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  • CFPB report finds one in four consumers have debts in collection

    Federal Issues

    On July 18, the CFPB released a report providing an overview of third-party debt collection tradelines from 2004 to 2018, which the Bureau segmented into two parts: debt buyer tradelines and non-buyer debt collections tradelines. The CFPB’s report, “Market Snapshot: Third-Party Debt Collections Tradeline Reporting,” is based on a nationally representative sample of approximately 5 million credit records from one of the three major credit bureaus. According to the report, as of the second quarter of 2018, more than one in four consumers in the sample have at least one debt in collection by third-party debt collectors. Additionally, fewer than 900 unique furnishers of third-party collections tradelines nationwide reported unpaid debts for consumers in the sample, according to the Bureau—a decrease from the 2,294 collectors reported back in 2004. The report also notes that in the second quarter of 2018, the top four debt buyers account for 90 percent of all debt buyer tradelines for consumers in the sample, while the top four non-buyers, by comparison, accounted for just 13 percent of reported tradelines. Furthermore, in the second quarter of 2018, 3 out of 4 of all reported tradelines in the sample from non-buyers were for non-financial debt, such as medical, telecommunications, or utilities debt. Buyers, in contrast, were more likely to report unpaid financial, retail, or banking debts.

    Federal Issues CFPB Third-Party Debt Collection Consumer Finance

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  • GAO recommends CFPB define supervisory expectations for CRAs

    Federal Issues

    On July 16, the U.S. Government Accountability Office (GAO) submitted a report to the ranking members of the Senate Banking Committee and the House Committee on Financial Services recommending that the CFPB improve communications to consumer reporting agencies (CRAs) and furnishers about the Bureau’s supervisory expectations. Specifically, the report—based on a CRA performance audit conducted by GAO from July 2018 to July 2019—presents two recommendations to the CFPB director on communicating expectations to CRAs concerning: (i) “reasonable procedures for assuring maximum possible accuracy of consumer report information;” and (ii) “reasonable investigations of consumer disputes.” According to the report, there are various causes for consumer report inaccuracies: errors in the data collected by CRAs and data not being matched to the correct consumer by CRAs. While the Bureau has “generally focused on assessing compliance with Fair Credit Reporting Act (FCRA) requirements,” GAO notes that the CFPB “has not defined its expectations for how CRAs can comply with key statutory requirements.” For instance, under the FCRA, CRAs must follow reasonable procedures for ensuring maximum possible accuracy and reasonably investigate consumer disputes. However, although the CFPB has identified deficiencies concerning these requirements in its CRA examinations, the Bureau “has not defined its expectations—such as by communicating information on appropriate practices—for how CRAs can comply with these requirements.” Therefore, GAO concluded, there exist opportunities for the Bureau to improve its oversight of CRAs. The CFPB neither agreed nor disagreed with GAO’s recommendations, and stressed that “it has made oversight of the consumer reporting market a top priority and that its supervisory reviews of CRAs have focused on evaluating their systems for assuring the accuracy of data used to prepare consumer reports.” The Bureau also commented on CRAs’ significant advances in promoting greater accuracy.

    Federal Issues CFPB GAO Supervision Consumer Reporting Agency FCRA

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  • CFPB updates advisory on elder financial exploitation

    Federal Issues

    On July 17, the CFPB issued an updated advisory to financial institutions with information on the financial exploitation of older Americans and recommendations on how to prevent and respond to such exploitation. The update urges financial institutions to report to the appropriate authorities whenever they suspect that an older adult is the target or victim of financial exploitation, and recommends that they also file Suspicious Activity Reports (SARs) with the Financial Crimes Enforcement Network (FinCEN). The update builds on an advisory that was previously released by the Bureau in March 2016 (covered by InfoBytes here), which included recommended best practices to help prevent and respond to elder financial exploitation, such as (i) establish protocols for ensuring staff compliance with the Electronic Fund Transfer Act; (ii) train staff to detect the warning signs of financial exploitation and respond appropriately to suspicious events; and (iii) maintain fraud detection systems that provide analyses of the types of products and account activity associated with elder financial exploitation. With the release of the update, Director Kraninger noted that, “[t]he Bureau stands ready to work with federal, state and local authorities and financial institutions to protect older adults from abusive financial practices that rob them of their financial security.”

    As previously covered by InfoBytes, in February, the CFPB’s Office of Financial Protection for Older Americans, released a report studying the financial abuse reported in SARs, discussing key facts and trends revealed after the Bureau analyzed 180,000 elder exploitation SARs filed with the FinCEN from 2013 to 2017. Key findings of the report included, (i) SARs filings on elder financial abuse quadrupled from 2013 to 2017, with 63,500 SARs reporting the abuse in 2017; (ii) the average amount of loss to an elder was $34,200, while the average amount of loss to a filer was $16,700; and (iii) more than half of the SARs involved a money transfer.

