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    CONSUMER FINANCIAL PROTECTION BUREAU TAKES ACTION AGAINST MEDICAL DEBT COLLECTOR

    Tuesday, June 23rd, 2015

    CONSUMER FINANCIAL PROTECTION BUREAU TAKES ACTION AGAINST MEDICAL DEBT COLLECTOR

    Company Mishandled Consumer Credit Reporting Disputes, Prevented Consumers From Exercising Debt Collection Rights 

    WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) announced an enforcement action against a medical debt collection company for mishandling consumer credit reporting disputes and preventing consumers from exercising important debt collection rights. These practices potentially affected the credit scores of thousands of individuals and caused consumers distress and confusion. The CFPB is ordering the company to provide over $5.4 million in relief to harmed consumers, correct its business practices, and pay a $500,000 penalty.

    “Syndicated Office Systems mistreated consumers and prevented them from exercising critical debt collection rights,” said CFPB Director Richard Cordray. “These violations are particularly egregious given the challenges many consumers already face who are attempting to navigate the medical debt maze. Today we are putting a stop to these illegal practices and getting consumers the relief they deserve.”

    Syndicated Office Systems, LLC, which does business as Central Financial Control, is a debt collection agency that primarily collects medical debt on behalf of hospitals, doctors, and other healthcare providers. The company is an indirect subsidiary of Conifer Health Solutions, LLC, which provides billing and other services to more than 600 hospitals nationwide. Tenet Healthcare Corporation, a publicly traded healthcare services company based in Dallas, Texas, is the parent company of Conifer Health Solutions.

    Companies that collect medical debt and supply this information to credit reporting agencies have a significant impact on consumers’ credit scores. More than 43 million Americans have medical debt adversely affecting their credit reports, and more than half of all overdue debt on consumer credit reports is from medical debt. A recent CFPB report found that the complex processes by which medical bills are incurred, collected by a wide range of debt collectors, and reported to credit reporting agencies can create unique challenges for consumers. The Bureau also found that medical debt can overly penalize consumer credit scores.

    As part of its debt collection business, Syndicated Office Systems regularly supplies information on the status of its medical debt collection accounts to credit reporting agencies and is considered a furnisher under the Fair Credit Reporting Act. Credit reporting agencies track a consumer’s credit history and other consumer transactions based on information supplied by furnishers. The reports that credit reporting agencies sell are used in determining everything from consumer eligibility for credit to employment decisions.  

    Syndicated Office Systems typically initiates collection efforts through letters and telephone calls to consumers. Within five days of their initial communication, debt collectors are generally required to send debt validation notices to alert consumers about their right to request proof that a debt is valid or dispute the debt. A CFPB investigation, however, uncovered that Syndicated Office Systems failed to send debt validation notices to thousands of consumers.

    The CFPB also found that the company mishandled consumer credit reporting disputes by failing to investigate and respond to consumers within the 30-day timeframe required under the law.  Because the company furnishes information related to past-due medical debt, the information consumers seek to dispute or validate has the potential to lower credit scores.

    The CFPB order charges the company with violating the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The violations specifically include:

    • Mishandling consumer credit reporting disputes:  Syndicated Office Systems failed to respond to more than 13,000 consumer credit report disputes within the 30-day timeframe required by law. On average, the company took more than 90 days to respond to consumers’ disputes and, in some cases, took over a year. Consumers spent time and money attempting to follow up on unresolved disputes and experienced distress and confusion due to the delays. The CFPB found that the company had no policies or procedures in place to investigate these consumer credit report disputes. Instead, the company treated consumer credit report disputes in the same way as other consumer complaints and had no deadline for responding.
    • Preventing consumers from exercising important debt collection rights:  Syndicated Office Systems failed to send debt validation notices to more than 10,000 consumers. During this time, the company continued to collect over $2 million from consumers who did not receive the notices. Failing to provide notices denies consumers the opportunity to assess whether the debt is valid and whether the amount or source is correct. These notices can be an especially important consumer safeguard with regard to medical debt, where issues like insurance reimbursements and medical billing processes are commonly fraught with complexity, confusion, and delay, and can lead to consumers being unsure of how much to pay or even whom to pay. 

