The CFPB has filed an amicus brief in the U.S. Supreme Court in support of the respondent/law firm defendant in Obduskey v. McCarthy & Holthus LLP, et al., a Tenth Circuit decision that held that a law firm hired to pursue a non-judicial foreclosure under Colorado law was not a debt collector as defined under the Fair Debt Collection Practices Act.  The Supreme Court granted certiorari in June 2018 to review the Tenth Circuit’s decision and resolve a circuit split on whether the FDCPA applies to non-judicial foreclosure proceedings.  Because the Supreme Court’s decision in Obduskey will determine whether the FDCPA’s protections apply in countless non-judicial foreclosure actions, it could have a significant financial impact on the mortgage industry.

The amicus brief represents the second CFPB amicus brief filed under Acting Director Mulvaney’s leadership (the first was filed in the Seventh Circuit) and the first CFPB amicus brief filed in the Supreme Court under his leadership.  Most significantly, the amicus brief appears to be the first amicus brief filed by the CFPB in which it has supported the industry position.

In its amicus brief, the CFPB points to FDCPA Section 1692a(6) which defines the term “debt collector” to include, for purposes of Section 1692f(6), someone whose business is principally the “enforcement of security interests.”  Section 1692f(6) provides that it is an unfair or unconscionable collection practice to take or threaten to take nonjudicial action to effect dispossession of property under specified circumstances.  The CFPB argues that it follows from this ‘limited-purpose definition of debt collector” that, except for purposes of Section 1692f(6), enforcing a security interest, is not, by itself debt collection and to read the provision differently would render the “limited-purpose definition…superfluous.”

Based on these provisions, the CFPB contends that because enforcement of a security interest by itself is generally not debt collection under the FDCPA, a person cannot violate the FDCPA by taking actions that are legally required to enforce a security interest.  According to the CFPB, “[t]hat is dispositive here because the initiation of a Colorado nonjudicial-foreclosure proceeding undisputedly was a required step in enforcing a security interest.”  (The CFPB observes in a footnote that, although not implicated in Obduskey, actions clearly incidental to the enforcement of a security interest, even if not strictly required by state law, also would not constitute debt collection.)  The CFPB asserts that deeming the initiation of a non-judicial foreclosure proceeding to be debt collection “could bring the FDCPA into conflict with state law and effectively preclude compliance with state foreclosure procedures.  No sound basis exists to assume Congress intended that result.”



Politico has reported that Senate Majority Leader Mitch McConnell filed cloture this afternoon on President Trump’s nomination of Kathy Kraninger to serve as CFPB Director.  The filing means that the full Senate will vote on the nomination once it returns after Thanksgiving, although the date of a vote remains uncertain.



The CFPB has issued its Spring 2018 Semi-Annual Report to Congress covering the period October 1, 2017 through March 31, 2018.

At 41 pages, the new report is even shorter than the Bureau’s last semi-annual report (which was 55 pages) and continues what appears to be a goal under Acting Director Mulvaney’s leadership of issuing semi-annual reports that are substantially shorter than those issued under the leadership of former Director Cordray.  Like the prior semi-annual report under Mr. Mulvaney’s leadership, and also in contrast to the reports issued under former Director Cordray’s leadership, the new report does not contain 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.

Pursuant to Section 1017(a)(1) of the Dodd-Frank Act, subject to the Act’s funding cap, the Fed is required to transfer to the CFPB on a quarterly basis “the amount determined by the [CFPB] Director to be reasonably necessary to carry out the authorities of the Bureau under Federal consumer financial law, taking into account such other sums made available to the Bureau from the preceding year (or quarter of such year.)”  The new report references the January 2018 letter sent by Mr. Mulvaney to former Fed Chair Yellen requesting no funds for the second quarter of Fiscal Year 2018.

Mr. Mulvaney has, however, sent letters to Fed Chair Powell requesting funds transfers for the third and fourth quarters of FY 2018 and for the first quarter of FY 2019.  The amounts requested are, respectively, $98.5 million, $65.7 million, and $172.9 million.  (In contrast, former Director Cordray’s final transfer request, which was for the first quarter of FY 2018, sought a transfer of $217.1 million.)  Two of Mr. Mulvaney’s letters included the following statement:

By design, this funding mechanism [created by Section 1017(a)(1)] denies the American people their rightful control over how the Bureau spends their money, which undermines the Bureau’s legitimacy.  The Bureau should be funded through Congressional appropriations.  However, I am bound to execute the law as written. 

