The CFPB has issued its Consumer Response Annual Report, which analyzes the approximately 329,800 complaints received by the CFPB between January 1 and December 31, 2018. The Report details the trends in consumer complaints across various categories and provides information about the CFPB’s process for handling complaints.

Of the 329,800 complaints received in 2018, the CFPB sent approximately 80% of the complaints to companies for review and response, referred 14% to other regulatory agencies, and found 4% to be incomplete. At the end of the reporting period, approximately 0.4% of complaints were pending with the consumer, while 1% were pending with the CFPB.

Companies responded to the vast majority of complaints sent to them for review. Approximately 4% of such complaints were closed with monetary relief; 12% were closed with non-monetary relief (e.g., mortgage foreclosure alternatives, stopping unwanted calls from debt collectors, correcting information in a consumer report, etc.); 74% were closed with explanation (i.e., the response substantively meets the consumer’s desired resolution or explains why no action was taken); 3% resulted in an administrative response requiring further review by the CFPB; 5% are still being reviewed by the company; and, 2% did not receive a timely response.

According to the CFPB’s breakdown by category, complaints regarding credit reporting (126,300 or 38%), debt collection (81,500 or 25%), mortgages (30,100 or 9%), credit cards (28,700 or 9%), and checking or savings (25,900 or 8%) accounted for approximately 89% of the 329,800 total complaints. Servicemembers submitted complaints at similar rates as non-servicemembers. Older consumers, in contrast, complained less often about credit reporting, debt collection, and student loans and more often about mortgage, credit card, and checking and savings issues than consumers under 62 years old.

Several complaint categories saw considerable change from 2017. Complaints decreased from 2017 numbers in the categories of student loans (-48%), payday loans (-20%), personal loans (-19%), and mortgages (-19%). Complaints increased in 2018 most significantly for credit repair (+33%), money transfers/virtual currency (+31%), and credit reporting (+27%).

Notably, the CFPB recognizes that market information, such as product or service market size and company share, is often necessary to put the number of consumer complaints (including the number of complaints involving a specific company) into context. However, it “has not yet identified an approach to contextualize multiple products, services, and markets without imposing a significant burden on companies to provide data” and “continues to welcome suggestions and best practices about how to publish information about complaints.”

Since complaints continue to play a role in the Bureau’s use of its supervisory and enforcement authority, minimizing the number of consumer complaints submitted to the CFPB remains a key step to avoid ending up on the regulator’s radar.

In remarks today at the Bipartisan Policy Center (BPC), CFPB Director Kathy Kraninger outlined how she plans to use the various “tools” available to the CFPB.  While consistent with her recent testimony to House and Senate committees, her BPC remarks provide a more detailed view of the approach she plans to take in wielding the CFPB’s authority.

Director Kraninger began her remarks by indicating once again that the CFPB’s focus under her leadership will be on the prevention of harm to consumers. She then provided the following outline of how the CFPB would use its four “tools” (education, rulemaking, supervision and enforcement) to prevent consumer harm:

  • Education.  The CFPB will pursue education initiatives intended to empower consumers to make financial decisions that best suit their individual needs.  She noted as an example the CFPB’s savings initiative that is intended to help consumers increase their savings, particularly savings for emergency needs.
  • Rulemaking. The CFPB will no longer engage in rulemaking through enforcement and will pursue rulemaking “deliberately and transparently” using the APA rulemaking process.  She indicated that rulemaking would be used to provide “clear rules of the road” to regulated entities and that the Bureau “must acknowledge” that compliance costs impact consumer access to and the availability of credit.
  • Supervision.  CFPB examiners will look for a “culture of compliance” at supervised entities and seek to use examinations to “head off trouble.”  Director Kraninger suggested that the CFPB would take a favorable view of companies that self-report and take corrective action to remedy consumer harm.  She indicated that in her role as FFIEC Chairman, she would seek to strengthen coordination between federal and state regulators.
  • Enforcement.  The CFPB will engage in “careful and purposeful enforcement” where “bad actors” have violated clear rules or where the CFPB believes a public enforcement action is needed “to send a clear message” to deter wrongful behavior.  Director Kraninger indicated that the CFPB will move expeditiously in deciding whether or not to pursue an enforcement action.

