May 10, 2019

Consumer Financial Services Practice Digest

3 min

Debt Collection: CFPB Proposed Rulemaking – A Lookback at 2018 Developments

The CFPB issued a Notice of Proposed Rulemaking to implement debt collection rules – the first of their kind – under the Fair Debt Collection Practices Act (FDCPA). The proposal would set limits on the number of calls debt collectors may place to reach consumers on a weekly basis; clarify how collectors may communicate lawfully using newer technologies, such as voicemails, emails, and text messages, that have developed since the FDCPA's passage in 1977; and require collectors to provide additional information to consumers to help them identify debts and respond to collection attempts. In addition, the proposal would require the use of a new consumer-facing disclosure and response form, and prohibit suits and threats on time-barred debts.

Also, as published in RMA Insights magazine, the regulation of debt buyers and collectors continued at the CFPB during 2018. The three most significant CFPB developments were (1) the confirmation of Kathy Kraninger as the Bureau's new Director, who is serving a five-year term and succeeds Acting Director Mick Mulvaney; (2) continued work (and an industry waiting) for the just-announced debt collection rulemaking; and (3) continued enforcement and supervisory activity involving the FDCPA and the Consumer Financial Protection Act, including a defeat in a lawsuit over debt collection letters sent on law firm letterhead.

CFPB Announces CID Policy

Receipt of a civil investigative demand (CID) from any federal agency means that a significant amount of a company's time and money will soon be tied up responding to the demand. The CFPB in particular has been known for broad, wide-ranging CIDs that probe the limits of the agency's jurisdiction. However, the CFPB's occasional overreach and several losses in court, coupled with the change in CFPB leadership, likely led to the announcement regarding changes to the CFPB's policies regarding CIDs.

Any Way You Want It: The OCC Provides New Avenues for Innovation

The OCC wants banks to know that it is the regulator with open arms for innovation. Although the OCC's push to create a special purpose national bank charter for fintechs ("fintech charter") has yet to bear fruit, the agency's groundwork on responsible innovation opened the door to other opportunities. Its latest effort, as announced on April 30, 2019, is a proposed Innovation Pilot Program providing national banks and other OCC-supervised financial institutions with a framework to test not only solutions but also innovative product offerings.

New York DFS Announces New Consumer Protection and Financial Enforcement Division

The New York Department of Financial Services (DFS) Acting Superintendent Linda Lacewell announced in late April the creation of a new Consumer Protection and Financial Enforcement Division. The reorganization likely signals a decision by DFS to (1) prioritize and expand its investigations of nonbank consumer financial services providers, including those that the DFS does not supervise, and examine like debt collectors and lead generators, and (2) enforce its cybersecurity rule.

New Commissioner Appointed to California DBO

Governor Gavin Newsom announced the appointment of Manuel Alvarez as commissioner of the California Department of Business Oversight on March 28, 2019. If confirmed, Alvarez will take the reins from Commissioner Jan Lynn Owen. Alvarez is a former enforcement attorney with the CFPB, where he worked from its inception in 2011 until 2014. Before that, Alvarez was a deputy attorney general at the California Department of Justice, Office of the Attorney General, for a year, and an associate at a multinational law firm from 2007 to 2010. Most recently, Alvarez served as general counsel, chief compliance officer, and corporate secretary of Affirm Inc.

Online Lender Settles with FTC on UDAP, TSR, and EFTA Claims

The Federal Trade Commission's settlement with an online consumer lending platform, Avant LLC, highlights the importance of legal and regulatory compliance in the fintech space, including—perhaps most importantly—what happens after a loan is made.