Photo of Ori Lev

Nearly ten years after passage of the Dodd-Frank Act, the Supreme Court has finally put to bed the raging argument about whether it was constitutional for Congress to establish the Consumer Financial Protection Bureau (CFPB or Bureau) as an independent agency with a single Director removable by the President only for cause. In an anti-climactic end to nearly a decade of heated rhetoric, political battle and costly litigation, the Court held that the Bureau’s structure is unconstitutional but that it can continue to operate as an Executive branch agency, with the Director subject to the President’s removal authority. While that will certainly have implications for the agency’s leadership—and policy—in the future, it does little to change the current legal landscape for regulated entities (with the possible exception, discussed below, of the need to ratify rules the agency has previously issued).
Continue Reading The Big Bang Fizzles: CFPB Unconstitutional But Not Inoperable

On Thursday, June 18, 2020, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) announced a new pilot program to issue advisory opinions (“Pilot AO Program”) on areas of regulatory or statutory uncertainty. The CFPB simultaneously issued a proposed procedural rule on a permanent advisory opinion program (“AO Program”). The Bureau intends to issue advisory opinions (“AOs”) to address ambiguities in legal requirements that are not suited to be addressed through other Bureau programs such as the Regulatory Inquiries Function and Compliance Aids. The proposed AO Program comes more than two years after industry participants requested such a program in response to the Bureau’s March 2018 Request for Information Regarding Bureau Guidance and Implementation Support.

The proposed AO Program is similar to those offered by other state and federal regulators and, if implemented properly, could provide much needed certainty for regulated entities and consumers alike. The AO Program is intended to address areas of regulatory and statutory uncertainty and provide publicly available guidance for similarly situated parties and affected persons. AOs will be issued as interpretive rules under the Administrative Procedures Act, published in the Federal Register, and signed by the Director of the CFPB. Where information submitted to the Bureau is information the requestor would not normally make public, however, the Bureau will treat it as confidential to the extent applicable under its confidentiality regulations. The CFPB will summarize the material facts of the request, and the AOs will apply to situations that conform to those facts. The AO will also indicate where a safe harbor may apply, such as those under certain consumer financial protection laws. The AO Program is not intended for situations that would require a regulatory change or to create bright-line rules where the regulation or statute is intended to require a fact-intensive analysis.

The AO Program will focus on four of the Bureau’s five statutory objectives under 12 U.S.C. 5511(b)—namely, that: (1) consumers are provided with timely and understandable information to make responsible decisions about financial transactions; (2) outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens; (3) Federal consumer financial law is enforced consistently, without regard to the status of a person as a depository institution, in order to promote fair competition; and (4) markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.

Notably, the Bureau will not use the AO Program to address the statutory objective that “consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination,” stating that “other regulatory tools are often more suitable for addressing” these issues.


Continue Reading Mind the Gap: CFPB Attempts to Address Regulatory Uncertainty With New Advisory Opinion Program

The Consumer Financial Protection Bureau (“CFPB” or “Bureau”) suffered an embarrassing setback in federal district court earlier this week, when a federal district judge denied the Bureau’s motion for entry of a consent judgment on the grounds that the proper party had not consented to entry of the judgment on behalf of the defendants. Back

On May 14, 2020, the Consumer Financial Protection Bureau (“CFPB”) filed a proposed stipulated final judgment and order (the “Order”) against Chou Team Realty, LLC (“Monster Loans”) and several related individuals and entities to resolve alleged violations of the Fair Credit Reporting Act (“FCRA”), the Telemarketing Sales Rule (“TSR”), and the prohibition on unfair, deceptive,

The Consumer Financial Protection Bureau (“CFPB”) has settled a lawsuit seeking to compel it to undertake the rulemaking required by Section 1071 of the Dodd-Frank Act (“Section 1071”). Section 1071, 15 U.S.C. § 1691c-2, requires financial institutions to collect and maintain information about loan applications by women-owned, minority-owned and small businesses, and requires the CFPB to collect and publish this data annually. It also requires the CFPB to issue implementing regulations. The settlement sets forth a specific date by which the CFPB must begin the rulemaking process and establishes a framework for determining, along with plaintiffs or subject to court order, a final timeline for promulgation of the required rule. The settlement should result in a final rule in 2022, a dozen years after Congress first required the CFPB to act.
Continue Reading Long-Awaited Section 1071 Small Business Rulemaking Is Finally on the Horizon

On Friday, January 24, the Consumer Financial Protection Bureau (“Bureau” or “CFPB”) published a Policy Statement clarifying how it intends to exercise its authority to prevent abusive acts or practices under the Dodd-Frank Act. According to CFPB Director Kathy Kraninger, the purpose of the Policy Statement is to promote clarity, which in turn should encourage both compliance with the law and the development of beneficial financial products for consumers.  The Policy Statement describes how the Bureau will use and develop the abusiveness standard in its supervision and enforcement work, pursuant to a three-part, forward-looking framework. Under the framework, the Bureau will: (1) generally rely on the abusiveness standard to address conduct only where the harm to consumers outweighs the benefit, (2) avoid making abusiveness claims where the claims rely on the same facts that the Bureau alleges are unfair or deceptive, and (3) not seek certain types of monetary relief against a covered person who made a good-faith effort to comply with a reasonable interpretation of the abusiveness standard. The Policy Statement suggests that the Bureau will use its abusiveness authority even less frequently than it has in the past. While that may be welcome news to regulated parties, it is also likely to mean slower development of meaningful guideposts as to what constitutes abusive conduct.
Continue Reading CFPB Announces Policy Regarding Prohibition on Abusive Acts or Practices

Many thought that with former Director Richard Cordray’s resignation, the Consumer Financial Protection Bureau (CFPB) would stop using its abusiveness authority in enforcement actions. After all, claims of abusiveness were the epitome of what critics derided as “regulation by enforcement,” as abusiveness was a new concept whose contours were not well defined. While that has largely proven true, there have been some exceptions. Last October, under then-Acting Director Mick Mulvaney, the CFPB issued a Consent Order against a payday lender that also offered check cashing services, which contained a single claim of abusiveness. That claim was based on the entity’s practice, when providing check-cashing services, of using check proceeds to pay off outstanding payday loan debts and providing only the remaining funds to the consumer. That, however, was the only abusiveness claim among the ten enforcement actions of the Mulvaney era (although the Mulvaney-led CFPB did continue to litigate abusiveness claims filed under Cordray).

