Many complaints from borrowers with auto loans have an air of helplessness and defeat. One said a bank stopped accepting payments, started charging more than is owed after two years of a perfect pay history, and is now treating the customer “like a scum bucket.” The writer wondered, “So what can you do?” One thing you can do if you’re frustrated with the way a lender is treating you over a car loan is what that borrower did: complain anonymously online to the Consumer Financial Protection Bureau (CFPB).
Since 2011, when the agency began operations in the wake of the worst financial crisis since the Great Depression, the CFPB has gathered more than 1.1 million consumer complaints. And since 2015, it has been publicizing “consumer narratives” on its website, accompanied by a searchable database.
Reasons borrowers give for reaching out to the CFPB appear to vary widely, as do the complainants’ levels of coherence. The common factor is that consumers are upset with a financial product or institution. Some complaints acknowledge that the borrower has been late making loan payments, to a lesser or greater degree, but lament that lenders were using collection techniques such as calling their places of work to badger them over the tardiness.
“I am a few days late on a vehicle payment,” one complaint reads. “It is scheduled to be paid electronically 10 days late.” The lender continues to call the borrower’s place of employment regularly, despite being informed of the payment plan. “This is my place of work. They are harassing me when payment is already planned.”
Several complaints paint a picture of consumers overextended on credit, often agreeing to buy vehicles on loans they could not afford to repay. Others talk about external factors that the lender or borrower may not have been able to control, such as job loss or being “forced to move because of a toxic relationship.”
But this is not just some taxpayer-funded Yelp for financial products. The CFPB has a team of people who reach out to the lending company targeted by each gripe. The agency gives the company 15 days to respond and confirm a commercial relationship with the complainant. If the CFPB hears nothing, it publishes the complaint anyway. The CFPB says 97 percent of consumers get timely replies when it sends the grievances to companies.
The agency also uses the complaints it receives to look for patterns and emerging trends that inform its enforcement work. And its enforcement work is no joke. The bureau recently announced a $1.25 million fine against Security National Automotive Acceptance Company (SNAAC) for failing to repay military veterans whom the agency said the lender had “hounded with illegal debt-collection tactics.” In 2013, it lobbed a $98 million fine against Ally, accusing the bank of charging minority borrowers higher interest rates for their auto loans.
This relatively young federal agency is giving consumers a place to turn. Not only does it let them air their grievances, but it also has teeth to end abusive practices. So aside from the lenders hit with these heavy penalties, everyone’s happy, right?
No, not everyone is happy. That public complaint database and its accompanying narratives are seen by opponents as a kind of public gallows that lacks prudent, factual vetting. The American Financial Services Association, for instance, has roundly rebuked the publication of these narratives for, it alleges, unfairly dragging companies’ reputations through the mud before they’ve had a chance to rectify any alleged problem. The consumer agency has been practicing “rulemaking by enforcement,” an AFSA spokesman told Car and Driver. The group has called for an end to the CFPB’s ability to make the consumer database narratives public.
The CFPB itself is facing a multi-pronged attack. “We are deeply concerned about the future of the CFPB,” Ira Rheingold, executive director of the National Association of Consumer Advocates, told C/D. And some Capitol Hill lawmakers say the agency’s actions are excessive and that it lacks accountability.
Even as the CFPB was doling out that fine against SNAAC, the U.S. House Financial Services Committee met this week to discuss legislation that would repeal and reform many aspects of Dodd-Frank, the shorthand name for the post-financial-crisis law that helped create the CFPB. Rep. Jeb Hensarling (R-Texas) is sponsoring the Republicans’ Financial CHOICE Act, which stands for Creating Hope and Opportunity for Investors, Consumers, and Entrepreneurs. It would water down the CFPB in a number of ways, such as eliminating some of its authority, restructuring it as part of the executive branch, making it subject to congressional oversight, and changing the name from the Consumer Financial Protection Bureau to the Consumer Law Enforcement Agency. The CFPB is currently an independent agency funded by the Federal Reserve.
At the hearing, Rep. Roger Williams (R-Texas), who is also an auto dealer, called the CFPB “the most unacceptable and unaccountable agency in the history of the United States.” He claimed the agency uses strong-arm tactics and “faulty” studies in justifying fines against financial firms. He said the bureau is growing “by leaps and bounds with no end in sight,” noting its $636 million estimated budget for 2017. The CFPB has a dizzying number of rules that financial firms need to follow, Williams claimed, adding that it “hides behind [its] consumer complaint database.”
Support for Hensarling’s proposed legislation is divided along party lines. If the bill clears the committee and makes it to the House floor, its future there is uncertain, and it is still not clear what companion legislation would look like in the Senate.
Meanwhile, the U.S. Court of Appeals for the District of Columbia ruled in October that the CFPB’s leadership structure is unconstitutional in that its director, Richard Cordray, can only be removed by the president and only for cause, the National Law Review reported. The CFPB has appealed the ruling, which would effectively allow the president to fire Cordray for any reason. Oral argument is scheduled May 24.
Regardless of the outcome of that dispute, which is expected to drag on well past May, Cordray’s term ends in 2018. When that happens, his replacement would be selected by President Trump, who has already filled other agencies’ leadership roles with people who are skeptical of aspects of the agencies they are now leading. “If Trump is [still] president he could appoint someone in his own image,” commented Ed Mierzwinski, consumer program director at the U.S. Federation of Public-Interest Research Groups (U.S. PIRG).
The fate of the consumer complaint database amid all this remains unclear. Meanwhile, though, it continues to grow. Last year its volume rose 7 percent to 291,400 complaints received, according to the agency’s annual report. There were about 16,400 consumer loan complaints, and within the consumer loans, vehicle loans led all grievances.
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