Associated Press
WASHINGTON – A company’s obligations don’t stop with the law. It also needs to be fair and upfront with customers.
That’s the message from Richard Cordray, who was named by President Barack Obama as the first director of the Consumer Financial Protection Bureau.
“Frankly, there’s a lot of fraud that’s committed in the marketplace that is not on its face necessarily technically illegal,” Cordray said. Such practices will now be a target for the CFPB.
The agency and Cordray’s appointment are both controversial. The CFPB was created as part of the overhaul of the nation’s financial regulations, with a mandate to police the array of financial products marketed to consumers.
Republicans blocked Cordray’s appointment for months, saying the agency would have far too much power with too little accountability. Then, earlier this month, Obama installed Cordray when Congress wasn’t in session.
On Thursday, the agency released a field guide for its examiners to analyze practices at payday lenders, which essentially offer customers advances on their paychecks for a flat fee. It will mark the first time the industry will be subject to such oversight.
The CFPB has started collecting public comment to help simplify the disclosures consumers receive with credit cards, mortgages and student financial aid. It will take months or even years before consumers see how these efforts play out.
But here’s what Cordray had to say about how the agency will impact consumers:
Question: A major focus for the CFPB has been on improving the transparency of a product’s fees and terms, and the disclosures consumers receive. Are there instances where this won’t be enough and more aggressive regulatory action will be required?
Answer: Let me answer that question in two parts.
On transparency and disclosure, a key insight here is that more disclosures don’t always make things better. As it accumulates, there can be so much dense fine print that it can actually make things much worse — consumers find it hard to penetrate and they often will not read it.
That’s a concern and that’s why we’re trying to make things more transparent, simpler and clearer with our “Know Before You Owe” project.
However, simply making things clearer to consumers is not enough if people aren’t actually playing by the rules and defrauding consumers. There we have to enforce the rules and we have to do it fairly, evenhandedly, but with rigor so that everybody understands that they have to follow and respect the law.
Q: Are there practices that are technically legal yet require regulatory action?
A: If something is technically legal, that’s one issue. But we also have the authority to determine that practices are unfair, deceptive and abusive. That’s where our authority can be used to try to protect consumers, even though maybe the technicalities of pre-existing laws have been followed.
So that’s something we’re going to have to be careful about — the use of that authority.
But it certainly is necessary to protect consumers, and frankly there’s a lot of fraud that’s committed in the marketplace that is not on its face necessarily technically illegal. But when you see how a product is marketed, you can see what the effect is on consumers.
Q: So in those situations, what is the most important thing consumers need to know about what the CFPB can and cannot do?
A: Consumers should know that when they feel they’re being treated unfairly, they have the opportunity to come and tell us about it. And I mean the 300 million consumers all across this country, they can come to our website at consumerfinance.gov.
If it’s a mortgage or credit-card issue, they can file a complaint with us.
If it’s any other kind of issue, we will be able to take those complaints eventually.
Q: Once those complaints are in hand, what are the limits of what the CFPB can do?
A: We have three different sets of authority that Congress gave us and that we are by law responsible to carry out. We have rule-making authority. And we particularly are going to be active in trying to correct some of the problems in the mortgage markets over the next year or two.
We have supervision and examination authority, which is new but very important. It’s the ability to actually go into these institutions, look at their books and records and ask questions about what they do, and really get to the bottom of things.
This means both working with them where that’s possible and or bringing enforcement actions where that’s necessary.
And the third is the ability to actually enforce the law.
Q: One of the first industries the agency will be looking at is payday lending. A concern for consumer advocates is that customers often roll over the loans, meaning they repeatedly take out new loans to repay previous loans. What practices in the payday industry raise concerns for you?
A: One of the things we’re very concerned about is making sure that those products actually help consumers and don’t harm them. So the possibility that consumers end up rolling loans over and over, and end up in this sort of debt trap where they’re living off of money at 400 percent interest rates is a concern and it’s something we’re going to look at very closely.
Q: Student loans were a big issue during the Occupy protests, and graduates are burdened with more and more debt. Do you see any parallels to the mortgage industry?
A: I’ve read a lot that suggests that student loans may be a bubble that is developing.
Obviously, the major driver of the total amount of student loans is the rapid increases in tuition and the costs of higher education in the last 10 years. We don’t control that.
What we can control and what we can affect is the choices that consumers make. That they know what their choices are, that they know the difference between federal loans and private student loans — how that can affect terms of repayment, how that can affect the price and interest rate.
