senate banking committee

Director Kraninger was sharply criticized by Democrats at today’s hearing on the Bureau’s semi-annual report held by the Senate Banking Committee.

Ms. Kraninger’s opening remarks and written testimony repeated nearly verbatim her opening remarks and written testimony to the House Financial Services Committee last week.  She indicated once again that the Bureau’s primary goal would be prevention of harm, that the Bureau would focus its enforcement activities on “bad actors, and that she would emphasize stability, transparency, and consistency. 

Like their Democratic counterparts on the House committee, Democratic members were highly critical of the Bureau’s proposal to eliminate the ability to repay (ATR) requirement in its payday loan rule, its decision to discontinue MLA compliance examinations, and the decline in CFPB enforcement activity with regard to fair lending and student loan servicing.  Several Democratic members also criticized the Bureau’s continued employment of Eric Blankenstein as Policy Associate Director of the Bureau’s Office of Supervision, Enforcement, and Fair Lending.  Mr. Blankenstein is alleged to have made racially offensive comments in 2016.

As she did during her House appearance, Ms. Kraninger held steadfast to her view that the CFPB lacks clear authority to examine financial institutions for MLA compliance and referred lawmakers to the proposed legislation submitted by the CFPB that would amend the Dodd-Frank Act to expressly provide such authority.

With regard to the Bureau’s proposal to eliminate the payday loan rule’s ATR requirement, Democratic members called into question the sufficiency of the CFPB’s basis for its proposal and highlighted the more than $7 billion in additional revenue that the CFPB has estimated lenders would receive as a result of eliminating the ATR requirement.  Despite Ms. Kraninger’s statement that she would approach the rulemaking with an “open mind,” Democratic members expressed skepticism as to whether the Bureau would objectively consider the evidentiary record.  

In response to a question from Senator Doug Jones regarding the Bureau’s use of the disparate impact theory in future fair lending cases, Ms. Kraninger referenced the CFPB’s Fall 2018 rulemaking agenda which indicated in its preamble that the future rulemaking under consideration included the requirements of the Equal Credit Opportunity Act regarding the disparate impact doctrine.  Ms. Kraninger declined to express her personal views on the doctrine but indicated that she was involved in internal discussions regarding potential pre-rulemaking activities.   

As might be expected, Senator Elizabeth Warren was perhaps Director Kraninger’s harshest critic, highlighting the lack of new Bureau fair lending and student lending enforcement actions filed since Director Cordray’s departure.  Senator Elizabeth Warren concluded her questioning with the comment that if Ms. Kraninger had “any decency,” she “would do [her] job or resign.”

In addition to the questions asked by Democratic members about topics also covered at the House hearing, Senator Mark Warner asked Ms. Kraninger about the CFPB’s “GSE patch” for qualified mortgages.  The “patch” is an exemption created by the CFPB’s QM rule from its 43 percent debt to income ratio cap for mortgages eligible for purchase by Fannie Mae or Freddie Mac.  It is a temporary measure that is set to expire in January 2021 or on the day the GSEs exit conservatorship, whichever occurs first.  Senator Warner stressed the need for the CFPB to take steps to address the patch to avoid potential adverse consequences to the mortgage market should the patch expire.

Like their Republican counterparts on the House committee, Republican members renewed their criticism of Director Cordray’s “regulation by enforcement” approach.  They also expressed continuing concern over the Bureau’s data collection practices, praised former Acting Director Mulvaney’s creation of an Office of Cost Benefit Analysis, and voiced support for the Bureau’s use of such an analysis in carrying out its authorities.

 

 

As we previously reported, Kathy Kraninger, President Trump’s nominee to become the next CFPB Director, testified at a hearing of the Senate Banking Committee on July 19.  Following the hearing, Democrats on the committee sent her a list of questions relating to her involvement in the development of President Trump’s “zero tolerance” immigration policy and how she would manage the Bureau.

