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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]
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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
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CFPB’s Data-Driven Approach
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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
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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
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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
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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”
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The Landscape in 2015
Mortgages Debt
Collection
For-Profit Education/Student Loans
Payday Lending
Checking Account
Auto Finance
Credit Reporting
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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
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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
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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
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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
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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
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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
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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
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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
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Trendspotting the CFPB in 2016:
More UDAAP
TRID – Enforcement
and Examination
HMDA Final Rule
Student loans (*Not just for-profit)
Prepaid Products
Auto Lending
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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
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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
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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.
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Auto Lending
Increased Complaints
Increased CFPB Focus
Herbies Auto Sales Enforcement Action
Announced January 21, 2016
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Trends Across the Consumer Financial Industry
Retaining documents,
data
Vendor liability
Technology limitations
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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]