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Senator Warren Calls For the Firing Of All Wells Fargo Board Members

Wells Fargo logo In a letter sent Monday to the Federal Reserve Chair Janet Yellen, U.S. Senator Elizabeth Warren (D-Massachusetts) has called for the firing of all 12 board members at Wells Fargo bank for failing to adequately protect accountholders. CNBC reported first the Senator's letter, which read in part:

"The fake accounts scandal cost Wells Fargo customers millions of dollars in unauthorized fees and damaged many of their credit scores," the senator wrote. "The scandal also revealed severe problems with the bank's risk management practices — problems that justify the Federal Reserve's removal of all responsible Board members."

After implementing sales targets and an incentive program, many of the bank's employees secretly opened new accounts and transferred money from other accounts to fund the new accounts -- all without the customers' knowledge nor consent. In some cases, employees applied for credit cards, created PIN numbers, and operated fake e-mail accounts in customers' names.

The Consumer Financial Protection Bureau (CFPB) announced in September, 2016 the consent order with the bank. As a result of the fake-account scandal, the bank paid about $185 million in fines and fired 5,300 lower-level employees for setting up 2 million bogus accounts. Few or no senior executives have been punished.

Many Republicans and President Trump seek to defund and shut down the CFPB.

During October, 2016 Timothy J. Sloan was elected chief executive officer at Wells Fargo bank after the former CEO, John Stumpf, retired. Sloan also joined the board of directors as a member.

CNN Money reported:

"... Wells Fargo suffered from inadequate risk management systems that should have flagged the illegal activity earlier. Shareholder advisory firm Institutional Shareholder Services (ISS) agrees. ISS argued the Wells Fargo board made the scandal worse by failing to provide oversight that could have limited the damage..."

In her letter, Senator Warren urged the Federal Reserve to act:

"I urge you to use the tools Congress has given you to remove the responsible board members and protect the continued safety and soundness of one of the country's largest banks..."

Reportedly, the Senator's letter mentioned the following Wells Fargo board members: John D. Baker II, John S. Chen, Lloyd H. Dean, Elizabeth A. Duke, Enrique Hernandez, Donald M. James, Cynthia H. Milligan, Federico F. Pena, James H. Quigley, Stephen W. Sanger, Susan G. Swenson, and Suzanne M. Vautrinot.

Some banking experts see the demand as unprecedented and unlikely. All of the bank's board members were re-elected during the annual shareholder meeting in April , 2017. Also during April, the bank announced an expansion of its class-action settlement agreements for its retail sales practices. The expansion covered account holders affected as early as May, 2002 by the bogus new account scandal, and added $32 million to the settlement amount total.


The Top Complaints About Financial Services. One Complaint Type Grew 325 Percent

Logo for Consumer Financial Protection Bureau After encountering unresolved issues with financial services, many consumers file complaints with the Consumer Financial Protection Bureau (CFPB). After each complain, the CFP works hard to get each consumer a reply within 15 days. This process allows the CFPB to track which issues affect most consumers, and to identify emerging problems.

According to its April Monthly Complaint Report, debt collection issues generated the most complaints on average, and complaints about student loans grew the fastest:

"As of April 1, 2017, the CFPB has handled approximately 1,163,200 complaints, including approximately 28,000 complaints in March 2017... Student loan complaints showed the greatest percentage increase from January - March 2016 (773 complaints) to January - March 2017 (3,284 complaints), representing about a 325 percent increase. Part of this year-to-year increase can be attributed to the CFPB updating its student loan complaint form to accept complaints about Federal student loan servicing in late February 2016. The CFPB also initiated an enforcement action against a student loan servicer during this time period."

CFPB Monthly Compalint Report. April, 2017. Table 1. Click to view larger version

The top five categories of complaints about during March, 2017:

  1. Debt collection: 8,711
  2. Credit reporting: 5,498
  3. Mortgages: 3,965
  4. Credit cards: 2,522
  5. Bank account or service: 2,476

Also during March: debt collection complaints represented about 31 percent of complaints; debt collection, credit reporting and mortgage were the top three most-complained-about consumer financial products and services. Together, these three categories represented 65 percent of complaints during March.

The top five categories of complaints since the CFPB began:

  1. Debt collection: 316,810
  2. Mortgages: 272,153
  3. Credit reporting: 195,826
  4. Credit cards: 118,732
  5. Bank account or service: 115,055

The CFPB began accepting complaints for different products and services at different times:

There were regional differences in complaint volume:

"Montana (54 percent), Georgia (46 percent), and Wyoming (45 percent) experienced the greatest complaint volume percentage increase from January - March 2016 to January - March 2017. New Mexico (-20 percent), Iowa (-5 percent), and Kansas (-0.7 percent) experienced the greatest complaint volume percentage decrease... Of the five most populated states, Texas (35 percent) experienced the greatest complaint volume percentage increase and Florida (8 percent) experienced the least complaint volume percentage increase from January - March 2016 to January - March 2017."

The report also tracks complaints by company:

CFPB Monthly Complaint Report. April, 2017. Figure 1. Click to view larger version

The CFPB reported additional details about student loan complaints:

"Approximately 32,700 (or 74 percent) of all student loan complaints handled by the CFPB from July 21, 2011 through March 31, 2017 were sent by the CFPB to companies for review and response. The remaining complaints have been found to be incomplete (7 percent), referred to other regulatory agencies (19 percent), or are pending with the CFPB or the consumer (0.5 percent and 0.4 percent, respectively)... The most common issues identified by consumers are problems dealing with their lenders or servicers (64 percent) and being unable to repay their loans (33 percent)."

"Federal student loan borrowers reported that when contacting their loan servicers regarding financial distress, servicers provided them with information on hardship forbearance or deferment, instead of potentially more beneficial repayment options like income-driven repayment plans... loan borrowers complained of difficulty enrolling in income-driven repayment plans. Borrowers reported lost documentation, extended application processing times, and unclear guidance when seeking to switch from one income-driven repayment plan to another."

Federal student loan borrowers described their experiences when trying to obtain guidance in completing annual income recertification for their income-driven repayment plan. Borrowers reported receiving insufficient information from their servicers to meet recertification deadlines and lengthy processing times. Some federal student loan borrowers stated their payments were misapplied. Borrowers reported overpayments were not applied to specified accounts but rather applied to all accounts managed by the servicer. Additionally, some borrowers’ overpayments—intended to reduce principal balance—were credited to the account as an early payment, resulting in their ac count reflecting a paid ahead status..."

To read more, download the full "April 2017: CFPB Monthly Complaint Report: Vol. 22" (Adobe PDF).


Here's Another Way Wells Fargo Took Advantage Of Customers

[Editor's note: today's article by reporters at ProPublica explores some questionable banking practices. This blog contains coverage about Wells Fargo, including this item from 2011. PropPublica originally published this news story on January 23, 2017. It is reprinted with permission.]

by Jesse Eisinger, ProPublica

Wells Fargo logo Wells Fargo, the largest mortgage lender in the country, portrays itself as a stalwart bank that puts customers first. That reputation shattered in September, when it was fined $185 million for illegally opening as many as 2 million deposit and credit-card accounts without customers' knowledge.

Now four former Wells Fargo employees in the Los Angeles region say the bank had another way of chiseling clients: Improperly charging them to extend their promised interest rate when their mortgage paperwork was delayed. The employees say the delays were usually the bank's fault but that management forced them to blame the customers.

The new allegations could exacerbate the lingering damage to the bank's reputation from the fictitious accounts scandal. Last week, Wells Fargo reported declining earnings. In the fourth quarter, new credit card applications tumbled 43 percent from a year earlier, while new checking accounts fell 40 percent.

"I believe the damage done to Wells Fargo mortgage customers in this case is much, much more egregious," than from the sham accounts, a former Wells Fargo loan officer named Frank Chavez wrote in a November letter to Congress that has not previously been made public. "We are talking about millions of dollars, in just the Los Angeles area alone, which were wrongly paid by borrowers/customers instead of Wells Fargo." Chavez, a 10-year Wells Fargo veteran, resigned from his job in the Beverly Hills private mortgage group last April. Chavez sent his letter to the Senate banking committee and the House financial services committee in November. He never got a reply.

Three other former employees of Wells Fargo's residential mortgage business in the Los Angeles area confirmed Chavez's account. Tom Swanson, the Wells Fargo executive in charge of the region, directed the policy, they say.

In response to ProPublica's questions, Wells Fargo spokesman Tom Goyda wrote in an email, "We are reviewing these questions about the implementation of our mortgage rate-lock extension fee policies. Our goal is always to work efficiently, correctly and in the best interests of our customers and we will do a thorough evaluation to ensure that's consistently true of the way we manage our rate-lock extensions." Through the spokesman, Swanson declined a request for an interview.

Wells Fargo's practice of shunting interest rate extension fees for which it was at fault onto the customer appears to have been limited to the Los Angeles region. Two of the former employees say other Wells Fargo employees from different regions told them the bank did not charge the extension fees to customers as a matter of routine.

Three of the former employees, who now work for other banks, say their new employers do not engage in such practices.

Here's how the process works: A loan officer starts a loan application for a client. That entails gathering documents, such as tax returns and bank statements from the customer, as well as getting the title to the property. The loan officer then prepares a credit memo to submit the entire file to the processing department and underwriting department for review. The process should not take more than 60 or 90 days, depending on what kind of loan the customer sought. During this period, the bank allows customers to "lock in" the quoted interest rate on the mortgage, protecting them from rising rates. If the deadline is missed, and rates have gone up, the borrower can extend the initial low rate for a fee, typically about $1,000 to $1,500, depending on the size of the loan.

