Last week, the CFPB finalized its proposed revisions to its trial disclosures and no-action letter policies and also finalized its proposal to create a new FinTech sandbox policy.  It also announced the creation of the American Financial Innovation Network (ACFIN), a network of federal and state regulators to facilitate innovation, and issued its first no-action letter under the final revised policy.

We are delighted that Paul Watkins, Director of the CFPB’s Office of Innovation, has agreed to participate as our special guest in a webinar with Ballard Spahr attorneys that will explore the potential benefits of these innovation policies.  The webinar, “The CFPB’s Final Innovation Policies: What You Need to Know,” will be held on October 1, 2019 from 12:00 to 1:00 p.m. ET.  Click here to register.

Our discussion will include:

  • An overview of the three final policies
  • Key differences between the final policies and prior policies
  • The CFPB’s evaluation of applications under the final policies
  • Benefits for approved applicants under the policies
  • Confidentiality concerns
  • The impact of state law and state sandboxes, including the role of the ACFIN
  • The first no-action letter



The CFPB has announced a number of “enhancements” to its consumer complaint database.  In March 2018, the CFPB issued a request for information seeking comment on potential changes to its practices for the public reporting of consumer complaint information.  (The RFI was one of twelve RFIs issued under former Acting Director Mulvaney’s leadership that sought information on various topics.)  The CFPB indicated that it received nearly 26,000 comments in response to the RFI and is making the enhancements based on its review of those comments.

During his tenure as Acting Director, Mr. Mulvaney criticized the Bureau’s public disclosure of consumer complaint data and suggested that public disclosure be discontinued.  That suggestion produced strong criticism from Democratic lawmakers and now appears to have been abandoned by the Bureau.  In its announcement, the CFPB indicates that “it will continue the publication of consumer complaints, data fields and narrative descriptions through the Bureau’s Consumer Complaint Database.

A primary concern of industry with the Bureau’s disclosure of unverified complaint data (and one which we often noted) was that because complaints are often invalid, they do not serve as reliable evidence that the complained about conduct occurred.  The CFPB indicates in the announcement that it plans to provide “modified disclaimers to provide better context to the published data.”  However, the only specific example given is that the Bureau’s website will “more prominently display disclosures making it clear that the Consumer Complaint Database is not a statistical sample of consumers’ experiences in the marketplace.”

The other enhancements described in the Bureau’s announcement are its plans to:

  • Highlight the availability of answers to common financial questions for consumers to help inform them before they submit a complaint; and
  • Highlight consumers’ ability to contact the financial company directly to get answers to their specific questions.
  • Build and launch dynamic visualization tools including geospatial and trend views based on recent complaint data to help users of the database understand current and recent marketplace conditions
  • Emphasize features for aggregation and analysis while continuing to make all the underlying data available for analysis
  • Explore expansion of a company’s ability to respond publically to individual complaints listed in the database
  • Continue to explore ways to put the complaint data in context of other data, such as by incorporating product or service market share and company size

Overall, we view the Bureau’s announcement as a positive development.

The CFPB has published a notice in the Federal Register seeking ideas on how it can use Tech Sprints to advance regulatory innovation and compliance.  Comments are due by November 8, 2019.

The CFPB’s notice describes Tech Sprints as a model that: 

“gather[s] regulators, technologists, financial institutions, and subject matter experts from key stakeholders for several days to work together to develop innovative solutions to clearly-identified challenges. Small teams include participants from both the regulator and a diversity of entities to ensure the inclusion of regulatory, industry, and technology perspectives.  The regulator assigns a specific regulatory compliance or market problem to each team and challenges the teams to solve or mitigate the problems using modern technologies and approaches.  The teams then work for several days to produce actionable ideas, write computer codes, and present their solutions.  On the final day, each team presents to an independent panel of judges that selects winners.  The most promising ideas can then be further developed either in collaboration with the regulator or by external parties.” 

The notice indicates that Tech Sprints have been used successfully by the Financial Conduct Authority in the United Kingdom and used in the United States by federal agencies such as the Census Bureau and the Department of Health and Human Services.

The CFPB indicates that the information it receives will help it identify “how stakeholders can work together to create a regulatory environment” that “allows innovation to flourish” while giving consumers “the appropriate level of protection and suitable access to the benefits of technological advancements.”  The Bureau asks for ideas on how it can use Tech Sprints in various areas such as HMDA submissions, its supervisory activities, the exchange of data between regulated entities and the Bureau, and the reduction of regulatory compliance burdens.  The notice also includes a list of questions to which the Bureau seeks responses, one of which asks what regulatory compliance issues could benefit from innovation through a Bureau Tech Sprint.