    Together, these violations had the potential to harm thousands of consumers and in some cases, negatively impact their credit scores. This can hinder consumers’ ability to obtain credit or increase the rates they may pay for credit. In some cases, the company reported inaccurate information to the credit reporting agencies and then failed to provide a timely response to consumer disputes about the errors. Some consumers may also have been able to avoid negative information on their credit reports if they had known about their right to assess and dispute the debt in question. 

    Enforcement Action
    To address these violations, the CFPB order requires Syndicated Office Systems to take the following actions: 

    • Provide over $5 million in relief to harmed consumers: Syndicated Office Systems must identify all affected consumers and provide monetary relief. Consumers who were never sent a debt validation notice and who made payments to the company will receive a full refund and have remaining account balances forgiven. The company will pay $100 to consumers who were never sent a debt validation notice and did not make any payments to the company. The company must also pay damages ranging from $100-$1,000 to each consumer who did not receive a timely response to his or her credit report dispute. The amount that each consumer receives will correspond to the duration of the company’s delay in responding to the consumer’s credit report dispute. The company must submit a written plan to the CFPB for approval detailing how the company will identify affected consumers and provide relief.
    • Correct errors on credit reports: Syndicated Office Systems must identify all consumer accounts affected by its illegal business practices and fix any inaccuracies. The company must also update the account information it has furnished to the credit reporting companies and notify all affected consumers of this update, to the extent it has not already done so.
    • End illegal credit reporting and debt collection practices: The company must cease its illegal business practices and develop new policies to comply with federal consumer credit reporting and debt collection laws.
    • Establish consumer safeguards: Syndicated Office Systems must change how it does business and establish safeguards to ensure it has the staffing, facilities, systems, and information necessary to timely and completely respond to consumer credit report disputes. It must also establish a strong oversight program to identify any systemic inaccuracies to ensure that it informs consumers of their right to validate and dispute inaccurate debts in collection.
    • Pay a civil monetary penalty of $500,000: Syndicated Office Systems will pay a $500,000 fine for the illegal actions.

    The consent order filed today is available here: http://files.consumerfinance.gov/f/201506_cfpb_order-syndicated.pdf

    The CFPB will continue to enforce federal laws to ensure accuracy in credit reporting and debt collection. Consumers should check their credit report for inaccuracies at least once a year. Consumers can order a free credit report once every 12 months from AnnualCreditReport.com.

    Tips for consumers on how to deal with medical debt can be found at: http://files.consumerfinance.gov/f/201412_cfpb-7-ways-to-keep-medical-debt-in-check.pdf

    CONSUMER FINANCIAL PROTECTION BUREAU IDENTIFIES ILLEGAL PRACTICES UNCOVERED THROUGH SUPERVISION

    Tuesday, June 23rd, 2015

    CONSUMER FINANCIAL PROTECTION BUREAU IDENTIFIES ILLEGAL PRACTICES UNCOVERED THROUGH SUPERVISION
    Supervisory Resolutions Across Industries Recover $11.6 Million for More Than 80,000 Consumers

     

    WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) released its latest supervision report outlining the illegal practices uncovered by the Bureau’s examiners in the first four months of 2015. The Bureau found problems with dual-tracking at mortgage servicers that could mislead consumers to believe their trial modifications were canceled. The Bureau also found a lack of quality control measures in place at consumer reporting agencies. The report shows that across all industries CFPB supervisory resolutions resulted in remediation of $11.6 million to more than 80,000 consumers.

    “We are extremely concerned that one year after the CFPB’s mortgage servicing rules went into effect we are still finding runarounds and illegal dual-tracking,” said CFPB Director Richard Cordray. “Consumers deserve to be treated with honesty and integrity, and our rules require that servicers give borrowers a fair process when they try to save their homes. The CFPB will continue to stand beside consumers to make sure mortgage servicers are following the law.”

    Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the CFPB has authority to supervise banks and credit unions with more than $10 billion in assets and certain nonbanks. Those nonbanks include mortgage companies, private student lenders, and payday lenders, as well as nonbanks the Bureau defines through rulemaking as “larger participants.” To date, the Bureau has issued rules to supervise the larger participants in the markets of debt collection, consumer reporting, international money transfers, student loan servicing, and auto finance.

