Released: December 01, 2014
Consumer Action INSIDER - December 2014
Table of Contents
- What people are saying
- Did you know?
- Anti-arbitration petition delivered to PNC and Wells Fargo banks
- Debtors’ rights and social networking privacy
- Hotline Chronicles: Sometimes you’re ‘cool’ to cancel—sometimes not
- ‘Gainful Employment’ rule fails to fully protect students and taxpayers
- Federal consumer watchdogs have day at the ‘Beach’
- Serving America’s servicemembers, military families and veterans
- Class Action Database: AT&T must refund mobile ‘cramming’ charges
- ‘Primed and Prepped’ for money management
- Coalition Efforts: Mortgage data, deceptive practices and predatory loan pushback
- CFPB Watch: Prepaid protections proposed and in-language access
- About Consumer Action
What people are saying
Your San Diego training on empowering veterans and servicemembers was a great event. Very informative! — Edith Smith, African American Business Women of Vision (AABWV).
Did you know?
You don’t have to rack up credit card debt or get swept up in the holiday season’s commercialism. Instead, consider creating holidays that instill more meaning into the season and encourage more creativity and less frenzy. A great place to start looking for inspiration is the Center for a New American Dream, which offers tips and resources to “Simplify the Holidays” and help you reduce stress and increase personal fulfillment.
Anti-arbitration petition delivered to PNC and Wells Fargo banks
A petition signed by more than 67,000 consumers and activists was delivered Nov. 20 to the PNC Financial Services Group Inc. headquarters in Pittsburgh and the Wells Fargo & Co. headquarters in San Francisco calling on these banks to remove terms in their contracts that deny customers their right to a day in court.
Public Citizen delivered the petition to PNC, while Consumer Action delivered the petition to Wells Fargo. Consumer Action’s petition can be found here.
The petition was organized by national consumer and citizen groups Public Citizen, Consumer Action, The Other 98%, Alliance for Justice, American Association for Justice, Americans for Financial Reform and National Association of Consumer Advocates, and targeted the five biggest banks that use forced arbitration clauses: PNC, Wells Fargo, JPMorgan Chase, Citigroup and U.S. Bancorp.
Forced arbitration clauses, buried in the fine print, prevent consumers who have been harmed or ripped off from holding their bank accountable in court and instead force them to plead their case to a private arbitration provider picked by the banks. The result is that consumers cannot practically or fairly resolve disputes with powerful institutions or seek remedies for harm caused by wrongful conduct of such institutions.
The petition comes as the Consumer Financial Protection Bureau (CFPB) studies the use of forced arbitration by financial institutions against their customers. It has been nearly a year since the CFPB released its preliminary data on the arbitration study, confirming that the clause is prevalent in most everyday consumer financial product agreements. The CFPB is authorized to ban forced arbitration after it releases the final report.
“It’s not acceptable for banks to force consumers to give up legal rights in order to open an account or get a credit card,” said Linda Sherry, director of national priorities for Consumer Action. “Along with our allies, we call on these powerful large institutions to do the right thing and eliminate forced arbitration in their contracts.”
“The broad response that the petition has received around the country shows a strong consumer demand for an end to this rigged game designed by Wall Street,” said Christine Hines, consumer and civil justice counsel for Public Citizen’s Congress Watch division.
Debtors’ rights and social networking privacy
Each year, Consumer Action publishes as many as a dozen or more new consumer education resources. While many of these publications are developed as part of special educational partnerships, some are produced with money from our general financial literacy budget. Funding for this budget comes from general purpose grants, cy pres awards (from class action lawsuits) and other miscellaneous income, and typically is used to address a need that we feel is critical yet unmet. Two such publications, released last month, help consumers understand their rights when facing a potential debt collection lawsuit and direct social media users how to protect their privacy.
What to know when a debt goes from collections to court
Consumers at risk of being sued for an unpaid debt or already facing a debt collection lawsuit must know their rights and options if they have any hope of defending themselves or retaining the income and assets that are exempt from garnishment or levy under the law.
Consumer Action’s 16-page Debtors’ Rights: Protecting yourself from debt collection lawsuits helps consumers who owe money understand how to avoid a debt collection lawsuit, what the legal process is if they can’t avoid being sued, where to find free or low-cost legal help, the process of responding to a suit, their rights if they lose the case, and how to file a complaint against a debt collector if their rights have been violated.