With regard to the CFPB’s highly anticipated debt collection proposed rule, Director Kraninger indicated that the proposal will be issued “in the coming weeks” and include limits on the number of calls collectors can make on a weekly basis, address communications by email and text, and require new disclosures at the beginning of the collection process.

She also announced that the CFPB will be launching a series of symposiums on topics related to the CFPB’s mission, with the first symposium to look at clarifying the meaning of “abusive acts or practices” in the Dodd-Frank Act.  In its Fall 2018 rulemaking agenda, the CFPB announced that it was considering whether it should engage in rulemaking to clarify the meaning of “abusive.”  Director Kraninger indicated that the symposium, which would include experts and stakeholders, would help to inform the CFPB’s decision on such rulemaking.

In response to questions from audience members, Director Kraninger indicated that:

  • She agreed with former Acting Director Mulvaney’s philosophy that the CFPB should go no further than what its statutory authority expressly provides.
  • While “there’s a place” for CFPB guidance, she would need to look carefully at what the Bureau could address through guidance and that rulemaking, rather than guidance, would be appropriate for something that the CFPB wanted “to hold institutions to.”
  • She is looking at staffing levels but has no goal of increasing or decreasing the number of CFPB staff members.

A memorandum issued by the Office of Management and Budget entitled “Guidance on Compliance with the Congressional Review Act” imposes a new review process on final rules issued by the CFPB and other independent regulatory agencies such as the Federal Reserve, the FCC, the FDIC, the FTC, and the OCC.  The new process will take effect on May 11, 2019.

The CRA provides a mechanism for Congress to overturn federal regulations by enacting a joint resolution of disapproval.  (A recent notable example is Congress’ use of the CRA to override the CFPB’s arbitration rule.)  The CRA requires “major” rules to be accompanied by a GAO report and have a delayed effective date of at least 60 days to give Congress additional time to consider whether to overturn a major rule before it goes into effect.  The CRA defines a major rule as a rule determined by the Administrator of the Office of Information and Regulatory Affairs (OIRA) of the Office of Management and Budget to meet certain criteria such as that the rule “is likely to result in an annual effect on the economy of $100,000,000 or more.”  The CRA does not, however, specifically require agencies to submit their rules to OIRA for such a determination to be made.

Pursuant to Executive Order 12866, agencies must submit a list of their planned regulatory actions to OIRA and indicate which actions, if any, an agency believes is a “significant regulatory action.”  OIRA must then review the list to determine whether any actions that the agency has not designated as “significant” should be considered a “significant regulatory action.”  The Executive Order defines a “significant regulatory action” to include an action that is likely to result in a rule that may “have an annual effect on the economy of more than $100 million or more.”  A “significant regulatory action” is subject to certain requirements set forth in the Executive Order.  According to a 2016 Congressional Research Service (CRS) report, in most cases, a rule determined to be ‘economically significant’ under the Executive Order will also be major under the CRA, and vice versa.”  (The CRS prepares reports for members of Congress and Congressional committees.)

Most notably, the requirement for OIRA review does not apply to independent regulatory agencies.  The CRS report states that because the Executive Order exempts independent agencies but “OIRA is still tasked [by the CRA] with determining whether an independent regulatory agency’s rule is major…it is not clear whether and how rules issued by the independent regulatory agencies should be designated as major under the CRA.”  The report then notes that “recent accounts suggest…that at least some of the independent agencies no longer appear to be acknowledging a role for OIRA in the determination of rules as major.  Rather, these agencies appear to be making the determination themselves.”

