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CFPB Report June 6, 2014
CFPB Publishes Semi-Annual Report to Congress
The CFPB issued its fifth Semi-Annual Report on May 28, 2014. Totaling 177 pages, the Report provides a detailed accounting of actions the Bureau has taken from October 1, 2013 through March 31, 2014. With considerable attention devoted to the consumer complaint process, the document also highlights issues regarding supervision, enforcement and regulatory activity, and includes a chapter devoted to employment and procurement diversity. It also includes details on the CFPB’s budget and the Civil Penalty Fund used to compensate consumers and provide for financial education. The Bureau’s actions have resulting in more than $119 million deposited in the Fund, and over $867 million returned to consumers. The CFPB’s Office of Consumer Response received over 332,300 consumer complaints. The Report comes in advance of CFPB Director Richard Corday’s testimony before the Senate Banking Committee on Tuesday, June 10, 2014.
CFPB to Host Field Hearing on Mobile Financial Services
On Wednesday, June 4, 2014, the CFPB announced it will hold a field hearing on mobile financial services in New Orleans, LA, on Thursday, June 12, 2014 at 10 a.m. (CDT). Director Cordray is scheduled to offer remarks at the event, which will include participation from community groups, industry representatives and the general public. The hearing is open to all parties, but requires a RSVP. The hearing will also be available via live stream on the CFPB’s blog.
Payday Lenders Sue Over Operation Choke Point
On Thursday, June 5, 2014 the Consumer Financial Services Association of America and Advance America, a payday lender, filed a complaint/lawsuit against the FDIC, Federal Reserve, and OCC to end Operation Choke Point. The complaint was filed in the U.S. District Court for the District of Columbia and the Plaintiffs seek declaratory and injunctive relief to set aside certain informal guidance documents and other unlawful regulatory actions by the defendant agencies. The stated grounds of the complaint include the allegations that the defendant agencies’ actions exceed their statutory authority, are arbitrary and capricious, were promulgated without observance of the procedures required by law, and deprive Plaintiffs of liberty interests without due process of law.
Senate Banking Subcommittee Holds Hearing on Student Loan Servicing
On Wednesday, June 4, 2014, the Senate Banking Subcommittee on Financial Institutions and Consumer Protection held a hearing entitled: “Student Loan Servicing: The Borrower’s Perspective.” The hearing, for which CBA submitted testimony for the record, focused on student loan servicing issues, including application of federal student loan benefits under the Servicemembers Civil Relief Act (SCRA), switching servicers, and access to information such as repayment options.
In his opening statement, Subcommittee Chairman Sherrod Brown (D-OH), said, “I’m concerned that student loan servicers care more about maximizing their profits than giving proper customer service.” He discussed bills he has cosponsored including the Student Loan Borrower Bill of Rights (S. 1803) and the Refinancing Education Funding to Invest (REFI) in the Future Act (S. 1266). He also discussed a recent consent by the U.S. Department of Justice and the FDIC against Sallie Mae, the largest student loan servicer, for violations of the SCRA.
Senator Elizabeth Warren (D-MA) attended the hearing and spent considerable time discussing the need for student loan refinance options, including those which could be made available by the federal government if her bill, the “Bank on Students Emergency Refinancing Act” (S. 2292), were signed into law.
Senate Budget Committee Hearing Examines Economic Impact of Student Loan Debt
On Wednesday, June 4, 2014, the Senate Budget Committee held a hearing entitled: “Impact of Student Loan Debt on Borrowers and the Economy.” The discussion included student loan servicing, mortgage lending to young Americans, and a slow down in areas of consumer lending. Student loan refinancing, the cost of college, and budgetary implications of programs such as income-based-repayment (IBR) were also addressed.
In her opening remarks, Budget Committee Chairman Patty Murray (D-WA) stated: “Historically, young Americans have been a source of economic activity, as they set up households and as they start their careers. But today, many are finding it difficult to save up for a down payment on a home. And the high monthly bills to pay back student loans can disqualify many people from getting a mortgage.” A number of Committee Democrats echoed her concerns and voiced their support for Senator Warren’s (D-MA) bill, “Bank on Students Emergency Loan Refinancing Act” (S. 2292).
Ranking Member Sen. Ron Johnson (R-WI), and Sen. Kelly Ayotte (R-NH), were concerned with performance of federal student loan programs and their impact on the federal budget. In his opening statement, Sen. Johnson was critical of federal student loan repayment because of programs such as IBR. He also noted under the Federal Credit Reform Act of 1990, the Congressional Budget Office scores the federal loan program as a revenue raiser for the federal government, but if it were to use fair-value accounting incorporating market risk, it would likely score as a loss.
Rohit Chopra, the CFPB Student Loan Ombudsman, testified at the hearing, describing a “domino effect” of student loan debt and citing lessons from mortgage servicing applicable to student loan servicing. “To ensure that we do not see a repeat of the breakdowns and chaos in the mortgage servicing market, it will be critical to ensure that student loan servicers are providing adequate customer service and following the law,” Chopra said.
Merchants Asks Supreme Court for Filing Extension in Interchange Case
On Friday, May 30, 2014, the merchant groups in NACS v. Board of Federal Reserve asked the U.S. Supreme Court for a 30-day extension to file a writ of certiorari, citing complex coordination efforts between the petitioning parties and newly retained counsel. The merchant groups are challenging the Fed’s final rule implementing interchange fee requirements mandated by the Durbin Amendment to the Dodd-Frank Act. Specifically, the merchants argue the final rule incorporates costs in the interchange fee standard expressly prohibited by the statute. Relying on the Chevron deference standard, the appellate court affirmed the Fed’s final rule, holding the Fed reasonably construed the Durbin amendment when creating a third category of costs: 1) incremental authorizing, clearing, and settling (ACS) costs, which the Board must allow issuers to recover; 2) costs specific to particular transaction, other than incremental ACS costs, which the Fed may, but need not, allow issuers to recover; and 3) costs not specific to a particular transaction, which the Board may not allow issuers to recover.”
Supreme Court to Address Disparate Impact Claims and the Fair Housing Act
A writ of certiorari was filed with the U.S. Supreme Court on Tuesday, May 13, 2014, presenting the question of whether the Fair Housing Act (FHA) encompasses a disparate impact theory. This is the same issue presented in the Magner and Mount Holly cases, the two previous Supreme Court cases which settled before the Court could decide them. In this case, Inclusive Communities Project v. Texas Dep’t of Housing, the Inclusive Communities Project brought a disparate impact claim under the FHA, arguing the Department was disproportionately allocating low income housing credits in minority-populated areas.
The Department’s writ poses two questions: 1) whether disparate impact claims are recognized under the FHA and 2) if so, what standards and burdens of proof apply. Urging the Court take the case, the writ argues the Court previously granted certiorari on two similar claims, but never got the chance to clarify the issue; disparate impact’s far-reaching implications make this a question of “exceptional importance;” the statutory language relied on in Title VII employment disparate impact claims are absent from the FHA; and the appellate courts are divided as to which burden of proof applies, especially in light of the recent U.S. Department of Housing and Urban Development standard.