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CFPB Seeks to Publish More Details on Consumer Complaints
American Banker (07/16/14) Blackwell, Rob

On July 17, the Consumer Financial Protection Bureau (CFPB) announced that it would allow consumers to submit narratives of complaints against banks and financial institutions. The bureau would then share the narratives on its public facing complaint database, stating that doing so would allow consumers to “detect trends in the market” and allow consumers to make better financial decisions. The bureau noted that the narratives would be scrubbed of personally identifiably information and only be published on an opt-in basis.

"The consumer experience shared in the narrative is the heart and soul of the complaint," said CFPB Director Richard Cordray. "By publicly voicing their complaint, consumers can stand up for themselves and others who have experienced the same problem.” Industry analysts have noted in the past that the complaint database itself is poorly constructed because it contains a wealth of uncorroborated stories. The bureau’s latest proposal will only exacerbate this issue.

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CFPB Calls off Consumer Complaint Portal Agreement Proposal

The Consumer Financial Protection Bureau (CFPB) has decided not to proceed with a proposed Company Portal Services Agreement, which would have required companies registered with the CFPB’s Consumer Complaint Portal to get prior authorization from the Bureau before sharing the consumer’s complaint data in the portal with third parties. The agreement would have slowed down interactions between companies registered in the portal and third parties, such as state regulators during state audits, and third-party litigation. In addition, the industry did not see a need for an agreement as they are already required under the Graham-Leach-Bliley Act to protect the consumer’s personally identifiable information. AFSA communicated its serious concerns to the CFPB about the agreement both in writing and in-person, and has been closely tracking this issue for several months. Although the CFPB is not proceeding with the agreement approach, they stated they will continue to work on this issue. AFSA will continue to track any movement by the CFPB with regards to its Complaint Portal and Complaint Data.

For more information, please contact AFSA Director of Operations Compliance Alejandra Krasnow at akrasnow@afamail.org.

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Dos and Doníts Highlighted in AFSA Ancillary Products Webinar

The latest webinar in AFSA’s Compliance Outlook series had a high level of participation and is a valuable resource for AFSA members that offer ancillary products to its customers. More than 150 AFSA member company executives attended the association’s July 16th Compliance Outlook: Ancillary Products webinar sponsored by Experian.

Speaker Patty Covington, Partner, Hudson Cook LLP, summarized recent enforcement actions by the Consumer Financial Protection Bureau concerning ancillary products and listed the lessons learned from such actions, including practices to adopt and those to avoid. Covington also stressed the importance of a strong Compliance Management System and that in the current regulatory landscape the industry must be proactive rather than reactive concerning compliance issues. Participants asked specific questions and scenarios regarding the marketing and selling of ancillary products.

AFSA’s next Compliance Outlook webinar on Vendor Management will be held on September 17 at 3:00 p.m. Eastern.

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AFSA Comments on Amendments to Annual Privacy Notice Requirements

On July 14, AFSA submitted a comment letter to the Consumer Financial Protection Bureau (CFPB) on a proposed rule to amend Regulation P, which implements certain requirements of the Gramm-Leach-Bliley Act (GLBA.) The GLBA mandates that financial institutions provide their customers with initial and annual notices regarding their privacy policies. The proposed rule would create an alternative delivery method for the annual disclosure, which financial institutions would be able to use under certain circumstances. AFSA’s letter stated that although the association commends the CFPB for trying to create an alternative delivery method for the annual privacy notice, the exemption in the proposed rule is too narrow. AFSA suggested that the CFPB allow companies to avoid mailing annual privacy notices as long as: (1) the privacy policy has not been materially changed from the prior year, and (2) the current policy is posted online.

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Inside the Beltway
Citigroup Settles Mortgage Inquiry for $7 Billion
New York Times (07/14/14) Corkery, Michael

On July 14, Citigroup agreed to a $7 billion settlement with the U.S. Department of Justice over mortgage securities it packaged before, during and after the financial crisis. The deal involves the largest cash penalty – $4 billion – ever paid to settle a federal inquiry.

The deal also includes $180 million to build affordable housing, $2.5 billion for the financing of rental housing, mortgage modifications, down payment assistance and donations to legal aid groups and about $208 million to the Federal Deposit Insurance Corporation. The deal involves several states, including California, Illinois, Massachusetts, New York and Delaware, which will receive a total of $291 million. The deal forgoes potential cases against Citi for collateralized debt obligations.

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Op-Ed: Congress Needs to Choke Off Operation Choke Point
The Hill (07/14/14) Isaac, William M.

