NAFCU Compliance Blog

Mortgage Servicing Gone Rogue

By Stephanie Lyon, Regulatory Compliance Counsel

As some of you may have heard, the CFPB recently sued one of the country's largest nonbank mortgage loan servicers—Ocwen Financial Corporation and its subsidiaries (Ocwen)—for numerous mortgage servicing violations. The 93 page complaint is very informative and provides insight into what practices make the CFPB tick. While Ocwen is not a financial institution, it does have to follow some of the same mortgage servicing rule as credit unions. So breaking down the alleged violations is helpful when reviewing your credit union's policies and procedures to make sure it is not engaging in the same practices that got Ocwen into hot waters with the bureau. The alleged deficiencies include the following:

1. Used incorrect information to service loans

Regulation X requires mortgage servicers to maintain policies and procedures to provide timely and accurate information. See, 12 C.F.R. § 1024.38. Allegedly, Ocwen loaded incorrect information into its loan servicing system and also managed to change correct information because of system errors and deficient programming. Ocwen's own Head of Servicing described Ocwen’s technology as "[a]n absolute train wreck." The CFPB claims that even though Ocwen was aware of these deficiencies, it used the faulty information to service borrowers’ loans. Some of the issues caused by using the erroneous information was failing to cancel borrowers’ private mortgage insurance (PMI) in a timely manner which caused borrowers to overpay about $1.2 million for PMI premiums. Ocwen did eventually refund this money, but only after the CFPB called it to its attention.

2. Illegally foreclosed on homeowners

Section 1024.41 of Regulation X has requirements for loss mitigation procedures. Under the rule, if a mortgage servicer offers loss mitigation options and receives a completed application more than 37 days before foreclosure, it must evaluate the borrower for all loss mitigation options and notify the borrower of its determination. See, 12 C.F.R. § 1024.41(c). Ocwen allegedly failed to provide required foreclosure protections and wrongfully initiated foreclosure proceedings and sales on at least 1,000 borrowers. More specifically, the bureau claims that Ocwen initiated the foreclosure process before completing a review of borrowers’ loss mitigation applications and foreclosed on those who were fulfilling their obligations under a loss mitigation agreement.

3. Failed to resolve errors

Regulation X has error resolution procedures that generally require the servicer to investigate and correct servicing errors within 7 days of receiving a notice of error. See, 12 C.F.R. § 1024.35(a)-(e). Ocwen received numerous error notices on inappropriately credited payments and allegedly failed to correct these billing and payment crediting errors. The CFPB claims that Ocwen's policies and procedures required that borrowers complained at least five times in nine days before Ocwen automatically escalates their complaint to be resolved.

4. Incorrectly managed escrow accounts

There are several requirements associated with escrow accounts, such as providing an annual escrow account statement; conducting an analysis to resolve escrow surpluses or shortages and notifying borrowers of shortage or deficiencies in the account. See, 12 C.F.R. § 1024.17(f)-(g). Even though Ocwen manages escrow accounts for the majority of the loans it services, the servicer allegedly failed to conduct escrow analyses and sent some borrowers’ escrow statements late or not at all. Ocwen also allegedly failed to resolve escrow shortages by misapplying borrowers' payments resulting in some borrowers paying inaccurate amounts towards their escrow accounts.

Servicers that administer escrow accounts must also make timely insurance and tax payments on behalf of the borrower. In addition to the other escrow managing deficiencies, Ocwen allegedly failed to make timely insurance payments to pay for borrowers’ home insurance premiums which led to the lapse of homeowners’ insurance coverage for more than 10,000 borrowers. Because of this error, some of these borrowers had to pay for force-placed insurance.

5. Failed to assist heirs seeking foreclosure alternatives

Current mortgage servicing rules require the servicer to "promptly identify and facilitate communication with the successor in interest of the deceased borrower with respect to the property secured by the deceased borrower's mortgage loan." 12 C.F.R. § 1024.38(b)(1)(vi). Once these successors in interest are identified, the servicer is supposed to evaluate loss mitigation options for those who may be eligible. Ocwen allegedly mishandled accounts for successors-in-interest by failing to properly recognize individuals as heirs, denying assistance to help avoid foreclosure and in some instances, foreclosing on individuals who may have been eligible to save these homes through a loan modification or other loss mitigation option.

6. Deceptively signed up and charged borrowers for add-on products

The CFPB also claims that Ocwen took some other lenders' playbook and enrolled some consumers in add-on products through deceptive solicitations or without the consumer's consent. Ocwen then billed and collected payments for these ad-on products that the borrowers had not requested.

CFPB's complaint against Ocwen is a great example of when a mortgage servicer does not have proper internal controls, policies and procedures or a culture of compliance.

We Listened So You Don’t Have To: Interagency Overdraft Services Webinar

Written by Stephanie Lyon, Regulatory Compliance Counsel

On Wednesday, November 10^th, the Consumer Financial Protection Bureau (CFPB), the National Credit Union Administration (NCUA) and other financial services regulators joined to present a webinar on overdraft practices and issues identified through consumer complaints, examinations, and enforcement actions. You can listen to the audio of the webinar here and download the presentation slides here.

Unfair, Deceptive or Abusive Acts and Practices (UDAAP)

The key issues identified by the regulators centered on unfair and deceptive practices such as failing to obtain proper opt-ins, having overdraft practices that differed to those disclosed on the opt-in forms, and misrepresentations from staff regarding the service. The NCUA representative did state that the Agency continues to be impressed with credit unions’ tendency to promote financial literacy such as educating members on the benefits and the fees associated with the use of overdraft services. However, there are a few examples of unfair and deceptive acts and practices that are worth reviewing.

Some of the practices regulators found problematic are:

• Promoting constant use of overdraft service
• Not explaining overdraft alternatives that may be cheaper
• Improperly trained staff that is unable to explain program and alternatives
• Suggesting the overdraft service is free when there is a fee associated with the use
• Transaction re-ordering to increase consumer costs

It is no secret that CFPB and other regulators have their eye set up overdraft services. Credit unions can review CFPB’s supervisory highlights to get an idea of the overdraft practices that are raising potential UDAAP concerns in the industry.

Risk Management

The regulators gave a few options for monitoring overdraft services to mitigate the risk of facing an enforcement action. Among these suggestions a couple can be beneficial for credit unions:

1. Comparing the credit union’s disclosures to its actual policy and procedures to ensure that they accurately describe the credit union’s practices.

For example, if the credit union uses the member’s available balance to decide if there is an overdraft, the disclosures should clearly and conspicuously explain the practice so members are not caught by surprise if they incur an overdraft when there would be no overdraft if the member’s ledger balance was taken into account. Another important instance is when a software change makes the system operate differently than the disclosures anticipate.

2. Monitoring member complaints to identity systemic failures that should be reported to senior management.

A credit union that actively monitors member complaints is better positioned to find trends of potential member confusion or staff misrepresentations regarding overdraft services. For instance, if one teller consistently tells members that the service is free to encourage them to opt-in and the credit union receives 3 complaints from members who were charged an overdraft fee, this can serve as an early warning signal.

3. Monitor and control risks presented by third party vendors.

This risk management strategy is best understood by reviewing a recent CFPB enforcement action against Santander’s Bank. The Bank’s third party service provider was enrolling customers without affirmative opt-in and providing deceptive information to get consumers to opt-in. According to the enforcement action, Santander did not exercise appropriate oversight of its third party overdraft service provider and was ordered to pay a whopping $10 million civil money penalty.  You can read more about this enforcement action here.

In light of the interest overdraft services are receiving from regulators and potential plaintiffs alike, credit unions may want to ensure their program follows Regulation E’s disclosure and opt-in/opt-out requirements as well as review consumer complaints to identify potential unfair, deceptive or abusive practices.

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Early Thanksgiving

This weekend, my family celebrated thanksgiving early because we will not be able to be together on the actual date. It is the third year I celebrate thanksgiving with my wonderful husband Devon, and as usual, we made enough food to feed a family of 12. I have to admit, I was thrilled to have an excuse to use the wedding china we received for our wedding.

Disclosure of Consumer Complaint Narratives; 2015 Regulatory Compliance School Group Photo

Written by JiJi Bahhur, Director of Regulatory Compliance

It has been a full week since the conclusion of NAFCU’s 2015 Regulatory Compliance School.  For those of you who were in attendance, I want to thank you and also commend you for the hard work and effort you put into this very long, but rewarding week.  I also want to congratulate the many of you who earned your NAFCU Certified Compliance Officer (NCCO) designation on site or who will do so in the near future. 

If you were in attendance at School, you may recall that during the Consumer Financial Protection Bureau (CFPB) Update session, I spoke briefly on the CFPB’s Final Policy Statement regarding disclosure of consumer complaint narrative data.  For those of you that did not attend, I’ll brief you now. 

Before I jump into the details of this final policy statement, I’d like to start by saying that regulators’ expectations for handling consumer complaints have been increasing, and that trend shows no sign of slowing down.  Even though the CFPB only has supervisory authority over credit unions with assets over $10 billion, and therefore the ability to make public only those complaints made on select credit unions, the NCUA could adopt a similar practice down the road. Also, many CFPB enforcement actions and potential rulemakings are generated from consumer complaints.

Under the current practice, when a consumer submits a complaint to the CFPB, neither the consumer’s nor the company’s complaint narrative are made public.  Under the final policy statement, disclosure of the consumer’s unstructured complaint narrative data is allowed if the consumer opts-in to having it disclosed publicly.  Prior to publishing the narrative, the CFPB will take reasonable steps, according to the final policy statement, to scrub the narrative of information that would make the consumer identifiable.   

While investigation and resolution of consumer complaints is ideal, it seems that potential effects from this final policy statement can cause more harm than good.  For instance, disclosing narrative data raises safety and soundness concerns and unduly places financial institutions’ reputation at risk.  Also, disclosing narrative fields increases the likelihood that personal information will be inadvertently released.  Even with the CFPB employing methods to scrub the fields of personally identifiable information, these processes can be imperfect. 

For more information on the final policy statement, see NAFCU’s final summary here (NAFCU log-in required).  The final rule is effective no earlier than June 24, 2015.  In other words, the CFPB will not make public any narratives on the Consumer Complaint Database until at least June 24, 2015.

2015 Regulatory Compliance School Group Photo

CFPB Proposes Allowing Public Complaints on Financial Products and Services; Free Kick

Written by Ricardo Piñeres, Regulatory Compliance Counsel

CFPB Proposes Allowing Public Complaints on Financial Products and Services.  On Wednesday, the CFPB issued a proposed policy statement that, if enacted, would bring substantive changes to the Bureau’s Consumer Complaint Database.  Currently, the Database has anonymous information about the complaint received, including the date of submission, the consumer’s zip code, the relevant company, the product type, the issue the consumer is complaining about, and the company’s response.  Wednesday’s proposal would allow the consumer’s narrative description of what happened to be included in the database, if the consumer chooses.

In a press release announcing the proposal, the CFPB states:

“In many ways, the narratives are the most insightful part of a complaint. They provide a first-hand account of the consumer’s experience and the problem they would like resolved. By giving consumers an option to publicly share their stories, the CFPB would greatly enhance the utility of the database, a platform designed to provide consumers with valuable information needed to make better financial choices for themselves and their families.”

According to the Bureau, adding the narratives to the Database will:

• Provide context to the complaint;
• Spotlight specific trends;
• Help consumers make informed decisions; and
• Spur competition amongst financial institutions based on consumer satisfaction.

The CFPB’s proposal will allow financial institutions to respond to the narrative and have the response published alongside the consumer’s narrative.  The narratives will follow the same publishing procedures that currently in place with the Bureau first confirming the commercial relationship between the consumer and company.  The narrative and the rest of the complaint information would be listed in the database only after the company responds to the complaint or after it has had the complaint for 15 days, whichever comes first.

