This month we report developments from the Consumer Financial Protection Bureau, the Department of Justice, and the Federal Trade Commission. Although a couple of the items below are not directly auto-related, we thought they might be of interest to those in the auto sales, finance, or leasing business.
Complain, Complain, Complain. On January 28, the CFPB released its monthly complaint report, highlighting trends in the data it receives through its Consumer Complaint Database. The report includes company-specific data, including overall complaint volume and complaint volume by state, among other items. Each month, the report spotlights complaints about a particular issue and complaints from a particular location. This report focuses on financial services such as debt settlement, check cashing, money orders, and credit repair and highlights complaints from New York State consumers.
Another Shoe Drops. On February 2, the CFPB and the DOJ resolved alleged discrimination claims against Toyota Motor Credit Corporation. The agencies’ coordinated settlements with TMCC closely resembled earlier settlements with American Honda Finance Company and Fifth Third Bank. The CFPB and the DOJ alleged that TMCC’s policy of buying contracts from dealers having rates up to 250 basis points over TMCC’s wholesale buy rate resulted in African- American and Asian/Pacific Islander buyers paying rates higher, on average, than non-Hispanic white consumers, without regard to their creditworthiness. Under the orders, TMCC will pay up to $21.9 million in restitution to an unspecified number of consumers. The consent orders require TMCC to limit dealer discretion in setting rates to no more than 1.25% or 1% over the applicable buy rate, depending on the term. TMCC also has the option of moving to non-discretionary dealer compensation. CFPB Director Cordray announced that TMCC had committed not to raise its buy rates to cover “any additional nondiscretionary component of dealer compensation,” but this commitment does not appear in the CFPB’s order. For more information on these settlements, see Jean Noonan’s article on page 1.
Furnishing Information to Credit Bureaus? Be Careful! On February 3, the CFPB issued Compliance Bulletin 2016-01 reminding furnishers of their Fair Credit Reporting Act obligations to establish and implement reasonable written policies and procedures to ensure the accuracy and integrity of information they provide to consumer reporting agencies. For information on the CFPB’s bulletin, see Eric Johnson’s article in this issue.
The FTC Sends its Self-Reporting Cards to the CFPB. On February 10, the FTC announced that it provided its annual report to the CFPB on the FTC’s activities related to the enforcement of the Equal Credit Opportunity Act. On February 17, the FTC wrote to the CFPB summarizing its law enforcement activities in 2015 addressing unlawful debt collection practices as well as its education, research, and policy initiatives concerning debt collection. The information will help the CFPB prepare its annual report to Congress on the Fair Debt Collection Practices Act.
A “No-Action” Process of Dubious Value. On February 18, the CFPB released a final policy statement on so-called “no-action” letters that is intended to facilitate innovation and improve consumer access to financial products and services that promise substantial benefit to consumers. A no-action letter would state that, subject to stated limitations, the CFPB has no present intention to recommend initiation of an enforcement or supervisory action against the company with respect to a specific product or service. The CFPB would, at its discretion, issue a no-action letter to applicants looking to introduce innovative financial products or services that promise substantial benefit to consumers, but where there is substantial uncertainty whether or how specific provisions of statutes or regulations issued by the CFPB would be applied. If a no-action letter is issued, it will be posted on the CFPB’s website along with a summary of the company’s request. Several parts of the CFPB’s statement will make companies reluctant to use the process. No-action letters would be subject to modification or revocation at any time at the CFPB’s discretion. They may also be conditioned on particular undertakings by the applicant with respect to product or service usage and data sharing with the CFPB and would be non-binding on the CFPB, courts, and other actors who might challenge a recipient’s product or service.
Quo Vadis? In a February 25 press release, the CFPB announced that it had provided an overview of its goals for the next two years to its Consumer Advisory Board. The CFPB identified its nine priority goals as involving arbitration, consumer reporting, debt collection, “demand side consumer behavior,” household balance sheets, mortgages, “open-use” (essentially non-purchase- money) credit, small business lending, and student loans. The CFPB emphasized that these priority goals “do not capture all of the important work we are doing. In particular, we will continue to police all markets within our jurisdiction for compliance with consumer financial law and regulations.”