The new report indicates that the Bureau had 1,671 employees as of March 31, 2018, representing a slight increase in the number of employees (1,627) as of March 31, 2017.  The new report does not discuss any ongoing or past developments of significance beyond those we have covered in previous blog posts.





In this week’s episode, we discuss recent enforcement activity under the Military Lending Act and the Servicemembers Civil Relief Act, as well as takeaways about compliance.  We also review the CFPB’s controversial decision to no longer conduct exams for MLA compliance, look at the legal basis for the decision, and analyze the arguments made by critics.

To listen and subscribe to the podcast, click here.

In August 2018, Arizona began accepting applications for its regulatory sandbox that “enables a participant to obtain limited access to Arizona’s market to test innovative financial products or services without first obtaining full state licensure or other authorization that otherwise may be required.”  The state’s Attorney General is responsible for the application process and oversight of the sandbox.  At the end of last week, the Arizona AG announced that two more participants, Grain Technology, Inc. and Sweetbridge NFP, Ltd., had been added to the state’s sandbox.

In October 2018, there was an announcement by the AG that Omni Mobile Inc. had become the first sandbox participant.  The AG’s press release described Omni as “a mobile payment platform aiming to test cheaper and faster payment transfers through its centralized wallet infrastructure.”  It indicated that the product would be tested by processing guest payments at an Arizona resort, with Arizona-resident guests to receive a disclosure agreement (regarding the company’s participation in the sandbox), an explanation of the test nature of the product, a privacy notice, and the ability to opt out of any information sharing with the resort.

The AG’s announcement regarding Omni was accompanied by an announcement that the AG’s Office had signed a cooperation agreement with Taiwan’s financial regulator, the Financial Supervisory Commission, with the goal of creating an information-sharing arrangement that might create opportunities for businesses to develop and test fintech products in both markets.

The two additional sandbox participants announced last week are described in the AG’s press release as follows:

  • Grain Technology, Inc., based in New York, will test a savings and credit product in Arizona using proprietary technology to offer consumers customized savings plans and credit opportunities. Arizona consumers participating in the program will obtain access to a small line of credit aimed primarily at providing overdraft protection for bank accounts.  APRs for loans obtained through this line of credit may be as low as 12% for consumers who agree to follow a recommended repayment plan calculated using Grain’s technology (a standard APR of 15.99% will apply for those who adopt a different repayment plan).  Grain intends for loans and payments occurring through this line of credit to be reported to major credit-reporting agencies to enable consumers to build their credit profiles.
  • Sweetbridge NFP, Ltd., a Scottsdale-based international nonprofit building blockchain protocols for supply chains and commerce, will test a lending product using proprietary blockchain technology with an APR cap of 20%.  At these rates, Sweetbridge’s product will allow consumers to obtain credit at up to 1/10th the cost allowed under Arizona law.

In September 2018, the CFPB proposed significant revisions to its “Policy to Encourage Trial Disclosure Programs,” which sets forth the Bureau’s standards and procedures for exempting individual companies, on a case-by-case basis, from applicable federal disclosure requirements to allow those companies to test trial disclosures.  The proposal followed Acting Director Mulvaney’s July 2018 appointment of Paul Watkins to serve as Director of the Bureau’s Office of Innovation.  Before joining the CFPB, Mr. Watkins was in charge of fintech initiatives in the Arizona AG’s Office and led the state’s efforts to create its regulatory sandbox.  The CFPB’s proposal includes a process for the CFPB to coordinate with sandbox programs offered by other regulators.


Yesterday, the court reversed course in the lawsuit filed by two industry trade groups challenging the CFPB’s final payday/auto title/high-rate installment loan rule (Payday Rule).  On its own initiative, the Texas federal district court granted a stay of the Payday Rule’s August 19, 2019 compliance date and continued in force its stay of the lawsuit.  Unfortunately, the court did not specify a termination date for the stay of the compliance date, as the trade groups and CFPB originally requested.  Instead, the compliance date is stayed “pending further order of the court.”

