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CFPB’s Credit Union Advisory Council to Hold Public Meeting on March 30; Will Discuss Alternative Data and Consumer Access to Financial Records
In a Notice of Public Meeting published in the March 14 Federal Register, the CFPB announced that its Credit Union Advisory Council will hold a public meeting on March 30 from 3:15 to 4:45 pm EDT. According to the Notice, the Advisory Council plans to focus on “alternative data and consumer access to financial records.” Attendees should RSVP by noon on March 29.
Trump Administration Files Brief in PHH Corp. v. CFPB
On March 17, the Trump Administration’s Department of Justice (“DOJ”) filed its amicus brief in the D.C. Circuit’s en banc review of the CFPB’s enforcement action against PHH Corporation for alleged violations of the Real Estate Settlement Procedures Act (“RESPA”). In October 2016, a panel of the D.C. Circuit concluded that the CFPB misinterpreted RESPA and that its single-Director structure violated the constitutional separation of powers. The DOJ brief states that, “[w]hile we do not agree with all of the reasoning in the panel’s opinion,” the DOJ agrees with the panel’s conclusion that “a removal restriction for the Director of the CFPB is an unwarranted limitation on the President’s executive power” and that “the panel correctly concluded … that the proposed remedy for the constitutional violation is to sever the provision limiting the President’s authority to remove the CFPB’s Director, not to declare the entire agency and its operations unconstitutional.”
Like the brief filed in this case by the Obama Administration DOJ before the change in administration, the current DOJ brief states that “[t]he United States takes no position on the statutory issues in this case, but in the event that the ultimate resolution of those issues results in vacatur of the CFPB’s order [against PHH], it is within this Court’s discretion to avoid ruling on the constitutional question.” However, the brief goes on to state that, because the issue is already before the en banc court and the “question is likely to recut in pending and future cases, it would be appropriate for the Court to provide needed clarity by exercising its discretion to resolve the separation-of-powers issue now.”House Oversight Committee to Hold Hearing on March 21 Examining CFPB’s “Unconstitutional Design”
On March 16, the U.S. House of Representatives Subcommittee on Oversight and Investigations announced it will hold a hearing on Tuesday, March 21, at 10:00 a.m., entitled “The Bureau of Consumer Financial Protection’s Unconstitutional Design.” According to a March 16 Committee Memorandum, the hearing—which will be held in room 2128 of the Rayburn House Office Building—will examine, among other things, “whether the structure of the CFPB (Bureau) violates the Constitution as well as structural changes to the Bureau to resolve any constitutional infirmities.” The following witnesses are scheduled to testify:
- The Honorable Theodore Olson, Partner, Gibson, Dunn & Crutcher LLP
- Professor Saikrishna Prakash, James Monroe Distinguished Professor, University of Virginia School of Law
- Mr. Adam White, Research Fellow, Hoover Institution
- Ms. Brianne Gorod, Chief Counsel, Constitution Accountability Center
Credit Union Trade Association Submits Letter in Support of Proposed CFPB Exemption
On March 5, Credit Union National Association (CUNA) President Jim Nussle submitted a letter to Rep. Roger Williams (R-Texas), supporting his introduction of H.R. 1264—the Community Financial Institution Exemption Act. The bill, referred to the House Financial Services Committee on February 28, provides an exemption from rules and regulations of the CFPB for community financial institutions with under $50 billion in assets. “The rules are, in large part, implemented to address abuses perpetrated by the large institutions and other previously nonregulated providers, and not small institutions like credit unions and small banks,” Nussle wrote. “While we believe that the statute presently provides the CFPB authority to exempt credit unions under $50 billion from its rulemaking, the bureau has been unwilling to effectively use the exemption authority.”
House Democrat Wants CFPB to Probe Discrimination in Small Business Loans
In a March 15 letter to CFPB Director Richard Cordray, Rep. Emanuel Cleaver (D-Mo.) called upon the Bureau to address potential abuses by FinTech companies that may be engaged in predatory small-business lending. In so doing, he asked that the Bureau “investigate whether FinTech companies engaged in small business lending are complying with all anti-discrimination laws, including the Equal Credit Opportunity Act.” The letter also seeks responses to three questions:
- When does the CFPB anticipate finalizing regulation and guidance to fully implement Section 1071 of the ECOA (requiring financial institutions to collect and maintain loan data for women-owned, minority-owned and small business credit applicants)?
- Has the CFPB engaged in any supervisory activities over FinTech small business lenders and, if so, did the CFPB identify any ECOA-related compliance issues?
- Will the CFPB solicit complaints through its consumer complaint portal from consumers, particularly those from communities of color, who feel they have been discriminated against by a FinTech lender offering small business loans (and, if not, how can consumers formally submit a complaint)?
CFPB Reaches Settlement with Arizona-Based Title Lender
On March 13, the CFPB issued a consent order and stipulation in an enforcement action against the fifth of five Arizona-based title lenders under investigation for advertising periodic interest rates without including corresponding annual percentage rates. As previously covered in Infobytes in September and February, this marks the conclusion of the investigation initiated by the Bureau last year against five title lenders for alleged violations of TILA, Regulation Z, and the Consumer Financial Protection Act’s prohibition against unfair, deceptive, or abusive acts or practices. The terms of the consent order include a $40,000 civil money penalty, an agreement that the lender will refrain from further violations of TILA, and a requirement that the lender submit a comprehensive plan to ensure compliance with all applicable federal consumer financial laws and the terms of the consent order.
