Tuesday, December 22, 2015

CFPB Monthly Complaint Snapshot Examines Money Transfer Complaints (Dec 2015)

[re-posted media release from the CFPB] 

CONTACT:Office of CommunicationsTel: (202) 435-7170


Report Also Includes In-Depth Look at Consumer Complaints from Georgia 
WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) released its latest monthly consumer complaint snapshot, highlighting consumer complaints about money transfers. The report shows that consumers’ complaints about money transfers center around trouble safely and efficiently sending money, and complaints about being victims of fraud. This month’s snapshot also highlights trends seen in complaints coming from Georgia. As of Dec. 1, 2015, the Bureau has handled over 770,100 complaints across all products. 
“People rely on the money transfer process to make payments and take care of family members that they cannot be with,” said CFPB Director Richard Cordray. “Through rules on international money transfers and continued supervision of this important financial service, the Bureau is working to make sure that consumers can easily send money without having to worry about delays or hidden fees.” 
Product Spotlight: Money Transfer 

Every year, people send tens of billions of dollars through money transfer services. Consumers send funds both abroad and domestically in order to make payments, and to help family and friends pay for important needs such as school fees, rent for elderly relatives, and other necessary living expenses. In 2013, the CFPB finalized rules on international money transfers that provided new protections such as disclosures on third party fees and exchange rates, error resolution, and cancellation rights for consumers sending money. As of Dec. 1, 2015, the Bureau had handled approximately 5,100 money transfer complaints, which include both domestic and international transfers. Some of the findings in the snapshot include:
  • Consumers victimized by fraud: Of all complaints about money transfers, 42 percent of them involved consumers complaining about being victims of fraud. A common fraud tactic mentioned by consumers involves the fraud perpetrator asking for a money transfer in order to provide relief to a family member in need. While this is the most common type of money transfer complaint, it is not targeted at the actual money transfer service being provided.    
  • Problems transferring money: Consumers complain about problems arising when they try to complete a money transfer. Some consumers complained that the amount of money transmitted was smaller than expected, while others mentioned the money they sent being significantly and unexpectedly delayed.     
  • Lack of adequate customer service: Many complaints about money transfers centered around problems consumers faced when they contacted the company for help. People complained about long hold times when attempting to speak to a representative, and that when they did manage to get through to someone, they were provided confusing or inadequate information. Other consumers said when they called they were simply unable to speak to anyone from the company.
  • Issues resolving errors: Consumers complain that refunds on money transfers are often subject to long delays, and that their rights in resolving an error are not made clear by the company they are working with.
  • Most-complained-about companies: MoneyGram, Western Union, PayPal, and JPMorgan Chase were the four companies about which the CFPB has received the most money transfer complaints. Between July 2015 and September 2015, the four companies accounted for 80 percent of all money transfer complaints. Company-level information should be considered in the context of company size and activity in the relevant market.
Company-level complaint data in the report uses a three-month rolling average of complaints sent by the Bureau to companies for response. This data lags other complaint data in this report by two months to reflect that companies are expected to close all but the most complicated complaints within 60 days. After the CFPB forwards a company the complaint, the company has 15 days to respond, confirming a commercial relationship with the consumer.
National Complaint OverviewAs of Dec. 1, 2015, the CFPB has handled 770,100 complaints nationally. Some of the highlights from the statistics in this month’s snapshot report include:
  • Complaint volume: For November 2015, the two most-complained-about financial products were debt collection and mortgages, representing nearly half—49 percent—of complaints submitted. Overall, the CFPB saw a 12 percent decrease in complaint volume between October 2015  and November 2015.
  • Product trends: In a year-to-year comparison examining the time periods of September to November, complaints about prepaid products rose 215 percent. Between Sep. 1 and Nov. 31, the CFPB received 442 complaints about prepaid products. Payday loan complaints showed the greatest decrease—14 percent—during the same time period.
  • State information: The District of Columbia and Delaware are the two places with the highest complaint volume per capita in the country. The District of Columbia had 674 complaints per 100,000 people, while Delaware had 433 complaints per 100,000. 
  • Most-complained-about companies: The top three companies about which the CFPB received the most complaints between July and September of 2015 were Equifax, TransUnion, and Experian.
Geographic Spotlight: GeorgiaThis month, the CFPB highlighted Georgia and the Atlanta metro area for the report’s geographic spotlight. As of Dec. 1, 2015, consumers in Georgia have submitted 31,300 of the 770,100 complaints the CFPB has handled. Of those complaints, 23,600 have come from consumers in the Atlanta metro area. Findings from the Georgia complaints include:
  • Mortgages are the most-complained-about product: Mortgages have been the most-complained-about product in the Atlanta metro area and Georgia as a whole. Of the 31,300 complaints submitted by consumers in Georgia, 33 percent have been related to mortgages. 
  • Georgia complaint volume mostly mirrors national trends: While consumers in Georgia complain about mortgages at a slightly higher rate than consumers nationally, complaint volume about other financial products is similar to what is seen on the national level.
  • Most-complained-about companies: Equifax, Bank of America, Experian, TransUnion, and Wells Fargo were the five most-complained-about companies from consumers in Georgia.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, established consumer complaint handling as an integral part of the CFPB’s work. The CFPB began accepting complaints as soon as it opened its doors in July 2011. It currently accepts complaints on many consumer financial products, including credit cards, mortgages, bank accounts and services, private student loans, vehicle and other consumer loans, credit reporting, money transfers, debt collection, and payday loans.
The Bureau expects companies to respond to complaints and to describe the steps they have taken or plan to take to resolve the complaint within 15 days of receipt. The CFPB expects companies to close all but the most complicated complaints within 60 days.
In June 2012, the CFPB launched its Consumer Complaint Database, which is the nation’s largest public collection of consumer financial complaints. When consumers submit a complaint they have the option to share publicly their explanation of what happened. For more individual-level complaint data and to read consumers' experiences, go to the Consumer Complaint Database at:www.consumerfinance.gov/complaintdatabase/.
To submit a complaint, consumers can:
  • Go online at www.consumerfinance.gov/complaint/
  • Call the toll-free phone number at 1-855-411-CFPB (2372) or TTY/TDD phone number at 1-855-729-CFPB (2372)
  • Fax the CFPB at 1-855-237-2392
  • Mail a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244
  • Additionally, through “Ask CFPB,” consumers can get clear, unbiased answers to their questions at Ask CFPB.