Wells Fargo's policy is to pay extension fees when it's at fault for delays, according to Goyda. Yet in the Los Angeles region, the former employees say, Wells Fargo made customers pay for its failures to meet deadlines. The former employees attributed the delays to the inexperience and low pay of the processing and underwriting staff. In addition, to keep costs down, the bank understaffed the offices, they say.

"The reason we were not closing on time was predominantly lender related," said a former Wells Fargo employee. When a loan officer asked the bank to pick up the extension fee, "it didn't make a difference if" the written request "was a one-liner or the next War and Peace," said the former employee. "The answer was always the same: No. Declined. 2018Borrower paid,' never 2018Lender paid.'"

Anticipating that it couldn't close on time, the bank adopted a variety of strategies to shift responsibility to customers. The "most blatant methods of attempting to transfer blame onto customers for past and expected future delays," Chavez wrote, included having loan processors flag "the file for 2018missing' customer documentation or information that had already been provided by the borrower." The customers would have to refile, blowing the deadline.

Sometimes loan officers would ask customers to submit extra documents that Wells Fargo did not need for its initial assessments, burdening them with paperwork to ensure they wouldn't meet the deadline. On occasion, employees built in a cushion, quoting a higher fee at the beginning. That way, they didn't have to go back to tell the customer about the extra fee at the end.

One employee says he complained to Swanson's boss about the situation but upper management referred the problem back to Swanson. The employee's immediate manager then scolded him.

Swanson told co-workers that he personally took a hit if the bank paid out too many extension fees, two of the former employees recall. "Swanson would be very upfront that his bonus is tied to extension fees," says one. The other former loan officer says, "During meetings, the branch was told extensions were costing the branch money."

Swanson, an 18 year veteran of the bank, has faced criticism before that he sought profits at the expense of customers. In 2005, customers in Los Angeles sued Wells Fargo for racial discrimination. They contended that Swanson prohibited loan officers in minority neighborhoods from using a software program that gave them the ability to offer borrowers discounted fees. He allowed loan officers to use the same program in white neighborhoods, where residents paid lower fees as a result. Believing that minority borrowers did not shop around for mortgages, Swanson contended Wells Fargo did not need to offer the discounts in their neighborhoods since the bank faced less competition, according to witness testimony at trial.

In 2011, a Los Angeles Superior Court jury found that Wells Fargo intentionally discriminated on a portion of the loans in question and awarded plaintiffs $3.5 million, a decision that was upheld on appeal. With interest, the payout rose to just under $6 million. "The verdict in the case was not in line with the law and the facts, and there was no evidence that class members paid a higher price than other similarly situated borrowers," Goyda said. Nevertheless, he added, the bank decided to pay the judgment rather than pursue additional appeals.

"Swanson runs that place," said Barry Cappello, who co-tried the case against Wells Fargo with his partner Leila Noël. "He is the man. They do what he wants done. Despite the lawsuit and the millions they paid out, the guy is still there."

Shifting extension fees onto borrowers may amount to just poor customer service, rather than a regulatory violation. Still, if it is widespread and systematic, the bank could be running afoul of banking laws that ban unfair or deceptive practices, regulators say.

For a couple of years around 2011, when Wells Fargo was originating a heavy volume of mortgages, the bank made a decision to pay all the extension fees, spokesman Goyda said. But, around 2014, it reverted back to its traditional policy of paying fees only when it's at fault.

Chavez says that the problems began in earnest that year and persisted as of the time he left last April. The precise value of the improperly assigned extension fees in the Los Angeles region is unclear. Chavez and another employee estimate they ran into the millions. One of the former employees estimates a quarter of the mortgages at his branch had to be extended. By that measure, if a loan officer did $100 million in loans in a year, those mortgages would rack up about $62,000 in extension fees. The Beverly Hills office alone did around $800 million to $1 billion in underlying mortgages, generating at least half a million dollars in extension fees, the employee estimates. Swanson's region has 19 branches.

Some customers resented having to pay the extension fees, and took their business elsewhere. After one mortgage application faced a delay, a Wells Fargo assistant vice president in Brentwood named Joshua Oleesky called to tell the customer that he had to pay an interest rate lock extension fee. The customer balked, blaming the bank for missing the deadline. Oleesky "started interrogating me on why Wells Fargo was responsible for the delay," the customer wrote in a June 29, 2015, letter of complaint to Michael Heid, then president of Wells Fargo Home Lending. (He cc'd John Stumpf, Wells Fargo's former CEO, who was ousted after the fictitious accounts scandal.) The customer went with another bank for the mortgage. Through the Wells Fargo spokesman, Oleesky declined comment.

According to the customer, Heid didn't answer the letter.

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Several Banks Fined Billions By Justice Department For Alleged Wrongdoing

Credit Suisse logo In case you missed it, the U.S. Department of Justice (DOJ) announced last week several settlement agreements and fines against several banks. First, for conduct with the packaging, securitization, issuance, marketing and sale of residential mortgage-backed securities (RMBS) between 2005 and 2007, Credit Suisse will pay about $5.3 billion in fines and relief. That includes $2.48 billion as a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), and $2.8 billion in:

"... relief to underwater homeowners, distressed borrowers and affected communities, in the form of loan forgiveness and financing for affordable housing. Investors, including federally-insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued and underwritten by Credit Suisse between 2005 and 2007."

Principal Deputy Associate Attorney General Bill Baer said:

"Credit Suisse claimed its mortgage backed securities were sound, but in the settlement announced today the bank concedes that it knew it was peddling investments containing loans that were likely to fail... That behavior is unacceptable. Today's $5.3 billion resolution is another step towards holding financial institutions accountable for misleading investors and the American public."

Second, for conduct with the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2006 and 2007, Deutsche Bank will pay $7.2 billion in fines and relief. That includes a $3.1 billion civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), and $4.1 billion in relief to underwater homeowners, distressed borrowers and affected communities.

Deutsche bank logo Principal Deputy Associate Attorney General Bill Baer said:

"This $7.2 billion resolution – the largest of its kind – recognizes the immense breadth of Deutsche Bank’s unlawful scheme by demanding a painful penalty from the bank, along with billions of dollars of relief to the communities and homeowners that continue to struggle because of Wall Street’s greed... The Department will remain relentless in holding financial institutions accountable for the harm their misconduct inflicted on investors, our economy and American consumers."

Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division, said:

"In the Statement of Facts accompanying this settlement, Deutsche Bank admits making false representations and omitting material information from disclosures to investors about the loans included in RMBS securities sold by the Bank. This misconduct, combined with that of the other banks we have already settled with, hurt our economy and threatened the banking system... To make matters worse, the Bank’s conduct encouraged shoddy mortgage underwriting and improvident lending that caused borrowers to lose their homes because they couldn’t pay their loans. Today’s settlement shows once again that the Department will aggressively pursue misconduct that hurts the American public."

State Street Corporation logo Third, State Street Corporation will pay more than $64 million to resolve fraud charges. State Street:

"... entered into a deferred prosecution agreement and agreed to pay a $32.3 million criminal penalty to resolve charges that it engaged in a scheme to defraud a number of the bank’s clients by secretly applying commissions to billions of dollars of securities trades. State Street also agreed to offer an equal amount as a civil penalty to the U.S. Securities and Exchange Commission (SEC)."

Acting Assistant Attorney General Bitkower said:

"State Street engaged in a concerted effort to fleece its clients by secretly charging unwarranted commissions... The bank fundamentally abused its clients’ trust and inflicted very real financial losses. The department will hold responsible those who engage in this type of criminal conduct."

Acting U.S. Attorney Weinreb said:

"State Street cheated its customers by agreeing to charge one price for its services and then secretly charging them something else... Banks that defraud their clients in this way must be held accountable, no matter how big they are."

Kudos to the DOJ for its enforcement actions. If this wrongdoing is ever going to stop, then jail time for executives needs to be applied.


FINRA Fined 12 Brokerage Firms $14.4 Million For Inadequate Data Security

Just before the long holiday break, the Financial Industry Regulatory Authority (FINRA) announced that it fined 12 banks and brokerage firms a total of $14.4 million for failing to adequately protect information in electronic broker-dealer and customer records. The FINRA announcement explained:

"... at various times, and in most cases for prolonged periods, the firms failed to maintain electronic records in “write once, read many,” or WORM, format, which prevents the alteration or destruction of records stored electronically... Federal securities laws and FINRA rules require that business-related electronic records be kept in WORM format to prevent alteration. The SEC has stated that these requirements are an essential part of the investor protection function... FINRA found that each of these 12 firms had WORM deficiencies that affected millions, and in some cases, hundreds of millions, of records pivotal to the firms’ brokerage businesses, spanning multiple systems and categories of records... each of the firms had related procedural and supervisory deficiencies affecting their ability to adequately retain and preserve broker-dealer records stored electronically. In addition, FINRA found that three of the firms failed to retain certain broker-dealer records the firms were required to keep under applicable record retention rules. In settling this matter, the firms neither admitted nor denied the charges, but consented to the entry of FINRA's findings."

The firms fined and the amounts for each:

"Wells Fargo Securities, LLC and Wells Fargo Prime Services, LLC were jointly fined $4 million. RBC Capital Markets LLC and RBC Capital Markets Arbitrage S.A. were jointly fined $3.5 million. RBS Securities, Inc. was fined $2 million. Wells Fargo Advisors, LLC, Wells Fargo Advisors Financial Network, LLC and First Clearing, LLC were jointly fined $1.5 million. SunTrust Robinson Humphrey, Inc. was fined $1.5 million. LPL Financial LLC was fined $750,000. Georgeson Securities Corporation was fined $650,000. PNC Capital Markets LLC was fined $500,000.

In September, Wells Fargo bank paid $185 million in fines to settle charges of alleged unlawful sales practices during the past five years. LPL Financial had several data breaches during 2007 to 2009.

