CFPB & Congress

  • Funding: On July 25th, the Senate Appropriations Committee reported out S. 1371, which provides FY2014 funding for federal financial services and general government purposes.  The report accompanying the bill states that, “Given the need for transparency and accountability in the Federal budgeting process, and that the Consumer Financial Protection Bureau's budget is funded independently of the annual appropriations spending bills, the Committee directs the Bureau to provide an informal, nonpublic full briefing at least annually before the relevant Appropriations subcommittee on the Bureau's finances and expenditures.”
  • Payday Loans: On July 24th, CFPB  Associate Director for Research, Markets, and Regulation David Silberman testified before a Senate Special Committee on Aging hearing entitled, "Payday Loans: Short-term Solution or Long-term Problem?"  Silberman stated that, "The Bureau intends to continue its study of small dollar loan products to better understand why some consumers are able to use these products in a light to moderate way, while others seem to get trapped in a prolonged borrowing cycle. The Bureau would also like to better understand the effectiveness of limitations that have been put into place by state laws, trade associations, and institutions to curb the sustained use that can lead to adverse financial consequences for consumers."
  • Housing: On July 24th, the House Financial Services Committee reported out by a vote of 30-27 a bill, H.R. 2767, which would phase out Fannie Mae and Freddie Mac and restructure the Federal Housing Administration (FHA) as an independent agency.  During the markup of the bill, an amendment was offered that would have prohibited the FHA restructuring until the CFPB Director certifies to Congress that the restructuring would not adversely affect military communities.  The amendment failed by a vote of 25-32.
  • Appropriations: On July 23rd, the House Appropriations Committee reported out H.R. 2786, which would provide for the FY2014 appropriations to fund the financial services government agencies.  The Committee Report states that the Committee is "flummoxed" by the CFPB's "lack of documentation" to justify its budget, which, "makes it difficult to understand how the CFPB spends over $2 million per workday, whether these funds are spent economically and, ultimately, what value the CFPB provides to American consumers."  The bill:
    • Directs the Government Accountability Office to investigate the CFPB's collection of personal financial information;
    • Allows Committee review of financial transfers from the Federal Reserve to the CFPB;
    • Changes the CFPB's source of funding from the Federal Reserve to the congressional appropriations process beginning in fiscal year 2015;
    • Codifies the CFPB's practice of making requests for money transfers to the Federal Reserve public, requires the CFPB to notify Congress when making such requests, and requires the CFPB to compare the requested amount with the CFPB's budget justification; and
    • Directs the CFPB to submit quarterly reports and testify on its activities.
  • Servicemembers: On July 23rd, CFPB Assistant Director for the Office of Servicemember Affairs Holly Petraeus testified before a Senate Homeland Security and Governmental Affairs Committee hearing entitled, "The 90/10 Rule: Improving Educational Outcomes for our Military and Veterans."  The 90/10 rule requires for-profit colleges to receive no more than 90% of their revenue from Department of Education Title IV federal student aid, but financial assistance provided to collegebound servicemembers is generally not provided via DOE Title IV funds.  Petraeus testified, "it seems prudent for Congress to examine whether the 90-10 rule in its current form is a sensible framework, given the significant increase in the number of veterans receiving benefits under the Post-9/11 GI Bill. As long as the 90-10 rule adds a significant extra incentive for for-profit colleges to enroll military students, this concern will remain."
  • Inspector General: On July 22nd, Rep. Jack Kingston (R-GA) introduced H.R. 2779, which would establish a CFPB Inspector General, which would operate independently from the Inspector General at the Federal Reserve, who is currently tasked with overseeing the CFPB.
  • Community Banks: On July 18th, the House Oversight and Government Reform Committee’s Subcommittee on Economic Growth, Job Creation and Regulatory Affairs held a hearing entitled, "Regulatory Burdens: The Impact of Dodd-Frank on Community Banking."  At the hearing: o Prosperity Bank CEO Eddie Creamer testified, "I am not comfortable with the CFPB defining a qualified mortgage. I think that's the purview of the bank and its underwriting practices and the customer individually at that time."

CFPB Rulemaking

  • Mortgages: On July 24th, the CFPB published a final rule (78 FR 44686) that amends the CFPB's mortgage rules issued in January 2013.  The amendments:
    • Clarify how to determine a consumer’s debt-to-income (DTI) ratio;
    • Explain that CFPB’s Real Estate Settlement Procedures Act's rule does not preempt the field of servicing regulation by states;
    • Establish which mortgage loans to consider in determining small servicer status; and
    • Clarify the eligibility standard for the temporary QM provision.
  • Rulemaking Agenda: On July 23rd, the CFPB published the CFPB’s semiannual regulatory agenda (78 FR 44350) as part of the agency’s semiannual update as required by the Office of Management and Budget.  The updated agenda now includes rulemaking activity with regard to re-codifying regulations previously issued under the Fair Credit Reporting Act; the Gramm-Leach-Bliley Act annual privacy notices; and the CFPB Civil Penalty Fund.  Importantly, the CFPB updated agenda also indicates that the CFPB will begin an FDCPA reform rulemaking process in October of this year.  The CFPB expects to take, although will likely not complete, action on all of these agenda items by May 2014. 