Ms. Kraninger recently sent responses to the follow-up questions in which she denied being involved in the development of the “zero tolerance” policy and largely deflected questions related to how she would run the Bureau.  Perhaps the most illuminating answer she gave is one indicating that she agreed with the changes made by Acting Director Mulvaney in managing the Bureau.

I anticipate that the Senate Banking Committee will vote to confirm her nomination.  The timing of that vote is very unclear.  The vote was scheduled to take place today, but was postponed when Senator McConnell announced that the Senate would be in recess beginning today until August 13. It remains unclear whether and when the full Senate will consider her nomination. I still believe that it is unlikely that the full Senate will consider her nomination before the mid-term elections.

On April 12, 2018, Mick Mulvaney, the Acting Director of the Consumer Financial Protection Bureau (Bureau) testified before the Senate Committee on Banking, Housing, and Urban Affairs regarding the Bureau’s Semi-Annual Report to Congress.  The Senate Hearing comes the day after Democrats in the House Financial Services Committee questioned Mulvaney about his leadership at the Bureau.  A copy of his written testimony is here.

At the hearing, Mulvaney stuck to the theme of Bureau accountability—an issue raised in his written remarks and Semi-Annual Report—and fielded questions on topics including the Bureau’s role of protecting consumers, payday lending, data security, political favoritism, and constitutionality of the Agency:

  • Increased Congressional Oversight. Throughout the hearing, Mulvaney stressed his recommendations for greater oversight to hold the Bureau accountable.  “I don’t think that any director of any bureaucracy has ever come to you and said please take my power away, but that is what I am doing, and to the extent you can do that, I think we will all be well served by it.”  To illustrate his point, Mulvaney quipped in his opening remarks that Dodd-Frank merely required him to “appear” before Congress, but not to answer any questions.  Later, in exchanges with Republican senators, Mulvaney explained that Congress currently could do nothing to him as the Acting Director:  “You could make me look bad and that’s about it.  You can’t touch me statutorily. . . . Don’t rely on the person.  Fix the structure.”  According to Ranking Member Sherrod Brown (D-OH), however, Mulvaney “is hoping that if he does a bad enough job running the CFPB, Congress will take away CFPB’s ability to protect consumers.  Congress should not fall for it.”
  • Consumer Protection.  Several Democratic senators confronted Mulvaney about the Bureau’s goal of protecting consumers.  Sen. Elizabeth Warren (D-MA) outlined past Bureau successes, as well as Mulvaney’s attempts as a Congressman to get rid of the agency, and rebuked Mulvaney for “tak[ing] an obvious joy in talking about how the CFPB will help banks more than it will help consumers….  You’re hurting real people to score cheap political points.”
  • Payday Lending.  Other Democrats targeted Mulvaney’s payday lending decisions, including his decision to dismiss a lawsuit filed by his predecessor against a payday lender and his decision to reconsider the Bureau’s payday lending rules. Mulvaney refused to comment on the dismissal based on advice from legal staff and an ongoing investigation.  He also defended his decision to reconsider the payday lending rules.  He repeatedly stated that he has no “preconceived notions” about revoking the payday lending rules, but rather believes the rules were “rushed” and should go through the notice and comment period.  Mulvaney noted, however, that he has the discretion to reach a different conclusion about the payday lending rules than his predecessor, Richard Cordray.  During questioning by Sen. Doug Jones (D-AL), Mulvaney flaunted his view that payday lending concerns should be resolved by state legislatures, not consigned to the discretion of the Bureau’s director or Congress: “Who do you trust more, home town legislature or United States Congress.  Personally, I have a great deal of faith in my state legislature.”  Surprisingly, as was the case during his appearance before the House Committee, nobody asked him to comment on the lawsuit filed last week by the CFSA (the trade association of payday lenders) against the Bureau challenging the legality of the payday lending rule.
  • Data Security.  While data security was an issue that spanned both sides of the aisle, Republican senators focused on the Bureau’s handling of consumer data while their Democratic colleagues focused on Mulvaney’s position on the Equifax data breach.