According to CFPB Director Richard Cordray, “[t]he consumer experience shared in the narrative is the heart and soul of the complaint.  By publicly voicing their complaint, consumers can stand up for themselves and others who have experienced the same problem. There is power in their stories, and that power can be put in service to strengthen the foundation for consumers, responsible providers, and our economy as a whole.”

NAFCU has concerns with this proposal because it exposes financial institutions to undue reputational risks.  In a statement responding to the proposal, NAFCU Director of Regulatory Affairs Mike Coleman stated:

“Credit unions take great care to address their members’ complaints directly and foster ongoing relationships with their members.  NAFCU has serious concerns about the potential for undue reputation risks to financial institutions relative to unsubstantiated claims. NAFCU will closely examine the proposal and its impact on credit unions, however, at first blush the risks of unwarranted reputational harm to good actors far outweigh any benefits this proposal would create to assist the CFPB to resolve legitimate complaints.”

Credit unions interested in submitting comments regarding the proposal may submit their comments at http://www.regulations.gov.  The docket number is CFPB-2014-0016.

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Free Kick.  With an amazing World Cup behind us, it’s now time to turn our focus to the delightful world of club football.  Players are starting to rejoin their clubs after the World Cup and vacation, but as always, this time of the year is dominated by speculation regarding who is changing clubs.  It can be a bit overwhelming to keep track of the rumors that swirl around during the transfer window, so here is a recap of the big moves that have occurred thus far (through Friday night).

Player	New Club	Old Club
Mathieu Debuchy	Arsenal	Newcastle United
Alexis Sanchez	Arsenal	Barcelona
Ashley Cole	AS Roma	Chelsea
Mario Mandzukic	Atletico Madrid	Bayern Munich
Claudio Bravo	Barcelona	Real Sociedad
Ivan Rakitic	Barcelona	Sevilla FC
Luis Suarez	Barcelona	Liverpool
Robert Lewandowski	Bayern Munich	Borussia Dortmund
Demba Ba	Besiktas	Chelsea
Ciro Immobile	Borussia Dortmund	Torino
Diego Costa	Chelsea	Atletico Madrid
Cesc Fabregas	Chelsea	Barcelona
Yann M’Vila	Inter Milan	FK Rubin Kazan
Alvaro Morata	Juventus	Real Madrid
Adam Lallana	Liverpool	Southampton
Rickie Lambert	Liverpool	Southampton
Bacary Sagna	Manchester City	Arsenal
Luke Shaw	Manchester United	Southampton
Emmanuel Riviere	Newcastle United	AS Monaco
David Villa	New York City FC	Atletico Madrid
Kaka	Orlando City	AC Milan
David Luiz	Paris Sain-Germain	Chelsea
Toni Kroos	Real Madrid	Bayern Munich
Fabio Quagliarella	Torino	Juventus

CFPB's ANPR on Debt Collection Practices; NCUA Update: Looking Ahead to 2014 Webcast

Written by JiJi Bahhur, Director of Regulatory Compliance

Earlier this month, the Consumer Financial Protection Bureau (CFPB) issued an Advance Notice of Proposed Rulemaking (ANPR) seeking to gather information and data about debt collection practices.  The ANPR requests information on a wide range of debt collection issues and practices, including accuracy of information used by debt collectors, procedures for ensuring consumers know their rights, and avenues of communication used by collectors to recover debts.

The CFPB began accepting debt collection complaints back in July, 2013, and also announced that it will begin adding these consumer complaints to its public Consumer Complaint Database.   It is quite apparent that the CFPB has consumer protection laws regarding debt collection practices on its radar and will continue to explore these practices in order to determine whether rulemakings or other actions are appropriate. 

To view the ANPR, click here.  Also, for a quick look at what types of questions the CFPB is seeking comment and information gathering on, take a look at the press release here.

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NCUA Update: Looking Ahead to 2014.  On December 10, 2013, NAFCU’s Regulatory Affairs team will provide a look ahead into the affairs of NCUA, including updates on loan participations, capital reform, examinations, stress testing, securitization, corporate stabilization fund, the NCUSIF, derivatives, NCUA restructuring and more!  You won’t want to miss this one!  And, it’s open to all!  To register, click here. 

NCUA September Board Meeting; September/October TFCU – Compliance Central Article

Written by Bernadette Clair, Regulatory Compliance Counsel

NCUA September Board Meeting. NCUA’s September Board meeting includes the following agenda items:

1. Final Rule, Section 701.36 of NCUA’s Rules and Regulations, Federal Credit Union Ownership of Fixed Assets.
2. Request from Peoples Advantage Federal Credit Union to Expand its Community Charter.
3. Proposed Rule, Parts 703 and 721 of NCUA’s Rules and Regulations, Authorizing Charitable Donation Accounts.

The meeting takes place tomorrow, September 12th, at 10 a.m.

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The Federal Credit Union. For the September/October issue of The Federal Credit Union, I wrote the Compliance Central article on Managing Member Complaints: An Effective Tool for Managing Reputation Risk. Putting a process in place to manage member complaints can be an effective tool for establishing and maintaining your credit  union’s reputation as an institution that complies with consumer protection laws and is responsive to its members’ needs. Here’s a snippet from my article on how credit unions can use complaint management to their benefit:

 “Benefits of Comprehensive Complaint Management

Expanding complaint management beyond the bare minimum can be an effective risk management tool. Deter­mining the channels through which the credit union receives complaints, the types of complaints received, and the products or services involved can be invaluable in determining whether there are weaknesses in a credit union’s con­sumer compliance program and provides insight into how the membership may perceive certain products and services. Benefits of a comprehensive program include member service that is respon­sive to the membership’s concerns, and the  opportunity to fine-tune the credit union’s compliance program and correct potential issues before an examination.”

Establishing a comprehensive member complaint process sooner rather than later could also save your credit union some headaches down the road. Regulators’ expectations for handling consumer complaints have been steadily increasing, and that trend shows no signs of slowing down. For example, the CFPB noted in its Summer 2013 Supervisory Highlights Report that an effective compliance management system (CMS) includes a consumer complaint management response program.

The report describes key elements of a consumer complaint management program:

“CONSUMER COMPLAINT MANAGEMENT PROGRAM

Financial service providers should be responsive to complaints and inquiries received from consumers. In addition, entities should monitor and analyze complaints to understand and correct weaknesses in their programs that could lead to consumer risks and violations of law.

Key elements of a consumer complaint management program include:

• The establishment of channels through which the entity can receive consumer complaints and inquiries. Such channels may include telephone numbers or email addresses dedicated to receiving consumer complaints or  inquiries.

• The proper and timely resolution of all complaints;

• The recordation, categorization, and analysis of complaints and inquiries; and

• Reviews for possible violations of Federal consumer financial laws.

Entities should organize, retain, and analyze complaint data to identify trends, isolate areas of risk, and identify program weaknesses in their lines of business and overall CMS.”

Member complaint management is a topic we’ve blogged about many times, so be sure to check out some of our other blog posts on the topic.

Is Your Credit Union Tracking Member Complaints?

Written by Steve Van Beek

We've written tons about member complaints and the increased reputation risk for credit unions - especially in this viral media environment. The risk from member complaints was one of my messages to attendees at NAFCU's Annual Conference two weeks ago in Boston:

The CFPB's recent Dodd-Frank Mortgage Rules Readiness Guide also included some questions for financial institutions about how they track and analyze member complaints:

Regardless of whether the complaint was a formal complaint through NCUA or an angry tweet or Facebook message - tracking and analyzing that information can help manage the credit union's reputation and compliance risks.

Below is the closing paragraph from an article on Enhancing the Compliance Management Program with Complaint Data that highlights this point:

"CONCLUSION

Analyzing consumer complaint data and appropriately addressing issues noted in complaints will enhance and strengthen a financial institution's compliance management program. A wealth of information can be found in consumer complaint data, and one complaint could be the catalyst for an examination or further review. By analyzing complaint data, a financial institution can use the findings to regularly assess its compliance risk, validate its compliance controls, and provide a comprehensive compliance assessment to its board. A financial institution can also leverage its complaints to proactively prepare for regulatory examinations and to anticipate potential areas of congressional focus for future regulation."

I'd encourage you to review the full article. 

CFPB Releases Bulletins on Debt Collection Practices

Written by Michael Coleman, Regulatory Compliance Counsel

On Wednesday July 10^th, the Consumer Financial Protection Bureau (CFPB) conducted a field hearing in Portland, Maine, on debt collection. In conjunction with the field hearing the CFPB released two bulletins on debt collection practices. Here is an excerpt from the CFPB’s press release on the bulletin quoting Director Cordray:  

“These bulletins make clear that it doesn’t matter who is collecting the debt — unfair, deceptive, or abusive practices are illegal,” said CFPB Director Richard Cordray at a field hearing in Portland, Maine. “Consumers need options to help them secure fair and respectful treatment from those debt collectors that fail to abide by the law. They can protect themselves by using our action letters to communicate with debt collectors and by submitting a complaint to us if they believe they are harmed by illegal conduct.”

We will blog about the bulletins in more detail in upcoming posts, but in the meantime here are links to the bulletins and related notices:

• CFPB Bulletin 2013-07: Prohibition of Unfair, Deceptive, or Abusive Acts or Practices in the Collection of Consumer Debts
• CFPB Bulletin 2013-08: Representations Regarding Effect of Debt Payments on Credit Reports and Scores
• CFPB Press Release on debt collection bulletins
• CFPB Blog Post on debt collection practices
• CFPB Field Hearing Video (posted on the CFPB blog)

Both the press release and the blog post provide “Action Letters” for consumers, which are templates consumers can use when corresponding with debt collectors. And last but not least, the CFPB is now accepting complaints about debt collection. And the hits just keep on coming. 

Have a great weekend everyone!

What Does Your Board Need to Know About the CFPB?

Written by Steve Van Beek

The headline above was my goal when I created a presentation for NAFCU's Board of Directors & Supervisory Committee Conference next month in Asheville, North Carolina. The first point is that the CFPB's regulations apply to all credit unions.

After that, you can see my overview and key takeaway slides below.

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It's Not Too Late. Your Board can still sign up for the conference - May 15-17 in Asheville, NC - and we'll be having similar discussions at NAFCU's Annual Conference - July 9-13 in Boston, Massachusetts.  

Here is another question: How are you informing and updating your Board on the CFPB's actions (and potential actions)? 

2013 HMDA Getting it Right Guide; New NAFCU Calendar; Reg Alert on Escrow Proposal

Written by Steve Van Beek

2013 HMDA Guide. Yesterday, the Federal Financial Institution Examination Council (FFIEC) issued the 2013 HMDA Getting it Right! guide. According to the main page:

"The 2013 edition reflects the transfer of authority over Regulation C from the Federal Reserve Board to the Consumer Financial Protection Bureau. Appendix D, comment 1003.2 (Financial Institution)-2 is updated with the asset-size threshold exemption applicable to collection of 2013 data. There are also minor changes to the general text of the Guide, including updates to Sources of Geographic Information and Submitting the LAR."

You can find the full PDF of the 2013 Guide here.  

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Long Time Coming. Now, you may be wondering when the last version of the Guide was issued?  2010.  The 2011 version would have been the lame duck one when the Federal Reserve still had authority for Regulation C (HMDA). However, there was no guide issued. On July 21, 2011, the CFPB took over Regulation C and they failed to release a guide in 2012.  Fortunately, in year two, the CFPB found the time to update the Guide and provide guidance to HMDA-reporting institutions.

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Garbage In, Garbage Out? The CFPB is a self-described "data-driven" agency. If you doubt it, take a read through this Bloomberg.com story: U.S. Amasses Data on 10 Million Consumers as Banks Object. To me, if you want to be data-driven - the best first step is to make sure your regulatory requirements are clear and understandable so that the data you collect (whether it be consumer complaints, HMDA data, or anything else) is as reliable as possible. But, that's just me.  

