The Consumer Financial Protection Bureau will make sure consumers have the information they need to choose the consumer financial products and services that are best for them.
If you’ve ever applied for a credit card, a student loan, or a mortgage, you may have felt like you were signing your name to pages of incomprehensible fine print—and weren’t quite sure what was in there. Fine print can hide fees and rate increases, allowing companies to advertise one low price when the real price is much higher. Fine print can also make it impossible to make a direct comparison between two different loans because differences that could cost a lot of money are difficult to see and understand.
The CFPB will work to ensure that financial companies make the true price clear to consumers so they can compare prices and features of consumer financial products and services and make the decisions that are best for them. Companies shouldn’t compete by figuring out how to fool you best. Transparency means that markets really work for consumers—and that means that companies will be rewarded for offering lower prices or better features.
A cop on the beat
The CFPB will also be a cop on the beat to patrol the consumer financial services markets. Financial companies that break the laws will be held accountable. That’s fair to customers, and it is fair to the lenders who play by the rules and work to provide real value for their customers.
The CFPB will set up a system to receive your complaints and answer your questions about consumer financial products and services. We will use a website and toll-free number to help consumers—and to help us do a better job of enforcing the law.
Problems in the consumer credit market have caused real harm to real people. The stories below illustrate some of what people have encountered and how the Consumer Financial Protection Bureau will work to prevent it from happening again. Later this year, the CFPB will launch a Consumer Response Center to begin to receive complaints and to help resolve questions about consumer financial products and services.
Aggressive mortgage lending that the homeowner cannot repay
Karen, 32, is an airport security supervisor from Pennsylvania. When she refinanced her mortgage, her broker promised her a low fixed-rate loan but instead gave her two more expensive loans. Why? She didn’t know it at the time, but giving her both a large adjustable-rate first loan and a second smaller loan increased the fees she paid to the broker. Karen told the lender what she had in savings and her income, but the broker changed the numbers on her form. (Some brokers changed numbers in order to make borrowers eligible for higher loan amounts than they could otherwise qualify for—and to close a deal for a bigger mortgage that will give the broker bigger fees.) The broker scheduled Karen for a late-night closing and did not give her the closing documents at the time of closing, so she was not aware of these changes. The consumer bureau will work to prevent similar abuses, in part by enforcing the requirement in the Dodd-Frank Wall Street Reform and Consumer Protection Act that mortgage lenders document and verify a borrower’s income or assets before making a loan to ensure that the borrower can afford to repay it.
Arbitrary rate increases on credit cards
Robin, 55, is a seventh-grade science teacher from Georgia. Her credit card company increased the rate on her existing credit card balance from 10.90% to 17.90%, even though she paid her account on time every month. The increase has been particularly difficult for her family because her husband’s landscaping business has been hard hit recently by the financial crisis. The consumer bureau will enforce the Credit CARD Act, which President Obama signed in 2009 to ban credit card issuers from arbitrarily raising rates on existing balances and other unfair practices. The CFPB will also be responsible for updating the credit card rules moving forward.
Unexpected overdraft fees
Andrew, 62, is a retired Baltimore police officer and Vietnam veteran who manages a fitness center for seniors. Andrew had both a primary checking account and a separate “veteran’s account” in which he received $123 in benefits each month. In 2009, his bank made a mistake that caused confusion about a replacement debit card for one of his accounts. The bank had also automatically enrolled Andrew’s veteran’s account, including transactions using the debit card, in “overdraft” protection that he never asked for—a practice that has since been prohibited. When Andrew used the replacement card—expecting it to withdraw from his primary checking account—he was hit with hundreds of dollars in overdraft fees on his veteran’s account. Andrew discovered the bank’s error and explained the situation, but the bank was willing to refund only part of the fees. The consumer bureau will examine big banks to ensure that they are following the rules that now require banks to give consumers a real choice of whether to join overdraft protection programs for ATM and debit card transactions. The CFPB will update those rules to respond to changes in the marketplace over time.