This alert highlights some of the recent activities and enforcement actions of the Consumer Financial Protection Bureau (CFPB or the Bureau). For more details, or for questions regarding CFPB activities and actions, please contact Venable LLP's CFPB Taskforce.
CFPB Activities
Speeches
On November 20, 2014, CFPB Director Richard Cordray gave a speech to the Clearing House's annual conference in New York in which he discussed electronic payment networks, including the Automated Clearing House network (ACH). Director Cordray noted three areas of concern: consumer harm stemming from electronic payment systems – through unauthorized access to consumers' information; a lack of transparency in electronic payments systems; and fees consumers must pay to access their money through such systems. Director Cordray noted that electronic payment systems could be used to facilitate actions that are unfair to consumers, and specifically highlighted the CFPB's September 2014 lawsuit against the Hydra Group, alleging that the lender illegally deposited payday loans and withdrew fees without consent. Director Cordray concluded his remarks by extolling the Clearing House's efforts to develop a real-time payments system and noted the need to ensure that consumers are able to access their account information and correct errors in real time.
Proposed Rulemaking
On November 20, 2014, the CFPB published a notice of proposed rulemaking (NPRM) that would provide certain borrowers with additional foreclosure protections.
On November 13, 2014, the CFPB released an NPRM regarding prepaid products. The Bureau proposes to extend checking account protections (from the Electronic Transactions Act and Regulation E) and credit account protections (from the Truth in Lending Act and Regulation Z) to prepaid accounts. Learn more about the NPRM here.
Guidance and Reports
On November 18, 2014, the CFPB issued a bulletin to help lenders avoid imposing illegal burdens on consumers receiving disability income who apply for mortgages.
On November 5, 2014, the CFPB released a report highlighting debt collection as a top complaint for older Americans.
On November 3, 2014, the Federal Financial Institutions Examination Council (FFIEC), of which the CFPB is a member, released observations from the recent cybersecurity assessment. The FFEIC's observations place responsibility on bank senior management to understand and mitigate the cybersecurity risks inherent in their financial institutions. Learn more about the FFIEC's cybersecurity actions here.
Recent CFPB Enforcement Actions
Mortgage Rate Steering
On November 7, 2014, the CFPB proposed a consent order in an enforcement action against Castle & Cooke for alleged payment of illegal bonuses to loan originators. The proposed consent order would order the company to pay $9 million in restitution and $4 million in civil penalties. According to the complaint filed by the CFPB, Castle & Cook's president and senior vice president of capital markets violated the Loan Origination Compensation Rule, 12 C.F.R. § 1026.36(d)(1)(i) (formerly enforced by the Federal Reserve Board), as well as the Consumer Financial Protection Act (CFPA) and Regulation Z, by paying loan officers quarterly bonuses depending upon the interest rates offered to borrowers. The Loan Origination Compensation Rule prohibits mortgage lenders from paying loan officers based on loan terms such as interest rates. In addition to restitution and a civil money penalty, the consent order requires that prospectively Castle & Cooke retain a record of its efforts to comply with the Loan Origination Compensation rule.
On November 13, 2014, the CFPB announced that it had filed a complaint and proposed consent order against Franklin Loan Corporation, a residential mortgage lender based primarily in California. The CFPB alleged that, from June 2011 to October 2013, Franklin Loan Corporation paid at least $730,000 in quarterly bonuses to 32 loan officers, based in part on the interest rates for the loans they provided to borrowers. Here, too, the Bureau determined that the company's bonus payments violated the Loan Origination Compensation Rule.
"Buy Here, Pay Here" Auto Dealer
On November 19, 2014, the CFPB announced that it has entered into a consent order with DriveTime Automotive Group, Inc. and its finance company, DT Acceptance Corporation (collectively, DriveTime). DriveTime is a "buy here, pay here" auto dealer, meaning that the dealer sells the car as well as originates and services the auto loan. The CFPB alleges that a portion of DriveTime's debt collection calls violated the CFPA's prohibitions against unfair, deceptive, or abusive acts or practices, 12 U.S.C. §§ 5531, 5536, and that some of DriveTime's credit reporting procedures violated the Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., as well. Under the consent order, DriveTime must pay an $8 million civil money penalty. Further, DriveTime has agreed to halt several of its debt collection processes, amend its credit reporting procedures, and facilitate free credit reports for certain consumers. This case is the first time the Bureau has taken enforcement action against a "buy here, pay here" company.