As to the Bureau’s handling of data, Mulvaney explained that he has instituted a data freeze and commissioned a report about the Bureau’s data collection and protection.  While the data freeze does not apply to enforcement actions, the Bureau plans “to limit data that we take possession of.  . . . instead of having them send it to us electronically, we are going to look at it.”  Mulvaney acknowledged that “everything that we keep is subject to being lost.”  When Sen. David Perdue (R-GA) asked what data had been lost, Mulvaney declined to publicly comment.

Sen. Mark R. Warner (D-VA) explained that much of the data collected by the Bureau is anonymous and needed to show discriminatory patterns.  He, along with Sen. Chris Van Hollen (D-MD) and Sen. Robert Menendez (D-NJ), questioned Mulvaney instead on the Bureau’s failure to take action against Equifax for its data breach.  Mulvaney testified that his regulatory agenda includes rulemaking to protect consumers from credit reporting abuses and agreed that companies should have to inform the public about hacked data in a certain amount of time.

  • Political Favoritism.  Democrats also scrutinized Mulvaney’s decision to hire political “cronies” for Bureau positions and pay them large salaries.  Mulvaney asserted that he used the same “pads-and-dads” system used at the OMB, where a career staffer and political designee work on a team, and that the appointees were paid using the scale set by his predecessor.  While Mulvaney also claimed that he had “complete authority under the statute” to hire and pay such appointees, the Committee questioned how his hiring decisions were consistent with Mulvaney’s fiscally conservative views.  Sen. Jon Tester (D-MT) noted that Mulvaney’s chief of staff is paid $47,000 more per year than her predecessor and stated the hiring “smacks of political favoritism…. [Mulvaney] can’t be conservative just when it’s convenient.”

Sen. Tom Cotton (R-AR) struck back on the salary issue with questions about the salary of Leandra English, the Deputy Direct of the Bureau and the plaintiff in a pending lawsuit that seeks to have her named as Acting Director instead of Mulvaney. Mulvaney testified that he does not speak with English because of the litigation, nor does he know what she does at the Bureau.  Sen. Cotton commented, and Mulvaney agreed, that “she’s earning $212,000, claiming to be the director, running around and we have no idea what she does all day long.”  Ranking Member Brown took a different view, however, noting earlier in the hearing that Mulvaney’s appointment ignores the law, which states that the deputy director, rather than a political appointee, should take over the Acting Director role.

  • Constitutionality of the Bureau.  Mulvaney also walked a narrow line to answer questions about the constitutionality of the agency that he heads.  “I’m not sure that I have the discretion to consider this agency to be unconstitutional. . . . I think the system starts to break down if people who work at places make their own conclusions about constitutionality.  If the President tells me it is unconstitutional, I’ll pay attention.  I am assuming it’s constitutional every single day when I go in. . . .”

On November 13, members of the Senate Banking Committee announced that they had reached bipartisan agreement on “legislative proposals to improve our nation’s financial regulatory framework and promote economic growth.”  Following the announcement, a draft of a bill was released by Senator Mike Crapo, who chairs the Banking Committee.  A markup of the bill is scheduled for December 5, 2017. Observers believe that due to its bipartisan support, there is a strong likelihood that the bill will be enacted as part of a regulatory relief package.

We previously discussed the provisions of the bill relevant to providers of consumer financial services.  The following regulatory reform provisions are relevant to community banks generally, including those focused on the provision of consumer financial services:

