Consumer Financial Protection Bureau
Dear Mr. Cordray:
First, congratulations on your appointment to lead the Consumer Financial Protection Bureau.
Unless the banking interests have their way, your appointment is expected to last at least through the end of next year. And now with a director in place, the agency will be able to exercise its full powers to oversee such groups as payday lenders, credit bureaus and private education lenders.
Granted, you have a lot on your plate, but here are a few suggestions on where to focus your attention:
Payday lenders They provide advances on paychecks, and the fees charged are the equivalent of an annual interest rate of a few hundred percent. Maryland basically bans payday loans by capping the annual interest rate on small loans at 33 percent. Still, payday lenders circumvent our law by offering loans over the Internet.
Mark Kaufman, Maryland's commissioner of financial regulation, says it's difficult to pursue these violators that operate online from another state — or country.
We could use some help.
Also, check into direct-deposit advance loans, another paycheck advance, that some traditional banks offer. The fee, when calculated as interest, is similar to that of a payday loan.
Maryland's rate cap doesn't apply to federally regulated national banks, and the concern is that these loans might be offered here someday.
Mortgage servicers There are way too many horror stories of homeowners struggling to get loans modified or problems resolved through mortgage servicers. Can you do something about this?
Even departments within big banks don't seem to work together, says Marceline White, executive director of the Maryland Consumer Rights Coalition. One department will tell a homeowner that he's being considered for a loan modification, while another says the house is being foreclosed upon, she says.
"People can't get a straight answer," White says. "They don't have a single point of contact."
Private student loans Some college students turn to private education loans before taking full advantage of consumer-friendly federal loans. Graduates can end up saddled with more debt than necessary.
Pauline Abernathy, vice president with the Institute for College Access & Success, suggests a quick fix: The CFPB should require schools to certify private loans.
Schools now certify federal loans to determine how much students are eligible to borrow. By certifying private loans, schools could make sure that students have exhausted federal aid first, Abernathy says.
Promoting financial literacy also is part of the bureau's mission. Consider creating a crash course for high school juniors or seniors that would explain financial aid. It should teach students the difference between federal and private loans, and advise them not to take on more debt than their chosen career would be able to support.
Credit report disputes We don't know how often errors occur in credit reports that damage a credit score and lead to the consumer being denied credit or paying more for it. Studies by consumer groups found serious mistakes appeared in one-quarter of reports. A study financed last year by the credit reporting industry said less than 1 percent of reports contained such mistakes.
But even a small percentage of errors can affect millions. The CFPB should assure that reports are accurate and errors easily fixed.
Credit bureaus now generally have 30 days to investigate a complaint. They also must forward "all relevant information" to the creditor that furnished the disputed material. But the National Consumer Law Center in Boston says this information is typically boiled down to a numerical code that may include a sentence or two about the consumer's complaint.
If the creditor doesn't respond in time, the disputed item must come off the report. But it can reappear if the creditor later — without showing proof — says the disputed information is true, consumer advocates say. Consumers unhappy with the outcome can tell their side of the story in a 100-word statement in their credit files.
"No one looks at a 100-word statement anymore. Everything is a score," says Ruth Susswein, spokeswoman with Consumer Action. "They need to create a real dispute system."
Debt collections The Federal Trade Commission received more than 144,000 complaints in 2010 about debt collection, making it No. 2 on the agency's complaint list.
Most of those complaints involve debt collectors repeatedly calling consumers, says Robert Hobbs, deputy director of the National Consumer Law Center.
Consumers have a right under the Fair Debt Collection Practices Act to request that the debt collector stop calling them.
"The problem of having a right is needing to know about it," Hobbs says. He suggests that debt collectors be required to inform consumers of this right.
Of course, Mr. Cordray, this is a lot to tackle in two years, given all your other responsibilities. But any assistance will be appreciated by Maryland consumers.