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CFPB flags new issues in latest credit card review; Ballard Spahr to hold April 13 webinar

Posted in Credit Cards

The CFPB has issued another request for information about the credit card market that identifies significant new issues of CFPB interest.  The request is intended to inform the CFPB’s biennial review of the credit card market mandated by the CARD Act.  Based on its previous biennial reviews, the CFPB issued its first and second reports to Congress in, respectively, October 2013 and December 2015.

On April 13, 2017, from 12 p.m. to 1 p.m. ET, Ballard Spahr attorneys will hold a webinar, “The CFPB’s RFI and Other Important Recent Credit Card Developments.”  The webinar registration form is available here.

In the current request, the CFPB lists thirteen topics on which it seeks information.  The first four topics concern issues that the CFPB is required by the CARD Act to consider in its review.  The next nine topics involve “areas of further interest” as to which the CFPB has raised numerous new issues.  Since topics and issues identified by the CFPB in previous RFIs and reports were frequently the subject of heightened CFPB supervisory scrutiny and enforcement activity, the topics and issues identified in the new RFI can be expected to receive similar treatment.  Comments in response to the RFI are due on or before June 8, 2017.

The nine topics and some of the CFPB’s related questions are:

  • Deferred interest products.  As a follow up to the CFPB’s previous finding that such products “can pose risks to consumers,” questions include how market trends and practices have evolved since the 2015 report and what areas of risk still remain for consumers.
  • Subprime specialist products.  In its 2015 report, the CFPB highlighted the risk for consumers created by the reliance of certain subprime credit card issuers on fees.  As a follow up, the CFPB asks how the consumer experience of using such cards compares to the experience of consumers with similar credit profiles when using mass market credit cards.
  • Third-party comparison sites.  The CFPB states that it has received indications that some comparison sites generate significant revenue from issuer payments made in exchange for approved applications and that contracts between sites and issuers can influence or determine which (and how) products and choices are presented to consumers.  Questions include the degree to which consumers understand the benefits and risks of using comparison sites and the degree to which existing standards, practices, and disclosures protect consumers from unfair, deceptive, or abusive acts and practices.
  • Innovation.  The CFPB states that its prior review noted the following innovation trends that could substantially impact the credit card market: (1) advancements in payment security and form factor, including the widespread adoption of EMV standards (i.e., standards for cards with computer chips and the technology used to authenticate chip-card transactions) and the possibility of wider adoption of mobile payments, and (2) the trend toward new consumer lending models potentially competing with credit cards, either indirectly through marketing for debt consolidation or directly at point-of-sale.  Questions include the degree to which either of these trends have advanced in expected or unexpected ways in the past two years and which of these trends appears likely to have the greatest impact on the consumer credit card market in the foreseeable future.
  • Secured credit cards.  With the CFPB observing that it has noted indications of increased secured card originations and increasing interest in the product by new market entrants, questions include what is the current state of the secured credit card market and what evidence supports indications of positive consumer outcomes.
  • Online and mobile accounting servicing.  The CFPB states that its prior review found that increasing numbers of consumers are enrolling in issuers’ online and mobile account servicing platforms, have opted out of receiving paper statements, and appear to rarely access their statements online.  This results in such consumers rarely encountering required disclosures.  Questions include the extent to which consumers who are making only minimum payments or have a propensity towards making late payments are not encountering disclosures and what other potential benefits or risks a broader shift to digital account servicing presents to consumers.
  • Rewards products.  Noting that its prior review identified areas of concern regarding the impact of rewards on consumer choice and credit card usage, as well as disclosure practices and program structure, questions include how market trends and practices have changed since the CFPB’s prior review and what areas of risk remain for consumers.
  • Variable interest rates.  Noting that its prior review found that most credit cards now have variable interest rates that will rise when market rates rise (something widely expected to happen soon), questions include the extent to which consumers are aware that their interest rates will increase on outstanding card balances when market rates increase and what practices are issuers using to inform consumers of such rate increases.
  • Debt collection.  Noting that its prior review examined the policies and practice of issuers’ collection practices and debt sales, questions include what changes have been made in such policies and practices since the CFPB’s last review, what drove such changes, and what associated metrics changed as a result.