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NAFCU Calendar.  NAFCU has a new calendar on our website that features:

• Compliance Deadlines;

• Important Regulatory Dates;

• Education & Conferences;

• CU Research Survey Deadlines; and

• Other Important Dates.

The calendar allows you to navigate month-by-month, click to find more information and add dates to your own calendar. For example, the "more information" link on the June 1st Escrow Changes Deadline includes this information:

CFPB Compliance Deadline: Escrow Requirement

Description:

Amended escrow requirements for higher-priced mortgage loans. Added a new small creditor exemption for credit unions that meet a four-part test.

Regulatory Text: 12 CFR 1026.35

NAFCU Compliance Blog: Mortgage Reform - Escrows

NAFCU Resources: www.nafcu.org/mortgagerules/#escrow

Download the latest full Compliance Calendar, including proposed regulations, past deadlines and more.

Date:Jun 01, 2013    

Add to Calendar                                             Back to Calendar

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NAFCU Members. The Mortgage Rules webpage includes NAFCU's Regulatory Alert on the CFPB's recent proposed rule. The proposal was published in the Federal Register yesterday and only provided 15-days for comments (comments to NAFCU on the Regulatory Alert are due on Wednesday, April 24).  

CFPB Expands Consumer Complaint Database Information; #Reputation Risk?

Written by Michael Coleman, Regulatory Compliance Counsel

We have blogged several times on the CFPB’s Consumer Complaint Database (and we even created a member complaints category for the blog) and its implications for credit unions, most recently, here. Initially, it is important to keep in mind that credit unions under $10 billion are not included in the Consumer Complaint Database.  The CFPB will forward any complaints from these credit unions to NCUA, and credit unions will need to follow NCUA's procedures for responding to member complaints, which we’ve outlined a couple of times on the blog.  Most recently here and here.

Well, the CFPB is at it again. On March 28^th, 2013 the CFPB announced in a press release and on its blog that they have expanded the consumer complaint database. The database now includes more than 90,000 complaints on mortgages, student loans, bank accounts and services, other consumer loans, and credit cards.

We have expressed our concern numerous times over the fact that the consumer complaint database contains unverified complaint information, and the danger that this poses to a credit union’s reputation risk in this age of viral media. Once that information is out there, you can’t un-ring that bell.

The CFPB acknowledges the fact that this data is unverified in a disclosure on the compliant database, but it doesn’t really jump off the page. Nor does their rationale for listing unverified data in their policy statement really resonate (see page 9), or the “significant controls” for verification in this policy statement on the release of credit card compliant data.  

Instead of beating that drum again, I’d like to focus on what I considered a particularly troubling excerpt from the CFPB announcement:

“A Call to Action

The CFPB is encouraging the public, including consumers, analysts, developers, data scientists, civic hackers, and companies that serve consumers, to analyze, augment, and build on the public database to develop ways for consumers to access the complaint data or mash it up with other public data sets.

The CFPB would like the public to highlight innovative uses of the data, from visualizations to new tools, by tweeting @CFPB using the hashtag #CFPBdata.”

Admittedly, I am what you might call technologically challenged (just ask any of my colleagues, if the printer is broken, its most likely my fault), and I have no idea how Twitter actually works. Still, I don’t know about you, but this makes my eyes start twitching and I want to employ Steve’s stress reduction kit. There is a great recap of “the new cycle” of regulation in this blog post, highlighting the fact that the solicitation of complaints can ultimately result in the passage of laws or the issuance of regulations that will apply to all credit unions, not just those over $10 billion in assets.

But the CFPB has taken it a step further. They are now asking the public, including “civic hackers,” to analyze and augment the data, or to “mash it up” with other public data sets. And then tweet it at “#CFPBdata.” To me, this just exacerbates the reputation risk issues associated with the consumer complaint database.

But wait, there’s more. On Thursday April 4^th, the CFPB announced in a blog post that they are now accepting complaints regarding remittance transfers:  

“Every complaint we receive helps us understand the challenges facing consumers, and they inform and shape our priorities.

Reading your complaints about money transfers will complement work we have already started in this area, including issuing a rule on international money transfers, which will include a new set of protections for consumers who send money internationally.”

As if the rulemaking process for the final rule on remittance transfers hasn’t been difficult enough already, the CFPB is now soliciting complaint data on remittances, and who knows where that will lead. To me, this feels like throwing gasoline on a wild fire. But I digress.

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Iceland Photos, Part 2. On a more cheerful (less rant-filled) note, I thought I’d share a couple more photos from my trip to Iceland. Have a great weekend!

My brother and I at Gullfoss.

 

Skógafoss!

CFPB Sharing Complaint Data; Unverified Complaints; Feedback on NCUA Process

Written by Steve Van Beek

Back in mid-December, the CFPB announced it would be sharing consumer complaint data with state regulatory agencies.  They also note that this is just the beginning:

"In the future, we’re planning on building ways to accept complaints and information from the agencies as well, and to make the data available to other federal agencies, state attorneys general, local agencies, congressional offices as appropriate, and other governmental organizations like the California Monitor (a program of the California Attorney General) and the Office of Mortgage Settlement Oversight."

The announcement then goes on to provide a summary of the CFPB's complaint process:

"What happens when I file a complaint?

When a consumer files a complaint, we screen it to make sure that it’s complete and not a duplicate of another complaint we’re already working on for that consumer. Next, we send it to the company in question and ask them to reply to the complaint within 15 days and expect them to close all but the most complicated complaints within 60 days. After the company responds, we publish a selection of the data (with information identifying the consumer removed) in our public Complaint Database."

You'll easily notice that there is no verification process.  And, the Complaint Database's disclaimer doesn't exactly jump off the page.  Of course, this is an issue we've discussed over and over on the blog - so much so that we have a Member Complaints category.  

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Initially, it is important to remember that credit unions under $10 billion are not included in the Consumer Complaint Database.  The CFPB will forward any complaints from these credit unions to NCUA and credit unions will need to follow NCUA's procedures for responding to member complaints (more on this at the end of the blog post).  

Unverified Complaints.  So, what is the big deal with unverified complaints?  The reputation risk issue is one that cannot be ignored.  In this age of viral media - where a simple complaint or issue can fly through blogs, Facebook, Twitter - it is much harder to correct inaccurate information.  Sometimes, once the story is out there, it is....well, out there.  

But, there is another angle that could be even more dangerous.  The CFPB's Annual Report on Student Loans and the companion report - The Next Front? Student Loan Servicing and the Cost to Our Men and Women in Uniform - both use consumer complaints as a focal point to help show the current regulations or enforcement is insufficient.  

The latter quotes directly from consumer complaints, for example:

        
That comes from page 5 of the Report.  An earlier quote includes this footnote:  "This report cites information from specific complaints submitted to the CFPB. In these cases, the consumers have provided consent to include the details of their complaints."

Again, there is no mention of verification of the complaints.  I'm interested, was the rate incorrect?  We don't know.  But, the CFPB is implying it was by including one side of the story.  Remember:  The institution - whichever institution this was from - is prohibited by privacy laws from providing any information about the member's account.  So, we have the one side of the story.

Of course, I'm not saying these complaints are not true.  I'm just saying they are unverified (if they were verified, the CFPB should include that information).  

And, I'm not saying that institutions always do everything correctly.  For example, if this complaint is accurate - the institution has a lot of work to do:

"According to a complaint received by the CFPB, one borrower had six loans with a servicer, two of which had interest rates above six percent and four of which had interest rates below six percent. Instead of reducing the interest rate on the two higher-rate loans to six percent and leaving the four lower-rate loans untouched, the servicer simultaneously increased the interest rate on the lower-rate loans up to six percent."

Or, it could have been a mistake that was quickly corrected by the institution.  We just don't know.

***

The New Cycle?  The reason I bring this up is that this seems to be the start of a new type of regulating that credit unions need to be aware of.  Or, at the least it is a new type of justifying the need for new regulation.  

Think about it.  The CFPB is soliciting consumer complaints (remember the flashing red "complaint button" on their first website?)  Then, they write a report (usually to Congress) using the complaints to argue there are issues that need to be corrected.  There might also be testimony to explain the report and what they've found.  After that?  Well, it might just be that the reports help build the case for a new regulation (or a new law from Congress).  All with unverified consumer complaints.  

At this point, we don't know.  But, the CFPB seems to be falling short of their data-driven analysis goal:

"The CFPB is a data-driven agency. We take in data, manage it, store it, share it appropriately, and protect it from unauthorized access. Our aim is to use data purposefully, to analyze and distill data to enable informed decision-making in all internal and external functions."

And, remember - the new requirements that come from these new regulations or laws will not be limited to credit unions with more than $10 billion in assets.  The new requirements will apply to everyone.  

***

NCUA Complaint Process.  Taking a little different angle here.  We've detailed the NCUA Complaint process a couple of times on the blog.  Most recently here and here.  What we are interested in from blog readers is if there are areas NCUA could improve?  If so, please let us know.  We'll be sure to raise the issues with NCUA and see if some of the issues can be smoothed out.  

More on the CFPB's Strategic Plan for 2013-2018

Written by Steve Van Beek

Last Friday, we blogged on the CFPB's Strategic Plan for 2013 through 2018.  Today I wanted to review a couple aspects of the plan.  Initially, it makes sense to take a step back and look at the structure of the Strategic Plan:

• 4 strategic goals that outline what we aim to achieve
• 11 desired outcomes in support of our goals
• 25 strategies that state the actions we will take to accomplish our outcomes
• 27 performance measures that we will track against specific targets in order to assess our progress toward achieving our outcomes
• 4 performance indicators that we will track and use to assess progress toward achieving our outcomes. Unlike performance measures, indicators do not reflect targets

***

Consumer Complaint Volume.  We blogged numerous times about the CFPB's Consumer Complaint Database and the lack of verification of complaints (as well as the CFPB's ineffective disclaimer).  

With this in mind, it was very disheartening to see this performance measure regarding consumer complaints:

"COMPLAINT VOLUME:  Number of consumer complaints handled"

Not to beat a dead horse, but why should the performance measure be quantitative rather than qualitative.  Shouldn't the measure relate to whether or not the submitted complaints were, in fact, valid?  Are consumers protected if the complaint volume increases?  Or are consumers protected if valid complaints are submitted and addressed?  

***

Regulation Reviews.  Another interesting performance measure is the CFPB's completion of their review of existing regulations:

"% OF ON-SCHEDULE REGULATION REVIEWS:  The percentage of five-year regulation reviews completed on schedule"

If the CFPB's current streamlining initiative is any indication, the CFPB has put reducing regulatory burden very low on their priority list.  Hopefully they will place a greater focus on this issue in the future.  After all, credit unions (and the super-majority of other entities offering financial products and services) want to comply.  However, they are often faced with extremely complex or severely outdated regulations which make the process much harder than it needs to be.  

***

Of course, there is much more information in the Strategic Plan and I encourage you to share this with your management teams and Boards.  

CFPB Report on Private Student Loans

Written by Michael Coleman, Regulatory Compliance Counsel

On Monday we blogged about a report on private student loans released by the CFPB's Student Loan Ombudsman. Today we would like to take a closer look at some of the details of the report. The report indicates that the current outstanding student loan debt is now over $1 trillion, with private student loans accounting for more than $150 billion (15% of the debt).  Furthermore, there are at least $8 billion of private student loans in default, representing more than 850,000 individual loans.  Student loans have now surpassed credit cards as the largest source of unsecured consumer debt. 