Continue Reading Abusiveness Isn’t Dead Yet

CFPB Director Kathy Kraninger has filed her first contested lawsuit as CFPB Director.  Somewhat surprisingly, the lawsuit seeks to enforce a Civil Investigative Demand (CID) issued by the CFPB in June 2017—under former Director Richard Cordray—to a debt collection law firm.  The petition to enforce the CID makes clear that the respondent law firm made a “final, partial, redacted production” in response to the CID in September 2017.  Clearly, therefore, this matter was pending at the CFPB throughout the year-long tenure of Mick Mulvaney, during which the agency took no action to enforce the CID. It is dangerous to read too much into this action, but it does suggest that Kraninger may take a more aggressive enforcement posture than Mulvaney, who was criticized for the sharp drop in the number of enforcement actions under his watch.

The CID at issue is a typically broad CFPB CID from that era. It contains 21 interrogatories with dozens of sub-parts, seven requests for written reports, 15 requests for documents, and, unusually, four request for “tangible things,” in this case phone recordings and associated metadata. Read as a whole, the CID seeks information regarding virtually every aspect of the respondent’s debt collection business over a period of three-and-a-half years. The CID’s Notification of Purpose is equally broad and limitless,
Continue Reading Kraninger’s First Lawsuit

The Bureau of Consumer Financial Protection now has the third Director in its history. On December 6, the Senate confirmed Kathleen (“Kathy”) Kraninger on a 50-49 party-line vote to a five-year term as Director, ending Mick Mulvaney’s year-long tenure as Acting Director. Mulvaney’s tenure was marked by elements of both change and continuity from the

On October 17, the Bureau of Consumer Financial Protection (“BCFP” or “Bureau”) issued its Fall  2018 regulatory agenda.  Notable highlights include:

  • Payday Lending Rule Amendments. In January 2018, the Bureau announced that it would engage in rulemaking to reconsider its Payday Lending Rule released in October 2017.  According to the Bureau’s Fall 2018 agenda, the Bureau expects to issue a notice of proposed rulemaking by January 2019 that will address both the merits and the compliance date (currently August 2019) of the rule.
  • Debt Collection Rule Coming. The Bureau expects to issue a notice of proposed rulemaking addressing debt collection-related communication practices and consumer disclosures by March 2019.  The Bureau explained that debt collection remains a top source of the complaints it receives and both industry and consumer groups have encouraged the Bureau to modernize Fair Debt Collection Practices Act (“FDCPA”) requirements through rulemaking.  The Bureau did not specify whether its proposed rulemaking would be limited to third-party collectors subject to the FDCPA, but its reference to FDCPA-requirements suggests that is likely to be the case.
  • Small Business Lending Data Collection Rule Delayed. The Dodd-Frank Act amended the Equal Credit Opportunity Act (“ECOA”) to require financial institutions to submit certain information relating to credit applications made by women-owned, minority-owned, and small businesses to the Bureau and gave the Bureau the authority to require financial institutions to submit additional data.  In May 2017, the Bureau issued a Request for Information seeking comment on small business lending data collection.  While the BCFP’s Spring 2018 agenda listed this item as in the pre-rule stage, the Bureau has now delayed its work on the rule and reclassified it as a long-term action.  The Bureau noted that it “intends to continue certain market monitoring and research activities to facilitate resumption of the rulemaking.”
  • HMDA Data Disclosure Rule. The Bureau expects to issue guidance later this year to govern public disclosure of Home Mortgage Disclosure Act (“HMDA”) data for 2018.  The Bureau also announced that it has decided to engage in notice-and-comment rulemaking to govern public disclosure of HMDA data in future years.
  • Assessment of Prior Rules – Remittances, Mortgage Servicing, QM; TRID up next. The Dodd-Frank Act requires the Bureau to conduct an assessment of each significant rule adopted by the Bureau under Federal consumer financial law within five years after the effective date of the rule.  In accordance with this requirement, the Bureau announced that it expects to complete its assessments of the Remittance Rule, the 2013 RESPA Mortgage Servicing Rule, and the Ability-to-Repay/Qualified Mortgage Rule by January 2019.  At that time, it will begin its assessment of the TILA-RESPA Integrated Disclosure Rule (TRID).
  • Abusiveness Rule? Consistent with recent statements by Acting Director Mick Mulvaney that while unfairness and deception are well-established in the law, abusiveness is not, the Bureau stated that it is considering whether to clarify the meaning of abusiveness through rulemaking.  The Bureau under former Director Richard Cordray rejected defining abusiveness through rulemaking (although the payday rule relied, in part, on the Bureau’s abusiveness authority), preferring instead to bring abusiveness claims in enforcement proceedings to establish the contours of the prohibition.  Time will tell if the Bureau will follow through on this.


Continue Reading BCFP’s Fall 2018 Regulatory Agenda