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Director Cordray provides update on CFPB’s public library partnerships

Posted in Financial Literacy

In his remarks last week at the Columbus Metropolitan Library, Director Cordray spoke about the partnerships that the CFPB is building with public libraries around the country to promote accessible financial education information for consumers.

Director Cordray noted that the Columbus Metropolitan Library system was one of the first nine public libraries from across the country that joined the CFPB’s national pilot project.  (Although Director Cordray stated in his remarks that the nine libraries joined the project “about a year and a half ago,” he announced the project’s launch and the nine libraries’ participation in remarks given in Chicago about nine months ago in April 2014.)  According to Director Cordray, more than 360 library systems in 48 states, with more than 1,700 branches, have now signed up for the project.

In his remarks, Director Cordray discussed the important role played by public libraries in our society and referred to a statistic showing that one out of four people who sign on to a library computer does so to take care of commercial needs or financial matters.  Director Cordray stated that the CFPB’s goal “is to help the library become the go-to place for people to learn more about how to deal with their financial affairs” through initiatives that include helping libraries (1) identify and connect with local partners in their own communities that can provide information and expertise, and (2) build online communities for librarians to learn and share more about financial education.  The CFPB is also providing training for library staff and managers.

As we have previously commented, the CFPB’s plan to help libraries become providers of financial education information makes eminent sense and deserves wide-spread support.  We are glad to learn that the CFPB is making steady progress in implementing that plan.


CFPB posts video of Nov. 18th webinar on new closing disclosure

Posted in Mortgages

The CFPB has posted a video of its November 18th webinar that addressed questions about the final TILA-RESPA Integrated Disclosure Rule that will be effective for applications received by creditors or mortgage brokers on or after August 1, 2015.  The webinar was the fourth in a series to address implementation of the new rule.  (To view the video, it is necessary to either have previously registered for the webinar or register when accessing the video.)

A detailed discussion of the webinar prepared by Marc Patterson, a member of Ballard Spahr’s Mortgage Banking Group, can be found here.

CFPB issues sixth Semi-Annual Report

Posted in CFPB General

The CFPB has issued its sixth Semi-Annual Report to the President and Congress covering the period from April 1 through September 30, 2014.

As we have found with previous CFPB semi-annual reports, despite its 188-page length, the latest report provides no noteworthy new information about CFPB activities.  Instead it recycles information in various previously-issued CFPB reports and reviews ongoing and past developments, all of which we have already covered in previous blog posts.

We did, however, find noteworthy the section of the report dealing with TILA, EFTA and CARD Act enforcement efforts of federal agencies other than the CFPB.  For example, the report indicates that in 2013, the FDIC issued (1) one civil money penalty and nine cease and desist orders for TILA violations, (2) seven civil money penalties and seven cease and desist orders for EFTA violations, and (3) 16 civil money penalties, seven cease and desist orders, and eight actions requiring restitution (including one with the OCC and CFPB) for violations of the CARD Act and related federal consumer protection laws.

Perhaps we will learn something new about the CFPB’s ongoing activities and future plans should the House Financial Services and Senate Banking Committees call Director Cordray to testify about the latest report as they have done in connection with previous semi-annual reports.

AFSA responds to state AG call for arbitration limits

Posted in Arbitration

The American Financial Services Association (AFSA) has sent a letter to Director Cordray responding to the letter sent to him last month by 16 Democratic state attorneys general calling on the CFPB to limit the use of pre-dispute arbitration in agreements for consumer financial products or services.

In its letter, AFSA challenges the accuracy of various assertions made by the state AGs.  Responding to their contention that the Federal Arbitration Act (FAA) was intended to facilitate disputes between commercial entities, AFSA asserts that Congress specifically intended that the FAA apply to individuals.  As support for its position, AFSA cites to Justice Breyer’s observation in Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995) regarding the potential advantages of arbitration for individuals.

AFSA also challenges the AGs’ contention that mandatory pre-dispute arbitration is procedurally unfair to consumers and jeopardizes the right of consumers to seek judicial redress, citing to further observations of Justice Breyer in Terminix regarding the many advantages of arbitration.  AFSA comments that given the workload of overburdened state courts, the AGs’ conclusion that courts provide a better avenue of consumer redress for small dollar cases is “inconceivable.”  AFSA also challenges contentions made by the AGs regarding arbitrator bias and the high costs of arbitration.

Finally, AFSA turns the tables on the AGs’ view that arbitration forestalls class actions, commenting that this is “a laudable result in light of the pittances consumers receive in settlements while class action lawyers reap financial windfalls.”  AFSA observes that as a mechanism for recompensing injured consumers or ensuring compliance, class action lawsuits “have taken a back seat” to the CFPB’s restitution powers, noting that consumers compensated through CFPB enforcement do not share their compensation with lawyers.  AFSA also notes the authority of state AGs to bring civil actions to enforce Dodd-Frank’s UDAAP prohibition.

We are in full agreement with the views expressed by AFSA in its letter.