Capital Simplifications for Qualifying Community Banks (Section 201).  The bill would require the federal banking agencies to establish a “Community Bank Leverage Ratio” of not less than 8% nor more than 10% for “Qualifying Community Banks.”  The Community Bank Leverage Ratio would be equal to the tangible equity capital to the average total consolidated assets.  A Qualifying Community Bank would be any insured depository institution or depository institution holding company with total consolidated assets of less than $10 billion that was not determined ineligible by its primary federal regulator due to its risk profile. (Factors considered in evaluating a bank’s risk profile would include (i) off-balance sheet exposures, (ii) trading assets and liabilities; (iii) derivative exposures; and (iv) other factors).  Any Qualifying Community Bank that met the new Community Bank Leverage Ratio would also be considered to have met generally applicable leverage capital requirements, generally applicable risk-based capital requirements, and any other capital or leverage requirements to which such insured depository institution and insured depository institution holding company is subject.  Any Qualifying Community Bank that was an insured depository institution would also be deemed well capitalized under Section 38 of the Federal Deposit Insurance Act (FDIA) and related regulations.  This would insulate a large number of community banks from the complexities of the Basel III capital framework.

Limited Exception for Reciprocal Deposits (Section 202).  The bill would provide that reciprocal deposits from an agent institution will not be considered to be funds obtained, directly or indirectly, by or through a deposit broker to the extent such reciprocal deposits do not exceed the lesser of (A) $5 billion and (B) 20% of the agent institution’s  total liabilities.  This change would benefit less than well capitalized financial institutions that would otherwise have to request a difficult to obtain waiver or would be ineligible to receive an  FDIC  waiver from the restrictions in Section 29 of the FDIA on the acceptance of brokered deposits.

Community Bank Relief (Section 203).  The bill would exempt banks with less than $10 Billion in assets from the Volcker Rule in Section 13 of the Bank Holding Company Act of 1956 (Prohibitions on proprietary trading and certain relationships with hedge funds and private equity funds) so long as the total trading assets and trading liabilities of the bank and any company that controls the bank were less than five percent of total consolidated assets.

Short Form Call Reports (Section 205).  The bill would require federal regulators to prescribe regulations to simplify call reports for the insured depository institutions they supervise that (i) have less than $5 billion in total consolidated assets; and (ii) satisfy other criteria set out by such federal regulator.

Option for Federal Savings Associations to Operate as Covered Savings Associations (Section 206).  For federal savings associations with total consolidated assets equal to or less than $15 billion, the bill would provide the same rights and privileges as national banks upon notice submitted to the OCC.  Federal savings associations would continue to maintain such rights and privileges after such election, even if the total consolidated assets of the federal savings association subsequently exceed $15 billion.

Small Bank Holding Company Policy Statement (Section 207).  The bill would require the Board of Governors of the Federal Reserve System to revise the “Small Bank Holding Company and Savings and Loan Holding Company Policy Statement” to increase the consolidated asset threshold thereunder from $1 billion to $3 billion, leaving the other requirements of such bank holding companies and savings and loan companies the same.  This change would allow bank holding companies with less than $3 billion in assets to avoid consolidated capital requirements and allow them to comply instead with less restrictive debt-to-equity limitations.

Examination Cycle (Section 211).  The bill would raise the threshold in Section 10(d)(4)(A) of the FDIA for small institutions eligible for 18-month examinations from $1 billion to $3 billion of total consolidated assets.

Enhanced Supervision and Prudential Standards for Certain Bank Holding Companies (Section 401).  The bill would raise the assets threshold for systemically important banks subject to enhanced prudential standards from $50 billion to $250 billion.  This amendment would take effect upon enactment for institutions with less than $100 billion in total consolidated assets, and would take effect 18 months after enactment for all other institutions.  This would reduce the number of institutions subject to enhanced standards.

Treatment of Certain Municipal Obligations (Section 403).  The bill would require the federal banking agencies to treat liquid, readily-marketable and investment grade municipal obligations as high-quality level 2B liquid assets for purposes of the final rule entitled “Liquidity Coverage Ratio: Treatment of U.S. Municipal Securities as High-Quality Liquid Assets.”

