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Financial Services Law Insights and Observations


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  • CFPB Takes Action Against Pawnbrokers for Misleading Annual Percentage Rates

    Federal Issues

    On December 19, the CFPB announced it had filed enforcement actions (3:16cv987, 3:16cv988, 1:16cv1566, 1: 16cv1567) in federal district court against four Virginia pawnbrokers for misleading customers through deceptively low annual percentage rates that intentionally omit or hide certain fees and charges. In each Complaint, the Bureau alleges both TILA violations and unfair, deceptive, or abusive acts or practices under Dodd-Frank and the CPA. The complaints seek injunctive relief ordering the pawnbrokers to stop the allegedly illegal practices, restitution for consumers, and statutory penalties.

    Federal Issues Consumer Finance CFPB TILA Dodd-Frank CPA

  • CFPB Unveils Web-based Tool To Deliver Regular Updates on Consumer Lending Markets

    Federal Issues

    On December 19, the CFPB announced the release of “Consumer Credit Trends,” a beta version of its new web-based tool to help the public monitor developments in the mortgage, credit card, auto loan, and student loan markets. According to the Bureau, the data used by Consumer Credit Trends “draws from a nationally representative sample of credit records maintained by one of the top three U.S. credit repositories.” The CFPB plans to update this information regularly, and will offer analyses on notable findings as warranted. It also clarifies that “before being provided to the Bureau,” the credit records are “stripped of any information that might reveal consumers’ identities, such as names, addresses, and Social Security numbers.” The ability to “chart the state of consumer markets,” says CFPB Director Richard Cordray, “will help us identify and act on trends that warn of another crisis or that show credit is too constricted.”

    Federal Issues Mortgages Consumer Finance Credit Cards CFPB Auto Finance Student Lending Payments

  • CFPB Orders Credit Services Provider to Pay $200K Civil Penalty for Improper Contract Disclosures

    Federal Issues

    On December 19, the CFPB entered a consent order against a Virginia-based credit services provider assessing a $200,000 penalty and other remediation for making loans with improper disclosures. It was the CFPB’s second enforcement action against the company, as the Bureau had previously taken action against the company, requiring it, among other things, to revise its contract disclosures back in 2014. Under the terms of the consent order released this week, the company must hire an independent consultant with specialized experience in consumer-finance compliance to conduct an independent review of the company’s issuance and servicing of credit, and report to the CFPB a compliance plan based on the findings of such review. The Bureau also assessed a $200,000 civil monetary penalty.

    Federal Issues Consumer Finance CFPB

  • PHH v CFPB Update: PHH and U.S. Solicitor General Respond to CFPB's Petition for En Banc Review


    On December 22, PHH filed its brief opposing the CFPB’s petition for en banc review of the October 2016 three-judge panel decision in PHH Corp. v. CFPB. PHH argued that the case is not worthy of review by the full D.C. Circuit because, although the majority of the panel determined that the CFPB’s structure violated the constitutionally-mandated separation of powers, that “conclusion, which horrifies the CFPB, simply means that an agency of the Executive Branch will be answerable to the Chief Executive.” With respect to the panel’s unanimous decision that the CFPB incorrectly interpreted RESPA, PHH argued that en banc review is inappropriate because, among other reasons, the D.C. Circuit could not side with the CFPB without “creat[ing] a circuit split with every other court to have considered the proper scope of RESPA.”

    At the invitation of the D.C. Circuit, the U.S. Solicitor General also filed its brief later the same day. While the Solicitor General supported the CFPB’s petition for en banc review of the constitutional question, it also suggested that, consistent with Judge Henderson’s dissent from the panel opinion, the full D.C. Circuit could simply vacate the CFPB’s order against PHH on the grounds that the Bureau misinterpreted RESPA. Doing so, the Solicitor General notes, would be consistent with the “well-established principle … that normally the Court will not decide a constitutional question if there is some other ground upon which to dispose of the case.” This ruling would vacate the panel majority’s conclusion that the CFPB’s structure was unconstitutional, although the Solicitor General noted that PHH could renew its constitutional challenge if the CFPB continues to pursue the case on remand.

    With respect to the separation of powers question itself, the Solicitor General argued that en banc review is warranted because the majority departed from the analysis used by the Supreme Court to decide such questions. Specifically, the Solicitor General suggests that the panel majority erred by concluding “that an agency with a single head poses a greater threat to individual liberty than an agency headed by a multi-member body that exercises the same powers,” noting that the President’s authority over the multi-member FTC was similarly limited and the FTC enjoyed similar powers at the time the Supreme Court upheld its constitutionality.

    Finally, after the filing of the Solicitor General’s brief, PHH requested permission to file an additional brief on the grounds that the Solicitor General had raised arguments not presented in the CFPB’s petition.

    For additional background, please see our summaries of the panel decision, the CFPB's petition for rehearing, and the D.C. Circuit’s order directing PHH to respond and the Solicitor General to provide views.

    Courts Consumer Finance CFPB FTC U.S. Supreme Court RESPA PHH v. CFPB Cordray U.S. Solicitor General Litigation Single-Director Structure

  • CFPB Report Reveals That One in Ten Adults are Credit Invisible

    Federal Issues

    On December 12, the CFPB announced the release of a brief on credit invisibility, following up on a 2015 report, which found that 26 million Americans—or one in 10 adults—do not have a credit history with one of the nationwide credit reporting companies. According to CFPB research, an additional 19 million consumers have “unscorable” credit files—i.e., files that are thin or contain insufficient or too brief credit history—and thus, overall, there are 45 million consumers who may be denied access to credit because they do not have credit records that can be scored. The Bureau also provided a checklist for consumers that incorporates the information from the post and identifies actions that consumers can take concerning credit reports. According to the CFPB, consumers should obtain and read credit reports and act quickly to correct any errors they may find in the reports.