CBO issues cost estimate for Bureau Advisory Opinion Act

Posted in CFPB General

The Congressional Budget Office (CBO) recently released a cost estimate for H.R. 4662, entitled the “Bureau Advisory Opinion Act.”  This was part of series of bills reported in June 2014 by the House Committee on Financial Services that were intended to promote greater transparency and accountability at the CFPB.

H.R. 4662 would require the CFPB to establish procedures for issuing advisory opinions in consultation with other federal regulators and after allowing for a public notice and comment period.  The bill would also require the CFPB to issue an advisory opinion within 90 days of receiving a request, create a rebuttable presumption in an action brought under a federal consumer financial law that conduct in conformity with an advisory opinion complied with such law, and require the CFPB to make advisory opinions available on its website with information redacted that is exempt from disclosure under the Freedom of Information Act.

The CBO estimates that H.R. 3662 would increase direct spending by the CFPB over 2015-2024 by $815 million.


High Praise from Above the Law

Posted in CFPB General

“There’s blogging, and then there’s blogging well. And really, an argument can be made that anything but the latter really isn’t blogging at all.”

So begins Above the Law’s commentary on Law Blogs and I’m happy to report that our CFPB Monitor fared exceptionally well. We started the blog in 2011 to coincide with the creation of the Bureau and President Obama’s nomination of Richard Cordray to lead it. Since then, we have added thousands of followers – and written an equally impressive number of posts. Our staff keeps a close eye on developments at the Bureau and every day there seems to be something new and significant to report.

And while the blog was conceived as a way to keep our clients and contacts “ahead of the curve,” it’s always nice when one’s efforts are recognized. CFPB Monitor is frequently cited as the primary source in news reports and our readers include significant players in the industry. For the third year in a row, the ABA Journal named us to their Blawg 100 list.

As Above the Law put it, “They (the attorneys who write CFPB Monitor) exclusively cover the Consumer Financial Protection Bureau, and boy do they cover it. If there’s any news even loosely tied to the CFPB, they’re on it, and they explain it in a way that anyone could read.”

Thanks, ATL. We are extremely proud of the success of CFPB Monitor and committed to remaining the go-to source for timely, relevant information about the Bureau. To read the article,

CFPB announces consent order relating to alleged debt relief scam

Posted in CFPB Enforcement

The CFPB has announced that it has entered into a proposed consent order with Premier Consulting Group LLC and a related law firm to settle claims that the defendants charged consumers upfront fees in violation of the Telemarketing Sales Rule (TSR). The consent order requires the defendants to pay a civil penalty of $69,075 which, according to the CFPB, represents the amount of advance fees the defendants took from consumers who did not have any debts settled.  It also enjoins the defendants from engaging in future TSR violations and requires them to submit a compliance plan to the CFPB to ensure that any debt relief services they provide in the future comply with the TSR and all other applicable federal consumer financial laws.

The consent order does not provide for restitution.  In its press release, the CFPB states
“[c]onsumers who were harmed by these violations may be eligible for relief from the CFPB’s Civil Penalty Fund in the future.” Perhaps this suggests that the defendants did not have the financial capability to also make restitution.  However, under those circumstances, it seems that a better result for consumers would have been for the CFPB to have ordered payment of restitution and omitted a civil penalty.

The CFPB had filed a complaint against the defendants in May 2013 in a New York federal district court.  The CFPB’s complaint also named as defendants another debt-settlement service provider, Mission Settlement Agency, and its principal, who were alleged to have engaged in similar unlawful conduct.  Contemporaneously with the filing of the CFPB’s civil lawsuit, Mission and its principal became the subjects of the CFPB’s first criminal referral.  Last month, Mission’s principal was sentenced to nine years in prison after pleading guilty to several charges and ordered to pay $2.1 million in restitution and a fine of $15,000.  The company was ordered to pay a fine of $4.393 million and $2.196 million in restitution.


CFPB creating boarding form for online consumer complaint company portal

Posted in CFPB General

The CFPB has published a notice in today’s Federal Register stating that the CFPB is developing a form to allow companies to “proactively participate” in its online company portal for viewing and responding to consumer complaints.

According to the notice, the CFPB’s proposed form, the “Company Portal Boarding Form,” will “serve to streamline information collection” from companies seeking to register to use the company portal and “result in a greatly enhanced and efficient experience from both the consumers and companies’ perspectives.”  Comments are due by February 2, 2015.

Clients continue to ask us whether they should register to use the CFPB’s company portal.  In response to that question, we have reminded clients that complaints are used by the CFPB to decide which nonbank companies to examine (meaning payday lenders, mortgage originators, private student lenders or other nonbanks as to which the CFPB has supervisory authority).  In our view, by not registering to access complaints, a company is missing the opportunity to demonstrate that it is responsive to complaints and, as such, not in need of examination.  Reviewing complaints will also give a company insight into the issues on which the CFPB may focus if the company is examined and an opportunity to be better positioned for the examination.