CFPB Releases Special Edition of its Supervisory Highlights Focusing on Consumer Reporting

Posted in CFPB Supervision

The CFPB recently released a “Special Edition” of its Supervisory Highlights that focuses exclusively on data accuracy issues in consumer credit reporting and the handling and resolution of consumer disputes. The report describes the observations of CFPB examiners during examinations of both consumer reporting agencies and the creditors and other companies that furnish information to consumer reporting agencies.

The CFPB acknowledges that consumer reporting agencies have made significant advances in promoting the accuracy of data reported to them by overseeing data furnishers and enhancing the dispute resolution process, but the CFPB believes that continued improvements are still necessary in these areas. In their examinations of furnishers, the CFPB examiners found “CMS weaknesses and numerous violations of the FCRA and Regulation V that required corrective action by furnisher(s).”

The CFPB’s “supervisory observations” include the following:

  • Data governance. CFPB examiners found that one or more consumer reporting agencies had decentralized data governance functions and undefined data governance responsibilities, a lack of quality control policies and procedures, and inconsistent practices for vetting furnishers and providing data quality feedback to them. CFPB examiners also found that one or more furnishers had weaknesses in its compliance management system, including weak oversight by management over data furnishing practices and no formal data governance program.
  • Reinvestigation of disputes. CFPB examiners found that one or more consumer reporting agencies did not comply with its obligation to conduct a reasonable reinvestigation when consumers dispute the completeness or accuracy of items in their consumer files. CFPB examiners also found that one or more consumer reporting agencies did not review and consider certain categories of documentary evidence in support of a dispute submitted by consumers. Furthermore, CFPB examiners found that one or more furnishers’ policies and procedures failed to promote reasonable investigations of disputes.
  • Required dispute notices. One or more consumer reporting agencies examined by the CFPB failed to provide notification of a consumer dispute within five business days to the furnisher who provided the information because the furnishers’ contact information was no longer valid at the time of the consumer’s dispute. CFPB examiners also found that one or more consumer reporting agencies sent dispute notices to consumers that failed to clearly articulate the results of the dispute investigation as required by the FCRA. In cases where furnishers decided to not investigate disputed information, the CFPB found that one or more furnishers failed to provide consumers with proper notice of a reasonable determination that a dispute was frivolous or irrelevant.
  • Quality control. One or more furnishers examined by the CFPB failed to perform quality checks on the data furnished to consumer reporting agencies, failed to conduct ongoing periodic evaluations or audits of furnishing practices, and failed to conduct audits of disputed information to identify and correct root causes of any inaccurate furnishing.
  • Data accuracy requirements. CFPB examiners found that one or more furnishers provided consumer information to consumer reporting agencies while knowing or having reasonable cause to believe that the information was inaccurate, including information that consumers were delinquent, had no payment history, or had an unpaid charged-off balance when they had settled the account in full.

The report indicates that the consumer reporting market is a “high priority” for the CFPB. Notably, the report states that the CFPB has “targeted substantial resources” to improving the accuracy of consumer information and will continue to do so.

House passes bill to subject CFPB rules to OIRA review

Posted in CFPB Rulemaking

On March 1,2017, by a vote of 241 to 104, the House passed the “OIRA Insight, Reform, and Accountability Act” (H.R. 1009), which would subject independent regulatory agencies such as the CFPB to the regulatory review process of the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget.  The bill has been referred to the Senate Committee on Homeland Security and Governmental Affairs.