For readers seeking more information, the FINRA announcement includes links to the settlement agreements.


Federal Reserve Study: Noncash Payments In The United States

Americans still love to use the plastic in their wallets and purses. Just before the holidays, the Federal Reserve Board (FRB) released the results of its study about how Americans use non-cash payment methods: debit cards, credit cards, prepaid cards, ACH payments, and checks. The study included the total number and value of non-cash payments by consumers and businesses through 2015.

The total number of U.S. non-cash payments was more than 144 billion payments with a value of almost $178 trillion in 2015. That represented an increase of almost 21 billion payments or about $17 trillion since 2012. Other key findings from the study:

"The number of debit card payments (including payments with prepaid and non-prepaid cards) grew to 69.5 billion in 2015 with a value of $2.56 trillion, up 13.0 billion or $0.46 trillion since 2012. This was the largest increase in number of payments among the payment types considered. Debit card payments grew at an annual rate of 7.1 percent by number or 6.8 percent by value from 2012 to 2015 with most of the growth occurring in non-prepaid debit card payments. The number of credit card payments reached 33.8 billion in 2015 with a value of $3.16 trillion, up 6.9 billion or $0.61 trillion since 2012. Credit card payments grew at an annual rate of 8.0 percent by number or 7.4 percent by value from 2012 to 2015, the largest growth rates among the payment types considered... The number of check payments fell to 17.3 billion with a value of $26.83 trillion, down 2.5 billion or $0.38 trillion since 2012. Check payments fell at an annual rate of 4.4 percent by number or 0.5 percent by value from 2012 to 2015. The decline of checks over the period was slower than previous studies had shown for prior periods since 2003."

Prepaid cards typically include gift cards and payroll cards which consumers load money onto and which aren't linked to bank accounts (e.g., checking, savings). Past studies have documented numerous fees with prepaid cards while some consumers use prepaid cards instead of traditional bank accounts. "Non-prepaid debit cards" refer to debit cards linked to traditional bank accounts.

There are significant differences between the volume and value for each non-cash payment type. For example, debit cards generated the largest share of payment volume and the smallest share by value:

Figure 1: Distribution of noncash payments by type, volume and value in 2015. FRB Study 2016. Click to view larger version

Another way of looking at the variety of non-cash payment types is the volume of payments over time:

Figure 2: Volume of noncash payments from 2000 to 2015. FRB Study 2016. Click to view larger version

Additional findings about prepaid cards:

"The number of prepaid debit card payments reached 9.9 billion with a value of $0.27 trillion in 2015, up 0.6 billion or $0.04 trillion since 2012. Almost all of the growth in prepaid debit card payments by number and value came from general-purpose prepaid cards, which can be used over the same general-purpose networks as non-prepaid debit cards. General-purpose prepaid card payments increased to 3.7 billion in 2015 by number, up 0.6 billion from 2012 to 2015, which was much less than the growth of 1.8 billion from 2009 to 2012... The average value of payments using these types of cards dropped slightly from $35 in 2012 to $34 in 2015.

Private-label prepaid card payments declined slightly by number, but rose somewhat by value from 2012 to 2015. In 2012, such payments totaled 3.7 billion by number or $0.05 trillion by value, while, in 2015, they totaled 3.6 billion by number or $0.07 trillion by value. Private-label prepaid card payments dropped at an annual rate of 0.3 percent by number but rose 15.0 percent by value. Hence, the average value of these payments rose from $13 to $20.

Payments made by prepaid EBT cards increased slightly from 2.5 billion in 2012 to 2.6 billion in 2015, or 1.7 percent per year, while the value of these payments also increased slightly from $0.07 trillion to $0.08 trillion, or 0.20 percent per year. The average value of prepaid EBT card payments declined slightly, from $30 to $29.

In 2015, non-prepaid debit and general-purpose prepaid cards were used in 5.8 billion cash withdrawals at ATMs, virtually the same level as in 2012, after dropping from 6.0 billion ATM cash withdrawals in 2009. The average value of ATM cash withdrawals rose from $118 to $122 between 2012 and 2015, continuing an upward trend in average value since 2003."

To minimize fraud and waste, banks and retailers began the migration to chip cards in the United States in 2015. The FRB study included findings about fraud:

"Payments with general-purpose cards using embedded microchips, which improve the security of in-person payments to help prevent fraud, have grown by 230 percent per year since 2012. But payments with the chip-based cards amounted to only about 2 percent share of total in-person general-purpose card payments in 2015, reflecting the early stages of a broad industry effort to roll out chip card technology. In 2015, the proportion of total general-purpose card fraud by value attributed to counterfeiting, the most prevalent type of in-person card fraud in the United States, was substantially greater than in countries where chip technology has been more widely adopted."

The United States was one of the last developed countries to switch to chip cards. So, chip card usage in the United States still has a long way to go. The types of fraud with debit/credit/prepaid cards:

  • Counterfeit card: Fraud is perpetrated using an altered or cloned card.
  • Lost or stolen card: Fraud is undertaken using a lost or stolen card.
  • Card issued but not received: A newly issued card sent via postal mail to a cardholder is intercepted and used to commit fraud.
  • Fraudulent application: A new card is issued based on a fake identity or on someone else’s identity.
  • Other: “Other” fraud includes account takeover and other types of fraud not covered above.
  • Fraudulent use of account number: Fraud is perpetrated without using a physical card.

Fraud is perpetrated via two channels: 1) in-person when the cardholder has their card, and 2) remote when the cardholder is not present (e.g., postal mail, online, telephone). To learn more, download the "2016 Federal Reserve Payments Study" (Adobe PDF) and/or read the FRB announcement.


Trump's Treasury Pick Excelled at Kicking Elderly People Out of Their Homes

[Editor's note: today's guest post is by reporters at ProPublica. This news story was originally published on December 27, 2016. It is reprinted with permission.]

by Paul Kiel and Jesse EisingerProPublica

In 2015, OneWest Bank moved to foreclose on John Yang, an 80-year-old Korean immigrant living in Orange Park, Florida, a small suburb of Jacksonville. The bank believed he wasn't living in his home, violating the terms of its loan. It dispatched an agent to give him legal notification of the foreclosure.

Where did the bank find him? At the same single-story home the bank had said in court papers he did not occupy.

Still OneWest pressed on, forcing Yang, a former Christian missionary, to seek help from legal aid attorneys. This year, during a deposition, an employee of OneWest's servicing division was asked the obvious question: Why would the bank pursue a foreclosure that seemed so clearly unjustified by the facts?

The employee's response was blunt: "You're trying to make logic out of an illogical situation."

Yang was lucky. The bank eventually dropped its efforts against him. But others were not so fortunate. In recent years, OneWest has foreclosed on at least 50,000 people, often in circumstances that consumer advocates say run counter to federal rules and, as in Yang's case, common sense.

President-elect Donald Trump's nomination of Steven Mnuchin as Treasury Secretary has prompted new scrutiny of OneWest's foreclosure practices. Mnuchin was the lead investor and chairman of the company during the years it ramped up its foreclosure efforts. Representatives from the company and the Trump transition team did not respond to requests for comment.

Records show the attempt to push Mr. Yang out of his home was not an unusual one for OneWest's Financial Freedom unit, which focused on controversial home loans known as reverse mortgages. Regulators and consumer advocates have long worried that these loans, popular during the height of the housing bubble, exploit elderly homeowners.

The loans allow people to benefit from the equity they have built up over many years without selling their houses. The money is paid in a variety of ways, from lump sums to a stream of monthly checks. Borrowers are allowed to stay in their homes for as long as they live.

The loans are guaranteed by the U.S. Department of Housing and Urban Development, meaning the agency pays lenders like Freedom Financial the difference between the ultimate sale price of the home and the size of the reverse mortgage.

But the fees are often high and the interest charges mount up quickly because the homeowner isn't paying down any of the principal on the loan. Homeowners remain on the hook for property taxes and insurance and can lose their homes if they miss those payments.

A 2012 report to Congress by the Consumer Financial Protection Bureau said that "vigorous enforcement is necessary to ensure that older homeowners are not defrauded of a lifetime of home equity."

ProPublica found numerous examples where Financial Freedom had foreclosed for legally questionable reasons. The company served several other homeowners at their homes to let them know they were being sued for not occupying their homes. In Florida, a shortfall of only $0.27 led to a foreclosure attempt. In Atlanta, the company sought to foreclose on a widow after her husband's death, but backed down when a legal aid attorney sued, citing federal law that allowed the surviving spouse to remain in the home.

"It appears their business approach is scorched earth, in a way that doesn't serve communities, homeowners or the taxpayer," said Alys Cohen, a staff attorney for the National Consumer Law Center in Washington D.C.

Since the financial crisis, OneWest, through Financial Freedom, has conducted a disproportionate number of the nation's reverse mortgage foreclosures. It was responsible for 16,200 foreclosures on government-backed reverse mortgages, or 39 percent of all foreclosures nationwide, from 2009 through late 2014, even though it only serviced about 17 percent of the loans, according to government data analyzed by the California Reinvestment Coalition, an advocacy group for low-income consumers. While some foreclosures were justified, legal aid attorneys say Financial Freedom has refused to work with borrowers in foreclosure to establish payment plans, in contrast with other servicers of reverse mortgages.

Experts say the companies are not entirely to blame for the wave of foreclosures. HUD oversees standards on most reverse mortgages. In the years after the housing crash, HUD's rules evolved, creating a miasma of confusion for mortgage servicers. Companies say the new federal rules required them to foreclose when borrowers fell far behind on property and insurance costs, rather than work out payment plans.

OneWest's rough treatment of homeowners extended to its behavior toward borrowers with standard mortgages in the aftermath of the housing crash. In 2009, the Obama administration launched a program to encourage mortgage servicers to work out affordable mortgage modifications with borrowers. OneWest, weighed down by several hundred thousand souring mortgages, signed up.