    Federal Issues CFPB Elder Financial Exploitation SARs FinCEN EFTA Compliance

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  • CFPB settles lawsuit against debt settlement provider

    Federal Issues

    On July 9, the CFPB announced a $25 million settlement with the nation’s largest debt settlement provider to resolve allegations that the company engaged in deceptive acts and practices in violation of the Telemarketing Sales Rule and the Consumer Financial Protection Act. As previously covered by InfoBytes, in 2017 the Bureau claimed, among other things, that the company (i) misled consumers about its ability to negotiate with creditors that the company knew maintained policies against working with settlement companies; (ii) charged advance fees without settling consumers’ debts; and (iii) failed to inform consumers about their rights to refunds from their deposit accounts if they left the settlement program. The proposed stipulated final judgment and proposed order requires the company to pay $20 million in restitution to affected consumers and a $5 million civil money penalty (CMP), in addition to providing certain upfront disclosures to consumers before enrollment. The settlement further enjoins the company from engaging in the alleged unlawful conduct in the future and stipulates that $493,500 of the CMP will be remitted in light of a penalty the company previously paid under a consent order issued by the FDIC in 2018.

    Federal Issues CFPB Enforcement Debt Settlement Telemarketing Sales Rule CFPA

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  • CFPB issues latest fair lending report to Congress

    Federal Issues

    On June 28, the CFPB issued its seventh fair lending report to Congress, which outlines the Bureau’s efforts in 2018 to fulfill its fair lending mandate. According to the report, in 2018, the Bureau continued to focus on promoting fair, equitable, and nondiscriminatory access to credit, highlighting several fair lending priorities that continued from years past such as mortgage origination, mortgage servicing, and small business lending. The Bureau also noted two new focus areas for fair lending examinations or investigations: (i) student loan origination, specifically, whether there is discrimination in underwriting and pricing; and (ii) debt collection and model use, specifically, whether there is discrimination in governing auto servicing and credit card collections, including the use of models that predict recovery outcomes. Additionally, the report highlighted several other Bureau activities from 2018, including, among other things (i) issuing guidance to facilitate the implementation of the August 2018 HMDA final rule (covered by InfoBytes here); and (ii) recommending supervisory reviews of third-party credit scoring models, noting that the “use of alternative data and modeling techniques may expand access to credit or lower credit cost and, at the same time, present fair lending risks.”

    Federal Issues Fair Lending CFPB Mortgage Origination Mortgage Servicing Small Business Lending Student Lending Debt Collection Alternative Data

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  • CFPB updates Payday Rule Small Entity Compliance Guide

    Agency Rule-Making & Guidance

    On June 28, the CFPB updated its Small Entity Compliance Guide for the Payday Lending Rule, which covers the payment-related requirements of the Rule. In addition to technical corrections, the update reflects the delayed compliance date for the mandatory underwriting provisions of the Rule. As previously covered by InfoBytes, on June 6, the Bureau released a final rule to delay the August 19, 2019 compliance date for the mandatory underwriting provisions of the Rule. Compliance with these provisions is now required by November 19, 2020.

    Agency Rule-Making & Guidance CFPB Payday Rule Compliance Underwriting

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  • CFPB 's first in symposia series discusses 'abusive' standard

    Federal Issues

    On June 25, the CFPB held its “Abusive Acts or Practices Symposium,” the first event in a symposia series covering a range of consumer financial services topics. The event had two panels of experts discussing unfair, deceptive, or abusive acts and practices (UDAAP)—the first was a policy discussion, moderated by Tom Pahl, CFPB’s Policy Associate Director, Research, Markets and Regulation; and the second, examined how the “abusive” standard has been used in practice in the field and was moderated by David Bleicken, CFPB Deputy Associate Director, Supervision, Enforcement and Fair Lending. Director Kraninger began the symposium noting that it will help to “inform the Bureau’s thinking as to whether the Bureau should use its rulemaking or other tools to provide clarity about the general meaning of abusiveness—and, if so, which principles should be applied to determine the scope of abusiveness.”

    The policy panel focused on whether consumer harm was required for a practice to be considered abusive. One panelist noted that while the Dodd-Frank Act statutory definition of abusive does not specifically require proof of consumer harm, it would be surprising if consumer harm wasn’t a priority in weighing enforcement claims. As for what principles the Bureau should apply in determining the scope of abusive acts and practices, one panelist identified three: “fidelity, autonomy, and modesty,” meaning the Bureau should follow the statutory language, protect autonomy of consumer decision-making, and be careful not to tie its hands prematurely based on current market information.