To my mind, the court’s failure to specify how long the stay of the compliance date will remain in effect leaves the Rule’s status hopelessly muddled.  The CFPB has stated that its current plan is to revisit the Payday Rule’s ability-to-repay (ATR) provisions but not its payment provisions.  CFPB officials have indicated that the Bureau intends to propose a delay of the Payday Rule’s ATR provisions but not the payment provisions.  What happens if the CFPB follows through with that plan?  When the parties report that development to the court, might the court just lift its stay of the compliance date, without affording lenders additional time to address the payment provisions?

My guess is that the court intends its stay to function like the tolling of a statute of limitations—meaning that, for each day the stay remains in effect, the August 19 compliance deadline is extended for an additional day.  But alas, the court’s order does not specify this intent.  I hope the parties in the case ask for clarification that the compliance date will be extended day-for-day so long as the stay remains in effect.  Alternatively, the CFPB could announce that it will propose a delay in the compliance date for the payment provisions when it moves forward with its rule-making next January.

Unless and until the court and/or the CFPB clarify their intentions, prudent lenders will continue to prepare for the advent of the payment provisions of the Payday Rule.  As Ned Stark from The Game of Thrones might say (if he were alive):  “August 19 is coming.”



In June 2018, HUD issued an advance notice of proposed rulemaking (ANPR) seeking comment on whether its 2013 Fair Housing Act disparate impact rule (Rule) should be revised in light of the U.S. Supreme Court’s 2015 Inclusive Communities decision.  Comments on the ANPR were due by August 20, 2018.  The Rule is the subject of a lawsuit originally filed in June 2013 by the American Insurance Association and National Association of Mutual Insurance Companies in the D.C. federal district court.  In April 2016, the trade groups amended their complaint to include a claim that the Rule is inconsistent with the limitations on disparate impact claims set forth in Inclusive Communities.  As described more fully below, the district court entered an order last week that contemplates HUD’s issuance of a proposal to revise the Rule by December 18, 2018.

Oral argument on the parties’ cross summary judgment motions was initially scheduled for February 13, 2017.  However, on February 8, 2017, the court granted in part a motion filed by HUD seeking a continuance of the oral argument to allow the Trump Administration to install new HUD and Department of Justice officials, and continued the argument until a date to be determined by the court.  In addition, on February 15, 2017, the court stayed the case pending further discussions between the parties.

On October 19, 2018, the parties filed a joint status report in which the trade groups urged the court to schedule oral argument on the cross summary judgment motions in light of uncertainty as to what HUD’s proposal might provide and its refusal to commit not to take enforcement action against the trade groups’ members under the Rule.

On October 26, upon consideration of the joint status report, the court entered a minute order continuing the stay until December 18, 2018 to allow HUD “to issue a Notice of Proposed Rulemaking in response to public comments.”  The parties were also ordered to file another joint status report by December 18 “updating the Court on the status of HUD’s issuance of the rule and proposing any next steps in this litigation.”

Disparate impact also appears to be on the CFPB’s rulemaking agenda.  On October 17, the CFPB released its Fall 2018 rulemaking agenda.  In its preamble to the agenda and a blog post about the agenda, the CFPB indicated that future rulemaking it is considering includes the requirements of the Equal Credit Opportunity Act (ECOA).  More specifically, the blog post referenced the Bureau’s May 2018 announcement that “it is reexamining the requirements of the [ECOA] concerning the disparate impact doctrine in light of recent Supreme Court case law and the Congressional disapproval of a prior Bureau bulletin concerning indirect auto lender compliance with ECOA and its implementing regulations.”


The CFPB has released a “Remittance Rule Assessment Report.”  The report was issued pursuant to Section 1022(d) of the Dodd-Frank Act which requires the CFPB to conduct a review of a significant rule and publish an assessment report within five years of the rule’s effective date.  The remittance report represents the first assessment report issued by the CFPB pursuant to Section 1022(d).