The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.  

Wednesday, December 16, 2015

EZCORP Ordered to Pay $10 Million for Illegal Debt Collection Tactics (re-post)


Bureau Issues Industry-Wide Warning on Home, Workplace Debt Collection Risks

WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) today took action against EZCORP, Inc., a small-dollar lender, for illegal debt collection practices. These tactics included illegal visits to consumers at their homes and workplaces, empty threats of legal action, lying about consumers’ rights, and exposing consumers to bank fees through unlawful electronic withdrawals. The Bureau ordered EZCORP to refund $7.5 million to 93,000 consumers, pay $3 million in penalties, and stop collection of remaining payday and installment loan debts owed by roughly 130,000 consumers. It also bars EZCORP from future in-person debt collection. In addition, the Bureau issued an industry-wide warning about collecting debt at homes or workplaces. 
“People struggling to pay their bills should not also fear harassment, humiliation, or negative employment consequences because of debt collectors,” said CFPB Director Richard Cordray. “Borrowers should be treated with common decency. This action and this bulletin are a reminder that we will not tolerate illegal debt collection practices.” 
Until recently, EZCORP, headquartered in Austin, Tex., and its related entities provided high-cost, short-term, unsecured loans, including payday and installment loans, in 15 states and from more than 500 storefronts. It did this under names including “EZMONEY Payday Loans,” “EZ Loan Services,” “EZ Payday Advance,” and “EZPAWN Payday Loans.” On July 29, 2015, after the Bureau launched its investigation, EZCORP announced that it would cease offering payday, installment, and auto-title loans in the United States. 
The CFPB found that EZCORP collected debts from consumers through unlawful in-person collection visits at their homes or workplaces, risked exposing consumers’ debts to third parties, falsely threatened consumers with litigation for non-payment of debts, and unfairly made multiple electronic withdrawal attempts from consumer accounts, causing mounting bank fees. The CFPB alleges that EZCORP violated the Electronic Fund Transfer Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against unfair and deceptive acts or practices. Specifically, the CFPB’s investigation found that EZCORP: 
  • Visited consumers’ homes and workplaces to collect debt in an unlawful way: Until at least October 2013, EZCORP made in-person collection visits that disclosed or risked disclosing consumers’ debt to third parties, and caused or risked causing adverse employment consequences to consumers such as disciplinary actions or firing. 
  • Illegally contacted third parties about consumers’ debts and called consumers at their workplaces despite being told to stop: Debt collectors called credit references, supervisors and landlords, and disclosed or risked disclosing debts to third parties, potentially jeopardizing  consumers’ jobs or reputations. It also ignored consumers’ requests to stop calls to their workplaces. 
  • Deceived consumers with threats of legal action: In many instances, EZCORP threatened consumers with legal action. But in practice, EZCORP did not refer these accounts to any law firm or legal department and did not take legal action against consumers on those accounts. 
  • Lied about not conducting credit checks on loan applicants: From November 2011 to May 2012, EZCORP claimed in some advertisements it would not conduct a credit check on loan applicants. But EZCORP routinely ran credit checks on applicants targeted by those ads. 
  • Required debt repayment by pre-authorized checking account withdrawals: Until January 2013, EZCORP required many consumers to repay installment loans through electronic withdrawals from their bank accounts. By law, consumers’ loans cannot be conditioned on pre-authorizing repayment through electronic fund transfers. 
  • Exposed consumers to fees through electronic withdrawal attempts: EZCORP would often make three simultaneous attempts to electronically withdraw money from a consumer’s bank account for a loan payment: for 50 percent, 30 percent, and 20 percent of the total due. The company also often made withdrawals earlier than promised. As a result, tens of thousands of consumers incurred fees from their banks, making it even harder to climb out of debt when behind on payment. 
