CFPB Guidance

  • Payroll Cards: On September 12th , the CFPB published a bulletin to remind employers that they may not require employees to receive wages on a payroll card.  Payroll cards are financial cards that permit employers to make wages and other earnings available to an individual without issuing paychecks or arranging for direct deposit to a banking account. The bulletin also emphasizes certain federal consumer protections that apply to payroll cards, including that employers must provide employees who use payroll cards with:
    • a disclosure of associated fees;
    • access to the card holders’ account history;
    • notice of card holders’ limited liability for unauthorized use; and
    • notice of card holders’ error resolution rights.

CFPB & Congress

  • Semi-Annual Report: On September 12th , CFPB Director Richard Cordray testified at a House Committee on Financial Services hearing entitled, “The Semi-Annual Report of the Consumer Financial Protection Bureau.”  Among the many topics discussed at the hearing were CFPB activities regarding debt collection and credit reporting.  Cordray testified that:
    • “The debt collectors covered by our supervisory authority account for over 60 percent of the industry’s annual receipts in that market. Bad actors in this market are a detriment to consumers and to every debt collector that operates lawfully.”
    • “Credit reports have a profound impact on people’s lives. Previously, these companies were not subject to any federal supervision, and consumers often struggled to get errors resolved. In addition to our new supervision program, we began handling consumer complaints about credit reporting issues, all of which will open a clear window into the actual operations of these companies. As a result, the Bureau can now evaluate whether federal consumer laws are being followed throughout the process, from credit origination through debt collection. By identifying problems and rooting them out early, we are working to minimize consumer harm.”
  • CFPB Reform: On September 9 th , Sen. Mike Crapo (R-ID) published on his website an open response to constituent mail concerning the CFPB.  Crapo proposed that the CFPB be:
    • led by a board rather than a single director;
    • subject to the standard congressional appropriations process; and
    • officially receptive to input from prudential banking regulators.

In the statement, Crapo also noted that at his request the Government Accountability Office is investigating the CFPB’s personal information data collection practices.

CFPB & Litigation

Debt Collection: On September 6th , the CFPB published on its website an August 14 th amici brief that was filed jointly with the Federal Trade Commission before the U.S. Court of Appeals for the Seventh Circuit (Delgado v. Capital Management Services, No. 13-2030).  The brief argues that a debt collector violates the Fair Debt Collection Practices Act (FDCPA) not only when suing or threatening suit to collect a time-barred debt, but also whenever a debt collector’s, “communications tend to deceive or mislead ‘unsophisticated consumers,’ whom the FDCPA was enacted to protect.  Depending on the circumstances, a time-limited settlement offer could plausibly mislead an unsophisticated consumer to believe a debt is enforceable in court even if the offer is unaccompanied by any clearly implied threat of litigation.”

CFPB Operations

  • CFPB Directory Database: On September 5th , the CFPB published a notice in the Federal Register (78 FR 54630) regarding the establishment of a revised Privacy Act System of Records, the “CFPB Directory Database.”  The database would create an agency-wide repository of identifying and registration information concerning entities and their affiliates that offer or provide, or materially assist in the offering or provision of, consumer financial products or services to ensure consistency in the use of information related to supervisory, enforcement, and regulatory actions.  Public comments are being accepted through October 7, 2013.  The new system of records will go into effect on October 15 th subject to the public comments.  It is unclear whether the broad language in this notice will be used to create a de facto registry of covered persons, such as debt buyers and debt collectors.
  • CFPB Oversight: On August 30 th , the joint CFPB-Federal Reserve Office of the Inspector General (OIG) released an update of its Work Plan, which identifies initiatives and priorities that the OIG is planning to review.  The update includes the following projects involving CFPB operations:
    • an audit of the CFPB’s public consumer complaint database; and a
    • a joint audit of the level of coordination between the CFPB and other regulatory agencies.

The report also includes a description of the following works in progress:

  • an evaluation of the CFPB’s annual budget process;
  • an evaluation of the CFPB’s integration of enforcement attorneys into examinations;
  • an audit of the CFPB’s civil penalty fund; and
  • an evaluation of the CFPB’s supervision program.

CFPB Outreach

  • CFPB Operations: On September 11th , The Washington Post  published an interview with CFPB Director Richard Cordray during which he addressed several issues:
    • Supervision: “We have to institute our supervision program for financial institutions that are used to being regulated, but not necessarily used to being regulated with a focus on consumer protection.  It’s an adjustment for them.  But in the nonbank sphere, they’re often not used to being regulated at all, or only on the state level.  In that area, there has been a real shift toward more of a compliance mentality.  And our being on the scene and doing this work has caused that [important] shift.”
    • Debt collection: “We will be undertaking rulemaking in the debt collection area…later this fall. … We’re also examining debt collectors.  We’ve done some enforcement actions involving debt collection, and there will be more.  We’ve put out a bulletin on first-party debt collectors, making clear that they’re also covered under existing law.  And we’re starting to provide some tools for consumers to use, such as the template letters they can use to try and avoid undue harassment and abuse from debt collectors.”
    • Prepaid cards: “We’re moving forward to write rules to make sure [prepaid cards] are protected under [the Electronic Fund Transfer Act].  It’s a real front-burner issue for us.”
    • Ability-to-pay: “The general principle…of ability to repay as the basis for making loans is just common sense. … How it would apply from one market to another is worth further analysis and that’s something we’re engaged in analyzing.”
  • Mortgages: On September 11th , CFPB Director Richard Cordray delivered a speech at the American Mortgage Conference in which he restated that the CFPB’s new mortgage rules will go into effect on January 10th .  Cordray indicated, however, that the CFPB may show leniency in its enforcement approach toward companies that demonstrate “good-faith efforts to come into substantial compliance on time.”  Cordray also mentioned that the CFPB will finalize proposed changes to servicing, ability-to-repay, and loan originator compensation rules “any day now.”
  • Fair Lending: On September 5th , CFPB Director Richard Cordray delivered a speech at the National Baptist Convention, USA, Inc.  In his remarks, Cordray discussed “what we call the ‘Four Ds’: deceptive marketing, debt traps, dead ends, and discrimination.”  Regarding discrimination, Cordray stated, “In many instances, hidden incentives for brokers or loan officers to negotiate higher rates have resulted in African American and Hispanic borrowers paying more than they should have for mortgages and auto loans.” 
  • Student Loans: On September 5th , CFPB Student Loan Ombudsman Rohit Chopra published a blog post on the CFPB website entitled, “Accessing Your Scholarships and Student Loan Funds.”  Chopra advised that:
    • students cannot be required to use a specific bank or card;
    • students should consider choosing a bank prior to arriving on campus; and
    • students should enroll in direct deposit if the students’ school offers it.

CFPB Commentary

  • Public Opinion: On September 11th , the Center for Responsible Lending published the results of a survey of likely voters in the 2014 Congressional elections.  The survey found that 80% of respondents favor the CFPB while only 12% oppose the CFPB.  Further, the survey found that 83% of respondents believe financial institutions should be held accountable with tougher rules and enforcement, and 63% support “the so-called Wall Street reform law.”