Over the last year, the CFPB has been especially active in the consumer finance industry, and we anticipate even more activity this year. In our CFPB2016 series, we look to 2016 and what we expect out of and with respect to the CFPB. The first two parts in our series covered Election 2016 and the agency's upcoming regulatory agenda. This week, we look at the CFPB's policy priorities.
One of the most interesting (or troubling, depending on whom you ask) aspects of the CFPB is the centralization of power in one director. As a result, the agency takes on the direction, priorities and agenda of the director. When Director Richard Cordray assumed the position in early 2012, he gained the power to shape the consumer finance industry almost single-handedly. This continues to be one of the major criticisms of the CFPB—but, that is a topic for a different post.
Last week, we looked at the upcoming regulatory and rulemaking agenda. In today's post, we highlight key policy priorities of the CFPB in 2016.
Looking back at 2015, it is clear that the agency is laser-focused on certain issues. Identifying those issues is easy. All it takes is looking at the time, effort, and resources spent. And, there is certainly reason to believe that in 2016 the CFPB will continue to emphasize:
- Consumer Complaints - Unaddressed consumer complaints can be the first sign of serious compliance problems, specifically unfair, deceptive or abusive acts or practices (UDAAP) (which we discussed here). For that reason, consumer complaints are possibly the number one priority of the agency. The CFPB maintains an online consumer complaint database, which, as of last summer, allows consumers to enter a narrative of the complaint. Additionally, last summer, the CFPB began publishingmonthly ‘snapshot' reports analyzing complaint data. This emphasis on aggregating, analyzing and using consumer complaints will continue in 2016.
- Debt Collection - Debt collection is also a central policy concern. The CFPB views debt collection as a high-risk area, ripe for consumer abuse. It is consistently one of the most-complained about industry areas, holding the top spot for the last 27 months. Just last month, the CFPB released a bulletin addressing in-person debt collection. Expect more this year.
- Discrimination - In 2015, the agency initiated several credit discrimination actions. These actions are particularly focused on redlining in the mortgage industry (as demonstrated in an action against Hudson City Savings Bank) and discretionary pricing in the indirect auto-lending industry (as demonstrated by actions against American Honda Finance Corporation and Fifth Third Bank). These actions, along with the US Supreme Court's endorsement of disparate impact in credit discrimination (which we discussed here), indicate an even-greater emphasis on credit discrimination in 2016.
- Cycle of Debt - The concept of the “cycle of debt” is also a problem. The CFPB is wary of credit products designed to perpetually keep consumers borrowing. As we discussed here, over the last several years, there have been actions against companies for keeping consumers in the cycle of debt. The small-dollar lending outline of proposals released last year includes an alternative of “debt trap prevention” and “debt trap protection,” which are designed to directly address the cycle of debt. There will surely be more on this over the next few months once the proposed regulation is released; but in the meantime, creditors need to understand that the CFPB enforcement staff is closely watching for cycle of debt problems.
Of course, the CFPB has other priorities and new issues will arise over the next year. But, as of January 2016, these four items are near (or at) the top of the agency's list.