Bureau of Consumer Financial Protection (CFPB) – Page 7

In Win for CFPB, Federal Court Clarifies Scope of “Substantial Assistance” and “Service Provider” Provisions of Dodd-Frank Act

Sep 08 2015

In the first court decision to opine on the “service provider” and “substantial assistance” provisions of the Dodd-Frank Act, a federal district court in Georgia denied a motion to dismiss brought by payments processors who had been sued by the Consumer Financial Protection Bureau (“CFPB”) for their role in an alleged phantom debt collection scheme. The decision addresses two novel areas of the CFPB’s jurisdiction – its ability to enforce the prohibition against unfair, deceptive, and abusive acts and practices (“UDAAPs”) against “service providers,” and its ability to go after those individuals and entities that “knowingly or recklessly provide substantial assistance” to the commission of a UDAAP. While grounded in the specific facts pled in the CFPB’s detailed complaint, the opinion nevertheless provides insight into how the federal courts may interpret these provisions, and serves as a warning sign to companies about the importance of implementing robust compliance programs.

Some Lessons from the CFPB’s Springstone Enforcement Action

Aug 25 2015

Last week, the Consumer Financial Protection Bureau (CFPB) announced a settlement with Springstone Financial, LLC, for deceptive practices related to enrolling consumers in deferred-interest credit products. Springstone administered a health-financing program through which consumers could finance various medical treatments, including dental treatments. Consumers could apply for credit either through Springstone’s website or at their medical provider’s office. In the case of the latter, the health care providers’ staff — who were trained and monitored by Springstone — would provide consumers with application materials and assist them in filling out the application before submitting it to Springstone on consumers’ behalf. The CFPB’s claim centered on these providers. “In some cases,” according to the CFPB, dental staff allegedly told consumers that the deferred-interest product was a no-interest loan and failed to mention that a 22.98 percent interest rate would apply from the date of the loan if the loan balance was not paid in full by the end of the promotional period. The CFPB found these practices deceptive and determined that more than 3,200 consumers “may have been” affected by them. As a result, Springstone was ordered to provide $700,000 in restitution to the 3,200 consumers who ended up paying deferred interest on a loan they applied for with a health-care provider’s assistance. The CFPB did not assess a civil money penalty.

Against the Tide: A New Take on RESPA’s Section 8(c)(2) Safe Harbor by the CFPB

Aug 05 2015

By: Irene C. Freidel, Brian M. Forbes, Matthew N. Lowe

Grab a flotation device – the final decision recently issued by Director Richard Cordray of the Consumer Financial Protection Bureau (“CFPB”) in the administrative enforcement proceedings against PHH Corp. (“PHH”) has rocked the boat for the real estate settlement services industry as portions of the decision run directly counter to decades of legal precedent, and the prior writings and Policy Statements issued by the Department of Housing and Urban Development (“HUD”) – the federal agency previously tasked with interpreting the federal Real Estate Settlement Procedures Act (“RESPA”) and enforcing its provisions. As K&L Gates summarized in its June 22, 2015 Alert, the decision addresses a number of topics, including Director Cordray’s interpretation of several provisions of the federal RESPA. And while many of the CFPB’s views and interpretations attempt to expand the scope of RESPA’s reach and are subject to criticism, one of the most significant developments is Director Cordray’s conclusion that Section 8(c)(2) of RESPA is not the type of safe harbor that has long been widely accepted.

CashCall Revisited: The CFPB’s Evolving Theory of Abusiveness

Aug 05 2015

In 2013, the CFPB filed a complaint against CashCall, Inc. and others, alleging that their conduct in collecting on payday loans that allegedly violated certain states’ usury and/or licensing requirements constituted unfair, deceptive and abusive acts and practices (UDAAPs) under federal law. Late last week, the CFPB struck again, filing suit against NDG Financial Corp. and others, making similar claims. The complaint against NDG, however, both expands the list of states where the CFPB alleges that collecting on a usurious and/or unlicensed payday loan is a UDAAP and changes the theory of abusiveness upon which the CFPB relies.

Happy Birthday, CFPB!