On September 12, 2018 at 10:00am EDT, The Senate Committee on Banking, Housing, and Urban Affairs will hold an open session hearing entitled “Examining the Fintech Landscape.”  Witnesses will be: Mr. Lawrance Evans, Director, Financial Markets, U.S. Government Accountability Office; Mr. Eric Turner, Research Analyst, S&P Global Market Intelligence; and Mr. Frank Pasquale, Professor of Law, University of Maryland Francis King Carey School of Law.  The hearing will likely focus on a number of high-level topics including online lending issuance models, the push for federal charters, FinTech’s impact on credit availability, and the state licensure process.

On Wednesday, July 15, CFPB Director Richard Cordray appeared before the Senate Committee on Banking, Housing, & Urban Affairs to answer questions regarding the Bureau’s Semi-Annual Report to Congress and the President, which it published on June 15, 2015.

Dir. Cordray observed that during the six month period covered by the report, from October 2014 through March 2015, the CFPB helped obtain more than $19 million in restitution for consumers through enforcement actions, including $2.5 million in relief for servicemembers for illegal debt collection practices, and more than $32 million in civil money penalties.  The report noted that during the same six month period CFPB supervisory actions resulted in financial institutions providing more than $114 million in redress to over 700,000 consumers.

The exchanges between members of the committee and Dir. Cordray tread some familiar ground, such as concerns about renovations to the CFPB’s headquarters and CFPB data collection practices, but a few newsworthy points emerged:

  • Arbitration rulemaking to be commenced “in due course”: In response to Ranking Member Sherrod Brown’s questions about the rulemaking efforts he had encouraged the CFPB to undertake following publication of the Bureau’s arbitration study, Dir. Cordray said that the CFPB was “moving ahead” with rulemaking efforts that would address pre-dispute arbitration agreements in consumer financial products or services pursuant to its authority under section 1028(b) of the Dodd-Frank Act.  He noted that “in due course” the CFPB would convene “a small business review panel as the first step” in the rulemaking process.  (The American Bankers Association, the Consumer Bankers Association and The Financial Services Roundtable (“Associations”) have submitted a joint letter to the CFPB commenting on the arbitration study.  In the letter, the Associations assert that the study does not support rulemaking under section 1028 of Dodd-Frank.  Ballard Spahr served as counsel to the Associations in preparing the comment letter.)
  • Effective date for TILA-RESPA Integrated Disclosure (“TRID”) rule: As we’ve noted before, the CFPB proposed to delay the effective date of the TRID rule until October 3, 2015.  In response to concerns expressed by Sen. Tim Scott about requests from Congress for a grace period before industry will be expected to comply with the rule, Dir. Cordray noted that a delay to January, which had been requested by some members of Congress and some companies, would likely introduce new challenges given the “system freezes” that many companies schedule to occur at the end of each calendar year.  But he also stated that the CFPB had coordinated with other agencies to ensure an implementation grace period “which may last many months” would be afforded:

We went out and worked with the other agencies to get an agreement, which we have, that the early examination of this will be diagnostic and corrective. We don’t think people are out there, are going to be trying to exploit consumers on something like this. They’re just going to be trying to get it right. And so for the first period, which may last many months, the other agencies and ourselves as we look at this, if we see errors, we will point out what they are and how they should be corrected. We will not be looking to be punitive toward people. We have said that explicitly. I will say it again on the record here today to you that is how it will be. I can tell you that’s what we said about the mortgage rules two years ago and that is how it has been and nobody has said otherwise or complained and we’ve taken that to heart here as well.

