CFPB

Podcast: On-Site at NIADA National Policy Conference

CARY, N.C. - 

Nick made the trip to Washington, D.C., this week for NIADA’s National Policy Conference and connected with NIADA president David Andrews and Kathy Collins, who is the industry relations manager at CARFAX.

We discussed how independent dealers are faring this year and how the industry is handling thousands of vehicles damaged by Hurricanes Harvey and Irma.

Check out the conversations below.

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Nearly 200 dealers gathering for NIADA’s Capitol Hill event

WASHINGTON, D.C. - 

One of the most important events hosted by the National Independent Automobile Dealers Association starts today with a new name and the organization’s most ambitious goals ever.

A record number of independent dealers from across the nation are converging on the nation’s capital for the National Policy Conference and Day on Capitol Hill — formerly known as the National Leadership Conference — NIADA’s annual opportunity to meet face-to-face with legislators and regulators.

The event, which runs through Wednesday, was renamed this year to reflect its overriding mission — making the voice of the independent dealer and small business heard and represented in shaping the policies of the federal government.

As in the past, the highlight is Wednesday's Day on Capitol Hill, when more than 180 dealers and industry partners representing the national association and its various state affiliates will participate in more than 100 meetings with members of Congress or their staff, advocating for the industry in support of tax reform, reforming the Consumer Financial Protection Bureau and repealing the CFPB’s arbitration rule, and against a blanket ban on sales of recalled vehicles by independent dealers.

Both of those numbers will be the most ever for NIADA's Washington conference.

In addition, NIADA will present its inaugural Legislator of the Year award at a reception Tuesday night at the Dupont Circle Hotel in Washington D.C. Legislators expected to attend include Rep. Jodey Arrington (R-Texas), Rep. Robert Pittenger (R-N.C.), Rep. Scott Tipton (R-Colo.) and Rep. Roger Williams (R-Texas). Afterward, the PAC Cup will be awarded to the NIADA region that contributed the most to the NIADA Political Action Committee over the past year.

Sen. Richard Shelby (R-Ala.) will be the featured speaker for Wednesday’s Power Lunch during the Day on the Hill.

The conference also includes a series of regulatory briefings Tuesday, including updates from the CFPB, the Federal Trade Commission, the Small Business Administration and, for the first time, the White House.

D.J. Gribbin of the National Economic Council and deputy chief of staff Rick Dearborn are the scheduled speakers from the White House.

“NIADA is engaged in the legislative and regulatory process at the federal level year round,” NIADA chief executive officer Steve Jordan said. “That’s one of the association’s highest priorities. The National Policy Conference is the centerpiece of our efforts to serve as advocates for our members and the used vehicle industry.

“Four years ago, we felt it was important to come back to Washington D.C. and let independent dealers talk to legislators firsthand about who we are, what we do and what we represent. It’s very exciting to see this event grow, but we've only scratched the surface of its potential,” Jordan went on to say.


EFG commentary: Another turn of the screw by the CFPB

DALLAS - 

On July 10, the Consumer Financial Protection Bureau (CFPB) issued a rule banning companies from denying arbitration to groups of people. And, if everything passes, the law should go into effect in September. For auto retail dealers and lenders, this change is just one more turn of the screw clamping down on the ability to do business.

The new ruling stipulates that auto dealers and their lending partners will still be able to include arbitration clauses in their contracts. But those clauses may not be used to prevent consumers from joining a class action lawsuit. The rule specifies the language that must be used in the contract. Companies are also required to submit detailed information to the CFPB about claims and awards made in arbitration. That data eventually will be made public, with consumer names and identifying data removed. It’s no wonder dealers and lenders are feeling like Big Brother is looking over their shoulders.

Shaun Petersen, vice president of legal and government affairs with the National Independent Auto Dealers Association (NIADA) recently joined the EFG Companies Common Sense Compliance podcast and shared some thoughts on how this ruling might impact dealers in the future.