The report highlights and summarizes the information and complaints received by the CFPB concerning the student loan marketplace. The CFPB received approximately 2,900 complaints and other submissions from consumers concerning private student loans, the vast majority of which (95%) were about loan servicing. The report summarized some of the issues borrowers identified in their complaints:

"Inability to speak with personnel empowered to negotiate a repayment plan.  By far, the most common concern communicated by borrowers has been the difficulty negotiating a repayment plan with their servicer in periods of unemployment, underemployment, or financial hardship.  Many borrowers report frustration that they are unable to identify appropriate personnel that can make a determination about their repayment options.

Inability to refinance. Many student loan borrowers have a limited credit history when applying for a private student loan— and their interest rate reflects a high level of risk.  But as borrowers build a credit profile, graduate, and earn income, they are often unable to refinance existing student debt at a lower rate— in stark contrast to the market for mortgage refinance products. We have heard from borrowers who say they are looking for loans with more attractive terms, but many have been unable to take advantage of today’s historically low rates. 

[…]

Inability to access repayment plans previously advertised.  Many private student loan borrowers are able to enroll in alternative repayment arrangements included in the terms and conditions of their loans.  However, some borrowers note that enrolling in a new repayment arrangement is a difficult process.  Some servicing personnel may not be fully aware of all policies or incentive plans available to private student loan borrowers. "

The report also featured a discussion from the CFPB Student Loan Ombudsman on the issues identified in the complaints. One point raised was that the complaints received concerning student loan servicing bore a striking similarity to the complaints received concerning mortgage loan servicing. Another focused on the difficulty that borrowers face in modifying or refinancing student loans, and that the CFPB would welcome "creative efforts by lenders to help borrowers restructure their debt prior to or after default."

In the discussion the CFPB Student Loan Ombudsman had this to say about credit unions' participation in the private student loan market: 

"Community Banks and Credit Unions

A number of leaders from small financial institutions have expressed interest in developing longterm relationships with young customers but note that many of them are unable to enter the mortgage market due to their student loans.  One way that small financial institutions might assist younger customers to get closer to homeownership is to offer products that allow them to refinance any student loans they might have with rates in excess of their perceived repayment risk.  Small financial institutions might even be able to assist customers worried about falling behind on student loans by offering products that might allow them to be successful.  

The CFPB received very few complaints from borrowers with private student loans from small financial institutions.  Increased participation by small financial institutions might benefit the market." (emphasis added)

The report notes that 87% of the complaints were directed at just 7 companies (take a look at Table 2 on page 5 of the report), which is not surprising considering the concentration of the market. However, as the report indicates, the CFPB received very few complaints from borrowers with private student loans at credit unions, and that increased participation by credit unions in the private student loan market might be beneficial. 

The CFPB also released a fact sheet and press release regarding the report. 

CFPB Report on Private Student Loans; CFPB Remittances Webinar; NAFCU's Offices Closed

Written by Steve Van Beek

We'll keep this blog post brief as we’ll have additional information on the CFPB reports in future blog posts.

***

Private Student Loan Report.  On October 16th, the CFPB issued a report on private student loans.  Here is from the press release:

"Today’s report, which was mandated by Congress, analyzed approximately 2,900 private student loan complaints, comments, and other submissions and input from borrowers. The report found that roughly 95 percent of the complaints are about loan servicing – when borrowers try to pay back their debt or are unable to pay."

The report is available here.  A fact sheet is available here.   

***

Student Loans and Servicemembers.  On October 18th, the CFPB issued a report on student loans and servicemembers.  Prominent in the report were discusses of student loans and the SCRA:

"Many servicemembers navigate hurdles that may be unnecessary in order to receive the SCRA interest rate cap. Once a borrower has qualified for this interest-rate cap, the SCRA requires the servicer to continue to provide this benefit for the duration of the servicemember’s time on active duty, as reflected in the servicemember’s orders. We have received complaints from servicemembers, on active duty for multiple years, who reported that they were told that their interest-rate cap would expire annually, and were subsequently required to submit  additional orders in order to retain this benefit."

The report is available here.  The CFPB also released a Guide for Servicemembers with Student Loans.  

***

CFPB Remittances Webinar.  If you missed the CFPB's webinar on remittances, you can view the archive here (slides are here).  The Small Entity Compliance Guide is also available.

***

NAFCU Closed.  NAFCU follows the Federal Government Operating Status and our offices will be closed today due to Hurricane Sandy.  NAFCU Members:  If you have compliance questions, please email us at [email protected].  If you call, please leave a voicemail and we'll get back to you as soon as we can.   

For those in and around the Hurricane area, be safe!

CFPB Consumer Complaint Database Updates

Written by Michael Coleman, Regulatory Compliance Counsel

We previously blogged about the CFPB’s Consumer Complaint Database on a couple of occasions, highlighting the (relatively ineffective) disclaimer at the top of the page among other things. In the wake of the release of the CFPB Consumer Complaint Database, we also discussed member complaints and the reputation risks associated with the nature of viral media, NCUA’s member complaint procedures, and supervisory committee complaint procedures.

On October 10^th, 2012, the CFPB announced that its Consumer Complaint Database left the beta stage. The CFPB blog had this to say about the move out of beta:

“While we will continue to expand functionality, data fields, and the “look and feel” of the database, after performing for three months as designed and without incident, the database is no longer a beta product.”

Another important update to the Consumer Complaint Database is the addition of consumer credit card complaint data going back to December 1, 2011. The Complaint Database previously contained only those credit card complaints received by the CFPB on or after June 1, 2012.

Also, the CFPB has reiterated its intention to include other financial products in the Consumer Complaint Database, from the blog post:

“One potential area for database expansion is the inclusion of additional products and services. Over the summer we asked for public comment on this idea and got a wide range of comments from a range of interested stakeholders. We are in the process of evaluating those comments and anticipate a final Bureau decision in early 2013.”

The CFPB’s notice for public comment (referenced in the quote above) outlines the CFPB’s rationale for expanding the database to include other financial products services in addition to credit cards. NAFCU submitted a comment letter to the CFPB expressing its continued concerns that the release of unverified complaints to the public poses serious reputation risk issues to credit unions given the nature of viral media and the speed at which information is disseminated, and that this expansion will only compound those concerns. This comment letter echoes NAFCU’s previous comment letter regarding the Consumer Complaint Database.

Note that the database will only contain information of credit unions directly supervised by the CFPB, those with over $10 billion in assets, and that NCUA has not expressed any intention to create a similar database. However, if a member of a credit union with less than $10 billion in assets submits a complaint to the CFPB, the CFPB will forward the complaint to NCUA's Office of Consumer Protection for resolution according to NCUA's procedures. 

Where is the Rest of the Story?

Written by Steve Van Beek

The CFPB has started to regularly provide snippets of consumers they've helped following a complaint.  The CFPB has been posting these on its blog using the tag - Consumer Stories.  

One of these stories features Greg from Michigan.  And here is the story posted on the website:

"Greg, a 39-year-old insurance adjuster from Michigan, whose credit rating was damaged after a bank failed to tell him that an account with which he was associated was in arrears.

Greg added his name to his 71-year-old mother’s checking account after he helped her move into an assisted living facility. Six months passed without Greg getting any statements or hearing from the bank. Little did he know, however, that his mother had written a check and the account was racking up big fees because its balance had fallen below zero. He found out about it when he checked his credit report and saw that he owed a collection agency $469.

Greg paid the bill but his credit was harmed and he says the bank wouldn’t help. After the CFPB got involved, the bank apologized for their error, called off the debt collector, and had Greg’s negative credit record removed."

Now, you may have the following questions (and I'm sure there are many more):

• Where were the periodic statements being sent?
• Did Greg change the mailing address when he helped move his mother into an assisted living facility?
• Did Greg change the mailing address for the account when he added himself to the account?
• Was the mother receiving any information or correspondence from the bank?
• If Greg wasn't receiving any information from the bank, did he try to contact the bank?
• Did Greg try to access the account online?
• Did his mother tell him about the check she wrote (remember they are both joint on the account)?
• How does removing the negative credit record from Greg's account (even though it was accurate) improve the reliability of the credit reporting system?  Aren't creditors required to report accurately?  

Unfortunately, the CFPB has provided only a portion of the story.  The part that makes Greg look innocent and the bank at fault.  Of course, this might actually be true but there is no way to know without additional information.  And, it is quite sad to see the CFPB pushing out these partial stories trying to paint financial institutions as cold-hearted when there is most likely plenty more to the story.  So, to the CFPB - where is the rest of the story?

***

I'm not the only one who noticed this one-sided story.  Kevin Funnell from the Bank Lawyer's Blog has a wonderful take on the CFPB's partial stories.  If you like Kevin's blog - and his snarkiness - you are in luck as he'll be our keynote at our 2012 Regulatory Compliance Seminar in Seattle.  The keynote presentation has a wonderful title - What Compliance Officers of "Good CUs" Can Learn from "Bad Banks".  

Supervisory Committee Complaint Procedures; On-Demand Webcasts

Written By Michael Coleman, Regulatory Compliance Counsel

Last month in the wake of the CFPB’s new Consumer Complaint Database, we blogged about member complaints and reputation risk, and NCUA’s member complaint process. Today’s post is the last in the series, and we want to talk about a credit union’s Supervisory Committee complaint procedures.

NCUA's Division of Consumer Compliance and Outreach (CCO) is responsible for the management of member complaints received by NCUA. NCUA Letter to Credit Unions 11-CU-17 details the responsibilities of CCO and also outlines NCUA's process for handling member complaints, which it states are in accordance with section 4.12 of the Supervisory Committee Guide. 

NCUA stresses that a member should try to resolve the issue directly with the credit union before submitting a complaint to NCUA. NCUA also directs members to submit complaints directly to a credit union's Supervisory Committee if the member feels the credit union is unresponsive to their complaint.

When NCUA does receive complaints, NCUA refers the matter to the credit union’s Supervisory Committee for investigation. The Supervisory Committee Guide outlines in detail the investigation procedures which the Supervisory Committee is expected to follow. These procedures start on page 4-10 and include numerous steps the Supervisory Committee should take in the investigation, including these highlights:

“(g) Interview appropriate credit union officials and/or employees.

[…]

 (i) Determine the validity of the complaint.

• Do not rely on the credit union’s manager or employees to do the investigation for the committee.  You should obtain all information firsthand, where possible.  Try to determine what actually happened, rather than obtaining various versions of what happened.

• You should not initiate a joint meeting between the complainant and the credit union officials as a means of resolving disputes or expediting the investigation.  This is often counter-productive and may intimidate the complainant.  You act as a liaison between members and management when disputes arise.

• Remember that no one likes to be investigated.  Credit union officials and employees will often be defensive and complainants may also be antagonistic.  You will need to be very skillful and tactful in obtaining the necessary information without alienating any of the parties involved.

j) Work with the officials to develop plans to correct any improper, unfair, or discriminatory practices, if applicable, or make appropriate recommendations.

k) Have corrective action implemented or obtain agreements from appropriate credit union officials and/or employees they will make corrections within a specified time.” (emphasis added)

From a review of the procedures, it is apparent that the Supervisory Committee is expected to complete a thorough, independent and impartial investigation into member complaints. As you can see from the highlighted sections above, while the credit union officials and employees are not expected to conduct the investigation, they are expected to facilitate the investigation. Working cooperatively with your credit union's Supervisory Committee when they are conducting an investigation into a member complaint provides another opportunity to help manage reputation risk. 

***

NAFCU's Interest Rate Rule Webcast. With the upcoming compliance deadline of September 30, 2012, for NCUA's final rule on the required  interest rate risk policy and program, now is the perfect time to order NAFCU's May 24th, 2012 webcast: A Detailed Look Inside NCUA's New Interest Rate Risk Rule, which is available on-demand here. All of NAFCU's prior webcasts are available for order on-demand, you can find the event list here.  

