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Powering Up: States Gain Authority to Take On Credit Bureaus
Plus: TAB Bank called out for predatory practices
A new interpretive rule issued by the Consumer Financial Protection Bureau (CFPB) gives states the authority to protect consumers from abuses of the credit reporting industry.
The credit reporting industry is notorious for failing consumers — whether in terms of abusive data collection practices or refusal to correct credit report errors.
“America’s credit reporting oligopoly has little incentive to treat consumers fairly when their credit reports have errors,” said CFPB Director Rohit Chopra. “Today’s report is further evidence of the serious harms stemming from their faulty financial surveillance business model.”
The consumer advocacy attorneys at Finn Law Group have more on what this new rule means for consumers.
According to Finn:
States can now enact safeguards against data abuse and misuse to further reduce risks to their citizens. This would give those individuals the right to know what data is being collected about them, the right to have inaccurate data corrected, and in some cases, the right to opt out of data collection altogether.
In addition, states can take enforcement action against companies that violate these laws. The CFPB affirms that, while federal law does not prohibit state activity in this area, it does not preempt such activities. The debate over whether or not states should have a role in regulating the credit market has also come to an end.
The move by the CFPB is one more step in the direction of pro-consumer reform. That’s reform that’s long overdue in an industry known for abusing consumers without apology or correction.
Chi Chi Wu, staff attorney at National Consumer Law Center, said of the industry:
“It is way past time for reform. The CFPB is the supervisor and regulator for the credit bureaus; what other industry would dare refuse to provide meaningful relief in 98% of the consumer complaints referred to them by their supervisor? This level of impunity against its own regulator must be met with swift, assertive, and uncompromising action that fundamentally reforms the credit bureaus in a deep, structural manner.”
A coalition of consumer groups is calling on the Federal Deposit Insurance Corporation (FDIC) to take regulatory action against Utah-based TAB Bank for what the groups call “predatory” lending practices.
The groups, including Consumer Federation of America (CFA), Americans for Financial Reform (AFR), Center for Responsible Lending (CRL), and National Consumer Law Center (NCLC) sent a comment letter to the FDIC detailing consumer complaints against TAB’s lending partner, EasyPay Finance and also submitted a petition signed by more than 44,000 individuals calling for FDIC action to rein-in the bank’s practices.
In its comment letter, the coalition argues: “In assessing whether TAB Bank is appropriately serving its communities, the FDIC should consider not merely access to credit but also the quality of credit extended. Predatory credit at high interest rates that borrowers cannot afford to repay, credit designed to evade state interest rate laws, credit that is the result of deceptive practices, and credit that leads to violations of debt collection, credit reporting, and other laws does not meet the convenience and needs of communities.”
The petition spells out the predatory practices of TAB’s partner, EasyPay Finance. EasyPay uses TAB bank to originate loans in order to evade state interest rate caps. This allows EasyPay to charge interest rates on auto repair and other loans of up to 189%.
The petition notes that “the typical predatory loan borrower will make payments for months that go mostly to interest and do little to pay off the loan,” and urges the FDIC to stop “Transportation Alliance Bank and any other bank from fronting for predatory lenders evading state interest rate limits.”