The Consumer Financial Protection Bureau, Week in Review: February 11-15, 2013
The CFPB was in full force this past week, rolling out a new advisory bulletin as well as a plan of action for the implementation of the new mortgage rules. At the same time the battle over the CFPB’s structure and the renomination of Director Richard Cordray continued. And the U.S. Chamber of Commerce had a few things to say to the Bureau.
“The effects of this continued uncertainty and inefficiency is not simply to impose excessive, unjustified costs on legitimate businesses seeking to comply with the law — it directly constrains the lending, especially lending to small businesses that our economy desperately needs in order to grow and create jobs for the millions of Americans who remain unemployed.”
- From the February 14, 2013, letter to CFPB Director, Richard Cordray, from the U.S. Chamber of Commerce, Center for Capital Markets Competitiveness.
“Attempts to force relitigation of issues related to CFPB’s funding and organization by filibustering Director Cordray’s renomination (or that of any other nominee for CFPB Director) are irresponsible and inconsistent with our democratic values.”
- From the February 14, 2013, letter to President Obama, signed by the 52 Senate Democrats and two Independents.
February 11, 2013
Bulletin Release: CFPB to Closely Monitor Servicing Transfers
The CFPB issued a bulletin advising mortgage servicers of their ongoing legal obligations to consumers in the transfer of the servicing of their loans. The bulletin highlights issues around processing loans that are transferred, and in particular, maintenance and retention of paperwork including any loss mitigation plans for those loans. In the CFPB’s press release Director Cordray advised that, “[This guidance directs all mortgage servicers, both banks and nonbanks, to follow the laws protecting borrowers from the risks of such transfers, and makes clear that we will be monitoring them for compliance.”1
Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) announced the Senate Banking Committee’s Subcommittee assignments. The following Senators will serve on the Financial Institutions and Consumer Protection Subcommittee:
Senator Sherrod Brown (D-OH), Chairman, Senator Patrick J. Toomey (R-PA), Ranking Republican Member, Senator Jack Reed (D-RI), Senator Charles Schumer (D-NY), Senator Jon Tester, (D-MT), Senator Jeff Merkley (D-OR), Senator Kay Hagan (D-NC), Senator Elizabeth Warren (D-MA), Senator Richard Shelby (R-AL), Senator David Vitter (R-LA), Senator Mike Johanns (R-NE), Senator Jerry Moran (R-KS), Senator Dean Heller (R-NV), and Senator Bob Corker (R-TN).
February 12, 2013
CFPB enters into MOU with the Navajo Nation Department of Justice
In a blog post by Kent Markus, Assistant Director of Enforcement, the CFPB announced that it had entered into a Memorandum of Understanding (MOU) with the Navajo Nation Department of Justice -- the first of its kind between the CFPB and a tribal government.2
Markus noted that the intent of the MOU includes “mutual consumer-protection” goals, and provides for the sharing of law enforcement related information. The MOU further details how the CFPB will respond to third party requests for tribal information. In particular, Markus’ blog post highlights that the information shared will be protected from disclosure.
February 13, 2013
Roll-out of the CFPB’s Mortgage Rule Implementation Plan
In the first two weeks of 2013 the CFPB released the much anticipated mortgage rules under Title XIV of the Dodd-Frank Wall Street Reform and Consumer Protection Act impacting the mortgage market. These included rules relating to ability to repay, mortgage servicing, high-cost mortgages, loan originator compensation and escrows on higher-priced mortgage loans. At the time of release of these rules, CFPB Director Cordray alluded to an intent to release implementation guides to help servicers understand the “supervisory expectations.”3 On February 13, 2013, the CFPB rolled-out a preview of its plan. The CFPB laid out five specific actions it plans to engage in over the next year to help the industry understand its “supervisory expectations” including:4
- Coordination with other federal regulators who also conduct examinations of mortgage companies to ensure they share the CFPB’s “understanding” of the new rules.
- Publication of plain-language guides in both written and video form, which the CFPB believes will be particularly helpful to smaller companies with limited staff — to be available this spring.
- Publication of updates to the official interpretations to provide guidance, with a focus on some of the more “important questions raised by industry, consumer groups, or other agencies.”
- Publication of readiness guides to assist mortgage originators and servicers prepare for compliance with the new rules. It is also noted that new in-depth exam procedures will be published later this year by the Federal Financial Institutions Examination Council — these procedures can be used for “self-assessments” and “internal reviews” of readiness.
