The CFPB has always said that one of its key missions is to level the playing field for bank and non-bank consumer financial services providers. CFPB Director Richard Cordray, when still only the Assistant Director of Enforcement, stated that leveling the playing field by treating the participants in the marketplace on par, regardless of their corporate structure or charter choice, would “benefit both consumers and financial companies.”
Beleaguered bankers might believe that this isn’t working out so well, and that they are usually the CFPB’s target. It’s true that larger banks are subject to the CFPB’s direct supervisory authority, making them an easier target than non-bank providers of consumer financial products and services. Many of the CFPB’s enforcement actions against these banks are also handled behind the scenes, through informal actions that are not posted on the CFPB’s Newsroom for all to see. It’s therefore admittedly difficult to perform a clear statistical analysis of enforcement actions based on corporate structure or charter choice alone. Even so, I believe that it’s fair to say that the CFPB is going a long way toward leveling the playing field.
Depending on how you count it, the CFPB announced approximately 57 enforcement actions in 2015. This approximation reflects that certain enforcement actions involved multiple parties. Of these actions, only nine involved banks, accounting for a little less than 1/6th of the enforcement actions. Fourteen enforcement actions were brought against general consumer finance companies, nine were brought against non-bank mortgage lenders or loan servicers, six against debt collectors (including a law firm), and two more against law firms for issues unrelated to debt collection. The CFPB also brought enforcement actions against two phone companies, for a total of almost $160 million in consumer reimbursements and civil money penalties, and they even ordered a land developer to fix roads in a Tennessee subdivision. Most of the remaining enforcement actions in 2015 involved consumer reporting agencies, providers of student financial services, non-mortgage loan servicers, title companies, bi-weekly mortgage payment providers, bank vendors, and a college.
One might argue that there are far more non-bank financial services providers in the U.S. than there are banks, so the fact that 5/6th of the enforcement actions in 2015 were against those non-bank providers is not remarkable. We could quibble over the exact ratios, but that misses the point. The point isn’t that banks have it easy, but that banks’ competitors now have to behave, too.
Prior to the CFPB, attorneys general and plaintiffs’ lawyers would occasionally target a non-bank financial services provider, but those entities get far more regulatory attention today as a result of the CFPB. Largely gone are the days when a bank could watch its mortgage company competitors ignore RESPA Section 8 or TILA loan originator compensation rules, while the bank was held to a strict compliance standard and therefore had a competitive disadvantage.
I know that there are still many politicians and financial service providers that want the CFPB to go away, but there is something to be said for an equal opportunity enforcer that spreads the costs of doing business.
*Originally published on consumerbankingblog.com