Washington, DC: CUAC Meeting 3/24/2016

Welcome to the Consumer
Financial Protection Bureau’s meeting of its Credit Union Advisory Council, or CUAC. The
Consumer Financial Protection Bureau is an independent federal agency whose mission is
to help consumer finance markets work by making
rules more effective, by consistently and fairly
enforcing those rules, and by empowering consumers to take more control over their
economic lives. My name is Zixta Martinez. I’m the
Associate Director for the External Affairs Division at the CFPB. Today’s meeting is being
held at the CFPB’s headquarters in Washington, D.C. This is the CUAC’s first meeting of the
year, and as always, we have a packed scheduled. Today’s meeting is being recorded and will
be available at consumerfinance.gov. You can
also follow CFPB on Twitter and Facebook.
Let me spend a few minutes telling you about what you can expect at today’s meeting.
First, I’ll introduce the Bureau’s CUAC members, then the CFPB’s Director, Richard Cordray,
will provide opening remarks. Following the
Director’s remarks, the CUAC’s Vice Chair, Robin
Romano, will conduct the meeting on behalf of
CUAC Chair Kevin Foster-Keddie, who was unable to
attend today’s public meeting. Vice Chair Romano will then introduce
Chris D’Angelo, the Bureau’s Chief of Staff, who
will lead a discussion about the CFPB’s priorities. Following the discussion about
the Bureau’s priorities, the CUAC will hear from
Stacy Canan and Naomi Karp, subject matter experts with the Bureau’s Office of Older
Americans. The two will lead a discussion about
elder financial abuse. The meeting will then adjourn at approximately 4:30 p.m. The Bureau
established a Credit Union Advisory Council to
include representatives of credit unions from across the U.S. The CUAC is charged with providing
substantive information, analysis, operational expertise, knowledge of their communities,
and feedback to inform the Bureau’s work. Today’s
public meeting and discussion is in support of
this important responsibility. As a reminder, the views of the CUAC
members are their views. They’re greatly appreciated and welcome, yet they do not
represent the views of the CFPB. So let’s get
started with an introduce of our CUAC members. I
would ask our members to raise your hand as I
call your name. The Chair is Kevin Foster-Keddie.
Kevin is President and CEO of Washington State Employee Credit Union in Olympia, Washington.
The Vice Chair is Robin Romano. Robin is CEO of
MariSol Credit Federal Credit Union, a CDFI credit union in Phoenix, Arizona.
Gail DeBoer is President and CEO of SAC Federal Credit Union in Papillion, Nebraska.
Bob Donley is Executive Vice President of Members Credit Union in Winston Salem, North Carolina.
Robert Falk is President and CEO of Purdue Federal Credit Union in West Lafayette, Indiana.
Gregory Higgins is Senior Vice President, Chief
Administration Officer, and General Counsel of
Wings Financial Credit Union in Apple Valley, Minnesota.
Jason Lee is Executive Vice President and CFO for Orion Federal Credit Union in
Memphis, Tennessee. Robin Loftus is COO of Heartland Credit Union in Springfield, Illinois.
James McDaniel is President and CEO of Heritage Trust Federal Credit Union in Charleston,
South Carolina.
Carrie O’Connor is Chief Lending Officer for CommunityAmerica Credit Union
in Lenexa, Kansas. Thomas O’Shea is President
and CEO of Aspire Federal Credit Union in Clark,
New Jersey. Katey Proefke is Assistant Vice
President and Compliance Officer for Chevron Federal Credit Union in Oakland, California.
David Seely is President and CEO of Kirtland Federal Credit Union in Albuquerque,
New Mexico. Jim Spradlin is President and CEO
of Park Community Credit Union in Louisville,
Kentucky. And last, but certainly not least, Bernie Winne is President and CEO of the Boston
Firefighters Credit Union in Dorchester, Massachusetts.
We also have with us, Delicia Hand, who is the CFPB’s staff director for the Bureau’s
Advisory Board and Councils Office. I’m now please to introduce Richard Cordray. Prior
to his role as the CFPB’s first Director, he
led the CFPB’s Enforcement Office.
Before that, he served on the frontlines of consumer protection as Ohio’s
Attorney General. In this role, he recovered more than $2 billion for Ohio’s investors,
retirees, and business owners, and took major steps to help protect its consumers from
fraudulent foreclosures and financial predators. Before serving as attorney general, he
also served as Ohio State Representative, Ohio Treasurer, and Franklin County Treasurer.
Director Cordray. Thank you, Zixta
Martinez, and also Delicia Hand, who has, as
Zixta mentioned, runs our Boards and Councils. And I want to welcome all of you to this meeting
of the Credit Union Advisory Council. It’s now
been four years that we have had this advisory group working with us and helping us.
This is a group of leaders that are as knowledgeable about this business as anyone
around. They come from all over the country. They have different backgrounds and experiences,
and different perspectives, and they share those
perspectives with us. That’s important because we recognized
earlier on that we had certain gaps in our vision
about what was going on in the financial marketplace. One gap was community banks,
because we don’t have the opportunity to supervise them under the statute as it was
drawn- up. We don’t supervise institutions of less
than $10 billion in assets on the depository side,
and the same was true of credit unions.
It’s only about five credit unions out of the thousands of credit unions across the
country that we have any kind of day-to-day experience with because we can examine them
and supervise their operations, so we wanted to
have the chance to have perspective and insight
from credit union leaders from around the country,
and that’s why we created this council.
We’re at a point now in our evolution where certain members of the council are cycling
off because we do have a rotating membership, which is always a point of sadness for us,
but new members are coming on and they continue
to maintain the same level of quality and insight,
and perspective. And we are very grateful to
them for taking time away from running their institutions to spend some of it with us,
and to help inform our work.
So today I want to talk about two things. The first is the issue of prioritization for the Bureau itself and for our work. And
I would say that at the Consumer Financial
Protection Bureau, we advise all consumes to set
goals and make plans to meet them. We believe the same should be true for the Bureau itself.
If we want markets where good information allows consumers to make smart
financial decisions, where consumers can choose among the costs and risks of various financial
products successfully, and where good service gives consumers all they reasonably can ask
for, then we should first map out how we plan to
get there.
In 2011, when we first opened our doors, we laid out two broad strategic objectives
to guide our work. The first objective was delivering tangible value to consumers. That’s
always been first and foremost with us. By following through on our statutory responsibility
to cleanup the practices that led to the collapse of the economy and caused so much harm to
everyday Americans. It also meant monitoring consumer
financial markets so we could see developments as
they occur in realtime and head off problems that
might arise in the future. The second objective, and it’s been a
constant for us over the last five years, was
building a great institution by putting in place
the basic infrastructure of this new agency, which we were required to build from scratch,
from the ground, up, including the personnel, and
the strategy, and the processes, and the tools necessary to accomplish the purposes that
Congress had set for us. Those tools include supervision,
enforcement, rulemaking, research, consumer education, and the handling of consumer
complaints. As we do all of this more and more,
as we do our actual work, we can see that we’re
succeeding and delivering tangible value for consumers.
Over the past year, we’ve been engaged in a particularly intensive effort to prioritize
how we use our tools to tackle the most troubling problems facing consumers. Often with a problem,
we have a tool choice. We can tackle it through supervision, or through enforcement, or through
rulemaking, or maybe we should use multiple tools.
The result of this work that we have done is that we have set a group of near-term
priority goals and a plan for how to deploy our
shared cross-bureau resources, our multiple tools, to achieve these goals.
While these goals do not capture all the important work we’re doing, we have a
lot of work streams now that are close to full maturity
in a number of different ways, the nine goals that I will lay out here represent key areas
where we hope to make substantial progress over
the next two years. They are statements we’re making about
particular outcomes in particular markets that we
want to drive toward fulfilling, rather than descriptions of what tools we plan to use,
which is something we will continue to contemplate
and figure out as we go.