It didn't go well. About three-quarters of homeowners who sought a modification from OneWest through the program were denied, according to the latest figures from the Treasury Department. OneWest was among the worst performing large servicers in the program by that measure. In 2011, activists protested OneWest's indifference at Mnuchin's Bel Air mansion in Los Angeles.

"We're in a difficult economic environment and very sympathetic to the problems many homeowners face, but under the government's program there's not a solution in every case," Mnuchin told the Wall Street Journal in that year.

Despite the controversy, Mnuchin and the other investors in OneWest made a killing on their purchase. In 2009, Mnuchin's investment group bought the failed mortgage bank IndyMac, which had been taken over by the Federal Deposit Insurance Corporation after the financial crisis, changing the name to OneWest. They paid about $1.5 billion, with the FDIC sharing the ongoing mortgage losses. George Soros, a Clinton backer at whose hedge fund Mnuchin had worked, and John Paulson, a hedge fund manager who also supported Trump, invested alongside Mnuchin in IndyMac.

In 2015, CIT, a lender to small and medium-sized businesses, bought OneWest for $3.4 billion, more than doubling the Mnuchin group's initial investment. Mnuchin personally made about $380 million on the sale, according to Bloomberg estimates. He retains around a 1 percent stake in CIT, worth around $100 million, which he may have to divest if confirmed.

CIT has found the reverse mortgage business to be a headache. Recently, CIT took a $230 million pretax charge after it discovered that OneWest had mistakenly charged the government for payments that the company should have shouldered itself. An investigation of Financial Freedom's practices by HUD's inspector general is ongoing.

Yang's lawyers at Jacksonville Area Legal Aid fought his foreclosure for a year. Though Yang had run a dry cleaning business in Florida and roamed the world as a missionary, working in North Korea, China, and Afghanistan, the bank's torrent of paperwork had overwhelmed him. Yang didn't speak English well. OneWest claimed it had sent him forms to verify he was living at his home, but that he never sent them back.

Under HUD rules, OneWest was required to verify that each borrower continued to use the property as a principal residence. It is a condition of all the HUD-backed loans in order to help ensure the government subsidy goes to those who need it.

But Yang can be forgiven for thinking that OneWest could not have doubted that he was still in his home. During the same period that OneWest was moving to foreclose on Yang for not living in his home, another arm of the bank regularly spoke and corresponded with him at his home about a delinquent insurance payment, according to court documents.

A Financial Freedom employee testified in the case that the department that handled delinquent insurance payments and the department that handled occupancy did not communicate with each other in those circumstances.

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Federal Reserve: Monitor Your Bank Accounts For Fraud And Know Where To Get Help

On Thursday, the Federal Reserve Board (FRB) issued a warning for consumers to do two things to protect themselves and their finances:

  1. Monitor online accounts for unauthorized transactions, and
  2. Learn where to find help should you find unauthorized transactions in your financial accounts

The FRB's warning also stated:

"Signs of potential problems may include a notice, bill, or debit card for an account that was not activated or authorized, as well as a notice of fees for unsolicited products or services tied to an existing account. Consumers who see questionable activity should contact their financial institution immediately. Consumers who continue to experience issues may also submit a complaint to the Federal Reserve. The Federal Reserve maintains the Federal Reserve Consumer Help (FRCH) website, which offers an online complaint form and information on filing complaints by fax and phone for consumers. The FRCH website also provides consumer alerts, frequently asked questions, and information about other government agencies. While the Federal Reserve does not have the authority to resolve every problem, it will refer complaints to the relevant federal or state agency. Consumers can contact FRCH at 1-888-851-1920, or at www.federalreserveconsumerhelp.gov."

Other relevant federal agencies may include the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau (CFPB), and the Securities & Exchange Commission (SEC).


Federal Reserve Bars Two Bank Executives From Working Within Industry

The Federal Reserve Board announced this enforcement action:

"Richard Henderson and Philip Cooper, who held senior positions at Regions Equipment Finance Corporation (REFCO), Regions' subsidiary, were recently indicted for bank bribery, wire fraud, money laundering, and conspiracy. According to the indictment, Henderson and Cooper conspired to defraud Regions and REFCO by directing REFCO to purchase insurance policies from a shell company that paid kickbacks to Henderson and Cooper. The indictment further alleges that Henderson and Cooper attempted to conceal those kickbacks by establishing additional shell companies to receive the kickbacks.

In issuing today's enforcement actions, the Board found that, given the indictment, Henderson's and Cooper's continued participation in any depository institution may impair public confidence in that institution. The prohibition is effective until the criminal charges against Henderson and Cooper are resolved or disposed of, or until the Board terminates the prohibition."

REFCO was founded in 1972 and is based in Birmingham, Alabama. It is a subsidiary of Regions Bank.


JPMorgan Chase Bank Fined $61.9 Million Fine For Improper Hiring Practices

JPMorgan Chase logo The Federal Reserve Board has levied a $61.9 million fine against JPMorgan bank for "unsafe and unsound" hiring practices. The Federal Reserve Board announced:

"In levying the fine on JPMorgan Chase, the Federal Reserve Board found that the firm's Asia-Pacific investment bank operated an improper referral hiring program. The firm offered internships, trainings, and other employment opportunities to candidates who were referred by foreign government officials and existing or prospective commercial clients to obtain improper business advantages.

The Federal Reserve found that the firm did not have adequate enterprise-wide controls to ensure that referred candidates were appropriately vetted and hired in accordance with applicable anti-bribery laws and firm policies."

To obtain improper business advantages, the bank operated the improper hiring program from at least 2008 through 2013. The FRB found that the program generally produced lesser qualified candidates. The Order to Cease and Desist and Order to Assess a Civil Monetary Penalty (Adobe PDF) stated:

"... from at least 2008 through 2013, JPMC’s APAC investment banking group operated a referral hiring program whereby candidates who were referred, directly or indirectly, by foreign government officials and existing or prospective commercial clients, and who in most instances were less qualified than non-referred candidates who were hired through the Firm’s standard hiring programs, were offered internships, training, and other employment opportunities in order to obtain improper business advantages for the Firm... Federal law and JPMC’s firm-wide policies prohibit the Firm’s employees from offering, directly or indirectly, anything of value, including the offer of internships, training, or other employment opportunities for relatives of a foreign government official, to foreign government officials in order to obtain improper business advantages... the laws in many foreign jurisdictions in which the Firm conducts business and JPMC’s firm-wide policies prohibit the Firm’s employees from offering, directly or indirectly, anything of value to existing or prospective commercial clients in order to obtain improper business advantages..."

JPMorgan has spotty history worth reviewing briefly. In January 2015, it was one of four banks that settled illegal foreclosure charges with the Massachusetts Attorney General with a $2.7 million payment. In November 2014, both RBS and JPMorgan were part of a group of banks that paid $4.2 billion in fines to U.S., U.K., and Swiss regulators for rigging the foreign exchange, or FX, market. In December 2013, JPMorgan paid $515.4 million to the Federal Deposit Insurance Company (FDIC), $300 million to the California Attorney General, and $13 billion with the U.S. Justice Department to settle charges about the misrepresentation of offering documents for residential mortgage-backed securities (RMBS).

In December 2013, JPMorgan Chase announced a data breach that affected half a million prepaid card customers. U.S. taxpayers also learned that month that much of the huge fines JPMorgan paid were tax-deductible and reduced the bank's tax payments. in September 2013, the Consumer Financial Protection Bureau (CFPB) ordered both Chase Bank USA, N.A. and JPMorgan Chase Bank, N.A. to refund about $309 million to more than 2.1 million customers for illegal credit card practices, where customers were enrolled in credit monitoring services without their authorization and charged for services not delivered.

The latest Consent Order also includes a clause not to prosecute executives. Additional terms of the fine require the bank to modify its hiring practices with oversight by the U.S. Justice Department (DOJ) and the U.S. Securities and Exchange Commission (SEC). Those modifications require improved oversight by senior management and anti-bribery policies.


Federal Reserve Bars 2 HSBC Foreign Exchange Traders From Working In The Industry

HSBC Holdings logo The Federal Reserve Board (FRB) has prohibited two former foreign exchange (FX) traders from working in the banking industry. Both persons, Mark Johnson and Stuart Scott were managers at London-based HSBC Bank plc, a subsidiary of HSBC bank Johnson had been a managing director and the global head of FX cash trading. Scott reported to Johnson and had managed the bank's FX trading for Europe, the Middle East, and Africa.

The FRB's press release explained the reasons for its actions:

"Mark Johnson and Stuart Scott, former senior HSBC managers, were recently indicted for criminal wire fraud in connection with their trading activities... According to the indictment, Johnson and Scott made multiple misrepresentations to an FX client of HSBC in connection with a large pre-arranged currency transaction. The indictment also alleges Johnson and Scott engaged in conduct to trade to the detriment of HSBC's client and for their own (and HSBC's) benefit... the Board found that given the indictment, Johnson's and Scott's continued participation in any depository institution may threaten to impair public confidence in that institution."

The U.S. Department of Justice filed criminal charges on July 16, 2016 against Johnson and Scott in U.S. District Court for the Eastern District of New York. On August 16, 2016, a federal grand jury indicted Johnson and Scott with multiple counts of wire fraud and conspiracy to commit wire fraud. The alleged fraud happened during November and December, 2011, in part, in New York City at the offices of HSBC Bank USA National Association, a unit of HSBC.

HSBC Bank plc is a unit of HSBC Holdings plc (HSBC). HSBC's website says it has 4,400 offices in 71 countries that serve 46 million customers worldwide.  Bloomberg described HSBC Bank plc's activities:

"HSBC Bank plc provides various banking products and services worldwide. The company operates through Retail Banking and Wealth Management, Commercial Banking, Global Banking and Markets, and Global Private Banking segments. It accepts various deposits, such as current, savings, and business bank accounts..."