  • Military Lending Act rulemaking by Department of Defense (“DoD”): In response to questions from Sen. Jack Reed regarding new rules under the Military Lending Act that were proposed by the DoD last year, Dir. Cordray telegraphed that he expects the new rules to be published by the DoD “very shortly”: “I believe that very shortly we’re going to have a new set of rules and servicemembers will have new important protections that they probably should have had several years ago.”
  • Rulemaking regarding payday loans and similar credit products: Several committee members addressed this pending rulemaking within their questions.  While no new details about the rules under consideration or the anticipated timeframe for publication of the proposed rules were disclosed, there was bipartisan agreement that the need for access to such credit would endure and that the rules under consideration by the CFPB should acknowledge that.  Sen. Heidi Heitkamp observed that the CFPB would need to strike a balance between protecting consumers and ensuring access to credit, noting that “sometimes people need diapers, and sometimes they need gas, and they have a flat tire and they can’t fix it.”  For such “folks that are living on the margin[,] I understand the need to protect people, but I also understand the need to have some form of small dollar, short-term lending.”  Chairman Richard Shelby agreed, noting that with the regulations under consideration, “we don’t want to drive the small, marginal consumer underground where there is no regulation, because that’s what we’ve had before . . . . [The thrust of the question is] how do we do this without overregulating this and how do we have access to some type of credit for these [consumers] because there will be credit, it’s a question is it going to be legal or illegal.”  Dir. Cordray affirmatively acknowledged Chairman Shelby’s comment.

The hearing failed to provide any news of note on other significant issues, including the evolution, if any, of the Bureau’s rulemakings on prepaid cards or the progress of pre-rulemaking activities on debt collection.

 

Director Cordray was the only witness at the Senate Banking Committee’s hearing yesterday on the CFPB’s fourth Semi-Annual Report to Congress.  As a Committee member observed, Director Cordray’s appearance represented his first before the Committee since his July confirmation by the Senate as CFPB Director.  

Like the Committee’s April hearing on the CFPB’s third Semi-Annual Report, a significant portion of yesterday’s hearing focused on the CFPB’s data collection activities and followed a familiar script—Republican members raising privacy concerns and Mr. Cordray defending the CFPB’s activities as necessary to fulfill the Bureau’s market monitoring and Congressional reporting obligations.  Any change in the CFPB’s data collection activities seems unlikely to occur before the General Accountability Office reports the results of the audit that the GAO agreed to conduct of those activities in response to a request from Republican Senator Crapo, the Committee’s Ranking Member.

Outside of the data collection arena, Director Cordray’s testimony did include the following noteworthy comments: 

  • While not conceding that the CFPB was wrong to issue a guidance bulletin on auto finance fair lending rather than engage in rulemaking, Mr. Cordray did state that he “agreed with some of the criticism.”  He indicated that he “would like to have a little more openness and transparency” and that the purpose of the CFPB’s auto finance forum scheduled for tomorrow is to “make sure we are engaging with key stakeholders.”
  • Mr. Cordray repeated statements he has previously made that the CFPB will not be expecting compliance “perfection” when the CFPB’s new mortgage rules become effective in January 2014.  He indicated that “in the early months,” the CFPB will instead be looking for “good faith efforts” by companies to come into compliance.  When pressed by Republican Senator Coburn about what was meant by “early months,” Director Cordray was unwilling to provide any specificity but stated only that it meant “several months” beyond January.
  • In his questioning of Mr. Cordray, Democratic Senator Brown promoted his sponsorship of S.B. 635, which would amend Gramm-Leach-Bliley to eliminate the requirement for a company to send annual privacy notices when there has been no change in the company’s privacy policy.  Mr. Cordray indicated that the CFPB is planning to move ahead “in the fairly near future” to eliminate the requirement through rulemaking and will do so in the absence of legislative action.
  • Mr. Cordray indicated that a drafting team consisting of representatives from the CFPB, FTC and other agencies is “close” to issuing proposed changes to Military Loan Act regulations implementing recent MLA amendments.  However, he did not provide any specifics on the proposal’s likely content.  (MLA regulations impose a 36% rate cap on “consumer credit,” which as currently defined, only includes tax refund loans and certain closed-end payday and auto title loans made to active duty armed forces members and their dependents, and prohibits certain terms in such loans.  Industry trade groups have expressed opposition to expanding the scope of the “consumer credit” definition.)
  • Mr. Cordray was unwilling to provide a timetable for when the CFPB expects to issue proposed prepaid card regulations.  However, based on his comments about needed consumer protections, it seems highly likely that the CFPB’s proposal will seek to extend much of Regulation E to prepaid cards, particularly disclosure and error resolution requirements.     
  • Mr. Cordray indicated that the CFPB’s supervisory staff is currently only at 80% of the CFPB’s target for being fully staffed. 