    Today’s report, which is the eighth edition of Supervisory Highlights, generally covers supervisory activities completed between January 2015 and April 2015. Among the findings:

    • Illegal dual-tracking of foreclosures and loss mitigation applications: The CFPB examiners found at least one servicer that sent notices of intent to foreclose to borrowers already approved for trial modifications. This dual-tracking could mislead consumers to believe the servicer had abandoned the trial modification. The CFPB examiners also found at least one servicer that, because of a system error, sent notices to borrowers who were current on their loans saying that foreclosure would be imminent.
    • Illegal runarounds with loss mitigation applications: The new CFPB rules specify that mortgage servicers must follow certain procedures when handling a homeowner’s loss mitigation application to protect consumers from runarounds. For example, five days after receiving an application, servicers must send the homeowner acknowledgment that it received the application, stating whether or not it was complete. If the application is incomplete, the servicer must identify what is missing. The CFPB examiners found at least one servicer requesting additional documents from consumers that were inapplicable to their circumstances or documents that had already been submitted. Other servicers simply failed to send the required notices five days after receiving the applications. These breakdowns caused delays in converting trial modifications to permanent modifications, resulting in harm to borrowers.
    • Debt collection complaints disregarded: Bureau examiners found at least one debt collector did not record, categorize, or process complaints and inquires. At other collectors, these complaints and inquiries remained in an electronic queue that never got reviewed or resolved. Debt collectors also failed to conduct investigations of disputes. These practices can harm consumers because their problems simply go unanswered. And they can harm consumers because a lack of record-keeping deprives compliance personnel of an important tool for detecting and fixing violations of federal consumer financial laws.
    • Accuracy problems at consumer reporting agencies: Examiners continue to find accuracy problems at one or more of the credit reporting agencies, stemming from issues with information collection and quality control. Examiners found that at least one consumer reporting agency did not conduct regular monitoring of its furnishers to make sure they were following requirements. Examiners also found no quality controls in place to test existing consumer reports for accuracy. CFPB Supervision directed one or more credit reporting agencies to develop a plan to implement such quality controls.
    • Fair lending violations: Bureau examiners found that one or more institutions denied or discouraged mortgage applications from consumers because they would have relied on public assistance income in order to repay the loan. Excluding or refusing to consider public assistance income violates the Equal Credit Opportunity Act. The CFPB examiners directed that institutions change their policies and identify and provide remediation to harmed applicants.

    Where CFPB examiners find violations of law or other significant problems or weaknesses, they alert the institutions to their concerns and outline necessary remedial measures. When appropriate, the CFPB opens investigations for potential enforcement actions. The CFPB expects all entities under its supervision to respond to customer complaints and identify major issues and trends that may pose broader risks to their customers.

    The CFPB often finds problems during supervisory examinations that are resolved without an enforcement action. Recent non-public supervisory actions and self-reported violations at banks and nonbanks resulted in $11.6 million in remediation to more than 80,000 consumers. These non-public actions have occurred in areas such as mortgage servicing, mortgage origination, deposits, payday lending, and debt collection.

    Today’s edition of Supervisory Highlights is available at: http://files.consumerfinance.gov/f/201506_cfpb_supervisory-highlights.pdf

    ###

    CFPB Finds 90 Percent of Private Student Loan Borrowers Who Applied for Co-Signer Release Were Rejected

    Friday, June 19th, 2015

    CFPB Finds 90 Percent of Private Student Loan Borrowers Who Applied for Co-Signer Release Were Rejected

    Industry Inquiry Reveals Problems for Consumers Seeking to Prevent Auto-Defaults

    WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman released a report finding high rates of consumers are being rejected for co-signer release on their private student loans, based on its review of industry practices. The Bureau uncovered problematic industry practices that may be disqualifying some consumers from securing a co-signer’s release from their loans. When student borrowers and co-signers seek a co-signer release but are unable to obtain it, the co-signer can suffer from damage to their credit or be subject to higher rates on other forms of credit. This can also result in serious financial distress for the borrower if a company triggers an auto-default when a co-signer dies or goes bankrupt.

    “Parents and grandparents put their financial futures on the line by co-signing private student loans to help family members achieve the dream of higher education,” said CFPB Director Richard Cordray. “Responsible borrowers and their co-signers should have clear information and standards for releasing the co-signer if the time is right. We’re concerned that the broken co-signer release process is leaving responsible consumers at risk of damaged credit or auto-default distress.”

