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Your new financial watchdog: what it can do

Consumer Financial Protection Bureau can act on a host of problems

By  and Juan Rodriguez

Consumer Financial Protection Bureau, new consumer watchdog group, debuts

Consumers now have a new advocate. As of July 21, 2011, a new federal agency opened for business as a watchdog over the myriad financial products on the market.

The Consumer Financial Protection Bureau (CFPB), created under the far-reaching Wall Street reform law passed in 2010, has broad powers to police how banks, credit unions, debt collectors, payday lenders and other financial services companies conduct business with their customers. If products or services are unfair or deceptive, consumers will have a single place to turn for help -- rather than as many as seven different regulators.

But it is very much a work in progress. At its launch Thursday, the bureau is leaderless, though President Obama has nominated Richard Cordray, the former attorney general of Ohio, as its first director. Cordray will have to be approved by the Senate to take office.

A long list of issues await him, or whoever eventually heads the agency. Here is an alphabetical list of payment industry services and practices that the new consumer watchdog is scheduled to have jurisdiction over and what it may do about them.

 


 

Consumers get a major advocate on July 21, 2011, when a new federal agency officially opens for business as a watchdog over the myriad financial products on the market.

The Consumer Financial Protection Bureau (CFPB) will have broad powers to police how banks, credit unions, debt collectors, payday lenders and other financial services companies conduct business with their customers. If products or services are unfair or deceptive, consumers will have a single place to turn for help -- rather than as many as seven different regulators.

But it is very much a work in progress. At its launch Thursday, the bureau will be leaderless, though President Obama is set to nominate its first director, Richard Cordray, the former attorney general of Ohio. Cordray will have to be approved by the Senate to take office.

A long list of issues await him, or whoever eventually heads the agency. Here is an alphabetical list of payment industry services and practices that the new consumer watchdog is scheduled to have jurisdiction over and what it may do about them.

Credit cards
Issue: The most sweeping credit card reforms in history were included in the Credit CARD Act of 2009. Among other things, the law limits fees and when interest can be hiked and how credit cards are marketed to minors and young adults. It also requires issuers to give cardholders advance warning of significant changes to their account terms. However, consumer groups complain that new credit card services and products not specifically banned by the law are cropping up and raising concerns about fairness and deception. Credit cards issued to businesses do not enjoy the same protections given to consumer credit cards.

What the bureau may do: The CFPB will have the authority to enforce the CARD Act provisions, supervise large bank issuers of credit cards, monitor industry practices and new products, collect and review consumer complaints about credit card practices, and, if necessary, draft additional regulations.

How to complain: First, call the credit card issuer to point out the problem and ask for a resolution. If that fails, contact the regulator that oversees the credit card issuer (see: How to complain about a credit card issuer). Consumers can contact the CFPB's Consumer Response Center once it becomes operational.

Credit counseling agencies
Issue:
Both nonprofit and for-profit companies offer services to help consumers who are drowning in debt create family budgets, cut spending on non-essential items and negotiate debt management plans with creditors to pay off their bills. Federal bankruptcy laws require credit counseling before and after filing for bankruptcy. The Credit CARD Act of 2009 requires credit card issuers to provide toll-free numbers to credit counseling agencies on monthly billing statements.

What the bureau may do: Credit counseling agencies are nonbank providers of financial services. Once a CFPB director is appointed, the agency will have the authority to regulate all credit counseling services to ensure that they are operating fairly.

How to complain: Contact CFPB's complaint system once it is operational. The Federal Trade Commission takes consumer complaints online and through its toll-free number: (800) FTC-HELP. You can also contact your local or state consumer affairs agency.

Credit repair services
Issue:
Companies that advertise credit repair services to remove negative information from credit reports are often criticized by consumer groups because no one can legally remove accurate negative information from a credit report. Consumers who sign up for these services may find they've been scammed, although there are legitimate credit repair services.

What the bureau may do: The CFPB can collect and review complaints from consumers who are duped by the largest credit repair companies, and enforce existing federal laws banning unfair and deceptive practices. Once a CFPB director is appointed and rules are established to determine what companies are the "largest participants," the agency can supervise those companies and draft new regulations to prevent fraud.

How to complain: Contact CFPB's complaint system once it is operational. The Federal Trade Commission takes consumer complaints online and through its toll-free number: (800) FTC-HELP. You can also contact your local or state consumer affairs agency.

