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
Kavita G. Shelat
First Tennessee Building
165 Madison Avenue
Suite 2000
Memphis, TN 38101
901.577.8120
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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
Kavita G. Shelat
901.577.8120