Consumer Action INSIDER - October 2016


Table of Contents

What people are saying

Thank you for all the work Consumer Action does to support our industry staff. Programs like Money Management 1-2-3 not only help stretch the non-profit industry budget (time spent creating the curriculum, free materials, etc.), but also help the communities in which we live and work! — Janice Parker, Navicore Solutions, Peoria, IL

Did you know?

There are several food preservation methods that you can use to save money and make your food last longer. They include freezing, drying and canning. Penn State University’s College of Agricultural Sciences offers several free fact sheets explaining various food preservation techniques that can stretch your food budget. Meanwhile, the folks at The Wise Dollar outline the benefits of food preservation, including the power of fermentation, in a new blog post.

Out and About: A rule to close the payday pit of despair

Last month, Consumer Action and other members of the Los Angeles #StopTheDebtTrap coalition joined Los Angeles County Supervisor Hilda L. Solis at a press conference at the Los Angeles County Hall of Administration to announce support of stronger federal consumer protections against payday, vehicle title and other damaging high-cost installment loans.

The action comes at a critical time, as the Consumer Financial Protection Bureau (CFPB) is proposing a rule to rein in the out-of-control short-term loan industry, which is notorious for offering 300%+ interest rate loans to low-income, vulnerable people with nowhere else to turn. Localities like Los Angeles County are taking action too: On Sept. 13, the Los Angeles County Board of Supervisors unanimously approved a motion by Supervisor Solis in support of strong CFPB rules to better protect consumers from payday loan abuses, making Los Angeles County the largest county in California (and the U.S.) to do so.

Consumer Action’s Community Outreach and Training Manager Linda Williams was front and center at the press conference, which was organized by Liana Molina, director of community engagement at the California Reinvestment Coalition. Williams proudly displayed a sign that read #StopTheDebtTrap (the coalition name and a trending hashtag on Twitter, flagging opposition to the payday industry).

Prior to the press conference, Williams worked behind the scenes, making calls to Consumer Action’s partners to speak with clients who had been devastated by payday and auto title lending and to encourage them to attend the conference to tell their stories.

Conference speakers were flanked by a visually stunning, life-sized 3D art installation called the “Pit of Despair.” The pit, which appears to be opening up into the street itself, demonstrates how easy it is to fall into the “debt trap” that a majority of payday loan borrowers find themselves in when they are unable to make high-interest payments.

Rabbi Joel Thal Simonds, associate program director at the DC-based Religious Action Center of Reform Judaism, introduced Supervisor Solis and opened the press conference with a quote reminding the public of the words of Exodus 22:25: “If you lend money to my people, to the poor among you, do not act toward them as a creditor; exact no interest from them.” Rabbi Simonds, who spoke on behalf of the coalition, stated (in accordance with the spirit of these principles) that the coalition seeks a just and caring society in which those in need are not set on a downward spiral of debt and hopelessness.

Unfortunately, Los Angeles County is home to approximately 800 payday lenders—the highest number of any city in California, and one of the highest numbers in the nation. Research has shown that these lenders are disproportionately located in communities of color. Bill Allen, CEO of the Los Angeles County Economic Development Corporation, who also spoke at the press conference, explained that payday loan fees only succeed to drain these low-income residents of wealth. As Allen pointed out in a recent LA Daily News piece: “More than $54 million in check-cashing fees and $88 million in payday loan fees each year are paid by county residents. If those consumers had better financial services options, much of that $142 million could go toward building household savings, thus increasing economic stability for their families and communities.”

The CFPB’s proposed rules, would, if adopted, go into effect nationally in June of 2017. The rules would require lenders to take steps to ensure that consumers have the ability to repay the loans they are seeking.

Despite being a step in the right direction, advocates warn that the CFPB’s proposed rule contains dangerous exceptions that would allow lenders to evade the intent of the regulations. For instance, despite the fact that even one high-interest loan can bury borrowers in debt, as it stands now, the proposal would allow six payday loans per lender per year.

You can help support the CFPB in implementing a strong rule by submitting a comment today.

Taking action to combat fraud in for-profit education

In accordance with our ongoing campaign to support students who were defrauded by for-profit colleges, Consumer Action recently garnered the support of almost 2,500 constituents who answered our call to take action by electronically signing a petition asking the U.S. Department of Education to discharge the federal student loans of those who were scammed by unscrupulous schools. The message of our petition was clear: Hold these colleges accountable so that they, not taxpayers, pay for their wrongdoing!