The exemption of independent agencies from the Executive Order’s requirements for “significant regulatory actions” has been criticized for removing independent agency rules from Presidential control, because the President, through OMB, does not have direct influence over such rules.  It is this criticism that the new OMB memo is intended to address.

The memo applies to all final “rules” subject to the CRA.  For purposes of the CRA, a “rule” can include agency guidance.  (The GAO determined that CFPB’s indirect auto finance guidance was a “rule” subject to the CRA.  The guidance was subsequently disapproved by Congress pursuant to a joint CRA resolution.)

The memo provides that for rules submitted for review pursuant to Executive Order 12866, OIRA “will continue to incorporate the CRA major determination into its standard process.”  For “rules that would not be submitted to OIRA under Executive Order 12866”  (i.e. rules of independent agencies), the memo sets forth a process for determining whether such rules are major.  This process includes the following requirements:

  • An independent agency must provide a recommended designation of whether a rule is major. If the agency has designated a rule as not major, OIRA must inform the agency within 10 days wither it agrees with the agency’s designation.  Otherwise, the rule becomes subject to the major rule determination process using the “regulatory analysis principles” set forth in the memo.
  • If a rule is considered major by an agency or OIRA does not agree with an agency’s determination that a rule is not major, the agency must submit the rule and an analysis to OIRA for a CRA determination at least 30 days before the agency publishes the rule in the Federal Register or otherwise publicly releases the rule.
  • Once OIRA makes a designation, the agency can publish the rule in the Federal Register or otherwise publicly release the rule.  If the rule is designated major, the agencies must delay the effective date for 60 days from the date of the rule’s submission to Congress or its publication in the Federal Register, whichever is later (subject to applicable CRA exceptions.)

The memo indicates that OIRA anticipates that it will designate certain categories of rules “as presumptively not major” and therefore not subject to the major determination process set forth in the memo.



A payment processor and its individual owner have entered into a settlement with the FTC to settle charges that they violated a 2009 federal district court order that required them to review and monitor their merchant clients to ensure that the merchants were not engaged in deceptive or unfair practices.  The order is a stark reminder of the risks to payment processors of failing to implement adequate policies and procedures designed to avoid establishing or maintaining relationships with disreputable merchants.

The FTC’s 2006 complaint alleged that using consumers’ names and bank account information provided by its merchant client, the processor continued to debit thousands of consumers’ accounts despite high rates of returned transactions and complaints from consumers and banks.  The FTC alleged that such conduct constituted unfair practices in violation of the FTC Act.

In 2009, the court granted the FTC’s motion for summary judgment and entered an order that prohibited the processor and its owner from continuing to engage in the unfair practices alleged in the complaint and required them to undertake a “reasonable investigation” of prospective merchant clients to ensure that the charges to be processed are authorized and the client is complying with the FTC Act.  The order detailed the steps to be taken by the processor in conducting a “reasonable investigation.”  It also required the defendants to pay $1,779,000 for consumer redress.

On April 10, the court entered a stipulated final judgment and order superseding its 2009 judgment and order except with respect to the payment of consumer redress.  The stipulated judgment and order (1) finds that the defendants violated the 2009 judgment and order by failing to conduct reasonable investigations of prospective merchant clients and monitor clients’ activities, (2) permanently enjoins them from engaging in, and assisting others with, payment processing, and (3) requires them to pay an additional $1.8 million as a “compensatory contempt relief.”

Last summer, in testimony before Congress, Andrew Smith, the Director of the FTC’s Bureau of Consumer Protection, discussed the FTC’s continued focus on payment processors.  While lawsuits against payment processors represent a small number of the total cases filed by the FTC, Mr. Smith indicated that the FTC views the payment processor’s role as integral to the agency’s anti-fraud efforts because of the processor’s role in facilitating fraudulent schemes.

In bringing claims against payment processors, the FTC has relied on two key legal theories. The first theory (which was used in the case described above) is that the payment processor, by failing to adequately monitor merchant clients, engages in unfair conduct in violation of the FTC Act.  The second theory is that the payment processor violates the FTC’s Telemarketing Sales Rule by “assisting and facilitating” a violation through its provision of services to an entity that the processor knows or consciously avoids knowing is violating the Rule.