    The CFPB Student Loan Ombudsman’s Mid-Year Update is available at:http://files.consumerfinance.gov/f/201506_cfpb_mid-year-update-on-student-loan-complaints.pdf

    “Private student loan companies should own up to borrowers when they qualify for valuable benefits, clean up contracts with surprises buried in the fine print, and step up to provide borrowers and their co-signers the service they deserve,” said CFPB Student Loan Ombudsman Rohit Chopra.

    Student loans make up the nation’s second largest consumer debt market. The market has grown rapidly in the last decade. Today there are more than 40 million federal and private student loan borrowers and collectively these consumers owe more than $1.2 trillion. While private student loans are a small portion of the overall market, they are generally used by borrowers with high levels of debt who also have federal loans. In general, private student loans carry higher interest rates and lack flexible repayment options, compared to federal student loans. Unlike other markets, independent data on the size and performance of the private student loan market is not available to investors and the public.

    Most private student loans require a co-signer. In fact, according to a 2012 report on private student loans published by the CFPB and the Department of Education, while co-signers were less often required during the years prior to the financial crisis, by 2011 more than 90 percent of new private student loans were co-signed, often by a parent or grandparent.

    A co-signer may help a borrower access credit or obtain a lower rate because they may be more creditworthy and can step in if a borrower is unable to repay. However, borrowers have also been hit with a default because of activities related to the co-signer, even if the borrower is paying on time. However, the loan will appear on the co-signer’s credit record which will count towards the co-signer’s total debt level and can affect the co-signer’s credit score if the loan is not repaid. Consumers also can be at a disadvantage if they are unable to obtain a co-signer release. For example, a co-signer may also have a more difficult time obtaining an affordable rate on other credit, making it more expensive to refinance a home or to buy a car.

    Last year, the CFPB released a report highlighting complaints related to auto-defaults. Consumers reported that private student lenders and servicers placed borrowers in default when a co-signer died or filed for bankruptcy, even if the loan was in good standing.

    Following the report, the Bureau’s Student Loan Ombudsman issued an information request to companies comprising much of the activity in the market in order to better understand and address current practices and policies affecting consumers.

    Today’s report includes findings of the information request from industry participants as well as analysis of more than 3,100 private student loan complaints and approximately 1,100 debt collection complaints related to student loan debt received between October 1, 2014, and March 31, 2015. Overall, private student loan complaints increased by 34 percent compared to the same time period last year.

    Among the issues that consumers face:

    • Companies rejected 90 percent of consumers who applied for co-signer release: Many private student lenders advertise options to release a co-signer from a private student loan. However, an analysis of industry responses to the CFPB’s information request found that the lenders and servicers surveyed granted very few releases—of those borrowers that applied for co-signer release, 90 percent were rejected.
    • Consumers left in the dark on co-signer release criteria: The CFPB found that consumers have little information on the specific borrower criteria needed to obtain a co-signer release. Consumers reported being confused about their eligibility for obtaining a co-signer release as well as not understanding why they had been denied.
    • Most private student loan contracts continue to contain auto-default clauses: Last year, the CFPB reported that private student loan servicers were putting borrowers in default when a co-signer died or filed for bankruptcy, even when their loans were otherwise in good standing. Following that report, some financial institutions stated that they would no longer hit borrowers with auto-defaults. The CFPB’s analysis of private student loan contracts, however, found that most private student loan contracts continue to include auto-default clauses.
    • Borrowers are at risk when loans are sold and packaged by Wall Street: Even if individual companies state that they will not trigger auto-defaults in certain cases, loans are often sold to other banks and securitized on Wall Street. This exposes borrowers to risk that the new owner of the loan will trigger an auto-default.
    • Company policies can permanently disqualify borrowers from co-signer release: Student loan borrowers reported that some companies’ policies penalize or disqualify borrowers who prepay their loans and are in good standing. Some companies also disqualify borrowers from releasing a co-signer if the consumer accepts the servicer’s offer of postponing payment through forbearance. These company policies can permanently ban a consumer from seeking co-signer release for the life of the loan and penalize consumers that may have graduated during tough economic times.
    • Potentially harmful clauses found in the fine print: In addition to auto-default clauses, the CFPB found other potentially harmful clauses hidden in fine print of some loans including “universal default” clauses. Financial institutions use these clauses to trigger a default if the borrower or co-signer is not in good standing on another loan with the institution, such as a mortgage or auto loan, that is unrelated to the consumer’s payment behavior on the student loan. These clauses can increase the risk of default for both the borrower and co-signer.