NCUA Member Complaint Process; Reports from NCUA's OCP

Written by Michael Coleman, Regulatory Compliance Counsel

Last week we blogged about the CFPB's new Consumer Complaint Database, and we also blogged about the reputation risk associated with member complaints. Given the nature of viral media, managing reputation risk is of primary concern to credit unions, and the proper management of member complaints is one way to reduce reputation risk.  

Today we want to talk about NCUA's procedures for handling member complaints. NCUA's Office of Consumer Protection (OCP) is NCUA's newest office, and OCP's Division of Consumer Compliance and Outreach (CCO) is responsible for the management of member complaints received by NCUA. NCUA Letter to Credit Unions 11-CU-17 details the responsibilities of OCP and CCO and also outlines NCUA's process for handling member complaints. NCUA stresses that a member should try to resolve the issue directly with the credit union before submitting a complaint to NCUA.

However, when a member is unsuccessful in resolving the issue with the credit union, Letter to Credit Unions 11-CU-17 provides the following procedures for how NCUA's CCO will handle the member complaint:  

• The member may submit a written complaint (on-line, by e-mail, by fax or by regular mail) along with any supporting documentation to CCO;

• CCO sends a letter to the chairman of the federal credit union’s supervisory committee, including the member’s original complaint, requesting a response usually within 21 days from the date of the letter;

• CCO sends an acknowledgement letter to the member including the date the supervisory committee is to respond to NCUA;

• Once the supervisory committee’s response is received, CCO reviews the response to ensure it adequately addresses the member’s complaint and that the action(s) taken, if any, are consistent with consumer protection laws and regulations;

• If the federal credit union did not address all of the member's concerns or there are remaining questions involving regulatory or consumer compliance issues, CCO will request additional information and/or clarification from the supervisory committee and notify the member that the complaint investigation is still ongoing;

• Once all issues associated with the complaint have been adequately addressed by the supervisory committee and analyzed by CCO, NCUA notifies the federal credit union and the member of one of the five following actions:
  • The federal credit union has resolved the issue to the member’s satisfaction and the case is being closed;
  • The federal credit union did not violate either a consumer protection law or consumer compliance regulation and the case is being closed;
  • One of the two parties initiated litigation; therefore, the courts will decide the outcome and the case is being closed;
  • Upon further investigation the issue does not involve either a consumer protection law or consumer compliance regulation; therefore, it does not fall under NCUA’s purview (Examples of this are complaints involving state contract law, state foreclosure procedures, etc.); or
  • A violation of either a consumer protection law or consumer compliance regulation has occurred. CCO cites the specific violation or the law or regulation and required corrective action(s) to be taken by the federal credit union.

Letter to Credit Unions 11-CU-17 also references in a footnote that the CCO handles member complaints in accordance with section 4.12 of the Supervisory Committee Guide. We will talk about these procedures in a future blog post. 

Reports from NCUA's OCP.  NCUA's Newsletter, the NCUA Report, sometimes features a section from the OCP. The March 2012 edition of the NCUA Report contained this report from the OCP, it is worth taking a look at. The good news from the report is that although NCUA is receiving and processing member complaints, federal credit unions are largely in compliance with federal regulations, and that where necessary federal credit unions have taken swift corrective action. The December 2011 report also contained a report from OCP, it is also worth a read.  

Member Complaints & Reputation Risk; CUSO Rule Delayed

Written by Michael Coleman, Regulatory Compliance Counsel

Yesterday we blogged about the CFPB's new Consumer Complaint Database. We mentioned that unfounded complaints can present a reputation risk to credit unions. Today we want to focus on NCUA's procedures and guidance for complaints made to NCUA, and some steps that credit unions can take to manage their reputation risk.

NCUA's Office of Consumer Protection (OCP) is NCUA's newest office and is responsible for member complaints. OCP maintains a Consumer Assistance Center which contains the page "Help With My Credit Union" designed to help members with the complaint process. NCUA states the following regarding when to file a complaint with NCUA:

"First, Attempt to Resolve the Complaint Directly with Your Credit Union 

Before you contact NCUA, please contact the credit union directly to attempt to correct the problem. You can do this over the phone, in person or in writing. If you believe the credit union's staff is unresponsive to your inquiry or complaint, address your concerns in writing to the president or chief executive officer of the credit union or the credit union’s supervisory committee."(emphasis added).

As you can see, NCUA stresses the importance of trying to resolve the complaint directly with the credit union before submitting a complaint to NCUA. This is a great opportunity for your credit union to manage your reputation risk. As we have talked about in the past, there are bound to be some complaints received at your credit union, but poor handling of member complaints can negatively affect your credit union's reputation. Here are some steps that your credit union can take to mitigate these reputation risks arising from complaints:  

• Establish a process for handling member complaints and train your staff to implement it. Prompt responses to member complaints will hopefully resolve the issue and prevent a complaint from being submitted to NCUA.
• Create written policies and procedures for member complaints.
• Monitor the complaints that you receive. This will help you identify patterns in complaints and help you take corrective action where necessary.

Even with effective reputation risk management and an effective complaint response program at your credit union, some complaints may still be submitted to NCUA.  We'll talk more about the actual complaint process in a future blog post.

***

CUSO Rule Pulled.  Yesterday, NCUA heeded NAFCU's advice and removed their CUSO rule from their June Board Meeting.  And, since the CUSO rule was the only agenda item - canceled the open meeting.  NAFCU Today has more information.

CFPB Consumer Complaint Database Continued; Hearing on SBA; BSA Webcast

Written by Michael Coleman, Regulatory Compliance Counsel

Yesterday, the Consumer Financial Protection Bureau (CFPB) launched its new Consumer Complaints Database for credit cards, you can read about the details of the Complaint Database in our blog post from yesterday. Note that the database will only contain information of credit unions directly supervised by the CFPB, those with over $10 billion in assets.

Regarding the purpose of the database, the CFPB stated that: "Our goal is to improve the transparency and efficiency of the credit card market to further empower American consumers." You can take a look at their policy statement for more details. The CFPB has proposed adding complaints to the database about other financial products and services in the near future. 

At the top of the Complaint Database site there is the following disclosure: 

"This contains data from the consumer credit card complaints received by the Consumer Financial Protection Bureau. We do not verify the accuracy of these complaints, but we do take steps to confirm a commercial relationship between the consumer and the identified company."

The purpose of the disclaimer is to let people know that what is listed in the database are complaints, but more importantly, that the CFPB is not asserting the validity of the complaint. You may be asking yourself "Well, isn't this like trying to unscramble an egg?" A good question. The disclosure of unfounded compliants could impact a financial institution's reputation - an issue that NAFCU strenuously raised in our comment letter to the CFPB. 

***

Testimony on the Hill. Thursday June 21, 2012, Robert Marquette, president and CEO of Members 1st FCU in Mechanicsburg, Pa., and a NAFCU Board Member, will testify before the House Subcommittee on Investigations, Oversight and Regulations concerning credit unions' work with the Small Business Administration (SBA). You can read more about the upcoming testimony in this NAFCU Today article.  

***

NAFCU's BSA Webcast.  Now is the perfect time to get your annual BSA training.  Check out NAFCU's June 27th webcast: BSA for Compliance Experts.  Sign up by TODAY, June 20, to Save $100!

CFPB Launches Consumer Complaint Database; Final Regulation; Comment Letters

Written By JiJi Bahhur, Regulatory Compliance Counsel

Consumer Complaint Database.  The Consumer Financial Protection Bureau (CFPB) has launched a Consumer Complaint Database on credit cards.  The database is available to the public and can be accessed here. 

The idea behind the Consumer Complaint Database is to allow the public access to information such as what is being complained about, when it was complained about, why it was complained about, and the company that the complaint concerns.  Also, if action has been taken on the complaint, the database will hold information as to whether the company’s response was timely, how the company responded, and whether the consumer disputed the company’s response.  The consumer’s identity will be withheld. 

The database will include only those credit card complaints received by the CFPB on or after June 1, 2012.  The complaints will be uploaded only after the company verifies that it has been correctly identified by the complainant, but the company will only have 15 days to make the verification. 

It should be noted that the database will only contain information of credit unions directly supervised by the CFPB - those with over $10 billion in assets. 

As of now, the database’s focus is on credit cards, but this will eventually be expanded to other consumer issues as well.  As a head start, the CFPB has also released a snapshot of the complaints it has received on credit cards, mortgages, private student loans, and bank products through June 1, including six stories of success. These can be located here. 

Final Regulation.  NAFCU’s Regulatory Affairs Team has issued its Final Regulation on Loan Workouts and TDR Reporting.  It can be located here (12-EF-05) and is available to NAFCU members only.

Comment Letters.  Yesterday, NAFCU submitted two comment letters, one on Overdraft Protection Programs and the other on Information Collections.  NAFCU’s Comment Letters are available to the public. 

Member Complaints; NAFCU's 2012 Regulatory Compliance Seminar

Written by Steve Van Beek

Consumer and member complaints are at the forefront of quite a few conversations right now (including quite a few news articles).  The CFPB's promotion of their complaint process is one reason for this uptick in discussion as is the centralized complaint process for financial products.  

The CFPB issued their 2011 Annual Report on Consumer Complaints and it is full of useful information to review.  Here is a snapshot of the results:

"Between July 21 and December 31, 2011 the CFPB received 13,210 consumer complaints, including 9,307 credit card complaints and 2,326 mortgage complaints.

Forty-four percent of all complaints were submitted through the CFPB's website and 14.7 percent via telephone calls.  Referrals from other regulators accounted for 34.9 percent of all complaints received.  The rest were submitted by mail, email, and fax."

Future reports will include even more details - including complaints in new areas such as private student loans, auto loans and checking accounts.  Be sure to review the full report or pass it along to the appropriate person at your credit union.   

NCUA.  The March 2012 edition of the NCUA Report also included an article on Trends in Member Complaints and Consumer Inquiries.  Of note, the article indicates that of the complaints received in 2011 less than 1 percent involved a consumer compliance violation.  Of that 1 percent, half of those were related to timing issues related to the error resolution process under Regulation E.  

***

NAFCU Regulatory Compliance Seminar.  October seems like a long way off but it will be here before you know it.  We are in the process of putting together the content and agenda - so please feel free to send in any comments, ideas or suggestions.  We love your input and this conference is really about you all so let us know what you need.

Here is what we are tentatively looking at so far (topics are subject to change, of course):

• TILA/RESPA Mortgage Disclosures
• Upcoming Mortgage Servicing Requirements
• The Latest on Overdraft Protection
• Remittance Transfers under Regulation E
• CUSOs
• Loan Participations
• Bank Secrecy Act Changes
• Social Media
• NCUA Update
• CFPB Update

I think that is a pretty good start - but let us know what you are looking for and how we can make NAFCU's 2012 Regulatory Compliance Seminar even better than the past.  

Recertification for NCCOs.  Remember, attending Regulatory Compliance Seminar is the best way to recertify your NAFCU Certified Compliance Officer (NCCO) designation.  Seminar offers 24 CEUs which is enough to fully recertify for two years.

Seattle, Washington.  Did I mention Seminar was in Seattle?  Right Downtown?  Well, now I have.  Hope to see you October 23-26, 2012!    

NAFCU Today: On the Hill; Derivatives; CFPB Expands Complaint Program

Written by Steve Van Beek

As we mentioned on Friday, the NAFCU Compliance Team will be in and out of the office this week as we'll have nearly 150 compliance officers in town for our Regulatory Compliance School.

***

NAFCU Today.  I wanted to pass along a couple of recent stories from the NAFCU Today which is written by NAFCU's Communications Team.  If you or someone at your organization wants to receive this daily news feature, you can subscribe to the NAFCU Today here.

As with the Compliance Blog, the NAFCU Today is open to everyone that is interested in learning more about issues impacting credit unions.

