The Consumer Financial Protection Bureau (CFPB), Recent Developments: November 4, 2013 – November 8, 2013
CFPB Responds to Senators’ Letter
On November 4th, the CFPB responded to a letter from a bipartisan group of 22 Senators that asked the CFPB to detail its policy regarding fair lending violations in indirect auto financing programs.1 In justifying the CFPB’s issuance of Bulletin 2013-02 and its goal of limiting dealer finance charge participation,2 CFPB Director Richard Cordray stated that “[h]istorically, the failure to properly or consistently monitor such policies and practices for compliance with anti-discrimination laws has been a contributing factor in discrimination…in auto lending…This historical experience has been documented by scholars and is reflected in relevant case law and Department of Justice enforcement actions.”
In responding to the Senators’ request for an explanation of the CFPB’s statistical methodology for determining whether there is a disparate impact in an auto lender’s portfolio indicating that the lender has engaged in illegal discrimination, Cordray discussed using proxies based on public records, such as a database of names from the Social Security Administration and demographic data from the U.S. Census Bureau, to detect disparate impact patterns.
CFPB to Hold Auto Finance Forum
The CFPB is holding a forum on auto finance on Thursday, November 14th at 8:45 a.m. at its headquarters in Washington, D.C. The forum will include remarks by Director Richard Cordray and a discussion with consumer groups, industry representatives, and members of the public. A live stream of the forum will be available on the CFPB’s blog. In the past, the CFPB has used such events to announce major developments. We note that the CFPB’s proposed larger participant rule covering the auto finance industry is expected this quarter.
CFPB to Hold Mortgage Field Hearing
The CFPB will also be holding a field hearing on its “Know Before You Owe: Mortgages” program on Wednesday, November 20th at 11 a.m. in Boston. Director Cordray will make remarks at the event, which will also include testimony from consumer groups, industry representatives, and members of the public. Similar to the upcoming auto finance forum, it is widely suspected that the CFPB will announce the issuance of the RESPA/TILA integrated disclosures final rule at this event.
CFPB Issues Semi-Annual Report
On November 5th, the CFPB issued its fourth Semi-Annual Report to the President and Congress.3 The Report generally discusses CFPB activity over the period April 1, 2013 to September 30, 2013. Among other things, the Report provides a summary of the Bureau’s regulatory, supervisory, and enforcement activity over that period. For example, the Report summarizes the 13 enforcement actions the CFPB was a party to in the preceding year. The Report also provides an overview of the consumer complaints it has received for various financial products, which may indicate areas of focus for the CFPB going forward. The Report does provide some hints about what activity might be expected from the CFPB in the near future. According to the Report, the CFPB is working toward a rulemaking on prepaid cards in the “upcoming period.” The CFPB is also accelerating work to develop a proposal implementing amendments to the Home Mortgage Disclosure Act, which would require creditors to collect and report certain additional lending data. Director Cordrary delivered testimony on the Report before the Senate Banking Committee on November 12th.
CFPB Announces Addition of Debt Collection Complaints to Its Public Complaint Database
On November 6th, the CFPB announced that it was adding the more than 5,000 debt collection complaints it has received over the past few months to its public Consumer Complaint Database.4 The CFPB has stated that it uses consumer complaints to focus its enforcement, supervisory, and rulemaking activities. This is particularly relevant as the CFPB on November 6th also issued its Advance Notice of Proposed Rulemaking regarding new rules for the debt collection industry.5
CFPB Adds Payday Loan Complaints to List of Consumer Complaints it Accepts
The CFPB announced on November 6th that it is now accepting complaints from borrowers regarding payday loans. The CFPB is accepting these complaints in addition to complaints about other consumer financial products it already accepts, including: credit cards, mortgages, bank accounts and services, private student loans, consumer loans, credit reporting, debt collection, and money transfers. As with all other types of complaints, the CFPB expects companies to resolve all but the most complicated complaints within 60 days. Consumers can submit payday loan complaints to the Bureau about:
Unexpected fees or interest;
Unauthorized or incorrect charges to their bank account;
Payments not being credited to their loan;
Problems contacting the lender;
Receiving a loan they did not apply for; and
Not receiving money after they applied for a loan.
CFPB Enters Proposed Consent Order with Mortgage Company
On November 7th, the CFPB announced that it had entered a proposed consent order in its enforcement action against Castle & Cooke Mortgage, LLC, a mortgage company.6 The CFPB alleged in its original complaint that Castle & Cooke violated the Federal Reserve Board’s Loan Originator Compensation Rule by paying its loan officers bonuses that varied based on the interest rate they offered to borrowers.7 The CFPB is asking a federal district court to approve the consent order, which includes a $13 million penalty consisting of $9 million in restitution for consumers and $4 million in civil money penalties against Castle & Cooke and two of its officers.
CFPB Launches Housing Counselor Tool
On November 8th, the CFPB launched a new tool to help consumers find local housing counseling agencies.8 In conjunction with the launch of the new tool, the CFPB also published guidance for lenders to help lenders comply with requirements under the CFPB’s 2013 final rule on the Home Ownership and Equity Protection Act. The final rule requires that lenders provide consumers with a list of homeownership counseling organizations in certain circumstances.
Lenders may fulfill this requirement by using CFPB-developed housing counseling lists (available through the new tool), or by generating their own lists using the same HUD data that the CFPB uses to build its lists. The CFPB’s interpretive rule explains how lenders can build their own lists.9 According to its press release, “[t]he Bureau recognizes that lenders may be unable to provide the lists in time for the rule’s January 10, 2014 effective date. In those situations, today’s bulletin suggests that lenders consider directing borrowers to the CFPB’s new tool. If lenders take these steps in good faith while building their systems or are working with vendors to build systems, the CFPB would not raise supervisory or enforcement concerns.” 10
CFPB Trial Disclosure Program Now Effective
On October 29th, the CFPB’s Notice of Policy regarding its Trial Disclosure Program was published in the Federal Register, thus making the Policy effective.11 Section 1032(e) of the Dodd-Frank Act permits consumer financial service providers to “conduct a trial program that is limited in time and scope, subject to specified standards and procedures, for the purpose of providing trial disclosures to consumers.” Also pursuant to Section 1032(e), the CFPB is permitted to “establish a limited period during which a trial disclosure program shall be deemed to be in compliance with, or exempted from, a requirement of a rule or an enumerated consumer law.” The Policy fulfills this statutory provision.
The goal of the Policy is to encourage “banks, thrifts, credit unions, and other financial services companies to innovate by proposing and conducting [trial disclosure programs].” The Policy contains four sections:
Section A describes which proposed programs will be considered eligible for a temporary waiver;
Section B lists factors the CFPB will consider in deciding which eligible programs to approve for such a waiver;
Section C describes the CFPB’s procedures for issuing waivers; and
Section D describes how the CFPB will disclose information about these programs.
2 CFPB Bulletin 2013-02 is available here.
3 The Semi-Annual Report is available here.
4 The Consumer Complaint Database is available here.
5 The Advance Notice of Proposed Rulemaking is available here. Comments are due February 10, 2014.
6 A copy of the proposed consent order is available here.
7 A copy of the complaint is available here.
8 The new tool is available here.
9 The CFPB’s Interpretive Rule is available here.
10 CFPB Bulletin 2013-13 is available here.
11 The Notice of Policy is available here.