The archived webcast of the hearing can be viewed on the Committee’s website.

Collection documentation and medical debts proved to be the focus of much of yesterday’s  Senate Banking Committee hearing on the debt industry.  The witnesses were Corey Stone, CFPB Assistant Director, Office of Deposits, Cash, Collections, and Reporting Markets, and James Reilly Dolan, FTC Acting Associate Director, Division of Financial Practices. 

The two witnesses drew heavily on the discussions that took place at the CFPB’s and FTC’s joint roundtable in June 2013 which examined the flow of consumer data in the debt collection process.  Based on their comments in response to questions from Democratic Senator Sherrod Brown, it seems likely that any future debt collection rulemaking or guidance by the CFPB will include standards for documentation that must be maintained by third-party debt collectors and debt buyers.  (As we recently reported, the CFPB has issued five action letters for consumers to use as debt collection tools.  We commented that the detailed account information requested in the letter to be used by consumers needing more information seems, in effect, to represent an indirect attempt by the CFPB to impose specific documentation requirements on persons collecting debts.) 

Mr. Stone noted as a “promising development” the efforts of several companies to design documentation registries for debts in collection. Such a registry could be accessed by each collector or debt buyer that is attempting to collect a particular debt, thereby avoiding the need for documents to be transferred each time the debt moves to a new collector or is resold.  (This registry concept seems ironically similar to the Mortgage Electronic Registration Systems, Inc., or MERS, which has regularly been the subject of challenges by consumer advocates.) 

It is also possible that such documentation standards will be accompanied by changes to record retention requirements.  Mr. Stone noted that TILA only has a two-year record retention requirement while the FCRA allows debts to be included on credit reports for up to seven years after they are placed for collection.  

A substantial portion of Mr. Stone’s testimony dealt with issues relating to medical debts.  He discussed the varying debt collection practices of hospitals and other medical providers and indicated that the CFPB’s findings suggest more protections are needed for consumers.  We must observe, however, that the CFPB has very limited authority to address debt collection by medical providers.  

Such providers are not subject to the CFPB’s supervisory authority.  Nor are they generally subject to the CFPB’s authority to bring enforcement actions for violations of the FDCPA or the Dodd-Frank Act’s prohibition of  “unfair, deceptive, or abusive” acts or practices (UDAAPs).  When collecting their own debts, medical providers generally are not subject to the FDCPA.  Since medical debts typically do not involve an extension of credit, medical providers generally are not “covered persons” subject to the CFPB’s UDAAP authority under Dodd-Frank. 

Republican Senator Pat Toomey was the only Senator other than Senator Brown who participated in the hearing.  Senator Toomey questioned Mr. Stone about the CFPB’s recent bulletin warning creditors and servicers who are not covered by the FDCPA that their collection practices are subject to the CFPB’s UDAAP authority.  He asked Mr. Stone why the CFPB chose to issue a bulletin to define UDAAPs rather than do so through the rulemaking process.  (Might Senator Toomey be reading our blog, since we raised the same issue?) 

Mr. Stone’s response claiming that the creditor and servicer conduct identified in the bulletin as potential UDAAPs was already unlawful conduct under existing law was not convincing. 

 

The Senate Banking Committee’s Subcommittee on Financial Institutions and Consumer Protection will hold a hearing on Wednesday, July 17 entitled “Shining a Light on the Consumer Debt Industry.”  The scheduled witnesses are Corey Stone, CFPB Assistant Director, Office of Deposits, Cash, Collections, and Reporting Markets, and Reilly Dolan, FTC Acting Associate Director, Division of Financial Practices.