CFPB Director Kraninger is scheduled to give public remarks at a Bipartisan Policy Center program scheduled for April 17, 2019 at 10 a.m. in Washington, D.C.

According to BCP’s website, the remarks will be Director Kraninger’s “first public remarks laying out her vision for the Bureau” and “will cover topics including protecting consumers from bad actors, providing clear rules of the road to financial institutions and non-bank lenders, and empowering consumers to make sound financial choices.”  A panel discussion will follow her remarks.


The CFPB recently posted on its website revised Home Mortgage Disclosure Act (HMDA) examination guidelines.

The revised guidelines address the exemption adopted in the Economic Growth, Regulatory Relief, and Consumer Protection Act (also known as S.2155) applicable to the new HMDA data categories added by Dodd-Frank and the HMDA rule adopted by the CFPB in October 2015. The exemption is available for insured depository institutions and insured credit unions that originate mortgage loans below certain thresholds and meet certain Community Reinvestment Act rating criteria. We previously reported on the exemption and a related interpretive rule issued by the CFPB in September 2018.

The Office of the Comptroller of the Currency also issued Bulletin 2019-19 that addresses the revised examination guidelines.

In this podcast, we take a close look at the CFPB’s findings on ancillary product refunds by auto loan servicers in the event of total loss or repossession, consider such findings’ implications for early payoffs and a servicer’s duty to request refunds, and share observations on how the CPPB’s use of its UDAAP authority has changed under post-Cordray leadership and what that means for a company’s approach to compliance.

Click here to listen to the podcast.

According to a Financial Times report, Ginnie Mae is considering proposals that would create federal safety and soundness standards for non-bank mortgage lenders that are similar to those that apply to banks.  More specifically, the report cites comments made by Maren Kasper, Ginnie Mae’s acting president, that the proposals would provide for stress testing to assess a lender’s liquidity and include a requirement that lenders have a “living will” that describes how the lender would wind down its operations in the event of financial distress or the lender’s failure.

The proposals appear to stem from a white paper, “Ginnie Mae 2020: Roadmap for sustaining low-cost homeownership.”  Counter-party risk will be a topic of discussion at the Ginnie Mae Summit scheduled for June 13-14, 2019.

Ballard Spahr is proud to be partnering with Venminder, Inc. in sponsoring a webinar, “Banking and regulatory expectations in today’s third-party risk management world,” to be held at 2 p.m. ET on April 16, 2019.  Hosted by American Banker, the webinar will feature Glen Trudel, a partner in Ballard Spahr’s Consumer Financial Services Group, and Branan Cooper, Venminder’s Chief Risk Officer.

Glen and Branan will be joined by Elizabeth Khalil, Director and Associate General Counsel of the Canadian Imperial Bank of Commerce.  The webinar will be moderated by Mike Perkowski, Co-Founder and Partner, New Reality Media, LLC.

The webinar will look at third party oversight requirements and best practices, addressing cybersecurity and handling vendor data breach notifications, preparing for an exam or audit, GDPR and negotiating vendor agreements, and the biggest third party risk struggles organizations are facing.

The webinar is complimentary.  Click here to register.


At the end of last month, the U.S. Supreme Court heard oral argument in Kisor v. Wilkie, a case in which the question before the Court is whether it should overrule a line of cases instructing courts to defer to an agency’s interpretation of its own regulation, a doctrine sometimes referred to as “Auer deference.”  The name derives from Auer v. Robbins, a 1997 U.S. Supreme Court opinion written by Justice Scalia for a unanimous court.  In Auer, the Court ruled that the Department of Labor’s interpretation of its own regulation controlled unless it was plainly erroneous or inconsistent with the regulation.