    Federal Issues Consumer Finance CFPB Credit Scores

  • CFPB Releases Student Banking Report Examining Credit Card Marketing Deals Targeting College Students

    Federal Issues

    On December 14, the CFPB released a student banking report analyzing roughly 500 marketing agreements between colleges, universities and affiliated organizations, and large banks in an effort to identify trends in the school-sponsored credit card market. The report found in part that while credit cards offered in conjunction with educational institutions have declined since the CARD Act was enacted in 2009, many similar offers and deals still exist and may include features that lead students to rack up hundreds of dollars in fees. As explained by CFPB Student Loan Ombudsman Seth Frotman, “Colleges across the country continue to make deals with banks to promote products that have high fees, despite the availability of safer and more affordable products.” According to Mr. Frotman, “Students shouldn’t get stuck with the bill when their school inks a deal for an account that’s not in their best interest.”

    In conjunction with the publication of this report, the Bureau also published a new compliance bulletin to assist colleges in understanding their obligations under the CARD Act and Regulation Z related to college credit card agreements. This bulletin noted, among other items, that many of the largest colleges and universities do not publish credit card agreements on their websites or make them available to students and the public upon request, creating increased risks of non-compliance. The complete set of credit card agreement data collected by the Bureau in accordance with its obligations under the Credit CARD Act of 2009 can be accessed here.

    Federal Issues Banking Consumer Finance Credit Cards CFPB Student Lending Payments Regulation Z CARD Act

  • CFPB Publishes Fall 2016 Rulemaking Agenda

    Federal Issues

    On December 2, the CFPB published its Fall 2016 Statement of Regulatory Priorities, and its Fall 2016 rulemaking agenda, addressing current and future rulemakings in accordance with its obligations under the Regulatory Flexibility Act. In its Agenda, the Bureau notes, among other things, that: (i) publication of a final Arbitration rule is expected in February 2017; (ii) the Bureau intends to finalize proposed amendments to TRID by March 2017; and (iii) the Bureau plans to release in March 2017 a proposed set of technical corrections to the HMDA reporting requirements and proposed amendments to Regulation B “to clarify how financial institutions and creditors subject to Regulation C and Regulation B may comply with both regulations.” There was no next step identified for the proposed rule on payday loans and deposit advance products.

    In a corresponding blog post, the Bureau provided a brief status update and overview of its various rulemakings, which are grouped into pre-rule, proposed rule, final rule, long-term, and completed stages. The CFPB noted that it anticipates that the next “larger participant” rulemaking will focus on the markets for consumer installment loans and vehicle title loans, including whether to impose registration requirements on non-depository lenders.

    Federal Issues Consumer Finance CFPB HMDA TRID Agency Rule-Making & Guidance

  • Legislators Appeal to CFPB Regarding Payday Loan Proposal

    Federal Issues

    In a letter sent to CFPB Director Richard Cordray on December 1, a group of Republican members of Congress expressed concern about the Bureau’s proposal regarding payday, vehicle title, and certain high-cost installment loans. The letter observes that CFPB’s proposal “attempts to further regulate an industry that is already highly regulated by nearly a dozen federal laws including the Truth in Lending Act, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, and the Electronic Fund Transfer Act.” Specifically, the letter contends that the CFPB’s framework will effectively preempt existing statutory and regulatory frameworks and/or eliminate regulated small dollar credit products from the market, thereby leaving consumers without access to credit or forcing them to seek “riskier, illegal” forms of credit.

    Federal Issues Consumer Finance CFPB TILA FCRA ECOA EFTA U.S. House

  • Fed Forms Fintech Working Group

    Federal Issues

    On December 2, Fed Governor Lael Brainard announced, at the Conference on Financial Innovation in Washington DC, that the Fed has formed a Fintech working group. The move comes as the OCC takes steps toward launching a fintech bank charter. According to Ms. Brainard, the group will incorporate personnel with a broad array of expertise and will be tasked with “facilitat[ing] innovation where it has the potential to yield broad social benefit, while ensuring that risks are thoroughly managed.” While Ms. Brainard highlighted several benefits from the growth of Fintech, the Fed Governor also raised certain concerns innovations relying on data sharing could create security, privacy, and data-ownership risks, despite increased convenience to consumers. Specifically, Ms. Brainard explained, the Fed must “be attentive to the potential social benefits of these new technologies, prepared to make the necessary regulatory adjustments if their safety and integrity are proven and . . . vigilant to ensure risks are well understood and managed.”

    Federal Issues Consumer Finance Federal Reserve OCC Fintech

  • NYDFS to Oppose Any Effort to Federalize Regulation of FinTech Companies

    State Issues

    On December 2, NYDFS Superintendent Maria T. Vullo issued a public statement stating the NYDFS’ opposition to “any effort to federalize” regulation of Fintech companies, such as that proposed recently by the OCC in its announcement on Fintech charters. According to Superintendent Vullo, state regulators have “long-standing expertise in this arena” and are therefore best positioned to balance innovation with a tailored regulatory regime.”

    State Issues Consumer Finance OCC NYDFS Fintech


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