The CFPB announced that it will host a public workshop with the FTC on December 10, 2019 to discuss issues affecting the accuracy of both traditional credit reports and employment and tenant background screening reports.

According to the announcement, the workshop “seeks to bring together stakeholders – including industry representatives, consumer advocates, and regulators – for a wide-ranging public discussion on the many issues impacting the accuracy of consumer reports.”  The announcement also invites interested individuals to recommend topics that should be addressed at the workshop or to provide information on the potential topics that are set forth in the announcement.




The long-running saga that is the litigation over whether the CFPB’s single-director-removable-only-for-cause structure is constitutional took a new twist on Tuesday with the CFPB’s announcement that it has determined that its structure is unconstitutional.

On October 22, 2019, from 12:00 to 1:00 p.m. (ET), Ballard Spahr will hold a webinar, “The CFPB’s Constitutionality Goes to the Supreme Court: What It Means.”  Click here to register.

The announcement was made in identical letters sent by Director Kraninger to House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell.  In the letters, Director Kraninger advised the lawmakers that in response to Seila Law’s petition for a writ of certiorari seeking U.S. Supreme Court review of the Ninth Circuit’s ruling that the CFPB’s structure is constitutional, the DOJ, on the Bureau’s behalf, has taken the position that the Bureau’s structure violates the U.S. Constitution’s separation of powers.

In its response, the DOJ urges the Supreme Court to grant the petition and resolve the constitutional issue by finding that existing Supreme Court precedent does not require the Court to uphold the Bureau’s constitutionality because the Dodd-Frank removal provision is distinguishable from those previously upheld by the Court.  The DOJ argues (and Director Kraninger agrees in her letters) that the appropriate remedy is to sever the for-cause removal provision.  The DOJ suggests that because the CFPB now agrees that its structure is unconstitutional, the Supreme Court may “wish to consider appointing an amicus curiae to defend the judgment of the [Ninth Circuit]” if it grants review.  The briefs on Seila Law’s petition have been distributed for the Supreme Court’s October 11 conference.

While the constitutionality issue has loomed over the Bureau nearly since it opened its doors for business, it has now descended upon the Bureau as a very dark cloud.  Although Director Kraninger suggests in her letters to Ms. Pelosi and Mr. McConnell that it will be business as usual at the Bureau and states that she will continue “to defend the Bureau’s actions,” she also indicates that she has “directed the Bureau’s attorneys to refrain from defending the for-cause removal provision in the lower courts.”  At a minimum, her instructions are likely to cause the courts hearing pending cases (which are listed in Director Kraninger’s letters) to stay those cases until the Supreme Court rules on Seila Law’s petition for review and, if granted, its appeal.  But even more significantly, her instructions could effectively bring the CFPB’s enforcement activities to a halt.  Companies that are recipients of CFPB CIDs or PARR letters or otherwise targeted by the CFPB in new or threatened enforcement actions can be expected to raise the constitutionality issue to challenge the CFPB’s actions and Director Kraninger’s instructions create uncertainty as to what position CFPB attorneys will take when faced with such challenges.

The CFPB’s change in position is also likely to result in stays from the Fifth and Second Circuits in, respectively, All American Check Cashing and RD Legal.  The CFPB has filed letters with the Fifth and Second Circuits indicating that it now agrees with the defendants in both cases that the Bureau’s structure is unconstitutional but does not agree that the entire CFPA should be struck down.  Instead, the CFPB believes severance of the for-cause removal provision is the appropriate remedy.

The Fifth Circuit heard oral argument in March 2019 and last week directed the parties to file letter briefs regarding what action the Fifth Circuit panel should take in light of the en banc Fifth Circuit’s decision in Collins v. Mnuchin.  Briefing has been completed in RD Legal and the Second Circuit has scheduled oral argument for November 21, 2019.


In this podcast, we team with Bridgeforce, a leading financial services consultancy, to discuss how companies can prepare their operations should the CFPB’s proposed debt collection rule become final.  We look at the operational approaches available to companies in implementing the rule and legal considerations raised by each, the need for an assessment of assets before selecting an approach and the role of legal advice, and the role of future planning.

Click here to listen to the podcast.

In its first No-Action Letter under the new revised policy, the CFPB addresses a long-standing issue under the Real Estate Settlement Procedures Act regarding certain payment arrangements between mortgage lenders and housing counseling agencies.  We previously reported on the CFPB issuing its final No-Action Letter policy and other innovation policies.  (The CFPB issued just one No-Action Letter under its policy prior to its revision.)

