Consumer Finance Monitor

Increasing regulatory, competitive and economic challenges are causing a new focus on credit cards. Bob Curry of Bassett Capital Group, an expert on portfolio management/acquisition/ divestiture joins for a discussion of the types of business structures available to institutions seeking to offer credit cards for the first time and associated issues. We also look at issues institutions now offering credit cards should consider in moving forward during an economic downturn and heightened competition.

After looking at how the 2008 financial crisis and its aftermath might inform regulators’ response to the pandemic, we discuss how collections, loss mitigation/hardship programs, and originations of existing products and new programs designed to assist pandemic-impacted consumers (including changes to credit risk/fraud models to address the pandemic’s effects) can create UDAP and fair lending risk.

Our discussion examines a range of issues, including how the wording of the model forms could create consumer confusion, challenges in determining whether a debt is time-barred, and questions arising from use of a “know or reason to know” that a debt is time-barred standard to trigger disclosures. We also look at industry’s reaction and how the proposal’s finalization is likely to fit with the CFPB's issuance of a final larger debt collection rule.

We are joined by Richard Cordray, former CFPB Director, and John Roddy, prominent plaintiffs’ class action lawyer, for a discussion of regulatory and litigation risks the crisis is expected to create for the consumer financial services industry. Topics include: industry practices that could trigger regulators’ scrutiny; operational areas impacted by working remotely that create compliance risks; fair lending issues arising from loan modifications/forbearances; state authority to change credit terms.

We are joined by Nitin Shah of Democracy Forward, attorney for the plaintiffs in the lawsuit brought to compel the CFPB to issue rules implementing Sec. 1071 which requires financial institutions to collect and report race, ethnicity, and other data in connection with credit applications made by women-or minority-owned and small businesses. We discuss the lawsuit’s basis, the rulemaking deadlines in the settlement and expected rulemaking timeline, and substantive issues the rules are likely to address.

In our examination of two recent OCC BSA/AML consent orders, one with a bank and another with an in-house professional, we review the OCC’s allegations underlying the orders and how the OCC focuses on the core pillars of BSA/AML compliance when choosing to pursue enforcement. Topics discussed include takeaways for boards and management of financial institutions when accepting higher-risk customers, AML liability risk for individuals, and considerations in using third-party AML compliance advisors.

We are joined by Richard Cordray whose book about his CFPB tenure, Watchdog, was recently-released. Among other topics, Mr. Cordray shares what he considers to be his key successes and disappointments as Director, describes his relationship with the Trump Administration, responds to criticism of his use of the CFPB’s enforcement authority, offers his prediction for how SCOTUS will rule in Seila Law, and discusses the abusiveness standard and creation of state mini-CFPBs.

We discuss the modifications with Lauren Valenzuela, Corporate Counsel for Performant Financial, a provider of technology-based solutions to assist debt recovery. Our topics relevant to the debt industry include the potential impact for debt collectors/other service providers indirectly collecting consumer data; changes for processing household requests; availability of GLBA/other exemptions; issues for users of AI; relationship of CCPA opt-outs and FDCPA C&D requests; areas needing more clarification.

We look at the CFPB's key findings related to payday lending and mortgage servicing, discuss their implications for the CFPB's approach to supervision and enforcement, and share practical takeaways for lenders and servicers, including how the CFPB's findings related to loss mitigation requirements might be used by servicers to inform how they approach disruptions arising from the current coronavirus outbreak.

The Act, which has been introduced in the House (H.R. 5050) and Senate (S. 2833), would impose a 36% national usury limit on most forms of consumer credit. Bill Himpler responds to claims that the rate limit will not reduce credit access for creditworthy consumers and discusses relevant studies, the bill’s status and political prospects, AFSA's efforts to educate lawmakers and their staff about consumer finance, and other current federal and state issues of concern to industry members.

With oral argument just days away, we interview Prof. Morrison who filed an amicus brief urging SCOTUS not to decide whether Dodd-Frank’s limits on the President’s authority to remove the CFPB Director are constitutional and dismiss the case. We examine his arguments that Seila Law has no standing to challenge the limits' constitutionality and there is no longer a case or controversy that gives a federal court jurisdiction to hear the challenge.

Key issues and practical pointers discussed include (1) seller due diligence to prepare for sales, such as identifying and creating policies/procedures and reviewing documentation for debts to be sold, (2) important contract issues for buyers and sellers negotiating sales agreements, such as debt repurchase rights, resales and assignments, buyer responsibility for its providers’ activities, and seller post-sale obligations regarding buyer information requests, and (3) seller monitoring of such requests.

The Act, which has been introduced in the House and Senate, would impose a 36% national usury limit on most forms of consumer credit. We are joined by the bill's drafter, Professor Chris Peterson of the University of Utah S.J. Quinney College of Law, for a discussion of the rationale for the cap, its potential impact on credit access, the implementation process if enacted, and the bill’s status and political prospects.

After reviewing how the CFPB has used its abusiveness authority, we look at why such authority has created industry concern, consider implications of the CFPB's decision to forego rulemaking, discuss the policy statement’s three parts and likely practical impact on the CFPB's behavior and industry's assessment of risk, and examine continuing industry concerns about the Bureau's unfairness and deceptiveness authority.

We are joined by Diego Zuluaga, a Cato Institute policy analyst, for a discussion of the proposed changes. After reviewing the current regulatory framework, we examine the proposal's new qualifying activities criteria and approach to "branchless banking" in determining assessment areas, respond to criticism of its approach to public projects, look at the small bank opt-out and what in the proposal should be revisited, and consider the impact of the Fed's non-participation.