Consumer Financial Protection Bureau (CFPB)

The dispute over the CFPB acting director designation has moved into federal court.

In yesterday’s post, we explained why the President’s designation of Mick Mulvaney as acting CFPB director complies with the law, and why Mr. Mulvaney—rather than CFPB deputy director Leandra English—qualifies as the lawful acting director.

On the evening of November 26, Ms. English filed a lawsuit against President Trump and Mr. Mulvaney seeking a declaration that she is the lawful acting director.  (Note that Ms. English is represented by private counsel, not by CFPB lawyers.)

Meanwhile, the Justice Department’s Office of Legal Counsel on November 25 issued an opinion supporting the President’s designation of Mr. Mulvaney as acting director.  Among other things, the opinion points out that the Federal Vacancies Reform Act—the statute invoked by President Trump—expressly does not apply to a number of specified positions (in 5 U.S.C. § 3349c), but that the CFPB director is not included in that list.

Finally, the CFPB’s general counsel agrees with the Justice Department’s analysis: Continue Reading CFPB Acting Director – The Controversy Escalates

Richard Cordray is no longer the director of the Consumer Financial Protection Bureau. He resigned as of midnight on November 24.

But—as with so many events relating to the CFPB since its creation in 2010—there is a controversy about what happens next.

Before he resigned, Mr. Cordray appointed Leandra English—who had been serving as the agency’s chief of staff—to the position of deputy director.  And in a note to the Bureau’s employees, Mr. Cordray stated: “upon my departure, she will become the acting Director.”

Hours later, the White House announced that the President “is designating Director of the Office of Management and Budget (OMB) Mick Mulvaney as Acting Director of the Consumer Financial Protection Bureau (CFPB).” It stated that “Director Mulvaney will serve as Acting Director until a permanent director is nominated and confirmed.”

Is the New York Times correct in asserting that the Bureau now has “dueling directors, and there [is] little sense of who actually would be in charge Monday morning”? Continue Reading The CFPB’s Acting Director Is . . .

The Consumer Financial Protection Bureau (CFPB) recently posted its Enforcement Policy and Procedures Manual (Manual) on its FOIA reading room website.  This is a welcome step in transparency, which was driven by the agency’s receipt of multiple FOIA requests for the Manual.  Other documents available in the FOIA reading room relating to the agency’s enforcement process now include the instructions and template for the memo sent to the Action Review Committee (ARC), which determines whether issues identified in the course of a CFPB examination warrant public enforcement action, and a template of the memo that staff send to the Director seeking authority to settle or sue at the conclusion of an enforcement investigation.  Hopefully, the CFPB will not wait for multiple FOIA requests to post other helpful documents on its website, such as a staff directory, which is available via FOIA request but is not currently posted on the CFPB website.

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

The anti-arbitration rule issued by the Consumer Financial Protection Bureau in July is now just one short step away from elimination.

The Senate tonight voted 51-50 (with Vice President Pence casting the deciding vote) to invalidate the CFPB’s rule under the Congressional Review Act (CRA). That vote follows the House of Representatives’ disapproval of the rule in July.

The last remaining step is the President’s signature on the legislation, which seems highly likely given the Administration’s statement today urging the Senate to invalidate the rule.

The President’s approval will trigger two provisions of the CRA.

First, the rule “shall not take effect (or continue)” (5 U.S.C. § 801(b)(1)). In other words, the rule no longer has the force of law and businesses are no longer required to comply with its terms.

Second, the CFPB may neither re-issue the rule “in substantially the same form” nor issue a new rule that is “substantially the same” as the invalidated rule—unless Congress enacts new legislation “specifically authoriz[ing]” such a rule (5 U.S.C. § 801(b)(2)). The scope of this “substantially the same” standard has not been addressed by the courts, but it seems clear that at the very minimum the Bureau cannot issue (a) a new rule banning class action waivers; (b) an express ban of pre-dispute arbitration clauses; (c) a rule that has the practical effect of eliminating pre-dispute arbitration clauses; or (d) any other rule that imposes similar burdens on the use of arbitration.

Invalidation of the rule under the CRA also will moot the pending broad-based industry lawsuit against the CFPB challenging the legality of the regulation. (Mayer Brown represents the plaintiffs in the litigation).

On October 4, the Consumer Financial Protection Bureau (“CFPB”) issued an interim final rule and a proposed rule related to the 2016 Mortgage Servicing Final Rule to clarify the timing of and facilitate the provision of certain required communications with borrowers.