  • Lied to consumers that they could not stop electronic withdrawals or collection calls or repay loans early:  EZCORP told consumers the only way to stop electronic withdrawals or collection calls was to make a payment or set up a payment plan. In fact, EZCORP’s consumers could revoke their authorization for electronic withdrawals and demand that EZCORP’s debt collectors stop calling. Also, EZCORP falsely told consumers in Colorado that they could not pay off a loan at any point during the loan term, or could not do so without penalty. Consumers could in fact repay the loan early, which would save them money. 
Enforcement ActionUnder the Dodd-Frank Act, the CFPB is authorized to take action against institutions or individuals engaged in unfair, deceptive or abusive acts or practices, or that otherwise violate federal consumer financial laws. Under the consent order, EZCORP must: 
  • Pay $7.5 million to 93,000 consumers: EZCORP is ordered to refund $7.5 million to about 93,000 consumers who made payments after illegal in-person collection visits or who paid fees to EZCORP or their banks because of unauthorized or excessive electronic withdrawal attempts covered by this order. 
  • Stop collection of its remaining payday and installment debt: EZCORP must stop collection of an estimated tens of millions of dollars in defaulted payday and installment loans allegedly owed by about 130,000 consumers, and may not sell those debts to any third parties. It must also request that consumer reporting agencies amend, delete, or suppress any negative information related to those debts. 
  • Stop illegal debt collection practices: If EZCORP decides again to offer payday or installment loans, it cannot, among other practices, make in-person collection visits, call consumers at their workplace without specific written permission from the consumer, or attempt electronic withdrawals after a previous attempt failed because of insufficient funds without consumers’ permission. 
  • Pay a civil penalty of $3 million: EZCORP must pay a penalty of $3 million to the CFPB’s Civil Penalty Fund. 
The full text of the CFPB’s consent order is available at:http://files.consumerfinance.gov/f/201512_cfpb_ezcorp-inc-consent-order.pdf 
Warning Against Illegal Debt Collection TacticsToday, the CFPB also issued a bulletin warning the financial services industry, and in particular lenders and debt collectors, about potentially unlawful conduct during in-person collections. Lenders and debt collectors risk engaging in unfair or deceptive acts and practices that violate the Dodd-Frank Act and the Fair Debt Collection Practices Act when going to consumers’ homes and workplaces to collect debt. 
The bulletin highlights that in-person collection visits may be harassment and may result in third parties, such as consumers’ co-workers, supervisors, roommates, landlords, or neighbors, learning that the consumer has debts in collection. Revealing such information to third parties could harm the consumer’s reputation and result in negative employment consequences. The bulletin also highlights that it is illegal for those subject to the law to engage in practices such as contacting consumers to collect on debt at times or places known to be inconvenient to the consumer, except in very limited circumstances. 
The bulletin offering guidance on debt collection practices can be found here:http://files.consumerfinance.gov/f/201512_cfpb_compliance-bulletin-in-person-collection-of-consumer-debt.pdf                                                                                                                                                                                                         ###

On December 16, 2015, the CFPB announced a consent order with EZCORP, Inc., a short-term, small-dollar lender, for illegal debt collection practices, some of which were initially discovered during the course of a Bureau examination. These practices related to in-person collection visits at consumers’ homes or workplaces, risking disclosing the existence of consumers’ debt to unauthorized third parties, falsely threatening consumers with litigation for non-payment of debts, misrepresenting consumers’ rights, and unfairly making multiple electronic withdrawal attempts from consumer accounts which caused mounting bank fees. EZCORP violated the Electronic Fund Transfer Act and the Dodd-Frank Act’s prohibition against unfair or deceptive acts or practices. EZCORP will refund $7.5 million to 93,000 consumers, pay a $3 million civil money penalty, and stop collection of remaining payday and installment loan debts owed by roughly 130,000 consumers. The consent order also bars EZCORP from future in-person debt collection. In addition, the CFPB issued an industry-wide warning about potentially unlawful conduct during in-person collections at homes or workplaces. 

SOURCE: March 2016 issue of Supervisory Highlights, available at