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Inside the CFPB

July 1, 2013

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SCOTUS Invalidation of Cordray Could Cause Turmoil for Industry

Now that the U.S. Supreme Court has decided to take on the presidential recess appointment issue in Noel Canning v. National Labor Relations Board, the odds are high that Richard Cordray’s appointment will also be reviewed and perhaps declared unconstitutional, according to the consensus expectations of a number of industry representatives. And if that happens, it could be a real mess for the mortgage lending community, according to one top industry lobbyist. In Canning, the D.C. Circuit Court of Appeals... Read More

CFPB Details ‘Responsible Conduct’ in Enforcement Probes

The CFPB issued a bulletin last week that details the kind of “responsible conduct” by a regulated institution that the agency may “favorably consider in exercising its enforcement discretion.”The factors include the nature, extent and severity of the violations identified; the actual or potential harm from those violations; whether there is a history of past violations; and a party’s effectiveness in addressing violations. The bureau said the guidance was being issued to inform those subject to its enforcement... Read More

Bureau Extends Supervisory Authority to Risky Nonbank Acts

Last week, the CFPB came out with a final rule that establishes procedures to extend its supervision to certain nonbanks whose activities it has reasonable cause to determine pose risks to consumers. Nonbanks subject to the rule are companies that offer or provide consumer financial products or services but do not have a bank, thrift or credit union charter. The CFPB has the authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act to supervise, after following certain procedures, any nonbank... Read More

U.S. Chamber of Commerce Faults CFPB Data Collection

The U.S. Chamber of Commerce wrote CFPB Director Richard Cordray to take issue with the bureau’s increasing number of requests that companies provide huge quantities of data about individual consumers’ financial transactions on an ongoing, real-time basis. “We agree with you that data are important in determining whether there is a sound basis for regulation and how regulation should be structured, and recognize that Congress conferred specific authority on the bureau to collect data to inform the bureau’s use of its regulatory... Read More

Records Detail CFPB Data Collection Contract Outlays

The self-styled watchdog organization Judicial Watch said records obtained from the CFPB under the Freedom of Information Act reveal the bureau’s “warrantless collection of citizens’ personal financial data.” They also provide some nitty-gritty details about the agency’s data collection contract expenditures. The documents obtained by Judicial Watch include: An “indefinite delivery, indefinite quantity” contract with Experian worth up to $8.42 million to track daily consumer habits of select individuals “without... Read More

Bureau Compels Auto Lenders To Settle Over Military Marketing

Auto lender U.S. Bank and one of its nonbank partner companies, Dealers’ Financial Services, have agreed to pay about $6.5 million to service members the CFPB said were harmed by the allegedly deceptive marketing and lending practices associated with the companies’ Military Installment Loans and Educational Services (MILES) auto loans program. “The bureau has a special mission to protect service members,” said CFPB Director Richard Cordray. “The MILES program failed to properly disclose costs associated with repaying auto... Read More

Cordray Finds Indirect Auto Lenders Weak on Fair Lending Compliance

Responding to queries from Democratic members of the House Committee on Financial Services about the CFPB’s activities related to auto fair lending, bureau Director Richard Cordray said that indirect auto lenders have poor fair lending compliance programs, and that failure to monitor auto loans for fair lending compliance “has been a contributing factor in discrimination.” Back in May, several House Democrats asked how the CFPB would determine fair lending violations for auto loans. In his written response to the lawmakers, Cordray... Read More

CFPB Revises Proposed Policy Encouraging Trial Disclosures

Last month, the CFPB made what it characterized as a significant update to its proposed policy to encourage trial disclosure programs, part of its Project Catalyst, an initiative to support innovators in creating consumer‐friendly financial products and services. After obtaining and sifting through feedback with various stakeholders, the bureau made a number of revisions and clarifications, including: Iterative testing. Companies can conduct iterative testing during disclosure trials, making small adjustments throughout the trial... Read More

The CFPB Brain Drain is Set to Continue With Pending Departure

Politico reports that Richard Hackett, the bureau’s assistant director for installment and liquidity lending markets, is planning to leave the agency later this summer. Hackett works in the CFPB’s research, markets and regulations group, where he has been overseeing the agency’s work on installment loans, such as auto and student loans, as well as small dollar loans, including payday and auto title loans. “We know Rick well from his many years in private practice representing industry prior to his joining the CFPB and have great... Read More

CFPB, FDIC Team Up to Protect Seniors from Financial Exploitation

The CFPB and the Federal Deposit Insurance Corp. recently released “Money Smart for Older Adults,” an instructor‐led training module designed to help senior citizens and their caregivers protect themselves from financial exploitation and make informed financial decisions. “Older Americans lose an estimated $2.9 billion annually to financial exploitation, and it’s estimated that for each case that is reported, 43 others go unrecognized,” the bureau said. “With 50 million older people in this country, and 10,000 more reaching... Read More

Bureau Clarifies Mortgage Rules Mostly on L.O. Comp, Servicing

In response to a significant amount of public input – and private bellyaching – from the mortgage finance industry, the CFPB last week issued a number of proposed clarifications and revisions to several mortgage rulemakings finalized in January 2013, including changes to those having to do with loan originator compensation. The proposed changes would, among other things, clarify the definition of a loan originator. Under the CFPB’s January 2013 loan originator compensation final rule, persons classified as loan originators... Read More

Using a Complaint Management Process a Suggested Best Practice

If an organization hasn’t already done so, it would be well advised to institute a complaint management process. During the recent American Bankers Association’s regulatory compliance conference, Mary Clouthier, senior audit manager with the compliance and operational risk audit team at Wells Fargo, rattled off nearly a dozen components that should make up an effective complaint management process. She started with, surprisingly for some, an institutional definition of “complaint.” A complaint could be defined as “an oral or written... Read More

Bachus Bill Would Replace CFPB Director With Commission

Rep. Spencer Bachus, R-AL, chairman of the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law, recently introduced H.R. 2446, the “Responsible Consumer Financial Protection Regulations Act of 2013.” The legislation would replace the director of the CFPB with a five-person commission. The five members would be appointed by the president, with the approval of Congress, to serve staggered terms of five years each. The chair of the panel would serve as the CFPB’s principal executive officer... Read More

Worth Noting/Looking Ahead/Did You Know?

Legislation Would Pre-Empt CFPB Oversight of CUs in a Few Regards. On the last work day of June, House Financial Services Committee Vice Chairman Gary Miller, R-CA, introduced a credit union regulatory relief bill that would pre-empt CFPB oversight of credit unions in a few potentially significant regards. Miller’s “Regulatory Relief for Credit Unions Act of 2013” would, among other things, authorize the National Credit Union Administration to step in “where appropriate” to modify a CFPB rule affecting credit unions. It also would... Read More

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