Trendspotting the CFPB: What’s CFPB...Jan 27, 2016 · Credit cards • CitiBank Enforcement Action −$700 Million reimbursement to consumers, $35 Million penalty −Add on products

Trendspotting the CFPB: What’s

Coming and How Institutions Can

Prepare

Courtney H. Gilmer

Baker Donelson Center

Suite 800

211 Commerce Street

Nashville, TN 37201

615.726.5747

[email protected]

Kavita G. Shelat

First Tennessee Building

165 Madison Avenue

Suite 2000

Memphis, TN 38101

901.577.8120

[email protected]

mailto:[email protected]


2 www.bakerdonelson.com © 2016 Baker, Donelson, Bearman, Caldwell & Berkowitz, PC

The CFPB’s Broad Authority

• CFPB’s primary duties

• Write rules, supervise companies, and enforce federal consumer financial protection laws

• Take consumer complaints

• Promote financial education

• Research consumer behavior

• CFPB is both rule maker and rule enforcer

• Overlaps supervision with FTC, OCC and other federal and state agencies


CFPB’s Data-Driven Approach


All complaint data published is freely available for anyone to use, analyze and build on

Anyone can view, search, sort and filter data

Implications: GOLD MINE for Plaintiff’s attorneys and savvy

consumers


CFPB Releases Monthly Reports on Key Trends

CFPB releases monthly reports to highlight key trends from consumer complaints submitted to the Bureau including:

• Complaint data on company performance

• Complaint volume

• State and local information

• Product trends


What is UDAAP?

The Bureau may take any action authorized to prevent an

unfair, deceptive or abusive act or practice under Federal

law in connection with any transaction with a consumer

for a consumer financial product or service.

The CFPB’s UDAAP expands the FTC’s UDAP


Where to look for guidance on UDAAP?

CFPB Consent Orders

Agency enforcement actions filed in federal court

CFPB's Examination Manual

Guidance in Bulletins

A word about “Consent Orders”


The Landscape in 2015

Mortgages Debt

Collection

For-Profit Education/Student Loans

Payday Lending

Checking Account

Auto Finance

Credit Reporting


Mortgages and Loss Mitigation

• Green Tree Enforcement Action

− FDCPA, FCRA, RESPA

− Mortgage servicer for delinquent loans

− Honoring loan modification agreements from prior

servicers, lack documentation from prior servicers in order

to collect accurate payments, aggressive debt collection

− Prioritized debt collection before loss mitigation

• Settlement

− $48 Million to consumers

− $15 Million civil penalty

− Convert in process modifications,

fast track applications


Debt Collection – Chase Enforcement Action

Settlement regarding Chase’s sale of credit card debt to third-party debt collectors and filing collection lawsuits

Allegations that the debts were inaccurate, settled, in bankruptcy, or no longer collectible

Signal that debt collection continues to be a focus

Suspended collections litigation in 2011, debt sales in 2013; yet several years of monitoring


Auto Loan Pricing: CFPB’s Indirect Policing

No authority to directly regulate automobile dealers

• Marketing and disclosing terms

• Accurate furnishing to credit bureaus

• Debt collection

• Fair lending

Regulates bank and nonbank entities that offer financing to automobile dealers

• The retail installment contract does not state race, national origin

• Proxy methodology that combines geography-based and name-based probabilities

Disparate impact methodology


Auto Loan Pricing

• HONDA Enforcement Action

− Under the Equal Credit Opportunity Act

− Analyzed retail installment contracts from Jan 2011 to Dec 2013

− Utilized geography-based and name-based probabilities to

assign race and national origin probabilities to applicants

− Based on this method, CFPB finds disparities in pricing for Black,

Hispanic and Asian consumers

• Settlement Terms

− Reduce dealer markups from 2.25 percent to only 1.25 percent

− $24 Million refunded to consumers

− No penalty


Credit cards

• CitiBank Enforcement Action

− $700 Million reimbursement to consumers, $35 Million penalty

− Add on products to cancel a consumer’s payment/debt if

hardship, credit monitoring and credit report retrieval

− Expedited payment fee

− Enrollment process, misrepresentations at time of application

• Affinion Group Holdings

− Credit monitoring, credit retrieval add on products

misrepresented

− Billed for products before services made available

− $6.8 Million reimbursement, $1.9 Million penalty


Overdraft Fees

• REGIONS Enforcement Action

− Under UDAAP

− Charging overdraft fees to consumers who had not opted-in for

overdraft coverage

− Mandatory Opt-In in July 2010 for new accounts, Aug 2010 for

existing accounts.

− Took more than one year for the issue to be corrected

• Settlement

− $49 Million refund to consumers

− $7.5 Million fine

− Correct errors in credit reports


Payday lending

• EZCorp

− High cost, short term unsecured loans in 15 states, 500 stores

− Violated UDAAP in its debt collection activities, including in

person collection and third party contact

− $7.5 Million refund to 93,000 consumers

− Stop collection on loan portfolio, and cannot sell portfolio

− $3 Million penalty

• Integrity Advance and its CEO

− short term loans ranging from $100-1000

− Disclosures focused on cost of repaying the loan in a single

payment, not setting out rollover costs


Advertising and endorsements

NewDay charged with deceptive practices related to payment arrangement

with a veteran’s organization for an endorsement

unrelated to NewDay’s consumer service

Expands RESPA through UDAAP


Trendspotting the CFPB in 2016:

More UDAAP

TRID – Enforcement

and Examination

HMDA Final Rule

Student loans (*Not just for-profit)

Prepaid Products

Auto Lending


TRID Enforcement and HMDA Final Rule

• Effective October 1, 2015

• Concerns from industry

• Informal good faith grace period – how long will it last?

TRID

• Increases # of data points that financial institutions are required to report

• Security/privacy concerns HMDA


The $1.2 Trillion Student Loan Market

2015 Report

Public and

political pressure

Anticipated Actions:

• Industry-wide standards

• Increased coordination among agencies

• Information given to borrowers

• Publishing data


Prepaid Products

• Proposed Rules announced 2014

• 90 day comment period had significant participation

• Final rule has been in-progress and now expected 1Q of 2016

• Likely to cover:

− Payroll cards;

− Certain federal, state and local government benefit cards;

− Student financial aid disbursement cards;

− Tax refund cards; and

− Certain peer-to-peer payment products.


Auto Lending

Increased Complaints

Increased CFPB Focus

Herbies Auto Sales Enforcement Action

Announced January 21, 2016


Trends Across the Consumer Financial Industry

Retaining documents,

data

Vendor liability

Technology limitations


Thank you for your attendance.

We welcome any questions.

Courtney H. Gilmer

615.726.5747

[email protected]

Kavita G. Shelat

901.577.8120

[email protected]



Documents

Trendspotting the CFPB: What’s CFPB...Jan 27, 2016 · Credit cards • CitiBank Enforcement Action −$700 Million reimbursement to consumers, $35 Million penalty −Add on products