Currently, under Executive Order 12866, federal agencies, other than those defined as an “independent regulatory agency” by 44 U.S.C. Sec. 3502(5), must submit proposed and final regulations constituting a “significant regulatory action” to OIRA for review prior to publication in the Federal Register.  A key component of OIRA review is an evaluation of the agency’s analysis of a regulation’s anticipated costs and benefits and its determination that the regulation’s anticipated benefits justify its anticipated costs as well as the agency’s identification and assessment of feasible alternatives.  The Executive Order defines a “significant regulatory action” as any regulatory action that is likely to result in a rule that may (a) “have an annual effect on the economy of more than $100 million or more,” (b) “adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, tribal governments or communities,” or (c) raise other coordination, budgetary, or policy issues, such as creating a serious inconsistency with another agency’s action.

Executive Order 12866 also contains requirements that apply to both executive and independent agencies, such as the preparation of a semi-annual rulemaking agenda and an annual regulatory plan to be published in the Unified Regulatory Agenda and participation in a regulatory working group convened by OIRA.  In addition to generally codifying these and other requirements of the Executive Order, H.R. 1009 codifies the Order’s definition of “significant regulatory action” and its requirement for OIRA review of new regulations that constitute a “significant regulatory action” but makes the review requirement applicable to both executive and independent agencies.

According to the report on the bill issued by the House Committee on Oversight and Government Reform, the exclusion of independent regulatory agencies from OIRA review in Executive Order 12866 “means that numerous controversial and extremely costly regulations are issued without the second look by regulatory experts that OIRA review provides.”  In addition to the CFPB, the other independent regulatory agencies currently excluded from OIRA review by Executive Order 12866 include the Federal Reserve, the FCC, the FDIC, the FTC, and the OCC.



CFPB publishes prepaid card rule compliance guide

Posted in Prepaid Cards

As it has done for other CFPB rules, the CFPB has published a small entity compliance guide for its prepaid card rule.  The final rule is generally effective on October 1, 2017.

We have blogged about Republican efforts that are underway in Congress to use the Congressional Review Act to enact a joint resolution of disapproval to nullify the prepaid card rule.


Divided D.C. Circuit panel denies injunction blocking CFPB CID

Posted in CFPB Enforcement

The D.C. Circuit, in a divided decision, denied a motion for an emergency injunction pending appeal filed by a company seeking to halt all CFPB action adverse to the company, including enforcement of a CID and disclosure of the company’s identity.  The company seeking the injunction in John Doe Company v. CFPB is a California limited liability company with its principal place of business in the Philippines that is in the business of purchasing and selling income streams.

To satisfy the requirement of showing a likelihood of success on the merits, the company pointed to the D.C. Circuit’s PHH decision holding that the CFPB’s single-director-removable-only-for-cause structure is unconstitutional.  In denying the injunction, the D.C. Circuit observed that the company was required to show not only that there is potentially persuasive authority for its legal position but also that the district court abused its discretion by not giving sufficient credit to that showing when it balanced the equities for purposes of deciding whether to grant preliminary injunctive relief.

The D.C. Circuit concluded that pointing to PHH was not enough because:

  • The PHH decision has been vacated as a result of the order granting the CFPB’s petition for rehearing en banc.  The D.C. Circuit stated that the district court “did not abuse its discretion in determining that simply pointing to the vacated majority opinion in PHH did not establish the likelihood of an identical constitutional ruling by the en banc court in PHH or the court in this case.” (emphasis provided).
  • Even assuming the en banc court were to agree with the majority opinion in PHH, the company is not in the same constitutional position as PHH.  According to the court, PHH was “on the receiving end of a completed law enforcement action by the Bureau” and the majority opinion emphasized the Constitution’s assignment of law enforcement authority to the Executive Branch.  In contrast, the company is seeking to stop “a non-self-executing investigative demand for regulatory action” and had not objected to the scope or content of the CID or argued that it is outside the CFPB’s authority.  To obtain the injunction, the company “would have to show that only the Executive Branch can demand information from regulated businesses or take such investigative steps,” something which the court deemed “far from constitutionally self-evident.” (emphasis provided).
  • The company’s argument that the alleged separation of powers violation requires the CFPB to “be stopped in its tracks” ignores that severance of the unconstitutional provision is often the chosen remedy (as it was in PHH) and that vacatur of past actions is not routine.  The court observed that the PHH decision “did not undo the Bureau enforcement action and make it start over from scratch.  The court simply remanded for the Bureau to address specific matters.”
  • An administrative proceeding rather than the D.C. Circuit is the proper forum for the company’s separation of powers claim.