CFPB Issues Largest HMDA Fine in Bureau History Against Nonbank Mortgage Lender
On March 15, the CFPB announced a consent order assessing a $1.75 million civil money penalty against a national mortgage lender for failing to accurately report mortgage data in violation of the Home Mortgage Disclosure Act (“HMDA”). The Bureau alleged that, during the supervision process, it found the lender’s HMDA compliance systems to be flawed, and that the flaws led to the generation of “significant, preventable” errors in its mortgage lending data. The following violations were also alleged: (i) a failure to “maintain detailed HMDA data collection and validation procedures”; (ii) a failure to “implement adequate compliance procedures”; and (iii) a failure to “consistently define data among its various lines of business,” which resulted in data discrepancies. As reported by the Bureau, the size of the penalty reflects the lender’s market size, the magnitude of the errors, and its history of violations. The terms of the consent order require the lender to pay a $1.75 million penalty, develop an effective compliance management system to prevent future violations, and review and correct HMDA reporting inaccuracies for the defined time period. Notably, the consent order does not provide for consumer redress.
Later that day, the mortgage lender issued a statement announcing the resolution of the Bureau’s examination and highlighting the company’s efforts “over the past two years” to “proactively ma[ke] substantial investments in new staff, training and technology to enhance all of [their] HMDA-related processes and controls.”
30 Organizations Join the 2017 Edition of the CFPB’s “Your Money, Your Goals Cohort”
On March 10, the CFPB announced the 30 organizations selected to join the Your Money, Your Goals Cohort. These organizations, selected from a pool of respondents to the Bureau’s October invitation to submit letters of interest, will receive training and technical assistance on how to use the program’s “financial empowerment materials” to better serve low-income and economically vulnerable populations.
CFPB Denies Data Provider’s Petition to Set Aside CID
In a Decision and Order released last month, the CFPB denied a Petition to set aside or modify a civil investigative demand (CID) directed to a data provider (“Petitioner”). The order also directed Petitioner to produce responsive information within 10 calendar days.
The CFPB originally issued the CID on January 5 in connection with its efforts to gather information about Petitioner’s business, products, services, and operations. According to Petitioner, the stated purpose of the CID “purport[ed] to exercise jurisdiction over [Petitioner] under the Fair Credit and Reporting Act (‘FCRA’) or under ‘any other federal consumer financial law.’” On January 25, Petitioner moved to set aside or modify the CID arguing, among other things, that: (i) the Bureau lacks jurisdiction over Petitioner because Petitioner is neither a consumer reporting agency (“CRA”), nor a “covered person” or “service provider” under a “federal consumer financial law”; (ii) the CID’s Notification of Purpose is impermissibly vague in that it fails to adequately state the “nature of the conduct constituting the alleged violation” and/or “the provision of law applicable to such violation”; and (iii) the CID is “impermissibly overbroad and seeks information which cannot possibly be related to or reasonably relevant to the inquiry at hand (which itself remains unclear and undefined).”
Ultimately, the CFPB determined that none of three objections raised by Petitioner “warrant[ed] setting aside or modifying the CID.” In response to the argument that the CFPB lacks jurisdiction, the Bureau interpreted its authority under the Consumer Financial Protection Act to include investigative authority to issue CIDs to “any person” who may have information “relevant to a violation” of any federal consumer financial law, regardless of whether that person or entity is subject to CFPB authority. In response to Petitioner’s argument regarding the vagueness of the CID’s Notification of Purpose, the Bureau stated that the argument fails because “it is well settled that the boundaries of an agency investigation may be drawn ‘quite generally.’” Finally, as to Petitioner’s objection that the CID was overbroad and/or sought irrelevant information, the Bureau concluded that this was merely a restatement of the jurisdictional argument and fails for the same reasons. The CFPB explained that the question of whether Petitioner is properly subject to CFPB authority need not be answered at the outset of an investigation, because it is the type of question “the investigation is designed and authorized to illuminate.”
Two Trade Associations File Notices of Intent to Submit Amicus Briefs in PHH v. CFPB
On March 8 and 9, two separate Notices of Intention to Participate as Amicus Curiae were filed in PHH Corp. v. CFPB. The first was filed by ACA International, a trade association for the credit and collections industry. The second was filed on behalf of the following parties: American Bankers Association; American Escrow Association; American Financial Services Association; Consumer Bankers Association; Credit Union National Association; Housing Policy Council of the Financial Services Roundtable; Independent Community Bankers of America; Leading Builders of America; Mortgage Bankers Association; National Association of Federally- Insured Credit Unions; National Association of Home Builders; National Association of REALTORS; and Real Estate Services Providers Council. Nearly all of the associations listed above filed either joint or separate amici briefs at the panel stage and believe that “the en banc Court will be aided by a brief addressing how the Bureau’s Order not only contravenes RESPA’s statutory text, governing regulations, and applicable policy statements, but also how the Order’s violation of fair-notice principles disrupts the critically important home-lending market.”