Under federal law, students are eligible for loan discharges when their schools are found guilty of fraud—schools like ITT Tech and Corinthian Colleges that profit from federal student loans, grants and veteran benefits at student and taxpayer expense. Until recently, this right has not been widely publicized and few borrowers have gotten the relief they are entitled to.

The Department of Education has proposed changes to its existing Defense to Repayment rule that would clarify and strengthen existing protections for defrauded federal student loan borrowers and taxpayers. The rule, as it stands, helps curb bad behavior by predatory colleges, but it needs to be strengthened. As written, the proposed rule would also roll back eligibility for student loan relief in some cases, and make it likely that defrauded borrowers would get only partial or no relief.

The petition to U.S. Education Secretary John B. King, which garnered over 2,000 of the 2,500 e-signatures in the first 48 hours alone, urged the department to include rules that would:

Provide full loan relief to defrauded students. Under the department’s proposal, defrauded students would face a separate highly subjective, time-consuming and costly process for determining how much relief, if any, they should receive. This process would lead to inconsistent treatment of student-loan borrowers and delay borrower relief even further.

Provide automatic discharges when there is sufficient evidence of a school’s wrongdoing. While the proposed rules explicitly outline the Department of Education’s authority to automatically discharge federal student loans on behalf of groups of defrauded borrowers, they don’t ensure that this authority would actually be used. The Department is currently requiring former Corinthian College students to submit unnecessary individual applications when it has already determined that they are eligible for full loan discharges due to the school’s wrongdoing. We want the Department to establish a process for state attorneys general to petition the agency to provide automatic loan discharges for groups of students. The rule should also require the Department of Education to use its authority to automatically discharge loans when it knows that a group of students took out loans based on school misconduct.

Eliminate time limits on relief for defrauded borrowers. The Department’s proposal creates a new six-year time limit on the ability of borrowers to recover amounts paid on loans taken out due to school fraud. The clock starts ticking at ambiguous and varying times depending on the type of school misconduct and limits relief for borrowers who may not know that such a time limit exists or applies to them. Schools are often investigated for years before formal charges of wrongdoing are formally brought against them. The Department should not impose time limits on borrowers when there are no limits on the government’s ability to collect student loan debt.

Some supporters added their own comments to the Education Secretary, outlining how they too had fallen victim to a for-profit college and were now saddled with enormous student loan debt and worthless degrees. One student from Arizona wrote: “I graduated from Apollo College and could not get a job because I didn't get proper, hands-on training for [a] medical assistant [degree].” Another student from Michigan sympathized, writing: “We [the taxpayers] bailed out the banks, yet we refuse to help those students that truly believed they could succeed with an education and, with all of the best intentions, took out loans to pay for this faulty education. Who benefited most from those loans? Not the students.”

Others expressed outrage over the possibility of federal loan dollars not being recouped. A signer from New York wrote: “As a taxpayer, I DO NOT want to end up paying for restitution to these students through my taxes! These reforms should be instituted immediately! The fraudulent colleges should pay—strip them of their assets and go after their owners!” One woman from Florida asked the Department of Education: “Why should the taxpayers pick up the tab for these fraudulent colleges? [These schools] need to be held accountable!” Finally, a man from California reminded the Department of its regulatory duties, stating: “Agencies administering federal loan programs have a responsibility to ensure that those citizens using agency programs to pay for their education are not defrauded. Taxpayers and students should not have to pay for services that were inadequate or misrepresented.”

And still more industry offenses ensue. Last month, ITT Tech abruptly shut its doors after the Department of Education imposed tough financial sanctions due to the school’s questionable recruiting practices. Meanwhile, Bridgepoint Education, the parent company of Ashford University and The University of the Rockies, was found guilty by the Consumer Financial Protection Bureau of deceiving students about the true costs associated with the school’s in-house private student loan program and was forced to refund and cancel $24 million in private loans.

