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Ally to repay $80 million to consumers it discriminated against

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When you shop for a car, auto lenders work with your auto dealer to offer you financing for your loan. Auto lenders consider the terms of your loan, your credit history, and other factors, to set a risk-based interest rate on your loan.  Many of them have policies that allow an auto dealer to “markup” that interest rate. Lenders use a part of that markup to compensate dealers for the valuable services they perform in arranging financing. Unfortunately, that creates incentives for dealers to charge higher interest rates and may be implemented in a way that results in illegal discrimination.

Ally Financial Inc. and Ally Bank have markup policies that have resulted in illegal discrimination against over 235,000 African-American, Hispanic, and Asian and Pacific Islander borrowers.

Today, along with the Department of Justice (DOJ), we’re ordering Ally Financial Inc. and Ally Bank to pay $80 million in damages to the consumers that were harmed by their discriminatory markup policy between April 2011 and December 2013.

Ally will pay a settlement administrator to contact consumers who are due to receive compensation. Along with the DOJ, we will identify victims and calculate their damages by looking at loan data.

Protections against discrimination

Remember, it’s illegal for a creditor to discriminate in any aspect of a credit transaction based on certain characteristics. If you believe a lender has discriminated against you for any reason, you can submit a complaint online or by calling (855) 411-2372.

You can learn more about the warning signs of discrimination and what you can do to protect yourself.

Protect yourself

In the meantime, watch out for scammers claiming that they will get you money. When large numbers of consumers get damages, scammers sometimes pop up. The scammer may charge you a fee or try to steal your personal information. If someone tries to charge you, tries to get you to disclose your personal information, or asks you to cash a check and send a portion to a third party in order to “claim your refund,” it’s a scam. Please call us at (855) 411-CFPB to report such scams.

What we’ve been doing for youth financial capability

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Young people shouldn’t have to repeat financial mistakes made by earlier generations. That’s why we support financial education in K-12 classrooms. This year, we’ve reached some exciting milestones.

To help the public better understand the financial education landscape, we made some recommendations for helping young Americans improve their financial capability. We also shared these during our  national conference on youth financial education and capability.

The conference brought together over 100 public, private, and nonprofit organization leaders from across the country who are dedicated to advancing the financial education of American youth. We discussed:

  • Challenges and opportunities  for integrating personal finance into existing curriculum and offering stand-alone high school personal finance classes
  • Increasing access to high-quality teacher training in financial education
  • Strengthening and expanding school-based financial education efforts  by using online and mobile technology
  • The need for financial education initiatives to help students develop  decision-making and financial skills

Check out our conference summary to learn more about the conference.

We’re committed to helping consumers improve their capability to make sound financial choices by providing innovative tools and information online, including resources like Ask CFPB and Paying for College.

Stay tuned to learn more about what we’re doing next in financial education.

Explainer: What the multi-billion dollar Ocwen enforcement action means for you

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Along with authorities in 49 states, and the District of Columbia, we’re filing an order requiring the largest nonbank mortgage loan servicer in the country, Ocwen Financial Corporation, to pay for years of systemic misconduct in mortgage servicing. The misconduct included unfair shortcuts, unauthorized fees, deception, illegal foreclosures, and other illegal practices. Ocwen will be required to provide $2 billion in loan modification relief to its customers and $125 million in refunds to consumers whose homes were foreclosed.

Since 2009, Ocwen has been taking advantage of homeowners with shortcuts and unauthorized fees and deceiving consumers about loan modifications. We have mortgage rules that will take effect in January 2014 that establish strong protections for struggling homeowners facing foreclosure.

We have answers to some of your questions about this case:

Q: What is a mortgage servicer and how do I know if Ocwen services my loan?

A: The company that you make your monthly payment to is your mortgage servicer. Many of the loans administered by servicers are owned by third-party investors, so they may or may not be a lending institution and may or may not own your loan. A mortgage servicer administers mortgage loans, including collecting and recording payments from borrowers. A servicer also handles loan defaults and foreclosures, and may offer programs to avoid foreclosure to assist delinquent borrowers.

