CFPB  Enforcement

  • Payday lending: On September 17th, the CFPB announced that it sued the Hydra Group, an online payday lender, for alleged deceptive practices as well as alleged violations of the Truth in Lending Act and the Electronic Fund Transfer Act.  The CFPB alleges that the Hydra Group used information it had purchased from online lead generators to access consumers’ checking accounts and then illegally deposit payday loans and withdraw fees without consent.  The CFPB also alleged that the Hydra Group falsified loan documents to suggest that consumers had agreed to the loans. In a press release, the CFPB accused the Hydra Group of “illegitimate debt collection,” but the CFPB’s complaint does not allege a violation of the Fair Debt Collection Practices Act.  In addition to a permanent injunction, the CFPB seeks unspecified consumer redress and a civil monetary penalty. The case is CFPB v. Mosely, et al., No. 4:14-cv-00789-DW (W.D. Mo., Sep. 8, 2014).
  • Debt collection: On September 16th, the CFPB sued Corinthian Colleges, Inc., a for-profit education company, for allegedly violating the Dodd-Frank Act’s prohibitions against  unfair, deceptive, and abusive acts and practices, as well as the Fair Debt Collection Practices Act (FDCPA) by making, “deceptive representations about career opportunities that induced prospective students to take out private student loans, and then us[ing] illegal tactics to collect on those loans.” As part of its suit, the CFPB is seeking a permanent injunction against Corinthian as well as redress for all private student loans made since July 21, 2011, including those that have been paid off.  In June 2014, Corinthian stated that it may cease operations after the Department of Education reduced Corinthian’s access to federal student loans and grants, and, in August, Corinthian disclosed in a Securities and Exchange Commission filing that it had met with CFPB officials regarding a settlement to resolve alleged violations of the FDCPA and the Dodd-Frank Act. The CFPB separately published a notice to current and former Corinthian students regarding, “options and obligations on your student loans.”  The case is CFPB v. Corinthian Colleges, Inc., No. 14- 7194 (N.D. Ill., Sep. 16, 2014).

CFPB Supervision

  • Indirect auto lending: On September 17th, the CFPB issued a special edition of its “Supervisory Highlights” to describe the CFPB’s fair lending supervisory activity in the indirect automobile lending market.  After issuing its March 2013 bulletin entitled “Indirect Auto Lending and Compliance with the Equal Credit Opportunity Act [ECOA],” the CFPB examined indirect auto lenders for ECOA compliance in three areas: credit approvals and denials, interest rates quoted by the lender to the dealer, and any discretionary markup or adjustments to such interest rates. The CFPB stated in its “Supervisory Highlights” that these examinations identified lenders with discretionary pricing policies that violated ECOA by resulting in discrimination against African-American, Hispanic, and/or Asian and Pacific Islander borrowers, and the CFPB reviewed its public actions to date in response to those findings. The report noted that, “as a result of these supervisory actions, some lenders are more stringently monitoring dealers and…implementing additional limits to discretionary pricing adjustments or taking other appropriate action to manage or reduce the lender’s fair lending risk.”  Also on September 17th, the CFPB published a white paper on the proxy methodology that it uses to calculate a lender’s compliance with fair lending laws.  Finally, on September 18th, the CFPB held a field hearing in Indianapolis (IN) on automobile finance, at which CFPB Director Richard Cordray delivered prepared remarks.

CFPB  Rulemaking

  • Electronic Fund Transfer Act: On September 18th, the CFPB issued a final rule (79 FR 55970) to amend Regulation E, which implements the Electronic Fund Transfer Act, by extending a temporary provision allowing insured institutions to estimate certain pricing disclosures under the Dodd-Frank Act. The CFPB stated that it had determined, “that the termination of the exception would negatively affect the ability of insured institutions to send remittance transfers,” and thereby extended the temporary exception for five years, from July 21, 2015 to July 21, 2020. The CFPB anticipates that the additional time will allow credit unions, banks, and thrifts to, “develop better communication mechanisms with foreign financial institutions that may help execute wire transfers and certain other types of remittance transfers.”
  • Auto finance: On September 17th, the CFPB issued a proposed rule, to be published in the Federal Register, to subject to the CFPB’s oversight those nonbank auto finance companies that make, acquire, or refinance 10,000 or more loans or leases in a year, covering approximately 38 auto finance companies that account for approximately ninety percent of nonbank auto loans and leases.  Cordray stated in a press release, “Nonbank auto finance companies extend hundreds of billions of dollars in credit to American consumers, yet they have never been supervised at the federal level.”  Cordray added, “Today’s proposal would extend our oversight, allowing us to root out discrimination and ensure consumers are being treated fairly across this market.”  The following day, the National Consumer Law Center issued a press release to “applaud” the CFPB’s action, stating that it hopes that, “this new rule will ensure better enforcement and regulation of auto lending abuses as well as a more level playing field for all of the larger participants in the auto lending market.”  The CFPB will accept public comments on the proposal for 60 days following the proposed rule’s publication in the Federal Register.
  • Remittances: On September 12th, the CFPB issued a final rule, to be published in the Federal Register, to subject to the CFPB’s oversight those nonbank international monetary transfer providers that provide more than 1 million such transfers annually. The CFPB proposed the rule in January 2014 (previously reported) and finalized the rule largely unchanged. The CFPB stated in a press release that it will examine covered providers for consumer protections such as providing appropriate disclosures about costs and fees, an option to cancel a transfer within 30 minutes if it has not been received, and the opportunity to correct certain errors. The final rule goes into effect on December 1, 2014.