    Today’s report describes opportunities to improve the private student loan industry’s co-signer practices. The report identifies practices that could benefit consumers and industry, including:

    • Improving transparency around co-signer release criteria: Consumers and industry would benefit from increased transparency around the availability of co-signer release, including what specific requirements exist that a borrower needs to meet to obtain a release.
    • Improving consumer notifications for co-signer release eligibility:Private student loan servicers could notify consumers before placing them in a repayment status, such as forbearance, that it would disqualify them from co-signer release. In addition, private student loan servicers could improve their customer service by proactively notifying borrowers when they meet prerequisites for releasing a co-signer, such as making a certain number of on-time payments.
    • Examining potentially harmful clauses in the fine print: The CFPB report notes that policymakers should consider whether auto-default, universal default, and other potentially harmful terms in the fine print of private student loan contracts are appropriate.

    To help borrowers overcome obstacles to co-signer release, the CFPB published a set of sample letters for private student loan borrowers and their co-signers that they can send to the private student loan servicer. These letters instruct servicers to provide clear information about co-signer release policies.

    Last month, the CFPB launched a public inquiry into student loan servicing practices that can make paying back loans a stressful or harmful process for borrowers. The issues that the Bureau is seeking information on include: industry practices that create repayment challenges, hurdles for distressed borrowers, and the economic incentives that may affect the quality of service. The comment period is open until July 13, 2015.The CFPB also launched a new version of the Repay Student Debt tool, which helps borrowers get unbiased tips on how to navigate student loan repayment, along with other sample letters they can send to their student loan servicers.

    The CFPB began accepting consumer complaints about private student loans in March 2012. More information is at: consumerfinance.gov/students.

    FCC STRENGTHENS CONSUMER PROTECTIONS AGAINST UNWANTED CALLS AND TEXTS

    Friday, June 19th, 2015

    Media Contact:

    Will Wiquist, (202) 418-0509

    will.wiquist@fcc.gov

     

    For Immediate Release

     

    FCC STRENGTHENS CONSUMER PROTECTIONS

    AGAINST UNWANTED CALLS AND TEXTS

    Commission Responds to Requests from Businesses and Attorneys General for Guidance on Robocall Blocking, Autodialers, Recycled Phone Numbers and More

      —

    WASHINGTON, June 18, 2015 – The Federal Communications Commission today adopted a proposal to protect consumers against unwanted robocalls and spam texts.  In a package of declaratory rulings, the Commission affirmed consumers’ rights to control the calls they receive.  As part of this package, the Commission also made clear that telephone companies face no legal barriers to allowing consumers to choose to use robocall-blocking technology.

     

    The rulings were informed by thousands of consumer complaints about robocalls the FCC receives each month.  Complaints related to unwanted calls are the largest category of complaints received by the Commission, numbering more than 215,000 in 2014.

     

    Today’s action addresses almost two dozen petitions and other requests that sought clarity on how the Commission interprets the Telephone Consumer Protection Act (TCPA), closing loopholes and strengthening consumer protections already on the books.  The TCPA requires prior express consent for non-emergency autodialed, prerecorded, or artificial voice calls to wireless phone numbers, as well as for prerecorded telemarketing calls to residential wireline numbers.

     

    The rulings provide much needed clarity for consumers and businesses. Highlights for consumers who use either landline or wireless phones include:

     

    • Green Light for ‘Do Not Disturb’ Technology – Service providers can offer robocall-blocking technologies to consumers and implement market-based solutions that consumers can use to stop unwanted robocalls.
    • Empowering Consumers to Say ‘Stop’ – Consumers have the right to revoke their consent to receive robocalls and robotexts in any reasonable way at any time.
    • Reassigned Numbers Aren’t Loopholes – If a phone number has been reassigned, companies must stop calling the number after one call.
    • Third-Party Consent – A consumer whose name is in the contacts list of an acquaintance’s phone does not consent to receive robocalls from third-party applications downloaded by the acquaintance.