“While the original purpose of the CFPB was to ‘root out’ unfair, deceptive or abusive acts or practices, supervise companies, and enforce laws,” Petersen said, “the bureau has certainly had its eye on the automotive market. While there are certainly some bad actors, the majority of auto dealers and lenders are trying to help the consumer. This additional ruling complicates these efforts.”

“This rule will force small businesses to bear additional costs in defending class-action litigation, particularly meritless suits,” Petersen continued. “Those costs will ultimately be borne by consumers, and in the case of those who are credit-challenged, it could prove to be too much.”

Petersen outlined some of the steps the NIADA is taking to work with key members of Congress to oppose the ruling. “From the outset of this rulemaking process, NIADA has voiced concern about the poor policy reflected in this proposal to both the CFPB and to members of Congress,” Petersen said. “As Congress considers CFPB reform, we will be urging lawmakers to overturn this anti-consumer rule.”

In the meantime, Petersen encouraged dealers and lenders alike to review their contract language, as well as any other materials which discuss the consumer’s rights to contract arbitration.  “The ruling is scheduled to take effect Sept. 18,” Petersen elaborated. “While we continue to work with members of the House and Senate to oppose this ruling, we also don’t want dealers and lenders to be caught flat footed.”

Compliance is certainly a growing challenge for auto dealers and their lending partners. When entities such as the CFPB issue wide-ranging rulings, it’s no wonder that dealer principles, F&I teams and lenders throw up their hands in frustration. How can you manage the pressure from this latest turn of the compliance screw? Stick to your compliance checklist and leverage available resources from industry associations and providers. And turn the screw back toward your favor.

As vice president of compliance at EFG Companies, Steve Roennau utilizes his extensive industry experience to provide EFG clients a sophisticated analysis of their current compliance procedures and proactively prepare them for upcoming changes in federal and state regulations. Steve is an AFIP Senior Certified Professional in Financial Services, and has developed compliance training modules in the areas of adverse action, privacy rule, risk-based pricing/exception notice, red flag rule, safeguards rule, deceptive practices, and federal and state regulations. In addition, he has conducted several compliance courses, including compliance workshop for dealership managers; AFIP prep course for F&I producers; and, F&I compliance training for F&I producers. He can reached at [email protected]


Latest CFPB complaint update looks at older consumers

WASHINGTON, D.C. - 

The latest monthly complaint report shared by the Consumer Financial Protection Bureau highlighted complaints submitted by older consumers, but problems with auto financing and related products weren’t specifically mentioned.

Of the 1,163,200 complaints the bureau has handled since it began accepting complaints in July 2011, officials indicated 54 percent of consumers have voluntarily reported their age. Of those, more than 103,000 complaints have come from consumers who report that they are 62 years old or older.

The following is a breakdown of those complaints along category and state lines:

—Complaint volume: For March 2017, debt collection was the most-complained-about financial product or service by consumers identifying as over the age of 62. Of the 2,169 older consumer complaints handled in March, there were 496 complaints about debt collection. The second most-complained-about consumer product was mortgages, which accounted for 486 complaints. Credit reporting was the third most-complained-about financial product or service, accounting for 326 complaints.

—Product trends: Complaints related to mortgages have accounted for 26 percent of all older consumer complaints submitted to the bureau since 2011. This is 10 percentage points higher than the proportion of mortgage complaints from consumers under 62.

—State information: California, Florida and Texas are the three states with the most complaints from older consumers, accounting for nearly one fourth of all complaints from older consumers since the bureau began accepting complaints in July 2011.

“Older consumers who may be on a fixed income are at a greater risk for financial trouble if they encounter problems with financial products or services,” CFPB director Richard Cordray said. “The complaints submitted by older consumers are important for the bureau to ensure we are properly looking out for this segment of the population.”


CFPB files suit against Weltman, Weinberg & Reis for collection violations

WASHINGTON, D.C. - 

As the volume of complaints the agency has handled swelled above 1.1 million, the Consumer Financial Protection Bureau filed a lawsuit in a federal district court this week against the debt collection law firm Weltman, Weinberg & Reis. The CFPB contends the firm has been falsely representing in millions of collection letters sent to consumers that attorneys were involved in collecting the debt.

