In the last few weeks, the CFPB has announced a number of high-profile activities that indicate the Bureau is actively expanding its oversight while continuing to assess costly fines on financial institutions. The agency has been busy:
- It fined JPMorgan Chase $309 million dollars for illegal credit card practices
- It released a tool to help consumers visualize data collected under the Home Mortgage Disclosure Act (HMDA)
- It announced the investigation of 5 major auto manufactures about unfair lending practices, and published a bulletin warning food-service employers about paying employees through payroll cards
With the CFPB already monitoring companies across 7 different product categories, these announcements go to show that the CFPB is continuing to change the regulatory landscape for banks and credit unions, and is looking to extend its jurisdiction well beyond the traditional financial services sector.
JPMorgan Chase’s $309 million dollar penalty
In September 2013, the CFPB announced that JPMorgan Chase will have to pay a $309 million dollar fine for conducting “illegal credit card practices.” The CFPB concluded that Chase billed customers for credit monitoring services that customers either didn’t receive or didn’t authorize. As a result of these unwanted or undelivered services, many customers also incurred extra fees for exceeding their credit limits. Currently, JPMorgan Chase has the fourth most credit card complaints in the CFPB database behind Capital One, Citibank and Bank of America. The fine against JPMorgan Chase makes them the fourth credit card company fined by the CFPB, for a grand total of around $800 million dollars in the past 14 months.
Data from the Home Mortgage Disclosure Act (HMDA)
In July 2011, the Federal Reserve gave rulemaking authority of the HMDA to the CFPB. The HMDA is an act that “requires many financial institutions to maintain, report, and publicly disclose information about mortgages.” The CFPB has just announced a new visualization tool that allows the public to manipulate and view all of the data from the Home Mortgage Disclosure Act from 2010 to 2012. In 2012 alone there were nearly 18.7 million records, making this data set an invaluable look into current and past trends in the United States mortgage market. Some of the key highlights from the 2012 data include:
- Refinances drove up mortgage volume
- The FHA market share fell
- High-priced loans were uncommon
Non-financial institutions are on the radar
The CFPB also just announced that, along with the Department of Justice, it is now looking into the lending practices of 5 major auto manufacturing companies. The two agencies are specifically looking into a practice called “dealer markup,” in which auto lenders add onto the interest rate given by an outside lending company and keep the difference for services rendered. Various consumer groups say that this practice gives auto lenders an incentive to get customers to apply for higher priced loans that they may not be able to afford.
Along with this announcement, the CFPB released a bulletin warning companies, mainly food service providers, that they cannot require employees to receive their wages through an ATM or payroll card. The agency cites complaints submitted by employees who have encountered problems associated with this type of wage distribution. The CFPB reminds employees that ATM payroll cards do provide certain protections, such as disclosure of fees, access to account history, limited liability for unauthorized use and error resolution rights.
The CFPB has already established itself as an entity that is continuously monitoring financial institutions’ banking services. These companies should stay well-informed of current investigations to protect themselves against any perceived wrongdoing. Also, the fact that the CFPB is now investigating auto lenders and company payroll processes goes to show that the agency will continue to expand its monitoring reach. All companies offering financial products should be aware that they now fall under the agency’s purview. Careful examination of their customer experience practices is the only sure way to keep them from facing harsh penalties from the CFPB.