Member Business Lending.  Grassroots efforts initiated to urge support of S. 509 - the Small Business Lending Enhancement Act.  

Exam Bill.  Senate bill S. 2160 has been introduced.  This bill is a companion bill to H.R. 3461 and would bring additional transparency and consistency to bank and credit union examinations.    

CFPB Complaints.  The Consumer Financial Protection Bureau has recently expanded their complaint process and are now accepting complaints on consumer checking accounts and private student loans.  

Note:  All the links below will take you to recent NAFCU Today stories.  To see the March 12 edition of the NAFCU Today, you can go to the NAFCU homepage.  

Regulatory Compliance School; NCUA Board Meeting & NCUA Report; Division 3 Update

Written by Steve Van Beek

Just wanted to provide a short note regarding next week.  

Reg School.  NAFCU's Regulatory Compliance School takes place next week.  Our Compliance Team will be in and out of the office next week giving presentations, so please bear with us as our response times will be a little longer than normal.  The blog will continue as usual.  

Study Guide & GPS.  For those attending school next week, we've put together a handy Study Guide to help if you will be taking the exams to obtain your NAFCU Certified Compliance Officer (NCCO) designation.  Additionally, be sure to download your version of the Updated 2012 NAFCU Credit Union Compliance GPS (you will also receive a hard copy of the GPS at School).

Note:  For those not attending Compliance School, the Updated GPS will be available for purchase very shortly.  Blog readers will be the first to know when the Updated GPS is available.    

***

NCUA Board Meeting.  Late yesterday, NCUA announced their agenda for next Thursday's NCUA Board Meeting.  You can find the agenda here.

NCUA Report.  NCUA also released their March 2012 issue of the NCUA Report.  This looks to be a good one to read, here is what is discussed:

• Chairman Matz's Corner: CFPB Director Cordray Answers Key Questions on NCUA Webinar 
• Building Wealth and Deposits: An Opportunity for Credit Unions – Individual Development Accounts, Part II
• Board Perspective: Interest Rate Risk Policy and Program
• Board Perspective: The Rites of Spring
• Understanding Credit Union Indirect Lending Programs
• Elements of an Effective Member Business Lending Program
• Trends in Member Complaints and Consumer Inquiries

Quite a few of those look like good reads.  Be sure to pass those along to others at your credit union who might be interested.  

***

A quick update on the potential Division 3 basketball matchup between Hope College (my alma mater) and the College of Wooster (my wife's alma mater).  Wooster held up their end of the bargain but Hope fell in double-overtime.

I was really hoping for this matchup as I thought it would be a lot of fun.  I can't say the same about my wife.  Wooster's game finished a good half hour before Hope finally lost.  She spent the majority of that time on the phone with her Dad - who works at the College of Wooster - discussing the potential matchup and rooting against Hope.  As she so elegantly stated it:  "I want Wooster to win and that means Hope needs to lose, so be it."   

A Few CFPB Items

Written by Steve Van Beek

Below are a couple of CFPB-related items for your Tuesday morning:

• Last Thursday, the Senate failed to confirm Richard Cordray as Director of the CFPB.  It is starting to look more and more like the CFPB will be without a Director until after the 2012 Elections.

• The CFPB recently announced its Ombudsman's Office.  From the CFPB's blog:

"At the CFPB, the Ombudsman’s Office will assist in the resolution of individual and systemic issues that a depository entity, non-depository entity, or consumer has with the CFPB. People may use the Ombudsman’s Office when they have not had success with the existing CFPB processes, or to achieve an informal resolution. Others may contact the Ombudsman to keep their concerns confidential.

Starting today, the CFPB is officially opening the doors of the Ombudsman’s Office under the direction of our Acting Ombudsman, Wendy Kamenshine. Wendy now is ready to hear from the depository and non-depository entities we regulate on issues concerning our supervisory and enforcement processes. She looks forward to hearing from consumers beginning in the spring."

• The CFPB also recently issued a report on credit card complaints.  The CFPB blog post is here with the full report here.  

In addition to the report on credit card complaints, the CFPB proposed a policy statement related to disclosure of credit card complaint data.  Part of the disclosure would include a publicly available database including information on complaints to card issuers with over $10 billion in assets.  

NAFCU has issued a Regulatory Alert on this policy statement (11-EA-33).  

This and That: NCUA Office of Consumer Protection, Reg D Reserves; Fair Lending Webinar

Written by Sarah Zimmermann

I hope everyone is having a good week. I'm back in the office after a great week in Orlando and still trying to find my way to the top of my email box. Below are just a few things I've found swimming around in it that I don't think have made it to the blog yet.


NCUA Letter to Credit Unions 11-CU-17. NCUA issued a letter to credit unions to provide information about its new Office of Consumer Protection, which, among other things will be processing consumer complaints. This letter also mentions NCUA's consumer-oriented website www.mycreditunion.gov. When you have a free moment, go take a look at this website. It's always good to know what information your regulator is communicating to consumers.

Reg D reserves annual adjustments. The Fed has announced its annual adjustment for reserve calculations and deposit reporting for Regulation D.

FinCEN Speech. If your interested in BSA matters, you may want to read the speech James Freis, Director of FinCEN, gave at the Nebraska Bankers Association Summit on Regulatory Issues last week. There's nothing earth shattering, but it talks about the usefulness of the reports financial institutions provide and of information sharing.


Fair Lending Webinar. The Federal Reserve's Consumer Compliance Outlook is hosting a webinar on fair lending issues and hot topics. The webinar is tomorrow, 2 p.m. Eastern time. Follow this link for more information and to register.

Useful Fair Lending Guidance; Consumer Complaints

NCUA released fair lending guidance in 2009 in the form of Interagency Fair Lending Examination Procedures. You can find it in 09-RA-09. If you find yourself in need of a brief refresher the Introduction provides a short and sweet overview of the fair lending highlights, including examples of disparate treatment and disparate impact. If you need to develop fair lending training, this may be a good place to start. And if you enjoy the scare tactic method of training, you can always go to DOJ's fair lending page and pull out some nuggets from some of the more recent fair lending cases.

 

The CFPB has released more information on what they will be doing with consumer complaints. To satisfy a requirement from the Dodd-Frank act that it share consumer complaint information with the FTC, the CFPB has entered into an agreement with the FTC. Pursuant to the agreement the CFPB will share complaint information with the FTC's Consumer Sentinel system. This is an online database, a compilation of consumer complaints, is maintained by the FTC, and can be accessed by law enforcement.

NCUA's Office of Consumer Protection; Compliance GPS

Written by Steve Van Beek

I have focused quite a bit recently on the role and authority of the CFPB.  While the CFPB will have rulewriting authority that will impact all credit unions, NCUA will remain the primary examiner for federal credit unions with less than $10 billion in assets.

The new CFPB has been generating tremendous amounts of press coverage.  I have a feeling this will only intensify when the CFPB starts writing and enforcing regulations.  Financial journalists and consumer groups will write articles detailing the practices the CFPB is focusing on.  This will spark an uptick in consumer and member complaints.  For example, if the CFPB hints that a practice might be "unfair or deceptive," any institution involved in that practice will face reputation risk and will need to examine its practices.    

One thing to keep in mind is that NCUA will handle member complaints for credit unions under $10 billion in assets.  Any complaints the CFPB receives for credit unions below this threshold will be passed on to NCUA.  Those complaints will be handled by NCUA's Office of Consumer Protection - an office recently created by NCUA to focus on consumer compliance issues.

Unfortunately, we do not have a good idea of how NCUA's Office of Consumer Protection will handle these complaints and the processes it will use to communicate issues with credit unions.  On Monday, NAFCU sent a comment letter to NCUA seeking transparency regarding the new office and asking NCUA to, at a minimum, release a Letter to Credit Unions outlining the Office's functions and expected policies and processes in order for credit unions to be prepared.

***

Shameless Plug:  NAFCU has a new Credit Union Compliance GPS manual available.  The manual is electronic and includes numerous links to legal opinion letters, guidance documents, and the regulations themselves.  

You can take a peek at the table of contents as well.  We have chapters on the E-SIGN Act, Share Insurance, How to Conduct Research and many more.  The manual is available for purchase by anyone seeking to know more about compliance issues facing credit unions.  

Have a great weekend!      

CFPB; 1099; FDIC Complaints and Risk Management

Editor's Note.  Some of you had a difficult time opening certain links in yesterday's blog post. Here's my guess regarding what happened.  Many of you receive the blog post via email, and many email systems make it difficult to click on hyperlinks for security reasons.  If you had those problems yesterday, here's what I'd do.  Go to the actual blog post on the internet, which is here, and try the links again. Compliance peeps who had problems with the links in the email indicated to me that they were able to open the documents from the blog's web site. 

Posted by Anthony Demangone

Here are a few items of note...

The CFPB. Stories about President Obama appointing Elizabeth Warren to head the CFPB via a recess appointment seem to be gaining traction. (WSJ.com).   Also, the CFPB has issued what appears to be its first guidance document.   The guidance clarifies that the Dodd-Frank requirements found in section 1071 will not go into effect until the CFPB issues regulations.  And what did Section 1071 do?  It amended the Equal Credit Opportunity Act to require financial institutions to collect and report information concerning credit applications made by women or minority-owned businesses and by small businesses.

1099.  Ding-dong, this witch is dead.  (NAFCU Today.) For months, we chronicled how a small provision in the recent health care reform law amended 1099-MISC requirements in a way that would have placed a huge new burden on businesses – including credit unions.  Luckily, reasonable minds came to the rescue. President Obama recently signed legislation into law that repeals that provision.

FDIC Complaint.  Here's another great blog post from the Bank Lawyer's Blog.  This post analyzes claims made by the FDIC against the former directors and officials of failed banks.  Here's one portion of the post that caught my eye:

In the case of Corn Belt Bank, which failed in 2009, the FDIC found five loans that caused losses to the bank ("Loss Loans"), alleged that the former directors and officers were negligent or grossly negligent in making the loans because they were improperly underwritten, and that the officers and directors breached their fiduciary duties to the bank. The former officers and directors failed to adequately inform themselves of the relevant risks and acted recklessly in approving them. In addition, the FDIC alleges undue loan concentration, out-of-area lending, high loan-to-value ratios, and overall weak loan administration. Finally, the FDIC alleges that regulatory examiners "repeatedly warned" the bank of these risks and the bank chose to ignore these warnings.

I really do see a sea change when it comes to boards, corporate governance and risk management.  When a financial institution's risk management program fails or is non-existent, directors won't be able to point their fingers at management and say, "That was their responsibility." When it comes to risk management and boards, it is becoming increasing clear that there is no "they" or "their."  

***

I wanted to key you all in to a NAFCU promotion.  Here's an ad you may have seen recently. 

We're urging non-members who are eligible to join NAFCU to consider trying us on for size with a free, no obligation 6 month trial.   If you enjoy the blog, I think you'd enjoy membership with NAFCU.  Take a look at what we offer and consider kicking the tires.  As I always like to say, free is good.  

