CFPB Operations

  • Student loans: On October 16th, the CFPB’s Student Loan Ombudsman published its 2014 annual report, the third such report pursuant to the Dodd-Frank Act.  The report covers the approximately 5,300 private student loan complaints and approximately 2,700 debt collection complaints relating to student loan debt that the CFPB received between October 1, 2013, and September 30, 2014.  The 5,300 private student loan complaints represent an increase of 38% from the year prior.  The CFPB concluded that many student loan borrowers “are still struggling to repay the loans they borrowed during…the years leading up to the financial crisis”; that many borrowers “sought to negotiate a modified repayment plan during a period of financial distress but [that] lenders and servicers provided no options, leading the borrower to default”; and that “consumers continue to encounter limited or no flexibility when seeking help from their lender or servicer.”  The report concludes with the following recommendations:
    • Determine whether changes to the Bankruptcy Code might motivate lenders to constructively work with borrowers to modify loan terms;
    • Determine whether lenders and servicers provide adequate and timely disclosures to borrowers about repayment options, particularly in times of financial hardship; and
    • Assess the impact of the tax treatment of principal forgiveness on loan modification activity.

The CFPB concurrently published a sample letter for distressed borrowers to offer a lender or servicer an alternative payment plan that could help the borrower minimize the risk of default.

CFPB  Rulemaking

  • No-Action Letters: On October 16th, the CFPB published in the Federal Register (79 FR 62118) a notice of proposed policy and proposed information collection that would allow the CFPB to issue to financial product and service providers a “No-Action Letter.” Such a letter would inform the provider that CFPB staff will not recommend supervisory or enforcement action with respect to certain new products that may benefit consumers. The CFPB stated in a press release that it intends to “create a process to reduce the regulatory uncertainty that may exist for certain emerging products or services which stand to benefit consumers.” The CFPB added that a “No-Action Letter” would be revocable, may be limited in some way, and would not constitute a waiver, exemption, or official interpretation. Requestors would have to submit a formal application and demonstrate that the product promises significant consumer benefit but that regulatory uncertainty around the product or service not only exists but also interferes with the development of the product. The CFPB will accept public comments on the proposed policy and proposed information collection through December 15th.
  • Know Before You Owe: On October 10th, the CFPB published a proposed rule, to be published in the Federal Register, that would modify and make technical amendments to  its TILA-RESPA Integrated Disclosure Rule, otherwise known as “Know Before You Owe.” The proposed rule would allow creditors to provide a consumer with a revised Loan Estimate the day after a consumer locks in a floating interest rate, rather than on the same day. “After considering feedback from stakeholders on this requirement,” the CFPB stated in a press release, “we think that such a short turnaround may be challenging for creditors that currently allow consumers to lock interest rates late in the day or after business hours.” The rule would also add a space on the Loan Estimate form for creditors to include a notice regarding estimate changes for construction loans expected to take more than 60 days to settle. The CFPB will accept public comments on its proposed rule through November  10th. The TILA-RESPA rule is scheduled to go into effect on August 1, 2015.
  • Information collection: On October 9th, ACA International (“ACA”) submitted comments to the CFPB regarding its proposed “generic information collection plan” of consumer credit market information and household financial decision-making information (79 FR 53422) (previously reported). ACA argued that the CFPB’s request and supporting statement is “vague,” and yet suggests that it intends, according to ACA, “to collect data that will undoubtedly raise substantive or policy issues, regardless of how the [CFPB] claims the data will ultimately be used (or not used).”  Further, ACA argued that generic clearances from the Office of Management and Budget for information collection are typically reserved for “benign” collection such as for customer satisfaction surveys and focus group testing.  ACA concluded, “While the [CFPB] might find obtaining generic clearance to be more convenient and efficient, the request under review simply does not merit this streamlined process which will improperly deprive stakeholders of important opportunities to meaningfully participate.”

CFPB Outreach

  • Economic Rights: On October 10th, CFPB Director Richard Cordray delivered a prepared lecture at Michigan State University on “Economic Rights as Human Rights.” Cordray added the 40th anniversary of the Equal Credit Opportunity Act to the University’s commemoration of the 60th anniversary of the Supreme Court’s decision in Brown v. Board and the 50th anniversary of the Civil Rights Act. Cordray argued that economic rights are as important as political and legal rights, and discussed the CFPB’s efforts to uphold those rights, especially for disadvantaged consumers. “As we look back over our country’s history,” he stated, “we can observe a prolonged struggle to give meaning to the central principle that all are created equal and all should be treated fairly. We continue to hold to that principle today.”