The nine priority areas are, and the way we’re wording this is, we envision markets
that perform better for consumers in the following ways. First, we envision a mortgage
market where lenders serve the entire array of
creditworthy borrowers fairly, and where servicers have processes in place that result
in fair and efficient outcomes for consumers.
Second, we envision a student loan market where student loans are serviced in
a way that is transparent and fair to help students
repay their debts. Third, we envision a credit reporting market with better data that is
more accurate and inclusive of more consumers.
Fourth, we envision a market that is free — all markets that are free from
discrimination and where consumers have equal access to small business lending. Fifth, we
envision a market where consumers are savvy about
their own finances and they have reliable places to turn for the tools and skill building that
they need to increase their own financial capability.
Sixth, we envision a market where consumer education and policy decisions about
household finances are based on a deep understanding of how households use financial
products and make choices about money and the
effects on their lives. Seventh, we envision an open-use
credit market where payday and installment lenders rely on business models that succeed
when consumers use credit as needed and are able
to repay their debts when they come due.
Eighth, we envision a debt collection market where everyone who collects debts
substantiates the debts their collecting, and
communicates with debtors about their debts in a
respectful, lawful, consumer-oriented manner. Ninth, and finally, we envision an
entire consumer financial marketplace where consumers will have the ability to effectuate their rights and hold institutions accountable
for unlawful conduct. While these goals focus our shared cross-bureau efforts for the future,
we continue to dedicate resources so that we can
follow through on a few priority work streams that are well-established and ongoing, such
as our fair lending oversight of indirect auto
lenders and our rulemaking on prepaid cards. Today, we’re going to focus also on a
second subject, and this concerns the special needs and circumstances of older Americans.
We are devoting great efforts to protecting them
from financial exploitation, promoting their economic security, and educating both them
and those who care for them about potential dangers.
In fact, our Office for Older Americans is the only arm of the Federal
Government specifically dedicated to the financial health of our seniors. This is an
increasingly important subject in the United States. Fifty-seven million Americans are
now age 62 or older, and another 10,000 Americans join them every day.
Many of these older Americans face threats from financial predators that can
harm the unprepared and unprotected. Elder financial
exploitation has been rightly called the crime of
the 21st century and fighting it has never been
more urgent. Though this topic has been the most
common form of elder abuse, it is also one of the
least reported. When seniors fall victim to a scam or
theft by a family member, they may be too embarrassed or too frail to pursue legal action,
or even to report that they’ve suffered harm. So
it’s crucial that others know how to look out for
them. Over the past few years, members of
our Credit Union Advisory Council have often highlighted to us that credit unions and other
small financial institutions may be the first to
be alerted to fraud and other predatory activities, and we should be grateful to them
for that. This is because they know their
customers well and often have more opportunity to
deal with older consumers face-to-face when they
engage in transactions. These institutions are
also uniquely positioned to detect when an elder
account holder has been targeted of victimized. Yesterday, the Consumer Bureau
released an advisory and specific recommendations to help financial institutions prevent,
recognize, and report financial abuse. The team
members in our Office for Older Americans have
traveled the country listening to the concerns of
seniors. They’ve listened to people sharing their experiences and stories of their elder
customers. Based on what we have heard, we’ve
issued studies, guides, and advisories to arm
seniors and their caregivers with the information and tools they need to protect themselves
and their precious retirement savings. The advisory
released yesterday contains specific recommendations to banks and credit unions
about how they can act to prevent or halt the financial
abuse of seniors. It highlights the opportunities for
financial institutions to protect older consumers from abuse and exploitation. I’m particularly
please, as the members of this council have shared with us over the years, that many of
you are already taking some of the steps we included
in the advisory, which we consider best practices, or you’re considering other ways
to protect your senior customers.
We appreciate your willingness to share your knowledge and expertise with us
so that we can tackle together this important
issue. And we will continue our work to ensure older
Americans have the economic security they need
and the peace of mind they deserve. We know that the members of our Credit
Union Advisory Council have valuable insights to
offer on these topics and many more, and that’s why each of you was chosen from among many
applicants for these positions. As we look ahead and work toward the
primary goals we’ve set for ourselves, we’re intent upon constantly and tenaciously pushing
forward to make progress on behalf of consumers. In maintaining this outlook and approach,
we’re always seeking to learn, grow, and get better
at what we do.
So thank you for being here today and we look forward to a vigorous discussion.
Thank you, Director Cordray. My name is Robin Romano.
I am the Vice Chairman of the Credit Union Advisory
Council. Welcome to our public and welcome members to our very first 2016 public session.
The CFPB organized this council in 2012, as we’ve heard, to regularly hear from
credit unions from all over the country, large and small, and I believe it’s been a very
productive exercise. Our council has provided an
opportunity for credit unions to raise emerging issues facing them and to share their input,
often very passionately, and perspectives on the Bureau’s work to protect consumers.
So today, we’re going to hear from council members and the Bureau on their strategic
priorities, and you will also hear from council members as they respond to advisory and
recommendations on how all financial institutions can protect elderly customers from financial
exploitation and abuse. So first up we’re going to hear from
CFPB staff, Chris D’Angelo, who serves as the
Bureau Chief of Staff on the Agency’s strategic outlook for the next year to 18 months, and
then we’re going to shift our conversation over
to council members for their perspectives, and
then we’re going to have a talk about elderly abuse,
so, Chris? Thank you very much,
Vice Chair Romano, and thank you to all of the
Credit Union Advisory Council members for giving
us the opportunity to come speak with you today
about the Bureau’s two-year strategic outlook. I
also want to thank Zixta Martinez and Delicia Hand for their great work, and all their staff’s
great work, in preparing this event. I know a
lot goes into it. And I want to thank Director Cordray
for introducing this topic in his opening remarks. I’ll build on the Director’s remarks
in my presentation, first, providing a brief
overview of the strategic planning process, and
then walk through each of our nine priority goals, why we believe each of those goals
is important, and how we intend to achieve them
over the next two years.
As the Director articulated in his opening remarks, when we opened our doors
in 2011, there were two strategic objectives
that have guided our work. The first was, deliver
tangible value to consumers through data-driven policy work and rigorous law enforcement.
The second is to build a great institution, one
that attracts great talent and is designed to be
sustainable and enduring. In assessing how we might achieve that first objective, delivering tangible value
for consumers, we have focused on four industry-wide
problems, which the Director first articulated in
a 2013 speech to our Consumer Advisory Board. Those are, first, deception or situations
where costs and risks of financial decisions are
obscured or opaque. Second, debt traps, or practices that trigger a cycle of debt where
consumers rack-up substantial costs over time. Third, dead-ends, or situations where
people cannot vote with their feet when they are
treated unfairly. And fourth, discrimination, or
unequal treatment based on characteristics, such
as race, gender, and other bases that are prohibited by law.
We find no shortage of these problems in the market and have found it necessary
to prioritize how we limit our — how we use
our limited resources most effectively. In
developing our priority goals over the next two
years, we assessed the four problems that we just
identified across all markets and within each of those markets, prioritized them based on the
extent of the consumer harm and our capacity to
eliminate or mitigate that harm. The result is a set of nine near-term
priority goals where we hope to make substantial progress over the next two years, and a plan
for how we will deploy our shared cross-bureau
resources to do so. Before I jump into the nine goals
themselves, I want to say a few brief things about the process, which we named our One
Bureau Planning Process internally. This is a ground-up
process that involved over 200 staff from around
the organization and when we designed the process, we designed it to have four very
important features. The first was to think about the
outcomes that we want to achieve as opposed to
the specific things that we want to do, the second was to make sure that we built, then,
an interdisciplinary plan that pulled from all
of our tools to try to accomplish those outcomes, the third was to make sure that the process
was feeding into our budget so that we made sure
that we prioritized our resources to account for
our highest priority work, and the fourth was
the create a common vocabulary for our staff to
aide them in prioritizing their work on a day-to-day
basis, and creating a sustainable work environment.