The D.C. Circuit also found that the district court had not abused its discretion (1) in finding that the company had failed to show irreparable harm, calling the company’s argument about reputational harm “nothing more than speculation about how third parties might respond to routine regulatory investigations,” and (2) in holding that the company’s name did not need to be kept confidential in public court proceedings.  (On March 7, the date of the D.C. Circuit decision, the CFPB revealed the company’s name by publishing on its website the company’s petition to modify or set aside the CID and the CFPB’s decision and order denying the petition.)

Judge Kavanaugh, who was on the PHH panel and joined the majority decision, issued a dissenting opinion in which he stated that he would grant the company’s injunction motion.  According to Judge Kavanaugh, the company had shown a likelihood of success on the merits because “given the Supreme Court’s Article II precedents, I believe that the CFPB’s structure is likely to be ruled unconstitutional, whether by this Court sitting en banc or by the Supreme Court.”  He also found that the company had shown irreparable harm because “[i]rreparable harm occurs almost by definition when a person or entity demonstrates a likelihood that it is being regulated on an ongoing basis by an unconstitutionally structured agency that has issued binding rules governing the plaintiff’s conduct and that has authority to bring enforcement actions against the plaintiff.”

The CFPB had argued that even if it is unconstitutionally structured, the remedy would be to sever the for-cause removal provision as was done in PHH.  According to the CFPB, because it would continue to regulate the company as an executive agency rather than an independent agency in that scenario, the company is not entitled to a preliminary injunction to prevent the CFPB in its current form from regulating the company.  Calling the CFPB’s analysis “badly mistaken,” Judge Kavanaugh stated that “unless and until” the for-cause removal provision is actually severed, the company “will continue to be regulated on an ongoing basis by an unconstitutional agency.”  In his view, a preliminary injunction “would alleviate that ongoing harm.”


Director Cordray and Comptroller Curry speak at LendIt USA conference

Posted in Marketplace Lending, Technology

Earlier this week, we attended the LendIt USA conference in New York City, a leading annual fintech conference, at which both CFPB Director Richard Cordray and Comptroller of the Currency Thomas Curry spoke.

Director Cordray began his remarks by returning to his familiar “level playing field” theme, observing that “[e]venhanded oversight of all providers” regardless of size “is a basic rule of the road for effective regulation of the financial marketplace” and that “[n]obody gets a free pass to exploit regulatory arbitrage; everyone must be held to the same standards of compliance with the law.”  He then discussed the CFPB’s two most recent requests for information.

The first RFI, issued in November 2016, seeks information about market practices related to consumer access to financial information.  Director Cordray reported that the CFPB has received about 70 “extensive and thoughtful” comments from financial institutions, data aggregators, companies that use aggregated data, trade associations, consumer groups, and individuals.  He observed that “[c]ertain perspectives presented in the comments are not surprising,” with banks and other financial companies raising concerns about consumer data security and aggregators and users of the data recommending less fettered access and greater freedom to store and use collected data.  He commented that the CFPB is “keenly aware of the serious issues around privacy and security, for consumers and providers alike,”  and noted two “pressing” issues facing the CFPB:  how to satisfy the demands of consumers without exposing the providers that maintain consumer data to undue costs and risks and how to prevent consumers from subjecting themselves to undue risks, including the possibility that their data could be misused.  Echoing comments he made in October 2016, Director Cordray also stated that the CFPB “remain[s] concerned about reports of some institutions that may be limiting or restricting access unduly.”

