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Democratic Senators Urge Further Action on Credit Reporting
On February 15, Senate Banking Committee members Mark Warner (D-VA) and Elizabeth Warren (D-MA) sent a letter to the CFPB and the FTC following up on the agencies’ recent reports regarding the consumer reporting market. The Senators ask for the agencies’ help in “tak[ing] further action to improve consumer credit reporting,” and request that they prepare a separate report on whether the current legal framework for the regulation of credit reporting is sufficient or whether additional legislation may be needed.
Senate Democrats Complete Battle Lines over CFPB Nomination
On February 14, 54 of the 55 Senators in the Democratic caucus joined a letter to President Obama supporting the nomination of Richard Cordray to lead the CFPB and expressing opposition to "efforts to weaken the CFPB through structural changes." The letter responds to a recent letter to the President from Senate Republicans reiterating their opposition to confirming any nominee as CFPB Director until the structure of the agency is changed. In responding, the Democratic Senators state that never before has a President's nominee to lead an agency been obstructed on such a basis, and point out that a supermajority of the Senate approved the structure as it exists today.
FTC Recaps Debt Collection Activities for Annual CFPB Report
On February 1, the FTC sent a letter to the CFPB describing the FTC's debt collection-related activities over the past year. The responsibility to report to Congress each year on implementation and enforcement of the FDCPA shifted from the FTC to the CFPB last year, but given their shared authority with regard to the FDCPA, the CFPB relies on the FTC to provide information for inclusion in its annual report. The FTC letter recaps the agency's law enforcement efforts, including the filing or resolution of four actions against collectors alleged to have engaged in deceptive, unfair, or abusive conduct and the filing or resolution of three actions related to phantom debt collection. The letter also highlights outreach and policy activities, including the FTC's recent debt buyer study.
Defendants in CFPB Enforcement Action Renew Challenge to Validity of Director's Appointment
On February 11, a law firm and related parties sued by the CFPB for allegedly deceiving consumers through a network of mortgage loan modification businesses filed a brief in which they renewed a challenge to the CFPB Director's appointment. Opp. to Receiver's Request for Payment, CFPB v. Chance Edward Gordon, No. 12-6147 (C.D. Cal., filed Feb. 11, 2013). The defendants cite a recent opinion from the U.S. Court of Appeals for the D.C. Circuit that held appointments to the National Labor Relations Board made by President Obama in January 2012 during a purported Senate recess were unconstitutional, and argue that CFPB Director Cordray was appointed on the same day, and in the same manner found to be constitutionally invalid by the D.C. Circuit Court. The defendants stated in their motion that they have propounded Requests for Admissions regarding the date and nature of Mr. Cordray's appointment, and likely will follow with a motion for summary judgment.
Additional State AGs Join Challenge to Dodd-Frank Act Provisions
On February 13, the plaintiffs in a case challenging portions of the Dodd-Frank Act sought leave to file a second amended complaint to add as plaintiffs the state attorneys general (AGs) of Alabama, Georgia, Kansas, Montana, Nebraska, Ohio, Texas, and West Virginia. Motion for Leave to File Second Amended Complaint, State Nat'l Bank of Big Spring v. Wolin, No 12-1032 (D.D.C., filed Feb. 13, 2013). The new state AGs join the AGs of Michigan, Oklahoma, and South Carolina, who previously joined the suit and claim that the "orderly liquidation authority" (OLA) for financial institutions provided to the Treasury Secretary by the Dodd-Frank Act violates the separation of powers doctrine, as well as the Fifth Amendment's bar against the taking of property without due process. The case also involves private party plaintiffs who, in addition to challenging the OLA, challenge as unconstitutional (i) the formation and operation of the CFPB, (ii) the appointment of CFPB Director Richard Cordray, and (iii) the operation of the Financial Stability Oversight Council. The plaintiffs were due to respond to a pending government motion to dismiss, but asked the court to stay briefing on that motion pending resolution of the motion to file a second amended complaint.