One last point before I jump into the priority goals themselves, I want to clarify
one thing which is important to us, which is that
thought goals themselves do not encapsulate all
of the important work that we’re doing here at
the Bureau, and there are a few very important pieces that we will continue to focus on.
One is continuing to build a strong organization by achieving operational excellence.
Two is continuing to fulfill our mandate to police all markets within our jurisdiction
for compliance with consumer financial laws and
regulations. Third, maintaining a robust ability to understand and monitor markets through research and other market monitoring. And
fourth, continuing to intake consumer complaints which help us prioritize our work and keep
an eye on emerging issues.
And now for our priority goals. We’ve listed them in alphabetical order and not
in any priority order. And it’s important to note,
again, that for each of these goals, it’s not
that we prioritized an entire market, but rather,
identified an outcome or a set of outcomes that
we hope to achieved in our goal statement. The first goal relates to arbitration.
In recent years, many contracts for consumer financial products and services have included
pre-dispute arbitration clauses, stating that either party can require that disputes be
resolved through arbitration rather than through the court system.
The CFPB envisions a consumer financial marketplace where consumers have
the ability effectuate their rights and hold
institutions accountable for unlawful conduct. We believe this is important in part because
the CFPB’s arbitration study found widespread
use of pre-dispute arbitration clauses for a variety
of products.
We found that over 90 percent of the arbitration agreements that we studied expressly
prohibited class arbitrations, and moreover three
out of four consumers who were surveyed did not
know that they were subject to an arbitration clause.
The CFPB’s arbitration study found that consumers rarely bring individual lawsuits
and that class actions are an effective way to
enable large numbers of consumers to secure relief for small-dollar claims. We will achieve
this goal by continuing the rulemaking process and proposing a rule that’s consistent with
our study that will further enable consumers to
effectuate their rights and hold institutions accountable for unlawful conduct.
Our second goal relates to consumer reporting. Consumer reporting companies play
a key role in the financial lives of consumers.
The reports that the three largest consumer reporting companies sell are used in determining
everything from consumer eligibility for credit, eligibility for employment and housing, service
member edibility for security clearances. The CFPB envisions a consumer
reporting system where furnishers provide and
consumer reporting companies maintain and distribute data that are accurate and inclusive
of more consumers. We believe this goal is important because roughly 26 million consumers
lack a credit report, which makes it difficult for those consumers to obtain credit from
mainstream lenders. Additionally, according to the FTC,
roughly 20 percent of consumers who participated in a 2012 study had an error in at least one
of their credit reports, and 5 percent had errors
of a magnitude that could negatively impact their
score and result in less favorable loan terms. We intend to achieve this goal by continuing our supervisory and enforcement
work of consumer reporting companies and furnishers,
focusing in particular on the accuracy of those
consumer reporting networks. We will also use the information we
gather to assess options for cooperatively involving — cooperatively improving consumer
reporting data, and based on this work, the Bureau may consider additional rulemaking
around furnisher and consumer reporting accuracy,
dispute resolution, and other related issues. The Bureau is also exploring how
alternative data is or can be used in the consumer reporting system to improve access
to financial services.
Our third goal relates to debt collection. The CFPB envisions a debt collection
market where everyone who collects debts substantiates those debts, accurately identifies
debtors, provides debtors with appropriate information, and communicates with debtors
about their debts in a respectful, lawful, and consumer-oriented way.
This goal is important in part because the Bureau receives its highest volume of
complaints, around 80,000 per year, from consumers in the area of collections. In
addition, consumers often have limited resources or opportunities to address collections related
issues. We intend to achieve this goal by
initiating a rulemaking process that will establish clear rules of the road to ensure
that debt collectors, both first-party debt collectors
and third-party debt collectors, treat consumers with dignity and respect, obtain and retain
the information necessary to substantiate the
debts they collect on, and provide consumers with
appropriate information about their rights. In addition, the Bureau’s rulemaking
activity will be complemented by rigorous supervision and enforcement to ensure that
institutions are held accountable for fulfilling their current obligations and eventually by ensuring that institutions comply with any
new rules that are promulgated.
The Bureau’s fourth goal relates to demand side consumer behavior. In a central
of the CFPB mission is the empower consumers
to take control over their financial lives and to
improve their financial well-being. The CFPB envisions
a marketplace where community and public service
providers integrate financial capability skill building into their educational and service
programs, and consumers are aware of and have access to trusted tools and resources to make
and act on critical financial decisions.
This goal is important in part because a 2014 survey showed that only half of Americans
feel that they are financially secure. The amount spent in the United States on financial
education is dwarfed by the amount spent on consumer financial marketing.
For every dollar spent on financial education a year, roughly $25 is spent on
consumer financial marketing. We will achieve our goal here by continuing to create consumer
financial decision-making tools, like our paying
for college tool, our owning a home tool, and our
saving for retirement tool. We will continue to build awareness of
those tools, we will work to provide support to
social service providers, youth services, and K
through 12 organizations to ensure that more consumers are able to build financial skills,
and we’ll conduct foundational research that
financial educators can use to raise the effectiveness of educational services.
Our fifth goal relates to household balance sheets and our research agenda. The
lives of American consumers are complex and their
financial decisions are influenced by many factors. These decisions sometimes impact
their financial well-being for years to come, and
current research often yields insights into only
individual financial choices and rarely offers a
glimpse of the household’s entire balance sheet
over time. The CFPB envisions policymaking and
consumer education based on a deeper understanding of the evaluation of a household’s
balance sheet and how households use financial products over time. This is important in part
because most current research addresses credit products or financial decisions only in
isolation, without considering each consumers full set of assets and liabilities.
We’ll achieve this goal by initiating a research program and better understanding
the factors that promote or inhibit financial
health of households by researching the dynamics
of household balance sheets over time.
Our sixth goal relates to mortgages. With a market size of approximately $10 trillion,
the mortgage market is far and away the largest consumer credit market. For most consumers,
a mortgage is a necessary step in the path to
home ownership. Here, the CFPB envisions a mortgage
market where lenders serve the entire array of
creditworthy borrowers fairly and in a non- discriminatory manner, where servicers processes
result in a fair and efficient outcome for consumers, and where new mortgage rules are
implemented in a manner that supports a sustainable mortgage market.
We believe this goal is important in part because even though the market is safer
and more sustainable today, a mortgage is still
the largest debt obligation for many consumers.
Half of all consumers fail to shop for a mortgage in connection with the home purchase,
even though our research shows that it could result in substantial savings. As the market
recovers, discrimination also remains a significant risk, and at the same time, over
1.5 million consumers are still struggling to
pay their mortgages, while servicers continue
to lack incentives for sufficient investments in customer
service and compliance. In addition, investments are needed to
ensure that the Bureau has the right information to prevent the next crisis and a deep understanding of the mortgage market. And
finally, we believe we have an obligation to
follow through on implementation of the Bureau’s mortgage rules.
We will achieve this goal by using our supervisory and enforcement programs to ensure
equal and fair non-discriminatory access of mortgage credit by placing particular focus
on implementation of our servicing rules, protecting
delinquent borrowers still suffering from the
aftermath of the crisis, by ensuring that the new
HMDA rules are successfully implemented, and by
continuing to work with institutions to support implementation of the rest of the mortgage
rules, and by beginning to assess their effectiveness
over time. Our seventh goal relates to open-use
credit. The Bureau defines open-use credit as
any credit product that is offered without an
expectation that the loan will be used for a
specific purchase, such as to buy a home, or a
car, or to finance an education. Open-use credit may be secured or it
may be unsecured, and the open-use credit market
encompasses a broad range of financial products, including credit cards, overdraft products,
payday loans, auto title loans, and installment loans.