The second RFI discussed by Director Cordray was the RFI issued last month seeking information about the use of alternative data and modeling techniques in the credit process.  He indicated that the CFPB’s goal in issuing the RFI is “to learn more about issues raised by new technologies and new uses of data” and, in particular, to obtain information “about the potential benefits and risks of using, applying, and analyzing unconventional sources of information to predict people’s creditworthiness.”  He reviewed the main inquiries posed by the RFI, with emphasis on the CFPB’s interest in learning how the use of alternative data might impact so-called “credit invisibles,” meaning consumers with no credit history or credit histories that are too limited to generate a reliable credit score, and the application of fair lending laws to alternative data.

In addition to not providing any meaningful new insights into the CFPB’s views on fintech issues, perhaps the most disappointing aspect of Director Cordray’s remarks was his touting of the CFPB’s no-action letter (NAL) policy in his discussion of Project Catalyst,  the CFPB’s initiative launched in November 2012 for facilitating innovation in consumer-friendly financial products and services.  The CFPB’s NAL policy, which was finalized in February 2016, stated that the CFPB would publish NALs, along with a version or summary of the request, on its website.  Since we could find no NALs on the CFPB’s website, we assume no NALs have been issued.

Indeed, even if any NALs have been issued, they would be of marginal value to the recipients.  As we observed when the NAL policy was finalized, the NAL policy provides no immunity against private litigation or enforcement actions by other federal and state government agencies.  (In fact, the CFPB stated in the policy that an NAL can be revoked or modified at any time.)  To make matters worse, an NAL will receive no deference from the courts and may only cover one or more of the “enumerated consumer laws” and not UDAAP which is often of the greatest concern to banks and companies because of the lack of clarity as to what constitutes an “unfair,” “deceptive” or “abusive” act or practice.  Perhaps the reason no NALs have been issued is that none have been requested because of their marginal value as well as the potential for publication of an NAL to give competitors access to important confidential strategic information.

Comptroller Curry’s remarks focused primarily on the OCC’s fintech charter proposal, which he defended against a number of attacks from state regulators, consumer advocates, as well as industry opponents.  Comptroller Curry said that the OCC definitely has authority to grant special purpose charters without new legislation.  Companies obtaining these charters should not expect “light touch” supervision, as the OCC will supervise them in the same manner that it supervises full-service banks.  Furthermore, the OCC will not grant charters to companies engaging in practices considered to be predatory or abusive.

Comptroller Curry also said that there will be “appropriately calibrated” capital and liquidity standards, as well as financial inclusion requirements for obtaining a charter.  Details on the requirements will be outlined in a forthcoming supplement to the OCC’s licensing manual.  He added that national banks are subject to state law to a much greater extent under Dodd-Frank than previously was the case, so concerns about excessive preemption are misplaced.  Comptroller Curry said that companies will benefit from the OCC’s high standards and “rigorous supervision,” as it adds value to the companies.

Unlike Director Cordray, Comptroller Curry took questions from the audience, including questions from us.  Although he did not indicate whether there has been any contact between the White House and the OCC concerning policy, he said that the OCC intended to comply with the spirit of the recent executive orders concerning deregulation, although it is not required to follow them as an independent agency.  He noted that the OCC already had completed a recent decennial review of its rules as required by the Economic Growth and Regulatory Paperwork Reduction Act of 1996.  Asked whether the OCC would issue an interpretive opinion concerning the Madden v. Midland Funding case consistent with its amicus brief, Comptroller Curry said that it would not, since the agency cannot overrule the Second Circuit.

We strongly disagree with Comptroller Curry’s refusal to author an interpretive opinion which certainly would be helpful outside the Second Circuit (and maybe even within the Second Circuit since the OCC had not weighed in on Madden until it reached the Supreme Court).  For reasons that we will articulate in the future, we think that the OCC should propose to issue a regulation codifying the “valid when made” doctrine.

On March 21, 2017, from 12:00 pm to 1:00 pm ET, Ballard Spahr will hold a webinar, “Alternative Credit – Opportunities, Risks and the CFPB’s Request for Data.”  More information and a link to register is available here.





