CFPB Enforcement

  • Debt Relief: On August 20th , the CFPB filed suit against debt relief company Morgan Drexen Integrated Systems for alleged violations of the Telemarketing Sales Rule and the Dodd-Frank Act by misleading more than 22,000 consumers since October 2010 about its ability to eliminate debt, by illegally collecting upfront fees and by utilizing a deceptive contract.  Morgan Drexen filed suit against the CFPB in July 2013 for allegedly exceeding the agency’s constitutional authority by requesting sensitive financial information from law firm clients and by usurping states’ authority to license and regulate lawyers.

CFPB Supervision

  • Compliance: On August 21 st , the CFPB released “Supervisory Highlights” based on the CFPB’s supervisory activity between November 2012 and June 2013.
    • The CFPB emphasized the need for covered entities to have compliance management systems (CMS). The CFPB report noted that nonbanks are more likely than banks to lack a robust CMS. 
    • Formal enforcement orders against U.S. Bank and Dealers’ Financial Services required an end to deceptive marketing and lending practices and required them to pay $6.5m in restitution.
    • According to the CFPB, its supervisory activities have resulted in remediation to approximately 10,000 consumers, in addition to restitution under the enforcement orders. 
    • The report also covered topics including:
      • examinations;
      • mortgages;
      • adverse action notices;
      • Equal Credit Opportunity Act baseline review modules;
      • auto finance;
      • CFPB reorganization of its supervisory team;
      • examiner testing and staffing; and
      • the CFPB’s risk-based approach to examinations.

CFPB Operations

  • Cordray Commentary: On August 19th, in an interview with American Banker, CFPB Director Richard Cordray spoke about the CFPB’s successes and challenges.
    • He cited successes such as “the changes that we are effecting in the mortgage market”; the consumer complaint function, which has received over 200,000 complaints; and enforcement actions, particularly targeting deceptive marketing. 
    • He cited challenges such as “dead ends,” which “include debt collection; loan servicing, particularly mortgage servicing and potentially student loan servicing; and credit reporting—all instances where the relationship is between two businesses and the customer is almost collateral damage in it.” 
    • Concerning the CFPB’s new mortgage rules (previously reported), he stated that the rules should not be a concern for those “doing sound mortgages where [lenders] underwrite carefully.” 
    • He characterized his Senate confirmation as a “morale boost” within the CFPB. 
    • In a separate interview, with Politico, he stated that:
      • the CFPB is not considering a delay for the new mortgage rules expected to go into effect in January 2014;
      • the CFPB is currently writing a rule on prepaid credit cards; and
      • he will announce “something…fairly soon” on appointing a Deputy Director.
  • Debt Buyers: On August 13 th , CFPB Managing Regulatory Counsel Tom Pahl was interviewed by Debt Buyers Association President Rich Munroe at the 2013 DBA International Executive Summit.  Among the comments made during this session, Pahl stated that:
    • the CFPB recognizes value in consumers communicating with debt collectors;
    • the CFPB attempts not to overlap enforcement with other government entities and charge the same entity with the same violation; and
    • new CFPB rules might unintentionally impose greater challenges on debt buyers in the collection process.
  • Personnel: On August 14 th , Neil Peretz, who helped establish the CFPB’s Office of Enforcement, announced his new role as general counsel at BillFloat, a financial services technology company that assists consumers in accessing credit.  Peretz stated that his CFPB service as an enforcement attorney investigating consumer claims has prepared him well for his new position.  “As an advisor to [the CFPB] I’d get the whole grab bag of questions.”

CFPB Litigation

  • Amicus Program: On August 10 th , CFPB Deputy General Counsel To-Quyen Truong delivered remarks at a program entitled “The CFPB’s Amicus Program and Trends in Consumer Litigation” during the American Bar Association’s annual meeting in San Francisco.  Truong addressed concerns that the CFPB is “making law” through its amicus program.  The CFPB has filed 11 briefs in cases, intending to provide “fulsome information and analysis” to the court.  Addressing a related concern that the CFPB does not provide a notice and comment period prior to submitting amicus briefs, Truong stated that the amicus process does not lend itself to such opportunities.  Truong further stated that, because the CFPB is simply providing courts with its established opinion, such opportunities are not necessary.
  • Equal Access to Justice Act: Today, the CFPB published a notice in the Federal Register (78 FR 52513) about the CFPB’s proposed information collection subject to the Equal Access to Justice Act. The Act allows parties who have prevailed against the CFPB in certain administrative proceedings to payment of associated fees and expenses.  The CFPB will collect information demonstrating that the party is a prevailing party and is eligible to receive an award pursuant to the Act.  Public comments are being accepted through October 22, 2013.

CFPB & Dodd-Frank Act Implementation

  • White House Meeting: On August 19 th , President Obama hosted CFPB Director Richard Cordray and other financial regulators at the White House to convey his “sense of urgency” about implementing required regulations under the Dodd-Frank Act.  White House Deputy Press Secretary Josh Earnest stated, “The president wants to encourage them to capitalize on the momentum they’ve already built up to put this regulatory regime in place.”  The group also discussed interagency coordination and challenges posed by the current federal budget situation. 

CFPB & Servicemembers

  • Outreach: On August 21 st , Holly Petraeus, CFPB Assistant Director for Servicemember Affairs, spoke to Air Force Academy Airmen to solicit servicemember financial concerns and to offer some advice, including to encourage servicemembers to request reductions in their loan interest rates to 6% while on active duty and to contact the CFPB with any concerns.  Petraeus stated, “Our enforcement division looks at all complaints and it may help us build a case against someone who is making a practice of ripping off servicemembers.” 
  • Recommendations: On August 16 th , Petraeus published a blog post on the CFPB website on the preparations that servicemembers can begin taking this summer to avoid seasonal debt during the winter holidays.  Her recommendations include:
    • set reasonable expectations;
    • plan, budget, and save;
    • keep the big picture in mind;
    • look for ways to save;
    • watch out for costly surprises; and
    • avoid holiday debt traps.

CFPB Commentary

  • Predatory Lending: On August 16 th , Executive Director of the Native American Financial Services Association (NAFSA) Barry Brandon published an open letter distinguishing NAFSA from the recent commentary about the “predatory” lending industry.  Brandon criticizes the CFPB and other federal agencies, accusing them of “preying on consumers who desperately need access to financial services [in order] to score cheaply-gained political points.”  Brandon cites NAFSA’s online loans, offered for nominal fees rather than an APR, as supporting underserved communities with honesty and transparency.