 

NAAG/CFPB Partnership = Increased Compliance Risk

Posted by Anthony Demangone

Monday evening, the Consumer Financial Protection Bureau and the National Association of Attorneys General announced a partnership that they hope will better protect America's consumers from unlawful acts and practices. The agreement lays out a set of "joint" principles.  I would read each one closely.  Here is the list, with my own emphasis added:

• Develop joint training programs and share information about developments in federal consumer financial law and state consumer protection laws that apply to consumer financial products or services;
• Share information, data, and analysis about conduct and practices in the markets for consumer financial products or services to inform enforcement policies and priorities;
• Engage in regular consultation to identify mutual enforcement priorities that will ensure effective and consistent enforcement of the laws that protect consumers of financial products or services;
• Support each other, to the fullest extent permitted by law as warranted by the circumstances, in the enforcement of the laws that protect consumers of financial products or services, including by joint or coordinated investigations of wrongdoing and coordinated enforcement actions;
• Pursue legal remedies to foster transparency, competition, and fairness in the markets for consumer financial products or services across state lines and without regard to corporate forms or charter choice for those providers who compete directly with one another in the same markets;
• Develop a consistent and enduring framework to share investigatory information and to coordinate enforcement activities to the extent practicable and consistent with governing law;
• Share, refer, and route complaints and consumer complaint information between the CFPB and the state attorneys general;
• Analyze and leverage the input they receive from consumers and the public in order to advance their mutual goal of protecting consumers of financial products or services; and
• Create and support technologies to enable data sharing and procedures that will support complaint cooperation.​

If you think this is window dressing, I would review the agenda for this week's NAAG Presidential Initiative Conference. As I understand it, the Presidential Initiative Conference is a place where the president of the NAAG lays out what he or she hopes to accomplish during his or her term. Both Elizabeth Warren and Holly Petraeus spoke at the conference.  The conference agenda lays out sessions that include the following:

• Enforcement after Dodd-Frank
• Preempted or Not ‐ Reshaping of Federal and State Powers under Dodd‐Frank
• The Power of Data Sharing and Usage
• Too Big to Fail? How Best to Regulate and Structure Financial Institutions to Ensure Future Economic Prosperity
• Just Over the Horizon – Emerging Consumer Financial Protection Issues
• Looking Back / Looking Forward – What Triggered the Financial Crisis and How Best To Avoid Another

This agenda makes one thing very clear.  State Attorney Generals are very interested in what we're doing and how they can stop practices that they feel are unlawful, unfair or deceptive.  

I'll just make a few points.

• For those who thought the CFPB would not greatly affect the affairs of federal credit unions, this development paints a clear picture of why they were mistaken.  State attorneys general were able to drop the HVCC on an entire industry.  If I were a betting man, I'd lay a wager that the AG mortgage servicing "agreement" will find its way into law, regulation, or guidance.  Add to the mix the CFPB/NAAG Partnership, and the state AGs practically have a green light to scrutinize every aspect of our industry.
• The time for complaining is over.  This is the new world in which we operate.  At this point, it may serve us best to take every opportunity we have to educate the CFPB and state attorneys general that credit unions are the best friend a consumer has in the financial arena.  If they regulate or litigage with flamethrower, they'll end up harming consumers in the end. 
• This development increases what I call "Regulatory Risk."  Another actor, the state Attorneys General, can affect the rules of the game.  The HVCC mortgage valuation system and the AG mortgage servicers agreement came out of left field.  There will be more issues like those as we move forward.
• I don't want to steal my own thunder, but I feel the timing is right.  In May, I'll speak before NAFCU's Annual Volunteer's Conference in Savannah, Georgia.   Today, I'll give you the conclusion to my speech that I'll give in May:

Today's chaotic environment favors financial institutions with the following traits:

1. Strong corporate governance
2. Strong employee skill sets
3. Strong analysis and decision processes
4. Nimble and responsive operations

Take a look at your own shop, and take measure.  The next few years will be bumpy at best.  As I like to say, buckle up, buttercup. 

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Be sure to check out "A Practical Guide to the Wall Street Reform and Consumer Protection Act: Understanding and Implementing Regulatory Changes Under the Dodd-Frank Act."  
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State AG Servicing Agreement; CFPB; Complaints

Posted by Anthony Demangone

Survival
We've made it through another week.
Not a big deal, some may say.
But for a compliance officer in these times,
It's nearly a miracle, I dare say.

With that, here's are few items to digest.  

State Attorney General Servicer's Settlement Sheet Agreement.   It seems that not all state AGs are in agreement regarding all things in the agreement. At least a dozen states do not back the proposal.  (Bank Lawyers Blog.)

CFPB . Yesterday's hearing with Elizabeth Warren didn't bring up all that much new material.  But just in case you are interested, read this. Elsewhere, Rep. Spencer Bachus introduced legislation that would create a bipartisan 5-member commission to run the CFPB. Now, that is something new. 

Complaints.  NCUA clarifies its upcoming complaint process to NAFCU.  They did confirm that if NCUA receives a complaint directly from a member, they will contact the credit union's supervisory committee, wait for a response, review it to see if a violation occurred, and then contact the member accordingly.     

Matz, responding Monday, said the agency does occasionally see instances where a credit union has violated a consumer protection law or consumer compliance regulation. She said if the credit union resolves this, informs the member and makes the member whole, the OCP will confirm that with the member and close the complaint file. If no corrective action is taken and NCUA has enforcement authority, she said, “it is incumbent upon NCUA to notify both the credit union and its member accordingly.”

To date, NCUA has not published anything official on the new process.  I'm just worried that NCUA will issue a letter to a member that says something like: "Dear member, your credit union violated the Truth in Lending Act when it did..." Letters like that are mother's milk to plaintiff's attorneys. Stay tuned. 

Have a great weekend, everyone! Remember, NAFCU is hosting its Regulatory Compliance School next week.  I'll be there all week long, and other NAFCU attorneys will be in and out accordingly.  Your best bet to reach us is to email us at [email protected].   Response times may be a bit longer than usual, so we appreciate your patience. 

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Complaints; We Told You So

Posted by Anthony Demangone

On Wednesday, NCUA announced a new consumer-focused website - MyCreditUnion.gov.  While many may focus on the consumer education component of the new website, my attorney-diminished mind searched for the possible problem or new risk.  That's how my mind works, or doesn't, for that matter.  Just imagine being married to me.  

Well, I did find something.  The website devotes quite a bit of real estate to help consumers determine how to make a complaint against their credit union.  There's a section titled "Help With My Credit Union."   In case you were wondering, the section doesn't help a member find out where to send flowers for credit union appreciation day.  No, it helps them with complaints.  Specifically...

• When should one make a complaint?
• How does one submit a complaint?
• What to expect after submitting a complaint?

I'm not sure there's anything new here of substance.  But the marketing push should (at the margin) increase the likelihood that someone makes a complaint about your credit union to NCUA. For that reason, it is always important to take member complaints that you receive directly in a serious way. Because the next person they talk with may be their friendly credit union regulator.

***

File this one under: We Told You So.  It looks some banks are considering placing a dollar limit on debit card transactions. 

***

Speaking of complaints.  I am getting old.  I remember when tube socks were "in."  Then it was shorter white socks. But I just don't see myself wearing black athletic socks anytime soon.  I simply do not like this trend, and I fear it may be 20 years before the socks I am comfortable with are back in fashion.

Have a great weekend, everyone!

This and That: Mortgage Servicing; Complaints; CFPB; Interchange; UDAP

Posted by Anthony Demangone

A loyal reader let me know that he didn't mind my "This and That" posts.  But when he later tried to find something, he had to sift through 30 emails with the subject line of "This and That."  Opening emails one-by-one is not a great way to spend one's time, especially as a credit union compliance person in 2011.  Thanks to that input, I'll now try to draw attention to the subjects covered in the email in the...well, subject line. 

Mortgage Servicing. Yesterday, I mentioned how State AGs have issued a major proposal that outlines what they want changed in the mortgage servicing arena. Cheyenne Hopkins at American Banker produced this stellar piece of journalism that includes an overview of the issues, as well as a link to the AG proposal itself.  Could this be a big deal?  Read this part of her story and judge for yourself:

The term sheet, obtained by American Banker and available here, is just the opening bid in an ongoing negotiating process between the servicers and various state and federal agencies attempting to punish them for significant issues uncovered in the foreclosure process. While some of the details of the term sheet have been made public already, the sheer breadth and depth of the proposed requirements were not clear until now.

The term sheet covers virtually every detail of how servicers operate, laying out new requirements for mortgage documentation, interaction with borrowers, relationships with active military personnel, loan modifications, principal reductions, bankruptcy proceedings, short sales and technology systems.

This is one story to watch.  Mortgage servicers don't get a lot of love these days, especially with stories about how major servicers are foreclosing on homes with no mortgages.  I worry that new draconian measures meant to punish the bad actors will also affect the good guys.  AKA, us.

Complaints.  We've written a bit about complaints recently.  Hat tip to Van Beek for forwarding this annual list from the FTC - The Top 10 Consumer Complaints of 2010.   I wonder if folks at the CFPB and NCUA would look at this? If they did, they'd see the following in the top 10.

1.      Identity theft.
2.      Debt collection.
10.    Credit cards.  

What are the top 10 complaints you've received from your own members?  What if an examiner asked you that question?  Would you be able to pull that data?  

CFPB.  Richard Cordray, the former Ohio Attorney General who now heads up enforcement at the CFPB spoke yesterday to the National Association of Attorney Generals.    And he asked for their help. While I view the alignment of the CFPB with the state attorney generals to increase compliance risks for credit unions, Mr. Cordray did talk about the ability of AGs to level the playing field between credit unions and non-bank companies against which we compete.

Of course, State attorneys general also know that leveling the playing field across different kinds of financial providers and products and services is essential and will require sustained resources. Tens of thousands of so-called “non-bank” companies offer consumer financial products and services – they just don’t take deposits like a bank or thrift. These companies need to be subject to similar oversight and enforcement as banks if they are competing for customers with similar products and services in the same marketplace. Our nation has always maintained independent funding for bank regulators apart from the political process – and the consumer bureau, charged with regulating both banks and non-banks, has been set up the same way.

The consumer bureau will depend on the expertise and experience of State attorneys general as we work together to protect consumers. We will be more effective and efficient because of this partnership, and I know my visit with the State attorneys general today is another step toward a sustained effort to insist on fairness in the marketplace.

Interchange. The credit union's position on interchange made the front page of the New York Times.  

 “I am appalled that our members will shoulder tremendous financial burden and still be on the hook for fraud loss while large retailers receive a giant windfall at the hands of the government,” John P. Buckley Jr., the president of Gerber Federal Credit Union of Fremont, Mich., told a House of Representatives subcommittee last week.

Amen, Mr. Buckley.  Even the OCC weighed in with its sister agency on the Fed's debit interchange proposal.  

The impact of a revenue reduction of this magnitude has not been studied, but it is clear that it will change how financial institutions, both large and small, will do business, with obvious negative impacts on their ability to recover their costs of operation and unpredictable collateral consequences to their customers. We therefore urge the board to reconsider its rate-cap based approach in light of the flexibility it acknowledges it has to pursue other choices.

To be fair, not everyone is on our side.

UDAP.  As a reminder of how powerful UDAP can be in the hands of a regulator who wishes to use it, read this story about a Nebraska credit card issuer who settled with the FDIC for more than $10 million.

This and That...

Posted by Anthony Demangone

I hope everyone enjoyed their long weekend.  Winter appears to be loosening its grip on the Washington, D.C. area. There's nothing like the sun on one's shoulders to put a skip in your step. Of course, by just thinking that out loud, I've ensured that we'll have a terribly cold spring.   Here are a few things to kick off the week.

Consumer complaints.  Last week, NCUA’s Chairman Debbie Matz and senior NCUA staff held a Webinar that covered a range of timely issues.  One of those concerned NCUA’s practice of handing consumer complaints.  As you may know, NCUA has established a new Office of Consumer Protection, which, among other things, will handle member complaints.  Previously, after receiving the complaint, NCUA would contact the credit union and ask it to reply to the member and copy NCUA.  This practice has now changed.  Now, after receiving a complaint, NCUA will contact the credit union (specifically, the credit union’s supervisory committee) and ask that it responds to NCUA’s office of consumer protection.  This is an important change and credit unions should be aware of it.

Archives.  I'm embarrassed to pass along something that I learned about NAFCU's own compliance blog.  Check out this archives page, which provides archives back to the beginning of the blog, as well as links to each of the blog's categories.  Here's how the conversation went.  