“There has been an alarming increase in debt collectors prevailing in court not because they were in the right, but because the consumers they sued either weren’t aware of their rights or didn’t know how to preserve them,” said Linda Sherry, Consumer Action’s director of national priorities. “Our new guide to “debtor’s rights” urges people who owe money and are being pursued by collectors not to bury their heads in the sand—that just makes matters worse. Instead we give practical advice on how to deal with collection lawsuits.”
Keeping posts, tweets safe from prying eyes
As of January, according to Pew research, 74% of online adults use social networking sites, yet a more recent Pew survey found that eighty-one percent of people do not feel secure using social media to share private information with another trusted person or organization. These concerns are largely justified for social media users who don’t exercise reasonable caution, learn the data-use policies of each social network they participate in or take advantage of available privacy controls.
Privacy and Control for Social Media Users: How much do you want to share? presents the potential privacy risks in social networking and prepares social media users to make wise choices about what they share and who they share it with. It includes information about how to use the privacy controls on social networking websites and apps and offers tips for enjoying social media while still protecting their personal privacy.
“Everyone and her grandma is using social media these days,” noted Sherry. “Our publication is designed to remind people that ‘sharing’ too much can have drawbacks—sometimes quite serious ones like job loss or becoming the targets of scams and fraud.”
Both publications are available for free download at www.consumer-action.org and can be freely reproduced by consumer educators to distribute to their individual clients and throughout their communities.
Hotline Chronicles: Sometimes you’re ‘cool’ to cancel—sometimes not
James* signed a contract for pest control services sold by a door-to-door salesman. Later that day he changed his mind, but when he called to cancel, he was told there was a $170 cancellation fee. When he called Consumer Action’s hotline to complain, he learned that under the Federal Trade Commission (FTC) Cooling-Off Rule, James couldn’t be charged a cancellation fee as long as he let the company know within three days of the purchase.
Under the Cooling-Off Rule, consumers have three days to cancel a purchase of $25 or more under certain circumstances (see below). This right to cancel expires at midnight of the third business day after the sale.
To protect your rights under the Cooling-Off Rule, send your cancellation by certified mail. You can save almost $2 by tracking delivery on the U.S. Postal Service website instead of purchasing return receipt service.
Some states have stronger protections for canceling purchases, so check with your state consumer protection agency or attorney general’s office. If you paid for the service or goods with a credit card, you may have another way out if you have buyer’s remorse. For example, if you buy something with an American Express card and the merchant refuses to accept your return, AmEx will refund the full price (up to $300) for up to 90 days under its Return Protection benefit.
The ‘cool’ rule
You are entitled protections under the Cooling-Off Rule for:
- Door-to-door sales
- Sales at your workplace
- Sales that take place at temporary rented facilities like convention centers, hotel rooms or restaurants
It does NOT apply to:
- In-store purchases (although many merchants have generous merchandise return policies)
- Car sales (new or used)
Wait a minute—no cooling-off period for cars? Many consumers are surprised they can’t cancel a car purchase “just because.” After all, buyer’s remorse is more common on expensive purchases. (If a consumer gets a new car with serious mechanical issues, they have rights of redress under state “lemon laws,” but this can be a long road. Read “Lemon Law for New Cars” at the Nolo legal rights website.)
Used car sales are a different matter, as they are usually “as is” transactions, meaning there may not be a warranty to cover any repairs. However, you may still have some rights, for example if the dealer concealed defects he should have known about or made representations about the car's being in good condition, or if your state mandates warranty coverage. California allows the sale of two-day cancellation options when consumers buy a used car from a dealership. Cancellation options cost between $75 and $400, depending on the vehicle's sticker price, so Consumer Action recommends against buying them.
*Not this consumer's real name.
‘Gainful Employment’ rule fails to fully protect students and taxpayers
Late last month, the Department of Education (ED) released its latest gainful employment rule intended to rein in underperforming educational programs. The rule aims to prevent programs with extremely poor student outcomes from receiving federal student aid funding. While many argue the rule is a step toward protecting vulnerable students from unmanageable debt burdens, it has its shortcomings.