CFPB & Congress

  • Checking accounts: On September 10th, Rep. Carolyn Maloney (D-NY) sent a letter to Director Cordray regarding checking account overdraft practices.  Maloney requested that the CFPB limit overdraft fees charged to consumers’ checking accounts to an amount “reasonable and proportional” to the amount of the overdraft, stating, “You can still buy a $35 cup of coffee.”  Maloney also requested that the CFPB expand “opt-in” requirements for overdraft protections to include the use of checks and Automated Clearing House transactions.  Maloney introduced H.R. 1261, the “Overdraft Protection Act,” on March 19, 2013, to implement these and other reforms and protections related to overdraft fees.

On September 15th, the CFPB announced that it will hold a public forum on October 8th  in Washington, D.C., on checking account screening policies and practices. Cordray is scheduled to deliver prepared remarks.

CFPB Litigation

  • Debt collection: On September 12th, Frederick J. Hanna & Associates, P.C. (Hanna), a debt collection law firm based in Georgia, filed a motion to dismiss the CFPB’s July 14th complaint against it in a federal district court in Georgia.  The CFPB charged that Hanna violated the FDCPA and the Consumer Financial Protection Act (CFPA) by intimidating consumers with deceptive court filings and by introducing faulty or unsubstantiated evidence.  In its filing, Hanna argues that the CFPB is “expressly preclude[ed]” from bringing claims under the CFPA against an attorney involving the practice of law, and that the CFPB “cannot state a claim under the FDCPA or the CFPA” because the allegations are based on a “meaningful attorney involvement” standard that does not exist and that the CFPB has not specifically identified in any of Hanna’s conduct.  Finally, Hanna asserts that the CFPB may not bring charges against conduct going back to 2009 because the Dodd- Frank Act does not apply retroactively and because the FDCPA provides for a one-year statute of limitations. A CFPB press release in July characterized Hanna as, “a factory, producing hundreds of thousands of debt collection lawsuits…,” often against consumers, “who may not actually have owed the debts.”

CFPB Commentary

  • Consumer complaints: On September 15th, the Financial Services Roundtable reportedly ceased its public relations campaign against the CFPB.  Bloomberg reported that former Minnesota Governor and current Financial Services Roundtable President and CEO Tim Pawlenty, who had developed online and print advertisements criticizing the CFPB’s consumer complaints database, “conceded that the Roundtable’s membership wasn’t fully behind him on the campaign,” fearing, “needlessly antagoniz[ing] an agency that polices them.”
  • Mobile financial services: On September 12th, the Federal Trade Commission’s (FTC) Bureau of Consumer Protection filed comments in response to the CFPB’s Request for Information on mobile financial services (79 FR 33731).  The FTC highlighted five potential consumer protection concerns associated with mobile financial services, namely:
    • The potential liability for unauthorized charges using prepaid or stored value products;
    • The unfair billing practices on mobile carrier bills;
    • The privacy of consumers’ personal and financial data;
    • The security of consumers’ personal and financial data; and
    • The potential use of consumers’ information by data brokers and other third parties.

On September 10th, the U.S. Public Interest Research Group (PIRG) and the Center for Digital Democracy (CDD) submitted joint comments in response to the CFPB’s aforementioned Request for Information, stating that the CFPB, “must protect consumers by developing a comprehensive set of principles and safeguards for the overall digital marketplace, while also ensuring that existing consumer laws are effectively applied to online financial services.”  PIRG and CDD particularly expressed concern that, “the array of tools and techniques that is already available to target (‘monetize’) economically vulnerable consumers more effectively could—unless addressed by the agency now— undermine and erode their ability to enhance their financial security.”

  • Consumer complaints: On September 10th, researchers at George Mason University submitted comments to the CFPB on its proposal to expand disclosures of consumer complaint narrative data (79 FR 42765) (previously reported). The researchers argue that the expansion of the CFPB’s consumer complaint database would actually harm consumers, markets, and the CFPB. Specifically, the authors note that the CFPB has not identified a problem that the consumer complaint database expansion would address, and assert that the expansion would actually harm small financial institutions, “for which a single baseless complaint would likely constitute a larger percentage of the total mix of available information.”  Because some information in a narrative complaint would be redacted, the researchers also argue that the CFPB would be enticing consumers to, “rely on incomplete and potentially inaccurate information—exactly the type of practice the [CFPB] seeks to stop financial firms from engaging in.” Finally, the researchers argue that the CFPB simply lacks the statutory authority to publish such consumer complaint narratives.

CFPB Outreach

  • Servicemembers: On September 16th, the CFPB published a profile of a servicemember whom it assisted with “predatory auto loans.”  “Ari,” the father of a servicemember, reportedly submitted a “Tell Your Story” submission, which, “led to us opening an investigation into an auto loan program.”  The father is quoted as saying, “The fact that the CFPB took action in the name of servicemembers across the entire country…really shows us that someone’s in our corner.”