The prohibition is effective immediately and until the criminal charges against Johnson and Scott are resolved.


Massachusetts Regulator Charges Morgan Stanley Bank With Operating 'Unethical' Sales Contests

Another bank seems to have had difficulty managing a high-pressured sales incentive program. The office of the Secretary of the Commonwealth for Massachusetts has charged Morgan Stanley bank with running "dishonest and unethical" sales contests. The Boston Herald newspaper reported:

"The contests focused on the sales of securities-based loans, or SBLs, which let customers borrow against the value of the securities in their investment accounts with their securities as collateral, authorities said. Secretary of the Commonwealth William Galvin said 30 financial advisers in the Springfield, Wellesley, Worcester, Waltham and Providence, R.I., offices were offered incentives of $1,000 for 10 loans, $3,000 for 20 loans and $5,000 for 30 loans, creating a conflict of interest."

Reportedly, Galvin stated the contests were officially prohibited by the bank, but it proceeded anyway as the highly profitable contests tripled loan origination and added $24 million to new loan balances. Allegedly, bank executives were slow to recognize the improper activities and shut down the sales contests which began in 2014. The bank denies the allegations and claims that clients' consent was obtained first.

In July, Morgan Stanley reported financial results (Adobe PDF) with net revenues of $8.9 billion for the second quarter which ended June 30, 2016, compared with $9.7 billion for the same period a year ago. Net income was $1.6 billion compared with $1.8 billion for the same period a year ago. A data breach in 2011 exposed the sensitive personal information of 34,000 investment clients. Earlier this year, the bank paid a $1.0 million fine to settled charges by the U.S. Securities and Exchange Commission (SEC) that it failed to adequately protect customer information from 2011 to 2014 when 730,000 accounts were hacked.

Last month, Wells Fargo paid a $185 million fine to settle allegations by regulators that its employees created thousands of phony new accounts to earn sales incentive compensation. Investigations are still ongoing by Wells Fargo, regulators, and the Justice Department.

Both scandals raise two important questions: a) the appropriateness of incentive programs to encourage employees to cross-sell existing customers with more types of accounts, and b) accounts those customers may not need (nor want). The cross-selling programs may conflict with the bank's fiduciary duty to its investment clients.

Read more about the latest Morgan Stanley scandal at Fortune. What are your opinions?


Wells Fargo Tries To Do The Right Thing For Its Customers

Wells Fargo logo After the massive $185 million fine for its phony accounts scam, Wells Fargo bank is trying to do right by its customers. The bank published this statement with promises:

"Steps we have taken to ensure our Community Bank sales culture is wholly aligned with our customers’ interests include: 1) Eliminating product sales goals for all retail bankers to make certain nothing gets in the way of doing what is right for our customers; 2) Sending customers a confirmation email within one hour of opening any deposit account and an acknowledgement letter after submitting a credit card application; 3) Contacting all deposit customers across the country to invite them to review their accounts with their banker and calling the credit card customers identified in the review to confirm whether they need or want their credit card; 4) Expanding the remediation review to 2009 and 2010; and 5) Conducting an independent, enterprise-wide review of our sales practices."

There is more. A September 27th news release by Wells Fargo stated:

"The Independent Directors of the Board of Directors of Wells Fargo & Company (NYSE: WFC) today announced that they have launched an independent investigation into the Company’s retail banking sales practices and related matters. A Special Committee of Independent Directors will lead the investigation, working with the Board’s Human Resources Committee and independent counsel Shearman & Sterling LLP. Chairman and CEO John Stumpf, a member of the Board, has recused himself from all matters related to the Independent Directors’ investigation and deliberations.

The Independent Directors have taken a number of initial steps they believe are appropriate to promote accountability at the Company. They have agreed with Mr. Stumpf that he will forfeit all of his outstanding unvested equity awards, valued at approximately $41 million based on today’s closing share price, and that he will forgo his salary during the pendency of the investigation. In addition, he will not receive a bonus for 2016. Carrie Tolstedt, until recently Head of Community Banking, has left the Company, and the Independent Directors have determined that she will forfeit all of her outstanding unvested equity awards, valued at approximately $19 million based on today’s closing share price. Ms. Tolstedt will not receive a bonus for 2016 and will not be paid severance or receive any retirement enhancements in connection with her separation from the Company. She has also agreed that she will not exercise her outstanding options during the pendency of the investigation. These initial actions will not preclude additional steps being taken with respect to Mr. Stumpf, Ms. Tolstedt or other executives as a consequence of the information developed in the investigation."

Conducting an investigation? That means the bank's senior executives still don't know what happened, or may still be happening -- or even worse, some executives know and haven't admitted important facts. Is this a bank to do business with? John Chiang, the Treasurer for the State of California announced on Wednesday that the State has suspended doing business with Wells Fargo for 12 months. Chiang issued this explanation:

"... the Treasurer oversees nearly $2 trillion in annual banking transactions, manages a $75 billion investment pool, and is the nation’s largest issuer of municipal debt... The Treasurer announced in a letter to Wells Fargo Chairman John G. Stumpf and board members that he has ordered the suspension of Wells Fargo’s participation in its most highly profitable business relationships with the State of California. Those sanctions include: i) Suspension of investments by the Treasurer’s Office in all Wells Fargo securities; ii) Suspension of the use of Wells Fargo as a broker-dealer for purchasing of investments by his office; and iii) Suspension of Wells Fargo as a managing underwriter on negotiated sales of California state bonds where the Treasurer appoints the underwriter... These sanctions take effect immediately and will remain in place for the next twelve months. Wells Fargo is expected to comply with all of the terms of the consent orders it has entered with the Consumer Financial Protection Bureau, the Los Angeles City Attorney, and the Office of the Comptroller of the Currency... The letter warns the bank that if it fails to demonstrate compliance with the Consent Orders or evidence surfaces that Wells Fargo has engaged in the same behavior it will face tougher sanctions up to and including complete and permanent severance of all ties between the Treasurer’s Office and Wells Fargo..."

Hopefully, the board will assess more penalties upon Stumpf, Tolstedt, and senior bank executives. The penalties mentioned above seem woefully insufficient, since they penalize the executives in 2016 for activities that perpetuated during the last five years.

The bank's statement was also silent about important issues: a) remedies for customers whose credit ratings were damaged by the phony new accounts, and b) compensation for customers for lost interest revenues when their money was withdrawn from interest-bearing accounts to set up the phony new accounts.

The bank's news release included this statement by Stephen Sanger, Lead Independent Director:

"... We will conduct this investigation with the diligence it deserves -- and will follow the facts wherever they lead. Our thousands of outstanding team members and millions of loyal customers and shareholders deserve no less. Based on the results of the investigation, the Independent Members of the Board will take such other actions as they collectively deem appropriate, which may include further compensation actions before any additional equity awards vest or bonus decisions are made early next year, clawbacks of compensation already paid out, and other employment-related actions. We will proceed with a sense of urgency but will take the time we need to conduct a thorough investigation. We will then take all appropriate actions to reinforce the right culture and ensure that lessons are learned, misconduct is addressed, and systems and processes are improved so there can be no repetition of similar conduct."

While clawbacks into executives' compensation during prior years sounds good, the key takeaway seems to be: the board still does not know what is happening in its bank, nor what corrective actions to implement beyond the promises listed above. And it can't rely on Stumpf to tell them. Stumpf should be fired immediately for not keeping the board informed. Same for Tolstedt. In a perfect world, both would be in prison. Fraud is fraud.

What are your opinions about Wells Fargo? Would you do business with the bank?


Wells Fargo Bank Fined $185 Million For Unlawful Sales Practices. Questions Remain

Wells Fargo logo Last week, the Consumer Financial Protection Bureau (CFPB) announced a settlement agreement where Wells Fargo will pay $185 million in fines for alleged unlawful sales practices during the past five years. While many news outlets have reported about the fines and fired employees, many unanswered questions remain.

The CFPB announcement described how the fraud worked:

"Spurred by sales targets and compensation incentives, employees boosted sales figures by covertly opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges... thousands of Wells Fargo employees illegally enrolled consumers in these products and services without their knowledge or consent in order to obtain financial compensation for meeting sales targets..."

To perpetuate the unlawful activities, employees allegedly created bogus email accounts, and both issued and activated debit cards associated with the secret accounts. Then, employees also created PIN numbers without customers' knowledge nor consent:

"... employees opened roughly 1.5 million deposit accounts that may not have been authorized by consumers. Employees then transferred funds from consumers’ authorized accounts to temporarily fund the new, unauthorized accounts. This widespread practice gave the employees credit for opening the new accounts, allowing them to earn additional compensation and to meet the bank’s sales goals... employees applied for roughly 565,000 credit card accounts that may not have been authorized by consumers. On those unauthorized credit cards, many consumers incurred annual fees, as well as associated finance or interest charges and other fees..."

The Consent Order (Adobe PDF) described the unlawful sales activities in greater detail:

"[Wells fargo's] analysis concluded that its employees opened 1,534,280 deposit accounts that may not have been authorized and that may have been funded through simulated funding, or transferring funds from consumers’ existing accounts without their knowledge or consent. That analysis determined that roughly 85,000 of those accounts incurred about $2 million in fees, which [Wells Fargo] is in the process of refunding... [Wells Fargo's] analysis concluded that its employees submitted applications for 565,443 credit-card accounts that may not have been authorized by using consumers’ information without their knowledge or consent. That analysis determined that roughly 14,000 of those accounts incurred $403,145 in fees, which Respondent is in the process of refunding. Fees incurred by consumers on such accounts included annual fees and overdraft-protection fees, as well as associated finance or interest charges and other late fees..."

