Coronavirus drives record number of complaints to consumer bureau

The Consumer Financial Protection Bureau (CFPB) received a record-breaking number of complaints about banks and lenders in April as millions of Americans struggle to navigate the economic toll of the coronavirus pandemic, the bureau’s director said Friday.

CFPB Director Kathy Kraninger told reporters during a Friday press call that the financial watchdog agency received more complaints from consumers in April than any other month since the agency began tracking and cataloguing them in December 2011.

The bureau received 42,774 complaints in April compared to 36,690 in March, Kraninger said, a 15 percent increase that rose along with the number of Americans who contracted COVID-19 or lost their jobs because of the measures to slow its spread.

Kraninger said that most coronavirus-related complaints involved mortgages and credit card debt from consumers struggling to pay their bills or understand the extent of federal relief programs for certain homeowners.

“There’s a real need for all of us,” Kraninger continued, to ensure Americans receive “good information so they’re not confused, so they know what their rights are and they know what questions to ask when they get on the phone with their creditor or their lender.”

The director touted several CFPB outreach efforts intended to inform consumers about their rights under federal aid programs and pre-existing consumer laws, including a video explaining the mortgage forbearance provisions of the $2.2 trillion relief law signed by President Trump in March.

The economic downturn created by the coronavirus pandemic is the most significant test for the CFPB, an agency created during the depths of a different crisis to protect vulnerable consumers from fraud and abuse.

Created by the 2010 Dodd-Frank Wall Street reform law, the CFPB is charged with regulating and overseeing the consumer lending industry, which includes credit cards, home loans, auto loans, student loans and other slices of the financial sector.

As millions of Americans turn to their banks and the federal government to help them handle the financial pressure caused by the pandemic, consumer advocates are counting on the CFPB to protect those seeking help from abuse or deception.

However, Democrats who have long been critical of Kraninger’s leadership of the CFPB have also railed against her for not taking stronger direct action to protect consumers. 

In an April 7 letter to Kraninger, five Senate Banking Committee Democrats urged her to protect consumers from losing credit standing because of the pandemic, and declare certain debt collection and wage garnishment practices as legally punishable if conducted during the pandemic.

“In the face of this pandemic, the CFPB is needed now more than ever to protect and mitigate the financial harm being inflicted on American families,” wrote Democratic Sens. Sherrod Brown (Ohio), Elizabeth Warren (Mass.) Brian Schatz (Hawaii), Jack Reed (R.I.) and Chris Van Hollen (Md.)

Kraninger waived off the criticism as “a desire to see different kinds of relief provided that we don’t have the authority to provide and Congress has to act on.”

“We are absolutely first and foremost informing consumers about what they’re entitled to, and protecting them in the marketplace from unfair, deceptive, abusive acts and practices as we always have,” she continued. 

The CFPB is also homing in on the overall impact of the crisis on the broader consumer credit industry.

Credit inquiries for mortgages, auto loans and credit card applications plummeted in March as the spread of COVID-19 accelerated through the U.S. and forced millions of Americans out of work, according to a report the bureau released Friday.

The report found that between March 1 and 31, auto loan inquiries dropped by 52 percent, new mortgage inquiries dropped by 27 percent, and credit card inquiries declined by 40 percent from usual levels seen in March in previous years. 

Applications from consumers with higher credit scores also fell significantly more than requests from those with lower scores, according to the report, revealing the intense financial pressure facing the most vulnerable Americans.

The CFPB found the steepest declines in applications in early coronavirus hotspots such as the Northeast and California, and a strong correlation between the COVID-19 case rate in an area and the decline in auto and home loan inquiries, but not credit card applications. The bureau also found a strong correlation between the number of unemployment claims in an area and the decline in auto loan applications, but not for credit cards or mortgages.

The differences in which applications slumped for which reasons raise questions about the extent of the economic damage created by the pandemic and its unique impacts on specific credit markets. 

CFPB economists wrote that the declines could be driven by a decline in consumer demand or confidence in their credit standing, lenders pulling back on loan offerings amid the pandemic, or declines in auto and home sales due to the physical restraints of social distancing.

“Regardless of the reason, the data indicate all types of inquiries dropped significantly and that consumers with higher credit scores have more flexibility in substituting away from applying for credit than consumers with lower credit scores,” wrote CFPB economists Éva Nagypál, Christa Gibbs and Scott Fulford.