The CFPB recently issued a Request for Information (RFI) seeking vendor feedback on the agency’s consideration of establishing a web-based system that would require nonbank financial institutions to register with the CFPB. The RFI outlines the potential registration system’s capabilities and services, noting that nonbank financial institutions would use it to “apply for, amend, update, or renew a registration online using a single set of uniform applications.” In addition to other data gathering components, the potential registration system may be used for the collection of financial, operational, and organizational structure data. Responses from technology system vendors were due on July 29, 2016, with a disclaimer that the RFI was not “to be construed as a commitment that the CFPB will propose a rulemaking on the registration of nonbank financial institutions or that the CFPB will propose any specific system requirements.”
On August 19, the CFPB announced new members to the Consumer Advisory Board, the Community Bank Advisory Council, Credit Union Advisory Council, and Academic Research Council. Pursuant to the Dodd-Frank Act, the CFPB established the Consumer Advisory Board to counsel the agency’s Director on consumer financial issues; the Community Bank Advisory Council, the Credit Union Advisory Council, and the Academic Research Council were created at the Director’s order. The nine newly appointed members to the Consumer Advisory Board and the two new members to the Academic Research Council will serve three-year terms; the seven new members to the Community Bank Council and the eight new members to Credit Union Advisory Council will serve two-year terms.
On August 24, the FTC, in coordination with New York AG Schneiderman, announced that it issued a final order banning a debt collector and his four companies from the debt collection business. According to the order, the defendants engaged in deceptive and abusive debt collection practices in violation of the FTC Act, the Fair Debt Collection Practices Act, and New York General Business Law. The final order resolves a 2015 Operation Collection Protection action alleging, among other things, that the defendants “regularly threatened, pressured, and harassed consumers into paying debts [they] did not owe,” continuing to “collect on these fake debts even after the supposed creditor notified them that the debts were bogus.” The final order imposes a judgment of more than $18.4 million, which will be partially suspended due to the defendants’ inability to pay. AG Schneiderman and the FTC issued a separate order to the owner’s ex-wife, imposing a $418,000 judgment, which also will be partially suspended.
On September 15, the FTC will host a workshop titled “Putting Disclosures to the Test” to examine the effectiveness of consumer disclosures. Scheduled to take place in Washington, D.C., the full-day event will include an opening session devoted to how consumers process disclosures, and presentations on the following six topic areas: (i) methods and procedures for evaluating the effectiveness of disclosures; (ii) if and when consumers notice, read, or pay attention to disclosures; (iii) if consumers understand the information in disclosures; (iv) the impact of disclosures on consumers’ decisions and behavior; (v) case studies; and (vi) the future of disclosures, with emphasis on how to make them more efficient and effective. In addition to acknowledging the agency’s commitment to ensuring the use of effective, non-deceptive disclosures for advertisement purposes, the FTC highlighted the significance of effective disclosures in the privacy field and noted that it has “long encouraged the development and testing of shorter, clearer, easier-to-use privacy disclosures and consent mechanisms.”
Industry Groups Voice Concern that the CFPB’s Arbitration Proposal Fails to Provide Protection for Consumers
On August 22, the American Bankers Association, the Consumer Banks Association, and the Financial Services Roundtable sent a letter to CFPB Director Cordray regarding the agency’s proposed arbitration rule. According to the Associations, the CFPB’s proposal seeking to impose certain restrictions on the use of mandatory pre-dispute arbitration clauses is inconsistent with the agency’s March 2015 study of consumer arbitration and fails to meet the Dodd-Frank requirements that it provide consumer protection and satisfy the public interest. Arguing that consumers will “truly suffer if the proposed rule becomes final,” the letter highlights the following concerns: (i) due to the “surge” of additional class actions, consumers, as tax payers, will be forced to pay for the increased costs to the court systems; (ii) as litigants, they will face backlogs as court systems experience delays in administering and resolving the class action suits; (iii) as customers of financial service providers, they will be subject to increased prices and/or reduced services because “the billions of dollars in class action litigation costs will be passed through them in whole or in part”; and (iv) consumers will lose the benefits of arbitration, including efficiency, convenience, and fewer costs. The Associations contend that the proposal, if passed, would be particularly restricting for small dollar “non-classable” claims. Read more…