CFPB Enforcement

  • Loan origination: On July 23rd, the CFPB filed a complaint in a federal district court against Castle & Cooke Mortgage LLC, a Utah-based mortgage company, for allegedly violating the Federal Reserve Board’s Loan Originator Compensation Rule by giving bonuses to loan officers who steered consumers into mortgages with higher interest rates.  The CFPB's complaint seeks to:
    • Prohibit the company from continuing its compensation practices;
    • Ensure that the company retains records of compensation;
    • Obtain restitution for consumers; and
    • Obtain civil monetary penalties.

CFPB Operations

  • Complaints: On July 25th, the CFPB published a notice (78 FR 44931) about a proposed generic information collection entitled, "Generic Clearance for Consumer Complaint and Information Collection System (Testing and Feedback)."  Under the notice, the CFPB will be allowed to test and pilot new and improved questions in order to improve the complaint processing system. Public comments are being accepted through August 26, 2013.
  • FCRA: On July 25th, the CFPB published a notice (78 FR 44930) proposing to renew the CFPB's existing information collection entitled, "Fair Credit Reporting Act (Regulation V) 12 CFR 1022."  The information collection relates to the CFPB's Fair Credit Reporting Act consumer disclosures, which consumers can use to consider how and when to check and use their credit reports. Public comments are being accepted through September 23, 2013.
  • Language: On July 22nd, the CFPB published a document entitled the, "CFPB Plain Writing Act Compliance Report."  The report evaluates the CFPB's success at applying plain language principles in consumer print and online materials, including brochures, web content, blog posts, and other social media.
  • Debt Collection & Legal Authority: On July 22nd, Kimberly Pisinski, a bankruptcy attorney, and Morgan Drexen Inc., a contract legal support staff company, filed a lawsuit in the U.S. District Court for the District of Columbia against the CFPB.  The lawsuit alleges that the CFPB demanded confidential financial records belonging to clients of lawyers supported by Morgan Drexen.  The lawsuit also claims that the CFPB's regulation of debt-relief services is an attempt to "usurp" the authority of state bar associations to regulate the practice of law.  The lawsuit seeks an order halting the CFPB’s actions, a declaration that the CFPB’s structure is unconstitutional, and a finding that the provisions of the Dodd-Frank Act creating and empowering the CFPB are unconstitutional.

CFPB Commentary

  • Commentary: On July 20th, President Obama voiced approval of the Senate’s recent confirmation of Richard Cordray as CFPB Director.  Obama also recited some of the accomplishments at the CFPB in the past two years saying, "[b]ecause of the work that’s been done at the CFPB over the past two years, today, mortgage lenders, student lenders, payday lenders, and credit reporting and debt collection agencies all face greater scrutiny.  And if they don’t play by the rules, you now have somewhere to go to get some measure of justice."
  • Anniversary: On July 20th, the CFPB celebrated its two year anniversary.  In response to this landmark, the New York Times published a series of articles pertaining to the CFPB written by the following panelists: New York Attorney General Eric Schneiderman, George Mason Professor of Law Todd Zywicki, Chi Chi Wu of the National Consumer Law Center, Justin Draeger of the National Association of Student Financial Aid Administrators, Financial Services Lawyer Andrew Sandler, and Julia Gordon of the Center for American Progress. 

CFPB Outreach

  • Two Year Anniversary: On July 22nd, the CFPB published an infographic summarizing the CFPB's accomplishments during the past two years.  The infographic states that the CFPB has:
    • Received 175,000 complaints;
    • Had its financial aid model form adopted by 720 colleges; and
    • Returned $430 million to consumers.
  • Servicemembers: On July 19th, the CFPB published a draft solicitation through the Government Services Administration seeking contractors to assist the CFPB in implementing, "Integrating Financial Coaching into Service Delivery for Transitioning Veterans and Economically Vulnerable Consumers."  The CFPB intends to, "provide financial coaching services to transitioning veterans and economically vulnerable consumers to help them proactively take control of their finances at crucial moments in their lives."
    • The CFPB has announced a public conference will be held on the subject of the solicitation on August 28, 2013.
    • Also on July 19th, CFPB Assistant Director for the Office of Servicemember Affairs Holly Petraeus and National Federation of Community Development Credit Unions CEO Clifford Rosenthal announced the first consumer education and financial literacy program to be funded by the CFPB's Civil Penalty Fund.  The announcement states that the program will begin in 2014, and that the CFPB estimates that the program will reach, "tens of thousands of consumers" over three years.