Every month we hold a 30 minute Webinar This month’s top announcements and findings from the Consumer Financial Protection Bureau (CFPB) for financial service providers to consider. In this month’s article, we share some of our top “bites” that were covered during the October 20th webinar.

So what happened at CFPB last month?

Bite # 10 – An appeals court overturned the CFPB’s arbitration award against two mortgage lending companies and their attorneys.

Back in 2014, the CFPB filed a lawsuit against two legal groups and their law firms claiming they had violated the Consumer Financial Protection Act (CFPA) and Regulation O. Regulation O prohibits mortgage assistance providers from soliciting or receiving payments from consumers before a consumer signs their lender’s mortgage modification agreement. It provides for exemptions for lawyers. The CFPB had alleged that the law firms had failed to practice legal practice in this case while providing mortgage relief services. Although the U.S. 7th District Court of Appeals agreed with the lower court ruling that the law firms were subject to and violated the CFPA and Reg O, they found no evidence that the firm and attorneys had acted ruthlessly.

The 7th District Court ordered the lower court to investigate the violations under a strict liability standard that does not require a determination and carries a fine of $ 5,000 per day instead of the $ 25,000 per day for the reckless standard. The court also overturned the lower court ruling prohibiting lawyers from offering debt relief.

Bite # 9 – The CFPB sued a software company and its owners.

The CFPB filed a lawsuit in federal district court accusing a California-based software company and its owner of assisting an allegedly illegal credit repair company. The CFPB alleged that the company violated the Telemarketing Sales Rule (TSR) and the CFPA by providing significant assistance or assistance to credit repair companies that use telemarketing and charge consumers improper advance fees. The CFPB seeks legal assistance for alleged harm to consumers, surrender of their allegedly unjust profits, an injunction to stop their alleged unlawful behavior and civil penalties.

Bite # 8 – The CFPB issued three reports.

The CFPB released three reports last month, one on consumer complaints and demographics, one on defaults and interest rates on subprime auto transactions, and one reporting biannual activity to Congress.

The first report found differences in consumer complaints based on demographics. According to the CFPB, complaints from more affluent communities and communities with a higher percentage of white, non-Hispanic residents were more likely to have related to lending and service delivery, while complaints from communities of color and lower-income communities were more likely to be about credit reports, identity theft, and delinquent maintenance. Asian-American and Pacific Islander communities had higher credit report complaint rates than predominantly white, non-Hispanic communities; however, they also had a lower percentage of late service complaints.

The second report examined the differences in interest rates on subprime loans and the differences in default rates. According to the CFPB, differences in the risk of default could only explain some of the differences in the interest rates offered by different creditors. The report showed that banks and credit unions offering subprime auto transactions have consumers with higher credit ratings than financial firms and have buy-pay-here merchants and have lower default rates. Bank rates average around 10% and their consumers default around 15% of the time. Financial firms and buy-pay-here merchants offer rates between 15-20% and their consumers are down about 25-40% of the time. The report discusses other reasons that interest rates can vary by type of lender, including different borrowers’ access to information, financial sophistication, different business practices, and different incentives.

The third report, the semi-annual report to Congress, covered the activities of the CFPB between October 1, 2020 and March 31, 2021. The report highlighted the fact that the CFPB had issued its previous “Declaration of Principles Prohibiting Abusive Acts or Practices,” It also noted that the CFPB would revert to monitoring violations of the Military Lending Act. The report also quantified that the CFPB’s enforcement efforts totaled approximately $ 880 million in consumer protection and $ 200 million Had ordered millions of dollars in fines.

Bite # 7 – The Senate upheld Chopra and he was sworn in.

On September 30th, following a nomination process that began back in January, the US Senate approved the new CFPB director, Rohit Chopra, along party lines 50-48. Director Chopra was most recently FTC commissioner and prior to that, five years ombudsman for student loans of the CFPB under the former CFPB director Cordray. Chopra was then sworn in on October 12th. He published this letter To the staff of the CFPB, the Board of Governors of the Federal Reserve System, the Board of Governors of the Federal Deposit Insurance Corporation (FDIC), and the members of the Financial Stability Oversight Council.

Bite # 6 – The CFPB has published FAQs on collection rules.

