CFPB Report November 8, 2013

CFPB Issues ANPR on Debt Collection

On Tuesday, November 6, 2013, the CFPB released an Advanced Notice of Proposed Rulemaking(ANPR) to gather information about the debt collection system. The ANPR follows a joint Federal Trade Commission-CFPB industry roundtable held in June 2013 and a field hearing in July 2013, where the Bureau first expressed its intent to issue regulations related to debt collection practices. This ANPR is the Bureau’s initial step towards issuing new rules regulating the relationship between creditors, third-party debt collectors and consumers. The CFPB also announced it will begin adding consumer complaints about debt collections to its public complaint database system. 

As the CFPB notes in the ANPR, it is the first agency with the power to issue substantive rules under the Fair Debt Collection Practices Act (FDCPA), a law which governs the practices of third-party collectors and debt buyers. However, the CFPB adds that it “may also address concerns related to debt collection using its authority under the Dodd-Frank Act to issue regulations concerning unfair, deceptive, and abusive acts or practices and to establish disclosures to assist consumers in understanding the costs, benefits, and risks associated with consumer financial products and services.” 

The ANPR contains 162 questions, which may broadly be categorized under three topics: 

  • Information Accuracy: The CFPB is concerned about the integrity of data and information (e.g., consumer identity, debt amount, and documentation) transferred from original creditors to third-party debt collectors and debt buyers, and from those parties to other debt collectors and credit bureaus.
  • Informed Consumers: The CFPB expresses concern debt collectors may be providing confusing disclosures and information to consumers about their debt obligations. The agency is also worried consumers may not be aware of their rights under the FDCPA to dispute a debt or to limit certain types of communications with collectors.
  • Communication Tactics: The CFPB asks for feedback on whether harmful communication tactics are being used by debt collectors that are not specifically addressed in the FDCPA. Issues raised here deal with contact frequency, contact methods and contact claims.

The comment deadline for the ANPR is 90 days after Federal Register publication. 

CFPB to Take Complaints on Payday

On Wednesday, November 7, 2013, the CFPB announced it will now accept complaints concerning payday lending. Consumers can now submit complaints on payday loans concerning unexpected fees or interest; unauthorized or incorrect charges to their bank account; payments not being credited to their loan; problems contacting the lender; receiving a loan they did not apply for; and not receiving money after they applied for a loan. 

The CFPB has taken a number of steps to learn more about the marketplace for payday loans, including the release of a report on payday loans which found that payday products can lead to a cycle of indebtedness for many consumers. “Before the Consumer Bureau, consumers who had trouble with payday lending products had few places to turn,” said Director Richard Cordray. “By accepting consumer complaints about payday loans, we will be giving people a greater voice in this market.” 

CFPB Responds to Inquiries on Indirect Auto Lending Bulletin

On Monday, November 4, 2013, the CFPB responded to a letter inquiring about the Bureau’s indirect automotive lending bulletin that was signed by 22 members of the U.S. Senate. The Bureau provided some additional information, including how they determine proxies for gender and race. For proxy methodologies in general, the CFPB stated they rely on public data, as opposed to propriety databases. The CFPB said it also expects lenders to use a proxy method that will support a compliance management system commensurate with size, organizational complexity, and risk profile. In addition, the CFPB shared each exam or enforcement investigation is based upon the particular facts presented by the lenders and the analytical controls which are appropriate to each particular lender. 

The Bureau provided some explanation for not engaging in rulemaking, stating, “The Bureau published the Auto Bulletin to remind lenders of their responsibilities under ECOA and to offer guidance on how to address the identified risks to all indirect auto lenders within the jurisdiction of the Bureau.” The Bureau believes that cost-benefit analysis evaluating how movement to flat-fees would affect the marketplace and consumers is not necessary because the bulletin does not change or create new regulatory requirements. 

On the same day, Patrice Ficklin, Assistant Director, Fair Lending and Equal Opportunity for the CFPB, wrote a blog post on the CFPB’s website entitled “Preventing illegal discrimination in auto lending,” to provide some additional clarification. 

CFPB Expected to Provide More Answers Regarding Indirect Auto Lending Bulletin

The CFPB will host an auto finance forum at its headquarters on Thursday, November 14, 2013. According to the Bureau’s announcement, Director Cordray will make remarks at the event, followed by discussion with consumer groups, industry representatives, and members of the public. The event will be live streamed on the CFPB’s blog. Traditionally, the CFPB uses field hearings as a venue to reveal new public policy. 