The CFPB envisions an open-use credit market where lenders rely on business models
that succeed when consumers use credit when they
need it and are able to repay their debts when
they’re due. We believe this is important because
we have learned through our research that it’s
possible for lenders to structure loan products that enable lenders to succeed, even when
many of the borrowers cannot afford to repay those
loans when they’re due.
The Bureau has found this to be generally true of payday loans, auto title
loans, and certain installment loans. In the payday
loan space, according to the Bureau’s research, over 80 percent of payday loans are rolled
over or followed by another loan within 14 days. Fifteen percent of new loans are
followed by a loan sequence that lasts at least
ten loans. In addition, low and moderate-income households incur large and largely unanticipated
costs from overdraft products. In fact, most overdraft fees are paid by a small fraction
of bank customers. Eight percent of customers
incur nearly 75 percent of all overdraft fees and
the median transaction amount that causes an
overdraft fee is just $50. Continuing the small-dollar rulemaking
is a big part of achieving this goal, with a goal
of finalizing that rule to protect consumers from
debt traps associated with unaffordable loans. In addition, a proposal to define a larger
participant rule in the installment lending market will give the Bureau greater visibility
into a wider range of lending products. In addition, we will initiate a
rulemaking process with the goal of developing rules to make the overdraft market fairer
and more transparent, and our supervisory enforcement
work will complement this rulemaking activity. Our eighth goal relates to small-
business lending. While most of the CFPB’s focus
is on credit markets that serve consumers, Congress also directed the Bureau to monitor
certain aspects of the market for small-business lending.
Small businesses, including those owned by women and minorities, are critical
engines for economic growth. The CFPB envisions a small-business lending market where fair
lending laws are enforced and where communities, government entities, creditors have access
to the data needed to identify the businesses and
community development needs and opportunities of
women-owned, minority-owned small businesses. This goal is important in part because
the small-business lending market is vast and
complex, with a market size of $1 trillion serving over 28 million businesses. In addition,
existing research suggests that significant discrimination against minorities may exist
in the small-business lending market.
Currently, no federal agency collects comprehensive data on small-business loans.
We will achieve this goal by building a small
business lending team to begin market research and outreach for a rulemaking on small business
data collection. Subject to an assessment of
feasibility, we will build the infrastructure to
intake and analyze small business lending complaints. And as part of our supervisory
work, the Bureau will continue to examine small
business lenders for compliance with fair lending
laws. Our ninth and final goal relates to
student lending, and in particular, servicing of
student loans. The CFPB envisions a student lending market where servicers facilitate
repayment of student debt in a manner that is
consistent with consumer interests, transparent and fair, and has incentives to encourage
these outcomes. This goal is important in part because
outstanding student debt has doubled since 2007
to nearly $1.2 trillion owed by 40 million consumers. Nearly half of the amounts
outstanding are not currently in repayment, and
nearly 8 million student loan borrowers are in
default, while another 3 million are struggling to make payments. Together, that accounts
for more than one fourth of all student loan
borrowers. We will achieve this goal by
continuing to work with the Department of Education and other agencies to develop and
implement recommendations that align servicer incentives with appropriate consumer outcomes.
We will work, through our supervisory and enforcement activity, and in coordination
with other law enforcement partners, to hold servicers accountable for their legal obligations
to consumers, and based on this work, the Bureau
will evaluate additional policy responses, including a potential rulemaking. That concludes our nine goals for our
two-year strategic outlook. I’d like to open up
the floor of this presentation from all the Credit Union Advisory Council members, and
specifically, we have a series of questions that
we’d like input on from CUAC members, in particular, as the Bureau moves forward in
implementing this strategy, how can we engage the
CUAC members to provide regular progress reports and receive their input?
What are some of the ways in which CUAC members can provide the Bureau with
assistance in implementing this strategy? What
data and other sources of information are available? What are you seeing that may help
inform our work that we have planned? And what
reactions do you have to the plan for achieving the Bureau’s priority goals?
In addition, we want to know, how can we engage the CUAC as we refresh and adjust
this strategy over the coming years? Thank you
and I’d like to open it up for feedback now. Well, thank you
very much. I’d like to give you some input for
one of them. For the small business lending, while I realize that there isn’t one particular
agency that collects information, you may not be
aware, but the CDFI fund, from Department of
Treasury, actually does collect quite a bit of
information on small business loans. If an applicant has received a grant
from them and they do small business loans, they
have to report that information to the CDFI fund
annually. And that information includes, you know, dollar amounts, times, terms, whether
the business was to a minority, to a woman, how
many employees they may have hired from the loan
Census Tract information, and so forth, so that
may be a resource to you, and wasn’t sure you
were aware of that. That’s incredibly
helpful and we appreciate that as we’re starting to learn more about the small business lending
market, that’ll be very helpful as we stand up our team.
So, Committee, do we have some comments? Robin?
I think, looking at this, the area that I have the greatest concern
about is the student loans and the amount of debt
that’s outstanding. And I don’t know how we supply the information to you, but I daily
see young people who are so far in debt, I don’t
see that they’re going to get out of it. They’re
still living at home with their parents, and, you
know, we’re struggling all the time trying to
figure out how to help those people. I don’t know if there’s a way we can
supply — how we get the data to you to show just
how many people may be getting denied for loans
with us because they can’t buy a car because they’re so far in debt, so they can’t buy
the car, so they can’t get to their job. It’s
kind of like a vicious circle, and it’s something
that we talk about a lot at our institution about
how we’re going to be able to help these people. And you do reach a point where you
say, we are going to approve them for a car loan.
Maybe their ratios are a little bit high, but
they have to get a job. They have to have a way
to earn income to eventually get out of that student debt.
Of all of those, I’d say right now, I think that’s the biggest impediment because
if, you know, the housing market, they can’t buy
a home, they can’t do anything until they really
focus on that student debt, so anything you can
do to look at the servicers. I know, personally, I’ve been there
with my kids and I know that Sallie Mae had a
program that if you made your payment on time for
three years, they automatically reduced your interest rate. Well, they were supposed to
automatically, they don’t automatically reduce your interest rate. You have to contact them.
So there may be something there that we can do to help these people, at least if
they’re making their payments on time, that the burden is on Sallie Mae to automatically reduce
that payment by that 1 percent. Bernie.
My comments are going to be more of a general nature than they are
going to be targeted to any one of the specific
objectives. As the only member-owned financial cooperatives in the marketplace, I think our
goals as credit union executives and as credit union management teams, run very much in synch
with the goals of the CFPB. Credit unions, for years, have been
the good guys in the marketplace. We have said
many times, and I believe the people in the CFPB
agreed with us, that we didn’t cause the problems that actually gave birth to CFPB several years
ago. So as members of this committee
currently, and I think future members of this committee, we’re happy to sit with CFPB and
share our stories of how we’ve been able to do things
over the past years, how we’re doing things now, and how we’re looking forward to doing things
in the future as we work every day to help our
members solve these very same problems that you’ve so nicely articulated for us.
And so we look forward to being partners with you as we go forward on that
project. Thank you, Bernie.
I agree. Gregory, I think you had something. My reaction’s similar to
Bernie’s. I think we support the goals of the
Bureau. We’re all seeking the same thing. As an
institution, though, that has changed our loan
operating system, both consumer and mortgage, to
meet the new regulations that have come out, as
an institution that’s brought on two additional compliance folks to help us get through, and
digest, and get ready to move forward, I was hoping we would see a little bit of a breath
and take a break a bit, and just digest as we
go forward.