RESPA section 8 prohibits the giving or receiving of any thing of value pursuant to any agreement or understanding that business incident to or a part of a real estate settlement service shall be referred to any person.  An exemption from the prohibition permits the payment to any person of a bona fide salary or compensation or other payment for goods or facilities actually furnished or for services actually performed.

The U.S. Department of Housing and Urban Development (HUD) has a Housing Counseling Program (Program) that it administers pursuant to its authority to work with public or private organizations to provide information, advice, and technical assistance, including counseling and advice to tenants and homeowners with respect to property maintenance, financial management, and such other matters as may be appropriate to assist them in improving their housing conditions and in meeting the responsibilities of tenancy or homeownership.  Housing counseling agencies can apply for approval to participate in the Program and must meet the Program requirements set forth in HUD regulations and other HUD materials.  The Program requirements include consumer protections.  Additionally, under the requirements, if a counseling agency enters into a Housing Counseling Funding Agreement pursuant to which a lender will provide funding for counseling services, the terms of the agreement must be set forth in a Memorandum of Understanding (MOU) between the parties.  HUD regulations permit lenders to pay agencies for counseling services, through a lump sum or on a case-by-case basis, provided the level of payment does not exceed a level that is commensurate with the services provided and is reasonable and customary for the area.  Any payment arrangement between the lender and agency must be disclosed to the agency’s client (i.e., the consumer).

In its application for a No-Action Letter on behalf of more than 1,600 counseling agencies participating in the Program, HUD notes that both lenders and counseling agencies perceive that entering into a Housing Counseling Funding Agreement presents a compliance risk under RESPA.  This results in lenders being reluctant to enter into the agreements, and agencies must seek alternative sources of funding to provide counseling.  HUD explains that the PHH Corp. v. CFPB decision created uncertainty regarding the interaction of the RESPA referral fee prohibition and the exemption permitting compensation for goods, facilities or services that are provided.  The particular issue identified by HUD is whether a mortgage lender may condition its payment to a housing counseling agency on the consumer making contact with the lender or closing a loan with the lender.

HUD provides this interesting background on efforts of stakeholders to obtain guidance from the CFPB:

“HUD understands that while the PHH case was on appeal to the full D.C. Circuit, the Bureau in early 2017 gave informal, oral guidance to a group of interested outside stakeholders (i.e., housing counseling intermediaries, mortgage lenders, and their outside counsel) on how RESPA section 8 applied to Housing Counseling Funding Agreements.  HUD received feedback that the stakeholders did not believe the guidance alleviated the regulatory uncertainty because it did not directly address the key interpretive issues regarding application of RESPA section 8(c)(2), which the Bureau said it could not address while the PHH case was pending.”

HUD sought more definitive guidance from the CFPB by requesting a No-Action Letter.  The CFPB No-Action Letter defines as “Recipients” of the letter, housing counseling agencies that participate in the Program to the extent they are in compliance with all the Program requirements.  The No-Action Letter provides that unless or until terminated by the CFPB as described in the letter:

“[T]he Bureau will not make supervisory findings or bring a supervisory or enforcement action against any Recipient under

(a) its authority to prevent unfair, deceptive, or abusive acts or practices, or
(b) section 8 of the Real Estate Settlement Procedures Act (RESPA) and section 1024.14 of Regulation X.”

for including and adhering to a provision in the MOU between the Recipient and the mortgage lender reflecting the terms of the Housing Counseling Funding Agreement that conditions the lender’s payment for housing counseling services on the consumer making contact or closing a loan with the mortgage lender even if that provision or the parties’ adherence thereto could be construed as a referral (as such term is used in RESPA section 8(a) and defined in Regulation X § 1024.14(f)); provided that, the level of payment for the housing counseling services does not exceed a level that is commensurate with the services provided, and is reasonable and customary for the area.” (Footnotes omitted.)

The No-Action Letter identifies only Recipients as parties that may reasonably rely on the CFPB commitment in the letter.  Thus, lenders are not included among the parties who may so rely.  However, the CFPB provides a No-Action Letter template that may be used by lenders to seek a No-Action Letter.  Among the certifications that a lender would have to make in applying for a No-Action Letter is that the client of the housing counseling agency could choose between comparable products of at least three different lenders.

On Monday, September 9, 2019, a group of 28 housing, consumer protection and community development organizations issued a letter to the Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and Federal Reserve Board in advance of an anticipated Notice of Proposed Rulemaking regarding the Community Reinvestment Act (“CRA”) and in response to an Advance Notice of Proposed Rulemaking published in August 2018 (the “ANPR”). The letter encourages the agencies to issue uniform CRA regulations and advises that metric-based standards should not be focused solely on the bank’s CRA balance sheet.

