Minifinance: CFPB Supervision of Short-Term, Small-Dollar Financial Products and Services

17 minute read | April.25.2012

What acts and practices related to short-term, small-dollar (minifinance) products and services are "abusive?" Until a clearer definition emerges and the Consumer Financial Protection Board's examination and enforcement agenda plays out, John P. Kromer of Orrick set out the important steps minifinance providers should take to minimize the chances of being targeted for enforcement. They write:

The Consumer Financial Protection Bureau ("CFPB") launched its nonbank supervision program on January 5, 2012, and immediately kicked off a payday lending component. Announcing its regulatory authority over payday lending, CFPB Director Richard Cordray promised to devote "much more attention" to the payday lending industry. As evidence of that, the CFPB devoted its first field hearing to payday lending issues and promptly issued examination guidelines for short-term, small-dollar loans. A month later, the CFPB announced a review of checking account overdraft programs through another highly publicized field hearing and seminar.

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Authors

John Kromer Partner, Financial & Fintech Advisory, Strategic Advisory & Government Enforcement (SAGE)

Washington, D.C.

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D:+1 202 349 8040
E: [email protected]

Practice:

Financial & Fintech Advisory
Strategic Advisory & Government Enforcement (SAGE)
Fintech

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John Kromer Partner

Washington, D.C.

John helps clients navigate the complex maze of federal and state laws and regulations. He regularly counsels clients on compliance with regulations issued by the Consumer Financial Protection Bureau (CFPB) as well as examination and enforcement actions by the bureau, federal banking agencies, state regulators and other enforcement agencies. He advises on the laws governing licensing and chartering, usury, advertising, disclosures, privacy, lending and servicing practices, and laws prohibiting unfair, deceptive, or abusive acts or practices (UDAAP).

He advises financial services firms on new product and business line development, including structuring and negotiating commercial relationships, joint ventures and partnership agreements. He also assists financial and strategic purchasers of fintechs and financial services firms on regulatory matters, including due diligence of companies, assets and portfolios, and transactional structuring in light of federal and state licensing and regulatory requirements.

John is recognized by Chambers USA as a leading attorney in the field of Consumer Finance Compliance and has been noted by The Legal 500, in the practice areas of Financial Services Regulation, Cyber Law (including Data Protection and Privacy), and Fintech. He frequently speaks at industry conferences on legal issues affecting consumer finance companies. John is a co-author of a number of publications, including Residential Mortgage Lending: State Regulation Manual; Residential Mortgage Lending: Brokers; Pratt’s State Regulation of Second Mortgages and Home Equity Loans; Mortgage Bankers Guide to Regulatory Compliance and The Law of Electronic Signatures and Records, and has written numerous articles for consumer financial services industry publications.

John is Fellow of the American College of Consumer Financial Services Lawyers, served on the Advisory Council of the American Association of Residential Mortgage Regulators from 1998-2018, was a Board member of the Online Lending Policy Institute from 2016-2021 and is a past Chair of the Housing Finance Subcommittee of the Consumer Financial Services Committee of the Business Law Section of the American Bar Association.

Prior to joining Orrick, John was a partner at Buckley LLP. He served as Buckley’s Co-Managing Partner from 2009-2019 and was a member of the firm’s partner board from 2019-2022.