Nov. 15: CFPB Recent Updates
Published
CFPB Orders Global Tel Link to Pay $3 Million for Illegally Freezing and Draining Payments Accounts for People Who Are Incarcerated
The Consumer Financial Protection Bureau (CFPB) took action against Global Tel Link Corporation (GTL) for illegally taking millions of dollars from more than a half million accounts and blocking money transfers to consumers who are incarcerated, which the consumers relied on for goods such as food, medicine, and clothing. The CFPB is ordering GTL and its subsidiaries to stop their illegal practices, pay at least $2 million in redress to victims, and pay a $1 million penalty to the CFPB’s victims relief fund.
GTL is a Virginia-based corporation doing business as ViaPath Technologies. Its wholly owned subsidiaries include limited liability companies Telmate, LLC, based in California, and TouchPay Holdings, LLC, based in Texas. The companies contract with correctional facilities across the United States to provide various products and services, including money transfer services, to incarcerated people and their family and friends. Friends and family use the services to deposit money into an incarcerated person’s account, and these funds may then be used to pay for items in the correctional facility’s commissary. GTL and Telmate also provide accounts to pay for telephone services, online messaging, and video visitation.
GTL is often the sole provider of money transfer services in the correctional facilities where it operates. It has a “no-refund” policy for money transfers, with limited exceptions, which makes it difficult for friends and family to resolve errors such as duplicate transactions or funds sent to the wrong type of account. As a result, these consumers may file chargebacks with their own financial institutions to try to recover their funds. In some cases, GTL’s own customer service representatives instruct consumers to file chargebacks. In response, GTL in many cases blocks the account of the person who is incarcerated from receiving additional transfers via credit card or debit card until someone repays the amount of the chargeback and, in some cases in the past, an additional fee.
Additionally, between 2019 and 2023, GTL and Telmate emptied funds from certain consumer accounts after a period of inactivity without sufficiently notifying the consumers. The companies also failed to disclose complete fee schedules for money transfers. Read more
Published
CFPB Survey Reveals Impacts of Student Loan Debt Relief and Repayment Challenges
The Consumer Financial Protection Bureau (CFPB) issued its first results from its Student Loan Borrower Survey, providing insights into the effects of student loan debt relief programs and the challenges borrowers face in navigating repayment options. The survey, conducted between October 2023 and January 2024, gathered data from a representative sample of student loan borrowers as the federal student loan payment pause ended and many borrowers returned to repayment. The report found nearly 61% of borrowers who received debt relief reported positive life changes. In addition, nearly 42% of federal student loan borrowers have only ever used the standard repayment plan, with many unaware of alternative options that could help lower their payments.
Today’s report provides insight into the experiences of student loan borrowers, including how they struggle making payments, how student loans impact financial and nonfinancial decisions, and how borrowers interact with their loan servicers. Among findings in today’s report:
- A majority of borrowers who received debt relief said it gave them the opportunity to pursue important life decisions. Across all borrowers who received debt relief, 61 percent reported that the relief had allowed them to make a beneficial change in their life sooner than they otherwise would have.
- Debt relief predominantly reached borrowers with below-median incomes. In 2022, the median household income for student loan borrowers who reported receiving debt relief was between $50,000 and $65,000, below the national median of nearly $75,000. The amount of debt relief varied widely, with 10% of borrowers receiving $5,000 or less, 10% receiving $99,000 or more, and the median borrower receiving $20,000.
- Many borrowers are unaware of alternative repayment options or have trouble accessing them. Nearly 42% of all surveyed federal student loan borrowers report only ever being on the standard repayment plan for their federal student loans. Among these borrowers, 31% reported not knowing they could choose a different payment plan, such as a more affordable income-driven repayment plan. For those borrowers who were able to enroll in an income-driven repayment plan, nearly 45% said they experienced some difficulty in either enrolling in or using the income-driven payment plan.
Since opening its doors in 2011, the CFPB has taken multiple enforcement actions for shoddy student loan servicing practices, including last month ordering Navient to pay $120 million for years of misleading borrowers about income-driven repayment plans and steering borrowers toward costlier payment options. The CFPB also has multiple tools and resources available for students who currently have loans or are considering getting a loan.
- Read today’s report, Insights from the 2023-2024 Student Loan Borrower Survey.
- Read consumer complaints about student loan servicing.
Published
CFPB Report Details Carveouts for Financial Institutions in State Data Privacy Laws
The Consumer Financial Protection Bureau (CFPB) released a study revealing significant disparities in how lenders treat Black and white small business owners seeking loans. The research found that Black entrepreneurs received less encouragement to apply for a loan and were more frequently steered toward alternative loan products compared to white shoppers with similar or weaker business credit profiles. While focused on specific testing sites, this research provides insights into potential lending disparities that warrant further exploration.
The CFPB conducted matched-pair testing using trained individuals who posed as small business owners seeking credit. Testers visited 25 unique bank branches in Fairfax County, Virginia and 25 branches in Nassau County, New York, resulting in a total of 100 in-person test visits. Each visit was audio recorded and participants completed a survey after the bank interaction that documented their experience. Black participants were assigned slightly more favorable financial profiles compared to their white counterparts. In many tests, the Black and white participant each met with the same bank representative.
A study of the test results by the CFPB examined four key aspects of the loan inquiry process: encouragement or discouragement to apply for a loan; information provided about requested loan products and potential steering to other products; the overall quality of treatment or customer service; and the amount of business and credit information requested.
The study revealed statistically significant disparities in two key areas:
- Black participants received less encouragement to apply for a loan: Black test participants received significantly less encouragement to apply for loans. For example, lenders expressed interest in applications from 40% of white participants, but only 23% of Black participants. Additionally, Black participants consistently reported feeling less encouraged to apply for loans than their white counterparts. These differences were statistically significant, indicating a pattern of reduced encouragement for Black entrepreneurs.
- Lenders were more likely to suggest credit cards and home equity loans to Black business owners: While lenders discussed requested small business lending products with both Black and white participants, they were significantly more likely to suggest alternative credit products to Black participants, including personal credit cards and home equity loans. Non-requested or alternative credit products were discussed with 59% of Black participants, compared to 39% of white participants.
In 2010, Congress enacted legislation to require small business lenders to collect data about small business loans, similar to existing federal requirements for residential mortgages, subject to rules established by the CFPB. In 2019, the CFPB was sued for failing to institute these rules. Consistent with a court order to complete the rule, the CFPB finalized a rule last March to increase transparency in small business lending decisions.
This pilot study, though limited to two counties, illustrates why collecting comprehensive lending data is crucial for uncovering potential discrimination. Starting in July 2025, the largest lenders will be required to collect and report data on their lending decisions. The CFPB will review this lending data starting in July 2026 to ensure small business lending decisions comply with the law.
Lenders that engage in illegal discrimination can be subject to penalties and other sanctions under the Equal Credit Opportunity Act.
- Read today’s report, Matched-Pair Testing in Small Business Lending Markets.