Have you heard of the Consumer Financial Protection Bureau, or CFPB for short? The CFPB is a relatively new federal agency created to protect consumers from deceptive and predatory lending practices. It was created through the Dodd-Frank Financial Reform package. The reach of the CFPB goes far beyond banks and mortgage lenders. It is described as “a little known government watchdog that is striking fear into the lending industry”. The CFPB’s purview extends to any entity extending charging interest on any type of credit.
Being in real estate sales and having been a mortgage lender in the days before FICO scores, I was aware of the CFPB, but like most individuals, my first thought was, “wonderful, another government entity to waste taxpayer dollars. Then, I read an article in Time Magazine entitled, “The Agency That’s Got Your Back”.
The article begins with a story about Deborah Jacobs, a 65 year old Michigander whose initial reaction about the CFPB were the same as mine. Four years after first learning about the CFPB, Ms. Jacobs found herself in a bind. Her daughter and grandchildren moved into her home, with the burden of financial support falling on her shoulders. She fell behind on her mortgage and reached out to her lender, Flagstar Bank seeking a loan modification. Simply stated, a modification is a change to one or more of the loan terms, resulting in a permanent change. The modification generally results in a reduction in the interest rate to make the payment more manageable for the borrower.
Flagstar approved the loan modification, but when she received the loan documents in the mail, she was surprised to see what was deemed a “closing fee” of $11,600. Not knowing where to turn, she sent complaints to the Michigan Attorney General, to the bank’s federal regulators, the Office of the Controller of Currency and the CFPB. In the various letters sent she basically stated that she ‘was at a loss… and further stated “if I had $11,600 in the bank, I wouldn’t be behind on my mortgage” The day after the homeowner filed her complaint of the CFPB’s website, they responded advising her that they were looking into her case. Four days after the CFPB’s email, Ms. Jacobs received a new set of papers in the mail, minus the $11,600 “closing fee”.
The CFPB is only four years old and has already received approximately 650,000 complaints and is currently receiving nearly 27,000 new complaints per month. The CFPB publishes the details of a complaint and the offending institution on its website. It is literally shaming banks into compliance.
In late June of this year, the CFPB has added first person testimonials to their website for the world to see. These testimonials describe troubled interactions between consumers and their lenders.
To say that they have been successful during their short tenure is an understatement. To date, the CFPB has levied hundreds of millions of dollars on offenders and generated in excess of $11 billion in relief for roughly 25 million consumers. The CFPB has been granted unfettered powers which may be of a concern, but for now, they are serving eh greater good by protecting consumers who have been wronged by lenders.
The message is clear, if you have been wronged by a lender, or are getting the runaround,
with no apparent place to turn, reach out to the CFPB. They could very well be the savior you’ve been looking for.
Jeff Ross is an associate broker with Berkshire Hathaway HomeServices, PenFed Realty, in Annapolis. He holds a Juris doctorate and serves as a Commissioner on the Maryland Home Improvement Commission. He is a member of the Institute for Luxury Home Marketing and a Certified Negotiation Expert.