The CFPB published FAQs on the Collection Rule related to Regulation F. The FAQ topics are: Limited Content Messages, Telephone Call Frequency in General, Telephone Call Frequency Assumptions, Excluded Telephone Call Frequency Calls, and Refutation of Assumptions Concerning Telephone Call Frequency. The FAQs serve as the issued CFPB Compliance help.

Bite # 5 – The deadline for requesting an initial forbearance regarding COVID hardship has been extended.

The CFPB extended the deadline to request an initial cessation of COVID hardship. As part of the renewal, mortgage service providers will have the right to approve initial COVID-19 omission requests for home loans supported by HUD / FHA, USDA, or VA until the national COVID-19 emergency is officially over. Previously, the deadline was set for September 30, 2021. If a home loan is sponsored by Fannie Mae or Freddie Mac, there is currently no deadline to apply for an initial COVID hardship omission.

Bite # 4 – The US Supreme Court rejected a petition against the law enforcement agency of the CFPB.

RD Legal Funding LLC has challenged the CFPB’s power to pursue enforcement actions prior to the decision in Seila Law LLC v CFPB. the Seila The judgment left the question of what should be done with the cases before the decision. By refusing to hear the RD Legal Funding litigation, the Supreme Court signaled that enforcement action by the CFPB was at hand Seila will be allowed to continue.

Bite # 3 – The CFPB has taken action against a reverse mortgage company.

The CFPB filed a complaint proposing a consent order alleging that a mortgage lender used inflated and fraudulent real estate appraisals to trick consumers into taking out reverse mortgages. The CFPB also alleged that the company’s conduct violated a 2016 government consent order that dealt with its fraudulent reverse mortgage advertising. If the court issued them, the proposed consent order would prohibit the company from engaging in future illegal behavior and would require the company to pay $ 173,400 in consumer protection and a $ 1.1 million civil fine.

Bite # 2 – The CFPB’s rulemaking on payday, title and high-priced installment loans has been delayed.

On October 14, the U.S. Fifth District Court of Appeals sided with the Community Financial Services Association of America (CFSA) and the Consumer Service Alliance of Texas to delay enforcement until the appeal process was completed . The regulation is to come into force on June 13th, 2022.

Bite # 1 – The CFPB has taken action against a debit card provider in prisons.

In the first new lawsuit since Director Chopra was sworn in, the CFPB took action against a prison financial services company. The company allegedly violated the CFPA by requiring consumers to access their own money on prepaid debit cards required by the prison system. The CFPB also alleged that the company violated the Electronic Fund Transfer Act (EFTA) by requiring consumers to sign up for the company’s debit card as a condition of receiving government benefits – particularly gate money which is money that is under state law to help people meet their basic needs when they are released from custody.

The consent arrangement severely limits the future fees that the company can charge for release cards and only allows inactivity fees after 90 days of inactivity. The order also requires the company to pay $ 4 million for consumer protection measures and a $ 2 million civil fine.

Extra Bite – Acting director Ueijo announced new members of the advisory committee, and new director Chopra named key leadership positions.

Just before the Senate approved the new director Chopra, acting director Dave Uejio announced the appointment of new members to the Consumer Advisory Council (CAB), the Community Banking Advisory Board (CBAC), the Credit Union Advisory Board (CUAC) and the Academic Research Council (ARC.). The members of the committee will advise the leadership of the CFPB on a wide range of consumer finance issues and emerging market trends. Dodd-Frank and the Consumer Protection Act mandate the CFPB to set up a CAB to advise and consult with the CFPB’s director on a wide variety of consumer finance issues. The CFPB also created three councils: CBAC, CUAC and ARC. The CBAC and CUAC advise and consult with the CFPB on consumer finance issues related to community banks and credit unions. Committee members include experts in consumer protection, financial services, consumer credit, economic justice, and consumer financial products and services, as well as representatives from community banks and credit unions.

Following his swearing in, Director Chopra announced several new senior positions at CFPB, including:

• Zixta Q. Martinez will serve as the deputy director overseeing the operations division of the CFPB.
• Karen Andre will serve as the Assistant Director, Consumer Education and External Affairs.
• Jan Singelmann returns to the CFPB as Chief of Staff. Previously, he was Senior Litigation Counsel in the CFPB’s Office of Enforcement.
• Erie Meyer returns to the CFPB as Chief Technologist. She was a member of the implementation team that started the CFPB and became a founding member of the CFPB’s Office of Technology and Innovation.