United States: CFPB: March 2013 Roundup

Did a customer file a complaint against you in the past year? If so, now everyone knows (or could know). The CFPB released even more complaint data on its website and is encouraging consumers to review and manipulate the data, as well as share it.

Additionally, the CFPB issued a targeted fair lending bulletin addressing concerns related to potential disparate impact in the automobile lending industry.

FAIR LENDING

In April 2012, the CFPB issued Bulletin 2012-04, which articulated the Bureau's perspective that a claim of ECOA discrimination can be proven via disparate impact. Nearly one year later, on March 21, the CFPB released Bulletin 2013-02 addressing the issue of disparate impact within the indirect automobile lending industry.

By way of background, when a car purchaser seeks financing, a dealer may provide that financing directly or it may facilitate indirect financing by a third party such as a depository institution, a nonbank affiliate of a depository institution, an independent nonbank, or a "captive" nonbank (a lender whose primary business is to finance the purchase of a specific manufacturer's automobiles).

Based on its supervisory experience, the CFPB believes that because of the incentives created and discretion permitted in the indirect lending model, there is a significant risk that they will result in pricing disparities on the basis of race, national origin, and potentially other prohibited bases.

ECOA defines a "creditor" to include not only "any person who regularly extends, renews, or continues credit," but also "any assignee of an original creditor who participates in the decision to extend, renew, or continue credit." Regulation B further provides that "creditor" means "a person, who, in the ordinary course of business, regularly participates in the decision of whether or not to extend credit" and expressly includes an "assignee, transferee, or subrogee who so participates." And the Commentary provides that a "creditor" "includes all persons participating in the credit decision" and that "[t]his may include an assignee or a potential purchaser of the obligation who influences the credit decision by indicating whether or not it will purchase the obligation if the transaction is consummated."

Institutions subject to CFPB jurisdiction (regardless of whether the CFPB has supervisory authority over the lender), including indirect lenders, should take steps to ensure that they are operating in compliance with the ECOA and Regulation B with respect to dealer markup and compensation policies. These steps may include, but are not limited to:

• Dealer Controls. Imposing controls on dealer markup and compensation policies, or otherwise revising dealer markup and compensation policies, and also monitoring and addressing the effects of those policies to address unexplained pricing disparities on prohibited bases; or eliminating dealer discretion to mark up buy rates and fairly compensating dealers using another mechanism, such as a flat fee per transaction, that does not result in discrimination.
• Fair Lending CMS. Developing a robust fair lending compliance management program which includes, among other things, adopting an up-to-date fair lending policy statement and instituting regular fair lending training for all employees as well as all officers and Board members.

Contact a CFPB Taskforce attorney if you have questions about your own fair lending compliance.

COMPLAINT DATABASE

If a customer has a complaint about credit cards, mortgage loans, automobile loans, bank deposits, installment loans, credit reporting agencies, debt collectors or money transmitters, the customer can submit his complaint to the CFPB at: http://www.consumerfinance.gov/complaint/. Once submitted, the CFPB will forward the complaint to the appropriate financial service provider, assuming that provider has been "onboarded" onto the CFPB's complaint system. (If you have any questions about the onboarding process, or how to respond to a complaint, contact a CFPB Taskforce attorney.)

The CFPB released the data complaint information for all of its complaint databases to the public. The Bureau encourages "consumers, analysts, data scientists, civic hackers, and companies that serve consumers," to "analyze, augment, and build on the information in the database to develop ways for consumers to use the complaint data or mash it up with other public data sets to reveal potential trends." Public manipulation of the data may be shared by tweeting @CFPB using the hashtag #CFPBdata.

REPORTS

Semi-Annual Report

To fulfill its statutory responsibility for accountability and transparency, the CFPB published its third Semi-Annual Report to the President and to Congress. The report updates the Congress and the American people on the Bureau's mission, activities, accomplishments and publications and is available here: http://files.consumerfinance.gov/f/201303_CFPB_SemiAnnualReport_March2013.pdf.

The report covers the Bureau's activities in six-month increments (beginning January 1st and ending July 1st) and addresses all aspects of the Bureau's activities from fair lending and enforcement to regulations.

Office of Women and Minority Inclusion

As required by Section 342(e) of the Dodd-Frank Act, the CFPB's Office of Minority and Women Inclusion ("OMWI") submitted its annual report, which provides detailed information about the Bureau's diversity and inclusion efforts for 2012. The report is available here: http://files.consumerfinance.gov/f/201303_cfpb_OMWIAnnualReport-to-Congress.pdf.

The OMWI's mission is to help the Bureau achieve equal employment opportunity and diversity in the CFPB workforce and senior management, facilitate increased participation of women- and minority-owned businesses in Bureau procurement, and develop standards for assessing the diversity policies and practices of regulated entities.

