NEWS: CFPB makes it easier to sue financial companies

ALTERNATIVE FINANCIAL SERVICE PROVIDERS ASSOCIATION

NEWS: July 12

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CFPB ISSUES RULE TO BAN COMPANIES FROM USING ARBITRATION CLAUSES TO DENY GROUPS OF PEOPLE THEIR DAY IN COURT

Financial Companies Can No Longer Block Consumers From Joining Together to Sue Over Wrongdoing

WASHINGTON, D.C. - The Consumer Financial Protection Bureau (CFPB) today announced a new rule to ban companies from using mandatory arbitration clauses to deny groups of people their day in court. Many consumer financial products like credit cards and bank accounts have arbitration clauses in their contracts that prevent consumers from joining together to sue their bank or financial company for wrongdoing. By forcing consumers to give up or go it alone - usually over small amounts - companies can sidestep the court system, avoid big refunds, and continue harmful practices. The CFPB's new rule will deter wrongdoing by restoring consumers' right to join together to pursue justice and relief through group lawsuits.

"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. "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."

Hundreds of millions of contracts for consumer financial products and services have included mandatory arbitration clauses. These clauses typically state that either the company or the consumer can require that disputes between them be resolved by privately appointed individuals (arbitrators) except for individual cases brought in small claims court. While these clauses can block any lawsuit, companies almost exclusively use them to block group lawsuits, which are also known as "class action" lawsuits. With group lawsuits, a few consumers can pursue relief on behalf of everyone who has been harmed by a company's practices. Almost all mandatory arbitration clauses force each harmed consumer to pursue individual claims against the company, no matter how many consumers are injured by the same conduct. However, consumers almost never spend the time or money to pursue formal claims when the amounts at stake are small.

Read more at CFPB's ARBITRATION RULE

GOP senator targets CFPB's Arbitration Clause rule for repeal

Sen. Tom Cotton (R-Ark.) said Tuesday morning he would seek the repeal of a new Consumer Financial Protection Bureau (CFPB) rule cracking down on arbitration clauses in customer contracts with financial firms.

Cotton said in a statement that CFPB had "gone rogue again" with a rule released Monday meant to prevent credit card companies and banks from blocking class-action lawsuits with arbitration clauses.

The conservative senator and frequent CFPB critic said he had begun the process of repealing the rule through the Congressional Review Act. The law, which allows Congress to eliminate rules finalized within a certain timeframe, has been used frequently this year on regulations enacted late in President Obama's term.

"The Bureau's new rule on arbitration clauses ignores the consumer benefits of arbitration and treats Arkansans like helpless children, incapable of making business decisions in their own best interests," Cotton said. "The last thing Americans need is more anti-business regulation that will prompt frivolous lawsuits while hurting consumers."

Cotton's announcement is the first congressional action to rescind the rule. House Financial Services Committee Chairman Jeb Hensarling (R-Texas), senior U.S. Chamber of Commerce officials and major bank lobbying groups have already called for it to be repealed.

House Republicans are largely united in opposition to the arbitration rule and the CFPB, but repeal efforts could falter in the Senate, where there's a slimmer GOP majority. Only three Republican holdouts there could sink a congressional review repeal, and Democrats are unlikely to vote against the CFPB rule. Read more at THE HILL

Traditionally invisible or unscorable applicants are no more. by Adam DiVeroli

1 in 5 adults in the United States cannot obtain credit due to the fact that they are unscorable or invisible in the eyes of the credit bureaus. The terms "thin" or "no file", "credit invisible", and "credit unscorable" have been used for years when discussing consumers who simply do not have enough credit history, but really, how big is the problem? According to a study conducted by the Consumer Financial Protection Bureau (CFPB) in 2015, 1 in 10 adults in the United States, ~26 million people, are considered credit invisible.

Credit invisible and credit unscorable are sometimes used interchangeably, yet are actually quite different. A consumer is considered credit invisible when they have absolutely zero credit history with any of the credit bureaus (TransUnion, Equifax, and Experian). Whereas a consumer is considered unscorable, when there is either not enough or insufficient credit history, or the credit history is severely outdated. In the United States, 19 million adults are considered to be unscorable, which combined with consumers who are invisible, makes up 20% of the adult population. Reasons as to why consumers are invisible or unscorable to traditional bureaus include, but are not limited to, age (millennials), recent immigration, or simply being unbanked.

