The 2018 CFPB Research Conference will take place at the Crystal Gateway Marriott Hotel in Arlington, Virginia on May 3-4, 2018.  The conference is an opportunity for researchers and policymakers to learn about recent findings from both academic and government researchers in the area of consumer finance.  Panel discussions will focus on research into household budgeting and consumption, credit and labor market dynamics, consumer beliefs surrounding mortgage lending, intervention strategies for savings, credit and repayment, credit and default topics, and price sensitivity for loan products.

Here is the link for the full agenda and to register for the conference.

A recent bill introduced in the US House of Representatives would require the CFPB to issue guidance on federal consumer financial laws, and also provide a framework for civil money penalties.  H.R. 5534 would create the Give Useful Information to Define Effective Compliance Act or GUIDE Compliance Act.  The bill was introduced by Representative Sean Duffy (R-WI) and is co-sponsored by Representative Ed Perlmutter (D-CO).

The Act would require the CFPB Director to “issue guidance that is necessary or appropriate to enable the Bureau to carry out Federal consumer financial law, including facilitating compliance with such law.”  For purposes of the Act, “guidance” is defined as “any written interpretive or legislative rule, interim final rule, bulletin, statement of policy, letter, examination manual, frequently asked question, or other document issued by the Bureau regarding compliance with a Federal consumer financial law that is exempt from notice and comment rulemaking requirements under section 553(b) of [the Administrative Procedure Act,] title 5, United States Code.”  The Act does not provide any parameters on specific laws or issues that the CFPB should address, or the nature of the guidance provided.  The Act would require that a proposed rule be published within one year of the date that the Act becomes law, with a final rule being published within 18 months of that date.  The Act also would provide that no person could be held liable for any act done or omitted in good faith in conformity with CFPB guidance.

At least some of the guidance that the Act would require would trigger the ability of Congress to consider the guidance under the Congressional Review Act (CRA).  We previously addressed the ability of Congress under the CRA to address not only federal agency actions structured as rules, but also guidance issued by such agencies that rises to the level of a rule within the purview of the CRA.

The Act also would require the CFPB to publish within 18 months of the date the Act becomes law a proposed rule establishing guidelines for determining the size of any civil money penalties issued by the CFPB “based on the severity of the actionable conduct in violation of a Federal consumer financial law and the level of culpability.”  The final rule would need, “to the fullest extent possible, align with any chart, matrix, rule, or guideline published by the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, or the Board of Governors of the Federal Reserve System.”

The Act would address calls from various industry members that the CFPB issue authoritative guidance on rules, and provide a framework for the imposition of civil money penalties.  While the Act would require that the framework for civil money penalties conform with the framework of the federal banking agencies, as noted above there are no parameters set forth for any guidance on consumer financial laws that is issued by the CFPB.  To some this evokes the adage, be careful what you wish for, you may get.

Yesterday, Mick Mulvaney made his first appearance as CFPB Acting Director before the House Financial Services Committee to present the Bureau’s Semi-Annual Report to Congress for the period beginning April 1, 2017, and ending September 30, 2017, a period of time when Richard Cordray was still the Director.

In his message preceding the Semi-Annual Report, Acting Director Mulvaney noted the disagreements many members of Congress have with his actions as Acting Director, just as many members of Congress disagreed with Director Cordray’s actions.  His message also included legislative recommendations for changes to the CFPB to address his view that the Bureau lacks accountability to any branch of government.  Noteworthy aspects of Mr. Mulvaney’s testimony to the Committee include:

  • While committee members did not specifically engage in a discussion with Mr. Mulvaney about his recommendations, Republican committee members focused on their concerns surrounding Bureau accountability, both with respect to its spending decisions, and control over the Bureau’s Director.
  • Democratic committee members raised a host of concerns with Mr. Mulvaney’s actions as Acting Director, ranging from questioning his authority to serve as Acting Director, to his efficacy in the role while serving concurrently as the Director of the Office of Management and Budget, to his intentions leading the Bureau.  Acting Director Mulvaney continued to return to his position that one party or the other would have concerns regarding the Director depending upon who is the appointing President, and the solution is to reform the Bureau’s structure  to ensure greater oversight by Congress and the President.
  • There was a fair amount of discussion around the decline in the number of enforcement actions initiated under Acting Director Mulvaney. Democratic Representative Carolyn Maloney stated that under former Directory Cordray, the Bureau brought an average of four enforcement actions per month, while in the first five months of Acting Director Mulvaney’s tenure, no enforcement actions have been brought.  However, in response to Republican Representative Bill Huizenga’s question asking how many enforcement actions were brought under former Director Cordray in his first six months, Acting Director Mulvaney stated there were zero enforcement actions brought.  He also indicated the lack of new enforcement actions so far does not indicate a lack of action on the part of the Bureau; it is continuing to prosecute several enforcement actions and to manage over 100 investigations, some of which are in the “sue or settle” phase.  Acting Director Mulvaney did not say anything about widespread rumors that the CFPB is about to enter into a major consent order with a large bank (other than stating, to correct a committee member citing the rumors, that the Bureau had not announced any enforcement actions on Tuesday).
  • Acting Director Mulvaney indicated the Bureau is continuing to review the final Payday Loan Rule (although he was not asked any questions about the recently filed lawsuit challenging the validity of the rule). He also noted the Bureau’s request for information regarding the Bureau’s adopted regulations and encouraged members to engage with the Bureau in exploring ways to better serve their constituents.
  • When asked about current bank legislative reform, Mr. Mulvaney indicated his support for further negotiations with the Senate to incorporate additional pieces of the Financial CHOICE Act, stating “I know it’s not easy to pass a piece of bipartisan legislation anywhere, let alone in the Senate, and I think they’ve done an excellent job. I don’t think that necessarily needs to be the end of the analysis. To the extent y’all have done really good work to find ways on a bipartisan basis to improve Dodd-Frank, God bless you, and let’s see if we can’t add that to the Senate bill. If not, the Senate bill is a great fallback. But if it can get better, why wouldn’t we accept that as a really good outcome?”  At the end of the hearing, Acting Director Mulvaney reiterated with respect to reform, “I don’t think that we’re in a rush, I don’t think that we have to have a bill by the end of this week from the Senate.  I think we need to go ahead and do it right, because I don’t think you’ll get a chance to do it again for a long time.”

Click here to read Acting Director Mulvaney’s  written testimony. He appears today before the Senate Committee on Banking, Housing, and Urban Affairs.

The CFPB has issued a request for information that seeks comment on its handling of consumer complaints and inquiries.  Comments on the RFI must be received on or before 90 days after the date the RFI is published in the Federal Register, which the CFPB expects to occur on approximately April 16, 2018.

The CFPB defines consumer complaints as “submissions that express dissatisfaction with, or communicate suspicion of wrongful conduct by, an identifiable entity related to a consumer’s personal experience with a financial product or service.”  It defines “consumer inquiries” as “consumer requests for information—typically proffered by telephone—to its Office of Consumer Response about consumer financial products and services, the status of a complaint, an action taken by the Bureau, and often combinations thereof.”

The CFPB seeks feedback on all aspects of its consumer complaint and inquiry handling process, including the following:

  • Specific statutorily-permitted suggestions regarding how the CFPB currently allows consumers to submit complaints and inquiries, including whether the CFPB should require consumers to classify their submission affirmatively as a complaint or inquiry prior to submission
  • Specific statutorily-permitted suggestions regarding the CFPB’s consumer complaint process, such as whether the CFPB should add or discontinue any channels for accepting complaints or expand, limit, or maintain the ability of authorized third parties to submit complaints
  • Specific statutorily-permitted suggestions regarding the CFPB’s consumer inquiry process, such as whether the CFPB should add or discontinue any channels for accepting inquiries, develop web chat systems to support consumers’ submission of inquiries, develop a process for companies to provide timely responses to consumer inquiries sent to them by the CFPB, or publish data about consumer inquiries

The new RFI represents the twelfth and final RFI in the series of RFIs announced by Mr. Mulvaney.  The subjects of the CFPB’s first eleven RFIs and their comment deadlines are as follows:

(The initial comment deadlines for the first three RFIs listed above were extended to the dates indicated.)

 

The CFPB has issued its Consumer Response Annual Report that provides an analysis of the approximately 320,200 complaints received by the CFPB between January 1 and December 31, 2017.  (In 2016, the CFPB received approximately 291,400 complaints.)

The report provides data on the most common types of complaints for each product and the handling of complaints.  Unlike prior annual reports, however, the new report contains no information on the median amount of monetary relief paid for different complaint types by companies that reported such amounts. (Companies have the option to report an amount of monetary relief.)