The CFPB amended its mortgage servicing rules in August 2016, to go into effect in large part on October 19, 2017 (the “2016 Final Rule”). One provision of the 2016 Final Rule requires mortgage servicers to send certain delinquent borrowers early intervention notices, modified for use with a borrower who has requested a cease in communication under the Fair Debt Collection Practices Act (“FDCPA”). The FDCPA allows borrowers to request that servicers and other companies refrain from contacting them except in certain circumstances, such as when a borrower becomes delinquent. The 2016 Final Rule exempts servicers from sending the early intervention notices only in situations where the borrower does not have a loss mitigation option available or where the borrower is a debtor in bankruptcy.

Under the 2016 Final Rule, mortgage servicers, when communicating with consumers who have invoked the FDCPA’s cease communication right, were required to provide the consumers modified early intervention notices, but only once every 180 days. Continue Reading It’s All in the Timing: CFPB Addresses Timing Challenges in 2016 Mortgage Servicing Rules

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 be 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

No AfBA disclosure — no safe harbor!

By Consent Order dated September 27, 2017, the Consumer Financial Protection Bureau took action against Meridian Title Corporation for violating Section 8 of the Real Estate Settlement Procedures Act of 1974 by failing to furnish affiliated business arrangement (AfBA) disclosures to consumers. Meridian, an Indiana title and settlement agent, referred over 7,000 customers to its affiliated title insurer, Arsenal Insurance Corporation, without providing written AfBA disclosures notifying consumers of the entities’ affiliation and consumers’ rights. It also received compensation above and beyond its standard allowable commission set forth in the companies’ agency agreement. Under the Consent Order, Meridian agreed to disclose its affiliation with Arsenal, implement certain compliance measures, and set aside $1.25 million for affected consumers, with any portion of that amount not ultimately provided to consumers to be paid to the CFPB.

As indicated above, the underlying basis for action in this case was Meridian’s failure to provide written AfBA disclosures to consumers it referred to Arsenal. The disclosure requirement is black and white – payments under an AfBA cannot qualify for RESPA’s Section 8(c)(4) exception to the anti-kickback and fee-splitting provisions unless the referring entity provides written disclosures to customers meeting certain form and content requirements. Failure to furnish the disclosures leaves payments between the entities subject to scrutiny to determine whether they constitute payments for referrals or qualify for some other exception, Continue Reading CFPB Requires Title Agent to Pay Up To $1.25 Million to Consumers Referred to Affiliated Title Insurer

Yesterday, the CFPB issued two HMDA-related items – a final rule amending federal Regulation B’s information collection provisions and a proposed policy document addressing which HMDA data fields the Bureau intends to make public beginning in 2019.

The Regulation B amendment is intended to facilitate compliance with the new version of Regulation C going into effect on January 1, 2018.   The final rule provides creditors with flexibility in complying with Regulation B’s information collection requirements and restrictions for certain dwelling-secured loans. This will allow lenders to use uniform information-gathering practices and consistent forms without running afoul with Regulation B, even when their loan volume or other circumstances exempts them from data collection and reporting under Regulation C.  The final rule can be found here.

The policy guidance document sets out how the CFPB proposes to balance the competing goals of making HMDA data available to the public while also protecting loan applicant privacy. The Bureau believes that public disclosure of HMDA data is critical to advancing HMDA’s goals, including the identification of possible lending discrimination.  On the other hand, there is a risk that the expanded list of HMDA fields that will be collected next year under amended Regulation C could reveal loan applicants’ identities and other personal information.  The CFPB therefore proposes to exclude certain fields from public disclosure and to modify certain others so they are less specific.  The proposed guidance can be found here. The Bureau will accept comments on the proposal for 60 following its publication in the Federal Register.

The Consumer Financial Protection Bureau (“CFPB”) has issued its first No-Action Letter (“No-Action Letter” or “Letter”) in response to a request from Upstart Network, Inc. (“Upstart”). The No-Action Letter means that CFPB staff currently has no intention of recommending enforcement or supervisory action against Upstart. This decision is limited to the application of the Equal Credit Opportunity Act (“ECOA”) and its implementing regulation, Regulation B, to Upstart’s automated model for underwriting applicants for unsecured, non-revolving credit (“automated model”).

Upstart is an online lending platform that, working with a bank partner, uses alternative data to facilitate credit and pricing decisions for consumers with limited credit or work history. In addition to relying on traditional credit information, Upstart uses non-traditional sources of information to evaluate a consumer’s creditworthiness. For instance, Upstart might look at an applicant’s educational information, such as school attended and degree obtained, and the applicant’s employment to determine financial capacity and ability to repay. Upstart submitted a Request for No-Action Letter (“Request”) in relation to its automated model to the CFPB pursuant to the agency’s no-action letter policy.

According to the CFPB, the no-action letter policy is intended to facilitate consumer-friendly innovations where regulatory uncertainty may exist for certain emerging products or services. In practice, however, the process has presented significant challenges for companies that might seek to benefit from it. Continue Reading CFPB Issues No-Action Letter to Alternative Credit Lending Platform