Wants To Regulate The Buy Now, Pay Later (BNPL) Industry

MediaNama

“The US Consumer Financial Protection Bureau (CFPB) on September 15 published a report detailing the consumer harms that it observed with the “rapidly growing” Buy Now, Pay Later (BNPL) industry arising from practices like data harvesting, inconsistent consumer protection, and debt overextension.  The agency noted that it will identify potential guidelines or rules to issue to ensure that BNPL lenders adhere to many of the baseline protections that already exist for other forms of credit. The report comes after CFBP in December 2021 announced a market monitoring inquiry to gain more insight into the industry.”

September 28, 2022

On the web

Regulator Homes In On ‘Loan Stacking’ Across Buy Now, Pay Later Firms

Forbes

“Buy now, pay later services (BNPL) are growing by leaps and bounds, but the lightly regulated industry could end up causing more harm than good for consumers, according to a new U.S. government report. The BNPL lenders offer consumers the option to pay for purchases in interest-free installments over a relatively short period; four payments in six weeks is common. That kind of financing is popular with people who don’t have access to traditional forms of credit, and the lenders will offer increasingly larger borrowing limits if borrowers exhibit solid repayment behavior. The services are designed to be easy to use and are often seamlessly integrated with online checkouts, making it almost too easy for consumers to sign on for a new loan. Unlike banks and credit-card companies, however, the BNPL lenders run only limited credit checks, and they don’t know if new users already have loans on rival services. A report by the U.S. Consumer Financial Protection Bureau released last week warned of the risk of “loan stacking,” where individuals risk getting in over their heads by taking out loans from multiple BNPL companies.”

September 16, 2022

On the web

U.S. Consumer Watchdog Plans to Regulate ‘Buy-Now, Pay-Later’ Companies

Reuters

“The U.S. Consumer Financial Protection Bureau (CFPB) plans to start regulating “buy-now, pay-later” (BNPL) companies like Klarna and Affirm Holdings due to worries their fast-growing financing products are harming consumers, the agency said on Thursday. The watchdog, which does not currently oversee BNPL companies or products, will issue guidance or a rule to align sector standards with those of credit card companies, it said. The agency also said it would implement appropriate supervisory examinations.”

September 1, 2022

On the web

The P2P Fraud Conundrum

The Regulatory Review

“Have you ever received an automated message from your bank warning you about an unauthorized payment? If so, you may want to think twice before acting on it. According to a recent report in The New York Times, some individuals have received instructions to send payments through peer-to-peer (P2P) payment apps such as Zelle or Venmo to reverse supposedly fraudulent transactions, only to have scammers steal those payments. And even if victims report the fraud, banks may refuse to return the credit. This increasingly common scenario reveals a critical distinction in what consumer protection law considers to be an “unauthorized transaction.” When thieves hack consumers’ accounts or steal their phones and transfer money, the Electronic Fund Transfer Act (EFTA) considers the resulting transactions to be unauthorized and requires banks or payment services to refund them. But in instances where scammers trick individuals into authorizing payments themselves, Regulation E, which implements the EFTA, does not protect the payments. This subtle distinction marks the difference between an easy refund and the loss of thousands of dollars for victims of fraud. Currently, Regulation E requires financial institutions to credit customers for unauthorized transfers from their accounts made by third parties. In most cases of unauthorized transactions, the financial institution itself has liability. But in some cases where a third-party service gives a customer access to transfers from the customer’s bank account, the regulation holds the service provider liable for unauthorized transactions.”

August 1, 2022

On the web

Unlocking Consumer Bank Data Stokes Chopra’s ‘Underworld’ Fears

Bloomberg Law

“Consumers who let budgeting apps or payment platforms access their banking data shouldn’t feel as “powerless” about how that information is used if a pending regulation works as planned, said the head of the Consumer Financial Protection Bureau. The bureau is working to finish a long-awaited rule that would make it easier for people to share information about their bank accounts and other sensitive data that financial institutions store and protect. Opening up this data to online financial tools promises to boost competition, though it also raises risks that people’s information could be misused… Chopra called the emergence of big tech companies in the financial services arena “one of the most high stakes questions we have to confront as an industry, as regulators and as a public.” “It raises a lot of very, very pressing questions, not just about privacy, but about fair competition, transparency and consumer protection,” he told Bloomberg Law.”

