The CFPB recently announced that it is revising the methodology used to determine average prime offer rates (APORs).  The revised methodology is available on the website of the Federal Financial Institutions Examination Council (FFIEC). Both the revised methodology and prior methodology are available on the FFIEC website.

The CFPB has used information from the Freddie Mac Primary Mortgage Market Survey® (PMMS) on three products (30-year fixed-rate mortgages, 15-year fixed-rate mortgages, and five-year variable-rate Mortgages), and pricing data from CFPB’s own internal survey on one-year variable-rate mortgages, to calculate APORs on a weekly basis for various loan products. … Continue Reading

On April 17, the Consumer Bankers Association (CBA) issued a news release responding to the CFPB’s proposal to lower the credit card late fee safe harbor amount to $8.  The CFPB claims that, even though Congress banned excessive credit card late fees, credit card companies have exploited a regulatory loophole “to escape scrutiny for charging an otherwise illegal junk fee.” … Continue Reading

The CFPB has filed a Statement of Interest in a case pending before a Florida federal district court in which the plaintiffs allege that the defendant engaged in discriminatory targeting in violation of the Equal Credit Opportunity Act (ECOA).

In Roberson v. Health Career Institute LLC, the plaintiffs are students at a for-profit nursing school who allege that the school engaged in various unfair and deceptive practices and other unlawful conduct in connection with enrolling students in and operating its “functionally valueless” nursing program. … Continue Reading

Our discussion focuses on generative artificial intelligence, a new and emerging category of AI.  We first discuss what generative AI is, its use of large language models, and the role of supervised training in developing generative AI models.  We then discuss the potential benefits and limitations of generative AI in the following use cases in the consumer finance industry: marketing, fraud management, underwriting, collections, customer service, and back office functions. … Continue Reading

I am very tired of the Biden Administration’s, most notably the CFPB’s, inflammatory rhetoric about “junk fees.”  In its recent “Junk Fees Special Edition” of Supervisory Highlights, the CFPB defined “junk fees” as “unnecessary charges that inflate costs while adding little to no value to the consumer” and stated that “[t]hese unavoidable or surprise charges are often hidden or disclosed only at a later stage in the consumer’s purchasing process or sometimes not at all.”… Continue Reading

Legislation to opt out of a 43-year-old federal law allowing FDIC-insured state banks to “export” interest on interstate loans to the same extent as their national bank counterparts is quietly, but swiftly, working its way through the Colorado legislature.  The bill has passed the House and is expected to be the subject of a hearing next week before a Senate Committee.… Continue Reading

The U.S. Supreme Court ruled last week that parties seeking to challenge the constitutionality of the structure of the Federal Trade Commission and the Securities and Exchange Commission cannot be required to raise such challenges in the first instance before an administrative law judge (ALJ) and may bring such challenges directly in a federal district court. … Continue Reading

On April 6, 2023, the U.S. Department of the Treasury released a report examining vulnerabilities in decentralized finance (“DeFi”), including potential gaps in the United States’ anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”) regulatory, supervisory, and enforcement regimes for DeFi.  The report concludes by making a series of recommendations, including the closing of “gaps” in the application of the Bank Secrecy Act (“BSA”) to the extent that certain DeFi services currently fall outside the scope of the BSA’s definition of a “financial institution” covered by the BSA. … Continue Reading

On April 26, 2023, the CFPB will hold a field hearing in Brooklyn, New York on “zombie second mortgages.”  At the event, Director Chopra will host a discussion with local community organizations, advocates, leaders, and members of the public about such mortgages and debt collection issues.  The CFPB describes “zombie second mortgages” as “debts that consumers thought were satisfied long ago by loan modifications or bankruptcy proceedings or that were written off by lenders as uncollectable.”… Continue Reading

Professor Willis advocates the adoption of a performance-based approach to regulation to replace or supplement the current approach of disclosure and design regulation.  We first discuss how benchmarks would be used in a performance-based approach and discuss the shortcomings of the current disclosure and design approach as well as behavioral economics in designing regulations. … Continue Reading