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The Summer 2018 edition of Supervisory Highlights –the first one the BCFP has issued under Mick Mulvaney’s leadership – is much the same as previous editions. In it, the Bureau describes recent supervisory observations in various industries, and summarizes recent public enforcement actions as well as supervision program developments.

One aspect of the report that is notably different, however, is the introductory language. In prior regular editions of Supervisory Highlights, the report’s introduction would emphasize the corrective action that the Bureau had required of supervised institutions. It would highlight the amount of total restitution to consumers and the number of consumers affected by supervisory activities, and would note the millions of dollars imposed in civil money penalties.

This new version eliminates all of that discussion from the introduction. Instead, the Bureau has added language emphasizing that “institutions are subject only to the requirements of relevant laws and regulations” and that the purpose of disseminating these Supervisory Highlights is to “help institutions better understand how the Bureau examines institutions” to help industry limit risks to consumers.

The first sentence of the report, which in previous iterations used to say that the Bureau is “committed to a consumer financial marketplace that is fair, transparent, and competitive, and that works for all consumers” now says the Bureau is committed to a marketplace that is “free, innovative, competitive, and transparent, where the rights of all parties are protected by the rule of law, and where consumers are free to choose the products and services that best fit their individual needs.”

Ultimately, time will tell whether this is simply rhetoric or if the Bureau’s supervisory and enforcement posture will be dramatically different from that under Mulvaney’s predecessor. Continue Reading BCFP’s Latest Supervisory Highlights

On July 30, 2018, the U.S. Department of the Treasury issued its much-anticipated report on reshaping Fintech regulation.  “A Financial System That Creates Economic Opportunities — Nonbank Financials, Fintech, and Innovation,” available here, focuses on the regulation of financial technology and makes more than 80 recommendations related to Fintech and nonbank financial policy, including:

  • endorsing so-called regulatory sandboxes;
  • ending the CFPB’s small-dollar lending rule;
  • increasing consumers’ control over their data;
  • establishing a national data breach notification standard; and
  • endorsing the OCC’s Fintech charter proposal.

The report also proposes an approach to conforming some of the differences in state-by-state financial regulation and advocates for greater legal certainty in nonbank lending.  Stay tuned for Mayer Brown’s forthcoming analysis of the key aspects of the report.

 

On July 26, 2018, the Federal Reserve Board (“FRB”) announced the launch of a new publication called the Consumer Compliance Supervision Bulletin. Similar to the Bureau of Consumer Financial Protection’s (“BCFP”) Supervisory Highlights, the new publication summarizes examiners’ observations from recent supervisory activities and offers guidance on what supervised institutions can do to address consumer compliance risks. The first bulletin focuses on three areas: fair lending, unfair or deceptive acts or practices (“UDAP”), and recent regulatory and policy developments. Continue Reading Key Takeaways from the Fed’s July 2018 Consumer Compliance Supervision Bulletin

Nearly seven months into Mick Mulvaney’s tenure as Acting Director of the Bureau of Consumer Financial Protection (Bureau), the agency issued just its second enforcement action under his leadership on June 13, 2018. You may have missed it, as the press release was not pushed out through the Bureau’s email notifications and the cursory press release may have flown under your radar. The settlement is with a parent company and its subsidiaries that originated, provided, purchased, serviced, and collected on high-cost, short-term secured and unsecured consumer loans. The consent order contains allegations of violations of the prohibition on unfair practices under the Consumer Financial Protection Act and of the Fair Credit Reporting Act, and requires the respondents to pay a $5 million civil money penalty. Notably, the consent order does not require any consumer redress, despite Mr. Mulvaney’s stated intent to only pursue cases with “quantifiable and unavoidable” harm to consumers.

Debt Collection Practices

The Bureau alleges that respondents engaged in unfair in-person debt collection practices, including discussing debts in public, leaving the respondents’ “field cards” (presumably identifying the respondents) with third parties (including the consumers’ children and neighbors), and visiting consumers’ places of employment. The Bureau alleges that these practices were unfair because they caused substantial injury such as humiliation, inconvenience, and reputational damage; consumers could not reasonably avoid the harm because consumers were not informed of whether and when such visits would occur and could not stop respondents from engaging in the visits; and any potential benefit in the form of recoveries were outweighed by the substantial injury to consumers. The consent order notes that respondent attempted 12 million in-person visits to more than 1.3 million consumers over a five-year period, and requires respondents to cease in-person collection visits at consumers’ homes, places of employment, and public places. Continue Reading Mulvaney’s Bureau Issues Second Enforcement Action: Debt Collectors Beware?

Despite changes in leadership at numerous federal agencies, Washington D.C. continues to focus on lending to servicemembers. In December, Congress extended the time period for protections against foreclosure under the Servicemembers Civil Relief Act. Otherwise, those protections would have expired at the end of 2017.

In addition, the Department of Defense recently amended its Military Lending Act interpretive rule. Among other topics, the amendments address loans to purchase a motor vehicle or other property, and the extent to which the Act’s requirements exempt loans that finance amounts in addition to the purchase price.