July 27, 2022

On the web

U.S. Consumer Watchdog (CFPB) to Scrutinize Crypto Payments, Big Tech Moves Into Finance

Reuters

“The top U.S. consumer watchdog plans to scrutinize the use of cryptocurrencies for real-time payments and ramp up oversight of Big Tech companies as they expand into the traditional financial sector, its director told Reuters. The Consumer Financial Protection Bureau (CFPB) also will publish a report this fall on “buy-now, pay later” or BNPL products, and expects to propose a rule to boost consumer finance competition around early next year, Rohit Chopra said in an interview.”

July 21, 2022

On the web

Consumer Bureau to Push Banks to Refund More Victims of Scams on Zelle and Other Payment Services

MarketWatch

“The Consumer Financial Protection Bureau is preparing to prod banks to pay back more customers who are the victims of scams on Zelle and other money-transfer services, according to people familiar with the coming regulatory effort. Under new guidance the bureau is preparing to release in the coming weeks, banks could face heightened requirements around certain scams that have become more prevalent on these platforms, these people said, such as when a customer is tricked into sending money to a scammer pretending to be a representative of his or her bank.”

June 23, 2022

On the web

U.S. Consumer Watchdog to Review ‘Excessive’ Credit Card Late Payment Fees

Reuters

“The top U.S. consumer watchdog on Wednesday said it had begun a review of “excessive” credit card fees and asked card issuers for data on revenue and expenses in a bid to stamp out abuses and boost competition. The advanced notice of proposed rulemaking issued by the Consumer Financial Protection Bureau (CFPB) confirms a Reuters April report that the agency would scrutinize credit card fees as part of a broader crackdown on what it calls “junk fees,” a catch-all for overdraft, credit card late-payment fees, bounced check fees, and other charges.”

June 22, 2022

On the web

CFPB Initiates Review of Credit Card Company Penalty Policies Costing Consumers $12 Billion Each Year

Consumer Financial Protection Bureau

“The Consumer Financial Protection Bureau (CFPB) is taking the first step toward addressing credit card company penalty policies costing consumers $12 billion each year, starting by looking at excessive late fees. In an Advance Notice of Proposed Rulemaking published today, the CFPB asks for information on the Federal Reserve Board of Governors’ 2010 immunity provision for excessive late fees that allows credit card companies to escape enforcement scrutiny. The CFPB is seeking data about credit card late fees and late payments, assessing whether those fees are “reasonable and proportional.” We are also seeking data about card issuers’ revenue and expenses, the potential deterrent effect of late fees, and the role late fees play in credit card companies’ profitability.”

April 28, 2022

On the wires

U.S. Consumer Chief Chopra to Revisit Rules Around Credit Card Fees, Abuses

Reuters

“The U.S. consumer watchdog will revisit its rules around credit card fees in a bid to stamp out abuses, discourage excessive late fees and boost competition, the agency’s director told Congress on Wednesday, confirming a Reuters April report.  “I am asking the staff to look at whether we should reopen the CARD Act rules … to determine whether there needs to be any changes,” said Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra.”

April 26, 2022

On the web

CFPB Invokes Dormant Authority to Examine Nonbank Companies Posing Risks to Consumers

“The Consumer Financial Protection Bureau (CFPB) announced that it is invoking a largely unused legal provision to examine nonbank financial companies that pose risks to consumers. The CFPB believes that utilizing this dormant authority will help protect consumers and level the playing field between banks and nonbanks. The CFPB is also seeking public comments on a procedural rule to make this process more transparent.”

April 13, 2022

On the web

CFPB Charges TransUnion and Senior Executive John Danaher With Violating Law Enforcement Order | Consumer Financial Protection Bureau

Consumer Financial Protection Bureau

“Today, the Consumer Financial Protection Bureau (CFPB) is filing a lawsuit against TransUnion, two of its subsidiaries, and longtime executive John Danaher for violating a 2017 law enforcement order. The order was issued to stop the company from engaging in deceptive marketing, regarding its credit scores and other credit-related products. After the order went into effect, TransUnion continued its unlawful behavior, disregarded the order’s requirements, and continued employing deceitful digital dark patterns to profit from customers. The Bureau’s complaint also alleges that TransUnion violated additional consumer financial protection laws.”