The CFPB also uses complaints to decide which companies will be targets for enforcement actions. By demonstrating that it is responsive to complaints, a company may be able to forestall enforcement action or mitigate any penalties if an enforcement action is begun.


CFPB’s Ombudsman’s Office issues third annual report

Posted in CFPB General

Last week, the CFPB’s Ombudsman’s Office issued its third annual report covering the Office’s activities during fiscal year 2014 (October 1, 2013 through September 30, 2014).  The role of the Ombudsman’s Office is to assist in the resolution of individual and systemic issues that a depository entity, non-depository entity or consumer has with the CFPB.

A new section of the annual report entitled “The Ombudsman in Practice” lists issues the Ombudsman heard in FY 2014 from consumer and trade groups and individual inquiries and raised with the CFPB as part of its regular internal meetings with various CFPB offices and divisions.  Those issues included:

  • A need for more clarity on CFPB points of contact for industry and an understanding of how CFPB staff learns of industry developments
  •  A desire for more clarity on regulatory compliance for business planning and operations
  • Concern about broad examination information requests
  • Differences in language between consent orders and corresponding CFPB press releases (which the Ombudsman undertakes to independently review in FY 2015).  This is something we have questioned in the past.

Among the issues raised with the Ombudsman by industry in individual inquiries were:

  • A need for understanding the intersection between the supervision and enforcement processes, such as how the two work together and what to expect or not to expect
  • Not knowing where to obtain regulatory interpretations
  • Unanticipated outcomes from regulations

The report includes a section entitled “Perspectives on Industry: How the CFPB Learns about Developments in Industry” that focuses on the steps taken by the Ombudsman to address industry’s concerns about this issue noted above.  The report discusses the Ombudsman’s review of how information is shared with and within the CFPB and CFPB initiatives “that may address some of the issues highlighted to the Ombudsman by industry.”  One such initiative noted by the Ombudsman is that the CFPB “has routine cross-Bureau product meetings and coordinates meetings with industry that bring in representatives from offices across the agency.”  In an attempt to provide “helpful” information to companies and trade groups “who do not always know who to contact” at the CFPB, the report contains a list of “CFPB connection points.” (Except for discussing the issue addressed in this section and stating that the Ombudsman intends to review differences in consent order and press release language, the report does not indicate how the Ombudsman plans to address the other issues noted in the bullet points above.)

In the section of the report dealing with the Ombudsman’s review of systemic issues, the Ombudsman updates several issues raised in previous annual reports.  Among such issues were how the CFPB shares information about its activities, events and services, and financial entities’ experiences with the examination process.

With regard to information sharing, the report indicates that the CFPB is engaged in a project to “refresh” its website that will include the addition of a digest to all website updates, creation of a single location  for users to subscribe to all available CFPB online “sign-ups,” creation of an aggregated place on the CFPB’s website for CFPB events, and the addition of instructions on how to request a CFPB speaker.

With regard to the examination process, the Ombudsman claims that the CFPB’s Division of Supervision, Enforcement, and Fair Lending (SEFL) adopted all of the recommendations made in the Ombudsman’s FY 2013 annual report to address concerns involving how a financial entity can elevate concerns about an examination and what can be expected during the examination lifecycle.  As a result, “the Ombudsman now views the FY 2013 recommendations on this topic as closed.”

The report sets forth the Ombudsman’s understanding that “the cover letter accompanying the initial information request now includes: the contact information for the examination team through the Regional Director; information about contacting the EIC to address questions or concerns about data format, data scope, or follow-up information requests; a link to the examination manual; and information on what to expect at the end of the examination.”  The report also indicates that the SEFL “shared a new policy for examiners to contact the financial entity no less than once each month after the onsite portion of the examination” and “to ensure that the appeals bulletin is readily accessible, the Ombudsman understands that the appeals bulletin will be co-located with the examination manual” on the CFPB’ website.

Among the Ombudsman’s FY 2015 plans is the launch of a new focus group program “to provide another forum for consumer, trade, and other groups to share feedback.”

CFPB to host research conference on consumer finance

Posted in CFPB General

The CFPB has announced that it plans to host its first “Research on Consumer Finance” conference in Washington, D.C. on May 7-8, 2015.

The announcement includes a call for research papers to be submitted by January 16, 2015.  The CFPB seeks complete papers or detailed abstracts that include preliminary results dealing with “the ways consumers and households make decisions about borrowing, saving, and financial risk-taking; how various forms of credit (mortgage, student loans, credit cards, installment loans etc.) affect household well-being; the structure and functioning of consumer financial markets; distinct and underserved populations; and relevant innovations in modeling or data.”

According to the CFPB, the conference is intended “to connect researchers and policymakers with the best research being conducted across the wide range of disciplines and approaches that can inform the topic. Disciplines from which we hope to receive submissions include, but are not limited to, economics, the behavioral sciences, cognitive science, and psychology.”

The announcement also includes a list of 15 academics who have been named to the conference’s “scientific committee.”  Given that the CFPB already has an Academic Research Council, it’s unclear why the CFPB needs yet another committee of academics.