The numbers are shocking: 1.5 million secret checking accounts created; $2 million in fees generated by 85,000 secret checking accounts generated; 565 thousand secret credit-card accounts; $403 thousand in fees generated by 14,000 secret credit-card accounts; and 5,300 employees fired due to the unlawful sales activities.

The Consent Order also stated:

"... (3) enrolled consumers in online banking services that they did not request... 12. Respondent’s employees used email addresses not belonging to consumers to enroll consumers in online-banking services without their knowledge or consent..."

This suggests that the employees knowingly attempted to circumvent the bank's internal systems designed to provide alerts and confirmation messages to customers about new accounts, and perhaps, targeted customers who weren't Internet-savvy or were perceived to be less likely to notice changes. That raises ethical issues. Also, 12 percent of consumers are "under-banked," the industry term for people with a bank account, but don't have both savings and checking accounts (and use some other payment method outside the banking system). If that ratio applies to the bank's customers, then this group was targeted, too. About 43 percent of consumers with both smartphones and bank accounts use online banking services. So, the 57-percent group of non-users were targeted, too.

Terms of the settlement agreements require the bank to pay full restitution to all victims, pay a $100 million fine to the CFPB’s Civil Penalty Fund, hire an independent consultant to review its procedures to prevent improper sales practices, pay a $35 million penalty to the Office of the Comptroller of the Currency (OCC), and pay $50 million to the City and County of Los Angeles. Additional terms require the bank to hire within 45 days of the Consent Order a consultant to independently audit the bank's processes.

Within 180 days after hiring a consultant, a written report reviewing of the bank's processes must be submitted to the bank's board of directors. Within 90 days after that, the Board and consultant must develop a compliance plan to correct problems and explain why each action is the plan is accepted or rejected. The compliance plan must be submitted to the CFPB for review.

The settlement terms suggest that the banks internal controls may be unreliable, employees and management were unreliable, or both. Context matters.

During the past five years while the unlawful sales activities occurred, Wells Fargo paid in 2011 an $85 million civil penalty to settle allegations that its employees steered potential prime borrowers into more costly subprime loans and separately falsified income information in mortgage applications. In 2015, Wells Fargo was one of four banks that paid $2.7 million to settle allegations of violations of Massachusetts foreclosure law and the Massachusetts Consumer Protection Act by illegally foreclosing upon Massachusetts residents’ homes when the banks lacked the legal authority to do so. Last month, the bank was fined $3.6 million for illegal practices while servicing private student loans.

Some customers noticed the unauthorized accounts, complained, and have moved their money to other banks or to credit unions. Wells Fargo issued a statement which said it had already prepared $5 million to refund to customers:

"The amount of the settlements, which Wells Fargo had fully accrued for at June 30, 2016, totaled $185 million, plus $5 million in customer remediation... Wells Fargo is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request. Our commitment to addressing the concerns covered by these agreements has included:
- An extensive review by a third party consulting firm going back into 2011, which we completed prior to these settlements. The review included consumer and small business retail banking deposit accounts and unsecured credit cards opened during the period reviewed;
- As a result of this review, $2.6 million has been refunded to customers for any fees associated with products customers received that they may not have requested. Accounts refunded represented a fraction of one percent of the accounts reviewed, and refunds averaged $25;
- Disciplinary actions, including terminations of managers and team members who acted counter to our values;
- Investments in enhanced team-member training and monitoring and controls;
- Strengthened performance measures that are tied to customer satisfaction, loyalty and ethics; and
- Sending customers a confirming email within one hour of opening any deposit account, and sending an application acknowledgement and decision status letter after submitting an application for a credit card.”

That last item is troubling. It suggests that the bank's existing processes didn't provide confirmation emails within one hour, or did so inconsistently, or failed to do so entirely. Both traditional and online banking customers deserve prompt, consistent confirmation notices. This suggests that the bank's system may not be state-of-the-art.

During my career, I built websites in a variety of industries, including financial services, with usability best practices. Well built sites (and apps): a) provide immediate, consistent confirmation email and messages, b) provide postal confirmations for customers without email or online banking services, c) send confirmation emails to both new and old email addresses when there are changes, d) display confirmation messages (about any profile changes) to online customers after sign-on, and e) provide online customers with the option to consolidate multiple accounts (e.g., mortgage, educational loan, checking, savings, money market, credit line, credit card, etc.) under a single sign-on.

If the bank's online site and systems contained these tasks and features but were deactivated, then it suggests broader problems beyond the sales department. If the tasks weren't built or were partially built, then hopefully the compliance report and/or the CFPB review will address them.

Kudos to the CFPB, the OCC, and local Los Angeles government for holding Wells Fargo accountable; and for a correction plan with a detailed schedule and deadlines. It seems unwise to trust the bank to correct things on its own. Yet, many questions remain unanswered:

  1. What other tasks in the user experience (e.g., new account, new/edited/additional email address,  new/edited account profile elements, etc.) did the bank's systems fail to provide prompt, consistent confirmation messaging to customers (e.g., traditional offline, online banking)?
  2. How exactly did these illegal sales activities and secret accounts go undetected for so long?
  3. What was the average lifespan of a secret account? Were they permanent? Or were they temporary -- open long enough for employees to collect the compensation, and then closed? If the latter, it is disturbing how internal systems failed to notice the account churn.
  4. What percentage of the fired employees were managers? And, will more employees be fired?
  5. Will the bank "claw-back" bonuses from employees (e.g., fired, still employed) who benefited from the unlawfully sales activities? And why or why not?
  6. Were any fired employees prosecuted? And why or why not?
  7. The restitution amounts seem to focus upon only fees. If the bank's employees transferred their money from interest-bearing accounts to set up the secret credit card and checking accounts, then some customers lost interest. This seems likely since we know that 12 percent of consumers are under-banked (e.g., have a checking or savings account, but not both). Did the bank conduct a forensic audit to determine the customers and lost interest amounts? That could be substantial over five years with compounding. Then, the $5 million restitution amount set aside would be insufficient.
  8. Are any of the fines tax deductible? Prior wrongdoing by banks often resulted in fines that were tax deductible. This meant the banks wrote off the fines to decrease their taxes, and taxpayers took it on the chin to make up any tax revenue shortfalls. That's not right, since taxpayers didn't commit any unlawful acts.

What are your opinions? If you are a Wells Fargo customer, what was your experience? What questions do you have?


Released Prisoners And Arrestees Forced To Accept And Use Prepaid Cards

Numi Financial logo Banks have found an effective, profitable method to force their prepaid cards upon consumers. Yes... literally force people to use their prepaid cards. When people arrested are released from prison, any cash in their possession at the time of arrest is returned to them in the form of prepaid cards by corrections staff. The Nation reported about the rise in "get-out-of-jail broke cards" and the banks that issue them:

"Numi Financial is one of many for-profit players in an increasingly privatized prison industry... Numi is now in more than 400 jails across the country, including large facilities that house up to 8,500 inmates, and the company issues more than 600,000 cards a year. That’s enough to make Numi one of the top 10 providers nationwide of prepaid cards of all kinds... Richard E. Deloney Jr., vice president of business development at Numi, said Numi’s model is based on “turnover.” “We market to the 3,300 jails in the country,” he said... According to a 2015 Dun & Bradstreet report on Stored Value Cards, Numi’s parent company, its revenue is $3 million a year."

The industry calls these prepaid cards given to prisoners "prison release cards." Arrestees are given the contractual terms and fee schedule when they receive their release cards:

"The terms for the card used in Multnomah County lists 11 possible fees—the $5.95 monthly fee, a $2.95 fee for ATM withdrawals, $0.95 for a declined transaction, $1 to check the balance, and $9.95 to have the balance refunded by check. Some cards have as many as 19 fees, a maintenance fee as high as $15 a month, and higher fees for international transactions."

So, the release cards contain the same multitude of fees found on other prepaid cards. Previously, arrestees were given a mix of cash and checks. Other banks offering prison release cards:

"At least 10 companies now offer release cards or inmate banking services to correctional systems. JPMorgan Chase does not give a card to each and every prisoner, but according to the Center for Public Integrity, it has a “lock” on the Federal Bureau of Prisons population, which currently stands at just under 200,000. At the state level, CPI found that JPay, a company founded in 2002, dominates, generating “well over $50 million in revenue” in 2013. It was acquired for $250 million in 2015 by Securus Technologies..."

There are plenty of issues with prison release cards. First, arrestees are a vulnerable population. They are forced to accept and use release cards since their cash has been confiscated. There is no opt-out, unlike other consumers who can choose other bank services instead. This can create hardship, as the Nation's article highlighted an arrestee released at 2:00 am with no way to get home. Not all taxi-cabs accept prepaid cards.

Second, the cards contain the same multitude of high fees as other prepaid cards. People released from prison may not have jobs to return to, making the high fees a huge burden. Third, claims by Numi executives in 2014 that one-third of cardholders pay no fees and that about one percent of cards aren't used have been debunked. Fourth, the banks offering prison release cards were given no-bid contracts:

"The banks’ exclusive deals came not from the Bureau of Prisons, but from the U.S. Treasury. The agency awarded the contracts using a 150-year-old authority that allows it to sidestep the oversight, transparency and competition typically required for federal contracting. That means that for 14 years, Bank of America has never been required to compete with other vendors who might do the work better or for less money, according to Treasury documents obtained under the Freedom of Information Act. JPMorgan’s no-bid deal to issue debit cards for various federal agencies began in 1998, was extended in 2008 and eventually expanded to include cards for federal prisons. Fees from former inmates make up most of the bank’s compensation for these cards..."

This is absolutely lousy, poor management by government officials with no attempt to lower costs for taxpayers. Competition matters. Competition forces companies to provide better services, lower costs, and ideally both.