Steve: Check out this archive page.
Anthony: That's on our blog? 
Steve. Yes.
Anthony.  Cool.  

That's right - nothing gets by me.

Sale of non-deposit investments.  NCUA has published a legal opinion letter, which is their response to NACUSO on a number of issues related to NCUA's recent guidance on the sale of non-deposit investments. 

SCRA Notice.  HUD has updated its SCRA notice.

HPML.  The Bankers Compliance Consulting Blog has a nice post on HPMLs and how the issue of truncating versus rounding can make a big difference.  

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This and That...

Posted by Anthony Demangone

The issues runneth over.  Here's a health dose of compliance "stuff" to get your week started.

Who is the Joker?  As Sarah pointed on our Friday, the CFPB unveiled its website and logo.  Did that logo ring a bell?   If it made you think of Batman, you weren't alone.  (The Hill.) My only question is this: if the CFPB is Batman, who is the Joker?  Or Riddler, for that matter? I hope that credit unions and community banks aren't seen as the villains.  You may want to check out its consumer complaint section.  It will route complaints about federal credit unions to NCUA's complaint page.   I bet the launch of this website will increase the number of complaints against federal credit unions.  The CFPB appears intent to get the word out.  If you listen to this narrated video, you might recognize the voice. The voice belongs to Ron Howard. 

Oh, and they even have a blog.

Troubled debt restructuring.  An archived version of NCUA's recent webcast on this topic is now available. 

Fed services. Speaking of webcasts, NAFCU is offering a free webcast (for both NAFCU members and nonmembers) that details the Federal Reserve's services that are available to credit unions. I know a lot of credit unions are rethinking who they do business with in the wake of the corporate credit union crisis.  This webcast should provide useful information for anyone considering the use of the Fed.

TILA and RESPA.  Elizabeth Warren has indicated that the CFPB is already working on a combined mortgage disclosure.   When it comes to this issue, Godspeed, CFPB.  Godspeed. 

Exam Issues "On the Radio"; Other "Stuff"

Posted by Anthony Demangone

Yesterday, I had the opportunity to take part in a panel discussion on examination issues, hosted by the Credit Union Times.  You can listen in here.  (Warning - the broadcast will start automatically. Length: roughly 30 minutes.) The discussion was lively, focusing on what credit unions are experiencing, what they can expect, and how they can prepare themselves for examinations. With that in mind, here's a link to NAFCU's "Managing Exams in Challenging Times" white paper.  It is free to NAFCU members and non-members alike. 

Here's some other "stuff."

• EEOC complaints are on the rise.  (Kaufman & Canoles.) Here's a link to the EEOC report.  And if you want to see a very detailed chart showing a historical breakdown of EEOC charges by type, go here. Why do I mention this?  This shows a general up-tick in EEOC claims, which in my mind signals a possible increased risk of an EEOC claim at your credit union. How would you tap down that increased risk?  Training.  For employees and management. 
• The NMLS, the SAFE Act registration system, has announced a series of training programs for financial institutions who will need to register MLOs.   The "how to" series breaks the process into four training programs. 
• The CFPB has a proposal out regarding how it will handle consumer complaints. As I read this, the CFPB plans to share complaint-related information with...well, just about anyone it wishes.  Check out the "routine uses" section on page 2 of their proposal.   When their system is up and running, just be aware that the CFPB will (assuming this proposal makes its way into final form in a similar form) be able to share a consumer complaint about your credit union with NCUA, a Member of Congress in some instances, or law enforcement. For this reason, it may be wise to see how your credit union currently handles member complaints.  Do you track complaints?  How are those complaints resolved?  While I have no data to back this up, it seems to me that the better you handle direct complaints, the less likely it will be that this CFPB complaint process will be problematic.  

 

 

Flood Insurance; "Free" Credit Reports; and Member Complaints

Editor's Note: The Fed just released a proposed rule for the remaining portions of the Credit CARD Act that have to be implemented.  The link takes you to an overview page, which also provides a link to the tiny 157-page proposal.  I'll have more on this tomorrow.

Posted by Anthony Demangone

Flood insurance.  The President has signed the Temporary Extension Act of 2010, which temporarily extends the National Flood Insurance Program through...March 28, 2010.

Free credit report commercials.  OK, I realize that this doesn't directly affect you.  But I hate these commercials, even if some of them have catchy songs and jingles.  Here's why: the commercials often mislead consumers.  The ads often imply that a company provides a free credit report, but the company may require the consumer to sign up and pay for some service to get it.  And along the way, the advertisement somehow neglects to mention that consumers already have access to a free copy of their credit report. Well, no more.  At least not after April 2.  The Federal Register has published a final rule issued by the FTC to clean up these advertisements a bit, as required by the Credit CARD Act.

To that end, the Commission amends the Free Annual File Disclosures Rule to require certain advertisements for ‘‘free credit reports’’ to include prominent disclosures designed to prevent consumers from confusing these ‘‘free’’ offers with the federally mandated free annual file disclosures available through the single centralized source. In addition, the final amended Rule requires nationwide consumer reporting agencies to delay advertisements for products and services through the centralized source until after consumers receive their free annual file disclosures, and prohibits other practices that may interfere with the free annual file disclosure process.

Amen, to that.  I really can't tell you how much I hate those commercials.  The thought that some consumer, my grandmother, for example, has to pay $29.95 a month to get a free credit report burns me.

Member complaints.  The most recent issue of The NCUA Report highlights how NCUA handles member complaints.  The issue also highlights recent Board actions and organizational changes within NCUA.  It is a good read.  Also, the portion regarding member complaints is a good item to share with your member service division.  Member complaints can find their way to NCUA, and understanding how NCUA handles those complaints may affect how you handle member "feedback."

FHA...Again

Posted by Anthony Demangone

A short while ago, Steve Van Beek posted some information about FHA violations by 120 lenders.  Well, there's more.

Yesterday, HUD made two FHA-related announcements.  First, HUD announced that 2008 was a banner year for FHA enforcement.

A record 10,552 fair housing discrimination complaints were filed in fiscal year 2008, according to a report just released by the U.S. Department of Housing and Urban Development. The report, which is produced for Congress each year, shows that a large portion of the complaints, 44 percent, were filed by persons with disabilities. Thirty-five percent, or 3,699, of the complaints alleged discrimination based on race.

Second, HUD announced a media campaign to make people more aware of their FHA rights.

So, let's do the math.  HUD had a banner year last year with FHA enforcement.  Just a few weeks ago, HUD announced FHA violations by 120 lenders.  And there's going to be a media campaign to make consumers aware of their rights.  That all adds up to higher compliance risk in the land of FHA. 

You may just want to make sure your FHA compliance is up to snuff. 

Hello, I'd Like to Register a Complaint

For Monty Python fans, there are few funnier pieces of comedy than the "complaint sketch."  The sketch involves a person who bought a parrot that dies soon after the purchase.  He returns to the store (with the dead parrot) to make a complaint, and the skit takes off from there.

If only all complaints were so enjoyable...

Consumers are not afraid of complaining.  The FTC, it seems, gets quite a bit of them.  In 2008, they received more than 1.2 million!  The top 10? Here they are....

1. Identity Theft. 313,982 complaints.
2. Third Party and Creditor Debt Collection.104,642 complaints.
3. Shop-at-Home and Catalog Sales.52,615  complaints.
4. Internet Services.52,102 complaints.
5. Foreign Money Offers and Counterfeit Check Scams.38,505 complaints.
6. Credit Bureaus, Information Furnishers and Report Users.34,940 complaints.)
7. Prizes, Sweepstakes and Lotteries.33,340 complaints.
8. Television and Electronic Media.25,930 complaints.
9. Banks and Lenders.22,890 complaints.
10. Telecom Equipment and Mobile Services. 22,387 complaints.

Go here for the official list from the FTC.

Do members complain about credit unions?  You bet they do.  In fact, we get quite a few of them here.  (Consumers tend to confuse us with NCUA for some reason.)  In addition, NCUA has a consumer complaint hotline/website set up right here. NCUA outlines the complaint process for federal credit unions here. 

In short, NCUA urges members to work things out with their credit union.  If that doesn't work, they ask that members forward the information to them.  NCUA will log it, and then forward the complaint to your supervisory committee.  Of note, NCUA states the following:

NCUA cannot represent consumers in settling claims or recovering damages. However, if your complaint brings a violation to our attention, we will take steps to ensure the federal credit union complies with applicable laws and regulations. (Emphasis added.)

In addition, I've always seen complaints as a source of reputation risk.  You'll always get some complaints, but at someone point the complaints will start to affect your reputation - especially if you do not handle them well.  How do you manage this risk?

• Understand your complaints process.  Where might complaints come from? How do you handle them now?  When does something rise to the level of "complaint" at your credit union?
• Determine whether you need to create a policy and procedure to address complaints. 
• Track them.  Are complaints increasing or decreasing?  Where are they coming from?  What are people complaining about? With this data, you'll be able to distribute resources more effectively.

Finally, NCUA's Supervisory Committee Guide has a ton of information on the complaint resolution process. Access the guide here.

Consumer Complaints; The Wedding

Consumer complaints have been getting some attention lately.  Last month, NCUA Board Member Gigi Hyland addressed consumer complaints and consumer hotlines.  You can read the media advisory about her comments here.  In her comments, Board Member Hyland noted that Congress is considering the creation of a centralized financial institution complaint hotline and website. 

The alert notes:

"Addressing the first step in the process, Hyland urges listeners to start by airing their complaint with officials at their credit union. If consumers prefer not to speak to anyone there or they remain unsatisfied, they can contact a regional NCUA office, call NCUA’s toll-free consumer assistance number to speak to someone in NCUA’s central office, or send a letter or e-mail."

NCUA hosts a consumer complaint web page.  You can access it here.

Back in 2003, NCUA's Office of Inspector General reviewed how NCUA handles consumer complaints. You can access their report here.  It provides a good overview of the topic.

Where am I going with this?  When a member complains to you, there is a chance that this complaint may find its way to NCUA.  When faced with a member complaint, I would think of the following:

• How do we handle consumer complaints?  Do we log them?  How do we show whether a particular response is resolved?
• Would we respond differently if we knew the member were also complaining directly to NCUA via a carbon copy?  Or to the Better Business Bureau?

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The wedding is now roughly two months away.   My blood pressure is still OK, and my fiance and I are still civil with each other 98 percent of the time.  I consider both of those to be major accomplishments, given the flurry of activity and my incessant level of sarcasm.  I get tons of questions from you guys about the wedding, so I thought I'd share a few pictures from the wedding locale. (Which will be Syria, Virginia.)

FTC Releases Top Consumer Fraud Complaints; Viva Las Vegas; The Diet

The FTC has released a list of the top consumer fraud complaints.  View the list here. 

Why should compliance officers care?  NCUA has indicated that credit unions should consider educational efforts regarding identity theft and fraud for their membership. (Letter to Credit Union 05-CU-18, Attachment).  This list provides the top 20 areas where consumers have been burned.  I think credit unions could build an educational program around that list.

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Vegas, baby.  Vegas.  NAFCU will host a free educational session on Friday, February 29 in Las Vegas, Nevada.  Yours truly will hit as many topics as he can in roughly 2 1/2 hours.  The event is open to all credit unions.  So bring your questions.  Your compliance comments.  And your lucky rabbit's foot.

When: Friday, February 29, 2008
What Time: 8:30 – 12:00 noon
Where: Planet Hollywood Resort & Casino, Las Vegas, NV

Visit this link for additional details, including how you can sign up.

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Current Weigh Loss: 11 pounds. 
Needs to Lose: 59.
Days until Wedding: 85.
Current Estimated Odds of Success:  Akin to the Pirates' chance of winning the World Series.