    The practitioners’ panel focused on whether there was even a need to clarify the abusive standard, as it is already statutorily defined. Most panelists agreed that a guidance document or policy statement would be an important first step for the Bureau in providing clarity to the industry. Specifically, the panelists noted that the industry has struggled with examples of how abusiveness is different from unfairness or deception, arguing the Bureau has been “inconsistent at times” in the application of the abusive standard. One panelist explained that the Bureau often brings abusive claims in connection with a claim of deception or unfairness, stating “while this may work for the Bureau’s litigation strategy the market looks to enforcement for guidance on the policy. Standalone abusiveness claims that show how abusiveness is different from deception and unfairness would provide direction to staff and industry.” Because the standard is unclear to industry, a panelist argued that many companies choose to limit products or offerings to avoid unknown compliance risks. 

    An archived copy of the webcast will be available on the Bureau’s website.

    Federal Issues Agency Rule-Making & Guidance CFPB UDAAP Dodd-Frank Abusive

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  • CFPB and Fed issue final amendments to Regulation CC

    Agency Rule-Making & Guidance

    On June 24, the CFPB and the Federal Reserve Board (Fed) announced a final rule amending Regulation CC to adjust dollar amounts cited in the rule for inflation. The Dodd-Frank Act requires that the dollar amounts be adjusted for inflation every five years by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The agencies selected July as the CPI-W month and will use July 2011 to July 2018 as the initial inflation measurement period. If there is no aggregate percentage increase in the CPI-W or it is negative, the dollar amounts will not be adjusted. The final rule also implements certain measures of the Economic Growth, Regulatory Relief, and Consumer Protection Act , including extending coverage of the Expedited Funds Availability Act to American Samoa, the Commonwealth of the Northern Mariana Islands, and Guam.

    The compliance date for the adjustment amounts is July 1, 2020. Other amendments are effective 60 days after publication in the Federal Register.

     

    Agency Rule-Making & Guidance CFPB Federal Reserve Regulation CC

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  • OCC issues new guidance for higher-LTV mortgage loans

    Agency Rule-Making & Guidance

    On June 19, the OCC issued Bulletin 2019-28, which highlights “core lending principles” for banks offering higher loan-to-value (LTV) loans. The Bulletin rescinds 2017 guidance from the OCC—Bulletin 2017-28, “Mortgage Lending: Risk Management Guidance for Higher-Loan-to-Value Lending Programs in Communities Targeted for Revitalization”— noting that “banks have engaged in responsible, innovative lending strategies that are different from [the previous bulletin’s] specific program parameters while being consistent with its goals.” The new guidance instead covers core lending principles that banks should consider when offering higher-LTV loans in an effort revitalize communities. Among other things, the OCC states that higher-LTV loans (i) should be consistent with safe and sound banking and comply with applicable laws and regulations; (ii) performance is effectively monitored, tracked, and managed; (iii) should be underwritten consistent with the Interagency Guidelines for Real Estate Lending and the bank’s standards for review and approval of exception loans. The Bulletin notes examples of sound policies and processes for higher-LTV loans, including underwriting standards and portfolio limits for the aggregate amount of higher-LTV loans. Lastly, the Bulletin emphasizes that marketing and consumer disclosures should describe the potential financial impacts and marketability of a higher-LTV loan where the value of the property is and could remain less than the loan amount.

    Agency Rule-Making & Guidance CFPB FDCPA Debt Collection

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  • CFPB symposium on “abusive” standard set for June 25

    Agency Rule-Making & Guidance

    On June 11, the CFPB announced that its first symposium, regarding the meaning of “abusive acts or practices” under Section 1031 of the Dodd-Frank Act, will be held on June 25. As previously covered by InfoBytes, the CFPB announced a symposia series that will convene to discuss consumer protections in “today’s dynamic financial services marketplace.” The June 25 symposium will be a public forum with two panels of experts discussing unfair, deceptive, or abusive acts and practices (UDAAP). The first panel will be a policy discussion, moderated by Tom Pahl, CFPB’s Policy Associate Director, Research, Markets and Regulation. The second panel will examine how the “abusive” standard has been used in practice in the field and will be moderated by David Bleicken, CFPB Deputy Associate Director, Supervision, Enforcement and Fair Lending.

    In addition to the June 25 symposium, the series will have future events discussing behavioral law and economics, small business loan data collection, disparate impact and the Equal Credit Opportunity Act, cost-benefit analysis, and consumer authorized financial data sharing. 

    Agency Rule-Making & Guidance CFPB UDAAP Abusive

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