Student loan debt has crossed the $1.2 trillion mark, with $1 trillion coming from taxpayer-funded federal student loans. Many for-profit vocational schools—including Corinthian Colleges and ITT Tech—have been targeted by government agencies for deceptive marketing techniques and abusive lending practices. At for-profit schools, up to 90 percent of revenue can come from federal funding—especially outrageous because for-profit schools enroll only 10 percent of students but are responsible for 50 percent of student loan defaults.
Consumer advocates argue that these schools should be required to show the public they are getting a return on the investment of tax dollars by adequately preparing graduates to get jobs. The Institute for College Access and Success warns the average graduate of a for-profit college owes more than students at public or non-profit colleges and that about 19 percent of for-profit college students will default on their loans in the first three years of paying them back. For-profit colleges say this is because they enroll disadvantaged students who are more likely to need financial help and struggle more after graduation. Critics, Consumer Action, its advocacy allies and the Obama Administration say it's because these colleges overcharge for degrees that don't deliver on their promise of employment opportunities after graduation.
Last summer, Consumer Action joined more than 50 student, civil rights, veteran, consumer and education organizations in urging the Obama Administration to strengthen its draft gainful employment regulation. But the outcome, released last month, was disappointing. The final rule fails to protect students who withdraw without getting a degree or certificate and lacks consideration of student loan default rates. (Between one-third and one-half of students at for-profit colleges drop out before they graduate, but they still owe the loans.)
Under the revised rule, programs will no longer be held accountable for their “cohort default rates” (CDR), the percentage of borrowers at a school who are defaulting on their student loans. Under the previous rule, colleges lost eligibility for federal aid when too many of their students defaulted on loans: Colleges with a CDR above 40 percent lost eligibility to offer student aid and colleges with three consecutive CDRs at or above 30 percent lost eligibility to offer both loans and federal Pell Grants.
Although loan default and failure to graduate are the most serious risks faced by for-profit college students, the final rule does not include a provision that would have considered the default rates of all students at a particular school. Instead, the rule considers only graduates’ debt burden relative to their post-graduation income, and does not consider the fate of students who leave without a degree. The new rule will cut off federal aid to school programs where graduates, on average, spend more than 8 percent of their discretionary earnings, and 20 percent of their total earnings, on federal student loan payments. (Discretionary income is defined as the amount by which adjusted gross income exceeds the poverty line.)
By failing to include a default rate standard, the Administration ignored the most vulnerable students: those who withdraw from failing programs with debt but no degree. "This rule lets drop-out factories off the hook at the expense of students and their financial security," said Rory O'Sullivan, deputy director of Young Invincibles, a coalition partner.
However, the ED estimates that 1,400 programs (99 percent of them at for-profit colleges) will fail the rule in the first year. Those programs enroll some 840,000 students—one in five of those attending for-profit institutions. Programs that repeatedly fail the test will become ineligible to receive federal student aid.
"The final gainful employment regulation does not do enough to stop the fleecing of students and taxpayers," said Pauline Abernathy, vice president of the Institute for College Access and Success, a coalition leader. The new rule “lets programs where most students borrow, but few graduate, keep using taxpayer dollars to bury students in debt they can’t repay, so long as they limit the debt of the few students who complete.”
The final rule also provides important, but incomplete, protections against programs that do not qualify students to get the license or certification legally required to practice in their intended field. In recent years, some for-profit colleges advertised programs that claimed to prepare students for a specific occupation, but after taking out loans, many students found that they were not qualified under state law to practice their chosen occupations.
Advocates are pleased that the final rule does not water down the debt-to-earnings metric applied to graduates. But since a majority of for-profit college students face barriers to completing their degrees—including adequate support from their schools—eliminating the proposed default rate standard seriously weakens the rule.
Federal consumer watchdogs have day at the ‘Beach’
Consumer advocates, collection industry representatives, state and federal regulators and academics gathered at California State University, Long Beach on Oct. 23 to exchange information about how debt collection and credit reporting issues affect Latino consumers, especially those with limited English proficiency.
Throughout the day, panelists mentioned several debt and credit-related problems experienced by Latinos. One panelist mentioned that Latinos are often hounded by collections related to affinity fraud (such as purchases pitched on Spanish-language infomercials or as part of multilevel marketing schemes) rather than by traditional credit card or auto loan collections. Panelists raised other issues: Latino consumers' tendency to believe that they owe a debt, when they may in fact have legal defenses to the debt; not understanding that debt can change hands several times; problems related to faulty translations of consumer contracts; needing help with such tasks as checking a credit report and disputing report errors; and collection agencies that illegally threaten arrest and deportation.
