Consumer Financial Protection Bureau (CFPB)

Have you ever felt like suing a bank but did not want to spend the time and money in doing so? A complaint to CFPB is the closest you can get (for free).

I will use ‘bank’ as an exmaple but CFPB (and most of this post) is equally applicable to credit unions, credit reporting agencies, money transfer agencies, payday lenders, mortgage servicing firms, and debt collection agencies.

So you can reach out to CFPB for help if you have an issue for example with Citibank, Wells Fargo, Chase, Transunion, Equifax, or Western Union.

CFPB is your friend

CFPB is not an attorney acting on your behalf BUT some of the ‘effects’ are similar – you will get a response on time and many a times it will have the details of what you were looking for.

Often enough, the matter will be resolved in your favor if the bank realizes that they were at fault.

Going to CFPB does not stop you from taking any other action that you might be entitled to (for example – suing the bank).

Why does the CFPB model work?

It works in your favor because of the following reasons:

  1. Banks do not have a choice, they have to respond
  2. Banks have to be careful about what they respond – their response is going to a regulatory body
  3. It is no longer your job to find who the concerned person/ department is within the bank to answer your query
  4. It all happens online

Banks do not have a choice

It has happened to me multiple times that the bank just did not get back to me on my issue. They cannot do that with CFPB. With CFPB, they have to respond and that too in a timely manner.

Banks have to be careful

I have often enough encountered under-trained customer service professionals at banks who really do not know what they are talking about.For example, I was told that a second add-on card will be free while they later charged me a $14.99 fee for it.The chances that your CFPB complaint is answered by someone under-trained are very less. These complaints usually are answered by responsible knowledgeable people.

These people are aware that all the responses are being monitored by CFPB and too many issues can lead to regulatory action (disciplinary actions like fines).

Concerned person/ department

One of the most common problems incurred by customers in talking to customer service representatives (CSR) of the bank is “I am not from that department”. See if the below sounds familiar:Bobby goes and finds the 1-800 number online (or on the back of the credit card)
Bobby finds a quiet place to make that phone call
Bobby dials 1-800-000-0000 and goes through the entire menu, press 7 for accounts, press 3 for credit cards
Bobby enters his account number so that the process goes quickly
Bobby is asked for more identification information
Now Bobby listens to music
Bobby listens to more music
Your call is important to us, please wait for the next available agent
Some more music
An agent comes online and asks for more information to identify my account
Bobby explains the problem
CSR: Sure, I will help you today, may I please place you on a brief 2 to 3 min hold?
After 2-3 min, I cannot find any notes on your account
Bobby: I spoke to ‘Mike’ last week
CSR: I am sorry Sir but there is nothing on the account
Bobby: Ok, can you please tell me about ‘that charge’?
CSR: Sir you would have to talk to ‘the other’ department’. May I give you their direct number?
Bobby: Yes please
CSR: 1-800…..

So after 30 – 40 minutes, I have a new 1-800 number.

CFPB eliminates this problem, and rightly so. I mean, I am not making a sales call here that navigating through a bank’s hierarchy and internal organizational structure is my responsibility. If I have an issue with the bank, the bank should take ownership and get me an answer.

When you make a complaint at CFPB, you just provide basic information about the bank / product/ complaint. You leave the rest for the bank to figure out.

Online

All of the CFPB process happens online. You go to their website and make a complaint online. You instantly get an email confirmation. Usually within 5 minutes, you will also see another email that says “your complaint has been forwarded to the company for a response”.

The company responds within a few days (usually somewhere between one and 2 weeks). You can read the response online. Most will also send you the same response by paper mail.

At this point, you can either do nothing or dispute the response. If you dispute the response, CFPB and the bank both know that you disputed. The bank is not liable to respond again but CFPB makes a note of it and acts if there are too many disputes of a similar nature.

Personal experience

The screenshot below shows 10 of the complaints I have filed so far. You can see that I  disputed a couple of the company responses. For a couple (the top 2), I am still within the 60 day period to dispute the company response. For the rest, the status is ‘response not disputed’ – this means company provided information that was satisfactory.

In some cases, I was able to get a faster and more accurate response through CFPB rather than talking to customer service (of the bank).

CFPB – real example

I was helping a friend obtain a copy of her credit report. Here is a screenshot of the complaint from the CFPB website:

Here is the screenshot of the company’s response from the CFPB website:

To summarize: this friend of mine was trying to get a copy of her credit report for more than 6 months from Equifax. She was unable to do it online, she requested it by mail, they asked for additional documentation, and then silence for several weeks. So on and so forth.

When she filed a complaint with CFPB – she had a copy of her credit report in her hand within 10 days. It frankly can’t get better than this.

Helpful tip

Keep emotions away – Of course things have been wrong to a certain extent therefore you are at the CFPB site but keep the emotions away. I have learned it by experience.

Look at the following two descriptions of the same situation, tell me which one is better?

