On March 19, the CFPB announced the publication of its Final Policy Statement on disclosure of complaint narratives. The Final Policy allows consumers who file complaints with the CFPB to “opt-in” to have the actual narrative of the complaint disclosed in the CFPB’s consumer complaint database, with private information scrubbed out of the narrative. Until now, the database contained only general information. The company identified in the complaint will have the option, for a 180 day period, to select from a pre-set list of structured responses to accompany the consumer complaint narrative. Further, the CFPB will disclose the consumer narrative when the company provides its public-facing response or after the company has been in receipt of the complaint for 60 calendar days, whichever occurs first. On the same day, the CFPB issued a Request For Information regarding the potential collection, identification, and sharing of consumer feedback specific to positive interactions with banks and non-banks in conjunction with the complaint handling process.
On March 26, the CFPB announced that it is considering proposing a rule to “end payday debt traps” and released several related documents, including a fact sheet and an outline of the proposal that will be presented to a panel of small businesses pursuant to the Small Business Regulatory Enforcement Fairness Act (SBREFA). The proposal sets forth ability to repay requirements for “short-term” and “longer-term” loans, and then provides alternative options for lenders to provide both types of loans in lieu of complying with the general ability to repay requirements.
Under the SBREFA process, the CFPB first seeks input from a panel of small businesses that likely will be subject to the forthcoming rule. A report regarding the input of those reviewers is then created and considered by the CFPB before issuing its proposed rule.
Questions regarding the matters discussed in this Alert may be directed to the lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.
On March 17, the CFPB announced a Request for Information (RFI) seeking public comment on key aspects of the credit card market. This RFI is a part of a review mandated by the Credit Card Accountability, Responsibility, and Disclosure Act (the CARD Act)—a law passed in 2009 that requires the CFPB to conduct a review of the credit card market every two years. The review seeks feedback on how the credit card market has functioned over the last two years and the impact new credit card protections have had on consumers. Specifically, the review solicits input on the changing patterns of credit card agreement terms, unfair or deceptive practices within the credit card market, the use of third-party debt collection agencies, and how consumers understand credit card reward products. Information obtained from the review will culminate in a public report to Congress.
On March 12, the FTC announced its coordination with the CFPB to reauthorize for a three-year term their memorandum of understanding (MOU), which outlines the two agencies’ coordination under the Consumer Financial Protection Act. The interagency agreement outlines processes for, among other things, coordinated law enforcement activities, commencement of or settling investigations and actions and proceedings, intervention in law enforcement actions, consultation on rulemaking and guidelines, sharing supervisory information, sharing consumer complaint information, and coordination to minimize duplicative or burdensome oversight or administrative proceedings.
CFPB Releases Winter Issue of Supervisory Highlights, Schedules Date for Field Hearing on Payday Lending
On March 11, the CFPB released its seventh issuance of Supervisory Highlights, which highlights the CFPB’s supervision work completed between July 2014 and December 2014, detailing examination findings and observations in consumer reporting, debt collection, deposits, mortgage origination, and fair lending examinations. The winter issue also reveals recent supervisory resolutions reached in the areas of payday lending, mortgage servicing, and mortgage origination have resulted in remediation of approximately $19.4 million to more than 92,000 consumers during the time reported. Other notable information included within the report is the addition of Credit Card Account Management examination procedures to the CFPB’s Supervision and Examination Manual. In a separate announcement, the CFPB also announced it will host a field hearing on payday lending, scheduled for Thursday, March 26 in Richmond, VA.
On March 10, the CFPB announced the release of its final arbitration study, accompanied by a fact sheet, to coincide with its field hearing held in Newark, NJ. The study examined approximately 850 consumer financial agreements, of which almost 50% were credit card agreements, to analyze the prevalence of arbitration clauses and their terms. Among other data, the Bureau also reviewed over 1,800 arbitration disputes, more than 3,400 individual federal court lawsuits, 42,000 credit card cases filed in small claims court, and 420 class action settlements filed in federal courts.
On March 4, the CFPB Office of Inspector General (OIG) issued a report on its audit of the CFPB’s diversity and inclusion efforts, which was completed at Congress’s request. The report outlines its findings, noting that while the Bureau has worked to create a diverse and inclusive environment, there are four main areas where its efforts could be improved: (i) currently, diversity and inclusion training is not mandatory for employees, senior managers, and supervisors; (ii) ongoing issues exist in connection with data quality in the CFPB’s tracking of potential diversity and inclusion concerns; (iii) the diversity and inclusion strategic plan should incorporate opportunities “to strengthen supervisors’ and senior managers’ accountability for implementing diversity and inclusion initiatives and human resources-related policies;” and (iv) an official succession planning process should be implemented to ensure that candidates applying for senior management positions are diverse. The OIG made several recommendations that are intended to further enhance the Bureau’s “monitoring and promotion of diversity and inclusion,” and the CFPB has since approved new standard operating procedures to address these recommendations.