D.C. Circuit grants motion of U.S. for leave to file amicus brief in PHH by March 17; denies motions to intervene

Posted in CFPB Enforcement

The D.C. Circuit has entered an order granting the unopposed motion of the United States for leave to file an amicus brief in PHH by March 17, 2017.  As we previously observed, the motion appears to signal the DOJ’s intention to support PHH rather than the CFPB.

In a second order, the D.C. Circuit denied various motions to intervene or for reconsideration of motions to intervene as follows:

  • The motion of the plaintiffs in State National Bank of Big Spring, Texas, et al. v. Lew, another case challenging the CFPB’s constitutionality, to intervene in the en banc rehearing was denied.  In their motion to intervene, the plaintiffs had argued that if the D.C. Circuit granted the CFPB’s petition for rehearing en banc but decided the case on RESPA grounds, their constitutional claims would be left unresolved, and the district court would be left without binding guidance on the constitutional question.
  • The petition for rehearing en banc filed by Democratic AGs from 16 states and the District of Columbia was denied as were the motions for reconsideration en banc filed by Senator Sherrod Brown and Representative Maxine Waters and by Americans for Financial Reform, Center for Responsible Lending, Leadership Conference on Civil and Human Rights, United States Public Interest Research Group, Maeve Brown (who chairs the CFPB’s Consumer Advisory Board), and Self-Help Credit Union.  The motions to intervene were based in substantial part on the argument that because the movants can no longer rely on the CFPB and/or the DOJ under the Trump Administration to adequately defend the CFPB’s constitutionality and have a legal interest in the CFPB remaining an independent agency, intervention is necessary to protect the movants’ legal interests, including by filing a petition for a writ of certiorari.

It is noteworthy that Senior Judge Randolph, is named on both orders, thus confirming that he intends to participate in the rehearing en banc.  (Senior Judge Randolph can elect to sit on the en banc court because he was a member of the original panel.)  As a result, because Chief Judge Garland will not be participating, the en banc court will consist of eleven judges: ten active judges, six of whom were appointed by either President Obama or President Clinton, and Senior Judge Randolph who was appointed by President George H.W. Bush.

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ACA International flags shortcomings in CFPB national debt collection consumer survey

Posted in CFPB Rulemaking, Debt Collection

In a new white paper, “An Overview of the Analytical Flaws and Methodological Shortcomings of the CFPB’s Survey of Consumer Experiences with Debt Collection,” ACA International takes aim at the report released by the CFPB in January 2017 that presented the findings of the CFPB’s national debt collection consumer survey.

In our blog post about the survey, we commented that the CFPB’s current leadership would likely attempt to use the survey to justify the CFPB’s current regulatory focus and lay the groundwork for future enforcement and rulemaking priorities.  In its white paper, ACA charges the CFPB with “potentially manipulating inconclusive results to promote the incorrect perception of debt collectors as predatory.”  ACA concludes that because “the data obtained by the CFPB through the consumer survey is insufficient at best and fundamentally flawed at worst,” it “cannot be used as the basis to properly inform the Bureau’s debt collection rulemaking efforts” and the CFPB “must conduct further study and analysis of the debt collection market before it will be positioned to issue evidence-based, comprehensive rules to regulate this complex industry.”

The analytical flaws and methodological shortcomings of the survey described by ACA include the following:

