Developments at the year-and-a half-old Consumer Financial Protection Bureau (the "CFPB") are coming almost daily. We would like to discuss four recent developments: (1) the agreement to share information with the City of Chicago, (2) Congress' enactment of CFPB attorney-client privilege legislation, (3) last Thursday's release of a report by the CFPB on credit reporting, and (4) last Thursday's CFPB announcement that it will waive disclosure requirements on a case-by-case basis to permit trials of alternative forms of disclosures.
First, of course, it was widely reported that Chicago was the first city to enter into an information-sharing agreement with the CFPB. What was not widely reported was that an ordinance would be introduced in the Chicago City Council to regulate and license debt collectors. Conceivably information that the City receives from the CFPB could bear on action on license applications. It was also reported that the City would gather information on home repair loans, payday loans, small dollar loans, reverse mortgages, and mortgage origination and servicing. Presumably that information would be shared with the CFPB. The City also simultaneously announced that it would implement new zoning regulations that would apply to payday lenders and auto-title loan stores, as well as prioritize enforcement of predatory lending and fraudulent consumer practice laws. Again, one would expect that information from the CFPB could affect the City's zoning and enforcement decisions.
Second, following his announcement last week that he would resign from the U. S. Senate next month, Senator James DeMint (R-S.C.) released his hold on legislation that would clarify that providing privileged documents to examiners from the CFPB would not waive the privilege. (Similar legislation as to providing attorney-client privileged documents to other bank regulators is already on the books.) The U.S. Senate passed the legislation last Tuesday, and it is on the President's desk for signature, which is expected.
Third, last Thursday, the CFPB released a paper on the three largest nationwide consumer reporting agencies (the "CRAs"). The paper indicated that the three maintain credit files on more than 200,000,000 persons and provide information to approximately 10,000 firms that provide them data. The ten largest financial institutions furnish information to the CRAs for more than half of all accounts. The CFPB acknowledges that there is uncertainty as to the extent to which credit reports contain material inaccuracies, but it looks forward to forthcoming release of a decade-long study on this subject by the Federal Trade Commission. However, in 2011, eight million consumers disputed the accuracy of information in their credit files resulting in between more than 32 million disputed items. Information reported by collection agencies have the highest dispute rates and account for 40% of disputes. It has been widely reported that the CFPB paper found that the CRAs generally do not forward to furnishers of information documentation that consumers submit to them to support disputes, but instead provide numeric codes indicating the nature of the dispute.
Finally, last Thursday, the CFPB also announced a proposed policy to allow and actually to encourage companies to test new consumer disclosures on a case-by-case basis. The goal is to permit companies to conduct real world trials of disclosure alternatives In order to help the CFPB identify what works and what does not. Those who follow developments at the CFPB have noticed its commitment to fostering innovation, and this is another step in that effort. It appears that firms wishing to test new disclosure programs would apply to the CFPB for case-by-case approval and a limited time exemption from current federal disclosure laws. Of course, test results would have to be reported to the CFPB which would then use the information to improve its disclosure rules and forms.
Whatever one might think of the CFPB, it is difficult to criticize it for inactivity.