Contrary to popular belief, no consumer is actually invisible. By utilizing alternative data, such as Merchant Boost's Social Network Boost, companies are able to have insight into the identity of consumers who are traditionally considered invisible or unscorable. With just the click of a button, Social Network Boost provides insight into the consumer with many pieces of useful data. An example of the data provided includes: full name, email, reported location, date of birth, age of account, connection counts, reported employment history, reported education history, and much more including easy to interpret scores. Read more at MERCHANTBOOST

FTC announces $54M in payday loan settlements

The operators of a payday lending scheme that allegedly bilked millions of dollars from consumers nationwide have agreed to more than $54 million in tentative settlements with the Federal Trade Commission.

Announced Tuesday, the Federal Trade Commission settlements stem from allegations that Timothy Coppinger, Frampton Rowland III and their companies targeted online payday loan applicants - consumers seeking short-term loans to tide them over until they received their next paycheck.

Approximately 400,000 consumers were affected by the scheme, and the settlement funds will be used to reimburse them for losses, the FTC said.

Using information gathered from data brokers and lead generators, the companies allegedly deposited funds in the applicants' bank accounts without obtaining permission. The firms subsequently withdrew money to pay recurring "finance" charges without using any of the funds to pay the total allegedly owed, the FTC alleged.

The companies also allegedly misrepresented the loans' costs, finance charges, annual percentage rates payment schedule and other data.

Consumers who closed their bank accounts in a bid to halt the unauthorized debits subsequently discovered that the companies had sold the purported loans to debt-collection companies that harassed them for payment, the FTC alleged.

A federal court in Missouri halted the operation and froze the defendants' assets pending resolution of the FTC allegations.

The Coppinger and Frampton limited liability companies involved in the lawsuit include: CWB Services; Orion Services; Sandpoint Capital; Basseterre Capital; Namakan Capital; Anasazi Services; Anasazi Group; Vandelier Group; St. Armands Group; Longboat Group and Oread Group. Read more at USA TODAY

Special Interest Groups Urge CFPB to Pass Payday Loan Rule Before Congress Rolls Back Powers

As the controversial Consumer Finance Protection Bureau is set to have its powers cut by a GOP-backed law going through Congress, special interest groups are urging Director Richard Cordray to act on rules regarding so-called "payday loans" as soon as possible.

Republicans have accused Cordray of running a "rogue federal agency" and have long opposed the CFPB, which was created out of the 2010 Dodd-Frank financial reform bill. Some Republicans have called for the White House to fire Cordray.

"For conducting unlawful activities, abusing his authority and denying market participants due process, Richard Cordray should be dismissed by our President," said Rep. Jeb Hensarling (R-TX) in April. "Today, Mr. Cordray and his CFPB don't just act as a cop on the beat, they act as legislator, prosecutor, judge and jury all rolled into one."

Hensarling's Financial CHOICE Act, which passed the House last month, looks to blunt the powers of the bureau and roll back some of Dodd-Frank. The CFPB will be one of the agencies hit hardest by the law should it find its way to President Trump's desk

But as the axe sharpens against the bureau, left-wing and activist groups are keen to get a number of regulations enacted, specifically curbs on payday loans, which activists say are predatory and a debt trap. The CFPB has proposed a rule that would impose a number of restrictions, including a requirement that payday lenders determine whether borrowers can afford to pay back their loans. Opponents say this would wipe out the industry and leave many Americans without access to credit.

According to minutes of a meeting between Cordray and his staff and a number of special interest and left-wing groups on May 18., a number of groups urged action quickly on the rule. Mike Calhoun, at the Center for Responsible Lending (CRL), urged "quick action on finalizing the payday rule," according to the minutes. Calhoun recommended that if it is unable to issue a rule on both short and long-term rules soon, the Bureau should first focus on tackling the short-term loans.