The bureau also believes the law firm made statements on collection calls and sent collection letters creating the false impression that attorneys had meaningfully reviewed the consumer’s file, when no such review has occurred.

The CFPB is seeking to stop the unlawful practices and recoup compensation for consumers who have been harmed.

“Debt collectors who misrepresent that a lawyer was involved in reviewing a consumer’s account are implying a level of authority and professional judgement that is just not true,” said CFPB director Richard Cordray.

“Weltman, Weinberg & Reis masked millions of debt collection letters and phone calls with the professional standards associated with attorneys when attorneys were, in fact, not involved. Such illegal behavior will not be allowed in the debt collection market,” Cordray continued.

The suit arrives as debt collection continues to be the segment triggering the most complaints to the CFPB, which indicated it received more than 7,700 consumer issues stemming from these matters in February alone.

Cleveland-based Weltman, Weinberg & Reis regularly collects debt related to credit cards, installment loan contracts, mortgage loans and student loans, and has advised participants in the repossession space previously. The firm collects on debts nationwide but only files collection lawsuits in seven states: Illinois, Indiana, Kentucky, Michigan, New Jersey, Ohio and Pennsylvania.

Weltman, Weinberg & Reis issued what it called “a clear message” in response to the lawsuit filed against by the CFPB.

“We fundamentally disagree with the CFPB’s allegations and believe that this lawsuit is the result of our firm's refusal to be strong-armed into a consent order,” managing partner Scott Weltman said in a news release. “We are a law firm that is legally allowed, under federal and state law, to provide collection and legal services. We are being truthful with consumers and factually accurate when we use our name and our company's letterhead for proper debt collection activity.

“WWR has taken every reasonable step to ensure that it collects on consumer debts in compliance with those statutes and to ensure that every statement made to consumers is accurate and not misleading. I’d also like to emphasize that the CFPB’s two-and-a-half-year investigation into our firm did not uncover a single instance of consumer harm,” Weltman continued.

The firm said it cooperated fully with the CFPB since it initiated its civil investigative demand (CID) in September 2014, producing hundreds of thousands of pages of documents and more than 1 million collection phone call recordings, and submitting to two investigational hearings. Weltman, Weinberg & Reis insisted these actions were done at significant cost to the firm, but with the goal of proving to federal regulators that its attention to compliance and its by-the-book ethical practice of law is exemplary.

Weltman, Weinberg & Reis acknowledged that it is not unusual for any large entity in the financial services industry to receive a CID from the CFPB. The firm, which has 65 attorneys and more than 650 employees, represents many of the largest financial institutions in the U.S. in bankruptcy, consumer and commercial collections, litigation, and real estate default matters.

Weltman, Weinberg & Reis maintained that it has not been the subject of any other formal government actions or disciplinary reviews.

“The result of the CFPB’s investigation of our law firm is based on its interpretation of the law, and not on any actual violation of federal or state laws or regulations as they are written today,” Weltman said. “We will continue to vigorously defend WWR’s honest, ethical and compliant collection practices, and we look forward to our day in court.”

The CFPB alleged that the firm engaged in illegal debt collection practices. In form demand letters and during collection calls to consumers, bureau officials said the firm implied that lawyers had reviewed the veracity of a consumer’s debt. But typically, no attorney had reviewed any aspect of a consumer’s individual debt or accounts. No attorney had assessed any consumer-specific information. And no attorney had made any individual determination that the consumer owed the debt, that a specific letter should be sent to the consumer, that a consumer should receive a call, or that the account was a candidate for litigation.

The CFPB also alleged that the firm is violating the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Since at least July 21, 2011, the bureau said the law firm has sent millions of demand letters to consumers.