Of the 320,200 complaints received in 2017, approximately 81% were received through the CFPB’s website, 5% via telephone calls, 8% via referrals from other agencies and regulators, and the balance via mail, e-mail and fax.  Based on the CFPB’s breakdown of the number of complaints received in each category, credit reporting (100,000), debt collection (84,500), and mortgages (37,300) accounted for 69% of all 2017 complaints.

For credit reporting complaints, 55% involved incorrect information on credit reports and 20% involved the credit reporting company’s investigation.

39% of debt collection complaints involved continued attempts to collect debts not owed, 22% involved debt validation (such as not receiving enough information to verify the debt), 13% involved communication tactics, 11% involved taking or threatening illegal action, 10% involved false statements or representations, and 4% involved improper contact or sharing of information.

For mortgage complaints, 41% involved making payments (such as issues involving servicing, posting of payments, and escrow accounts), 37% involved problems relating to inability to pay (such as issues involving loan modifications, collections, or foreclosures), and 12% involved applying for a loan or refinancing an existing mortgage.

We recently blogged that the CFPB has apparently decided to put its monthly complaint reports on hold, having issued its last monthly complaint report in October 2017.

 

In addition to his scheduled appearance before the House Financial Services Committee this Wednesday, April 11, CFPB Acting Director Mick Mulvaney is scheduled to appear before the Senate Banking Committee this Thursday, April 12.

The hearings can be viewed on the Committees’ websites.  The official subject of both hearings is the CFPB’s recently-issued semi-annual report but Mr. Mulvaney is likely to be questioned about a wider range of issues and to engage in some sparring with Democratic members of the Committees.

The CFPB has issued a request for information that seeks comment on its consumer financial education programs.  Comments on the RFI must be received by July 9, 2018.

The CFPB seeks feedback on all aspects of its consumer financial education programs, including the following topics:

  • The CFPB’s focus on specific financial education topics and delivery channels, and its use of technology and contractors
  • Measuring the effectiveness of the CFPB’s financial education programs
  • Avoiding duplication between the CFPB and other federal agencies or other entities

In response to the CFPB’s question asking what financial education topics it should address, we would suggest that the CFPB educate consumers about arbitration, something it has not previously done.

The new RFI represents the eleventh in a series of RFIs announced by Mr. Mulvaney.  The subjects of the CFPB’s first ten RFIs and their comment deadlines are as follows:

(The initial comment deadlines for the first three RFIs listed above were extended to the dates indicated.)

In its press release announcing the latest RFI, the CFPB stated that the twelfth and final RFI in the series will be issued next week and will address consumer inquiries.

 

 

The CFPB has issued its twelfth Semi-Annual Report to the President and Congress covering the period April 1, 2017 through September 1, 2017.

The report begins with a message from Acting Director Mulvaney in which he makes recommendations for legislative recommendations for changes to the CFPB and invites members of Congress to question him about those recommendations when he testifies at future hearings.  (Mr. Mulvaney is scheduled to appear before the House Financial Services Committee on April 11.)  According to Mr. Mulvaney, section 1012(c)(4) of the Dodd-Frank Act contemplates that the CFPB Director will submit independent legislative recommendations to Congress.

That provision states: “No officer or agency of the United States shall have any authority to require the Director or any other officer of the Bureau to submit legislative recommendations, or testimony or comments on legislation, to any officer or agency of the United States for approval, comments, or review prior to the submission of such recommendations, testimony, or comments to the Congress, if such recommendations, testimony, or comments to the Congress include a statement indicating that the views expressed therein are those of the Director or such officer, and do not necessarily reflect the views of the Board of Governors or the President.”  Mr. Mulvaney’s message contains a footnote indicating that no office or agency of the United States other than him has approved his legislative recommendations and that the views he has expressed are his views and do not necessarily reflect the views of the Board of Governors or the President.

Mr. Mulvaney makes the following recommendations to address “the Bureau’s lack of accountability to any representative branch of government”:

  • Fund the CFPB through Congressional appropriations (rather than through transfers from the Federal Reserve up to a set cap as currently provided by Dodd-Frank)
  • Require legislative approval of major CFPB rules  (presumably in lieu of the current Congressional Review Act disapproval procedure)
  • Ensure the Director answers to the President in the exercise of executive authority  (perhaps intended to suggest that the President should be able to remove the Director at will rather than only for cause as currently provided by Dodd-Frank)
  • Create an independent Inspector General for the CFPB (rather that share an Inspector General with the Federal Reserve as the Inspector General Act currently provides)

Nearly all, if not all, of Mr. Mulvaney’s proposals have previously appeared in various House bills introduced during former Director Cordray’s tenure, including the Financial CHOICE Act passed by the House in June 2017.