CFPB Schedules Consumer Advisory Board Meeting
On February 12, the CFPB announced that its Consumer Advisory Board will meet on February 20, 2013 in Washington, DC. The portion of the event open to the public will feature remarks from Director Cordray, Associate Director Zixta Martinez, and Consumer Advisory Board Chairman Jose Quinonez. The balance of the event is private, and the agenda includes (i) a presentation by the CFPB's Supervision Office, (ii) breakout sessions with various CFPB offices, including the Office of Fair Lending, and (iii) a review of recently issued mortgage rules and implementation plans. Members of the public that would like to attend the portion of the event open to the public must RSVP.
CFPB Releases First MOU with Tribal Government
On February 12, the CFPB released a memorandum of understanding (MOU) it entered into last month with the Navajo Nation Department of Justice, pursuant to which the parties will share information. The MOU provides for confidential treatment and protection from FOIA disclosure of Navajo Nation documents and information provided to the CFPB, and establishes a framework pursuant to which the Navajo Nation can seek information from the CFPB. Notably, nearly a year ago, in remarks to state attorneys general, CFPB Director Richard Cordray stated the CFPB's intent to focus on payday lenders associated with Native American tribes. The MOU could facilitate the CFPB's efforts to pursue such lenders.
CFPB Announces Plan for Mortgage Rule Implementation
On February 13, the CFPB announced a plan to implement its recently adopted mortgage rules, which go into effect in January 2014. To assist financial institutions with implementing the rules, the CFPB will (i) coordinate with other agencies that conduct examinations of mortgage companies to ensure all regulators have a shared understanding of the CFPB's new rules, (ii) publish plain-language guides in the spring, (iii) publish updates to the official interpretations, with priority given to issues that are important to a large number of providers or consumers, and that critically affect mortgage companies' implementation decisions, (iv) publish readiness guides, available this summer, and (v) work with the FFIEC to develop more in-depth examination procedures.
CFPB Plans Heightened Scrutiny of Mortgage Servicing Transfers
On February 11, the CFPB issued Bulletin 2013-01 to address concerns about "potential risks to consumers" posed by the increased number and size of recent servicing transfers between financial institutions. The guidance states that the CFPB generally will examine such transfers to determine compliance with consumer finance laws, but examiners also will focus on (i) how a transferor has prepared for the transfer of servicing rights, (ii) how a transferee handles the files transferred to it, and (iii) the policies and procedures adopted with regard to transferred loans with loss mitigation in process. The CFPB also plans to require, in appropriate cases, servicers engaged in "significant servicing transfers" to submit written plans detailing how the parties to a transfer will manage consumer risks, and information including: (i) the number of loans involved, (ii) the total servicing volume being transferred, (iii) the name(s) of the servicing platform(s) on which the transferor stored account-level information for transferred loans prior to transfer and information about compatibility with the transferee's systems, (iv) a detailed description of the transaction and system testing to be conducted to ensure accurate transfer of electronic information and a description of the summary report to be generated as a result of this testing, (v) a description of how the transferee will identify and correct errors identified in connection with the transfer, (vi) a description of the training plan and actual training materials for staff involved in reviewing, assessing, utilizing, or communicating information regarding the transferred loans, and (vii) a customer-service plan for responding to loss mitigation inquiries and identifying whether a loan is subject to a pending loss mitigation resolution or application. Servicers will not need CFPB approval of such plans prior to completing a transfer. Finally, the Bulletin offers guidance regarding policies and procedures to comply with the transfer-related aspects of CFPB's recently-issued servicing rules, which become effective on January 14, 2014.
Special Alert: Detailed Analysis of CFPB's Final Escrow Rule
On January 10, 2013, the Consumer Financial Protection Bureau issued its final rule on escrow account requirements for first-lien higher-priced mortgage loans. The rule amends existing escrow requirements and exemptions for such loans by, among other things, extending the required period of time during which escrow accounts must be maintained from one to five years, and creating a new exemption for small creditors that operate predominantly in rural or underserved areas. This Alert provides a detailed summary and analysis of the rule, which becomes effective June 1, 2013 and applies to loans for which creditors receive applications on or after this date. Click here to download our detailed analysis of CFPB's Final Escrow Rule.