CFPB  Enforcement

  • Predatory lending: On July 29th, the CFPB announced a Consent Order with Rome Finance to provide approximately $92 million in debt relief for approximately 17,000 American servicemembers and other consumers. The Order states that Rome Finance violated Regulation Z by failing to make required disclosures in certain financing transactions and violated the Consumer Financial Protection Act by unfairly facilitating deceptive disclosures.  In addition, the Order accuses Rome Finance of both servicing and collecting on financing agreements rendered void or limited by state laws.  In addition to the debt relief payment, the Consent Order requires the respondents to notify affected consumers, update credit reporting agencies, pay redress for hidden finance charges, and cooperate with affected consumers seeking to vacate judgments.  Finally, the Consent Order requires the company’s bankruptcy trustee to pay a $1 civil monetary penalty, and requires the company and its owners to permanently cease consumer lending.

CFPB & Congress

  • Employee management: On July 30th, CFPB Director Richard Cordray testified as the sole witness at the House Financial Services Committee Subcommittee on Oversight and Investigations hearing entitled, “Allegations of Discrimination and Retaliation and the CFPB Management Culture,” held at the request of Representatives Maxine Waters (D-CA) and Al Green (D-TX), the respective Ranking Members of the full Committee and the Oversight and Investigations Subcommittee.  In prepared testimony, Cordray stated that, “Because of the speed with which we tried to build this new agency, we have found that we did not get everything right for our own employees.  One especially sore spot was the system for reviewing and assessing the performance of CFPB employees.” He added that the CFPB’s efforts so far to address certain employee management issues reflect that the CFPB is, “holding ourselves to the same standards of fairness that we expect from the financial industries we oversee.”  The hearing marked the fourth in four months that the Subcommittee has held on the issue.
  • Cordray appointment: On July 29th, House Financial Services Committee Chairman Jeb Hensarling (R-TX) and Senate Banking, Housing, and Urban Affairs Committee Ranking Member Mike Crapo (R-ID) sent a letter to Director Cordray referencing the Supreme Court’s recent decision in NLRB v. Canning and questioning, “the outcome of decisions made by you during your 2012-2013 tenure at the CFPB.”  The signatories also questioned the validity of Cordray’s Federal Register notice of ratification of the actions Cordray took as CFPB Director during the time of his recess appointment. They requested by September 1st a full accounting of all CFPB actions during the recess appointment period that are not derived from Title X, Subtitle F of the Dodd-Frank Act, as well as all CFPB or outside counsel documents, communications, and analyses related to:
    • The validity or standing of CFPB actions taken during the recess appointment that are not derived from Title X, Subtitle F;
    • The CFPB’s authority and Cordray’s standing to ratify past actions; and
    • The impact of Canning on the effective dates for all regulations that the CFPB issued during the recess appointment.
  • Model disclosures: On July 24th, Rep. John Carney (D-DE) introduced H.R. 5188, the “Checking Account Simplification Act,” which would require the CFPB to develop,   through consultation with industry, a, “straight-forward, easy-to-understand model checking account disclosure form that can be adopted across the banking services industry.”  Carney stated, “People opening a standard checking account shouldn’t be surprised by hidden fees or get caught in unfair policies.  My legislation ensures that Americans can make confident, informed choices when deciding where to keep their money.”

CFPB  Rulemaking

  • Home Mortgage Disclosure Act: On July 24th, the CFPB proposed a rule that would amend Regulation C, which implements the Home Mortgage Disclosure Act (HMDA), to expand data reporting related to the residential mortgage market and to “simplify” financial institutions’ reporting requirements and processes. In a press release, the CFPB stated that its 2012 HMDA dataset has, “not kept pace with the market’s evolution,” and, for example, “do[es] not provide adequate information about certain loan features that helped contribute to the mortgage crisis, such as adjustable-rate mortgages and non-amortizing loans.” The personal information the CFPB proposed to collect includes a borrower’s or applicant’s age and credit score, the property value, term of the loan, total points and fees, and the  duration of teaser or introductory rates.  The CFPB is accepting public comments through October 22nd.
  • Consumer complaints: On July 29th, the CFPB announced an extension from August 22nd to September 22nd  of the public comment period for its proposed policy, announced last week, to expand its Consumer Complaint Database to include consumers’ narrative stories based upon the complaint.

CFPB Operations

  • Civil Penalty Fund: On July 28th, the Government Accountability Office released a report entitled, “Opportunity Exists to Improve Transparency of Civil Penalty Fund Activities,” which reviewed how the CFPB administers its Civil Penalty Fund, including the controls guiding the management of the Fund, as well as how the Fund compares to other civil money penalty funds and activities administered by other federal agencies.  The GAO found that the CFPB, “did not document its Fund Administrator’s assessment of all the factors leading to” certain allocations for consumer education and financial literacy.  In turn, the GAO recommended that the CFPB Director ensure appropriate documentation. The CFPB stated that it agreed with the recommendation.  The GAO’s June 26th report was issued to Rep. Shelley Moore Capito (R-WV), Chairwoman of the House Financial Services Committee’s Subcommittee on Financial Institutions and Consumer Credit.
  • Overdraft fees: On July 31st, the CFPB published a “data point report” entitled, “Checking Account Overdraft,” which, “present[s] the results of several analyses of consumers’ experiences with overdrafts at a number of large banks.”  The CFPB found that:
    • Consumers use debit cards nearly three times more frequently than checks or online billing;
    • The majority of debit card overdraft fees occurred for transactions of $24 or less;
    • More than half of consumers pay negative balances within three days, and 75% pay back negative balances within a week; and 
    • 18% of accounts opted-in for overdraft coverage overdraft more than 10 times per year, compared to 6% for non-opted-in accounts.

The CFPB stated in a press release that it reviewed data that, “did not contain consumers’ directly identifying personal information” and that it is, “weighing what consumer protections are necessary for overdraft and related services.”

  • Financial education: On July 30th, the CFPB announced a partnership with national and local organizations to train social service workers to provide financial education to their clients with low and moderate incomes.  The CFPB introduced a new comprehensive  guide in English and Spanish entitled, “Your Money, Your Goals,” which covers topics such as budgeting for daily expenses and debt management.
  • Plain Writing Act: On July 29th, the CFPB published its “Plain Writing Act Compliance Report.” The Plain Writing Act of 2010 requires federal agencies to publish consumer- facing content in language, “that the public can understand and use.” The brief report identifies the senior CFPB official for plain writing, documents covered by the Act, means of personnel training, and other related issues.