Although we agree with Mr. Mulvaney’s view that Congress vested way too much power in one individual when it created the CFPB, we think the better way to address that concern is by creating a bi-partisan 5-member commission similar to the FTC.  We strongly disagree with Mr. Mulvaney’s proposal to require legislative approval for all “major Bureau rules.”  Given the filibuster rule which requires at least 60 votes for a bill to pass the Senate, requiring legislative approval would typically be tantamount to not permitting the CFPB to promulgate any “major Bureau rules.”

While the consumer financial services industry has often opposed prior rules adopted by the CFPB (two perfect examples being the arbitration and payday lending rules), the industry sometimes needs the CFPB to issue rules in order to create more certainty as to  what is and what is not lawful.  For example, the debt collection industry needs regulations that address debt collection practices in the age of the Internet and smart phones.  The FDCPA was enacted in the pre-Internet era.  The mortgage industry also wants the CFPB to revise its very rigid mortgage rules which are impeding mortgage originations.

Mr. Mulvaney has stated previously that he wants the CFPB to be more focused on giving guidance to the industry through regulations rather than consent orders.  His proposal seems inconsistent with that approach.  One wonders whether Mr. Mulvaney has considered the possibility that a requirement to obtain legislative approval for all major rules could mean that he could not change the CFPB’s payday lending rule without gaining 60 votes in the Senate for a revised rule – a rather Herculean task.

With respect to the substance of the report itself, it is notable that the new report consists of 55 pages in contrast to the CFPB’s last semi-annual report which consisted of 178-pages.  In his introductory message, Mr. Mulvaney states that section 1016(c) of Dodd-Frank lists nine elements for inclusion in the CFPB’s semi-annual report and the new report “precisely meets this mandate.”

Among the changes contributing to the new report’s shorter length is the elimination of the numerous exhibits contained in prior reports and significantly abbreviated discussions of consumer complaints and the CFPB’s budget.  In addition to its substantially shorter length, another notable difference from prior reports is the absence in the new report of any aggregate numbers for how much consumers obtained in consumer relief and how much was assessed in civil money penalties in supervisory and enforcement actions during the period covered by the report.

Like past reports, the new report discusses ongoing and past developments that we have covered in previous blog posts.  However, while the report states that it covers the period April 1, 2017 through September 1, 2017, it also includes post-September 1 developments, including developments that have occurred since Mr. Mulvaney became Acting Director.  The report’s summaries of enforcement actions in which the CFPB was a party from October 1, 2016 through September 1, 2017 references developments in those cases after September 1, such as the CFPB’s dismissal in January 2018 of a case it had filed against four tribal lenders.  The report also lists the eleven RFIs already issued by the CFPB under Mr. Mulvaney and the twelfth RFI expected to be issued next week.

Most significantly, the report includes the CFPB’s plans for upcoming rules.  The upcoming proposed rules listed are:

  • A rulemaking to reconsider the CFPB’s rule on payday, vehicle title, and certain high-cost installment loans
  • A rule to be issued jointly with the Federal Reserve amending Regulation CC (Expedited Availability of Funds Act)
  • A proposed debt collection rule “concerning FDCPA collectors’ communications practices and consumer disclosures”
  • A rulemaking to reconsider various aspects of the CFPB’s 2015 HMDA rule

 

 

The D.C. Circuit will live stream the oral argument scheduled for April 12 in Leandra English’s appeal in her action seeking a declaration that she, rather than Mick Mulvaney, is the lawful CFPB Acting Director.  Ms. English has appealed the district court’s denial of her preliminary injunction motion.

In December 2017, the D.C. Circuit announced that it would live stream any oral argument upon request in an individual case.  (A panel can make an exception for case-specific confidentiality concerns.)

The court’s notice indicating that it approved a request to live stream the English oral argument contains instructions for how to listen.  We previously blogged about the members of the panel that will hear the oral argument.

 

The FTC has filed comments on the CFPB’s Request for Information regarding its civil investigative demands and investigational hearings.