During one session, panelists talked about the importance of communicating with Spanish-speaking consumers. Collection industry representatives on the panel said that they communicate with consumers in Spanish when they know or determine that the consumer is a Spanish speaker. One industry representative, whose company hires third-party collectors, explained that his company will take back the file of a Spanish-speaking consumer if the subcontractor is unable to provide Spanish-speaking collectors.
One idea that was discussed during the session is whether the Consumer Financial Protection Bureau (CFPB) should mandate a centralized repository to hold documentation about the debt from origination through payoff, including information about its subsequent purchase by debt buyers. Some consumer advocates and industry speakers agreed with the idea, but it has been on the table for many months without earning widespread consensus in comments submitted to the CFPB’s Advance Notice of Rulemaking on debt collection issues that closed earlier this year.
In another session, as part of a broader discussion on access to justice, panelists discussed the high cost of providing Spanish interpreters in court. Courts in Colorado and New Mexico were mentioned as providing significant access to Spanish interpreters. California’s five-year court access plan and related funding issues were also discussed. When discussing Spanish-language videos created by courts, panelists agreed that not all limited-English speakers use the Internet. One panelist suggested that the CFPB use funds recovered in a recent enforcement action to pay for California’s language access program.
Another problem discussed at length was the difficulty that Latino consumers and others can experience when they try to obtain their annual free copy of a credit report. One panelist described problems seen among clients of a law school legal clinic, including difficulty answering security questions, problems related to spelling of names (e.g., Cortes vs. Cortez) and order of names (e.g., maiden name before husband’s last name, etc.). In response, a speaker from the credit reporting industry talked about the importance for credit bureaus to avoid giving a credit report to the wrong person. He noted that a consumer who is denied a report can call or write to request the report.
The day closed with a session on best practices for educating consumers about debt collection. Some of the ideas discussed may sound familiar to Consumer Action INSIDER readers. These included having material on websites available in Spanish; collaboration with other agencies; working with in-language media; reaching consumers early, even before they get to high school; and recognizing that Latino consumers are not monolithic, which might mean, for example, that a website is not the right tool for everyone. Some specific examples of best practices include members of ACA International, a debt collection industry association, speaking at schools about credit and debt management; the CFPB making information about new remittance rules available in consular offices; and referring consumers to the Consumer Reports en Español website.
As if anticipating the call to continue making consumer information available in Spanish, the host agencies FTC and CFPB did not disappoint. Both announced new tools for Latino consumers at the event.
The CFPB now has Spanish instructions for sending the debt collection “action letters” previously posted on their site.
For its part, the FTC unveiled new fotonovelas—picture books—including one based on debt collection complaints received from Spanish-speaking consumers.
As for a suggestion that the federal agencies write new rules to prohibit collectors from making threats related to a consumer's immigration status, no surprise announcement was made...but stay tuned.
Serving America’s servicemembers, military families and veterans
Last July, Consumer Action announced it was joining forces with the Association for Financial Counseling and Planning Education (AFCPE), Consumer Federation of America (CFA) and Visa Inc. to form the Veterans Financial Coalition to address the needs and financial challenges faced by servicemembers as they transition to civilian life.
In a joint statement, the Veterans Financial Coalition indicated it would address the needs of servicemembers through three main goals: (a) to educate transitioning servicemembers, veterans and the community service organizations that serve them, (b) to conduct research and advocate for consumer protection for veterans, and (c) to raise awareness of veterans’ financial needs.
Consumer Action has implemented activities to address those needs.
With a focus on educating transitioning servicemembers, military families and veterans, Consumer Action created a new educational module, “Economic Survival Guide for Servicemembers and Veterans,” and rolled it out at train-the-trainer workshops in San Diego, CA and Hampton, VA. The survival guide, developed by Consumer Action with a grant from Visa Inc., includes a question-and-answer backgrounder booklet, PowerPoint slides, a lesson plan with games and activities and a brochure. The materials are designed to help servicemembers, military families and veterans learn their rights and how to assert them when necessary.
