On May 23, 2014, the Consumer Financial Protection Bureau (CFPB) released its semi-annual update to its rulemaking agenda. The spring 2014 agenda covers rulemaking mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) that the CFPB is continuing to develop and implement. The agenda also reveals that the Bureau has turned its attention to issues in other major markets for consumer financial products and services. The regulatory agenda provides banks and nonbanks, and their service providers, a useful guide for understanding the CFPB’s rulemaking direction and related priorities.
Mortgage Rulemakings Continue
The agenda reflects continuing work on several significant rulemakings mandated by the Dodd-Frank Act, including implementation of rules and other significant reforms concerning mortgage originations, servicing, and most recently, the federal disclosures that consumers receive shortly after application and shortly before closing. In addition, the CFPB has convened a small business review (SBREFA) panel to discuss potential amendments to the Home Mortgage Disclosure Act.
Larger Participant Supervisory Implementation – Auto Lending and International Money Transfer Markets
The CFPB continues to consider regulations that further establish the scope of the CFPB's nonbank supervision program by defining who is a larger participant in certain markets for consumer financial products or services. The CFPB is in the process of developing a proposal to identify “larger participants” in the market for auto lending (August 2014) and is finalizing a rule defining larger participants in the international money transfer market (September 2014). The CFPB already has supervisory authority over other nonbanks such as mortgage originators and servicers, payday lenders, larger debt collectors, larger consumer reporting agencies, private student loan originators, and student loan servicers. Nonbanks that are not classified as “larger participants” may still be subject to the Bureau’s supervisory authority if the Bureau has reasonable cause to determine a company poses risk to consumers.
Debt Collection Rulemaking
In November 2013, the CFPB issued an Advance Notice of Proposed Rulemaking seeking comment, data, and information from the public about debt collection. Significantly, the CFPB indicated that the rules could encompass parties that collect their own debts—entities that are, under most circumstances, not subject to the Fair Debt Collections Practices Act (FDCPA). The comment period closed in February 2014. The CFPB indicates that it expects to advance to the next stage in December 2014.
Small Dollar Loans, Overdraft Fees, and Prepaid Cards
The CFPB’s agenda indicates it is researching and considering whether rulemaking is warranted in the areas of payday and deposit advance products, as well as consumer overdraft products. The CFPB held a field hearing in March 2014 in Nashville, Tennessee, and also released a report that analyzed payday lending. The CFPB says it is expecting to build on an Advance Notice of Proposed Rulemaking that it published in 2012 concerning prepaid cards by issuing a proposed rule to strengthen federal consumer protections for these products. In addition, the CFPB has been testing potential disclosures that it may propose to be used on the packaging of prepaid cards.
Initiatives to Streamline and Modernize Annual Privacy Notices
The CFPB issued a proposal regarding annual privacy notices in May 2014. Specifically, the CFPB proposed to amend Regulation P, which (in part) requires that financial institutions provide an annual disclosure of their privacy policies to their customers. The amendment would create an alternative delivery method for this annual disclosure, which financial institutions would be able to use under certain circumstances (including not engaging in certain types of information-sharing activities and posting the annual notices on their websites). The comment period closed on June 12, 2014, and the CFPB is presently considering potential next steps.
Civil Penalty Fund and Consumer Education and Financial Literacy Programs
The Dodd-Frank Act establishes a "Consumer Financial Civil Penalty Fund" (Civil Penalty Fund) into which the CFPB must deposit any civil penalty it obtains against any person in any judicial or administrative action under federal consumer financial laws. Under the Dodd-Frank Act, funds in the Civil Penalty Fund may be used for payments to the victims of activities for which civil penalties have been imposed under federal consumer financial laws. In addition, to the extent that such victims cannot be located or such payments are otherwise not practicable, the CFPB may use funds in the Civil Penalty Fund for the purpose of consumer education and financial literacy programs. This rule will implement the statutory provisions by (a.) outlining what kinds of payments to victims are appropriate and (b.) establishing procedures for allocating funds to victims, to consumer education, and to financial literacy programs. The agenda indicates a final rule is expected in November 2014.
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For more information, please contact Jonathan L. Pompan at 202.344.4383 or [email protected].
Jonathan L. Pompan, a partner in the Washington, DC office of Venable LLP, co-chairs the firm's Consumer Financial Protection Bureau Task Force. His practice focuses on providing comprehensive legal advice and regulatory advocacy to a broad spectrum of clients, such as nonbank financial products and services providers, advertisers and marketers, and trade and professional associations, before the CFPB, the Federal Trade Commission, state Attorneys General, and regulatory agencies.