CFPB  Enforcement

  • Credit reporting: On August 20th, the CFPB filed a Consent Order against First Investors Financial Services Group Inc. (“First Investors”) to impose a $2.75 million civil monetary penalty and to require that the company fix computer system errors that transmitted inaccurate information to credit reporting agencies.  The CFPB found that First Investors knew of the errors in its computer system, which it purchased from a vendor, and notified the vendor but, “did not make sufficient efforts to fix the errors.”

First Investors makes and services auto loans primarily to subprime borrowers, and supplies account information to credit reporting agencies as a furnisher under the Fair Credit Reporting Act.  In a statement, CFPB Director Richard Cordray warned that, “Companies cannot pass the buck by blaming a computer system or vendor for their mistakes.”

The CFPB alleges that, over a period of at least three years, First Investors provided inaccurate information on consumer payments, distorted dates of delinquency, inflated numbers of delinquencies, and mischaracterized voluntary vehicle surrenders and repossessions.  In addition to the civil monetary penalty and improvements to its computer systems, the Consent Order requires First Investors to identify and correct errors on affected consumers’ credit reports, help consumers obtain free copies of their credit reports, and establish appropriate safeguards. The CFPB claimed that the errors affected potentially tens of thousands of consumers, but did not identify a specific number.

Debt settlement: On August 25th, the CFPB filed a complaint along with a proposed  Consent Order against Global Client Solutions, LLC (OK), a debt-settlement payment processor, seeking $6 million in consumer relief, a $1 million civil monetary penalty, and a permanent injunction for allegedly helping third parties to collect tens of millions of dollars in upfront fees in violation of the Dodd-Frank Act and the Telemarketing Sales Rule.  The complaint marks the CFPB’s sixth such case involving advance fees. In a press release, CFPB Director Richard Cordray stated, “We will continue to crack down on illegal debt- settlement firms and the companies that help these operations collect illegal fees from consumers.”

CFPB Supervision

  • Community banks: On August 18th, Director Cordray delivered prepared remarks before the Association of Military Banks of America.  Cordray began by stating that, “community banks were not among the causes of the financial crisis,” and that such banks, “were upholding sensible underwriting standards even though [they] may have been losing some of [their] customers and [their] market share to the financial predators who were not held to the same standards of responsible lending.”

Cordray highlighted that Holly Petraeus, Assistant Director for the Office of Servicemember Affairs, and her staff have visited with servicemembers at military bases nationwide, informing enforcement actions, policy decisions, and assisting in financial education.  Cordray also provided examples of the CFPB’s efforts to avoid a “one-size-fits- all” approach, namely allowing financial institutions to estimate certain fees and taxes imposed on remittance transfers and also accommodating the business models of small mortgage providers and servicers in shaping the new mortgage rules.

  • Loan transfers: On August 19th, the CFPB published a bulletin outlining expectations for mortgage servicers that transfer loans in light of the CFPB’s new mortgage rules that went into effect in January 2014.  The bulletin discusses appropriate practices for servicers subject to CFPB examination.  Lastly, the bulletin states that the CFPB will require some servicers to submit written plans to the CFPB describing assessment and management of associated consumer risk. In a related press release, Cordray stated, “At every step of the process to transfer the servicing of mortgage loans, the two companies involved must put in appropriate efforts to ensure no harm to consumers. This means ahead of the transfer, during the transfer, and after the transfer.”

CFPB Guidance

  • Credit practices: On August 22nd, the CFPB, the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corporation, and the National Credit Union Administration issued interagency guidance on unfair or deceptive credit practices in order to, “clarify that the repeal [by the Dodd-Frank Act] of credit practices rules applicable to depository institutions does not mean that the unfair or deceptive acts or practices described in those former regulations are permissible.”  The agencies added that the Federal Trade Commission’s Credit Practices Rule remains in effect, and that the agencies, “may determine that statutory violations exist even in the absence of a specific regulation governing the conduct.”
  • Remittance transfers: On August 22nd, the CFPB finalized revisions to its remittance rule, originally proposed in April 2014.  The revisions extend for five years an exception for federally-insured financial institutions to estimate third-party fees and exchange rates for remittance transfers where a specific, exact amount is indeterminable in advance.  In a press release, the CFPB stated that, “Without the exemption, these insured institutions reported that they would have been unable to send some transfers to certain parts of the world that they currently serve.  The [CFPB] believes that this exception is limited and is not used for most remittances by insured institutions.”  The CFPB concurrently published a revised version of its remittance transfer rule compliance guide.

CFPB Litigation

  • Debt collection: On August 20th, the CFPB and the Federal Trade Commission (FTC) jointly filed an amicus brief with the Ninth Circuit arguing that the Fair Debt Collection Practices Act (FDCPA) requires that each debt collector that contacts a consumer, rather than only the first to collect on a particular debt, must send to the consumer an appropriate notice of the consumers’ debt information and rights either as part of, or within five days of sending, the initial communication. The CFPB and the FTC argued that a district court wrongly interpreted the language of the FDCPA to require only an initial collector to provide such required notice because only an initial collector could send an initial notice.

The amicus brief responds, “The phrase ‘the initial communication’ is most naturally read—and has been read by this Court and Congress—to refer to each debt collector’s initial communication with a consumer.”  The agencies also warn, “Exempting subsequent debt collectors from [the notice requirement] would also create a loophole that could nullify [the requirement’s] debt-validation protection altogether. … If [a] second debt collector had no independent obligation to send consumers a validation notice, consumers would be unable to stop attempts to collect disputed, unverified debts—the precise problem that Congress designed [the requirement] to protect.”  The case is Hernandez v. Williams, Zinman & Parham, No. 14-15672 (9th Cir., Aug. 20, 2014).

CFPB Operations

  • Financial literacy: On August 20th, the CFPB published a notice and request for public comment in the Federal Register (79 FR 49286) regarding a proposed information  collection entitled, “Teacher Training Initiative (TTI) Local Education Agencies (LEA) Partnership Application.”  The CFPB stated that it intends to collect application information from LEAs that are interested in partnering with the CFPB to design and implement a model for training and for otherwise supporting K-12 teachers to incorporate financial education into their curricula.  Public comments are being accepted through October 20th.
  • Mortgage closings: On August 21st, the CFPB announced the participants that it selected for its mortgage eClosing pilot program.  The program is intended to address the use of technology in addressing the major pain points in the closing process.  The pilot program will study how educational materials help improve consumer understanding, how consumers are affected by early review of closing documents, and generally how consumers and industry, “can save time and money by preventing last-minute surprises and unnecessary bottlenecks caused by outdated processes.”