CFPB – Page 4 – Consumer Financial Services Watch

Increased Scrutiny On “Auto-Defaults”— Road To Enforcement Or Impetus For Change?

Mar 16 2016

By: David E. Fialkow and Hollee M. Watson

Private student loan companies are at the center of increased scrutiny by the Consumer Financial Protection Bureau (the “CFPB”). Speaking at a recent conference, the CFPB student loan ombudsman Seth Frotman warned attendees that student loan companies are at risk of violating the law for placing borrowers in default when the co-signer of the loan dies or declares bankruptcy. See Danielle Douglas-Gabriel, Federal agency warns student loan companies about automatic defaults, The Washington Post (Mar. 8, 2016). This “auto-default” practice occurs when banks and other financial companies provide student borrowers with education loans that grant lenders or servicers the right to trigger a default upon a co-signer’s death or declaration of bankruptcy, even if the loan is paid on time.

Proactive Protection of Consumers or Premature Penalty? Consumer Financial Protection Bureau Bucks the Trend in Data Security Breach Cases

Mar 15 2016

By: R. Bruce Allensworth, Ryan M. Tosi, Lindsay S. Bishop

Data breaches and cybersecurity attacks appear to be growing in frequency. Despite the increase in the number of such attacks, plaintiffs have found it difficult to establish a legal foothold for data breach claims, as federal courts across the country have routinely dismissed data breach claims brought by private litigants where no cognizable harm has been alleged. The Consumer Financial Protection Bureau (“CFPB”), however, now appears poised to enforce regulations regarding the protection of private consumer information, including holding companies accountable — even without any data breach or misuse of private consumer information.

To read the full alert, click here.

A New Cyber Regulator on the Beat: The CFPB Issues its First Cybersecurity Order and Fine

Mar 08 2016

By: Ted Kornobis

On March 2, 2016, the Consumer Financial Protection Bureau (“CFPB”) instituted its first data security enforcement action, in the form of a consent order against online payment platform Dwolla, Inc. The CFPB joins several other regulators that have recently issued statements or instituted enforcement actions in this space, including the Securities and Exchange Commission (“SEC”), Commodities Futures Trading Commission (“CFTC”), the Financial Industry Regulatory Authority (“FINRA”), the National Futures Association (“NFA”), the Department of Justice (“DOJ”), state attorneys general, and the Federal Trade Commission (“FTC”), which has been active in this area for several years.

To read the full alert, click here.

The CFPB’s TILA-RESPA Integrated Disclosures Rule

Feb 19 2016

From the January 2016 issue of The Review of Banking and Financial Services, with permission.

On October 3, 2015, the Consumer Financial Protection Bureau’s (“CFPB”) final rule integrating certain mortgage disclosures under the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act (“RESPA”) went into effect. While potentially simplifying the mortgage disclosure obligations of creditors by bringing together two separate disclosure regimes, the text of the regulation, along with its Preamble and Official Interpretations (the “Commentary”), impose significant changes on the disclosures required in the residential mortgage loan origination process. Creditors have been grappling with these requirements since the regulations were finalized in November 2013, and have devoted substantial resources to updating technology, working through legal and compliance issues, testing the production of the disclosures, and training employees on the requirements of the TILA-RESPA Integrated Disclosures (“TRID”). But challenges remain, and many questions are still unanswered about how certain disclosures should be made on the forms in specific loan-level scenarios. Inevitably, themes have emerged as to the issues that continue to cause concern. After providing a brief introduction to TRID, this article highlights several of these “hot” topics that are keeping compliance officers awake at night.

Certain Compliance Risks in Marketplace/Peer-to-Peer/Online Lending

Feb 10 2016

The tragic terrorist shootings in San Bernardino on December 2, 2015 shed light on serious risks associated with online marketplace lending. The attackers obtained $28,500 from an online marketplace lender under a pretext, but then allegedly used the funds to reimburse their arms dealer. This apparent link between the money lent and the mass murders led public officials to re-examine the risks associated with this new and increasingly popular method of lending.