As new abuses continue to come to light, it’s important to have strong consumer protections in place that shield students and taxpayers from footing the bill. Fortunately, the Department of Education expects to release its final Defense to Repayment rules on Nov. 1. While the Department reviews and deliberates the nearly 10,000 total public comments it received, we urge them to heed our advice. For-profit colleges have gotten away with scamming us for years, and only stronger regulations will deter future offenses and protect the vulnerable populations that these schools historically prey on.

Note: Consumer Action also hosted a tweet chat to provide guidance to students who have been defrauded by ITT Tech and other for-profit schools. See our story, What’s next for ITT Tech students?, in this edition of INSIDER.

Hotline Chronicles: Filing a class action lawsuit

Class action lawsuits are those in which one or several people (“plaintiffs”) sue on behalf of a larger group (“class”), all of whom say they were harmed by a certain business practice. Consumer Action offers a free Class Action Database to help consumers learn about which of these collective lawsuits they might be eligible to join or claim their share of a settlement. Even with our extensive database, we still get lots of inquiries from consumers who can’t find an existing case against a company they have a beef with, leading them to ask, “How can I be the one to file a class action?”

While civil courts may allow consumers to file a class action simply by checking a box on a court filing sheet, we advise against this. “Consumers making allegations against large corporations or businesses may find themselves outmatched by well-paid defendant’s attorneys,” said Linda Sherry of Consumer Action. “The best way to file a class action lawsuit is to hire an experienced class action attorney.”

Attorneys specializing in class action lawsuits can help you determine how strong your case is. Class actions are very complex, so having experienced attorneys to represent the class is crucial.

Once the class action complaint is filed and served on the defendant (the accused party), a court must certify the class. Depending on the state, the court will either initiate the certification process or the class plaintiff (the accuser) and/or their counsel will file a motion to have the class certified before the case can proceed. Simply put, certification involves decisions by the court as to whether the lead plaintiff and class members have actually suffered the injuries alleged in the complaint and, if so, whether a class action is the best way of resolving the claims. If the class is not certified, the case is dismissed.

Class action attorneys are interested in finding strong cases and will sometimes—but not always—take cases on “contingency.” This means that the class members they are representing don’t pay attorney fees. Instead, the attorneys ultimately get paid in the settlement, or if the plaintiffs win the case in court.

Some class action cases go to trial and, if successful, provide “relief” for the class, which can be money and/or credit for in-kind goods or services. Successful cases may also change industry practices, as they discourage businesses from behaving in ways that are not only bad for consumers, but also harm them financially. Many class actions, however, are settled before trial. In settling, defendants usually do not admit guilt but do agree to offer consumers relief, as they want to avoid the expense and time involved in taking the case to trial.

Sometimes, attorneys will identify harms or abuses that they believe would be a successful basis for a class action lawsuit. They may sponsor an investigation to find affected consumers, posting investigations on their websites and allowing potential lead plaintiffs to respond and express interest in becoming a part of the case. Before you agree to become a client of any attorney or law firm, however, make sure to check his or her license with your state bar association or other licensing authority. (You can find contact information in your state here.)

Finding class counsel

These resources can help you search for a local class action attorney:

The American Association for Justice offers a searchable public directory of its members, to help consumers find an attorney.

FindLaw, an online resource providing legal information, message boards and more, lists class action lawyers near you.

The National Association of Consumer Advocates’ “Find an Attorney” tool allows consumers to search its membership database.

The National Trial Lawyers’ Class Action Trial Attorneys (a group of attorneys who specialize in working with class action litigation) offers a searchable database of its members.

*Not this consumer’s real name

What’s next for ITT Tech students?

Last month ITT Tech abruptly shut its doors following sanctions made by the Department of Education that cut off the school’s access to federal funding. The move has left over 40,000 students (including 6,000 military veterans) in 39 states scrambling to figure out what to do next. Consumer Action seized the opportunity to offer guidance during this uncertain time, hosting our first-ever interactive chat on Twitter, under the hashtag #ForProfitFails. The “tweet chat” provided a platform for ITT students and others to ask questions, while advocates were able to share helpful resources and insight.

As we outlined during the tweet chat, if you’re an ITT Tech student, you have two major options (both of which have pros and cons, depending on your personal circumstances). Your decision will depend on the amount of credits and debt you’ve incurred while in school. Take some time to consider the following factors: This is a very significant opportunity for those with thousands in debt to start over.