The case that is now before the Court was brought by James Kisor, a Vietnam War veteran who filed for benefits for post-traumatic-stress disorder.  In 2006, the Department of Veterans Affairs agreed with Mr. Kisor that he suffered from PTSD, but refused to give him benefits dating back to 1983 as he had sought.  In denying his claim, the VA relied on its interpretation of the term “relevant” in a VA regulation that addresses the VA’s reconsideration of a claim.  The regulation provides for reconsideration “if VA receives or associates with the claims file relevant official service department records that existed and had not been associated with the claims file when the VA first decided the claim.” (emphasis added).  The VA concluded that certain documents offered by Mr. Kisor in support of his claim were not “relevant” because they were not “outcome determinative.”  The VA’s decision was affirmed by the Court of Appeals for Veterans Claims.  Mr. Kisor then appealed to U.S. Court of Appeals for the Federal Circuit, which deferred to the VA’s interpretation in affirming the lower court’s decision.

In his main brief, Mr. Kisor argues that Auer deference is inconsistent with the federal Administrative Procedure Act because it circumvents the APA’s notice-and-comment rulemaking requirements.  He describes Auer deference as “fundamentally at war with basic principles of predictability and public notice at the heart of the APA.”  Mr. Kisor also contends that Auer deference is inconsistent with constitutional separation of powers principles because its “practical effect is to vest in a single branch the law-making and law-interpreting functions.”

In its brief, the DOJ acknowledges that Auer deference “raises significant concerns” but argues that the doctrine should be clarified and narrowed rather than discarded entirely.  The DOJ contends that courts should not defer to an agency’s interpretation of its own regulation “if, after applying all the traditional tools of construction, a reviewing court determines that the agency’s interpretation is unreasonable—i.e., not within the range of reasonable readings left open by a general ambiguity in the regulation.”  According to the DOJ, that approach would eliminate the need for Auer deference in many cases.  The DOJ asserts further that even if an agency’s interpretation is determined to be reasonable, a court should only defer to the interpretation if it satisfies the following conditions: it was issued with fair notice to regulated parties, it is not inconsistent with the agency’s prior views, it rests on the agency’s expertise, and it represents the agency’s considered view, as distinct from the views of “mere field officials or other low-level employees.”

In their briefs, both Mr. Kisor and the DOJ distinguish Auer deference from Chevron deference and neither challenges Chevron deference.  Chevron addresses the deference a court should give to an agency’s regulation.  As the DOJ observes, however, it is not clear that Chevron’s rationale applies to the deference given to an agency’s construction of its own regulations.  The DOJ, citing Supreme Court case authority, states that under Chevron, “an ambiguity in a statute is understood to be an implicit delegation from Congress to the agency to make a policy judgment within the bounds of any statutory ambiguity.  But an ambiguity in an agency’s own regulation is not of Congress’s making.”  Mr. Kisor also characterizes Chevron deference as resting “on congressional delegations of lawmaking authority to the agencies,” and argues that, as distinguished from Auer deference, it “promotes, rather than skirts, notice-and-comment rulemaking.”

The questions asked at oral argument by Justices Sotomayor, Ginsburg, and Breyer suggested they were skeptical of Mr. Kisor’s arguments, with Justice Breyer emphasizing an agency’s expertise in particular subject matter.  Justice Kagan’s comments suggested that she was reluctant to overrule Supreme Court precedent when “Congress has shown no interest whatsoever in reversing the rule that the Court has long established.”  Justices Gorsuch and Kavanaugh both raised concerns that Auer deference creates regulatory uncertainty and potentially allows an agency to avoid notice-and-comment rulemaking.

The issuance of guidance by an agency without use of the APA’s notice-and-comment procedures has also met with criticism.  A notable example is the CFPB’s indirect auto finance guidance which set forth the CFPB’s disparate impact theory of assignee liability for so-called auto dealer “markup” disparities.  After the Government Accountability Office determined that the guidance was a “rule” within the scope of the Congressional Review Act (CRA), Congress used the CRA to override the guidance.