The CFPB Comes Out Swinging In 2017

The now-sitting Trump administration has made no secret that it is no fan of the Dodd-Frank legislation that enables the Consumer Finance Protection Bureau to exist, and the Bureau itself has drawn the critical ire of the new President. House Republicans are also staunchly opposed to most of what the Bureau does in the name of consumer protection — but in fairness, that is not exactly news. House Republicans have spent most of their waking hours not dedicated to hating the ACA on hating the CFPB for the last several years.

Regardless, if the first few weeks of the year are prologue for what’s to come, it seems pretty safe to say that the CFPB — for as long as it exists in its current configuration — seems to content to keep on keepin’ on right up until they can’t do it anymore.

Of course, depending on what happens with a new report put together by the Republican staffers of the House Financial Services Committee, that end date may be a bit sooner than the CFPB is currently thinking.

Citi’s Latest Fines

New year, new fines to hand out — and the early winner of the prize for 2017 is a few subsidiaries of Citigroup Inc who’ve been ordered to pay $28.8 million for giving “the runaround to borrowers” on mortgage servicing. The CFPB specifically alleged that CitiMortgage kept borrowers in dark about options to avoid foreclosure and attempted to make it harder for consumers to apply for relief.

Of that fine, CitiMortgage will pay out $17 million toward compensating consumers directly with $3 million serving as a civil penalty. CitiFinancial Services will refund approximately $4.4 million to consumers, and pay a civil penalty of $4.4 million.

The CFPB said the subsidiaries neither admitted nor denied the findings in the consent orders.

“We are pleased to resolve these matters,” said Mark Rodgers, director of Citi public affairs.

Citi stock price took a slight dip on the announcement of the fine — $55.52 from $55.77 — but had recovered by mid-day trading and was up .04 percent by the close of the market.

“Citi’s subsidiaries gave the runaround to borrowers who were already struggling with their mortgage payments and trying to save their homes,” CFPB Director Richard Cordray said in a statement. “Consumers were kept in the dark about their options or burdened with excessive paperwork.”

CitiMortgage must freeze all foreclosure-related activity as part of the settlement— CitiFinancial has been ordered to improve disclosure on deferments and stop sending credit raters “bad information” that settle accounts were “charged off.”

Citi was the first big bank to feel the sting of the CFPB finding pen in 2017 — but they weren’t the first big firm to find themselves in headline-making hot water with the consumer watchdog over confusing their customers. That honor went to student loan underwriter Navient.

Navient’s Multi-Phase Fail

Navient — the nation’s largest servicer of federal and private student loans — has also found itself on the business end of a CFPB filing — on the grounds that the former subunit of Sallie Mae has been in violation of Dodd-Frank, the Fair Credit Reporting Act and the Fair Debt Collections Practices Act. In specific, the bureau alleges that Navient and two subsidiaries intentionally provided bad information, processed payments incorrectly and failed to act when borrowers issued complaints. The bureau’s release accused Navient of “systematically and illegally failing borrowers” at every phase of the loan process.

The CFPB also alleges that Navient cheated borrowers out of options to lower repayments, which in turn forced borrowers to pay more than they had to for their loans. And not a small amount more — between January 2010 and March 2015, the CFPB accuses Navient of adding as much as $4 billion in extra interest charges to borrowers’ principal balances by enrolling them in multiple, consecutive forbearances, which had a nasty habit of racking up interest. Most of those consumers could have been better served by income-tethered loans instead.

The CFPB lawsuit seeks to recover relief for borrowers harmed by Navient’s alleged servicing failures.

“For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans. At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them, and today’s action seeks to hold them accountable,” noted CFPB director Richard Cordray.

Apart from Navient’s individual accusations, its subsidiary Pioneer is alleged to have misrepresented the federal loan rehabilitation program by implying that completing the program would erase all adverse information from the borrower’s credit report and that collection fees would be forgiven upon completion.

In an interview with the Washington Post, Navient’s CEO Jack Remondi accused the CFPB of being “more interested in filing lawsuits than fixing student loan services.”

He further noted that Navient has tried, and failed, to work with the CFPB for five years to mend problems in student loan underwriting — mostly to no avail.

“They make these accusations about our servicing performance hurting borrowers, but no one mentions the fact that who leads the industry in number and percentage of borrowers enrolled in income-driven repayment? We do. Who has the lowest levels of severe delinquency of federal student loan borrowers serviced? We do. Who has the lowest levels of defaults, 31 percent lower than everybody else? We do. Yet somehow, what we do is harmful to borrowers.”

Remondi also accuses the CFPB of simply not being aware enough of how student loan underwriting works — and they’d rather punish than work with those involved in actually doing it.

But, perhaps for not much longer, since House Republicans are getting really, really serious about building a case to get rid of Executive Director Richard Cordray.

The Case Against Cordray

While there had been some speculation as to whether or not there would be a move to remove Cordray — a legally challenging proposition since the CFPB director does not serve at the will of the president and can only be dismissed for cause — it seems that GOP staff on the House Financial Services Committee want to move ahead.

As of last week, they dropped a report that essentially accused the CFPB of violating the Administrative Procedure Act when handing down guidelines for the auto lending industry. According to the report, the agency did not follow advice from in-house counsel on how to comply with the APA when dealing with auto lenders. The staff report cites internal CFPB documents pertaining to the regulatory and enforcement processes and back channel communications between CFPB representatives and consumer activist groups.

The CFPB has confirmed the agency is reviewing the report.

“The bureau is committed to ensuring that consumers are treated fairly in the financial marketplace and makes a conscientious effort at all times to carry out its mission in compliance with all applicable laws,” Samuel Gilford said.

If Cordray is guilty of violating federal law, President Trump would be able to fire Cordray and replace him with a new director.

This, of course, could be made moot if the CFPB is ruled unconstitutional by a federal appeals court.

But, for the time being, Richard Cordray is still the executive director — and the CFPB is not backing down.

Should be an interesting year.