Apply for a discharge

In general, discharging your federal debt is likely the best option. Although you are forfeiting the hard work and time you spent in school (which is incredibly frustrating and unfair), you may later find out that the value of your degree is not worth the money you spent. Discharging (or cancelling) your federal loans is an opportunity to start over, debt-free, and to find a legitimate program that will help you find your dream job.

Students who were enrolled at ITT Tech at the time it closed or who withdrew from the school during the 120 days between May 6, 2016 and the school’s closure on Sept. 6, 2016 and did not graduate from their program of study are eligible to apply for a closed school loan discharge. If you decide to go this route, then once you have completed your application, you must submit it directly to your student loan servicer (the company that sends your monthly bill). Parents also may seek discharge of any Parent PLUS loans used to fund the expenses of dependent students who were unable to complete their degree due to ITT’s closure. If you take the closed school discharge, you cannot transfer your ITT credits into a similar program at another school. Enrolling in a similar or comparable program at another school makes you ineligible for a closed-school discharge (you cannot discharge your loans). However, you may be able to transfer ITT credits into a different program without jeopardizing your closed school discharge eligibility.

If you took out private student loans to attend ITT Tech, your options for discharge are limited and you will likely still be responsible for repaying the loans. However, some states have programs that assist students with recovering their private student loan money in the event of a college closure. Additionally, some private lenders may offer options to assist certain borrowers in this situation, but this is rare. To start, contact your student loan servicer and ask about your options. Your servicer also can inform you of any repayment options available to you.

Transfer schools

In certain cases, transferring to another school may be a viable option. To determine that, ask yourself whether the program you started at ITT Tech is still right for you and if you remain interested in a career in the corresponding industry. Interview employers in the field you want to work and ask them which programs they recommend (this will give you a “real world” idea of how employable you will be upon graduation). Those considering transferring because they are close to graduation should call local public community colleges and public state universities and see how many of their existing credits would be accepted. You may find out that you are not as close to graduating as you thought. Make sure you are considering legitimate alternative programs in order to avoid enrolling in another failing for-profit school like ITT or Corinthian College (even if the school in question is heavily recruiting you and telling you that they will accept all of your earned credits!).

Ask prospective schools:

  • Is the school regionally or nationally accredited? Regional accreditation is typically more rigorous and prestigious than national accreditation. Most non-profit institutions are regionally, not nationally, accredited. National accreditation is legitimate in some specific trade areas, including auto repair or HVAC. Take the time to learn which accreditation is better for the degree or certification you want.
  • How many of your credits transfer? This will vary depending on the program and schools you consider.
  • How much is the school’s tuition? Be sure to include any fees and materials costs, like books or labs, along with transportation and housing costs. Consider that you may still be on the hook for the loans you took out to attend your former school, and factor in the cost of future coursework, which will be added to your debt should you take out additional loans.
  • How long will the program take to complete?
  • What is the program’s graduation rate?
  • What are alumni earning post-graduation? Make sure these figures include actual full-time jobs in the field of study you’re interested in.

We break down all of these important questions for you in Consumer Action’s job training school guide.

It’s worth restating that if you transfer your ITT credits into a similar program elsewhere, you are forfeiting your ability to cancel your outstanding ITT student loans. Although you’d sacrifice the time you spent studying at ITT, take the time to learn whether the same degree at more reputable school (like a local community college) would provide you with the same (or better) value for less than what you’ve already spent at ITT.

Keeping transcripts and school records

It’s a good idea to keep a copy of your ITT or other for-profit transcripts for your records, regardless of if you are attempting to transfer or not. Do not wait to order a copy of your records and credentials; your request may take several weeks to process and there is no guarantee that the school will be able to provide these documents for you several months from now. ITT has partnered with Parchment to fulfill online requests for student transcripts and credentials. You will likely be charged $10 for each copy. However, you may be able to ask your state’s postsecondary education agency if it will provide you with the transcript for free. You can find your state agency’s contact information and state fact sheets here (downloads an Excel spreadsheet). We also recommend keeping any and all financial aid documents, promissory notes, school contracts and emails with faculty and staff. These documents may come in handy if you are attempting to prove your school’s fraudulent behavior at a later time.

