CFPB Supervision

  • Credit Reporting Agencies: On April 23rd, Equifax Inc. disclosed in its Form 10-Q that in February 2014 it received a Civil Investigative Demand (CID) from the CFPB.  The CID requests documents and other information as part of the CFPB’s investigation of nationwide consumer reporting agencies and acts or practices relating to the advertising, marketing, sale, or provision of consumer reports, credit scores, or credit monitoring products in possible violation of the Dodd-Frank Act or the Fair Credit Reporting Act.  Equifax stressed that it is cooperating with the investigation.

CFPB Litigation

  • ITT Educational Services: On April 30th, ITT Educational Services, Inc., a for-profit education company, filed a motion to dismiss the CFPB’s February 2014 complaint against it (previously reported). ITT argues that the CFPB’s allegations are mostly “window- dressing,” unrelated to, “third-party loans or the causes of action the [CFPB] has chosen to plead.”  ITT also argues that the CFPB, “operates in violation of the Constitution’s separation of powers,” and that its complaint violates the Constitution’s Due Process Clause by failing to provide appropriate notice regarding “unfair” or “abusive” acts or practices.  Finally, ITT argues that it is not a “covered person” under the Dodd-Frank Act. The case is CFPB v. ITT Educational Services, Inc., No. 1:14-cv-00292-SEB-TAB in the Southern District of Indiana.
  • Payday Lending / Tribal Jurisdiction: On April 25th, the CFPB filed a reply to three tribally- affiliated payday lenders, who on April 11th  filed an opposition to the CFPB’s June 2012 CIDs.  The CFPB argues that the lenders are “companies” covered by the Dodd-Frank Act. The CFPB also states that the Dodd-Frank Act is, “a statute of general applicability silent as to its applicability to tribes,” and that the lenders fit under none of three possible exceptions. Finally, the CFPB argues that the lenders incorrectly asserted that the CFPB failed to provide adequate notice and that the CIDs are indefinite and overly broad.  The case is CFPB v. Great Plains Lending, et al., No. 2:14-cv-02090-MWF-PLA in the Central District of California.

CFPB & Congress

  • Subpoena: On April 29th, the House Financial Services Committee’s Subcommittee on Oversight and Investigations voted 22-0 to subpoena the testimony of two CFPB employees—Stacey Bach, Assistant Director of the Office of Equal Employment Opportunity, and Liza Strong, Director of Employee Relations—as well as a National Treasury Employees Union (NTEU) representative. The Committee alleges that CFPB Director Richard Cordray refused to allow the two CFPB officials to testify at an April 2nd Subcommittee hearing on allegations of discrimination and retaliation at the CFPB (previously reported).  Cordray and NTEU President Colleen Kelley offered to voluntarily testify, and Cordray reportedly authorized the subpoenaed individuals to testify in closed session to protect the privacy of CFPB employees, but Subcommittee Chairman Patrick McHenry (R-NC) expressed interest in hearing directly from, “the people in the proper position to know the details of what happened.”  McHenry added, “What we saw was a brand new agency establishing a very bad culture.  We’ve tried to limit this in scope and try to understand this, and see where we need to take it.”  Rep. Maxine Waters (D-CA) hoped the Subcommittee would prove, “serious about addressing discrimination” rather than, “create a political spectacle.”

CFPB Operations

  • Chain of Command: On April 26th, media reported that the CFPB “elevated” its Office of Minority and Women Inclusion to report directly to the Director’s office.  According to a CFPB spokeswoman, Director Cordray asked the CFPB’s Director of the Office of Minority and Women Inclusion, Stuart Ishimaru, to, “lead a series of staff listening sessions concerning issues of diversity and equality across the [CFPB],” and to, “report [such] findings to the Director and propose an action plan for how to best promote equality and fairness at the [CFPB].”
  • Auto Lending: On April 30th, Director Cordray issued a statement approving of BMO Harris Bank’s stated intentions to pay auto dealers a flat percentage fee for originating indirect auto loans. “It is encouraging to see BMO Harris taking this proactive step to protect consumers from discrimination,” Cordray stated. “When people go to buy a car, they should not have to worry whether they’ll pay more for their auto loan because of their race, gender, or ethnic background. The CFPB is committed to creating a fair marketplace for all consumers, and we recognize that many lenders share that commitment as well.”
  • Fair Lending: On April 30th, the CFPB published a report on fair lending reviewing the activities of its Office of Fair Lending and Equal Opportunity in that Office’s first year of operation.  In an introduction, Fair Lending Director Patrice Alexander Ficklin stated that she relies on, “a range of qualitative and quantitative factors,” and values, “robust and ongoing dialogue with all market participants, including industry, consumers, and civil rights organizations.”  The report includes the following sections:
    • Risk-based prioritization and the fair lending toolkit;
    • Addressing fair lending risk: supervision and enforcement in housing, automobile,and other financial markets;
    • Promoting fair lending compliance, education, and dialogue: outreach to private industry, fair lending, fair housing, civil rights, consumer and community advocates; and
    • Interagency engagement, including on the Equal Credit Opportunity Act and the Home Mortgage Disclosure Act.
  • Credit Reporting: On May 1st, the CFPB published action letters for child welfare caseworkers to send to credit bureaus regarding children in their care. The letters address the existence of a credit report for a child who is not eligible for a credit report, as well as errors on children’s credit reports.  Additionally, the CFPB published “tip sheets,” and a corresponding blog post, for parents and foster care workers to assist in young people’s development and maintenance of good credit.

CFPB  Rulemaking

  • Mortgage Credit: On April 30th, the CFPB published a proposed rule that would make “minor adjustments” to its new mortgage rules in order to improve access to mortgage credit.  The proposed rules would provide an alternative definition of a small servicer for certain nonprofit small servicers and would provide certain exemptions for nonprofits, such as Habitat for Humanity, from the Ability-to-Repay rule.  Lastly, the proposed rules would allow lenders in limited circumstances to refund points and fees in excess of the Qualified Mortgage parameters in order to maintain the loan’s legal status as a Qualified Mortgage. Public comments are being accepted for 60 days following the proposed rule’s publication in the Federal Register.