“Operation Choke Point is one of the most dangerous programs I have experienced in my 45 years as a bank regulator, attorney and consultant,” said William Isaac, former chairman of the Federal Deposit Insurance Corporation and senior managing director and global head of Financial Institutions at FTI Consulting, in this opinion piece. Unelected officials, who have no legal authority, are discouraging banks from providing basic banking services. Working in concert with a variety of federal agencies, the Department of Justice (DOJ) launched Choke Point in 2013 to sensitize the banking industry to the risk of doing business with “legal but undesirable businesses,” according to a House Oversight and Reform Committee report.

These businesses are highlighted by the DOJ as ammunition dealers, producers of adult films, check cashers, short-term unsecured loans (commonly called “payday loans”), telemarketers, firearms/fireworks vendors, raffles, pharmaceutical firms, life-time guarantees, surveillance equipment firms, and home-based charities. Operation Choke Point is, in its very nature, unfair to the banks and legal businesses it is attempting to cut off, Isaac stated. The Department of Justice claims that it is only interested in cutting of fraudulent behavior, but instead of going after criminals, they are targeting legitimate businesses.

The House Committee on Financial Services is holding a subcommittee hearing on Operation Choke Point and H.R. 4986, the End Operation Choke Point Act of 2014. This bipartisan proposal has several provisions that would stop the DOJ from skirting the law. The bill is an extremely important step in reining in government agencies that are greatly overstepping their authority and breaching the constitution.

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National and State News
Lyft Delays New York City Start as Judge Keeps Status Quo
Bloomberg (07/15/14) Larson, Erik

Lyft, which uses smartphones to allow consumers to hail a ride, has agreed to postpone its start of service in New York City in order to avoid a court-ordered shut down by the state. Uber Technologies is vying for business in the city as well. State officials argue that Lyft is failing to comply with state and local regulations as well as insurance laws, according to a July 11 court complaint. The complaint stated that Lyft does not require drivers to have commercial driver’s licenses, go through safety inspections and drug screenings or take driving courses that are required of normal taxi drivers.

Lyft previously agreed to use only commercially licensed drivers and vehicles. The complaint was originally filed by New York Department of Financial Services Superintendent Benjamin Lawsky, who oversees insurers in the state.

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Lynn Proceeding as Usual with Foreclosure Ordinance
The Daily Item (07/15/14) Stevens, Chris

Seven banks have joined together to ask the U.S. District Court in Worcester to declare the foreclosure ordinances in both Worcester and Lynn unconstitutional. The town of Lynn, however, is continuing with business as usual, as it waits to receive an injunction from the court. The ordinance, which was approved in 2013, requires banks to reach out to property owners and provide mediation services before initiating foreclosure proceedings.

The ordinance also requires a $10,000 bond per property from the bank attempting to foreclose. A Massachusetts-based company, Dispute Resolution Services, is handling the mediations on behalf of the towns. The city of Springfield, Massachusetts, is already in the middle of a nasty court battle over its version of the ordinance. Town officials are surprised that the injunction is taking as long as it is. Court orders generally arrive within a few days, but more than two weeks have gone by since the bank’s complaint was filed, and the town spokesperson reported that they have received nothing

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Wells Fargo's Architect of Credit-Card, Auto Expansion to Retire
Wells Fargo's Architect of Credit-Card, Auto Expansion to Retire (07/16/14)

Tom Wolfe, who joined Wells Fargo in 2008 after it purchased Wachovia, will leave the bank later in 2014 according to a memo released yesterday by Avid Modjtabai, Wells Fargo head of consumer affairs. Wolfe currently oversees Wells’ credit card and auto lending businesses and has been instrumental in growing the two marketspaces since his arrival. Wolfe’s duties will be split by Dawn Martin Harp and another executive yet to be named. Harp will expand her responsibilities within auto dealer services.

"Tom has been instrumental in building our market leadership position in the auto lending business and has used his 31 years of industry experience to successfully integrate our consumer-credit businesses," Modjtabai said. Wolfe led several key initiatives during his time with both Wachovia and Wells Fargo, including developing relationships with General Motors and Tesla, as well as increasing credit card penetration rates.

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July 17, 2014

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AFSA Newsbriefs

AFSA Newsbriefs is a weekly executive summary of AFSA initiatives and consumer credit articles. AFSA Newsbriefs is free for members. Send an email to newsbriefs@afsamail.org to subscribe.

The American Financial Services Association, or AFSA, is the national trade association for the consumer credit industry, protecting access to credit and consumer choice. The association encourages and maintains ethical business practices and supports financial education for consumers of all ages.