When Consumer Action’s community outreach managers Linda Williams and Nelson Santiago teamed up for the rollout in San Diego, advocates with the Department of Defense, California Attorney General’s Office, Fleet & Family Support Center, Courage to Call and other local veteran support agencies gathered at the San Diego Convention Center for the train-the-trainer event. In Virginia, community-based organizations from all over the state and the District of Columbia turned out for a half-day training on how to use the new information, tools and resources.
The trainings were broken into three segments: “Engaging the Adult Learner,” a “leaders’ session” on effective ways to present the new module, and a “strategy session” on how to reach servicemembers, military families and veterans with the important information.
The Consumer Action outreach team opened each training session with an interactive pre-training activity. The activity—a true-and-false quiz—introduced participants to many of the topics that would be covered during the training, such as the Military Lending Act, the Servicemembers Civil Relief Act, signs of scams, student loans and facts about alternative and predatory financial services. Teams of participants competed for points, and the activity not only set the tone for the rest of the training, but afforded participants the opportunity to ask questions, tell stories and share their experiences working with servicemembers, military families and veterans.
Trainer Williams followed the true-and-false activity at both trainings with an interactive segment that provided participants with tips and strategies for engaging adult learners. Participants’ feedback on the training was 100% positive. When asked on the training evaluation to agree or disagree with the statement “With the information I learned today on adult learning principles, I can now more effectively engage my client,” 62.5% of the California training participants strongly agreed and 37.5% agreed, while 67.7% of the Virginia participants strongly agreed and 32.3% agreed.
Williams facilitated a robust discussion during the session on consumer protections for servicemembers and veterans, the credit side of alternative financial services and ways in which servicemembers and veterans can avoid and defend against identity theft. She reviewed consumer protections in detail, including the Military Lending Act (MLA) and the Servicemembers Civil Relief Act (SCRA).
Currently, MLA protections apply to these “closed-end” loans:
- Payday loans for no more than $2,000 and with a term of 91 days or fewer;
- Auto title loans with a term of 181 days or fewer; and
- Tax refund anticipation loans.
Closed-end credit is paid in set installments by a specific date, as opposed to “open-end” credit such as credit cards.
Williams noted that the Consumer Financial Protection Bureau (CFPB) and Department of Defense are working on new rules that are expected to expand the types of credit products covered by the MLA’s 36% interest rate cap for servicemembers. Williams told the audience that if the proposed rules to improve the MLA are adopted, it would close loopholes that allow lenders to offer products that escape current regulations. Williams encouraged participants at both trainings to submit comments in favor of updating and improving the MLA by the Nov. 28 deadline. Read the proposal here.
Santiago led the portion of the session that focused on the transactional side of alternative financial services, such as check cashers, money transfers and prepaid cards. He told participants that a common concern with these products is that they charge very high fees and target a disproportionate number of low-income and minority households, including servicemembers and veterans, who can ill afford the cost of these predatory products.
Williams and Santiago rolled out segments of the new module using different techniques and strategies, including games, question-and-answer sessions and videos, to demonstrate how to present the module in their own workshops.
The evaluations for both trainings were overwhelmingly positive. A San Diego participant answered “What would you change to improve the training?” with “I wouldn’t change a thing.” Another participant wrote, “Great info. Great training materials. We will use it in our next train-the-trainer workshop.”
Consumer Action is distributing the new materials to our network of community-based organizations. They are also available for free download to consumers and community educators on our website.
Class Action Database: AT&T must refund mobile ‘cramming’ charges
Class actions involving Red Bull energy drinks, Ghirardelli white “chocolate” chips, and Pure Via sweeteners were among 14 new cases added to the Consumer Action Class Action Database during October and November.
One notable case is Federal Trade Commission v. AT&T Mobility, LLC.
The Federal Trade Commission (FTC) brought the action against AT&T under the FTC Act, which prohibits unfair or deceptive acts or business practices. The FTC charged that AT&T billed consumers for unauthorized third-party charges, a practice known as mobile “cramming.” AT&T agreed to a $105 million settlement, with $80 million going to consumer refunds.
The FTC alleged that many AT&T customers have been paying up to $9.99 per month for random subscription services such as horoscopes, flirting tips, celebrity gossip, wallpaper or ringtones.
The FTC’s investigation into AT&T showed that the company received very high volumes of consumer complaints related to the unauthorized third-party charges placed on consumer’s phone bills. For some third-party content providers, complaints reached as high as 40 percent of subscriptions charged to AT&T consumers in a given month. In 2011 alone, the FTC’s complaint states, AT&T received more than 1.3 million calls to its customer service department about the charges.