    Additional highlights for wireless consumers include:

    • Affirming the Law’s Definition of Autodialer – “Autodialer” is defined in the Act as any technology with the capacity to dial random or sequential numbers. This definition ensures that robocallers cannot skirt consumer consent requirements through changes in calling technology design or by calling from a list of numbers.
    • Text Messages as Calls – The Commission reaffirmed that consumers are entitled to the same consent-based protections for texts as they are for voice calls to wireless numbers.
    • Internet-to-Phone Text Messages – Equipment used to send Internet-to-phone text messages is an autodialer, so the caller must have consumer consent before calling.
    • Very Limited and Specific Exemptions for Urgent Circumstances – Free calls or texts to alert consumers to possible fraud on their bank accounts or remind them of important medication refills, among other financial alerts or healthcare messages, are allowed without prior consent, but other types of financial or healthcare calls, such as marketing or debt collection calls, are not allowed under these limited and very specific exemptions. Also, consumers have the right to opt out from these permitted calls and texts at any time.

    Today’s actions make no changes to the Do-Not-Call Registry, which restricts unwanted  telemarketing calls, but are intended to build on the Registry’s effectiveness by closing loopholes and ensuring that consumers are fully protected from unwanted calls, including those not covered by the Registry.

     

    By taking action today, the Commission is embracing the opportunity afforded by the 23 requests for clarification of the law to clearly stand with consumers against unwanted calls.

     

    Action by the Commission June 18, 2015 by Declaratory Ruling and Order (FCC 15-72).  Chairman Wheeler and Commissioner Clyburn, Commissioners Rosenworcel and O’Rielly approving and dissenting in part and Commissioner Pai dissenting.  Chairman Wheeler, Commissioners Clyburn, Rosenworcel, Pai and O’Rielly issuing statements.

     

    ###


    Office of Media Relations: (202) 418-0500

    TTY: (888) 835-5322

    Twitter: @FCC

    www.fcc.gov/office-media-relations

     

    This is an unofficial announcement of Commission action.  Release of the full text of a Commission order constitutes official action.  See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

    Reverse mortgages

    Thursday, June 4th, 2015

    FOR IMMEDIATE RELEASE:
    June 4, 2015

    CONTACT:
    Office of Communications
    Tel: (202) 435-7170

    CONSUMER FINANCIAL PROTECTION BUREAU STUDY FINDS REVERSE MORTGAGE ADVERTISEMENTS CAN CREATE FALSE IMPRESSIONS
    CFPB Issues Advisory Warning Consumers Not To Be Deceived

     

    WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) released results of a focus group study on reverse mortgage advertisements that found many participants were left with misimpressions about the product. After viewing the ads, consumers were confused about reverse mortgages being loans, and they were left with false impressions that they are a government benefit or that they would ensure consumers could stay in their homes for the rest of their lives. Today, the CFPB is also issuing an advisory that warns consumers that many reverse mortgage ads do not tell the full story.

    “As older consumers consider reverse mortgage loans to tap into their home equity, they need to be careful of those late night TV ads that seem too good to be true,” said CFPB Director Richard Cordray. “It is important that advertisements do not downplay the terms and risks of reverse mortgages or confuse prospective borrowers.”

    The study can be found at: http://files.consumerfinance.gov/f/201506_cfpb_a-closer-look-at-reverse-mortgage-advertising.pdf

    A reverse mortgage is a special type of home loan that allows older homeowners to access the equity they have built up in their homes and defer payment of the loan until they pass away, sell, or move out. The loan proceeds are generally provided to the borrowers as lump-sum payments, monthly payments, or as lines of credit. The reverse mortgage market is about 1 percent of the size of the traditional mortgage market, with 628,000 outstanding loans, according to industry reports. Most reverse mortgages today are federally insured through the Federal Housing Authority’s Home Equity Conversion Mortgage program, which carry some regulatory requirements.

    The number of reverse mortgage originations is likely to increase in upcoming years with the retirement of the “baby boom” generation, which has more home equity than retirement savings. Studies have estimated that among Americans nearing retirement, 41 percent have no retirement savings account. But a majority of them, about 74 percent, own their homes and have built up good equity. The most common ways for consumers to access this home equity is to refinance their original mortgage, take out a home equity loan or line of credit, sell the home and downsize, or obtain a reverse mortgage.

