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FTC publishes letter to CFPB on its law enforcement and public outreach
On November 16, the FTC released its letter of its annual summary of activities in 2022 to the CFPB. The CFPB used the findings in its annual report to Congress on the Fair Debt Collection Practices Act (FDCPA). In the letter, the FTC outlined several of its important procedural law enforcement activities, such as debt collection issues affecting small businesses, redressing consumers harmed by debt collection schemes, halting collection in consumer debt, and combating unauthorized charges to consumers. The second part of the letter outlines how the FTC enables public outreach and cross-agency coordination. For public outreach, the FTC proactively educates consumers about their rights under the FDCPA, and how debt collectors can comply with the law. The FTC also noted that it publishes material in both English and Spanish to broaden its outreach. In addition, the FTC added that it distributes print publications to libraries and businesses and logs more than 50 million views on its website pages. In its efforts to raise awareness about scams targeting the Latino community, the FTC highlighted its series of fotonovelas (graphic novels) in Spanish.
CFPB’s Language Access Plan breakdown for consumers with limited English proficiency
On November 15, the CFPB issued a report, titled “The CFPB Language Access Plan for consumers with limited English proficiency,” on expanding consumer needs in the financial marketplace for individuals with limited English proficiency. The CFPB released this report consistent with the mandates under E.O. 13166 to “educate and empower all consumers, provide information and assistance to traditionally underserved consumer and communities, enforce fair lending laws, and promote an equitable workforce for all consumers.”
The CFPB cites that 22 percent of the U.S. population over the age of five speak a language other than English at home. The CFPB commits itself to ensuring that tools, programs, and services are available to those who need language assistance by (i) understanding the needs of the population; (ii) conducting outreach and engagement; (iii) providing products and services in eight different languages other than English; and (iv) promoting fair and equitable access to the financial marketplace.
The CFPB’s report also lists several public enforcement actions involving communicating with consumer with limited English proficiency. The report mainly outlines how well the agency does in addressing the diverse language needs of the U.S. population, including translated disclosures, websites, and outreach and engagement sessions.
CFPB imposes $15 million penalty on lender for violating 2019 order
On November 15, the CFPB announced a consent order against a Chicago-based small-dollar lender for allegedly violating a 2019 order and by independently violating the CFPA. According to the 2019 consent order, the respondent allegedly withdrew funds from consumers’ bank accounts without permission and failed to honor loan extensions. Specifically, the respondent replaced consumers’ bank account information used to pay for existing loans with separate account information supplied by a “lead generator.” Respondent allegedly debited consumers’ payments through the accounts provided by the lead generator, instead of the consumers’ originally saved payment method. The 2019 order, among other things, (i) barred the respondent from making or initiating electronic fund transfers without valid authorization; (ii) barred the respondent from failing to honor loan extensions; (iii) required the respondent to pay a $3.8 million civil money penalty. In its most recent order, the CFPB alleged that through an investigation of the respondent’s compliance with the 2019 order, the respondent continued the same unauthorized withdrawals and canceled loan extensions. The Bureau also alleged that the respondent failed to disclose that making a partial payment could cancel a loan extension and misrepresent associated fees, and they failed to provide consumers copies of signed authorizations. The respondent also allegedly provided inaccurate due dates, misrepresented skipping payments, and misrepresented loan amounts. The respondent released a statement on the enforcement action, highlighting its cooperation with the CFPB, and internal technical issues.
In the most recent order, the respondent, without admitting nor denying the CFPB’s allegations, agreed to pay a $15 million civil money penalty and refund affected consumers. The respondent also agreed to stop providing certain types of consumer loans for seven years (beginning in 2022) and to reform its executive compensation agreements and policies to ensure that compensation accounts for executives’ compliance with consumer financial protection laws, including the Consent Order. The respondent must conduct an annual compensation review and provide a report of the review to the CFPB.
Agencies finalize 2024 HPML smaller loan exemption threshold
On November 13, the CFPB, OCC, and the Fed published final amendments to the official interpretations for regulations implementing Section 129H of TILA, which establishes special appraisal requirements for “higher-risk mortgages,” otherwise termed as “higher-priced mortgage loans” (HPMLs). The final rule increases TILA’s loan exemption threshold for the special appraisal requirements for HPMLs. Each year, the threshold must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. The exemption threshold will increase from $31,000 to $32,400 effective January 1, 2024.
CFPB and Fed release updated thresholds for Regulations Z and M
On November 13, the CFPB and the Fed released updated dollar thresholds for whether certain credit and lease transactions are subject to Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) requirements for 2024. The thresholds for both regulations were increased from $66,400 to $69,500, an increase of 4.6 percent. Transactions at or below the 2024 threshold of $69,500 will be “subject to the protections of the regulations.” The CFPB derives its thresholds from the June 1, 2023, report on the Consumer Price Index for Urban Wage Earnings and Clerical Workers (CPI-W). The thresholds for 2023 were previously increased at a rate of 8.8 percent, a larger increase given the rate of inflation during the previous year.