You can find out whether your mortgage is serviced by Ocwen by calling (800) 337-6695 or emailing your question to ConsumerRelief@Ocwen.com.

Q: How will I know whether this settlement affects me?

A: This settlement involves Ocwen and two companies recently purchased by Ocwen: Litton Loan Servicing LP and Homeward Residential Holdings LLC (previously known as American Home Servicing, Inc. or AMHSI). If your loan was serviced by Ocwen, Litton, or Homeward, you lost your home to foreclosure between Jan. 1, 2009 and Dec. 31, 2012, and if you meet other criteria, the settlement administrator will mail you a notice letter and claim form.

For loan modification options, you may be contacted directly by Ocwen. You can also contact Ocwen for information about specific loan modification programs and find out if you will be impacted by this settlement. You can reach Ocwen by calling (800) 337-6695 or emailing ConsumerRelief@Ocwen.com.

Q: Will there be payments to foreclosure victims?

A: Yes. The settlement administrator will mail Notice Letters and Claim Forms to borrowers who lost their home due to foreclosure between January 1, 2009 and December 31, 2012, whose loans were serviced by Ocwen, Homeward, or Litton, and who meet other criteria. Borrowers who receive payments will not have to release any claims and will be free to seek additional relief in the courts.

Q: How do I know if I am eligible for payment as a foreclosure victim?

A: You are eligible if you meet the following requirements:

  • Your home was foreclosed between January 1, 2009 and December 31, 2012.
  • At the time of foreclosure, the loan was serviced by Ocwen, Homeward, or Litton.
  • You made at least three payments on the loan.
  • You lived or intended to live in the property as your principal place of residence at the time of the origination of the loan.
  • The property was a one-to-four unit residential property.
  • The unpaid principal balance of the first-lien did not exceed $729,750 for a one-unit property, $934,200 for a two-unit property, $1,129,250 for a three-unit property, or $1,403,400 for a four-unit property.
  • You make a valid claim.

Q: If I am eligible for foreclosure relief, how much will I get?

A: That depends. All consumers who successfully file eligible claims will receive an equal payment based on the total number of successful claims.

Q: What about those borrowers who continued making payments?

A: Borrowers who are current on their payments but are nonetheless struggling to make their payments and are “underwater” on their mortgages may qualify for loan modifications that will result in reductions in principal.

For loan modification options, borrowers may be contacted directly by Ocwen.

Borrowers can also contact Ocwen themselves to obtain more information about specific loan modification programs and inquire whether the borrower may be impacted by this settlement. You can reach Ocwen by calling (800) 337-6695 or emailing ConsumerRelief@Ocwen.com.

Q: What laws did Ocwen violate?

A: Ocwen is charged with engaging in unfair and deceptive acts or practices in violation of the federal Consumer Financial Protection Act and state laws. Ocwen’s unlawful conduct has resulted in injury to consumers who have had home loans serviced by Ocwen, Litton , and Homeward. The harm includes payment of improper fees and charges, unreasonable delays and expenses to obtain loss mitigation relief, and improper denial of loss mitigation relief.

We have some more answers to specific questions about the Ocwen settlement.

Join us in making mortgage shopping easier

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If you read our blog regularly, you’ve gotten the picture by now: We care a lot about making your experience with mortgages better.

We just released rules that redesign the forms you get when applying for and closing on a mortgage, and we made sure to seek your feedback throughout that process. And in January, our rules that help make the mortgage market safer go into effect.

Those are important policy changes. But we also want to help you, personally, with your goal of owning a home – with your mortgage options, your shopping process, your comparisons, and your decisions. We want to give you guidance you can trust, tools that help you make decisions, and information that can help make you a savvier negotiator – we’re calling this effort “Owning a Home.”

But we need your help. Your feedback is the most crucial part of making sure that what we do meets what you need. Our tools don’t work if they don’t help you make decisions, or if they help you with decisions you don’t think are important. They don’t work if they are overwhelming or unclear.

Over the coming months, we will be building and releasing these tools. We’re excited to kick off our “Owning a Home” beta group, and we hope you sign up!