The remittance rule took effect on October 28, 2013, and gives certain protections to consumers that send remittance transfers from the United States to another country.  It imposes three principal requirements on remittance transfer providers.  Such requirements concern:

  • Disclosures of specified information, including the price of a remittance transfer, the amount of the currency to be delivered to the recipient, and the date of availability
  • Cancellation and refund rights
  • Error resolution procedures

The CFPB notes in the report that it does not include a cost-benefit analysis of the remittance rule.  It states that going forward, the Bureau is considering whether to include a cost-benefit analysis in its assessments and published reports.  According to the Bureau, U.S. consumers in 2017 transferred over 325 million remittances worth more than $175 billion.  Money service businesses (MSBs) conducted 95.6% of all remittance transfers and accounted for 68.4% of dollar volume but the average size of remittance transfers through banks and credit unions was typically much larger than the average size of transfers made through MSBs.

The CFPB’s key findings include:

  • The volume of remittance transfers by MSBs was increasing before the rule’s effective date and continued to increase afterwards at the same or higher rate.  The dollar volume of remittance transfers by MSBs was also increasing both before and after the rule became effective.  However, many factors other than the rule can affect consumer demand for remittance transfers, and the evidence does not eliminate the possibility that remittance transfers would have increased more rapidly in the rule’s absence.
  • The percentage of all banks that transfer more than 100 remittances (the threshold that makes a bank generally subject to the rule’s requirements), has been steady or increasing since 2014, the first full year after the rule took effect. The percentage of all credit unions that transfer more than 100 remittances has increased slightly.  While a number of banks and credit unions stop transferring more than 100 remittances in each year, about an equal number start transferring more than 100, so the net change is small.
  • The number of credit unions that report offering remittance transfers increased in the two years after the rule took effect, compared to the two years before, although that increase is likely driven at least in part by changes in the data collection process.  Comparable data before the rule took effect are not available for banks.
  • The average price of remittances was declining before the rule took effect and has continued to do so.  The available evidence does not rule out the possibility that prices would have fallen even faster in the rule’s absence and does not seem to support the rule causing either substantial price declines or substantial price increases.
  • The Bureau’s examinations have uncovered mixed levels of compliance.  Although the evidence from those examinations is consistent with consumers generally receiving disclosures, there are inaccuracies and errors in many instances.  Such evidence is also mixed for error resolution because systems to correctly track and investigate error claims were identified as weak at some providers.  As of the date of the report, no enforcement actions have been filed by the Bureau against remittance transfer providers.  However, where examinations found violations of the remittance rule, the entities are making appropriate changes to their compliance management systems for remittance transfers to prevent future violations and, where appropriate, providing remediation to consumers.
  • In addition to the one-time compliance costs incurred by remittance transfer providers when the rule took effect, the limited available evidence indicates that providers continue to incur ongoing annual compliance costs ranging from $19 million, based on the Bureau’s 2018 industry survey and largely reflecting the costs of a few large providers, to $102 million, based on analysis at the time of rulemaking.  These costs correspond to between $0.07 and $0.37 per remittance transfer in 2017 and the Bureau expects that the actual cost is somewhere in this range.
  • Unless the funds are picked up or deposited, the rule gives consumers 30 minutes after payment to cancel a transfer with some providers allowing a longer cancellation period.  Available data sources indicate that consumers cancel between 0.3% and 4.5% of remittance transfers.  Of cancellations that occur within five hours, approximately 70% happen within 30 minutes after payment.  There is evidence that some banks or credit unions delay initiating at least some transfers to make it easier for them to provide a refund if a consumer requests a cancellation within the 30-minute period, but the evidence does not indicate how prevalent this practice is.
  • The rule gives consumers 180 days to assert errors.  Available data sources report that consumers assert errors for between 0.5% and 1.9% of remittance transfers.  Nearly all error assertions, however, are made within 30 days of the remittance transfer, with less than 0.5% made after the rule’s 180-day deadline.  The amount of time that it takes to resolve error claims ranges widely among providers.  Approximately one-fourth of asserted errors are ultimately found to be provider errors as defined by the remittance rule, thus suggesting that most asserted errors are attributable to consumer mistakes or other issues.