Steering clear of debt relief scams

Student debt relief scams have been running rampant the past few years and are now targeting confused and desperate ITT students with federal loans. Don’t be fooled by companies that charge fees for student debt assistance, loan forgiveness and/or consolidation services. Often, the scammers pass off the federal government’s income-driven repayment programs as their own and bill borrowers for it. Most so-called “debt relief” companies operate the same way: They consolidate the borrower's loans and move them into an income-driven repayment plan. After that, the borrower sends their monthly payments to the company. These payments, however, often include hidden monthly fees. Worse yet, some scam debt relief companies don't pass your payments on to the lender at all. Make sure that you’re enrolled in a legitimate repayment program (enrollment should be free) through the U.S. Department of Education.

For ITT students who graduated from their program or withdrew from the school before May 6, 2016

If you are a former ITT student and ineligible for a closed-school discharge due to earlier attendance, you may be able to file for a loan discharge under the Department of Education’s defense to repayment rule. Although rare, the Department has started granting more discharges under the provision after the disgraced for-profit Corinthian Colleges collapsed in 2014 amid allegations of widespread fraudulent activity. Similarly, ITT has also spent years battling allegations of fraud, deceptive marketing and predatory student lending. Right now, parent company ITT Educational Services is being investigated by more than a dozen state attorneys general and is facing lawsuits from two federal agencies, including the Securities and Exchange Commission. Hundreds of former students who attended ITT as far back as the 1980s, who were left with crushing debt and worthless degrees, are moving forward and submitting their defense to repayment applications in light of the school’s collapse, so it might be worth a try.

Need more information to help guide your next steps?

There is no doubt that ITT students face a confusing and frustrating road ahead. Check out the following additional resources to help you review your personal circumstances and make the best decision for your future.

  • The U.S. Department of Education. The Department of Education is conducting ongoing webinars that provide students with an overview of their options. The Department’s ITT FAQ webpage is also updated frequently as information becomes available.
  • ITT Tech warriors. The Debt Collective, Consumer Action’s education coalition colleague (that also helped gather former Corinthian College students together to protest their student loan debt), is helping former ITT Tech students join together to support one another, swap stories, ask questions and more in a private Facebook group. Request permission to join the Facebook group by clicking here (you’ll need to log in to your free Facebook account first).
  • Veterans. The Department of Veteran Affairs has compiled a list of helpful resources for ITT students, including a link to emergency housing grants and a list of schools willing to take ITT credits. Veteran ITT Tech students may also find answers to questions about their GI Bill funding by contacting the Veteran Affairs Education Call Center at 888-442-4551 or the Student Vets of America at 202-223-4710, or .(JavaScript must be enabled to view this email address).
  • Borrowers of private student loans. If you’ve already contacted your private lender with your problem and they are unable or unwilling to help, seek help from the Consumer Financial Protection Bureau by submitting a complaint online or by calling the Bureau at 855-411-2372. If you think you have been a victim of fraudulent activity, you may also file a complaint with your state’s attorney general and/or with the attorney general in the state where you went to school.

Note: Consumer Action has been active in helping the U.S. Department of Education to create new rules to combat fraudulent for-profit schools. For more information on our work in this arena, see our story, Taking action to combat fraud in for-profit education, in this edition of INSIDER.

MoneyWi$e: It’s fun to learn at the YMCA

Consumer Action’s Audrey Perrott led a training last month for a group of women at San Francisco’s Bayview Hunters Point YMCA using the MoneyWi$e “Manage Your Money Wisely” educational module. The training materials were developed through Consumer Action’s financial literacy partnership with Capital One in order to provide community-based organizations like the local YMCA with the tools they need to help clients and community members achieve greater financial literacy.

The Bayview Hunters Point YMCA provides youth enrichment programs, workforce development initiatives and supportive services to local residents.

“It is always a pleasure to facilitate financial education trainings for the residents of Bayview-Hunters Point and to see them become more empowered to take charge of their finances,” Perrott said. “Bayview has a history of being one of the lowest-income neighborhoods within San Francisco, which is why I commend the local YMCA for all of the innovative programs and initiatives they’ve designed to meet the economic, emotional and overall health needs of this often marginalized community.”

Bayview Hunters Point YMCA community outreach manager Lynetta Demus added, “The training was helpful for me personally as well as for the group members. The case study activities were engaging and caused the participants to begin a conversation on how to manage money wisely and develop strategies to increase income and eliminate debt.”