Additionally, the FTC found that the phone bills masked the cramming by putting the unauthorized charges under the heading for “AT&T Monthly Subscriptions”, making it look like the subscriptions were part of basic mobile phone services. The settlement requires AT&T to clearly indicate any third-party charges and provide consumers the option to block third-party charges.
Current and former AT&T customers who paid for unauthorized third-party charges after Jan. 1, 2009, may be eligible for refunds. Click here to apply for the refund. The claim deadline is May 1, 2015.
‘Primed and Prepped’ for money management
In November, the Bayview YMCA in San Francisco invited Consumer Action’s Audrey Perrott back to the Primed and Prepped program’s current eight-week session on food service preparation and hospitality management. Kelly Armstrong, co-founder and project manager of Primed and Prepped, asked Perrott to present the MoneyWi$e “Teens and Money” module to the students enrolled in the program.
The Primed and Prepped program provides food service training to young men from underserved communities. Armstrong, a financial educator and long-term partner with Consumer Action, sought Perrott’s participation because an earlier MoneyWi$e training for previous program graduates proved to be beneficial. Consumer Action’s MoneyWi$e modules are created in partnership with Capital One Bank and contain a wealth of information on personal finance topics designed to empower consumers to manage their money, save and financially prosper.
Perrott has conducted financial literacy trainings for youth and adults at the Bayview YMCA before and said she welcomed the opportunity to return to the facility.
“I appreciate the opportunity to share information with these young men and empower them to make informed decisions. The activities in the module equip them to handle real-life scenarios,” explained Perrott.
The young men welcomed Perrott by preparing her a meal from their industrial kitchen. They were eager to learn and share information about their own banking and money management skills. One young man shared with his peers that he uses online banking as a tool to manage his account.
During the hour-and-a-half workshop, Perrott not only covered the substantive material from the module, but also gave the students a chance to put their knowledge into practice in a number of MoneyWi$e activities, including Wants vs. Needs, Jamal’s First Paycheck, Check Writing, Check Register, and Monica and Sarah. (All modules and activities can be found on the MoneyWi$e website.)
Armstrong requires the young men in her class to write in journals, where they chronicle what they have learned. Perrott provided the students with a take-home assignment to conduct a weekly spending evaluation and return to class with a journal entry on how they modified their spending or re-evaluated making a purchase based on what they learned in the classroom.
“Thank you for taking time out of your life to give a very insightful and meaningful financial literacy workshop to the students of Primed and Prepped,” said Armstrong.
Coalition Efforts: Mortgage data, deceptive practices and predatory loan pushback
Advocates have been speaking out to improve options and treatment for borrowers and banking customers.
Improving mortgage data collection. The Consumer Financial Protection Bureau (CFPB) is proposing to improve collection of Home Mortgage Disclosure Act (HMDA) data, as required by the Dodd-Frank Act. HMDA data provide a wealth of information to evaluate mortgage lending for patterns of discrimination and understand the dynamics of the mortgage market for underserved borrowers and communities of color. Consumer Action joined other advocates in a letter supporting the CFPB’s efforts to improve HDMA data collection and suggested additional data sets, including whether racial/ethnic data is self-reported or based on the lender’s observation, if applicants are first-time homebuyers and whether the applicant speaks English as a second language.
Consumer protections weakened by Reg AA repeal. In August, federal banking regulatory agencies repealed Regulation AA, which banned banks from unfair and deceptive acts covered by the FTC Credit Practices Rule (such as piling on late fees, retaining security interests in household goods, etc.). In its stead, the agencies jointly issued the Interagency Guidance Regarding Unfair or Deceptive Credit Practices (the Guidance), which clarifies to banks and financial services providers that the credit practices described in Reg AA are still not permissible. Consumer Action joined coalition advocates in seeking a stronger rule that mirrors and improves upon the protections originally included in Regulation AA.
Fix the predatory lending industry for good. The Consumer Financial Protection Bureau is currently developing new rules to regulate short-term, high-cost loans. Consumer Action has joined nearly 500 other organizations from around the country in a letter urging the CFPB to write regulations that are strong enough to effectively end this ongoing debt trap.