Fifth, prison release cards are given to all arrestees when released. That includes both people arrested for just causes wh have served their prison time, and people where law enforcement has dropped all charges. You'd think that people released with charges dropped would simply have their cash returned to them, but they too are forced to use prison release cards.

Many people view this situation as unacceptable. In November 2015, several U.S. Senators including Mark R. Warner (D-Va.) and VP-candidateTim Kaine (D-VA) sent a letter to the Consumer Financial Protection Bureau (CFPB) urging it to re-examine prison release cards:

"Prison release cards are a critical tool for people leaving prisons to transfer their earned wages and/or commissary account balances to a prepaid card. Any reductions to the wages and account balances of formerly incarcerated people could harm their ability to successfully reenter society. Today, some firms charge high fees on prison prepaid cards that create significant barriers to reentry for formerly incarcerated people. Most corrections agencies that report using prepaid cards also report that fees are imposed on cardholders, including unusual fees such as weekly maintenance fees. These cards often also include forced arbitration provisions. As your recent study on arbitration showed, the rights of consumers nationwide are limited by forced arbitration in the financial services industry. As another example, states receive revenue from certain vendors chosen to provide prison release cards. Correctional facilities may also structure their contracts with prepaid card vendors in such a way that costs are entirely passed on to formerly incarcerated people."

The letter listing all 18 U.S. Senators is also here. Sixth, the forced arbitration clauses are typically one-sided, expensive for consumers, and heavily favor the company, as readers of this blog already know.

Some consumers aren't waiting and have filed a class-action lawsuit: Brown versus Numi Financial, No. 3:15-cv-01370-MO (Adobe PDF). The court rejected Numi Financial's motion for arbitration. Good! Other affected consumers may want to join this suit.

What are your opinions of prison release cards?


Valuable Items You Can't Change

For more convenient access to devices and websites, many device manufacturers and online publishers encourage consumers to use items other than passwords for logins. Is this a good deal? To answer that question, one must consider what happens after a data breach when login credentials are stolen by hackers. Typically after a data breach where login credentials are stolen, websites and businesses have advised consumers to change their passwords. However, many of the newer items cannot be changed:

Observation number 49. Click to view larger version


JPMorgan Chase To Raise Pay of 18,000 Tellers And Branch Workers

JPMorgan Chase logo Jaime Dimon, the Chairman and CEO of JPMorgan Chase, announced that the bank will raise the pay of about 18,000 tellers and branch workers in 75 cities. The announcement appeared in an opinion article in The New York Times:

"Our minimum salary for American employees today is $10.15 an hour (plus meaningful benefits, which I’ll explain later), almost $3 above the current national minimum wage. Over the next three years, we will raise the minimum pay for 18,000 employees to between $12 and $16.50 an hour for full-time, part-time and new employees, depending on geographic and market factors."

The article discussed the bank's non-wage benefits for employees, why the pay increase was the right thing to do, and related investments:

"It is true that some businesses cannot afford to raise wages right now. But every business can do its part through whatever ways work best for it and its community. It can identify local partners to address economic inequality. It can encourage and provide continuous training, teach leadership capabilities and identify mentors to help sharpen employee skills. In our case, we will invest over $200 million in 2016 on training for thousands of entry-level employees in our consumer banking business... We are also investing $325 million in career-oriented education aligned to growing sectors. This fall, through partnerships with education organizations, we will provide 10 states with up to $2 million each to strengthen and expand career-focused education in their school systems..."

An economist in the company's commercial banking unit wrote in October 2015:

"Raising the minimum wage has the potential to vastly improve the lives of low-income workers who are currently employed—but it could also limit opportunities for future job seekers... Proposals for raising the minimum wage have strong political appeal. It would be wonderful, of course, if it were that easy to help low-income earners who are struggling. Unfortunately, despite the well-meaning intentions behind this effort, non-business actions that force businesses to absorb higher costs would likely carry hidden costs. Though higher wages would undoubtedly benefit low-earning workers who retain their jobs, those who become unemployed, or future potential workers who are trying to get a start in the job market, could find fewer opportunities to rejoin the labor force."

Will the bank's hiring slow as a result? Time will tell.

An August, 2015 report by the National Employment Law Project found that while bBank tellers comprise the largest banking-related occupation in the United States, with almost half a million workers nationwide, three in four (74.1 percent) earn less than $15 an hour, compared with 42.4 percent of the total U.S. workforce. Tellers’ median hourly wage is just $12.44.

JPMorgan isn't the only bank to raise the pay of its employees. In January 2016, Bangor Savings Bank raised its minimum wage to $13.00 an hour. In August 2015, Amalgamated Bank raised its minimum wage to $15.00 per hour. In July 2015, C1 Bank raised its minimum wage to $15.00 per hour.

In 2012, JPMorgan Chase was part of a group of banks that paid $25 billion to resolve allegations of foreclosure abuses of homeowners' mortgages. The bank paid $13 billion in 2014 to settle charges by the U.S. Justice Department about alleged wrongdoing with mortgage-backed asset securities. Later that year, we taxpayers learned that large portions of the fines were tax deductible.

Dimon's April 6, 2016 letter to shareholders about the company's performance in 2015 said:

"Our company earned a record $24.4 billion in net income on revenue of $96.6 billion in 2015. In fact, we have delivered record results in the last five out of six years, and we hope to continue to deliver in the future. Our financial results reflected strong underlying performance across our businesses..."

The bank has done well financially. It's good that the bank shared some of its success with employees, but why not raise the minimum wage with a $15.00 per hour floor? Dimon's pay (including incentives rose 35 percent last year, from $20 million to $27 million. One person summarized accurately the bank's pay increase in a comment on Robert Reich's Facebook page:

"I think that pushing larger crumbs off the table isn't quite the same as setting a place."

Dimon's statement in the New York Times did not mention the total cost of the pay increase and related programs. Even if the total is $1 billion (spread over 3 years), it seems that JPMorgan Chase can easily afford that without a slow-down in hiring. If the bank can afford multiple, massive settlement agreement payments, it can easily afford the pay increase for its employees.

What do you think?


Goldman Sachs Bank To Pay $5 Billion To Settle Charges About Mortgage Abuses

Department of Justice logo The U.S. Justice Department announced on Monday a $5.06 billion settlement agreement with Goldman Sachs for the bank's conduct with packaging, marketing, and sales of mortgage-backed securities (RMBS) between 2005 and 2007. Terms of the agreement require the bank to:

  • Pay $2.385 billion in a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA),
  • Pay $875 million to resolve claims by other federal and state entities. This includes $575 million to the National Credit Union Administration, $37.5 million to the Federal Home Loan Bank of Des Moines (as successor to the Federal Home Loan Bank of Seattle), $37.5 million to the Federal Home Loan Bank of Chicago, $190 million to the state of New York, $25 million to the state of Illinois, and $10 million to the state of California. And,
  • Provide $1.8 billion in other relief for underwater homeowners, distressed borrowers, and affected communities. Some of that relief includes loan forgiveness and financing for affordable housing.

The announcement described activities by specific departments in the bank:

"Goldman’s Mortgage Capital Committee, which included senior mortgage department personnel and employees from Goldman’s credit and legal departments, was required to approve every RMBS issued by Goldman.  Goldman has now acknowledged that “[t]he Mortgage Capital Committee typically received . . . summaries of Goldman’s due diligence results for certain of the loan pools backing the securitization,” but that “[d]espite the high numbers of loans that Goldman had dropped from the loan pools, the Mortgage Capital Committee approved every RMBS that was presented to it between December 2005 and 2007.”  As one example, in early 2007, Goldman approved and issued a subprime RMBS backed by loans originated by New Century Mortgage Corporation, after Goldman’s due diligence process found that one of the loan pools to be securitized included loans originated with “[e]xtremely aggressive underwriting,” and where Goldman dropped 25 percent of the loans from the due diligence sample on that pool without reviewing the unsampled 70 percent of the pool to determine whether those loans had similar problems."

U.S. Attorney Benjamin B. Wagner of the Eastern District of California described the settlement agreement:

“Today’s settlement is yet another acknowledgment by one of our leading financial institutions that it did not live up to the representations it made to investors about the products it was selling... Goldman’s conduct in exploiting the RMBS market contributed to an international financial crisis that people across the country, including many in the Eastern District of California, continue to struggle to recover from. I am gratified that this office has developed investigations, first against JPMorgan Chase and now against Goldman Sachs, that have led to significant civil settlements that hold bad actors in this market accountable. The results obtained by this office and other members of the RMBS Working Group continue to send a message to Wall Street that we remain committed to pursuing those responsible for the financial crisis.”

The Working Group was formed in 2012, and Goldman is the last of the banks to reach at settlement. Prior RMBS settlement agreements included $16.65 billion with Bank of America, $13 billion with JPMorgan, $7 billion with Citibank, and $1 billion with SunTrust. Yes, there have been so many it can be confusing or difficult to keep track.

The settlement agreement has already received much criticism. The New York Times reported:

“They appear to have grossly inflated the settlement amount for P.R. purposes to mislead the public, while in the fine print, enabling Goldman Sachs to pay 50 to 75 percent less,” said Dennis Kelleher, the founder of the advocacy organization Better Markets, referring to the government announcement. “The problem all along, with all of these settlements — and this one highlights it even more — is that they are carefully crafted more to conceal than reveal to the American public what really happened here — and what the so-called penalty is.”

And:

"... Goldman bought loans issued by subprime mortgage specialists like Countrywide Financial. Goldman then packaged these loans into bonds that were able to get the highest rating from credit rating agencies. The loans were sold to investors, who sustained losses when the loans went sour. Over the course of 2006, Goldman employees took note of the decreasing quality of loans that it was buying... When an outside analyst wrote a positive report about Countrywide’s stock in April 2006, the head of due diligence at Goldman wrote in an email: “If they only knew.”Despite the worrying signs, Goldman did not alert investors who were buying the bonds it was packaging..."

