CFPB Bites of the Month – Top 10 of June | Hudson Cook, LLP
In this month’s Top 10 article, we share some of our best “bites” from the previous month covered in the June 15 webinar.
So what happened at the CFPB last month?
Bite #10 – The CFPB has bolstered state law enforcement efforts.
The CFPB issued an interpretative rule regarding state efforts to prosecute organizations and individuals who allegedly violated federal consumer financial protection laws. The interpretative rule affirms that states can apply consumer financial protection law to pursue claims and actions against a wide range of entities. It also indicates that the CFPB’s enforcement actions do not put an end to these state actions. The CFPB also said it plans to consider other measures to promote state enforcement of federal consumer financial protection laws, including ways to facilitate redress for victims.
Bite #9 – The CFPB and New York AG shut down a debt collection organization.
The CFPB, in partnership with the New York Attorney General, has filed a proposed stipulated judgment in federal court to settle a case against a debt collection company and its owners and officers. Together, the company purchased delinquent consumer debt from personal loans, payday loans, credit cards and other sources. The CFPB and the New York Attorney General alleged that the company deceived and harassed consumers, violating the Fair Debt Collection Practices Act and the Consumer Financial Protection Act. The complaint alleges that the owners, managers and businesses used the following illegal tactics to collect the debts:
- Falsely threatening to be arrested and imprisoned,
- Lying about a lawsuit,
- Inflated and misrepresented amounts due,
- Create “smear campaigns”,
- Harassing people with repeated phone calls, and
- Failure to provide legally required information.
The proposed stipulated judgment will require companies, along with their owners and managers, to exit the debt collection market. The defendants must also pay a $2 million fine to the CFPB, which will be deposited into the CFPB’s victim relief fund, and a $2 million fine to the New York Attorney General. If the defendants fail to make the payments in a timely manner, the amount of each penalty will increase to $2.5 million.
Bite #8 – The CFPB has set up its Competition and Innovation Office.
The CFPB announced the opening of an office, now called the “Competition and Innovation Office”, as part of a new approach to fostering innovation and competition. The office will replace the “Innovation Office”, which opened in 2018 and had replaced the Catalyst project, launched in 2014. The CFPB says the new office will support broader analysis of barriers to market opening , better understand how big players “squeeze out” small players, organize incubation events and generally facilitate the change of financial services provider. As part of this change, the CFPB also encourages companies, start-ups as well as members of the public to file regulatory petitions asking for clarity on particular rules.
Bite #7 – The CFPB explains non-banking supervision.
Recently, the CFPB announced that it will begin using a provision of the law to supervise a wider range of non-bank financial companies. Then last month, the CFPB shared a post explaining what “non-banking supervision” means. According to the CFPB, a CFPB exam is similar to a state exam. The CFPB says that before a review, the entity under review will be told what the CFPB will be focusing on, and companies are often asked to show records or provide data so reviewers can assess compliance.
Bite #6 – The CFPB says deleting payment data can be harmful.
The CFPB announced that it had sent letters to CEOs asking them to explain the accuracy of consumer payment information reported to consumer reporting agencies. According to recent CFPB research, about half of the largest credit card companies provide accurate data to credit reporting companies on borrower monthly payment amounts. Several of the largest credit card companies have removed information about the actual payment amount that they had previously provided or provided to consumers. The CFPB said removing information about the actual payment amount may impact consumers’ ability to access credit at the most competitive rates.
Bite #5 – The CFPB approaches credit models using algorithms.
The CFPB published a Circular on consumer financial protection meet adverse action notification requirements under the Equal Credit Opportunity Act (ECOA). The CFPB confirmed that federal anti-discrimination law requires companies to explain specific reasons for taking adverse action, even when relying on credit models using complex algorithms. The CFPB encouraged technicians to provide information and to visit the CFPB Whistleblower Program webpage to learn more.
Bite #4 – CFPB Supervisory Highlights targets credit dispute responses.
According to the recent CFPB Supervisory Highlights, reviewers found that credit card companies were sending unclear notices to consumers at the end of dispute investigations. The CFPB noted that the Fair Credit Reporting Act (“FCRA”) requires providers to conduct reasonable investigations into disputes and then “report the results of the investigation to the consumer” generally within 30 days, addressing the specific information required by the FCRA. After the CFPB reviews, some credit card providers revised their notices to comply with the FCRA.
Bite #3 – The CFPB has terminated a no-action letter issued by the previous administration.
On April 13, 2022, a loan originator notified the CFPB that it intended to add a significant number of new variables to its underwriting and pricing model, and requested termination of its previous “letter of no -action” of the CFPB. As requested by the company, the CFPB has terminated the 2020 “No Action Letter”, effective immediately. The CFPB had granted the originator a “letter of no action” in September 2017 and a second letter in November 2020. The CFPB had immunized the lender against claims under the Fair Lending Act regarding its algorithm for subscription, while the “letter of no action” remained in effect. Under the terms of the 2020 “No Action Letter”, the CFPB had required the lender to notify the CFPB of material changes to its “artificial intelligence” model before they were implemented.
Bite #2 -Te CFPB sought to ban a student loan owner.
The CFPB sued the owner of a student debt relief company for allegedly withdrawing hundreds of thousands of dollars from the bank accounts of student borrowers, without authorization. The CFPB alleged that the company took funds from consumers, without their knowledge or consent, after obtaining their data from a company closed by the CFPB in 2016. The proposed settlement will require the payment of a fine $175,000 to stop participating in debt relief and other activities.
Bite #1 – The CFPB has launched an initiative to improve customer service in major banks.
The CFPB is invited to give its opinion to the public on how bank customers can assert their rights to better customer service with the big banks. The Information request (RFI) asks what information would be useful for consumers to obtain from their bank. Specifically, the CFPB would like information on the following:
- What information do people request from their bank and how do they use this information?
- What information can consumers currently not obtain from their bank?
- Does the way a person contacts their bank make a difference in their ability to get information?
- Are there any customer service barriers that impede their ability to bank?
- Is there value in banks disclosing who they share account information with, or compensation they can receive for sharing that information?
- What do bank customers experience in terms of wait times, disconnected calls, the ability to speak to a person at a specific location, or the quality of answers to questions?
Public comments will inform future policy directions and other initiatives regarding the rights set out in Section 1034(c). The deadline for submitting comments is 30 days after publication in the Federal Register.
Join us for our next CFPB bites of the month: Camp CFPB on July 20. If you missed any of our previous bites, request a replay on our site.