But as I look at your nine objectives and look at the folks around the council,
these aren’t big issues to us. Some of them are
things that we do. Arbitration, for instance. I think
a lot of us have an arbitration agreement. I
don’t think that we would make a clear-cut statement that class action lawsuits are in
the best interest of our members.
I think they’re in the best interests of the Plaintiff’s lawyers and the Plaintiff’s
bar, but when I got my free coffee card in the
mail as a result of a class action lawsuit, I
wasn’t real satisfied with it. So I would encourage you to talk with us and not draw
the conclusions, and then try to circle us in
as we get there, but I think we’re on the right
track and there’s a lot that we can agree on.
Thank you. Tom. Thank you. A comment and
a couple of questions. This is a very ambitious list of priorities for a near term, having
nine. Any of us that have done strategic planning
within organizations, coming up with nine 0048
objectives, especially in light of your current progress and status with many different programs,
will be very difficult to achieve and to not kill
your people, but good luck in getting through all
that. A question on the student loan and on
the small business loan. You’ve identified 11
million students that are either in default or
struggling. Have you broken those down between private student loans and federal loans?
Because, you know, the federal loans are needs- based. Anybody that needs that money can get
the money.
The majority of private student loans are credit-based. So have you looked at that
to see the difference between the two? And do
you have supervisory oversight over the federal
loan servicers or is that a DE, Department of
Education, area? I don’t know how that falls. Those are both issues
we can follow up with you on offline. I don’t have that data in front of me and we work
very closely with the Department of Education in
thinking about how we look at the federal loan
environment. Okay. And then secondly,
on the small business, you identified discrimination as a concern, or as an issue,
within small business lending, and you talk about
doing a data collection, would that data collection focus on the issue or the problem
we’ve identified or would you envision a larger data-collection process to gather far more
information than just addressing that particular identified problem?
We’re at the very early stages of that process, and actually, what
we’re doing there is implementing a statutory mandate
that we have under the Dodd-Frank Act to do a
small business data collection. In part, the statutory provision identifies the minority-
and women-owned small businesses as an aspect,
but it’s not limited to that.
Exactly how this data collection happens and what it exactly looks like is
very much something that we’re in the early stages
of the figuring out and we’ll welcome your input
in that process as we move forward.
Thank you. Anyone else?
David. Just a comment and then a
question. The comment concerns your commitment to continue to do research on financial education
and financial literacy training. I know we’re all very involved in that, but whatever you
can share with us, whatever you can learn, so
we can better educate consumers would be really helpful.
I really like your emphasis on that, that it’s
still a goal. And then the question concerns a
comment that’s made in the mortgage section, the
last one, where you identify there’s still 1-1/2
million consumers that are struggling to make mortgage payments and are facing foreclosure.
That’s still a large number, but it seems to me that it’s a lot smaller than it was back in
2008, 2009, and I’m wondering if you can work with
the GSEs, Fannie Mae, Freddie Mac, and really
encouraging them to start to restructure those loans and provide some relief to those consumers,
using your influence, because I think it’s now,
in my opinion, almost a manageable problem at
that level and we just need to get this behind them and really help them out.
I know as credit unions, we do a lot of troubled debt restructuring, but we need
the GSEs to step up. So that’s just a question
and whether you feel that’s appropriate.
Yes. I’ll actually speak to both of those. There certainly has
been a tremendous amount of healing in the mortgage
market. It is also true that we still are not
back to, sort of, normal levels, whatever normal
would mean, because we haven’t been at normal for
probably 15 years now because of the run-up to
the crisis, the crisis itself and then the residue of the crisis. We do cooperate closely with FHFA,
which oversees Fannie Mae and Freddie Mac, because we both do a tremendous amount of
work affecting the mortgage and housing markets,
and also with HUD, and, you know, as the markets
are healing gradually, but there’s still elevated
levels of underwater houses around the country, there’s also still elevated levels of defaults
and foreclosures in certain parts of the country, although in some markets, that has largely
healed. There are, we discussed this a bit,
but inventory problems in a lot of markets, both
because of those problems and also because of
homebuilders have been slow to come back in. They’ve lacked confidence as they, you know,
had to work off the residue of the market crash,
so those are things that are affecting the housing
market going forward. But we have put regulations in place,
a number of them specified by Congress, many of
them we had some discretion about how to tailor the rules that help protect the mortgage market
going forward from some of the things that were
happening again that happened before. On financial education, what I would
say is, the Bureau has worked now over several years to develop some terrific tools and
resources that are freely available. Nothing that we do is copywritten, and therefore,
not copyrighted, and therefore, anybody can use
them, anybody can distribute them.
If I were a credit union, I would look to use our tools with your members. There
are moment-in-time tools that have been discussed
about issues like paying for college, owning a
home, planning for retirement. We have the Ask
CFPB set of frequently asked questions and our
best expert neutral answers, all of which can be
socialized with your members, whether they are
interested in, say, debt collection or credit reporting or anything in particular.
Your employees may not be expert in all these areas, but they can utilize these resources, and that’s something that we would
strongly encourage. The financial advisory that’s going to
be discussed in a moment is all about best practices, many of which, certain of your
institutions may be engaging in now, but if they
aren’t, they can learn from them and they can
implement them. We want to work together with financial institutions on financial education.
And those of you who pay particular attention to the welfare of your members,
if you want to use our tools, if you want to co-brand
those tools, all of those things are strongly encouraged by us and we would be glad to help
facilitate that. For financial education,
I think you are aware, but United Way has four
pillars, and one of their main pillars, one of
those four, is financial stability and education. And I don’t know if you’ve had a chance to
partner with United Way, because there are people
who aren’t currently using — the unbanked, and I think that they are trying to get into churches
and get to people to help provide financial education, and hopefully maybe with a partnership
with United Way, with that being one of their priorities, would benefit both — would benefit
everybody. Yes, I actually
worked with United Way on financial education and
homeowner issues, and the like, when I was attorney general and treasurer in Ohio. They
are a partner that we have worked with around
the country. We’re working with libraries around
the country as well.
And the Your Money, Your Goals resource that we have utilized that is being
utilized by social service providers, labor unions, legal aid groups, and a variety of
providers, now volunteer groups such as, not entirely volunteer, but charitable groups
such as United Way and the like.
The other thing that, I’m forgetting the other part of your comment there, but
again, we mean these tools to be used by others and
distributed widely, and credit unions would be a
great partner for us. And one of the things we’ve liked that credit unions do around the
country is, you’re very active in promoting Reality Fairs, reality days, programs for
young people who roleplay what it’s like to be out
in the world on their own, looking after managing
their affairs, and that’s very eye-opening for a
lot of young people who are going to be doing this a few years later, but ought to be thinking
about it sooner. And we very much appreciate that
program and encourage you to be doing more of it.
Yes. Just as a follow-up on
the Reality Fairs, after doing these for about two and a half years where we’re headquartered,
we have become, in one of the counties where we
are at, the middle school curriculum for financial education in the middle school for
the entire county, and we’re working our way forward in the other counties that we serve.
And it’s a great — because the school systems are strapped for money as well and
they don’t have the expertise to teach this subject,
so they are becoming more and more willing to
allow that to be outsourced to us, and it is
extremely eye-opening when you walk in and deal
with 7th graders and this is the first time they’ve even had this subject even discussed
with them.
I’ve been dealing with the Reality Fair program for about 12
years now, going back to when I was a local official,
I think it’s a great thing for those school
districts to encourage institutions to start to
come in and bring their expertise. Some school districts are very reluctant to do that.