Online marketplace lending represents a chance for investors to realize greater returns and for borrowers to refinance expensive debt and pay less interest, as technology and peer-to-peer matching/evaluation greatly reduces the overhead of the business model. Given both the widespread interest in and the potential for the misuse of such online lending platforms, federal and state lawmakers and regulators are increasing scrutiny of the industry.

CFPB Takes Action Against Another Buy-Here Pay-Here Used Car Dealer

Jan 28 2016

On Thursday, January 21, 2016, the CFPB entered into a consent order with a small buy-here pay-here used car dealer. This is the third CFPB settlement against a buy-here pay-here dealer. The settlement resolves allegations that the dealer inaccurately disclosed finance charges to consumers in violation of the Truth in Lending Act (“TILA”) and the prohibition on deceptive acts or practices, and engaged in abusive sales practices.

Splitting the Baby — CFPB Pursues Aggressive Statute of Limitations Argument but Effectively Concedes Limits to Its Authority

Jan 22 2016

Last month, we wrote about how the Consumer Financial Protection Bureau’s (CFPB) administrative enforcement action against Integrity Advance might signal that the agency believes it can pursue claims of unfair and deceptive conduct without regard to either the statute of limitations or the effective date of the Dodd-Frank Act. In a brief made public yesterday, the CFPB revealed its hand when it filed its opposition to Integrity Advance’s motion to dismiss. In its brief, the CFPB indeed asserted that its administrative enforcement authority is not limited by any statute of limitations. But the CFPB did not seek to pursue its claims for conduct that occurred before the July 21, 2011 effective date of Dodd-Frank.

CashCall Revisited (Again): The CFPB’s Continued Federalization of State Law

Jan 04 2016

Last August, we wrote about the Consumer Financial Protection Bureau’s (CFPB) complaint against NDG Financial Corp. and how it represented a continuing evolution of the CFPB’s theory that certain state law violations might be predicates for federal law claims of unfair, deceptive, and abusive conduct (UDAAP). We refer to this as the “CashCall theory,” because the CFPB first articulated this novel approach to UDAAP enforcement in its complaint against CashCall, Inc. In December, the CFPB took two more steps down this road.

What’s Driving the CFPB’s Latest Administrative Enforcement Action?

Dec 10 2015

The Consumer Financial Protection Bureau’s (CFPB) latest enforcement action suggests that the CFPB may seek to use its administrative enforcement authority to pursue claims of unfair or deceptive conduct that would otherwise be time-barred and that pre-date the agency’s formation. The CFPB Director’s ultimate decision on these issues—and any court decisions that may result from any appeal—are likely to have widespread implications for the agency’s enforcement powers.

On November 18, the CFPB filed a Notice of Charges (essentially an administrative complaint) against Integrity Advance, LLC and its CEO and president, James R. Carnes. The Notice of Charges, which was made public last week, alleges that from May 15, 2008 through December 2012, Integrity Advance and Carnes engaged in unfair and deceptive conduct, and that Integrity Advance also committed violations of the Truth in Lending Act (TILA) and the Electronic Funds Transfer Act (EFTA) in the origination of online payday loans.

CFPB Expands Its Targeting of For-Profit Schools and Pushes Jurisdictional Limits

Dec 04 2015

After suing two of the nation’s largest for-profit school chains, ITT and Corinthian, the Consumer Financial Protection Bureau (CFPB) is continuing its push to police the for-profit school industry. Bridgepoint Education, Inc. recently disclosed that on August 10, 2015, Bridgepoint and Ashford University received Civil Investigative Demands (CIDs) from the CFPB related to the CFPB’s investigation to determine “whether for-profit post-secondary-education companies” have engaged in unlawful acts or practices related to the advertising, marketing or origination of private student loans. And on October 29, 2015, the CFPB filed a lawsuit to compel the Accrediting Council for Independent Colleges and Schools (ACICS) to comply with a CID that the CFPB had issued to it on August 25, 2015. That CID concerns an investigation into possible legal violations “in connection with accrediting for-profit colleges.” These two actions suggest the CFPB will continue to pursue the for-profit industry, including associated entities such as ACICS that provide accreditation to such schools, apparently without concern over possibly exceeding its jurisdictional limits. This alert reviews the CFPB’s cases against for-profit schools to date and discusses the implications of the CIDs issued to Bridgepoint and ACICS.

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