  1. They charged me $50 for xyz – this is unfair because xyz. I expect the fee to be refunded
  2. They charged me $50 for xyz. Other banks in the industry do not charge this fee. It looks like they do not care about customers. I am thinking about taking my business to another bank. When I called up the customer service, the bank representative said there is not much she can do. I asked her if I can speak with a supervisor, she took down my contact details and said the supervisor will call me back but the supervisor never did. The bank has very poor customer service. I am fed up with the bank.

The first one is better – both the descriptions will likely lead to the same end result, but the first one is crisp and precise. You are being very clear in what happened and the remedy you are requesting. It does not leave any room for confusion/ misinterpretation.

Rent vs Buy a house

12 factors that go in the decision Rent vs Buy a house – you can also download the Excel with a real example, change the numbers per your situation.

36 million people move every year, assuming these 36 million people represent 20 million households, 20 million households face the following question every year: Rent or Buy?

In most cases, people say ‘Let us start by renting and then see if we like the place enough to buy’. Although that is a very valid way to think about things, read on to find a holistic scientific method of determining what makes more sense financially?

12 Facts to consider

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Compare 30 year vs 15 year mortgage

More than 5 million homes get sold in the country each year. Assuming 80% of them are financed through a mortgage – 4 million households face the question ’30 year vs 15 year mortgage’ every year (and in my opinion 90% – 3.6 Million – do not understand all the differences):

How to compare 30 year vs 15 year mortgage?

 First off – there is no straight forward answer to the decision between 30 year mortgage vs 15 year mortgage, here is a screenshot of an Excel spreadsheet that I developed to make my decision:

30 year vs 15 year mortgage

30 year vs 15 year mortgage


What are the factors that go into that decision?

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What is a credit score and why is it important?

What is a credit score, how is it calculated, and why it is (or is not) important?

What is a credit score?

Let us take a personal example in order to understand what is a credit score. We do not know each other. You have extra money that you are willing to lend in return of interest expectations. Apart from asking me details like my salary, my other debt obligations, my employment history; you will want to know have I taken loans from others before, and if yes then have I paid them back on the agreed terms and conditions (payment history).

In addition, you would want to know if I borrowed as much money as they were willing to give me, or my ‘needs’ were less than what I could have borrowed (utilization).

In addition, you would like to know how long have I been borrowing from others (age of credit history), you might want to know in total how many times have I borrowed and how many of the loans are still active (total accounts), you might want to know how many loans did I take recently.

And finally, you would like to know how many loans did I ask for (credit inquiries) and if I have any public records that might be of relevance (civil litigation where I was asked to pay damages, or previous loans that went into collections).

This is exactly the way anyone lending money to anyone will think, and the banks are no different. Banks are professional money lenders and a credit report lists all of the facts that we listed above (saying you might want to know).

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Playing the game of Credit

Rich and poor both use credit. Poor need credit while the rich have mastered the game of credit. For them, credit means leverage, tax benefits, and liability insurance.

A few days back, I had posted ‘Why did I refinance my car loans today‘, I had someone ask me “Oh, so you went into debt with 2 cars” -> That is what prompted me to write this post.

What is Credit?

Let us first define what do we mean by Credit -> Credit is any form of borrowing. The most common forms of Credit include credit cards, student loans, auto loans, and mortgage.

Why rich use credit

Everyone uses Credit – rich as well as poor

Everyone uses Credit, the poor as well as the rich. At first it sounds ironical – why would someone rich borrow money (use credit/ go under debt). Well, read on, and by the end of this post you will know why?

The image conceptually represents what I am trying to say – poor use a large proportion of credit lines available to them. The middle class tries to minimize the use of their credit lines, and then the rich again try to use as much credit as possible.

This chart is more conceptual, we will make a couple of minor tweaks to it as we develop this post today.

Why do Poor use Credit

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Why did I refinance my car loans today

I will explain my entire thought process behind the decision to refinance my cars. I will start by telling you the reasons why I refinanced and everything that was going on in my mind while I was talking to the credit union for an hour.

Background

I bought both the cars  (a Mercedes and a Ford) in 2013. I financed both of them with the manufacturer’s preferred financial institutions because both of them gave me an incentive via a discount on the purchase price.

I had very limited credit history (just one credit card and nothing else, that too was just about 2 years old). The rates that I received were upwards of 9% for one car and upwards of 6% on the other.

Soon afterwards, I refinanced both the car loans with my local credit union. With the exact same credit history (limited), I was able to get an interest rate of 3.89%. They dropped it a quarter point further (0.25% or 25 basis points) because I agreed to take a credit card (this was my second credit card ever).

I made all the payments on time for these 2.5 years. As expected my credit score improved tremendously.

Why did I decide to refinance today

  1. Interest rate of 3.64% was too high. I knew I will get the best rate (or very close) available given my very good credit history now.
  2. I wanted cash out of my ‘equity in the car’ – more on that later in this post
  3. I do not foresee any large purchase on credit coming up soon (like a mortgage), so a little temporary drop in the credit score (by an additional inquiry today) does not bother me.

Here is how the process went

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