I think they’re wrong, those that are reluctant, and I’m glad to hear that that’s
changing. My children went through a Reality Days program in their school district in Ohio
and thought it was really valuable. My son, I remember him saying that he didn’t think anything
that he learned that day was particularly difficult, but he couldn’t imagine going out
in the world and not knowing any of it, but many
young people do. Yes, you sort of have to
prove to the school system that the education is
the real reason you’re there, and it’s the first
reason you’re there, and once you do that, then
their buy-in is pretty rapid after that. The other question I have is on the
debt collection side. I know that you differentiate in your document here about
first party or original creditor versus third-party
creditors, but I would encourage you to gather as
much information as you can from us on, succinctly, the two groups of borrowers, or
people who are in collection issues, because they’re pretty much divided into two large
groups; those who can’t pay and those who will
not pay. And we need to be careful that we don’t restrict our abilities in either of
those groups by having one, sort of, directive that
sort of carves off some of the edge out of both
of those groups so that we’re limited in one aspect about what we can do to help versus
what we can do to actually fairly collect the debt
that’s owed to us from that borrower who hides from us, who hides the collateral, who refuses
to pay, but has the wherewithal to pay.
You can reasonably determine that they can pay; they’re just choosing not to. And
then on the other side you have the member who
has had a catastrophic event in their life and now
they can no longer — they can’t pay under the
original terms and conditions, and we are perfectly willing that if you will communicate
with us, we can help restructure that so that you
can pay, which helps both the credit union and it
helps their credit, because we rearrange the terms in such a way where they can pay on
time instead of paying late.
So I just ask that you be mindful of that on the original creditor piece.
Thank you. I think communication is the key to success
in most things. I just have one thing. We need to
turn this back over so that we can be educated
on the next part of the session, but as far as credit
reporting, again, being CDFI, I do a lot of alternative credit-type of things.
I know that two of the things that we look for on a pretty regular basis is a 12-month
history, or 24-month history, for rental payments as well as looking at insurance payments.
And I know insurance companies pull credit and have
their own little way of pulling credit, so why
shouldn’t they have to report payments? And I think many of the large rental
companies out there should also report too. I
have seen a few. Just food for thought. All right. That was a wonderful discussion, so
now we’re going to transition into a discussion
on how credit unions can protect elderly customers
from financial exploitation and abuse. So I’d like to invite Stacy Canan, Deputy Assistant
Director, and Naomi Karp, Senior Policy Analyst from the Office of Older Americans. Stacy
and Naomi.
Thank you very much. I want to thank the Council for including us
in your meeting today. We are delighted to be
here to have this opportunity to tell you about
the advisory and report that Director Cordray
told you a little bit about earlier in his remarks.
The Bureau released the advisory yesterday, so the timing is impeccable for
today’s meeting. And actually, today is not the
first time that we’ve briefed the Council. In
fact, we were here about a year and a half ago
when we were at the early exploratory phase of
the project, and we reviewed our notes from that
meeting from a year and a half ago, and we were
reminded how helpful that meeting was, and we
received excellent feedback. And for those of you who may have been
on the Council then, perhaps you’ll see some of the things we talked about at that meeting
actually in the advisory and in the report that
accompanies it. Before I turn things over to my
colleague Naomi, who’s going to walk you through the recommendations that are included in the
advisory, I just wanted to tell you a little bit
about our Office for Older Americans, in case some of you are not familiar with it.
We are one of the four special population offices in the Consumer Education
and Engagement Division here at the Bureau. And
we essentially engage in policy and education
initiatives that are designed to, one, help older
consumers navigate important financial decisions as they age, and secondly, to help protect
them from unfair, deceptive or abusive practices,
and to help them protect themselves as well.
Combating financial exploitation has always been a very important priority for
us and we think that the advisory that we released
yesterday takes us into an important area and is an important step forward in that effort.
So having said that, I will turn things over to Naomi. One other thing, actually,
before I do. Sorry, Naomi. Regarding the consumer education, I just wanted to mention
that on consumerfinance.gov, or please feel free
to contact either one of us, we have an array
of consumer guides and reports that I think many
of you will find helpful and useful, and we are
delighted to share those with you too. So now I’m going to make
Stacy do the clicking and I’ll walk you through this, and thank you, Director Cordray, for
the great setup with your remarks. So what I think,
then, I’ll try to do is go fairly quickly through
some of the background on older Americans and
elder financial exploitation so that I can then
spend a little bit more time on the actual content of the advisory.
We actually issued two documents yesterday, one is a very concise advisory
that has all of the high points of our recommendations. The second document is called
recommendations and report on the same topic. It’s quite a bit longer, but it’s very meaty,
it has a lot of good stuff in it, and a lot of
elaborating on the things in the advisory, so
we’re really hoping that you will take a look at
both of them. So let me just walk you through a
couple of quick data points on older Americans to
set the stage, and the Director already really gave you the background on the demographics.
It’s also important to note the net worth of
older adults, and I’m sure that you’re all aware
of this from your business, so in 2011, the net
worth of households headed by a consumer age 65
and older was about $17.2 trillion, so that is
actually a lot of money out there in the hands of
older Americans. Even though their incomes may be
reduced, they do hold the wealth, and that’s part
of actually what makes them vulnerable because the scammers and the predators out there know, you know, like Willie Sutton said, that’s
where the money is, so their net worth is actually
somewhat of a problem for them. In terms of their banking habits,
again, you probably know that they are very, very
highly banked or credit-unioned as well, I should
say, because they are more highly banked than any
other age group, so over 3/4 of households headed
by a consumer age 65 and older are fully banked, which means that they use banks and credit
unions. They don’t use alternative financial services.
And the other key point, and this will lead into some of our recommendations, is,
especially those over age 70, they are very, very
likely to rely on tellers as their primary form
of banking, which means they’re actually in the
bank or the credit union, you guys get to know
them, and you get to see what’s happening, and
they’re coming up to you, and, you know, they’re telling you things that should send up some
red flags, so that’s part of what provides an opportunity and makes you such important actors
in this sphere. Another thing that I think we’re all
aware with the aging of the population is cognitive status. Diminished capacity, or
diminished cognitive abilities really impacts people’s ability to handle finances. Financial
capacity, the ability to manage money and property, is the first type of capacity to
go. Even with mild cognitive impairment,
before Alzheimer’s or another dementia, people start to lose that ability to manage money
and part of that means losing their ability to
judge whether something is a scam or a fraud, so
cognitive status is very important. It also means that a lot of people
need surrogates to manage their money and we’ll
touch on that a little bit as well. So elder financial exploitation, just
so we’re on the same page, a very simple definition of it is the illegal or improper
use of an older adult’s funds, property or assets. As Director Cordray said, it is the most common
form of elder abuse and unfortunately, it’s very
highly under-reported. So in terms of the statistics, it’s
very hard to measure. Somewhere in the realm of
about 5 percent, according to the academic studies. That’s probably a gross underestimate.