According to the report, the Bureau employs a higher percentage of women and minorities than its sister banking agencies. As of December 19, 2012, the CFPB's workforce totals 1,074 employees, of whom 520 (48.4%) are female and 554 (51.6%) are male. Of the 1,074 employees at the end of 2012, 711 (66.20%) self-identify as White, 177 (16.48%) as Black, 94 (8.75%) as Asian American, 53 (4.93%) as Hispanic or Latino, 3 (0.28%) as American Indian or Alaska Native, 2 (0.19%) as Native Hawaiian or Other Pacific Islander, and 34 (3.17%) as of two or more races.

Consumer Response Unit

As indicated above, the CFPB has published data relating to its complaint databases, which is available to the public for review and manipulation. Concurrent with the release of this data, the CFPB also published a report describing its efforts relating to consumer complaints received beginning July 21, 2011. A copy of the report is available via the link below, and it provides a full breakdown of the statistics for each type of database (including nature of the complaint, response time, etc.): http://files.consumerfinance.gov/f/201303_cfpb_Consumer-Response-Annual-Report-to-Congress.pdf.

Fair Debt Collection Practices Act

On March 23, the Bureau presented its annual report to Congress on the Fair Debt Collection Practices Act. Currently, approximately 30 million consumers are subject to debt collection activities for amounts that average about $1,500 apiece.

This report covers the work done by the CFPB and FTC together relating to the FDCPA. Notably, last year, the CFPB issued a "larger participant" rulemaking to bring any firm with more than $10 million in annual receipts from consumer debt collection activities within the supervisory authority of the CFPB. This authority extends to about 175 debt collectors, which accounts for over 60% of the industry's annual receipts in the consumer debt collection market.

Additionally, the report identifies systemic issues that the CFPB and FTC hope to correct, with respect to, among other things, data integrity and abusive collection activities. A copy of the full report is available here: http://files.consumerfinance.gov/f/201303_cfpb_March_FDCPA_Report1.pdf.

CFPB MISCELLANEOUS ACTIVITIES

Regional Directors in the Office of Supervision

The CFPB announced the names of each of its regional directors who are responsible for leading a staff that consists of three assistant regional directors, a team of field managers, and over 100 examiners.

• Edwin Chow, West Region: Mr. Chow is a founding member of the CFPB, having joined the implementation team in September 2010. Mr. Chow brings 26 years of experience from the Department of the Treasury's Office of Thrift Supervision, and its predecessor agency, the Federal Home Loan Bank of San Francisco.
• Anthony Gibbs, Midwest Region: Mr. Gibbs joins the CFPB from the private sector after 19 years with HSBC and as an auditor at PriceWaterhouse.
• Steve Kaplan, Northeast Region: Mr. Kaplan joined the Bureau in September 2011. From 2007 until September 2011, Mr. Kaplan served as Pennsylvania Secretary of Banking. Prior to this period, Mr. Kaplan worked at the Mellon organization for 25 years.
• Jim Carley, Southeast Region: Mr. Carley joined the CFPB in October 2011, after serving as senior associate director in the division of banking regulation at the Federal Housing Finance Agency.

Financial Education

Financial education is an important component of the CFPB's work. Accordingly, the Bureau is engaging in two major financial education projects:

• Financial Education Evaluation: The Bureau is working with the Urban Institute to evaluate two financial coaching programs offered by the Financial Clinic in New York City and Branches (formerly South Florida Urban Ministries).
• Measuring Financial Health: The Bureau is working with the Corporation for Enterprise Development to develop tested measures of consumer financial knowledge, behavior, wellbeing, and related factors.

REGULATIONS

"Larger Participant" for Student Loans

Continuing with its "larger participant" rulemakings, the CFPB proposed a rule relating to private student loan servicers. These servicers are often different than the lenders in the transactions, and the borrowers have no control or choice over which company services a loan.

The proposal would allow the Bureau to supervise nonbank student loan servicers for compliance with federal consumer financial laws. And, under the proposed rule, any nonbank student loan servicer that handles more than one million borrower accounts would be considered a "larger participant." That threshold covers the seven largest student loan servicers, which, combined, service the loans of nearly 50 million borrower accounts. The rule would apply to these servicers regardless of whether they handle federal or private student loans. Comments are due by May 28.

ATM Fee Disclosure

As of March 26, information regarding ATM fees will no longer be required to be disclosed on the ATM itself; however, disclosure of such charges will still appear on the ATM screen or a printout.

Rural and Underserved Communities from Escrow

The Bureau's Escrow exempts Higher Priced Mortgage Loans made by certain small creditors that operate predominantly in rural or underserved counties. To enable creditors to identify these communities, the CFPB will make a list available on its website. A preliminary list is available here: http://files.consumerfinance.gov/f/201303_cfpb_preliminary-list_rural-or-underserved-counties.pdf.

A final list will be published before the effective date of the rule.

OUTSTANDING FEDERAL REGISTER PUBLICATIONS

UPCOMING REGULATIONS

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.