On November 2, Consumer Financial Protection Bureau Director Richard Cordray delivered remarks during the Consumer Advisory Board meeting in Tampa. Cordray's public pronouncements reflect and foreshadow the CFPB's regulatory priorities, and his recent comments indicate the CFPB's focus on reverse mortgages, consumers with limited English proficiency, and short-term loans.
Cordray mentioned the CFPB's recently-released report about the costs and risks of using reverse mortgages as a strategy to delay collecting Social Security benefits and the increasing promotion of this strategy by those in the reverse mortgage industry, often without disclosing to consumers the costs and risks involved. The CFPB's report discussed its analysis of these products using different scenarios and found that the cost of a reverse mortgage usually exceeds the benefits that would be gained by delaying Social Security retirement benefits from age 62 until full retirement age.
Cordray also discussed the CFPB's efforts to increase home ownership for Spanish-speaking Americans, which has been identified as their top financial goal. The CFPB most recently is helping this population through its publication of Como prepararse para comprar una casa ("How to get ready to buy a home"), which may be found on the CFPB's Spanish website at www.cfpb.gov/es.
Short-term loans have been of concern to the CAB and the CFPB for some time. Cordray pointed out the final rule issued in October addressing payday, vehicle title, and certain high-cost installment loans. Cordray continued his past references to such loans as "debt traps," and he explained that the rule "rests on the basic principle of requiring lenders to make a reasonable assessment upfront of whether people can afford to repay these loans." He also noted that the rule curtails repeated attempts by lenders to debit checking accounts, which results in additional fees, thus making it more difficult for consumers to get out of debt on both short-term and longer-term loans. Cordray explained that the rule was promulgated to assist borrowers who repeatedly roll over or refinance their loans, given that more than four out of five payday loans are re-borrowed within a month, usually soon after the loan is due. Cordray noted that the CFPB received about 1.4 million public comments on this proposed rule.
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