Also, Goldman Sachs will receive credits that reduce the total amount of taxes the bank will pay:

"... any money that Goldman spends on consumer relief will be deductible from its corporate tax bill. If Goldman spends $2.5 billion on consumer relief, and pays the maximum United States corporate tax rate of 35 percent, it could, in theory, reap $875 million in tax savings. But Goldman could easily pay less than $2.5 billion in consumer relief because of the sections of the settlement that give it extra credit for certain types of activity."

This means that taxpayers effectively pay for part of the fine or penalty payment. That is nuts, since taxpayers did nothing wrong. The bank did. Unfortunately, we've seen tax-deductible portions before with multi-billion- dollar bank settlement agreements. The Justice Department comment about "pursuing those responsible" seems directed at companies and never at individuals. Nobody has gone to jail, even after reports last year about possible criminal charges against bank executives.

It seems that the threat of criminal charges is a "stick" or feeble attempt the Justice Department uses during settlement negotiations. The Justice Department announcement also stated:

"The settlement expressly preserves the government’s ability to bring criminal charges against Goldman, and does not release any individuals from potential criminal or civil liability."

Enough words. We taxpayers demand action. Many consumers lost homes and others had lives disrupted during and after the financial meltdown of 2007-08, fueled largely by banks' wrongdoing. The settlement agreements haven't been only about mortgage abuses. Several banks paid billions in fines to settle foreign exchange market abuses, and unlawful foreclosures on homeowners. Add to this: a 2012 survey found many bank executives view unethical or illegal behavior as necessary to advance. A 2013 survey of bank executives found two key results: a) bad actors don't act alone nor unseen, and b) junior executives were more likely than older executives to know about, accept, and participate in illegal and/or unethical activities.

The long list of multi-billion settlements suggest the industry is unable (or unwilling) to fix its ethics problem. Those junior executives are now several years older, more experienced, and probably in managerial positions. When for criminal prosecutions of bank executives?


Report: Significant Security Risks With Healthcare And Financial Services Mobile Apps

Arxan Technologies logo Arxan Technologies recently released its fifth annual report about the state of application security. This latest report also highlighted some differences between how information technology (I.T.) professionals and consumers view the security of healthcare and financial services mobile apps. Overall, Arxan found critical vulnerabilities:

"84 percent of the US FDA-approved apps tested did not adequately address at least two of the Open Web Application Security Project (OWASP) Mobile Top 10 Risks. Similarly, 80 percent of the apps tested that were formerly approved by the UK National Health Service (NHS) did not adequately address at least two of the OWASP Mobile Top 10 Risks... 95 percent of the FDA-approved apps, and 100 percent of the apps formerly approved by the NHS, lacked binary protection, which could result in privacy violations, theft of personal health information, and tampering... 100 percent of the mobile finance apps tested, which are commonly used for mobile banking and for electronic payments, were shown to be susceptible to code tampering and reverse-engineering..."

Some background about the U.S. Food and Drug Administration (FDA). The FDA revised its guidelines for mobile medical apps in September, 2015. The top of that document clearly stated, "Contains Nonbinding Regulations." The document also explained which apps the FDA regulates (link added):

"Many mobile apps are not medical devices (meaning such mobile apps do not meet the definition of a device under section 201(h) of the Federal Food, Drug, and Cosmetic Act (FD&C Act)), and FDA does not regulate them. Some mobile apps may meet the definition of a medical device but because they pose a lower risk to the public, FDA intends to exercise enforcement discretion over these devices (meaning it will not enforce requirements under the FD&C Act). The majority of mobile apps on the market at this time fit into these two categories. Consistent with the FDA’s existing oversight approach that considers functionality rather than platform, the FDA intends to apply its regulatory oversight to only those mobile apps that are medical devices and whose functionality could pose a risk to a patient’s safety if the mobile app were to not function as intended. This subset of mobile apps the FDA refers to as mobile medical apps."

The Arxan report found that consumers are concerned about app mobile security:

80 percent of mobile app users would change providers if they knew the apps they were using were not secure. 82 percent would change providers if they knew alternative apps offered by similar service providers were more secure."

Arxan commissioned a a third party which surveyed 1,083 persons in the United States, United Kingdom, Germany, and Japan during November, 2015. 268 survey participants were I.T. professionals and 815 participants were consumers. Also, Arxan hired Mi3 to test mobile apps during October and November, 2015. Those tests included 126 health and financial mobile apps covering both the Apple iOS and Android platforms, 19 mobile health apps approved by the FDA, and 15 mobile health apps approved3 by the UK NHS.

One difference in app security perceptions between the two groups: 82 percent of I.T. professionals believe "everything is being done to protect my apps" while only 57 percent of consumers hold that belief. To maintain privacy and protect sensitive personal information, Arxan advises consumers to:

  1. Buy apps only from reputable app stores,
  2. Don't "jail break" your mobile devices, and
  3. Demand that app developers disclose upfront the security methods and features in their apps.

The infographic below presents more results from the consolidated report. Three reports by Arxan Technologies are available: consolidated, healthcare, and financial services.

Arxan Technologies. 5th Annual State of App Security infographic
Infographic reprinted with permission.


Facts About Debt Collection Scams And Other Consumer Complaints

Logo for Consumer Financial Protection Bureau The Consumer Financial Protection Bureau (CFPB) recently released a report about debt collection scams. The report is based upon more than 834,00 complaints filed by consumers nationally with the CFPB about financial products and services: checking and savings accounts, mortgages, credit cards, prepaid cards, consumer loans, student loans, money transfers, payday loans, debt settlement, credit repair, and credit reports. Complaints about debt collection scams accounted for 26 percent of all complaints.

The most frequent scam are attempts to collect money from consumers for debts they don't owe. This accounted for 38 percent of all debt-collection-scam complaints submitted. This included harassment:

"Consumers complained about receiving multiple calls weekly and sometimes daily from debt collectors. Consumers often complained that the collector continued to call even after being repeatedly told that the alleged debtor could not be contacted at the dialed number. Consumers also complained about debt collectors calling their places of employment... Consumers complained that they were not given enough information to verify whether or not they owed the debt that someone was attempting to collect. "

The two companies with the most complaints:

"... were Encore Capital Group and Portfolio Recovery Associates, Inc. Both companies, which are among the largest debt buyers in the country, averaged over 100 complaints submitted to the Bureau each month between October and December 2015. In 2015, the CFPB took enforcement actions against these two large debt buyers for using deceptive tactics to collect bad debts."

Compared to a year ago, debt collection complaints increased the most in Indiana (38 percent), Arizona (27 percent), and New Hampshire (26 percent) during December 2015 through February 2016. Debt collection complaints decreased the most in Maine (-34 percent), Wyoming (-26 percent), and North Dakota (-23 percent). And:

"Of the five most populated states, California (10 percent) experienced the greatest percentage increase and Illinois (-4 percent) experienced the greatest percentage decrease in debt collection complaints..."

The report lists 20 companies with the most debt-collection complaints during October through December 2015. The top five companies with with average monthly complaints about debt collection are Encore Capital Group (139.3), Portfolio Recovery Associates, Inc. (112.3), Enhanced recovery Company, LLC (65.7), Transworld Systems Inc. (63.7), and Citibank (54.7). This top-20 list also includes several banks: Synchrony Bank, Capital One, JPMorgan Chase, Bank of America, and Wells Fargo.

While the March Monthly Complaint Report by the CFPB focused upon debt collection complaints, it also provides plenty of detailed information about all categories of complaints. From December 2015 through February 2016, the CFPB received on average every month about 6,856 debt collection complaints, 4,211 mortgage complaints, 3,556 credit reporting complaints, 2,021 complaints about bank accounts or services, and 1,995 complaints about credit cards. Most categories showed increased complaint volumes compared to the same period a year ago. Only two categories showed a decline in average monthly complaints: credit reporting and payday loans. Debt collection complaints were up 6 percent.

Compared to a year ago, average monthly complaint volume (all categories) increased in 40 states and decreased in 11 states. The top five states with the largest increases (all categories) included Connecticut (31 percent), Kansas (30 percent), Georgia (25 percent), Louisiana (25 percent), and Indiana (24 percent). The top five states with the largest decreases (all categories) included Hawaii (-25 percent), Maine (-19 percent), South Dakota (-14 percent), District of Columbia (-8 percent), and Idaho (-6 percent). Also:

"Of the five most populated states, New York (12 percent) experienced the greatest complaint volume percentage increase, and Texas (-8 percent) experienced the greatest complaint volume percentage decrease from December 2014 to February 2015 to December 2015 to February 2016."

The chart below lists the 10 companies with the most complaints (all categories) during October through December, 2015:

Companies with the most complaints. CFPB March 2016 Monthly Complaints Report. Click to view larger image

The "Other" category includes consumer loans, student loans, prepaid cards, payday loans, prepaid cards, money transfers, and more. During this three-month period, complaints about these companies totaled 46 percent of all complaints. Consumers submit complaints about the national big banks covering several categories. According to the CFPB March complaints report (links added):

"By average monthly complaint volume, Equifax (988), Experian (841), and TransUnion (810) were the most-complained-about companies for October - December 2015. Equifax experienced the greatest percentage increase in average monthly complaint volume (32 percent)... Ocwen experienced the greatest percentage decrease in average monthly complaint volume (-18 percent)... Empowerment Ventures (parent company of RushCard) debuted as the 10th most-complained-about company..."

To learn more about the CFPB, there are plenty of posts in this blog. Simply enter "CFPB" in the search box in the right column.