Read more in Mayer Brown’s Legal Update.

In an email to staff, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray announced on Wednesday, November 15, that he will be stepping down this month.  His departure was widely anticipated.  Because the CFPB is headed by a single director – as opposed to a 5-member commission – the agency’s director wields enormous power. Below we address some of the most frequently asked questions regarding Director Cordray’s resignation.

Continue Reading CFPB Director Richard Cordray to Step Down

On October 5th, the CFPB finalized its long-awaited payday lending rule, reportedly five years in the making. The final rule is substantially similar to the proposal the Bureau issued last year. However, the Bureau decided not to finalize requirements for longer-term high-cost installment loans, choosing to focus only on short-term loans and longer-term loans with a balloon payment feature.

The final rule will become effective in mid-summer 2019, 21 months after it is published in the Federal Register (except that provisions facilitating “registered information systems” to which creditors will report information regarding loans subject to the new ability-to-repay requirements become effective 60 days after publication).

The final rule identifies two practices as unfair and abusive: (1) making a covered short-term loan or longer-term balloon payment loan without determining that the consumer has the ability to repay; and (2) absent express consumer authorization, making attempts to withdraw payments from a consumer’s account after two consecutive payments have failed. Continue Reading CFPB’s Final Payday Lending Rule: The Long and Short of It

The ABA Business Law Section is holding its 2017 Annual Meeting in Chicago next week and will offer over 90 CLE programs and many more committee meetings and events.

Mayer Brown’s Financial Services Regulatory & Enforcement (FSRE) partner David Beam (Washington DC) will moderate a panel on payment network rules and their impact in the marketplace. FSRE partner Melanie Brody (Washington DC) will participate on a panel on how fintech is changing the way consumer credit offerings work.

FSRE associate Matthew Bisanz (Washington DC) will co-moderate, and FSRE partner Stephanie Robinson (Washington DC) will participate on, a panel discussing innovative enforcement techniques being employed by bank regulators and how the industry can adapt to them. FSRE associate Eric Mitzenmacher (Washington DC) will participate on a panel on bank technology services and marketplace lending developments.

Mayer Brown’s Government Relations partner Mitchell Holzrichter (Chicago) will participate on a panel discussing the life-cycle of public-private partnership projects.

For more information, please visit the event webpage.

Pay-by-phone fees continue to attract the Consumer Financial Protection Bureau’s attention. Compliance Bulletin 2017-01, issued on July 27, 2017, indicates that the following acts or practices may constitute unfair, deceptive, or abusive acts or practices (“UDAAP”) or contribute to the risk of committing UDAAPs:

  1. Failing to disclose the prices of all available phone pay fees when different payment options carry materially different fees;
  2. Misrepresenting the available options or that a fee is required to pay by phone;
  3. Failing to disclose that a phone pay fee would be added to a consumer’s payment, which could create the misimpression that there is no service fee; and
  4. Lack of employee monitoring or service provider oversight, which may lead to misrepresentations or failure to disclose available options and fees.

The Bureau has previously raised concerns about phone pay fees. In a 2014 enforcement action, the Bureau and the Federal Trade Commission alleged that a mortgage servicer engaged in deceptive acts or practices by misrepresenting that the only payment method consumers could use to make timely payments was a particular method that required a convenience fee. In 2015, the Bureau took action against a bank for allegedly misrepresenting that a phone pay fee was a processing fee rather than a fee to enable the payment to post on the same day. The bank also allegedly failed to disclose other no-cost payment options. This week’s Bulletin 2017-01 suggests that companies should disclose such fees in writing to consumers, as opposed to relying solely on phone representatives to  explain the fees to consumers.

Bulletin 2017-01 also reiterates that certain practices in connection with phone pay fees may conflict with the Fair Debt Collection Practices Act (“FDCPA”). For example, Bureau examiners have found alleged violations of the FDCPA where the underlying consumer debt contract did not expressly permit the charging of phone pay fees and where the applicable state law was silent on the fees’ permissibility. The Bureau indicated last year that it may propose rules under the FDCPA to clarify that debt collectors may charge convenience fees only where state law expressly permits them or the consumer expressly agreed to them in the contract that created the underlying debt.

The Bulletin recommends that companies review their phone pay fee practices, including reviewing applicable state and federal laws, underlying debt contracts, service provider procedures, other consumer-facing materials, consumer complaints, and employee incentive plans for potential risks.

The Consumer Financial Protection Bureau (CFPB) marks its fifth birthday having made a substantial mark on the consumer financial services marketplace. To mark this event, we have compiled a retrospective of the CFPB’s first five years. The retrospective provides an overview of the CFPB’s actions in the realms of rulemaking, supervision, and enforcement. While it would be difficult to chronicle all of the CFPB’s activities over that period, the articles in the retrospective provide a snapshot of the rules the CFPB has written or proposed, the supervision program it has implemented, and the enforcement actions it has taken across the landscape of consumer financial services. Some of the articles appeared previously on this blog, others appeared as Mayer Brown Legal Updates, and many are new analyses or summaries of the CFPB’s actions.  Read the retrospective, available here.