Specifically, the CFPB alleged that the law firm:

—Sent collection letters falsely implying they were from a lawyer: Weltman, Weinberg & Reis sent letters on formal law firm letterhead with the phrase “Attorneys at Law” at the top of the letter and stated the law firm’s name in the signature line. The letters also included a payment coupon indicating that payment should be sent to the firm. Some demand letters referred to possible “legal action” against consumers who did not make payments. Despite these representations, the vast majority of the time, no attorneys had reviewed consumer accounts or made any determination that the consumer owed the debt, that a specific letter should be sent to the consumer, or that the account was a candidate for litigation before these letters were sent.

—Called consumers and falsely implied a lawyer was involved: Weltman, Weinberg & Reis’s debt collectors told consumers during collection calls that they were calling from a law firm. Specifically, sometimes they told consumers that it was the “largest collection law firm in the United States,” or that the debt had been placed with “the collections branch of our law firm.” This implied that attorneys participated in the decision to make collection calls, but no attorney had reviewed consumer accounts before debt collectors called consumers.

The bureau is seeking to stop the alleged unlawful practices of Weltman, Weinberg & Reis. The bureau also requested that the court impose penalties on the company for its conduct and require that compensation be paid to consumers who have been harmed.

“The bureau’s complaint is not a finding or ruling that the defendant has actually violated the law,” officials said.

The full text of the complaint .

Complaint database update

As of March 1, the CFPB reported that it had handled approximately 1,136,000 complaints nationally. Some of the findings from the statistics from its latest snapshot report include:

—Complaint volume: For February, the CFPB found that debt collection was the most-complained-about financial product or service. Of the approximately 26,000 complaints handled in February, there were 7,755 complaints about debt collection.

The second most-complained-about consumer product was credit reporting, which accounted for 4,902 complaints. The third most-complained-about financial product or service was mortgages, accounting for 3,718 complaints.

—Product trends: In a year-to-year comparison examining the three-month time period of December to February, the bureau determined student loan complaints showed the greatest increase — 429 percent — of any product or service. The bureau received 551 student loan complaints between December 2015 and February 2016, while it received 2,913 complaints during the same time period a year later.

—State information: Montana, Georgia, and Missouri experienced the greatest year-to-year complaint volume increases from December 2016 to February 2017 versus the same time period 12 months before; with Montana up 53 percent, Georgia up 53 percent, and Missouri up 39 percent.

—Most-complained-about companies: The top three companies that received the most complaints from October through December 2016 were Equifax, TransUnion and Experian.  


ACA’s new white paper examines CFPB’s consumer complaints submitted in 2016

WASHINGTON, D.C. - 

ACA International, the association of credit and collection professionals, recently released an analysis of complaints submitted to the Consumer Financial Protection Bureau in a new white paper titled, “A Review of Debt Collection Complaints Submitted to the Consumer Financial Protection Bureau’s Complaint Database in 2016.”

In the white paper, ACA argues that although the overall raw number of complaint submissions to the CFPB database appears high for the debt collection industry, once the data has been properly contextualized, the number of consumer complaints is “remarkably” low.

Furthermore, while the complaints have limited utility as indicators of the compliance commitment of legitimate debt collectors, they can function as tools to spur continual improvement of existing debt collection practices, according to ACA International’s endeavor.

“As an industry that makes approximately 1 billion consumer s each year and actively encourages communication between consumers and legitimate third-party debt collectors, it’s imperative to understand that the CFPB’s debt collection complaint handling process relies on a flawed methodology and the resulting data lacks critical context, fundamental flaws that create an inaccurate perception of the debt collection industry,” ACA International chief executive officer Pat Morris said.

In the white paper, ACA asserts that the CFPB fails to contextualize the number of complaints lodged with the CFPB within the larger context of the debt collection industry.  For example, ACA’s analysis shows the total number of debt collection complaints received by the CFPB represents an incredibly small number of consumers (0.004 percent) who had with the debt collection industry during 2016.

Further, the complaints account for only .05 percent of all Americans estimated to have a debt in collection.