On March 4, U.S. House Representative Randy Neugebauer introduced H.R. 1266, a bill to reform the CFPB’s leadership structure to replace its single director with a five-member commission appointed by the President. Representative Neugebauer serves at the Chairman of the Financial Institutions and Consumer Credit Subcommittee.
On February 23, CFPB Director Richard Cordray delivered prepared remarks at the National Association of Attorneys General Winter Meeting in Washington, D.C. In his remarks, Cordray indicated that the CFPB is keeping a watchful eye on the auto lending market, stating that auto lending practices are currently being supervised at the largest banks. Cordray further revealed that the CFPB intends to move forward with a proposed rule to oversee the larger nonbank auto lenders as well. Cordray also lobbied the attorneys general to use the CFPB’s government portal to analyze consumer complaints to assist in investigations, stating, “[w]e now have 22 attorneys general and 28 state banking regulators who are already signed up and accessing this information through the secure portal. I strongly urge the rest of you to join us and do the same.”
The CFPB announced on February 23 that it plans to host a field hearing on the issue of arbitration provisions within various consumer financial contracts. According to the CFPB’s blog post, the hearing will take place on March 10 in Newark, New Jersey, and will feature remarks from CFPB Director Richard Cordray, testimony from consumer groups, industry representatives, and members of the public. The Dodd-Frank Act instructs the CFPB to study the use of pre-dispute arbitration provisions in consumer financial contracts (and provide a Report to Congress) and gives the CFPB the authority to issue regulations on the use of arbitration clauses if the CFPB chooses. In December 2013, the CFPB issued a report on its preliminary findings, which indicated that approximately 9 out of 10 arbitration clauses used by large banks in credit card and checking account agreements prevent consumers from participating in class actions.
On February 24, the CFPB announced a proposed rule that would reduce the burden of credit card issuers by suspending – for one year – their obligation to submit credit card agreements to the CFPB on a quarterly basis. The proposed rule would be in effect while the CFPB works to establish a “more streamlined and automated electronic submission system” that would make it easier for issuers to submit the agreements. The proposal amends the 2009 CARD Act, which established the requirement that issuers submit consumer credit card agreements to the CFPB. During the proposed one-year suspension, other requirements of the CARD Act would remain in place, such as the issuers’ “obligations to post currently-offered agreements on their own websites.” Comments on the proposed rule are due by March 13. Credit card issuers would resume submitting credit card agreements on a quarterly basis to the CFPB starting on April 30, 2016.
CFPB Initiative Results in Free Access to Credit Scores, Agency Pledges to Increase Credit Reporting Enforcement Authority
One year after launching an initiative to improve consumer access to credit reporting information, the CFPB announced on February 19 that at least 50 million Americans now have the ability to directly and freely access their credit scores. As a result of the CFPB’s credit score initiative, over a dozen major credit card issuers have elected to provide free credit reports to their cardholders, and more issuers are expected to follow suit. The initiative was launched to emphasize the significance of monitoring credit scores and to make it easier for consumers to keep themselves informed. CFPB Director Richard Cordray applauded the agency’s efforts to increase transparency in this arena in his prepared remarks for Thursday’s Consumer Advisory Board Meeting, stating that improving both the accessibility and accuracy of credit reports is vital to consumers and credit providers alike. Cordray also alluded that the CFPB intends to leverage its enforcement authority to more closely regulate the credit reporting industry, thereby placing creditors, debt collectors, and other businesses that furnish consumer credit information on high alert. “Using our supervision and enforcement authorities,” Cordray said, “we are already bringing significant new improvements to the credit reporting system − and we are only getting started.”
On February 18, Steven Antonakes, Deputy Director of the CFPB, delivered remarks before the Exchequer Club of Washington, D.C. regarding the CFPB’s risk-focused supervision program. In his remarks, Antonakes identified two key differences that distinguish the CFPB from other regulatory agencies: (i) there is a “focus on risks to consumers rather than risks to institutions;” and (ii) examinations are conducted by product line rather than an “institution-centric approach.” Antonakes further stated that the agency uses field and market intelligence, which includes both qualitative and quantitative factors for each product line, such as the strength of compliance management systems, findings from CFPB’s prior examinations, the existence of other regulatory actions, the consumer complaints received, and metrics gathered from public reports, to adequately assess risks to consumers from an institution’s activity in any given market. After the review period, an institution will receive a “roll-up examination report” or a “supervisory plan,” depending on size, that will summarize the findings of the review. If corrective action is warranted, a review committee will assess violation-focused factors, institution-focused factors, and policy-focused factors to determine whether the examination should be resolved through a supervisory action or a public enforcement action.
On February 13, the FDIC released the third and final technical assistance video intended to assist bank employees to comply with certain mortgage rules issued by the CFPB. The final video addresses the Mortgage Servicing Rules and the “Small Servicer” exemption. The first video, released on November 19, 2014, covered the ATR/QM Rule, and the second video, released on January 27, covered the Loan Originator Compensation Rule.