Earlier today, the Bureau of Consumer Financial Protection released a Public Statement Regarding Payday Rule Reconsideration and Delay of Compliance Date. Echoing rumors that have been circulating in the industry for several weeks (which we had agreed not to address in our blog), the Statement reads in full as follows:

The Bureau expects to issue proposed rules in January 2019 that will reconsider the Bureau’s rule regarding Payday, Vehicle Title, and Certain High-Cost Installment Loans and address the rule’s compliance date. The Bureau will make final decisions regarding the scope of the proposal closer to the issuance of the proposed rules. However, the Bureau is currently planning to propose revisiting only the ability-to-repay provisions and not the payments provisions, in significant part because the ability-to-repay provisions have much greater consequences for both consumers and industry than the payment provisions. The proposals will be published as quickly as practicable consistent with the Administrative Procedure Act and other applicable law.

Of course, the Bureau is correct in observing that the ability-to-repay (ATR) provisions of the Rule “have much greater consequences for both consumers and industry than the payment provisions.”  That is because the ATR provisions, if allowed to go into effect, would largely kill the industry and thus deprive millions of consumers of a source of credit they deem essential.  Nevertheless, the draconian potential consequences of the ATR provisions do not justify leaving the payment provisions intact. These provisions are unduly complicated. They require hard-to-reach consumers to affirmatively reauthorize lender-initiated payment attempts after two consecutive unsuccessful attempts rather than relying on a simpler and more straightforward notice and opt-out regimen.

Also, while the payment provisions are supposedly designed to prevent excessive NSF fees, as we have pointed out in a comment letter to the Bureau and elsewhere, they treat attempts to initiate payments by debit card, where there is no chance of any NSF fee, the same as other forms of payment that can give rise to NSF fees. This treatment of card payments can only be ascribed to the hostility to high-rate lending characteristic of the former leadership of the Bureau. If the Bureau does nothing else with the Rule’s payment provisions, it should certainly correct this wholly indefensible aspect of the Rule.

We note that the Bureau requested an extension until Monday, October 29, to respond to the preliminary injunction motion by the Community Financial Services Association and Consumer Service Alliance of Texas. If the Bureau files its response Monday, we will likely have more to report.

The CFPB announced that it has entered into a consent order with Cash Express, LLC to settle charges that the company engaged in deceptive and abusive acts or practices in violation of the Consumer Financial Protection Act (CFPA).  The CFPB’s press release describes Cash Express as a small-dollar lender offering high-cost, short-term loans, such as payday and title loans, as well as check-cashing services, and that owns and operates approximately 328 retail lending outlets in four states.

The consent order sets forth the following findings and conclusions:

  • Cash Express sent collection letters to consumers owing debts as to which the applicable statute of limitations had expired in which it represented, directly or indirectly, expressly or by implication, that it would take legal action against them if a payment was not made.  It was not, in fact, Cash Express’s practice to file collection lawsuits against consumers with time-barred debts.  The representations made by Cash Express constituted deceptive acts or practices in violation of the CFPA.
  • Cash Express represented in its loan applications, privacy policy disclosures, collection letters, and loan agreements that it may furnish information about borrowers to consumer reporting agencies.  Cash Express did not, in fact, furnish information to CRAs.  The representations made by Cash Express constituted deceptive acts or practices in violation of the CFPA.
  • Cash Express disclosed in its application and deferred presentment and signature agreements that it may deduct funds owed on a previous loan by a customer using its check cashing services and consumers signed acknowledgments that they had received these disclosures.  Cash Express instructed its employees not to disclose at any time during a check cashing transaction that it would deduct previously owed amounts from the check proceeds.  Consumers may not have selected Cash Express to cash their checks if they had been informed at the point of check-cashing about the possibility of a deduction.  The manner in which Cash Express conducted such deductions constituted abusive acts and practices in violation of the CFPA.

The consent order requires Cash Express to pay a $200,000 civil money penalty to the Bureau.  It also requires Cash Express to pay approximately $32,000 in restitution, representing payments made during the relevant period by consumers owing time-barred debts within 90 days of receiving collection letters threatening legal action.  Cash Express is prohibited from deducting debt payments from checks cashed by consumers unless it has provided a clear and prominent disclosure about the deduction to the consumer at the time of the check cashing transaction and the consumer has affirmatively consented in writing to the deduction before the transaction is completed.  It is also prohibited from making misrepresentations about its consumer reporting activities and its intention to file a suit to collect a time-barred debt.