- Education of consumers concerning their new protections.5
FTC Announces its Annual FDCPA Report to the CFPB
The Federal Trade Commission (FTC) issued a statement in relation to its report to the CFPB regarding its own enforcement of the Fair Debt Collection Practices Act (FDCPA). The report is provided to assist the CFPB in its annual report to Congress. The statement noted that the “FTC remains vigilant in taking action against debt collectors who use illegal methods when collecting from consumers.”6
The FTC highlighted four actions that it has brought in the last year against operations that allegedly used deceptive or abusive tactics, and three actions against allegedly “phantom debt” collectors. Also noted in its statement was its joint action with the CFPB in the filing of an amicus brief with the U.S. Supreme Court which contended that a consumer who files an action in good-faith against a debt collector for alleged violations of the FDCPA, should not be required to pay a prevailing defendant’s costs of litigation.7
Senator Warren Supports Cordray Renomination
Commentators’ have been watching Senator Elizabeth Warren, (D-MA) once a possible nominee for director of the CFPB, and one of the newest members of the Senate Banking Committee and its subcommittee on Financial Institutions and Consumer Protection to see if she will be instrumental in striking a deal concerning the latest CFPB Director nomination battle. At one of the first hearings of the Senate Banking Committee for the 113th Congress, Senator Warren made her continuing support of Director Cordray clear. “The President has nominated him. He appointed him during recess and has now reappointed him. Rich has proven what he can do. This agency has proven what it can do. The agency has been signed into law…,” explained Senator Warren.8
February 14, 2013
U.S. Chamber of Commerce, Center for Capital Markets Competitiveness
In follow-up to a letter first sent on July 2, 2012, the U.S. Chamber of Commerce, Center for Capital Markets Competitiveness, (Chamber) sent a strongly worded letter to the CFPB, noting that “no action has been taken on most of the suggestions, including all those that would significantly eliminate uncertainty and lack of clarity that continues to close the Bureau’s activity…”9
The letter from the Chamber laid out several additional steps that it believed the CFPB could take to “eliminate inefficiency” and “unjustified burdens” in relation to exams and enforcement. The additional steps, laid out in detail in the letter, included:
- Improvement of training of supervision staff
- The application of consistent approaches to examinations
- Establishment of an end point in the examination process with a uniform closing letter process
- Compliance with the Ombudsman’s Office’s recommendation and clarify the role of enforcement attorneys in the examination process
- Avoidance of the misuse of the supervision process to demand huge amounts of data
- Not using the supervision process to engage in non-public interpretations of statutory requirements, or provide guidance regarding its view of statutory requirements
- Reconsideration of its policy regarding routinely broad investigatory demands for information
Support for Cordray’s Renomination
Fifty-four U.S. Senators, including the fifty-two Democrats and two Independents, signed a letter, led by Senate Banking Committee Chairman Tim Johnson (D - SD), to President Obama expressing their strong support for the renomination of Richard Cordray as Director of the CFPB.10 The letter included a pledge to do “all we can to secure his confirmation.” The letter went on to make clear that the Senators will oppose any efforts to weaken the CFPB through structural changes such as recent legislation11 filed by Senator Jerry Moran (R-KS) seeking changes to the CFPB including:
- Replace the single Director with a board to oversee the Bureau,
- Subject the Bureau to the Congressional appropriations process, and
- Establish a safety-and-soundness check for the prudential financial regulators who oversee the safety and soundness of financial institutions.
Director Richard Cordray Testifies
On February 14, 2013, Director Cordray appeared before the Senate Committee on Banking, Housing and Urban Affairs to deliver testimony related to the CFPB’s efforts in implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act. His testimony primarily focused on rule implementation, including the recent ability to repay, loan origination and mortgage servicing rules. Director Cordray also highlighted the CFPB’s work related to supervision of banks and non-banks, enforcement in the credit card space, and its consumer response and education efforts.
More NLRB Fall-out
It has been reported that eight more states, including Texas, Alabama, Georgia, Kansas, Montana, Nebraska, Ohio and West Virginia have moved to join the action, State National Bank of Big Spring, et. al. v. Timothy F. Geithner, et. al., Case No. 1:12-cv-010320ESH, pending in the U.S. District Court for the District of Columbia. The action challenges, among other things, the constitutionality of the appointment of CFPB Director Cordray. 12
1 See CFPB Press Release, Consumer Financial Protection Bureau Warns Mortgage Servicers About Legal Protections for Consumers When Transferring Loans, dated 2/11/13.
3 See Prepared Remarks of Richard Cordray, Director of the Consumer Financial Protection Bureau, Mortgage Servicing Field Hearing, Atlanta, GA, January 17, 2013.
4 See CFPB Press Release, Consumer Financial Protection Bureau Lays Out Implementation Plan for New Mortgage Rules, Bureau to Publish Plain-Language Guides, dated February 13, 2013.
6 See quote from Charles Harwood, Acting Director of the FTC’s Bureau of Consumer Protection, in the FTC’s Press Release, FTC Continues Vigorous Enforcement of Fair Debt Collection Practices Act, dated February 13, 2013. Report can be found at http://www.ftc.gov/os/2013/02/130213cfpbreport.pdf.
8 See Warren, Senate Dems Give No Ground on CFPB Structure, American Banker, by. Borak, D., dated 2/13/13.
11 See S.205, filed on February 1, 2013.
12 See Texas, 7 Other States Join Challenge to Dodd-Frank, Law360, by Overley, J., dated 2/13/13.