ACA’s analysis also demonstrates that the CFPB’s data suggests that many of the issues consumers complain about are associated with the technical aspects of credit, outstanding debt and the debt collection industry. In fact, based on the CFPB’s own data, an overwhelming majority of consumers are not lodging complaints about harassing or harsh debt collection practices, a finding that stands in contrast to the misleading narrative about the debt collection industry being fostered by the CFPB.

“Given that the CFPB has branded itself as a ‘data-driven’ agency that promotes transparency, this analysis underscores the critical need for the CFPB to do a significantly better job of making clear the limitations of the data it collects and reports,” ACA International director of research Josh Adams wrote in the paper .

ACA International’s research initiative aims to collect more original data about the credit and collection industry. The goal of this exclusive research and analysis is to quantify the ways that debt collectors help consumers and the overall economy.


New RISC course covers nonpublic personal information mandates

TAMPA, Fla. - 

The next online continuing education offering from risk management and training provider Recovery Industry Services Company (RISC) is geared to prepare recovery agency owners and agents to comply with federal regulations for protecting consumers’ nonpublic personal information (NPPI).

In addition to covering Gramm-Leach-Bliley Act requirements specific to third-party disclosure of NPPI, the new course also examines the growing role of social media in the repossession process.

RISC highlighted the course is priced at $49 through April 7, a discount of 50 percent off regular pricing.

 “Professionals in the collateral recovery industry face an array of complex and fast-changing challenges, from rising insurance rates to lender compliance mandates and federal consumer protection regulations,” said RISC president Stamatis Ferarolis, a licensed training instructor for collateral recovery specialists across the nation.

“In such an environment, it’s critical that recovery agents and agency owners continually advance their knowledge and understanding of the latest industry developments,” Ferarolis continued.

The CE 11 course provides recommended procedures for protecting NPPI from unauthorized third-party disclosure during the repossession process, specifically relating to address verification (residence and place of employment), procedure (other than debtor) and skip-tracing.

Additionally, the course outlines how social media can affect the repossession process, such as:

• Potentially violating an individual’s privacy rights through the disclosure and/or dissemination of personal and/or disparaging information online.

• Determining insurability, in part, through a review of an individual’s social media postings, including comments and photos.

Ferarolis pointed out RISC’s suite of continuing education courses has been developed to comply with Consumer Financial Protection Bureau and finance company mandates across a range of specialty areas, including field recovery procedures, data security and the Uniform Commercial Code.

All courses are offered 100% online, including final testing, and a certificate is issued upon successful completion of each of the 11 continuing education courses. The training provided is applicable in all 50 U.S. states and Puerto Rico.

“Our goal in developing certification and Continuing Education courses is to ensure collateral recovery professionals continue to serve their clients effectively, while complying with state and federal regulations that impact the repossession process,” said Ferarolis, co-author of the Field Recovery Specialist Operations Manual.

To learn more about RISC’s continuing education programs and other services, e-mail [email protected], call (866) 996-7472 or visit .


CFPB adds 23K complaints to database in December

WASHINGTON, D.C. - 

With debt collection continuing to be one of the primary triggers, the Consumer Financial Protection Bureau’s latest update about its complaint database indicated the bureau has handled approximately 1,080,700 consumer complaints across all products as of Jan. 1.

For December, the CFPB reported that debt collection again was the most-complained-about financial product or service. Of the approximately 23,000 complaints handled in December, there were 7,196 complaints about debt collection.

The second most-complained-about consumer product was credit reporting, which accounted for 3,837 complaints. The third most-complained-about financial product or service was mortgages, accounting for 3,762 complaints.

Agency officials noticed Alaska, Georgia, and Louisiana experienced the greatest year-to-year complaint volume increases from October to December versus the same time period 12 months earlier. The data showed Alaska was up 57 percent, Georgia climbed 46 percent and Louisiana rose 32 percent.

The CFPB added the top three companies that received the most complaints from August through October of last year were Equifax, Wells Fargo, and TransUnion.