  • The survey was touted by the CFPB as representing “the first comprehensive and nationally representative data on consumers’ experiences and preferences related to debt collection.”  ACA calls the CFPB’s overall sample of individuals with experience with the debt collection industry “remarkably small,” with only 682 (32%) of the 2,132 survey respondents reporting that he or she was contacted by a debt collector.  ACA states that the CFPB’s claims about the representativeness and overall quality of the data are “undermined by an array of caveats found throughout the report.”  For example, the CFPB minimizes the survey data by describing the report as a “descriptive” exercise to “highlight patterns that may be of policy interest” and “to sketch, from consumers’ perspectives, the broad experience of debt collection.”  In addition, ACA observes that the CFPB leaves the reader without any basis for determining the degree to which the findings are representative of the population as a whole by acknowledging that the report “does not present standard errors or statements about the statistical significance of the differences [across groups of consumers.]”
  • The CFPB’s focus on percentages, coupled with a near-total absence of raw numbers or sample sizes for individual questions provides a limited context for interpreting responses or situating them within the larger sample.  For example, the CFPB reported that “almost one-third of consumers (32 percent) reported being contacted over the past year by a creditor or debt collector about a debt.”  ACA points out that “the inclusion of raw numbers enables a reader to clearly see that the percentage represents roughly 682 consumers out of the 2,132 surveyed.”
  • Many of the findings highlighted in the CFPB’s press release about the survey and Director Cordray’s related remarks relied “on the presentation of a percentage that obscures the total number of responses for a given question.”  For example, the CFPB’s press release highlighted the survey’s finding that “three-in-four consumers report that debt collectors did not honor a request to cease contact.”  According to ACA, “a more accurate description of this finding would note that the 75% of consumers who reported repeated contact after a request to cease communication are a subset of the 42% who requested contact cease [(about 215 consumers)]; this 42% is itself a subset of the 32% of the total sample that have been contacted about a debt in collection [(about 286 consumers)].”  Accordingly, ACA calls the “CFPB’s public statement that ‘three-in-four consumers’ were continuously contacted by debt collectors after requesting contact be ceased… an overt exaggeration.”  In ACA’s view, the CFPB has “implied harassing behavior on the part of debt collectors” by using “a tactic that serves to characterize the debt collection industry as problematic.”

In July 2016, in anticipation of convening a SBREFA panel, the CFPB issued an outline of the proposals it was considering for a rule covering “debt collectors” subject to the FDCPA.  At that time, the CFPB stated that it expected to conduct a separate SBREFA proceeding for a rule covering first-party creditors collecting their own debts and others engaged in debt collection not covered by the proposals.  The CFPB’s Fall 2016 rulemaking agenda indicated that the CFPB expected to convene a second SBREFA proceeding in 2017 and gave a February 2017 estimated date for further prerule activities (which would likely include testing of model validation notices and other disclosures.)




CFPB February 2017 complaint report highlights credit reporting complaints, complaints from Louisiana consumers

Posted in Credit Reports

The CFPB has issued its February 2017 complaint report that highlights credit reporting complaints.  The report also highlights complaints from consumers in Louisiana and the New Orleans metro areas.

General findings include the following:

  • As of February 1, 2017, the CFPB handled approximately 1,110,100 complaints nationally, including approximately 29,700 complaints in January 2017.
  • Debt collection continued to be the most-complained-about financial product or service in December 2016, representing about 26 percent of complaints submitted.
  • For the first time, student loans replaced mortgages in the “top three” complaint categories with debt collection complaints, together with complaints about credit reporting and student loans, collectively representing about 60 percent of the complaints submitted in January 2017.  This likely reflects the increase in the number of student loan complaints received in January 2017 as compared with December 2016. Complaints about student loans showed the greatest month-over-month increase, increasing 537 percent from December 2016.  Student loans also had the greatest percentage increase based on a three-month average, increasing about 388 percent from the same time last year (November 2015 to January 2016 compared with November 2016 to January 2017).  In February 2016, the CFPB began accepting complaints about federal student loans.  Previously, such complaints were directed to the Department of Education.  As we have noted in blog posts about prior CFPB monthly complaint reports issued beginning in April 2016, rather than reflecting an increase in the number of borrowers making student loan complaints, the increasing percentages represented by student loan complaints received by the CFPB most likely reflects the change in where such complaints are sent.
  • Payday loans showed the greatest percentage decrease based on a three-month average, decreasing about 26 percent from the same time last year (November 2015 to January 2016 compared with November 2016 to January 2017).  Complaints during those periods decreased from 408 complaints in 2015/2016 to 302 complaints in 2016/2017.
  • Georgia, South Dakota, and Mississippi experienced the greatest complaint volume increases from the same time last year  (November 2015 to January 2016 compared with November 2016 to January 2017) with increases of, respectively, 59, 43, and 34 percent.
  • Delaware, New Hampshire, and Hawaii experienced the greatest complaint volume decreases from the same time last year (November 2015 to January 2016 compared with November 2016 to January 2017) with decreases of, respectively, 8, 8, and 4 percent.

