Massachusetts Bankruptcy and Consumer Update
What is the Consumer Financial Protection Bureau up to these days? And how can they help Massachusetts bankruptcy filers who are still underwater, or treading water, in this prolonged economic trough. According to the CFPB, they received 45,630 consumer complaints in the year ending July 1, 2012! 44% of those complaints were via their website, which you can access by clicking on the words Consumer Financial Protection Bureau above.
THE CFPB explains that the complaints about credit card companies are mostly about billing. These they forward to the companies for initial review.
Some folks get economic relief, but the results don’t seem stellar. On the broader level, we look at the ability of the CFPB to help more folks that need to get a fresh start with credit in Massachusetts. In that vein, a questionable ruling by the CFPB was Director Richard Cordray’s decision to allow credit card companies to charge up front fees. These fees would be applied to new accounts before Massachusetts, or any, consumers even charged anything on their bills. How does this help consumers? It doesn’t. The CFBP claims it is simply reacting to a federal appellate court decision in South Dakota that limited first year credit card fees to 25% of the credit limit of each borrower.
Ironically, the bank in that case, First Premier Bank of South Dakota, argued that it was helping high risk borrowers by extending credit to folks that were not able to get it elsewhere. It was reported that First Premier charges a $95 processing fee to open an account in addition to the $75 annual fee, all on an account with a $300 credit limit.
Another big area for consumer complaints is mortgages. Consumer mortgage complaints are very common as well. Many folks, including Massachusetts bankruptcy clients, are looking for loan modifications. Loan payments are an area of complaints too.
One thing at the national level that the CFBP is working on is regarding disclosure on mortgage documents. For years some information was required to be disclosed, but the CFPB is pushing for more openness and additional disclosures. For example, wind flood insurance, sometimes called “force placed” insurance is required on more mortgages these days, for good reason. And it’s different insurance from typical “hazard” insurance. However, the costs can be astronomical.
Disclosure of those costs are helping folks about to buy houses understand some of their costs. Many folks in their homes are forced to take on wind and flood insurance that the lenders buy…and they don’t buy the cheapest insurance necessarily.
The CFPB regulation over banks is one area where small consumers can get relief. For example, the most common types of complaints they are dealing with is the opening and closing of bank accounts. This also includes overdraft fees, and other fees outlined or not in the disclosure statements. The bank agreements allow for wide discretion which is often used against small depositors.
A look at the docket includes numerous important items: reverse mortgages, which affects many seniors and folks not able to understand the terms of the agreement, is an item where the public comment period is up at the end of next month. Expect a ruling thereafter.