The training covered how to budget, how to reduce spending, ideas to generate income or free up funds within the family budget, how to save more, how to set financial goals, how to best invest your money and how to select insurance.

The attendees were able to work through the case studies contained in a lesson plan designed to help them consider their own money management strategies as well as brainstorm ways to generate income collectively. Perrott provided group members with budget and goal-setting worksheets and encouraged them to discuss some of their personal goals, which ranged from saving for retirement and children’s college funds to reducing debt.

Consumer Action collaborates with our network of nearly 7,000 partners to educate consumers across the country using MoneyWi$e educational courses, which consumers can access for free here. Additional, past courses and webinars may be viewed on Consumer Action’s YouTube channel. For more information on the MoneyWi$e project, click here.

Coalition Efforts: From online privacy to auto insurance

Desperate students need protection from debt “relief” scams. Advocates called on the White House to crack down on private companies that charge fees for student debt assistance, loan forgiveness and consolidation services that are otherwise free. Often, the companies pass off the federal government’s income-based repayment programs as their own, charging borrowers additional, unnecessary fees in the process. These companies, known for preying on vulnerable student borrowers, must be closely monitored and shut down to protect borrowers and prevent them from paying for unnecessary services, adding to their mounting financial problems. Learn more and read the letter.

Monitoring availability and affordability of auto insurance requires more data. Consumer advocates have long argued that low-income drivers are price gouged when it comes to car insurance quotes. In response, the Federal Insurance Office (FIO) set a standard that labels auto insurance “unaffordable” when the average premium in a community exceeds 2 percent of the community's median household income. The FIO is also preparing to publish its first report on auto insurance affordability with help from the insurance industry. Advocates are urging the FIO to require mandatory participation from some of the biggest insurance companies, instead of relying on the companies’ voluntary submission of data. The group also asked the FIO to evaluate premiums at the ZIP code level to ensure its affordability analysis accurately represents the cost of insurance around the nation. Learn more and read the letter.

FCC’s proposed privacy rules provide important consumer protections. Broadband internet providers have access to massive amounts of browsing data, which can reveal sensitive personal information regarding a user’s lifestyle, health and finances. Given the limited choice of internet providers, consumers looking to compare privacy standards are at a disadvantage. The Federal Communications Commission (FCC) is considering rules that would fill a critical gap in the patchwork of U.S. privacy laws by giving consumers meaningful control over the ways in which their data can be used and disclosed by broadband internet service providers. The FCC’s proposed rules would require customers to opt-in to most uses of their data that are not directly related to the services to which they have subscribed. These rules, strongly supported by Consumer Action, would be a big step in protecting consumers’ online privacy and should not be weakened by industry groups looking to make a profit at the expense of their customers. Learn more and read the letter.

Social media surveillance proposal would prove ineffective and violates privacy rights. The Department of Homeland Security's proposed policy to collect information on the social media profiles of foreign travelers violates the rights of travelers and their friends, colleagues and family members in the U.S. Coalition advocates wrote to the Department of Homeland Security opposing the Customs and Border Protection policy and argued that the rule change would do little to enhance national security and would open the door to greater spying on U.S. citizens. Learn more and read the letter.

Class Action Database: Public records gone wrong

Class action settlements involving Citizens Bank and Portfolio Recovery Associates were among 11 new cases added to the Consumer Action Class Action Database during September.

This month we highlight James Jenkins, et al. v. Equifax Information Services LLC, a class action against the consumer reporting agency Equifax Information Services LLC (“Equifax”). Plaintiffs alleged that Equifax violated the Fair Credit Reporting Act. After requesting a copy of their credit file disclosures and finding public record items such as a court judgments, tax liens and bankruptcies listed in the report, plaintiffs alleged that Equifax falsely identified various courthouses as the source of the public information records, making it difficult for them to correct any errors. Plaintiffs also claim that when requesting their report through, Equifax failed to disclose the name of the courthouse providing them with information on the credit report.

Equifax denied the allegations but agreed to a settlement, as many class action defendants do, to avoid the burden of a trial.