When older adults are surveyed, they actually report much higher incidences, and actually,
again, in terms of timing is everything, actually, just two days ago, the Investor
Protection Trust released its updated version of
the 2010 statistic that you see here, they repeated the same survey again, and again
— well, the number went down from 20 to 17 percent,
but it’s really close to 1 in 5 older adults 65
and older are reporting that they’ve been scammed
or taken advantage of financially in one way or
another, so that’s a very significant number. And as I mentioned, it’s very under
the radar. One study said only 1 in 44 of those
cases ever makes it to an agency that can actually provide services to the victims,
so that’s very troubling. A sister agency, the
Financial Crimes Enforcement Network, or FinCEN, that I know you’re all familiar with, which
is part of the Treasury, issued a very important
advisory in 2011. They wanted to stress that financial
institutions can really play a key role in addressing elder financial exploitation, so
they highlighted that the filing of SARs, for
instances of elder financial exploitation, is
very valuable. As I’m sure you know, now SAR filing has become electronic, and on the
electronic SAR form there’s actually a category, a checkbox, for elder financial exploitation,
making it easier for you to designate that. It’s still very important to have a
narrative and to provide a lot of information about what you think happened and what law
enforcement should be looking for. Just a quick slide, this is FinCEN
data. You can see that since 2012, the number of SARs filed by depository institutions has
really gone up very substantially. Whether that’s
because of FinCEN’s advisory or because of the
greater prevalence of this, or just greater awareness, we’re not sure, but a lot of financial
institutions are filing those SARs. Also, the Government Accountability
Office, the GAO, did a study in 2012 on elder justice, particularly highlighting elder
financial exploitation. One of their findings was that banks, and I will extend that to
credit unions, are very important partners in combating
it because of their position, and that they learn
from Adult Protective Services, and law enforcement that frequently, at least at that
time, it was under-reported by banks, so they actually made a couple of recommendations
to us, to the CFPB.
One was to develop a plan to educate banks on how to identify and report, and to
some degree, this advisory and the recommendations
we issued yesterday are a response to that, although we were already very much thinking about how
to do that. Their second thing was, they wanted
us to clarify, under privacy laws, that you still
may report to authorities. And we had heard frequently over time
that there was confusion about, you know, is
there a conflict between the privacy laws and the
ability to share that non-public personal information when you think that an accountholder
might be subjected to suspicious activity. We, with seven other federal
regulatory agencies in 2013, issued guidance saying that, in general, you may report elder
financial exploitation without worrying about running afoul of the Gramm-Leach-Bliley Act,
and we re-emphasized that again in our advisory
that we just issued, and we are sure that you’re
probably aware of that, but it’s something that
we’re still trying to get the word out to financial institutions across the country.
So I think I jumped ahead of myself and my next slide talked about the guidance,
and so we can move on. So as you heard yesterday,
we issued the advisory and the report, which
are basically to identify what we believe are
best practices to enable you, as financial
institutions, both to prevent elder financial exploitation before it happens, and then to
intervene effectively, promptly, in a timely way
when it does occur. We hope that you will consider these
recommendations as you look at your own practices. We hope you will get ideas from
them that you’re not doing that you may think are
good ideas to implement. Some of them we hope you
will say, oh, yes, we’re doing that already, but
maybe we give you some more food for thought. We do need to point out that this is
not regulatory, it’s not binding on you; it’s recommendations, but again, we hope that you
will take them very seriously and consider them.
So let’s just walk, sort of, as quickly as I can through the areas of the
recommendations, and they’re divided into about six categories. The first is kind of general.
It’s about protocols. We think that you need, financial institutions need to have a
comprehensive, organized and clear way to attack
this problem. So we want to recommend to you that
you have internal protocols and procedures that
are clear, that can be communicated to all of
your employees. We understand that there’s a
huge variation between a small credit union, or a
community bank, and some of the largest banks in
the country, some of which have specialized central units where they have dedicated staff,
and they’re triaging cases from all over the country, small institutions are not going
to be doing things like that.
So we recognize that you’re going to want to adapt these protocols depending on
your size and the risks that you face and the needs
that you have in your community, so we recognize that it’s not a one-size-fits-all.
So moving on training, we think training is really critical, and especially
as we talked about, tellers and frontline people
playing such an important role, they need to be
trained, they need to be trained on the red flags, they need to be trained on some tips
of, when they see a situation, and maybe they
can do something to stop it, what are some scripts
for them, what are questions they might ask of
an accountholder who’s coming, saying, I want
to wire $10,000 to Jamaica because I won the
lottery and if I just pay my fees upfront, I’ll get
my million dollars and my son will get the Cadillac.
And so scripts, which happened to my mother’s friend, that will help them, perhaps,
raise the consciousness or, you know, get them to
come back with a son or daughter and help to
explain it, and just other tips for those kinds
of things. So that’s part of the training. The training should also be for back
office people, people who are dealing with your
fraud detection software and just really, everyone in the institution should be trained
and should be trained repeatedly. Clearly, there’s
a lot of training requirements, so you’re going
to have to figure out ways to do it succinctly
and, you know, within your resources, but training
is very important.
So moving on to detection. While the frontline people and the actual humans who
can observe the behavior is a very important part
of detection, but the other thing that we really
wanted to stress was harnessing technology. And
we want to recommend that you ensure that your
fraud detection systems include analyses of the
types of products and account activity that may
be associated with elder fraud risk. And a key point that we make there is
that transactions and behavior that may look normal for younger accountholders, may be
things that should throw up red flags for older
accountholders, and so we provide you with some
lists of some of those types of transactional activity, and we recommend that you integrate
that into your fraud detection systems. We also recommend, clearly, that if
you can, that you use predictive analytics so
that you’ll be looking at each individual accountholder’s behavioral patterns, so that
then when you see something that’s out of pattern,
that again, might be something that indicates a
risk of some kind of suspicious activity or elder
fraud. So we really want institutions to beef up
that technology at the back end. Moving on to reporting. So we
encourage financial institutions to report all
cases of suspected exploitation to relevant federal, state and local authorities. We say
all because you may not be mandated to report
all of them, but we think it’s important to have
a system to report them all.
Now, on the local and state level, that’s primarily Adult Protective Services
and law enforcement that you’ll be reporting to.
Clearly, SARs are another aspect of it, so the
FinCEN reporting. And then there could be situations where you may be reporting to other federal agencies, for example, the U.S. Postal
Inspection Service or the FBI, in addition to
FinCEN. We want people to be aware of state
reporting mandates and very likely you know about
them, but financial institutions’ — or some subset of financial institution — employees
are mandated reporters to state, probably to Adult
Protective Services, perhaps also to law enforcement, in about half the states.
And some of that half of the states, it’s a very specific mandate. There’s a state
statute that says financial institutions must report, in some states it’s any person who
suspects it must report, so everyone in the state
is a mandatory reporter, so those laws clearly are important for you to be aware of.
We talked about SARs. We talked about Gramm-Leach-Bliley. We have some information
in there about what is Adult Protective Services?
What do they do? What cases do they take? We
want to provide that information because some financial institutions may not really understand
how they operate and we also want you to collaborate with them.
And then we’ve heard some issues around when there is a law enforcement or
Adult Protective Services agency doing an
investigation, so a case is already open, whether
it was the credit union that reported it, or
someone else, and they come to you and they ask
for account information or documentation, sometimes there’s some frustration that they’re
not getting it quickly enough, they’re being charged for it, so we encourage people to
expedite those documentation requests. Okay. I’m getting a little bit of a
nudge here on the time. So then we have another category we call protecting older accountholders
and that really covers a lot of different things.
Part of it is around EFTA and Regulation E because elder financial exploitation may involve
unauthorized electronic transactions, and so we
have some reminders in there of particular things that might involve older consumers where we
want to make sure that you’re protecting their
rights under EFTA and Reg E.
The next section in this is something that might be new to you, and we actually
heard this a lot from credit unions and community
bankers, they’re frustrated because they report to law enforcement or to Adult Protective
Services and they don’t think anything happens. APS doesn’t have the capacity, law enforcement
thinks it’s a civil matter, whatever it is, and
they really want to protect this person. So they’d like to be able to go to the
son, the daughter, somebody known in the community, and say, hey, we think there’s
a problem with your mom, but they’re very worried
about the privacy rules, as they should be. We
have a recommendation in here about developing a
consent process in advance with the accountholder.
