Today's Headlines

    CFPB Consumer Advisory Board Focuses on Goals

    AFSA Staff

    AFSA staff attended the Consumer Financial Protection Bureau’s (CFPB) Consumer Advisory Board (CAB) meeting on Feb. 25.  At the meeting, CFPB Director Richard Cordray laid out nine priority goals which represent the key areas where the CFPB hopes to make substantial progress over the next two years.

    Among others, these goals include: limiting arbitration, advancing a consumer reporting system where furnishers provide and consumer reporting companies maintain and distribute data that are accurate and inclusive of more consumers, facilitating consumer-friendly debt collection, continuing to improve the mortgage origination and servicing markets, maintaining an “open-use” credit market (which includes installment loans) where lenders rely on business models that succeed when consumers use credit when needed and are able to repay their debts when due, and monitoring the small business lending market. Some of the goals will be met, at least in part, by the CFPB’s rulemaking efforts.

    Some of these goals are expected to be met, at least in part, by the CFPB’s rulemaking efforts.

    The CFPB cautioned that these priority goals do not capture all of the work the CFPB is doing. In particular, Chris D’Angelo, the CFPB’s Chief of Staff, noted that the CFBP, “…will continue to police all markets within our jurisdiction for compliance with consumer financial law and regulations. So, financial companies should continue their focus on complying with the law beyond the particular issues described in the goals, whether or not they see their particular industry or product mentioned explicitly.”

    D’Angelo also outlined four types of problems that the CFPB believes consumers face in the marketplace: deception, debt traps, dead ends (or situations where people cannot simply walk away when they are treated unfairly), and discrimination. The CFPB tends to focus on these problems in their work.

    Panel Discusses Trends in State-Federal Joint Enforcement Efforts

    AFSA Staff

    A Feb. 22 panel organized by the law firm of Cozen O’Connor provided state and federal perspectives on joint enforcement actions.

    Panel participants included Kristen Donoghue, Deputy Enforcement Director for Policy and Strategy, Consumer Financial Protection Bureau (CFPB); Parker Douglas, Chief of Staff & Federal Solicitor, Utah Office of the Attorney General; Travis LeBlanc, Chief of the Bureau of Enforcement, Federal Communications Commission; and Daniel Suvor, Chief of Policy, Office of the Attorney General, California Department of Justice.

    The panelists discussed a variety of issues, including state and federal agencies as they work to begin and manage joint actions. Suvor said that the first step is to look at consumer complaint trends then determine the resources that state and federal agencies have available. The panelists then discussed certain factors to consider when determining whether to pursue a multistate or joint action. Suvor cited that speed, how his state’s consumers are affected compared to other states, and potential civil penalties, play important roles. Douglas agreed. Donoghue said the CFPB may find a joint action useful because state unfair, deceptive, and abusive acts and practices (UDAAP) laws are often more broad. She noted that the Bureau is more likely to act alone if it’s an area where they feel they have expertise, such as enforcing the new federal mortgage servicing rules.

    The panel concluded by identifying areas that will likely be the next focus of enforcement actions. Those included areas where products and markets are blurring with technology, as well as data security and privacy.

    AFSA Members Tell Their Story on Capitol Hill

    AFSA Staff

    The 2016 edition of the American Financial Services Association (AFSA) Installment Lenders Summit brought traditional installment lenders from across the nation to Washington, DC on February 23-25. AFSA members met their congressional delegations to spread the word about the positive impact installment loans have on the American economy and in their communities. The summit kicked off with a keynote address from Rep. Andy Barr (R-KY) on Tuesday evening. The congressman, a member of the House Financial Services Committee (HFSC), touched on the important role access to affordable consumer credit plays in the lives of ordinary Americans.

    Wednesday featured a packed schedule, including a variety of panels and sessions. The day opened with a panel discussion, moderated by Frank Salinger, featuring Reps. Blaine Luetkemeyer (R-MO) and Ander Crenshaw (R-FL), which focusing on the representatives' efforts to bring some accountability to the supervision and enforcement processes at the Consumer Financial Protection Bureau (CFPB). Luetkemeyer serves on the HFSC and Crenshaw is a member of the powerful Appropriations Committee.

    David Silberman, Acting Deputy Director at the CFPB, outlined how the bureau was proceeding with its small-dollar lending rule and took several questions from AFSA members. AFSA Executive Vice President Bill Himpler also gave an update on the association's work with Congress and the CFPB.

    A.B. Stoddard, Associate Editor of The Hill newspaper provided attendees with an informative political update and gave a snapshot of where the presidential and down-ballot races may be headed in 2016.