The settlement provides 18 months of Equifax Credit Watch Gold with Scores credit monitoring service (valued at $269.10) for free to the class members. Equifax also agreed to include the names and addresses of any vendors supplying public records and to improve their dispute process regarding public records.

You are part of the class if you received a credit file disclosure from Equifax containing a public record between July 28, 2013 and April 14, 2016.

If the settlement is approved, class members will automatically receive the activation code by email. The final approval hearing is on Oct. 28, 2016.

CFPB Watch: Fines for Wells Fargo, protections for homeowners

The Consumer Financial Protection Bureau (CFPB) took action against Wells Fargo after learning that, over the last five years, thousands of the bank’s employees opened nearly two million unauthorized bank, credit and debit card accounts without the customers’ knowledge or consent.

“Wells Fargo employees secretly opened unauthorized accounts to hit sales targets and receive bonuses,” said CFPB Director Richard Cordray. “Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed.”

The bank was fined $185 million ($100 million by the CFPB, $35 million by the U.S. Dept. of the Treasury’s Office of the Comptroller of the Currency and $50 million by the City and County of Los Angeles). Wells is also paying about $5 million in refunds to customers who were charged penalty fees for the fake accounts. Consumers who were affected will automatically receive refunds.

Bank employees funded the new accounts by transferring customers’ funds from legitimate accounts to the phony ones. They illegally opened nearly two million unrequested credit card and bank accounts and secretly enrolled customers in online banking. Approximately 5,300 employees lost their jobs for participating in the scheme. The Wells Fargo executive in charge of these sales divisions retired this summer with a $125 million compensation package. “This is one of the more disturbing aspects of Wells Fargo’s widespread deception,” said Ruth Susswein of Consumer Action. “Rank-and-file employees are blamed and let go while top executives promoted this corporate culture and prospered from the ill-gotten gains.”

Enhanced mortgage servicing protections

Struggling homeowners will receive additional protections as a result of the Bureau’s recent amendments to its mortgage service rules.

Mortgage servicers must now notify borrowers when their loan modification applications are accepted as “complete.” The updated rules ban “dual-tracking” for completed loan modification applications. Dual-tracking is the reprehensible practice whereby a mortgage servicer evaluates a homeowner for a loan modification (to avoid foreclosure) while simultaneously moving forward with a foreclosure.

Updated rules will also ensure that family members (widows and other heirs) of a deceased mortgage holder will have the same rights as the original homeowner to protect their homes from foreclosure. Surviving spouses/heirs, called “successors in interest,” whose name was not on the mortgage note will have the same opportunity to apply for a loan modification once their identity and ownership interest in the home is confirmed. Servicers must provide a description of the documents needed to prove surviving family member status and must update the applicant on the status of their application. The CFPB’s legal definition of “successors in interest” was expanded to include persons who receive property upon the death of a relative or joint tenant; as a result of a divorce or legal separation; through certain trusts; or from a spouse or parent.

In addition, homeowners with mortgage modifications whose loans have been sold and transferred to a new mortgage servicer will no longer lose their modified repayment plan because of the transfer.

Some struggling borrowers with on-time payments who experience a new hardship will qualify to be considered for a new loan modification more than once during the life of the loan.

While mortgage servicers still are not required to offer borrowers a loan modification, they now are obliged to have adequate processes to evaluate, escalate and resolve imminent mortgage complaints at risk of foreclosure.

The protections will take effect over the next year and a half. Consumer advocates, including Consumer Action, have fought hard to press the CFPB to add these safeguards for borrowers.

About Consumer Action

Consumer Action is a non-profit 501(c)(3) 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, 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.

Community outreach. With a special focus on serving low- and moderate-income and limited-English-speaking consumers, Consumer Action maintains strong ties to a national network of nearly 7,000 community-based organizations. Outreach services include training and free mailings of financial and consumer education materials in many languages, including English, Spanish, Chinese, Korean and Vietnamese. Consumer Action’s network is the largest and most diverse of its kind.

Advocacy. Consumer Action is deeply committed to ensuring that underrepresented consumers are represented in the national media and in front of lawmakers. The organization promotes pro-consumer policy, regulation and legislation by taking positions on dozens of bills at the state and national levels and submitting comments and testimony on a host of consumer protection issues. Additionally, its diverse staff provides the media with expert commentary on key consumer issues supported by solid data and victim testimony.



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