What now? That's a question that consumer financial products
and services providers, their advertisers and marketers, and
related vendors have been eagerly asking about the Consumer
Financial Protection Bureau (CFPB). Since its inception, the CFPB
has been engineering transformational change through rulemaking,
enforcement, supervision, and use of its bully pulpit.
Venable recently presented a live, complimentary webinar
titled "CFPB 2014 Regulatory Outlook:
Nonbanks" to provide insight into what the CFPB may do
next and some general suggestions on how to be better prepared.
Members of Venable's CFPB
Task Force reviewed the current state of federal consumer
financial protection law and policy and outlined what companies and
organizations need to know about what's ahead. Throughout the
ninety-minute webinar, the panelists shared their experiences from
the front lines, presented an analysis on recent trends, and
offered strategies to help companies navigate the evolving legal
landscape.
Below are some excerpts from a post-webinar recap discussion among
our panelists about some of the trends they have identified and
which are likely to shape the CFPB's activities this
year.
Q: Have you seen notable changes in how the CFPB acted in
2013, and how the marketplace reacted?
Jonathan Pompan: Overall, the
CFPB has never lacked confidence, but once Richard Cordray secured
a full five-year term to run the Bureau, we started to see an
upswing in the Bureau taking on more complicated legal issues and
factual situations through enforcement. Also, over the last twelve
months, companies that fall under the CFPB's jurisdiction
continued to hunker down and focus on internal compliance
management systems and testing those systems, especially now that
the complaint portal can place a company's procedures under a
microscope.
Suzanne Garwood: As has been
heavily reported on, a big focus of the CFPB in 2013 was the
implementation of the mortgage rulemaking; but we also started to
see the impact of supervision and examinations in such markets as
mortgage, consumer reporting, debt collection, and student loans.
The heightened focus on compliance management systems for nonbanks
has created a lot more work for in-house legal, audit and risk, and
quality assurance teams.
Q: There are numerous items that the CFPB (and consumer
groups) has put on the Bureau agenda for 2014. What do you see as
potentially being overlooked, and are there particular trends that
you anticipate in 2014?
Allyson Baker: The Bureau has
said it will be doing a lot this year such as debt collection
rulemaking, arbitration, prepaid cards, overdraft, and more. The
CFPB will continue to partner with the Department of Justice and
other regulators, resulting in an increase in the number of jointly
prosecuted enforcement actions. The relationship between the Office
of Enforcement and the Office of Supervision will continue to grow
stronger, and we can expect to see more enforcement actions stem in
some way from supervisory examinations. In addition, the CFPB has
already stated its intention to bring more enforcement actions
against specific individuals, under the CFPB's "related
person jurisdiction." Finally, if the end of 2013 is any
indication, in 2014 we will see an increase in the number of
matters with large dollar figures.
JP: There is a substantial CFPB enforcement focus
on central "chokepoints" that allegedly make fraud
possible. Also, the Bureau is aggressively using its authority to
regulate unfair, deceptive, and abusive acts and practices. These
strategies are pages taken right out of the Federal Trade
Commission's playbook, but raise important questions of
fairness and due process that may result in litigation. The CFPB
also has started a slew of nonpublic investigations; there is no
doubt a backlog from which we will see more regulation through
enforcement. Lastly, there's the CFPB and law enforcement
agencies putting pressure on banks to act as a policeman over
service providers such as payment processors. As a result, there is
going to be a premium on being able to efficiently demonstrate
compliance with the law.
Q: How does Congress fit in now that the CFPB is up and
running?
Andrew Olmem: For one, both
the House and the Senate will continue to hold oversight hearings,
and there are proposals to reform the CFPB that are still pending.
They may not gain traction in the near term, but as the first few
years of the CFPB play out, some of the reform proposals may be
revisited, especially if there is a change in control of the Senate
or, down the line, the political affiliation of the next
Presidential administration. Second, there continue to be
legislative proposals to amend various federal consumer financial
laws, such as those dealing with prepaid cards, mortgages, and debt
collection, and those proposals will continue to be considered and
added to the debate.
Q: What are some concrete steps a company can take now to
avoid being behind the curve when it comes to the
CFPB?
SG: Compliance management systems and testing
compliance can make a huge difference. But, importantly, the CFPB
looks at both the big picture and the details, whether it's
through its enforcement lens or an exam.
AB: If the CFPB knocks at the door, understand why
the information is being requested and what the Bureau may do with
that information.
AO: Companies should watch the CFPB very carefully
to understand its regulatory priorities and how it approaches
enforcement. As with any new agency, it is still developing its own
unique approach to regulation. Companies should not assume that the
Bureau will approach issues the same way other financial regulators
did in the past.
JP: Develop a culture around being a
"regulated" entity at all levels and for all activities.
Also, to avoid liability for downstream activity, know your
customer (KYC), and know your customer's customer (KYCC), if
applicable.
* * * * * *
To listen to a recording of the program
and view the corresponding slides, please
click here. This session was geared towards nondepository
consumer financial products and services providers as well as their
service providers, including advertisers, in such markets as
student loans, mortgage servicing, auto lending, small dollar
lending, consumer reporting, consumer credit and related services,
money transmission and check cashing, prepaid cards, debt
collection, and debt relief services.
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.