CFPB Watch: Prepaid protections proposed and in-language access
Shopping with a prepaid card or making a mobile payment may soon be much safer. The Consumer Financial Protection Bureau (CFPB) has proposed new rules that would:
- Limit consumers’ financial losses if a prepaid card is lost or stolen;
- Add credit card-like protections to prepaid accounts that feature lines of credit; and
- Require issuers to conduct investigations when errors are brought to their attention.
The Bureau has proposed a $50 limit on losses if consumers report unauthorized transactions within two business days of learning of the problem, just as with a debit card. This protection would apply to general-purpose reloadable prepaid accounts “registered” with the issuer—but not off-the-shelf prepaid debit cards that cannot be reloaded.
The protections would also cover most government benefits cards (unemployment, child support, tax refund, etc.), payroll cards, campus cards and mobile payment services, including PayPal and Google Wallet.
“Our proposal would close the loopholes in this market and ensure prepaid consumers are protected whether they are swiping a card, scanning their smartphone or sending a payment,” said Director Richard Cordray at the CFPB’s November public field hearing in Wilmington, DE.
The proposal would also require fees (including monthly, ATM and reload fees) to be clearly disclosed prior to purchase. For prepaid accounts allowing cardholders to borrow via a line of credit, the CFPB would require that issuers evaluate cardholders for their ability to repay a debt and that certain CARD Act protections, such as a minimum 21-day repayment period, limit on late fees, etc., would also apply. However, issuers would be required to wait 30 days after a consumer registers a prepaid account before they could offer a line of credit. Money from the prepaid account could not be automatically taken by issuers to satisfy payments on the debt.
In September, Consumer Action joined the National Consumer Law Center (NCLC) and other advocacy organizations in calling for many of these consumer protections. Advocates had also recommended that the Bureau require FDIC insurance and a ban on overdraft fees on prepaid accounts. The Bureau stopped short of requiring FDIC insurance, but would require that issuers must be explicit if accounts are not protected with FDIC insurance. Instead of outrightly banning overdraft fees, the Bureau proposes that if prepaid card issuers offer overdraft protection (and charge for it), they must give consumers the same protections they would have when using a credit card.
The CFPB is seeking public feedback on its prepaid proposal at Regulations.gov. Read the proposal. When submitting comments, specify Docket No. CFPB-2014-0031.
Financial access in-language. The CFPB has heard advocates’ call for greater attention to the financial concerns of Limited English Proficient (LEP) consumers. Last month it created a Language Access Task Force to improve its outreach efforts to communities of limited-English speakers.
Already, the Bureau accepts complaints in more than 180 languages and has translated key guides and resources. Its financial empowerment toolkit (“Your Money, Your Goals”) is available in English and Spanish and a fact sheet on its international money transfer rules is available in eight languages (Mandarin, Korean, Vietnamese, Tagalog, Arabic, Spanish, Russian and Haitian Creole). The CFPB’s Spanish-language Web portal offers many resources, including guidance on submitting a complaint.
With the formation of the task force, the CFPB seeks to identify barriers that exist for LEP consumers. For example, housing advocates say that English-language foreclosure notices and mortgage modification plans have harmed limited-English-speaking consumers, arguing that in-language documents and multilingual housing counselors could have prevented some from losing their homes.
The Bureau has asked for public feedback about whether its in-language financial education materials and consumer protection rules are reaching the right communities. Click here to submit a language access suggestion to the CFPB. The deadline is Jan. 6, 2015.
About Consumer Action
Consumer Action is a non-profit organization that has championed the rights of underrepresented consumers nationwide since 1971. Throughout its history, the organization has dedicated its resources to promoting financial and consumer literacy and advocating for consumer rights in both the media and before lawmakers to promote economic justice for all. With the resources and infrastructure to reach millions of consumers, Consumer Action is one of the most recognized, effective and trusted consumer organizations in the nation.
Consumer education. To empower consumers to assert their rights in the marketplace, Consumer Action provides a range of educational resources. The organization’s extensive library of free publications offers in-depth information on many topics related to personal money management, housing, insurance and privacy, while its hotline provides non-legal advice and referrals. At Consumer-Action.org, visitors have instant access to important consumer news, downloadable materials, an online “help desk,” the Take Action advocacy database and nine topic-specific subsites. Consumer Action also publishes unbiased surveys of financial and consumer services that expose excessive prices and anti-consumer practices to help consumers make informed buying choices and elicit change from big business.
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