Attorneys General Recommend CFPB Issue Strong Debt Collection Rules

It was reported last week that 30 Attorneys General have written a letter to CFPB Director Richard Cordray concerning the CFPB’s Advanced Notice of Proposed Rulemaking concerning debt collection practices issued in November 2013.¹  In the letter, the Attorneys General stated that they “strongly believe that the CFPB’s rulemaking should cover as much of the debt collection industry as possible and work in concert with state law. The rules should act as a floor, not a ceiling, to state action.” Among other issues raised in the letter, the Attorneys General urged that the CFPB address the following issues in its final rule:

• Co-enforcement authority for states

• Apply the new rules to the original creditors as well as third party debt collectors

• Require detailed original account information to transfer with debts when they are bought and sold

• Require debt collectors to have evidence of ownership of the debt before initiating collection or litigation activity

• Specific rules to regulate the collection of time-barred debt

Upcoming Field Hearing on Payday Loans

The CFPB announced last week that it will be holding a field hearing on payday loans in Nashville, Tennessee on Tuesday, March 25, 2014 at 12 P.M. EDT. The event will feature remarks from CFPB Director Richard Cordray, as well as testimony from consumer groups, industry representatives, and members of the public. In the past, the CFPB has used its field hearings as a forum to announce new rule proposals.

CFPB Now Looking at “Zombie” Foreclosures

At a Federal Reserve Bank of Cleveland conference on March 11^th, the CFPB’s servicing and secondary markets program manager, Laurie Maggiano, stated that “[t]he CFPB is beginning to look very closely at abandoned properties and zombie foreclosures.” So-called “zombie” foreclosures are the result of creditors initiating a foreclosure, but not completing the process and not alerting the borrower that the borrower is still responsible for what is often a vacant property. Maggiano said that “[t]here is direct borrower harm if a borrower believes a foreclosure on their property has been conducted and they are no longer responsible, and months or years later find out that they are, that there was never a foreclosure and they have large financial responsibilities that they never knew about.” Maggiano said the requirement under the Truth in Lending Act that servicers send monthly periodic statements to borrowers who are still liable for delinquent mortgage debt is “pushing servicers to release the borrower from liability for the debt…[I]t’s not a technical requirement in our regulations…but we consider that to be a responsible communication to borrowers.” Maggiano added that the CFPB is considering various solutions to address the issue, such as writing a rule defining “abandonment” and developing a national registry of “zombie” properties.

CFPB CID Activity

Last week the CFPB posted on its website a new petition to modify or set aside a Civil Investigative Demand (CID).²  The company that had received the CID and filed the petition in response operates as a lead generator in the payday lending industry. The CFPB’s CID, which may be part of a larger probe of similar companies, is seeking information regarding whether such firms “have engaged or are engaging in unlawful acts or practices in connection with the marketing, selling or collection of payday loans.”

Also last week, a short-term installment loan lender disclosed in a regulatory filing that it has received a CID from the CFPB.³  According to the company’s filing, the CID states that “[t]he purpose of this investigation is to determine whether finance companies or other unnamed persons have been or are engaging in unlawful acts or practices in connection with the marketing, offering, or extension of credit in violation of Sections 1031 and 1036 of the Consumer Financial Protection Act, 12 U.S.C. §§ 5531, 5536, the Truth in Lending Act, 15 U.S.C. §§ 1601, et seq., Regulation Z, 12 C.F.R. pt. 1026, or any other Federal consumer financial law.”

Revised Consumer Publications Now Available

The CFPB announced last week that it is making available for purchase three revised consumer publications, including an information brochure and two booklets required under the Real Estate Settlement Procedures Act and the Truth in Lending Act:

• What You Should Know About Home Equity Lines of Credit Brochure 

• Consumer Handbook on Adjustable-Rate Mortgages (CHARM) Booklet 

• Shopping for Your Home Loan: Settlement Cost Booklet

The three publications were originally revised and issued in January 2014 and can be accessed for free via the CFPB’s website, here: http://www.consumerfinance.gov/learnmore/.

CFPB Makes Three New Senior Hires

On March 12^th, the CFPB announced that three people have been named to senior positions at the CFPB. The positions filled were: Assistant Director for the Office of Research; Assistant Director for the Office of Financial Empowerment; and Assistant Director for the Office of Installment and Liquidity Lending Markets. The CFPB provided the following brief biographies of the new hires:

• Christopher D. Carroll, Assistant Director and Chief Economist for the Office of Research in the CFPB’s Research, Markets, and Regulations Division. Dr. Carroll is a professor of economics at Johns Hopkins University, from which he has taken a leave of absence while serving at the CFPB. He also is a member of the Board of Directors of the National Bureau of Economic Research, and the Co-Chair of the NBER Research Group on Consumption. Dr. Carroll has served as a senior economist for the Council of Economic Advisors on two separate occasions, and as an economist for the Board of Governors of the Federal Reserve System. Dr. Carroll received a B.A. in Economics from Harvard University, and his Ph.D. from the Massachusetts Institute of Technology.

• Daniel Dodd-Ramirez, Assistant Director of Financial Empowerment in the CFPB’s Consumer Education and Engagement Division. Mr. Dodd-Ramirez previously served as the executive director of Step Up Savannah Inc. in Savannah, Ga., from 2005 to 2014. Prior to Step Up, Mr. Dodd-Ramirez served as education project director and community organizer for People Acting for Community Together (PACT) in Miami, Florida. From 1998 to 2000, Mr. Dodd-Ramirez was the human resources director for Families First, a social services agency in southern Vermont. He received a B.A. in Hispanic Studies from the University of Southern Maine and his M.A. in International/Intercultural Training from the School for International Training in southern Vermont.

• Jeffrey Langer, Assistant Director of Installment and Liquidity Lending Markets in the CFPB’s Research, Markets, and Regulations Division. Mr. Langer most recently served as senior counsel at Macy’s, Inc. in Mason, Ohio. He also has served as a partner in several law firms, including Jones Day and Dreher Langer & Tomkies. He is a founding fellow and treasurer of the American College of Consumer Financial Services Lawyers and is a former chair of the Consumer Financial Services Committee of the American Bar Association Business Law Section. Mr. Langer received a B.A. from the University of Illinois at Urbana-Champaign and his J.D. from the Northwestern University School of Law.