CFPB: Supervising Credit Markets
Identifying your needs and the right product is not an easy task. Many financial products are complex and hard to compare. In addition, many consumers are stressed-out and easily confused. Following the financial crisis of 2007-2008, Congress passed the Dodd-Frank Act and established the Consumer Financial Protection Bureau (CFPB).
The CFPB’s role in the financial market is to help identify problems in the financial market and protect the consumer. The CFPB’s role includes educating the consumer, setting up guidelines and rules, monitoring and supervising the financial market, taking complaints from the consumer, and enforcing those rules.
The CFPB published their first Supervisory report on October 2012 covering bank and non-bank financial institutions. The report related to supervision activity from July 2011 – Sept 2012. In addition to checking compliance systems, fair lending procedures, and third party and affiliate service compliance, the CFPB and covered these three areas:
- Credit Cards
- Reporting to Credit Bureaus
Here are some examples given in the October 2012 CFPB Supervisory Report:
The CFPB found instances of violations relating to the timely disclosure of rates and fees, as required by the HUD-1 and Good Faith Estimate. They also noted violations regarding disclosure of fees, interest rates, and payment schedules.
Bills.com Advice: Make sure that you understand about mortgage rates and mortgage fees. The CFPB proposed changes in the mortgage disclosure forms. They hope that their new Loan Estimate Disclosure Form will help consumers understand the different types of fees. Lenders will be obligated to issue a Loan Estimate Form within 3 days of getting an application. The CFPB is also working on a second form, which will be issued three days before closing. The goal is to produce a form in which the consumer can easily compare the original offer to the final offer.Quick Tip #2: Before applying for a loan, learn about qualifying for a mortgage loan, mortgage rates, and getting a pre-approval. When you are ready to shop, get a mortgage quote from Bills.com mortgage providers.
In the supervisory report, the CFPB notes that, together with other agencies, they have completed enforcement action against three main credit card issuers. They helped bring $435 million in relief to over 5.75 million consumers.
The CFPB points out instances in which three credit card issuers used deceptive marketing to sell credit card add-on products. This included presenting misleading information about fees or benefits associated with such products, not allowing consumers to cancel the products, and even enrolling consumers in products without their prior consent. The credit card issuers particularly targeted low credit or bad credit customers for these products.
Bills.com Advice: Before you take out a credit card, learn about the product that is most appropriate for your situation. If you have bad credit then deal with your situation by getting rid of debt and building your credit score. Consider using a secured credit card and shop around for the best terms.
Quick Tip #3: If you are struggling with debt, then get a free consultation from a Bills.com debt relief provider.
Credit card companies are allowed to issue credit cards for consumers under the age of 21 only if the applicants who have an independent source of income, or have a co-signer/guarantor. The CFPB found instances in which the Line of Credit was increased without the consent of the co-signer. This is a clear violation of the 2009 credit CARD Act.
Bills.com Advice: Anytime you set up a joint credit card, remember that you are fully responsible for all the debt. Monitor the cards activity. Anytime you see a mistake or a change in the terms, then immediately notify the credit card company. Make sure that you have access to the monthly bills and preferably on-line access to the account.Quick Tip #4: Monitor your credit reports. You can get a free copy from each credit bureau once a year through AnnualCreditReport.com. This does not include your credit score, so if you want to monitor your credit score sign up for a credit score and credit monitoring for a free trial period.
Reporting to Credit Bureaus
The CFPB noted that due to insufficient employee training, financial institutions incorrectly reported information to the Credit Reporting Agencies (CRAs). This resulted in loan and credit applications being unjustly rejected or consumers paying higher interest rates.
Bills.com Advice: The three major CRAs (Equifax, Experian, and TransUnion) record all reported credit and loan information. The report also includes information about public judgments, your residency, and employment. With the vast number of creditors reporting information, it is possible mistakes will occur. That is why it is important that you monitor your credit report regularly. If you do see mistakes, then you can have them removed through a dispute process.
Quick Tip #5: For more information about getting rid of negative information read the Bills.com article about credit repair.
Identifying Credit Problems: The CFPB, Bills.com and You
The Dodd-Frank Act and the establishment of the CFPB both aim at cracking down against predatory lending and incorrect practices in the loan and credit market. One of the main goals of the CFPB is to make sure that the consumer receives the correct information and is knows how to make good financial decisions.
Bills.com firmly believes in transparency in the market place. Use Bills.com resources to help you learn about mortgages, credit cards, debt relief, and other personal financial issues.
Among the areas that Bills.com can help you are:
- Budget Guide: Get your financial plan running.
- Debt Coach: Find a personalized debt relief solution.
- Mortgage Rates: Find today’s mortgage rates.
- Mortgage Refinance Calculator: Decide if it is a good time to refinance your loan.
- Minimum Payment Calculator: Understand how much you really pay on your credit cards.