Consumer financial services providers likely think of state licensing requirements as a state law compliance issue. But the Consumer Financial Protection Bureau (CFPB) views these issues as federal matters as well. In a consent order issued December 8, 2020, the CFPB asserted that an unlicensed debt collector’s threat of suit and actual suit to collect on a debt violated the federal prohibition against deceptive practices. The consent order represents the CFPB’s latest action that essentially federalizes state law violations.
Continue Reading State Licensing and Federal UDAAP – What’s the Connection?

We recently received a response to several FOIA requests we had made  to the Consumer Financial Protection Bureau (CFPB or Bureau) regarding various enforcement statistics and processes. Because the CFPB does not make these materials generally available to the public, we share them here. The materials include the Enforcement Policy and Procedures Manual and Consent Order template, and data regarding the number enforcement investigations, opened, closed and pending each fiscal year, and the number of matters referred from supervision to enforcement. 
Continue Reading CFPB: Enforcement Manual and Stats

News broke last week of a major reorganization at the Consumer Financial Protection Bureau (CFPB or Bureau), with headlines focusing on how the shakeup will hamper investigations and limit the Office of Enforcement’s autonomy. To better understand what happened, it’s helpful to have a little bit of perspective on the CFPB’s authorities and organization. While it’s too soon to know how the reorganization will impact the agency’s enforcement docket, it is not at all clear that it will have the limiting impact that some expect.

The CFPB was created as a somewhat unique regulator, combining the traditional tools of prudential regulators like the Federal Reserve or Office of the Comptroller of the Currency (supervision and examination) and those of law enforcement agencies like the Federal Trade Commission (investigation and litigation). While the prudential regulators also have enforcement authority, that authority is generally limited to entities over which the agency has supervisory authority (and related individuals and service providers). And that enforcement authority is exercised only after an examination by supervisory personnel; that is, it is the culmination of the supervisory process, not an independent process. By contrast, the CFPB’s enforcement jurisdiction is much broader than the defined set of covered persons over whom it has supervisory jurisdiction, extending to any company or individual that is subject to one of eighteen different statutes or who offers or provides a consumer financial product or service. While some CFPB enforcement actions arise out of examinations, the vast majority to date have been outgrowths of organic enforcement investigations that were not tied to examinations.

At bottom, these two tools—supervision and enforcement—are just different legal authorities by which the agency can gather information from institutions subject to its jurisdiction to determine if legal violations occurred. For a brand new agency, that raises a difficult question – which of these tools do you use in any given circumstance to determine if a particular institution is violating the law? Do you send in examiners or enforcement attorneys?

That question wasn’t answered immediately at the agency’s creation. Instead, the offices of Supervision and Enforcement each focused on hiring staff and building out processes for the exercise of their respective functions.
Continue Reading Unpacking the Enforcement Shakeup at the CFPB – A (Former) Insider’s View

On September 29, 2020, the CFPB, FTC, and state and federal law enforcement agencies announced a new initiative, called Operation Corrupt Collector, to address certain abusive and threatening debt collection practices, including “phantom” debt collection. If the partnership sounds familiar, it is. Operation Corrupt Collector was essentially announced almost exactly five years after the FTC announced Operation Collection Protection. Though the programs have different names, the goals appear to be the same: bring cases against debt collectors who engage in abusive debt collection practices.

Continue Reading New Name, Same Initiative? Federal and State Regulators Partner (again) to Limit Abusive Debt Collection Practices

On Monday, October 5, the Consumer Financial Protection Bureau (Bureau) issued a policy statement on early termination of consent orders. Recognizing that there may be “exceptional circumstances” where it is appropriate to terminate a consent order before its expiration date, the policy statement explains the process by which an entity subject to a consent order can apply for early termination and the criteria that the Bureau will consider in assessing such an application.

As a threshold matter, the entity must (of course) have actually complied with the terms and conditions of the consent order. But certain persons and orders are de facto ineligible for early termination. If the consent order imposes a ban on participating in a certain industry or involves violations of an earlier Bureau order, for example, or when there has been any criminal action related to the violations in the order, then the order is excluded from the policy and cannot be terminated early. Additionally, because natural persons, unlike entities, cannot make the same demonstration about being in a “satisfactory” compliance position—and the Bureau believes it would be impractical to undertake a review of whether individuals are likely to comply with the law in the future—early termination is not an option for individuals who have settled with the Bureau.

Early termination under the policy is only going to be available for orders issued through the administrative process,
Continue Reading Consumer Financial Protection Bureau Announces Policy on Early Termination of Consent Orders

On July 15, 2020, the Consumer Financial Protection Bureau filed a lawsuit against Townstone Financial, Inc., a Chicago-based mortgage lender and mortgage broker, alleging that Townstone “redlined” African-American neighborhoods in the Chicago Metropolitan Statistical Area and discouraged prospective applicants from applying to Townstone for mortgage loans on the basis of race. This marks the first

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 20, 2020, the Office of the US Comptroller of the Currency announced its final rule overhauling the Community Reinvestment Act regulations. The CRA requires insured depository institutions to participate in investment, lending, and service activities that help meet the credit needs of their assessment areas, particularly low- and moderate-income  communities and small businesses

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