    Today’s CFPB study is based on 97 unique ads found on TV, radio, in print, and on the Internet. The CFPB interviewed about 60 homeowners age 62 and older in focus groups and in one-on-one interviews in Chicago, Los Angeles, and Washington, D.C. The study found that many of the ads were incomplete and/or contained inaccurate information. While advertisements frequently do not describe all the details of the particular product or service being sold, the incompleteness of reverse mortgage ads raises heightened concerns because reverse mortgages are complicated and often expensive loans intended for older, and frequently vulnerable, homeowners. The study found that the ads were characterized by: 

    • Ambiguity that reverse mortgages are loans: Some consumers found it difficult to understand from the ads that reverse mortgages are loans with fees and compounding interest; that the loans need to be repaid. Most ads either did not include interest rates or included interest rates in fine print. Other consumers thought that because the money they received through a reverse mortgage represented home equity they had accrued over time, there was no reason they would have to pay it back. 
    • False impressions about government affiliation: The advertisements left some older homeowners with the false impression that reverse mortgages are a risk-free government benefit, and not a loan. The study found that consumers often misinterpret the role of the federal government in the reverse mortgage market as providing consumer protections that are not actually offered.
    • Difficult-to-read fine print: The study found that some consumers did not pick up on key aspects of the loan because the loan requirements were often buried in the fine print if they were even mentioned at all. Many reverse mortgage ads reviewed did not, for example, mention helpful information like interest rates, repayment terms, and other requirements. 
    • Celebrity endorsements that imply reliability and trust: Many ads featured celebrity spokespeople discussing the benefits of reverse mortgages without mentioning the risks. Most consumers recalled TV ads that featured spokespeople portrayed as reliable and trustworthy. One consumer in one focus group said, “When it’s a former Congressman endorsing it, it makes it sound like a good idea.”
    • False impressions about financial security and staying in the home for the rest of the consumer’s life: The study found that many ads implied financial security for the rest of a consumer’s life. But a reverse mortgage does not guarantee financial security no matter how long a consumer lives. A consumer can tap into their equity too early and run out of funds to draw on. In addition, borrowers with a reverse mortgage are still responsible for paying property taxes, homeowner’s insurance, and property maintenance. Failing to meet these requirements can trigger a loan default that results in foreclosure. Most of the advertisements reviewed failed to mention such requirements.

    Incomplete or inaccurate statements made in advertisements about reverse mortgages can pose serious risks to older Americans. Without more balanced information, consumers may not make the right financial choice and jeopardize their retirement security. This means they could run out of money for their day-to-day expenses or even lose their homes.

    Consumer Advisory: Don’t Be Misled By Reverse Mortgage Advertising
    Today the CFPB is issuing an advisory warning older Americans to watch out for misleading or confusing reverse mortgage advertisements. The advisory highlights facts that consumers should keep in mind when seeing the ads:

    • A reverse mortgage is a home loan, not a government benefit: Consumers need to know that reverse mortgages have fees and compounding interest that must be repaid, just like other home loans.
    • Reverse mortgage ads don’t always tell the whole story: Reverse mortgage ads don’t always tell the whole story, such as that a consumer can lose ownership of their home.
    • Without a good plan, a consumer could outlive the loan money: Consumers should have a financial plan in place that accounts for a long life. That way, if a consumer needs to tap into their home equity, they won’t do it too early and risk running out of retirement resources later in life.

    The CFPB’s advisory can be found at: http://files.consumerfinance.gov/f/201506_cfpb_consumer-advisory-dont-be-misled-by-reverse-mortgage-advertising.pdf

    The Bureau has questions and answers about reverse mortgages at Ask CFPB. The Bureau also has developed a  consumer guide for older Americans with key facts on reverse mortgages. Consumers can submit a complaint with the CFPB about reverse mortgages online at www.consumerfinance.gov, by phone at 1-855-411-CFPB or TTY/TDD (855) 729- 2372, or by mail.

    More information for older Americans and their caregivers about making financial decisions, protecting assets, preventing financial exploitation, and planning for long-term financial security can be found at: consumerfinance.gov/older-americans/

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    The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.