What is a beta group?
It’s a way for us to communicate with you as we are building tools. The goal of the group is twofold: to help you in your personal mortgage journey, and, in the process, for you to help us make the experience better for others. Even if you’re not home shopping right now but think you might be at some point in the future, sign up! Your feedback now will help make these tools more useful.

What if I am a realtor/housing counselor/other professional who helps other people who are shopping for a home? Can I sign up for the beta group?
Yes! If you are a professional who helps other people with the home-buying process, we want your feedback too. You play a critical role in this process, so we want these tools to be something you trust and would use with your clients.

What do I agree to do if I sign up?
Give us your feedback! We think your opinions and experiences matter. We’ll periodically send you surveys asking for your input on new product features, where you are in your mortgage journey, and what you think is important for us to consider. We’ll use that feedback when we decide what to build next.

What do I get out of it?
You’ll get a chance to influence how our tools develop over time. You’ll also be the first to know when new features are launched or when we make changes. Finally, you’ll be able to participate in webinars that will provide you with background on the tools, offer examples of how you can use them, and give you a chance to ask any questions you might have.

We hope you’ll join us in making it easier to shop for a mortgage – sign up to be a beta user today.

Sunshine for student financial products

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Today, Director Cordray is alerting financial institutions about the potentially risky practice of making secret payments to colleges and universities to market deposit accounts, prepaid cards, debit cards, and other financial products to students. We’re calling on financial institutions to voluntarily make these agreements available on their websites.

We’re also releasing a report on college credit card agreements, which shows a continued decline from 2011 to 2012.

Earlier this year, we set out to better understand how financial products are marketed to college and university students. We heard from many colleges, universities, financial institutions, as well as students and their families. We found that financial product marketing partnerships have shifted away from credit cards towards other products.

Congress created reforms to help consumers better understand the nature of these marketing partnerships. The Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act) requires credit card issuers to report to us the terms and conditions of any college credit card agreement with an institution of higher education.

This includes the number of credit card accounts, amount of payments made to the company, the number of new accounts, and any agreement between the company and the college or university. You can see these agreements in our public database of college credit card agreements. Check it out and see if your school has an agreement to market credit cards.

Including other products

The CARD Act requirement is limited to credit cards and doesn’t include other financial products marketed through schools. In a public comment submitted to us by the National Association of College and University Business Officers (NACUBO), the association described several best practices, particularly as they relate to debit card arrangements used to access student loan and scholarship proceeds. NACUBO urges institutions to “publicly disclose the terms of any agreements.”

Making these agreements available for students and their families is a sign of a financial institution’s commitment to transparency when marketing deposit accounts, prepaid cards, financial aid disbursement accounts, and other financial products. However, not publicly disclosing these agreements raises potential consumer protection risks.

According to a survey of school officials, 69 percent of debit card arrangements are already available to the public. However, finding these agreements can be troublesome. You may even need to file a formal request under state open records laws to see them. Easier access to these arrangements will increase the public’s confidence that these agreements are structured to help students build a bright financial future.

In the new year, we’ll be contacting financial institutions to find out more about their commitment to transparency. We’ll be asking financial institutions about whether existing agreements are made available to students and families in a clear and conspicuous place on their company’s website. Financial institutions or anyone who wants to share information about the availability of these agreements can email us.

If you are a student, or family member of a student, you can check out our guide to Managing Your College Money and our consumer advisory on accessing student loans and scholarships.

If you have a complaint about a financial product or service, you can submit a complaint online or by calling (855) 411-2372.

Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about the CFPB’s work for students and young Americans, visit consumerfinance.gov/students.

What’s on your international money transfers paperwork?

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If you send money to other countries, you can now get more information about exchange rates and costs before you pay for the transfers. That’s because of a new federal rule that went into effect at the end of October. Here’s a closer look at the information you’ll receive before and after you send money, and how you can use it.

Learn more about the rule and how you can help spread the word.

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The CFPB blog aims to facilitate conversations about our work. We want your comments to drive this conversation. Please be courteous, constructive, and on-topic. To help make the conversation productive, we encourage you to read our comment policy before posting. Comments on any post remain open for seven days from the date it was posted.