District Court grants payday lender's motion to stay CFPB case pending Supreme Court decision
On November 3, the U.S. District Court of Nevada granted a payday lender’s motion to stay a case brought by the CFPB, pending a SCOTUS’s decision in Community Financial Services Association of America v. Consumer Financial Protection Bureau (see InfoBytes here and here). The CFPB issued a civil investigative demand (CID) in late 2022 to the lender, as part of an investigation into its lending practices. The lender complied with the CID initially, but later requested a stay due to the impending SCOTUS decision regarding the constitutionality of the CFPB’s funding structure, which could impact the CFPB’s enforcement authority. Although the CFPB opposed the stay by arguing that the extensive delay could hinder its ability to investigate the lender, the court granted the lender’s motion, in line with other district courts that have faced similar issues.
CFPB proposes a rule to regulate fintech firms like banks
On November 7, the CFPB proposed a rule to supervise large non-bank fintech firms that offer services like digital wallets and payment apps, applicable to larger firms handling greater than 5 million transactions per year, in the same way many large banks and credit unions are supervised. While fintech agencies offer consumer banking services, they are not regulated as stringently as banks are.
The CFPB found that many consumers from middle- and lower-income backgrounds now prefer using digital consumer payment applications over cash. This shift from traditional banking puts consumers at risk since fintech applications are not subject to “traditional banking safeguards… like deposit insurance.” The CFPB’s proposed rule ensures these non-bank companies:
- Adhere to federal consumer financial protection laws that encompass protections against unfair, deceptive, and abusive practices, consumers’ rights when transferring money, and privacy rights. The CFPB would supervise larger participants to ensure compliance.
- Follow the same rules as banks and credit unions, fostering fair competition and consistent enforcement of federal consumer financial protection laws.
The Consumer Financial Protection Act (CFPA) provides the CFPB with the authority to conduct supervisory examinations over all non-bank companies in the mortgage, payday loan, and private student loan industries, as well as those who serve as service providers to banks and credit unions. In addition, the CFPB can supervise individual entities that pose a risk to consumers, as well as larger participants in other markets. This proposed rule would give the CFPB greater regulatory authority and oversight over large technology firms in consumer financial markets.
CFPB reports on veterans’ financial hurdles despite legislative wins
On November 1, the CFPB published a broad summary of several findings regarding how financial institutions may not be doing all they can to help service members under federal legislation. For instance, in 2022, the CFPB found that service members were losing $10 million a year in savings in eligible auto and personal loans. Last month, the CFPB released a similar study on how credit card companies were also limited in giving all the benefits they could offer under the SCRA. Loans aside, military payroll allotments provide financial companies with a way to force automatic payments––something the CFPB acknowledges is “ripe for abuse.” The CFPB worked with the DOD to close loopholes that could exploit servicemembers. Additionally, military identity theft in 2023 is still an ongoing issue, as has been previously covered by InfoBytes here. But in October the CFPB found that Transunion had failed to provide crucial identity theft protection for thousands of individuals, including active-duty members of the military. There are also issues with supposed consulting services: “Earlier this year, the CFPB published a joint WARNO with the VA on unaccredited individuals and organizations and the CFPB is working closely with federal and state agencies to protect veterans’ benefits.”
The CFPB notes it will “continue to work with all our partners as the financial marketplace evolves so we can understand the unique needs and challenges of members of the military community. If you have a problem with a financial product or service, submit a complaint to us, and we’ll work to get you a response.”
CFPB releases report on state community reinvestment acts
On November 2, the CFPB issued a report on several states’ community reinvestment laws. The report focused on how much outstanding mortgage debt banks hold in the residential mortgage market: in 1977, “banks held 74 percent of outstanding mortgage debt. By 2007, this share had declined to just 28 percent.”
In 1977, Congress passed the Community Reinvestment Act (CRA) to combat redlining practices that prevailed despite the passing of the Fair Housing Act of 1968 and the Home Mortgage Disclosure Act of 1975. While the federal CRA applies to banks only, many states created their community reinvestment laws to cover non-bank mortgage companies, including CT, IL, MA, NY, RI, WA, WV, and DC.
Key findings from the CFPB's report are below:
- Some states require mortgage companies to provide affirmative lending, service delivery, and investment services;
- Some states conduct independent examinations, while other states review federal performance evaluations in conjunction with state factors;
- Enforcement includes limitations on mergers, acquisitions, branching activities, and licensing;
- Some states collect information beyond federal requirements for evaluation; and
- Some state acts have been amended in response to market changes.
The CFPB finds that states play an active role in promoting reinvestment by institutions, but further review is necessary to understand these developments.
Senate passes resolution seeking to nullify CFPB’s small business lending rule
Recently, the U.S. Senate passed a joint resolution of disapproval (S.J. Res. 32) under the Congressional Review Act to nullify the CFPB’s small business lending rule. As previously covered on InfoBytes, the rule, which requires financial institutions to collect and report to the CFPB credit application data for small businesses, has faced opposition from various politicians and is the subject of litigation brought by financial institutions that would be subject to the rule in the U.S. District Court of the Southern District of Texas. In support of the joint resolution, Sen. John Kennedy (R-LA), who introduced the legislation, recently argued on the floor that “the CFPB is setting these small business people… up for lawsuits” because “[it] has promulgated a rule that totally perverts our intention in section 1071.” If the House of Representatives similarly passes the joint resolution, and President Biden signs it, the CFPB’s rule will be nullified under the Congressional Review Act.
The joint resolution follows the order from the U.S. District Court for the Southern District of Texas granting a nationwide preliminary injunction enjoining the CFPB from enforcing the rule (covered by InfoBytes here and here).