Debit cards
Issue:
Debit cards are the No. 1 noncash payment method in the United States. These payment cards are linked to checking or savings accounts and allow users to avoid carrying cash and quickly pay for everything from lattes to rental cars. However, there are fewer consumer protections on debit cards than on credit cards, and users have to watch out for fees and potential fraud if they are lost or stolen.

What the bureau may do: The CFPB will have the authority to enforce existing federal rules on debit card regulations (including overdraft fees and opt-in requirements). The agency can also monitor industry practices, investigate and sanction violators, collect and review consumer complaints and draft additional rules to address unfair, abusive or deceptive debit card features.

How to complain: First, call the credit card issuer to point out the problem and ask for a resolution. If that fails, contact the regulator that oversees the credit card issuer (see: How to complain about a credit card issuer). Consumers can contact the CFPB's Consumer Response Center once it becomes operational.

Debt collection practices
Issue:
Complaints about debt collection practices are among the top problems reported by consumers in the Federal Trade Commission's annual complaint registry.  The federal Fair Debt Collection Practices Act outlines when and how debt collectors can contact debtors, but abuses continue. The FTC has filed civil suits against some debt collectors, and the industry has attempted to police itself. However, consumers continue to report harassment, threats and other abuses.

What the bureau may do: As of July 21, 2011, the CFPB takes over monitoring and enforcement of the Fair Debt Collection Practices Act. Once a CFPB director is appointed and rules are finalized to determine the "largest participants" in the industry, the agency will have the power to draft new regulations aimed at curbing abusive or deceptive practices in the industry and investigate and sanction violators.

How to complain: Contact CFPB's complaint system once it is operational. The Federal Trade Commission takes consumer complaints online and through its toll-free number: (800) FTC-HELP. You can also contact your local or state consumer affairs agency.

Gift cards
Issue:
  Gift cards have become a popular mode of giving for many people, but they can include fees that diminish their purchasing power. The Credit CARD Act of 2009 made gift cards friendlier for consumers by banning dormancy fees during the first 12 months after the card is purchased or from the last time it is reloaded. The law also says cards cannot expire within five years of being issued.

What the bureau may do: The CFPB has jurisdiction over enforcing the Credit CARD Act. The agency can collect and review complaints from consumers, monitor industry practices, and, if warranted, draft new regulations to curb any unfair, abusive or deceptive practices.

How to complain: First call the gift card issuer to ask for a resolution. If that fails, contact the regulator that oversees the card issuer. (See: How to complain about a card issuer.) Consumers can contact the CFPB's Consumer Response Center once it becomes operational.

Interest rate caps
Issue:
Currently, there is no federal limit on how high banks can set credit card interest rates, although some states cap rates. (National credit unions are limited to 18 percent interest rates on credit cards and 28 percent on short-term and small loans. ) One bank that caters to applicants with bad credit set a 79.9 percent rate on its cards in 2010.

What the bureau may do: The CFPB can monitor interest rates charged by lenders and, if warranted, propose legislation to Congress to cap interest rates. The Dodd-Frank Wall Street reform law specifically prohibits the agency from regulating interest rates.

How to complain: Contact the card issuer first and ask for a lower interest rate. Consider shopping around for cards with lower rates. If you feel your interest is excessively high, contact CFPB's Consumer Response Center once it is operational.

Prepaid cards
Issue: 
Prepaid cards are payment cards that are loaded with funds either by users or by third-party payers, such as employers or government agencies. Many prepaid card users have bad credit and may not have access to credit cards as payment options. Consumer groups have raised concerns that prepaid cards do not carry the same consumer protections against fraud losses or in billing disputes with merchants.

What the bureau may do: The CFPB can study industry practices and  enforce existing federal regulations regarding payment cards. Once a CFPB director is appointed, the agency can also, if warranted, draft new rules to encompass prepaid cards.

How to complain: First call the card issuer to point out the problem and ask for a resolution. If that fails, contact the regulator that oversees the prepaid card issuer (see: How to complain about a card issuer). Consumers can contact the CFPB's consumer complaint system once it becomes operational.

See related: New consumer agency arrives with broard powers, controversy, Obama nominates new consumer money czar

Updated: July 21, 2011


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Updated: 09-02-2014

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