The letter first addresses the importance of identical regulations across the regulators to establish consistency and to prevent the need to revise the regulations in the near future. Noting that CRA regulations have historically been uniform across the three prudential regulators, the agencies request that the same be true for the forthcoming regulations.

The letter continues by recognizing the need for clear, consistent, and transparent regulations and acknowledging that these goals can be achieved by improved performance metrics. The agencies then raise concerns that a metrics-based framework that relies primarily on the dollar volume of a Bank’s CRA balance sheet against its deposit or asset base would not necessarily best serve the goals of the CRA. The letter highlights six potential pitfalls of a metrics-based framework to support the agencies’ position. Foremost among them: (i) the possibility that the framework may incentivize banks to hit their targets in the fastest way possible rather than to focus on the goal of meeting community needs, and (ii) that the metrics could encourage certain types of CRA activities and discourage activities that may not produce the same metrics, but still serve the low- and moderate-income community needs.

Although it remains to be seen how regulators will respond to comments received in response to the ANPR, the letter issued by the community organizations demonstrates the challenges regulators will face delivering clear, consistent, and transparent regulations that can best address the goals of the CRA.

The Washington State Department of Financial Institution (DFI) has published proposed revisions to its student loan servicer regulations. This proposal would amend rules that went into effect earlier this year pursuant to Washington’s student loan servicing law.

While most of the proposed amendments relate to mortgage loan origination, and several of the changes are merely technical, there are several substantive additions relevant to student loan servicers, including:

  • An affirmative requirement that Consumer Loan Act licensees disclose to all service members, in connection with student loans, their rights under state and federal service member laws and regulations;
  • A requirement that student loan servicers must (1) scrub against the Department of Defense’s Manpower Database on a monthly basis, (2) apply borrower entitlements accordingly, and (3) maintain related written policies and procedures (though compliance with applicable federal requirements is sufficient); and
  • A provision that would allow Consumer Loan Act licensees servicing student loans for Washington state borrowers to apply to the DFI’s director to have annual assessments waived or adjusted.

Additionally, the proposed regulations also make compliance with federal law sufficient for purposes of complying with several Washington requirements applicable to student loan servicers, including provisions related to the timing of when payments received are credited and borrower requests for information.

A hearing is scheduled for September 24, with an intended adoption date of October 22 and effective date of November 24.

The FTC announced settlements of two lawsuits filed in a California federal district court alleging similar violations of the FTC Act, the Telemarketing Sales Rule (TSR), and the Truth in Lending Act by providers of student debt relief services, their principals, and a Minnesota-based company that provided financing to customers of the providers involved in both complaints.  One of the complaints was filed jointly by the FTC and the Minnesota Attorney General and included claims alleging violations of various Minnesota statutes, including the Minnesota Uniform Deceptive Trade Practices Act.

The lawsuits alleged that the debt relief companies charged illegal upfront fees that they led consumers to believe went towards payment of student loans, and falsely promised that their services would permanently lower loan payments or result in forgiveness of loan balances.  They also alleged that the debt relief companies had entered into arrangements with the financing company defendant pursuant to which the financing company would extend credit to qualified consumers to pay the debt relief companies’ fees.  The financing company allegedly ignored red flags in the form of direct complaints from consumers and complaints forwarded by the Better Business Bureau and CFPB that the debt relief companies had engaged in misleading sales tactics and consumers had not authorized the loans they received from the financing company.  The lawsuits alleged that the financing company violated the TILA by failing to provide required disclosures in connection with the loans and violated the TSR by providing substantial assistance or support to the debt relief companies which it knew, or consciously avoiding knowing, were engaged in deceptive and abusive telemarketing practices in violation of the TSR.

In one of the lawsuits, all of the defendants have agreed to entry of stipulated orders.  In the second lawsuit, only the financing company has agreed to settle the case.  In the fully-settled case, the settlement imposes a $4.2 million judgment on the student debt relief company and its principals which, except for $156,000, is suspended based on inability to pay.  The settlement also permanently bans the defendants from selling any kind of debt relief products or services, making unsubstantiated claims about financial products and services, and making material misrepresentations about any other kind of product or service.  The settlements with the financing company require it to pay judgments of approximately $28 million which, except for $1 million, are suspended based on inability to pay, bar it from collecting any amounts owed on loans made to customers of the debt relief companies, and permanently ban it from financing the purchase of debt relief services.