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,
Federal regulators and Congress continue to release new guidance and requirements to assist residential mortgage loan borrowers facing economic hardships due to the pandemic. But in light of the anticipated volume of requests and associated burden on servicers, they also are offering some regulatory relief. This alert contains a summary of relevant mortgage servicing requirements,…
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
A new Memorandum of Understanding (MOU) between the Consumer Financial Protection Bureau (CFPB) and the US Department of Education (ED) appears to signal an end to the turf war between these two agencies regarding the handling of complaints related to federal student loans. It also ends a period during which the CFPB and ED failed to maintain an MOU, as required by the Dodd-Frank Act. …
Continue Reading Back to School: CFPB and ED Agree to New MOU
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.
Last week the Bureau of Consumer Financial Protection (“BCFP” or “Bureau”) issued guidance on the operations of financial institutions and other supervised entities in the wake of major disasters and emergencies. The guidance explains that supervised entities have flexibility under the existing regulatory framework to take action that could benefit affected consumers.
This is not the first time the Bureau has issued guidance on this topic. Last year, the Bureau released a statement on Hurricanes Harvey and Irma and another on Hurricane Maria. Unlike the prior guidance, the statement released last week does not address a particular emergency or disaster but applies to emergencies in general.
The new guidance echoes prior guidance by providing examples in which regulations allow flexibility. For instance:
- Although RESPA’s Regulation X generally prohibits residential mortgage servicers from offering a loss mitigation option to borrowers based on an evaluation of an incomplete application, the guidance notes servicers may nonetheless offer short-term loss mitigation options. Because it could be difficult for consumers impacted by a disaster to obtain and submit the necessary documents to complete a timely application, this exception may allow servicers to better assist those borrowers.
- Although ECOA’s Regulation B generally requires creditors to provide first-lien loan applicants with copies of appraisals or other written valuations promptly upon completion, or three business days prior to consummation or account opening, whichever is earlier, the guidance notes that the applicant generally may waive that timing requirement and agree to receive the copy at or before consummation or account opening (except where otherwise prohibited by law). That exception may allow supervised entities to give consumers impacted by a disaster quicker access to credit.
Unlike prior guidance that expressly “encouraged” supervised entities to take these steps, this latest guidance only states that supervised entities are permitted to use the flexibility. …
Continue Reading BCFP Releases New Guidance on Major Disasters and Emergencies