As we reported earlier this week, the CFPB’s new Acting Director and Treasury Secretary, Scott Bessent, has directed Bureau employees not to make any filings or appearances in litigation, other than to seek a pause in the proceedings. This directive played out almost immediately this week—including in a case before the Fifth Circuit brought by
Supervision
Acting Director Installed at CFPB: What to Expect in the Months Ahead
Yesterday, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) announced that Scott Bessent, the recently confirmed Treasury secretary, is now the acting director of the Bureau. The announcement comes after the Trump administration fired former Director Rohit Chopra over the weekend.
Unlike the prior transition to a Trump administration, when then-Director Richard Cordray stayed on through most of the first year of President Trump’s term, the industry expected Director Chopra to be removed immediately due to a 2020 Supreme Court decision that held that the CFPB director may be removed at will by the President. President Biden removed Trump’s Senate-confirmed CFPB director, Kathy Kraninger, using that authority. However, Director Chopra continued to hold his job for almost two weeks after the inauguration. In our view, this delay was expected as the administration had to wait to remove Director Chopra until it had a Senate-confirmed individual who could be appointed to serve as the acting director under the Federal Vacancies Reform Act. The Trump administration presumably did not want to remove Director Chopra only to have one of his deputies serve as the acting director as the goal of installing Secretary Bessent as the acting director is to quickly shift the priorities of the Bureau.Continue Reading Acting Director Installed at CFPB: What to Expect in the Months Ahead
CFPB Supervisory Highlights Target Certain Auto Lending and Servicing Practices
For the most recent edition of Supervisory Highlights, the Consumer Financial Protection Bureau focused on examiners’ findings in the auto finance sector. Several of these practices were identified by the CFPB in prior Supervisory Highlights. Many of the CFPB’s concerns relate to trends in the marketing, sales, financing, and refunds related to add-on products like optional vehicle- or payment-protection, and to consumers’ difficulty in cancelling those products or receiving refunds. The Federal Trade Commission and state regulators also have prioritized these areas, and several states have recently passed legislation addressing add-on products (including refunds, cancellation and notification). In several of the findings, the CFPB noted that the failures related to inadequate oversight of service providers, reflecting another recurring theme in CFPB’s compliance management expectations.
The CFPB has framed many of these targeted practices as unfair, deceptive or abusive acts or practices (“UDAAP”), which is consistent with certain of the agency’s recent consent orders or suits related to auto servicing practices.
In response to the findings, the CFPB generally demanded ceasing the allegedly noncompliant practices, developing policies and procedures to ensure compliance going forward, and in some cases refunding amounts to consumers.
Motor vehicle dealers, auto finance companies, servicers and secondary market purchasers of auto loans should take note of these highlighted practices when evaluating their policies and procedures.Continue Reading CFPB Supervisory Highlights Target Certain Auto Lending and Servicing Practices
Federal Court Stalls Enforcement of New CRA Rules
On March 29, 2024, the United States District Court for the Northern District of Texas issued a preliminary injunction prohibiting enforcement of the new Community Reinvestment Act (“CRA”) regulations against the plaintiffs in the case.
The CRA, passed in 1977, generally requires insured depository institutions to participate in investment, lending, and service activities that help…
CFPB Issues Order Establishing Supervisory Authority Over Nonbanks
On February 23, 2024, the Consumer Financial Protection Bureau published an order establishing supervisory authority over a small-loan consumer finance company, using a Dodd-Frank Act provision that allows the Bureau to supervise certain nonbanks that it has reasonable cause to determine pose risks to consumers.
In Mayer Brown’s Legal Update, we summarize relevant aspects…
FinCEN Proposes New Residential Real Estate Reporting Requirements
On February 7, 2024, the US Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a Notice of Proposed Rulemaking on certain US residential real estate transactions (“2024 NPRM”). The 2024 NPRM would require certain professionals involved in real estate closings and settlements to report information to FinCEN about non-financed transfers of residential real…
NYDFS Finalizes Climate Risk Management Guidance
The New York Department of Financial Services finalized guidance on how banks and mortgage institutions should manage climate-related financial and operational risks. The agency’s guidance creates extensive obligations for New York institutions, particularly mortgage lenders and servicers for which those risk management expectations may be new. Also, the NYDFS emphasizes that those institutions must still…
CFPB “Unfairness Discrimination” Struck Down
On September 8, 2023, a federal court struck down the Consumer Financial Protection Bureau’s (CFPB) attempts to supervise institutions for so-called “unfairness discrimination.” The CFPB had previously announced the view that the statutory prohibition on unfairness encompasses a broad-based prohibition on discrimination in an update to its examination manual in March 2022, eliciting substantial objections…
New Issue of Licensing Link
Mayer Brown has published a new edition of Licensing Link, a periodic publication that will keep you informed on hot topics and new developments in state licensing laws, and provide practice tips and primers on important issues related to state licensing across the spectrum of asset classes and financial services activities.
In this issue, we…
CFPB: Compensation Cannot Vary for Brokered Out Loans
In the CFPB’s new Supervisory Highlights, the agency concludes that paying individual mortgage loan originators differently for loan products that are brokered out to another lender, as compared to loans that are originated in-house, is a violation of Regulation Z’s Loan Originator Compensation Rule.
The CFPB’s Highlights describe a lender that makes certain mortgage…