February 16, 2022

On the web

CFPB Issues Warning on Use of Prepaid Cards to Pay Government Benefits

American Banker

“The Consumer Financial Protection Bureau warned financial services companies Tuesday about a longstanding prohibition on using prepaid debit cards as the sole method for distributing government benefits. Companies that get hired by government agencies to distribute payments to consumers may be extracting illegal fees that would be considered an abuse of their exclusive contracts, the agency said.”

December 2, 2021

On the wires

CFPB Research Shows Banks’ Deep Dependence on Overdraft Fees | Consumer Financial Protection Bureau

“Banks continue to rely heavily on overdraft and non-sufficient funds (NSF) revenue, which reached an estimated $15.47 billion in 2019, according to research released today by the Consumer Financial Protection Bureau (CFPB). Three banks—JPMorgan Chase, Wells Fargo, and Bank of America—brought in 44% of the total reported that year by banks with assets over $1 billion. The CFPB also found that while small institutions with overdraft programs charged lower fees on average, consumer outcomes were similar to those found at larger banks. The research also notes that, despite a drop in fees collected, many of the fee harvesting practices persisted during the COVID-19 pandemic.”

November 12, 2021

On the web

November 1, 2021

On the web

PayPal Calls CFPB’s Fee Disclosure Rule ‘Problematic’ – Law360

law360

“PayPal has asked the D. C. Circuit to uphold its win against the Consumer Financial Protection Bureau over the agency’s disclosure rules for prepaid cards and digital wallets, calling the requirements “problematic. “The CFPB is allowed by law to craft model disclosures for prepaid cards and digital wallets, but the agency overstepped its authority by creating requirements that include details such as the disclosures’ layout, font, font size and color, PayPal Inc. argued Wednesday.”

October 21, 2021

On the wires

Regarding the CFPB’s Inquiry into Big Tech Payment Platforms

“Congress has tasked the CFPB with ensuring that markets for consumer financial products and services are fair, transparent, and competitive. To that end, it has authorized the CFPB to require participants in the marketplace to provide information that help the Bureau monitor risks to consumers and to publish aggregated findings that are in the public interest. Little is known publicly about how Big Tech companies will exploit their payments platforms. For example, will the operators engage in invasive financial surveillance and combine the data they collect on consumers with their geolocation and browsing data? Will they in turn use this data to deepen behavioral advertising, engage in price discrimination, or sell to third parties?”

October 1, 2021

On the web

Card Issuers Resisted Slashing Credit Limits During Pandemic: CFPB

American Banker

“In a shift from the previous U.S. economic crisis, credit card issuers last year mostly avoided clamping down on their existing customers’ borrowing limits, according to a new report from the Consumer Financial Protection Bureau. The report, one of the most extensive analyses of credit card trends during the pandemic, found a significant tightening of credit availability as lenders lessened their appetite for new business. But the stricter credit criteria mostly appeared to affect potential new customers rather than existing ones, the CFPB’s biennial report to Congress on credit cards indicated.”

September 2, 2021

On the wires

CFPB Proposes Rule to Shine New Light on Small Businesses’ Access to Credit | Consumer Financial Protection Bureau

“The Consumer Financial Protection Bureau (CFPB) today proposed a new rule designed to help small businesses gain access to the credit they need and deserve by increasing transparency in the lending marketplace. This rule, mandated by Congress in the Dodd-Frank Act, would, if finalized, require lenders to disclose information about their lending to small businesses, allowing community organizations, researchers, lenders, and others to better support small business and community development needs.”

July 13, 2021

On the web

What Biden’s Data Portability Push Means for Banks

American Banker

“How much of an effort this will require banks to make from a technology and business point of view will depend on the rules the CFPB writes. The agency could validate the current state of consumer data sharing in the U.S., in which aggregators pull data out of banks and give it to fintechs on behalf of consumers. Or it could require something new — actually letting consumers download their own data in a usable format onto a device or into an online storage account, or allowing customers to have their data sent from one bank to another.”