So they could designate a trusted family member or friend and designate the circumstances under which they would want
you to communicate to that person if they thought
that something bad was happening to them. We think
there’s way to do it and still comply with the
privacy law, so we have some suggestions there. Then we make suggestions about a
number of age-friendly services that I think I
won’t walk you through right now, but we have a
good deal of detail there on working with your
members on planning for incapacity. And I guess
I’ll take this moment, I know you’re all interested in financial education and the
Director is urging you to use our materials, so I
just want to quickly plug a couple of them so
that you know they exist. So we have a series of guides called
Managing Someone Else’s Money. It’s for those sons, daughters, relatives, friends, who are
acting as legal surrogates and managing someone’s money, and we want them to do it right. So
we have these four guides for agents and their
powers of attorney, guardians, trustees and government fiduciaries, and they are really
great and lots of financial institutions are
distributing them, so I’m happy to actually share
these with you after the meeting. We have a short handout on planning
for diminished capacity and illness that is meant
for the public, and then we have our Money Smart
for Older Adults: Prevent Financial Exploitation financial literacy tool. Those are all out
there. We would like to have you use them. Okay. Moving on, so finally,
collaboration. This is fairly clear, that the
importance of working with law enforcement and
APS, developing contacts with them, coordinating with them about public education and member
education, and then in many places in the country, we have multidisciplinary network
initiatives that you can plug into. You are experts on finances, on
banking and so forth, and often, those law enforcement and community service providers
could really use your expertise, so we hope that
you will work with them.
So that was a really quick and dirty version of what’s a lot of information that
we hope that you will take some time to look
at, and we did want to throw out some questions to
you, so we’d like to know what ideas CUAC members
have on how the CFPB can disseminate the advisory
to reach the largest number of credit unions
out there.
What are some ways that you can help us in distributing the advisory and encouraging
credit unions to adopt our recommendations? And
finally, in this space of older Americans, and
protecting them, and protecting their assets, are
there other activities that you would like to see
the CFPB and specifically our Office for Older Americans, engage in that we think would be
helpful to you so we could work together with you?
Thank you so much. We have exactly five minutes to answer her
questions, so be brief. As one of those
Americans who now falls under this protection guideline, I appreciate it. Thank you very
much. We do a lot of training with our staff to
recognize elder abuse, particularly from, I will
say, the third parties. You know, the scams. Okay. You’ve won the U.K. lottery, the mail-
order bride system out of Europe. You send $2500
over, when your bride arrives at the airport, she
brings the cash to you when you pick her up at
the airport, all this other stuff. We’ve intervened, gotten chewed out by
the member, but we’ve acted on their behalf. Where we struggle is when the abuse is taking
place within the family, and particularly, if it
is the joint member on that account with that elderly member, just how far can we go and
still protect ourselves when we know there’s abuse,
particularly when I can’t discuss it with another
family member who’s not on the account. So that’s kind of what we struggle
with. So when you folks talk about elder abuse and what can we do, understand, elder abuse
comes from many angles, okay? Just like you’ll find
under overdraft protection, a courtesy pay, it’s
many angles, and then probably sometimes the best
thing to do is just sit down with us and talk about what we do to prevent it within our
own walls that will help you.
I also want to commend CFPB for the materials that are free. We use them
extensively, not only in this area, but in others. Also, that we’re allowed to co-brand
with it, so we appreciate that. It makes us look
smarter, but again, I thank you for that. But
that’s kind of what we struggle with. As far as dissemination, NCUA puts out
circulars to credit unions, the trade associations do, the leagues, the corporate
credit unions do, there’s a lot of sources that
we can get that information to the credit unions,
so I’ll shut up. Great. And can I just
quickly reply that we’re very aware and we do make it clear in the advisory in the report
that we’re not just talking about those stranger
scams. The prevalence really is much more in
those trusted people, the family members. Right.
We also recognize in our report the dangers of joint accounts. We hope
that institutions will actually warn people when
they’re opening them about some of the risks of
them. We encourage them to offer convenience accounts or a multi-party accounts without
right of survivorship because those might be safer
for people and to explain those kinds of things
to the members.
Bob. One approach you might
consider is providing us presentation materials. We have good luck bringing members to evening
seminars for different topics: Social Security, retirement planning, those kind of topics.
We feed them, which also helps with attendance,
but putting the materials in front of them, as
good as they are, people don’t read them until
after it’s almost too late, until they’ve experienced
the problem, but I’d be more than willing to, if
you were to give us a PowerPoint, or a deck, that
was all the same documentation material, we would
do multiple seminars a year and we would fill the
room every single time. Yes, and I will point out,
although it’s not the 15-minute thing, but the
Money Smart, it’s actually a training-the-trainer module, and so there is an instructor guide
and there is a PowerPoint. The whole thing is
150 minutes of content, so you’re not going to
probably do that at one of those sessions, but we
recommend to people that they can break it up
into, you know, bite-size pieces, so that is one
resource, but we will think about ways that we
could do more concise things and share them with
you. Kate.
So with respect to your first question you had there about the ability for the CFPB to reach the largest
number of credit unions and provide them with
information for training of their members, I
belong to a group called the Credit Union Compliance Professionals who meet in Southern
California once a month, and we have representatives from 65 credit unions come
together, so that would be a good place to reach
a lot of credit unions at one time. And I know there’s a similar group
here in D.C., so those kind of groups are around
the country and they also, many times, are linked
to the leagues, so they sponsor them, so that might be a good way to get a lot of credit
unions at once.
Great. Absolutely. Does anybody else have a comment?
Have you developed account agreement language for the convenience,
or the agency approaches you’ve talked about to
help us set those accounts up correctly to give
the limited access to them; the view-only type of language for others?
No, but it’s a great idea for us to think about, so we really appreciate
that idea. And did you bring this
to Western Union? Because the fact that these people are fully banked helps in detecting,
especially on the scam side, because they would
have no reason, I couldn’t think of a reason, for
someone who’s 70 years old to go to Western Union, which is what these scammers do.
I was talking to the chief of police at the local police department this week,
and, you know, they don’t come to us because we
are educating our staff, but a Western Union outpost
in a 7-11 or other type of convenience store, not
so much, so got me to thinking, can we detect that transaction within our system to flag
it for, you know, literally, immediate follow-up,
because once it’s done, it’s gone, and they move
on. But, you know, groups like the money transfer companies are people that need to
be more aware of this.
That’s about the fourth great idea in the last ten minutes.
Maybe we should extend the session a little bit.
Well, Director Cordray, Delicia gave us permission to extend
for a few minutes. I think that, you know, I’m
one of these people now taking care of older parents
and I have dealt with at least three at times. I
have a mother-in-law who has dementia and the
advantage that people try to take. I haven’t had a chance to read through
all the documentation since you gave it to us
yesterday, but, you know, one of the things that
we’ve seen in our credit union is phone call solicitations and phone call solicitations,
you know, on the national level, the IRS says
you owe money and you need to call me back, or we’ve
actually had several instances of people calling saying that your grandchild, or your grandson,
and they know the name of the child, is in trouble and you need to send money, and so
forth. You know, I hope that there’s
information on that. Those are scary things to
have to deal with. I think all of us are very passionate about this and, you know, we really
care. It shows, kind of, the passion we have overall as an industry for our members. People
work hard all their lives for their money and
they deserve to be able to keep it as long as
they can. Does anybody else have some great
ideas to share? No? She gave us extra time. All right. I know. I know. These are good.
We’re good. Well, I want to thank everybody for
this great discussion. We got some great information, great advice, and so forth. I’d
like to thank Delicia and Zixta for helping coordinate all of this, and Director Cordray
for always being here and allowing us the opportunity
to speak our minds. We do greatly appreciate that.
And since I know that this is the last session for a few of you in the public session,
good luck and farewell. I know we’ll be talking over the phone, but we won’t get to see each
other here again. So thank you and thank you for
a great audience, and I hope everybody has a
wonderful rest of the day. We’ll go ahead and
adjourn the meeting.

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