In the RFI, the CFPB requested feedback on various aspects of the CFPB’s processes and requirements for issuing CIDs, responding to CIDs, and conducting investigational hearing.  The FTC’s comments primarily describe the FTC’s comparable processes and requirements and highlights changes made in 2017 to the CID process used by the FTC’s Bureau of Consumer Protection (BCP).  Those changes included (1) adding more detail about the scope and purpose of investigations to give companies a better understanding of the information sought, (2) limiting the relevant time periods to minimize undue burden on companies and focus the FTC’s resources on investigating harms that have an immediate impact on consumers, (3) shortening and simplifying the instructions for providing electronically stored data, and (4) increasing response times for CIDs, where appropriate.

In addition to describing its own processes and requirements, the FTC makes several specific suggestions for the CFPB to consider including the following:

  • The FTC suggests that the CFPB may wish to consider applying an approach to opening and closing investigations that is similar to the FTC’s approach while remaining consistent with the CFPB’s structure, management, workload, and other relevant considerations.  At the FTC, the BCP Director is responsible for implementing the Commission’s enforcement agenda and meets regularly with the FTC Chairman and the other FTC Commissioners to obtain views about investigations and possible investigations to accomplish that agenda.  On a day-to-day basis, the BCP Director is responsible for ensuring that other BCP managers make opening and closing decisions in conformity with the FTC’s enforcement priorities and objectives.  The BCP Director has regular and frequent communications with other BCP managers, including regular discussions about specific divisional or regional office work, including matters currently under investigation and those as to which an investigation is contemplated.  Other BCP managers check with the BCP Director before opening, continuing, or closing an investigation that might not be in line with FTC priorities and objectives or that might present other challenging or sensitive issues.
  • The FTC observes that its procedures for CID issuance appear to be significantly different from those of the CFPB.  When a BCP staff member believes issuance of a CID is appropriate, he or she drafts the CID along with a supporting recommendation and, once approved  by the BCP Director, he or she submits the proposed CID and recommendation memo to the FTC.  Since any Commissioner is permitted to issue a CID relating to any matter under investigation, a single Commissioner generally reviews the proposed CID and recommendation memo to determine whether to approve, modify, or reject a proposed CID.  The FTC believes that because approval is sought for hundreds of proposed CIDs each year, it is more efficient and less burdensome to have a single Commissioner rather than the full FTC review each CID.  Also, Commissioner-approval ensures that there will be an independent assessment of a CID’s costs and benefits by someone who is not conducting the investigation.  In contrast, at the CFPB, not only the Director but also the Assistant Director and the Deputy Assistant Directors of the Office of Enforcement have authority to issue CIDs.  In addition, it is generally a CFPB Deputy Assistant Director who authorizes the issuance of a CID and that individual may be involved in direct oversight of investigations in a way that an FTC Commissioner is not.  The FTC suggests that because its approach has allowed the FTC to successfully balance the need to obtain information without imposing unnecessary or undue burdens, the CFPB may wish to consider the FTC’s experience, including revising its delegation of authority to one or more senior officials who are not directly involved in an investigation.
  • The FTC suggests that the CFPB may want to consider adopting requirements for processing requests for extending the dates and manner of compliance with CIDs that are similar to the FTC’s requirements.  To ensure that the meet-and-confer process is productive, the FTC requires CID recipients to make available persons who are familiar with the recipient’s information management system and the requested materials.  BCP staff conducts the meet-and-confer sessions, which are usually held telephonically.  After having the meet-and-confer, the appropriate BCP manager with the delegated authority can extend the compliance date if the CID recipient “has demonstrated satisfactory progress toward compliance,” and can also modify the terms of compliance with the CID.  The FTC believes that this combination of the meet-and-confer requirement and the delegated authority to modify the time and manner upon a demonstration of satisfactory progress toward compliance allows the FTC to reduce unnecessary and undue burden while at the same time advancing the purposes of the investigation.
  • The FTC observes that the BCP’s current guidelines for submission of electronically stored information (ESI) appear to be significantly shorter and less complex than the most recently available CFPB production requirements.  As streamlined in 2017, the BCP’s production requirements for submission of ESI in response to a CID are less complex, require the processing and production of fewer fields, and no longer require that each field meet exacting requirements for specialized eDiscovery applications.  By providing ESI in the new streamlined format, data can be used in any subsequent proceedings, obviating the need for the recipient to reproduce the data at a later time.