Jul 21 2015

By: Stephanie Robinson, Anjali Garg

While the Dodd-Frank Act turns five, today marks the fourth birthday of the CFPB. Despite a controversial start between recess appointments and enforcement attorneys at examinations, the CFPB has come a long way since its inception. The Bureau has brought more than 90 enforcement actions, filed numerous complaints, and obtained countless supervisory agreements in its four short years. It has expanded its regulatory reach through the newly implemented mortgage servicing rules and nonbank supervisory program. Just recently, the CFPB issued its first agency decision in a contested administrative proceeding, resulting in a disgorgement figure nearly 17 times the amount originally recommended in the proceeding. The CFPB has fundamentally changed the consumer finance landscape through its regulatory, enforcement, and supervisory activities. Here we highlight a few ways that the CFPB has made a difference in the areas of nonbank supervision; consumer complaints; unfair, deceptive, and abusive acts and practices; and individual liability.

Federal District Court Upholds CFPB Claims Against Debt Collection Law Firm But Rejects Open-Ended Statute of Limitations Arguments

Jul 17 2015

On July 14, 2015, the U.S. District Court for the Northern District of Georgia denied defendants’ motion to dismiss the Consumer Financial Protection Bureau’s (CFPB) claims in CFPB v. Frederick J. Hanna & Associates. The CFPB’s complaint in this case alleges that the defendants, a law firm and its principals, operate “less like a law firm than a factory” that files tens of thousands of collection cases each year. The complaint alleges that the defendants filed over 350,000 collection suits each year, but that attorneys spend less than a minute reviewing and approving each suit. The CFPB’s complaint alleges that the lack of attorney involvement constitutes a violation of the Fair Debt Collection Practices Act’s (FDCPA) and the Consumer Financial Protection Act’s (CFPA) prohibitions on deceptive practices because the collections actions filed by the defendants represented to consumers that attorneys were meaningfully involved in filing those actions when in fact they were not. The CFPB’s complaint also alleges that the defendants’ use of affidavits in which affiants represented they had personal knowledge of the validity and ownership of the debts violated these same statutes.

New CFPB/DOJ Enforcement Action Incentivizes Indirect Auto Lenders to Limit Discretionary Dealer Markups

Jul 16 2015

On July 14, 2015, the Consumer Financial Protection Bureau (“CFPB”) and the U.S. Department of Justice (DOJ) announced a joint settlement of allegations that American Honda Finance Corporation (“Honda”), an indirect auto lender associated with the car manufacturer of the same name, violated the federal Equal Credit Opportunity Act by discriminating against African-American, Hispanic, and Asian and Pacific Islander borrowers in the pricing of auto loans. Notably, the terms of the CFPB’s consent order may indicate how indirect auto lenders in the future can avoid the most onerous financial penalties associated with allegedly unlawful pricing practices.

CFPB PUBLISHES NEW SUPERVISORY HIGHLIGHTS

Jun 24 2015

By: Melanie Brody, Ernest Simons

On June 23, the Consumer Financial Protection Bureau (CFPB or Bureau) released its latest Supervisory Highlights, outlining key findings from supervisory work completed between January and April 2015. Recent supervisory resolutions across all industries have resulted in remediation of approximately $11.6 million to more than 80,000 consumers. The report highlights recent supervisory observations in the following areas:

CFPB Issues Final Decision in In Re: PHH Corp.: First Agency Decision in Contested Administrative Proceeding

Jun 24 2015

Earlier this month, the Consumer Financial Protection Bureau (CFPB) issued the Director’s final decision in the CFPB’s enforcement action against PHH Corp. (PPH). The decision is the agency’s first ruling in a contested administrative proceeding and sheds light on how the agency—at least under the leadership of Director Richard Cordray—will approach these matters. Most strikingly, Director Cordray overturned several key rulings by the Administrative Law Judge (ALJ), resulting in a decision requiring PHH to pay over $109 million in disgorgement, nearly 17 times as much as the $6.4 million recommended by the ALJ.

DOJ and CFPB Settle Discriminatory Mortgage Pricing Case with Wholesale Lender

Jun 01 2015

By: Melanie Brody, Anjali Garg

On May 28, 2015, the DOJ and the CFPB filed a complaint and proposed consent order against Provident Funding Associates (Provident) alleging that the mortgage lender violated the Fair Housing Act and ECOA by charging African American and Hispanic borrowers higher broker fees than it charged white borrowers. To resolve these claims, Provident will pay $9 million to approximately 14,000 borrowers who allegedly paid higher interest rates and/or fees for mortgages between 2006–2011. The agencies did not impose a civil money penalty against Provident.

Catagory:Bureau of Consumer Financial Protection (CFPB)