April 03, 2020

The CFPB's Taskforce on Consumer Financial Law Moves Forward and Seeks Input from Anyone Interested in Commenting

5 min

CFPB Director Kathleen Kraninger created the Taskforce on Federal Consumer Financial Law primarily to undertake two tasks: (1) examine the existing legal and regulatory environment facing consumers and providers of consumer financial products and services; and (2) report its recommendations for ways to improve and strengthen Federal consumer financial laws, including recommendations for resolving conflicting requirements or inconsistencies, reducing unwarranted regulatory burdens in light of market or technological developments, improving consumer understanding of markets and financial products and services, and identifying gaps in knowledge that the Bureau should address through future research. The Taskforce can review any of the enumerated laws under the CFPB's authority and the prohibition against unfair, deceptive, or abusive acts or practices. Its scope is so broad that it can make recommendations related to interpretations of those laws as currently written, suggest congressional amendments to those laws, and recommend how the CFPB uses its authority related to those laws. In fact, it's not even limited by previously issued Requests for Information (RFIs). The Taskforce asks that if any commentator's response to this RFI overlaps with a response to a previous RFI, that the commentator simply cross-reference the prior response. The only practical limitation that the Taskforce must adhere to is its expiration 90 days after its final report in January 2021.

The Taskforce issued a Request for Information on Friday, March 27, 2020, which lists the Taskforce's focus areas – products, services, and general questions. For more detail, please see the Request for Information available on the CFPB's website at Docket No. CFPB-2020-0013. We provide a summary below, with some practical advice should you choose to submit a comment.

An overarching piece of information that the Taskforce seeks from commentators about every regulation written, supervised, and enforced by the CFPB and any CFPB action is whether the benefit to consumers justifies the burden placed on business (in complying with the law). To point this out, the Taskforce takes time to mention its inspiration, the commission established in 1968 by the Consumer Credit Protection Act.

Product and Service Areas of Interest to the Taskforce

  • Automobile financing (credit or lease)
  • Consumer reporting
  • Credit cards
  • Credit repair
  • Debt collection by creditors (in-house collections)
  • Debt collection by third parties (collection agencies)
  • Debt settlement
  • Deposit accounts (checking or savings)
  • Electronic payments
  • Money transfers
  • Mortgage origination and servicing
  • Prepaid cards
  • Small-dollar loans (installment, payday, vehicle title loans)
  • Student loans and student loan servicing

Topic Areas of Focus

I. Expanding Access to Financial Services

With millions of consumers lacking in traditional banking services, the Taskforce would like to know if the CFPB should promote greater access to banking services and alternative banking services (such as prepaid, peer-to-peer payments, and small-dollar lending, etc.). The Taskforce inquires regarding whether consumers need these services and understand them, whether they are interrelated, the timing of services (real-time payments), competition among services (open banking), the use of alternative data in underwriting for these services, and whether there may be new regulatory risks or the need to clarify old regulatory mandates (fair lending and disparate impact).

II. Protection of Consumer Data

As the collection and storage of large amounts of consumer data become easier and more prevalent (as do data breaches), the Taskforce would like to know if the Fair Credit Reporting Act and the Gramm-Leach-Bliley Act (and their implementing regulations) are sufficient to keep up with the changing times as these laws relate to data accuracy, collection, disclosures, breaches, and privacy. The requests specifically mention fintech companies and their use of data related to underwriting criteria, privacy protection, and consumer control of data. The Taskforce would like to know whether federal legislation or guidance would be helpful to set a uniform standard. As noted above, the Bureau requests that commentators address whether the burden of changes to or adherence to cost regulation would be justified by the corresponding consumer benefit.

III. Regulations Written and Enforced by the CFPB

The Taskforce is interested in any gaps, inconsistencies, or clarifications that would benefit the understanding of or adherence to any laws (regulations) overseen by the CFPB. The CFPB asks, basically, whether there are any rules administered by the Bureau that have not kept up with the changing times and, if so, how can they be improved. Specifically, the Taskforce indicates that it would be helpful to know whether a strict rules-based or "principle-based" approach might be better.

IV. Federal and State Coordination

The Taskforce is seeking input regarding whether the CFPB should act to curtail overlapping supervisory and enforcement jurisdiction at both the state and federal levels. Specifically, the input solicited relates to whether overlapping agencies have been coordinating, sharing, and acting jointly toward regulated entities. Furthermore, the Taskforce is interested in the results of this overlapping jurisdiction in terms of the proportionality of remedies sought and the cost of compliance. In addition, the Taskforce seeks information related to whether the same regulatory advice is given to regulated entities from overlapping regulators and, if not, how it can harmonize this inconsistent advice or guidance. It also seeks information relating to the coordination among the various state regulatory agencies and the CFPB in terms of supervision and states using the CFPB's enforcement authority. Again, the Bureau appears to be focused on details related to the costs and benefits to consumers and regulated entities.

V. Improving Consumer Protection

The Taskforce is looking for information on how it can determine the optimal mix of regulation, enforcement, supervision, and consumer education in achieving its consumer financial protection goals. Furthermore, it is looking to understand how it can best assess the efficacy of that regulatory mix and other CFPB goals. In particular, the Taskforce is asking for information about markets that are functioning well (fair, transparent, and competitive), what markets could use regulatory changes to increase competition and consumer welfare, and what type of consumer disclosures are effective and when such disclosures should be provided to consumers.

Next Steps for Financial Services Providers

  • Decide whether to submit a comment or revise a previously submitted comment and cross-reference it to bring it to the attention of the Taskforce.
  • Include an economic analysis of whatever action you recommend the Bureau take related to its authority or jurisdiction (cost to entities versus the benefit to consumers).
  • Respond by the deadline as posted in the Federal Register, which has not yet been released. We will update the date once it is posted (likely late May or early June unless extended).