Debt collection is front and center as the Consumer Financial Protection Bureau (CFPB) holds a field hearing today in Seattle to gather information about the consumer debt collection market from the industry and the public. The CFPB also published a new rule that will allow the agency to federally supervise the larger consumer debt collectors for the first time.
And as part of the CFPB’s supervision authority, examiners will be assessing potential risks to consumers and whether debt collectors are complying with requirements of federal consumer financial law – which is precisely what CFSA’s Best Practice on Appropriate Collection Practices requires its members to do.
All CFSA members are asked to routinely evaluate and monitor the activities of all service provider relationships with debt collection companies to better assess risk and to ensure compliance with federal consumer law.
In fact, CFSA mandates that all our member companies collect past due accounts in a professional, fair and lawful manner. Under this Best Practice, CFSA members must also use the provisions of the Fair Debt Collections Practices Act (FDCPA) as a guide in their corporate practices, which would include:
Refraining from harassing, oppressing, or abusing any person in connection with collection of a debt;
Not using false, deceptive or misleading representations in collecting a debt; or
Not engaging in any unfair or unconscionable means to collect a debt.
The FDCPA would not generally apply to payday lending companies attempting to collect their own debt under their own names, however, CFSA members hold themselves to a higher standard and follow this guidance.
An informational video about CFSA’s Best Practice on Appropriate Collection Practices can be found here:
Public input is tremendously important to our work at the CFPB. At our January field hearing in Birmingham, we had the opportunity to gather information directly from Alabamans about their experiences with payday loans.
Your official comments will help inform how the CFPB works to protect consumers and create a fairer short-term credit marketplace. And to make it easier, you can do it online! Click here to tell the CFPB why a payday advance is an important financial option for you.
You can also watch CFPB Director Cordray’s opening remarks from Birmingham below, or read the transcript of the entire event, including what the Bureau heard from the public.
“So another key objective is making sure that both banks and their nonbank competitors receive the evenhanded oversight necessary to promote a fair and open marketplace. Our supervisors will be going on-site to examine their books, ask tough questions, and fix the problems we uncover. Under the laws enacted by Congress, and with a director now in place, we have the ability to make sure this is true across all financial products and services.”
In a blogpost dated last Friday, the Consumer Financial Protection Bureau put out an announcement asking any and all interested parties to “share your input on payday lending for the official record”.
“Public input is tremendously important to our work at the CFPB. At our January field hearing in Birmingham, we had the opportunity to gather information directly from Alabamans about their experiences with payday loans.
Payday loans are typically marketed as a way to get quick cash when you need it. They generally have three features: the loans are for small dollar amounts; borrowers must repay the loans quickly; and the loans require that a borrower give lenders access to repayment through a claim on the borrower’s deposit account.
We heard and learned a lot at the Birmingham forum, and we know that there are many others around the country who may wish to add to the dialogue. Please tell us your experiences!
This is an excerpt from an email that came out earlier from the CFPB’s Zixta Martinez, Assistant Director for Community Affairs, The Consumer Financial Protection Bureau:
Tonight, we’re hosting a town hall in New York to hear stories from community members about their experiences with checking accounts. You can watch it live on our website starting at 5:30p.m. Eastern / 2:30p.m. Pacific. We’re interested in stories from elsewhere, too. As you share your status, feel free to share additional thoughts about your checking account experiences. We’ll share what we hear with the CFPB’s Director, Richard Cordray.
Need not worry, you can watch the recap of CFPB Director Richard Cordray’s remarks by clicking here.
If you missed the first event, CFPB Director Rich Cordray talked about CFPB’s inquiry into overdraft practices. Here are some of the things the Bureau is working on when it comes to overdraft protection. EXCERPT BELOW IS TAKEN FROM THE CFPB’S WEBSITE:
We’re researching how overdrafts affect you. We launched an inquiry through a data request that is being sent to a number of banks and a Notice and Request for Information to gain insight into overdraft practices.
We want you to understand what actions you can take now to protect yourself from overdraft fees. Do you know your overdraft status? Read our Consumer Advisory that explains how you can learn whether or not you have opted in to debit overdraft fees on ATM and point-of-sale transactions. Go to our Twitter and Facebook accounts to tell us your debit overdraft status.
We’re working to make it easier for you to understand the costs and risks of overdraft programs. Our model overdraft “penalty fee box” is a thought-starter for a disclosure that would appear on your checking account statement and online banking landing page. It would highlight the amount overdrawn and total overdraft fees charged, so you so can clearly see how much overdrafts are costing you. Tell us what you think.
The CFPB is at the campus of Hunter College in New York City, where Richard Cordray, Raj Date, industry insiders, and consumer advocates are discussing customer experiences with checking accounts and overdraft protection.
You can either watch it by going to the CFPB’s website, by clicking here. Or watch it below:
Very great example of how innovation can happen in the short-term credit market, and a look at the many alternatives that are available to all consumers who seek payday-like loans. We applaud those in the space who disclose fees and APR upfront (a Best Practice of CFSA Members is “Full Disclosure,” click here to find out more). Only consumers win when this is done, allowing them to easily comparison shop.
In this New York Times article, Ann Carrns highlights the following about these two companies who are offering innovative products in this space:
“BillFloat, based in San Francisco, doesn’t pay any money directly to the customer. Rather, it pays its customers’ bills — say, a utility bill or cellphone bill — and then automatically deducts the amount of the bill, plus fees and interest, from the customer’s bank account within 30 days.”
…
“Customers apply by filling out an online questionnaire, and are then contacted by a ZestCash representative to complete the process. ZestCash, Mr. Merrill said, uses a proprietary underwriting process that looks at hundreds of variables to determine if the customer is likely to pay back the loan. If approved, the customer chooses an amount to borrow — up to $800 — and selects not only the length of the loan, but also the amount of the payments. The payments are automatically withdrawn from the customer’s account when a paycheck is deposited. The approach gives borrowers more flexibility…”
This is one of our critics’ main arguments against our industry, and last week, research was released that shows evidence that payday lenders do not target minorities. Donald P. Morgan and Kevin J. Pan with the Federal Reserve Bank of New York says that when it comes to research showing that payday lenders target minorities:
“Several studies have found that payday lenders are indeed more likely to locate in neighborhoods with disproportionately large Hispanic and/or black populations. Importantly, however, this literature uses data at the county or Zip code tabulation area, so the authors can’t really say which households are actually using payday credit. Nor can they control for household level income and other variables that might influence payday credit usage. The household-level data we study allows us to do both.”
Another important piece to NY Fed’s research: Unconditional Comparisons
“…Unconditionally, payday credit users and nonusers differed in a number of ways. The average payday credit user was younger for one, by about 11 years. Users were disproportionately female: 41 percent of users were female, while just 27 percent of nonusers were female. Single households, particularly single households headed by women, were disproportionate users of payday credit.
“There are obvious racial differences between users and nonusers as well, at least unconditionally. Consistent with the targeting critique, blacks and Hispanics were disproportionately represented among payday credit users. Blacks represented 22 percent of users, but only 12 percent of nonusers. Hispanics accounted for 15 percent of users, but just 9 percent of nonusers. By contrast, whites represented a larger share of the nonusers.
“There are some educational differences as well. Perhaps surprisingly, payday credit users are not the least educated members in society; users were actually more likely to have a high school degree or to have a GED than were nonusers. However, they were less likely than nonusers to have completed college.”