CFPB Publishes its fourth Semi-Annual Report

On Thursday, November 7, 2013, the CFPB published its Semi-Annual Report to Congress, which “provides Congress and the American people with an update on our mission, activities, accomplishments and publications since our last semi-annual report and contains additional information required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.” Director Cordray will testify before the Senate Banking Committee on November 12, 2013, regarding the report. 

House Republicans Request Delay of Mortgage Rules Implementation

On Wednesday, November 6, 2013, Members of the House of Representatives in a letter to the CFPB requested a delay on the implementation of the mortgage rules scheduled to take effect January 10, 2014. Signatories included 112 Republicans, some members of the House Financial Services Committee, and six moderate Democrats. The letter cites the difficulties of interpreting and complying with over 4,000 pages of new regulations, especially for community institutions with limited compliance staff. The lawmakers requested a one-year delay of the implementation date to January 1, 2015.

Fed Increases Stress Tests to Reach More Banks

On Friday, November 1, 2013 the Federal Reserve announced it will expand its “stress-testing” program to 30 banks in 2014, up from 18 in 2013. The banks will test three scenarios ranging from a baseline of economic activity to a severe global market shock. All banks with more than $50 billion in assets will be examined to ensure they have enough capital to continue operating if the economy experiences another severe downturn. 

Federal Reserve Governor, Daniel Tarullo, said, “The capital planning and stress testing program has been an integral component of the Federal Reserve’s broader supervisory and regulatory efforts to make the financial system stronger and safer since the financial crisis.”

Senate Banking Committee Holds Hearing on Access to Secondary Mortgage Market

On Tuesday, November 5, 2013, the Senate Banking Committee held a hearing entitled, “Housing Finance Reform: Protecting Small Lender Access to the Secondary Mortgage Market.” Industry witnesses included representatives from the Council of Federal Home Loan Banks, Independent Community Bankers of America, Credit Union National Association, Mortgage Bankers Association, National Association of Federal Credit Unions, and the American Bankers Association. Witnesses strongly agreed on the need for a cooperative entity owned by lenders that would allow small mortgage originators to pool and securitize mortgages with access to a guarantee provided by the federal government. In his opening statement, Chairman Johnson (D-SD) stated, “one of the essential tasks in building a new housing finance system will be to preserve the ability of small lenders to service their own loans.” Ranking Member Crapo (R-ID) predicted the committee would markup a bill in the “near future,” while Senator Tester (D-MT) called for a markup “before the end of this calendar year.”

Senate Banking Committee Holds Hearing on Affordable Housing

On Thursday, November 7, 2013, the Senate Banking Hearing held a hearing entitled, “Housing Finance Reform: Essential Elements to Provide Affordable Options for Housing.” Industry witnesses included representatives from the National Association for the Advancement of Colored People, National Association of Home Builders, National Consumer Law Center, American Action Forum, and the National Housing Conference. In his opening statement, Chairman Johnson (D-SD) stated: “It is imperative that any new system meets the housing needs for all Americans, and this morning we will explore the well-functioning elements of the current system that should be maintained to provide renters, low-and-moderate income families and those who live in rural areas affordable options for housing.” The committee is expected to hold more hearings on housing finance reform and consider legislation in 2014.

FHFA Moves on Forced Placed Insurance

On Tuesday, November 5, 2013 the Federal Housing Finance Agency (FHFA) directed Fannie Mae and Freddie Mac to restrict the use of lender-placed insurance practices, commonly referred to as “force placed insurance.” In a press release, the FHFA instructs the government sponsored enterprises (GSE) to prohibit servicers from being reimbursed for expenses associated with these programs.  This is not surprising, as many institutions expected the regulator to move on this subject since issuing a notice in the Federal Register in March 2013. FHFA cited reputational and legal risks to the GSEs from using force placed insurance. 

“FHFA remains concerned about the cost of lender-placed insurance for Fannie Mae, Freddie Mac, and consumers,” said FHFA Acting Director, Edward J. DeMarco. “One of our primary responsibilities as conservator of Fannie Mae and Freddie Mac is to preserve and conserve their assets on behalf of taxpayers. This directive is intended to reduce their costs as we consider additional measures.”