July 9, 2021

On the web

Recent Analysis of Consumer Financial Protection Bureau Data Shows Exponential Increase in Fintech and Crypto Complaints to CFPB

Lexology

“Data intelligence company Morning Consult recently analyzed consumer complaints made to the Consumer Financial Protection Bureau (CFPB). The analysis showed that fintech and crypto-related complaints made by consumers to the CFPB “exploded” in early 2021 compared to the same period in 2020. Our clients should be aware that the sharp increase in fintech and crypto consumer complaints is well known within the CFPB and that fintech enforcement is key priority for the CFPB Office of Enforcement. The Office of Enforcement is already active in the fintech space and seeking new matters for investigation.”

June 29, 2021

On the wires

CFPB Provides Guidance on Unauthorized Transfers | Davis Wright Tremaine

“Recent technological developments in banking and other financial services, combined with the effects of the pandemic, have led consumers to increasingly adopt digital payment solutions. At the same time, reports of digital fraud 1 and disputed electronic funds transfers (EFTs) are on the rise. In response to these trends, the Consumer Financial Protection Bureau (CFPB) recently provided guidance in updated FAQs 2 on unauthorized EFTs, consumer liability for unauthorized EFTs, and the related obligations of financial institutions.”

May 7, 2021

On the web

CFPB Investigating U.S. Bancorp Over Consumer Sales Practices

American Banker

“U.S. Bancorp is facing regulatory scrutiny over how it sells products to consumers. The $553.8 billion-asset company is under investigation by the Consumer Financial Protection Bureau regarding “certain of the company’s consumer sales practices,” according to a securities filing this week. The CFPB has been scrutinizing banks’ sales practices in the wake of Wells Fargo’s fake-accounts scandal. In 2019 the agency opened a civil investigation into Bank of America to determine whether the Charlotte, North Carolina-based company violated federal law by opening credit card accounts without customers’ knowledge. Last year, the consumer bureau sued Cincinnati-based Fifth Third Bancorp for allegedly opening customer accounts without their authorization between 2010 through 2016. That case is expected to go to trial in 2022 or later, unless a settlement is reached.”

March 30, 2021

On the web

CFPB Poised to Reinstate Tough Stance on Payday Lenders

American Banker

“The Consumer Financial Protection Bureau is giving its clearest signal yet that a 2020 regulation easing standards for payday lenders is in jeopardy, despite efforts already in motion by the industry to implement the Trump administration rule. Acting CFPB Director Dave Uejio — appointed by the Biden administration to lead the agency following Kathy Kraninger’s resignation — offered his most forceful comments to date on the 2020 rule, which eliminated underwriting requirements for small-dollar lenders.”

March 25, 2021

On the wires

CFPB Annual Complaint Report Highlights More Than a Half-Million Complaints Received in 2020 | Consumer Financial Protection Bureau

“Today, the Consumer Financial Protection Bureau (CFPB) provided to Congress the Consumer Response Annual Report for 2020. The impact of the COVID-19 pandemic on the consumer financial marketplace is reflected in the increase of complaints submitted to the CFPB. The CFPB handled approximately 542,300 complaints last year—a nearly 54% increase over the approximately 352,400 complaints handled in 2019.”

March 5, 2021

On the wires

Consumer Financial Protection Bureau Takes Action Against Payment Processor and Its Former CEO for Supporting Internet-Based Technical-Support Scams | Consumer Financial Protection Bureau

“The Consumer Financial Protection Bureau (CFPB) filed a lawsuit in federal court against BrightSpeed Solutions Inc. (BrightSpeed) and its founder and former chief executive officer, Kevin Howard, for knowingly processing payments for companies engaged in internet-based technical-support fraud. Chicago-based BrightSpeed was a privately owned, third-party payment processor founded and operated by Howard in 2015. It wound down business operations in March 2019.”

February 5, 2021

On the web

PayPal Says U.S. Consumer Watchdog Investigating Payment App Venmo

Reuters

“PayPal Holdings Inc said on Friday it was cooperating with the U.S. consumer watchdog regarding a civil investigation demand relating to its app Venmo’s alleged unauthorized fund transfers and collections processes. The demand from the U.S. Consumer Financial Protection Bureau was made last month, the digital payment processor said in a regulatory filing. ( bit.ly/3tsOHn1 )”