When I started practicing consumer finance law, a consumer finance company could design a compliance program based on three principles: (1) do what the state regulator says, (2) avoid trial lawyers, and (3) keep an eye on newFederal Trade Commission and Federal Reserve Board regulations from time to time. Companies never worried about federal examiners knocking on the door or initiating investigations. Sure, it could theoretically happen—but it just didn’t.
Nothing stays the same forever. In response to the financial meltdown in 2008, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. The Act significantly overhauled regulatory oversight of the financial services industry. And, most notably, the Act created the Consumer Financial Protection Bureau (CFPB). This new agency of government is charged with supervising a broad list of financial services companies including certain banks, student lenders, payday lenders, mortgage companies, debt collectors, consumer reporting agencies and finance companies.
We now live in a Brave New World of financial regulatory oversight. For the first time, finance companies have to worry about state and federal regulators. Further, with the establishment of the CFPB, we have seen and will continue to see an uptick in federal regulatory “activity”. The bottom line is that finance companies can no longer ignore what is going on in Washington.