Whatever Happened to Due Process and Equal Protection?

[caption id="attachment_13124" align="alignleft" width="183"]Marc Savitt Marc Savitt[/caption]

Imagine a credit bureau listing derogatory credit on a consumer’s credit report, knowing the accuracy of that information may not be true. We all know the CFPB wouldn’t stand for such bad behavior. However, that’s exactly what the CFPB is doing with their Consumer Complaint Database.


Earlier this year, the CFPB launched its new Consumer Complaint Database.  The Database allows consumers to file complaints regarding mortgages, credit cards, bank account services, vehicle or consumer loans, student loans or credit reporting. Once a complaint is filed, the CFPB lists that complaint publicly. I’m not speaking about a complaint that’s been adjudicated or even settled outside any authority. I’m referring to mere accusations alone.  Furthermore, the name of the lender is shown, but not the complainant.


Even more outrageous is the CFPB’s admission about their public database. A disclaimer on the website states, “This contains data from the consumer credit card complaints received by the Consumer Financial Protection Bureau. We do not verify the accuracy of all facts alleged in these complaints, but we do take steps to confirm a commercial relationship between the consumer and the identified company.”  


Currently, only credit card complaints are being listed. However, mortgages and other types of financial services are slated to be publicly listed in the near future.


Does the CFPB’s public disclosure of such accusations equate to denial of Due Process? The Fifth Amendment states, “No one shall be deprived of life, liberty or property without due process of law.” So what does this mean? It’s a promise that all levels of government must operate within the law and provide fair procedures. Is it fair for the CFPB to administer some degree of punishment without verifying the accuracy of all the facts in these complaints?


If this isn’t enough, it also appears the CFPB is “leading” consumers who file complaints. Under the mortgage complaints section of the database, consumers are asked to describe the nature of their complaint. This is a simple procedure, which gives the CFPB a starting point in an investigation. However, the last question is troubling. “Do you believe the issue involves discrimination? (Optional).”  One definition of a Leading Question is, “A leading question or suggestive interrogation is a question that suggests the particular answer or contains the information the examiner is looking to have confirmed.”


Let’s face it, most consumers filing complaints, whether justified or not, would see this question as a way of strengthening their complaint. Moreover, as we live in a litigious society, in all likelihood this question would plant a seed to find an attorney, who would file suit against the lender based on their clients “belief.” Even if the case is later proven to be frivolous, the costs of defending yourself could easily force a small company out of business. Moreover, there’s the loss of reputation factor too.


Let me be clear, discrimination of any kind should never be tolerated. However, if discrimination played any part in a consumer’s complaint, it would be revealed during an investigation.


The consumer is also asked if the issue is related to applying for a loan, more specifically the “application, originator, or mortgage broker.” Why does the CFPB ask if it involves mortgage brokers? Shouldn’t the CFPB know it’s originators who are licensed under NMLS? In my opinion, this is another example of “leading” the consumer.


One of the biggest problems faced by mortgage brokers is the misconception of who actually is a mortgage broker. Most consumers don’t know the difference between a broker and the MLO in a bank. By listing brokers in addition to originators, there’s more of a chance a consumer might incorrectly accuse a broker of wrongdoing. Instead, let NMLS numbers identify who originated the loan.


Some have suggested the CFPB might be manufacturing statistics with these and other leading or suggestive questions. Perhaps their actions are being used to justify anti-broker rules, regulations and/or comments made by the agency.


In the fall of this year, the CFPB announced the Members of their new Consumer Advisory Board. Despite the promise of a “level playing field,” the CFPB neglected to appoint a single mortgage broker, originator, mortgage banker, appraiser, credit reporting agency or settlement agent to the Board. NAIHP responded to the announcement with an Open letter to Director Cordray. Here’s part of what I wrote to Directory Cordray regarding this issue.


“Recently, the CFPB announced their advisory groups, i.e., Consumer Advisory Board, Community Banks Advisory Council, Credit Union Advisory Council and Academic Research Council. After reviewing the Consumer Advisory Board’s members, I was disappointed to learn that Mortgage Brokers, Real Estate Appraisers, Mortgage Bankers, Credit Reporting Agencies and Settlement Agents were all excluded from the Board. As you are aware, these groups are small business, Main Street housing professionals, who are involved with consumers on a day-to-day basis, with respect to the home mortgage process. These are the very groups who are currently facing an onslaught of new rules and regulations, and as licensed professionals have been denied a seat at the table. In our opinion, this does not represent a level playing field.


“Instead of being a well-rounded Board as promised, it appears several of the Board’s members have ties to debatable consumer groups, including the now defunct ACORN. In fact, both the Chair and Vice Chair have direct connections to the Center for Responsible Lending (CRL) or their Self Help Credit Union. This is a major concern for small business housing professionals, as these groups have long advocated against those professions that comprise our membership. CFPB has afforded these groups a forum in which to further their agenda, while those they oppose are left without a voice.”


NAIHP has been meeting with the CFPB regarding this issue. Hopefully, we will have reached a satisfactory resolution by the time this article is published. If not, we will explore other remedies.


By Marc Savitt of the NAIHP, who represents independent, small business housing professionals in all 50 states and the District of Columbia. Our grassroots membership consists of mortgage brokers, loan originators, residential appraisers, real estate agents, settlement agents, small banks, credit reporting agencies and consumers. Our members are Main Street USA, who assist consumers through the difficult maze of purchasing or refinancing residential real estate.  NAIHP is an all-volunteer organization with offices located in Washington, DC.  www.naihp.org