    AFSA members then headed to Capitol Hill for meetings with their congressional representatives. The meetings focused on bringing the positive message of traditional installment lending to Capitol Hill and ensuring that there is a strong line of distinction between AFSA member financial products and other, less reputable ones. Members of Congress, their staffs and AFSA members then met for a reception to continue the discussion about the importance of positive consumer credit products.

    Thursday kicked off with a presentation from Jack Ferry, Vice President of Communications with AFSA. Ferry's update focused on the public relations efforts the communications team is undertaking on behalf of AFSA members whose business model is installment lending.

    Douglas Holtz-Eakin, president of the American Action Forum, briefed attendees on the think tank's recent survey regarding the consumer perception and understand of the Dodd-Frank Wall Street Reform Act. The Summit closed with back-to-back presentations from John Redding, partner with BuckleySandler, and Patty Covington, partner with HudsonCook, on how AFSA members should be preparing for CFPB enforcement activity.

    How CFPB's Auto Enforcement Actions Are Disrupting the Industry

    American Banker, Rachel Witkowski (2/19/2016)

    The Consumer Financial Protection Bureau's (CFPB) use of enforcement actions to try and make broad changes to the auto lending market is fragmenting the industry further and potentially limiting a consumer's ability to negotiate for a lower interest rate. The agency has taken several enforcement actions, but the key differences in each of them have made it harder for system wide changes to be implemented.

    "This is what happens when using rulemaking though enforcement actions. There are disparities and loopholes which allow for incongruity of the law," said Isaac Boltansky, a policy analyst at Compass Point Research & Trading. "The problem with managing a market through enforcement actions and not broader rulemaking is that you have a disparate regulatory impact predicated off of a disparate market impact. There's definitely a degree of irony to it."

    Recently, the financial subsidiaries of both Toyota and Honda have entered into agreements with the CFPB – details of each company’s settlement are different making it exceedingly difficult, according to industry analysts, for companies to operate under different guidelines.”

    Not only does the CFPB's latest sue-and-settle scheme only further confuse the regulatory landscape, it calls into question whether the CFPB is operating outside the limits that were imposed on its authority by Congress, which is sure to prompt additional congressional oversight," said Jared Allen, a spokesman at the National Automobile Dealers Association. "We already know that this campaign to eliminate auto loan discounts is costing consumers money, harming the very people the agency is trying to help by making credit less affordable across the board, and proving to be an unreliable and ineffective approach to addressing fair credit risk in auto lending."

    While settlements and enforcement actions are tailored to fit each company’s business model, the bureau’s intent is to use the enforcement actions to cause industrywide changes.

    CFPB Finalizes NAL Policy

    AFSA Staff

    On February 18, the Consumer Financial Protection Bureau (CFPB) announced that it had finanlized its policy regarding No Action Letters (NALs). Originally proposed in October of 2014, the CFPB’s NAL policy allows those companies which fall under the regulatory purview of the bureau to submit new financial products to the bureau for review to meet existing standards.

    The CFPB would then issue an NAL that says the CFPB “has no present intention to recommend initiation of an enforcement or supervisory action against the requester in respect to the particular aspects of its products under the specific identified provisions and applications of statutes or regulations that are the subject of the [NAL].” The CFPB also said that NALs are subject to revocation or modification at any time and are considered nonbinding.

    AFSA commented on the proposal, asking the CFPB to expand the scope and availability of NALs. AFSA also asked for a few other changes including: making the submission process simpler, keeping the names of the companies confidential, providing protections from enforcement and supervisory actions, and not publishing any proprietary information.

    The CFPB declined to expand the scope and availability of NAL and to the contrary, noted that it anticipates that NALs will be provided rarely. The CFPB also declined to simplify the submission process, claiming that the volume of information required is necessary.

    Regarding company confidentiality and proprietary information, the CFPB confirmed that issued NALs generally would be publicly disclosed. The CFPB also emphasized that it considers publication of NALs an important aspect of transparency. The bureau stated, however, “To the extent that a potential applicant has concerns regarding the public release of particular information, Bureau staff plans to confer with the applicant, in advance of a submission, or later, to discuss whether the information is necessary to submit…”

    AFSA SGA Committee Chairman Appointed to Texas Finance Commission

    Phillip Holt,  senior vice president of Security Finance Company and current AFSA State Government Affairs Committee chairman, was named by Governor Greg Abbott to the Finance Commission of Texas this week. The Finance Commission is responsible for overseeing and coordinating the Texas Department of Banking, the Department of Savings and Mortgage Lending, and the Office of the Consumer Credit Commissioner and serves as the primary point of accountability for ensuring that state depository and lending institutions function as a system, considering the broad scope of the financial services industry.

    Holt’s term on the commission runs until February 1, 2022.