Findings regarding credit reporting complaints include the following:

  • The CFPB has handled approximately 185,700 credit reporting complaints.
  • The most common issues identified in complaints involved problems with incorrect information on credit reports and investigations by credit reporting companies.  Consumers complained about the process for disputing information on credit reports, such as difficulties in submitting disputes through phone and mail channels, authentication questions or other barriers to submitting disputes, and problems receiving results of investigations.
  • Consumers complained about the process for blocking and removing information resulting from identity theft and credit inquiries claimed not to have been initiated by the consumer.
  • Many consumer complaints about credit scoring reflect confusion over the variety of scores, scoring factors that  accompany credit score information, and receipt of varying scores from different reporting agencies.

Findings regarding complaints from Louisiana consumers include the following:

  • As of February 1, 2017, approximately 12,400 complaints were submitted by Louisiana consumers of which approximately 4,500 were from New Orleans consumers.
  • Debt collection was the most-complained-about product, representing 34 percent of all complaints submitted by Louisiana consumers, which was higher than the national average rate of 27 percent of all complaints submitted by consumers.
  • Average monthly complaints received from Louisiana consumers increased 31 percent from the same time last year (November 2015 to January 2016 compared with November 2016 to January 2017), higher than the increase of 21 percent nationally.


Motion filed by U.S. seeking leave to file amicus brief by March 17 signals support for PHH

Posted in CFPB Enforcement

The United States, at the Solicitor General’s request, has filed an “unopposed motion” with the D.C. Circuit for leave to file an amicus brief in PHH by March 17, 2017.  The motion states that both PHH and the CFPB have consented to the motion.

The D.C. Circuit’s order granting the CFPB’s petition for rehearing en banc requires amicus briefs supporting PHH to be filed by March 10 and amicus briefs supporting the CFPB to be filed by March 31.  (PHH must file its opening brief by March 10 and the CFPB must respond by March 31.)  In asking for leave to file its amicus brief by March 17, the United States appears to be signaling that its brief will support PHH rather than the CFPB.

In December 2016, at the D.C. Circuit’s invitation, the United States filed a response to the CFPB’s petition for rehearing en banc expressing the views of the United States.  The response, which supported the CFPB’s motion, did not address the D.C. Circuit’s RESPA rulings and instead addressed only the panel’s constitutional separation-of-powers holding.  The United States argued that the panel’s holding was based on an incorrect application of U.S. Supreme Court precedent.

Since the Department of Justice is now headed by Republican Attorney General Jeff Sessions, the amicus brief to be filed by the United States can be expected to support PHH’s position that the CFPB’s single-director-removable-only-for-cause structure is unconstitutional.  Should the United States also address PHH’s RESPA arguments in its amicus brief, it is also likely to support PHH’s position that the CFPB’s RESPA interpretation was incorrect.

Indeed, in addition to requesting a March 17 date for filing its amicus brief, the following statements made by the United States in its unopposed motion also appear to signal its intention to support PHH: “As this Court recognized in calling for the views of the United States on the question whether rehearing should be granted, the views of the United States on matters involving the President’s removal power are not always congruent with the views of independent agencies. An earlier filing date would make it exceedingly difficult to engage in the necessary consultation with the government.  A March 17 filing by the United States would provide the Bureau adequate time to address, in the Bureau’s own filing on March 31, points made in the Department of Justice’s filing.”



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