The bureau’s latest update also highlighted complaints from Tennessee. As of Jan. 1, the CFPB tabulated that consumers in Tennessee submitted 17,800 of the 1,080,700 complaints the bureau has handled.

Of those complaints, 4,700 and 5,800 have come from consumers in the Memphis and Nashville metro areas respectively.

Consumers in Tennessee most often submitted complaints about debt collection. Officials found that debt collection complaints accounted for 34 percent of the complaints submitted to the bureau by consumers from Tennessee, while nationally debt collection complaints account for 27 percent of complaints.  

Equifax, Experian and TransUnion were the most-complained-about companies for consumers in Tennessee.


Cause of Action Institute sues CFPB over arbitration documents

WASHINGTON D.C. - 

This week, the Cause of Action Institute filed a lawsuit in the U.S. District Court for the District of Columbia to compel the Consumer Financial Protection Bureau to provide records the agency used in formulating its rule to prohibit the use of mandatory binding arbitration clauses in financial services contracts.

Cause of Action Institute claims to be a non-profit, nonpartisan government accountability organization that “fights to protect economic opportunity when federal regulations, spending and cronyism threaten it.”

The organization insisted that prohibiting the use of third-party arbitration in financial contracts would subject numerous financial institutions to a flood of class action lawsuits, further burdening the courts and ultimately injuring consumers by increasing the costs associated with bank loans and other financial services. Officials added the CFPB’s proposed rule was largely based on a study commissioned by the agency in 2015.

“To issue a regulation affecting such a vast swath of the economy, and then attempt to conceal the bulk of the documents reflecting how that decision was made from public view, violates the law and the American people’s right to know,” Cause of Action Institute vice president John Vecchione said.

In April, the Cause of Action Institute filed a Freedom of Information Act (FOIA) request for records that would show how the agency conducted its study. Although CFPB produced some documents, the institute said the agency withheld a large number of responsive records and information.

In September, officials recapped that the CFPB issued a final determination, indicating the agency would withhold 1,877 pages of responsive records. The Cause of Action Institute appealed the CFPB’s determination and challenged each FOIA exemption the agency applied to the production.

Last month, the CFPB denied the appeal.

In its lawsuit, the Cause of Action Institute argues that CFPB is required to produce all responsive records not covered by a valid exemption. 

“The burden is on the agency to justify the use of any exemption to withhold or redact information, which CFPB has failed to do,” the Cause of Action Institute said. “The lawsuit compels the agency to produce all records improperly withheld within 20 business days of the court’s order.

The full lawsuit .


ACA argues CFPB significantly undervalues financial impact of new collections rules

MINNEAPOLIS - 

ACA International, the association of credit and collection professionals, released a new white paper this week.

The paper titled, “Business Practices and Capabilities within the Debt Collection Industry,” examines the potential impact of additional Consumer Financial Protection Bureau regulatory measures on member organizations and the debt collection industry.

“The Small Business Administration Office of Advocacy defines a small business as either ‘an independent business having fewer than 500 employees,’ or one that generates annual receipts that do not exceed the SBA size standard; for debt collection companies, the size standard is $15 million in average annual receipts,” ACA International director of research Josh Adams wrote in the white paper.

 “Most debt collection companies (78 percent) qualify as small businesses based on both criteria,” Adams continued.

Adams mentioned that the CFPB reported that modifying data management systems would cost between $1,000 and $2,800 for small collection agencies. In the white paper, ACA International estimates the cost of upgrading the data management systems or modifying the software systems for additional functionality to be $73,339 for a small collection agency.

The estimated cost of including an additional page of disclosures in conjunction with a validation notice in mailed communications for a small collection agency would be an average annual increase of $95,405 in additional mailings.

“When compared to the findings of the CFPB report on the operations of third-party debt collection firms, this analysis suggests that the CFPB substantially underestimates the financial impact of new rules on these businesses,” Adams wrote.

ACA International’s latest white paper is part of an ongoing research initiative to collect more original data about the credit and collection industry, and quantify how debt collectors help consumers and the overall economy.

This white paper .


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