These are important things for consumers to know.
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That’s the message from Richard Cordray, who was named by President Barack Obama as the first director of the Consumer Financial Protection Bureau.
“Frankly, there’s a lot of fraud that’s committed in the marketplace that is not on its face necessarily technically illegal,” Cordray said. Such practices will now be a target for the CFPB.
The agency and Cordray’s appointment are both controversial. The CFPB was created as part of the overhaul of the nation’s financial regulations, with a mandate to police the array of financial products marketed to consumers.
Republicans blocked Cordray’s appointment for months, saying the agency would have far too much power with too little accountability. Then, earlier this month, Obama installed Cordray when Congress wasn’t in session.
On Thursday, the agency released a field guide for its examiners to analyze practices at payday lenders, which essentially offer customers advances on their paychecks for a flat fee. It will mark the first time the industry will be subject to such oversight.
The CFPB has started collecting public comment to help simplify the disclosures consumers receive with credit cards, mortgages and student financial aid. It will take months or even years before consumers see how these efforts play out.
But here’s what Cordray had to say about how the agency will impact consumers:
Question: A major focus for the CFPB has been on improving the transparency of a product’s fees and terms, and the disclosures consumers receive. Are there instances where this won’t be enough and more aggressive regulatory action will be required?
Answer: Let me answer that question in two parts.
On transparency and disclosure, a key insight here is that more disclosures don’t always make things better. As it accumulates, there can be so much dense fine print that it can actually make things much worse — consumers find it hard to penetrate and they often will not read it.
That’s a concern and that’s why we’re trying to make things more transparent, simpler and clearer with our “Know Before You Owe” project.
However, simply making things clearer to consumers is not enough if people aren’t actually playing by the rules and defrauding consumers. There we have to enforce the rules and we have to do it fairly, evenhandedly, but with rigor so that everybody understands that they have to follow and respect the law.
Q: Are there practices that are technically legal yet require regulatory action?
A: If something is technically legal, that’s one issue. But we also have the authority to determine that practices are unfair, deceptive and abusive. That’s where our authority can be used to try to protect consumers, even though maybe the technicalities of pre-existing laws have been followed.
So that’s something we’re going to have to be careful about — the use of that authority.
But it certainly is necessary to protect consumers, and frankly there’s a lot of fraud that’s committed in the marketplace that is not on its face necessarily technically illegal. But when you see how a product is marketed, you can see what the effect is on consumers.
Q: So in those situations, what is the most important thing consumers need to know about what the CFPB can and cannot do?
A: Consumers should know that when they feel they’re being treated unfairly, they have the opportunity to come and tell us about it. And I mean the 300 million consumers all across this country, they can come to our website at consumerfinance.gov.
If it’s a mortgage or credit-card issue, they can file a complaint with us.
If it’s any other kind of issue, we will be able to take those complaints eventually.
Q: Once those complaints are in hand, what are the limits of what the CFPB can do?
A: We have three different sets of authority that Congress gave us and that we are by law responsible to carry out. We have rule-making authority. And we particularly are going to be active in trying to correct some of the problems in the mortgage markets over the next year or two.
We have supervision and examination authority, which is new but very important. It’s the ability to actually go into these institutions, look at their books and records and ask questions about what they do, and really get to the bottom of things.
This means both working with them where that’s possible and or bringing enforcement actions where that’s necessary.
And the third is the ability to actually enforce the law.
Q: One of the first industries the agency will be looking at is payday lending. A concern for consumer advocates is that customers often roll over the loans, meaning they repeatedly take out new loans to repay previous loans. What practices in the payday industry raise concerns for you?
A: One of the things we’re very concerned about is making sure that those products actually help consumers and don’t harm them. So the possibility that consumers end up rolling loans over and over, and end up in this sort of debt trap where they’re living off of money at 400 percent interest rates is a concern and it’s something we’re going to look at very closely.
Q: Student loans were a big issue during the Occupy protests, and graduates are burdened with more and more debt. Do you see any parallels to the mortgage industry?
A: I’ve read a lot that suggests that student loans may be a bubble that is developing.
Obviously, the major driver of the total amount of student loans is the rapid increases in tuition and the costs of higher education in the last 10 years. We don’t control that.
What we can control and what we can affect is the choices that consumers make. That they know what their choices are, that they know the difference between federal loans and private student loans — how that can affect terms of repayment, how that can affect the price and interest rate.
These are important things for consumers to know.
http://tourism9.cm/ http://vkins.com/
