BillingTree survey shows how much CFPB concerns have diminished


Key findings of BillingTree’s sixth annual Operations and Technology Survey involving collections, recoveries and more, are showing just how much of an impact all of the widespread changes at the Consumer Financial Protection Bureau are leaving on service providers.

For the first time in the history of the survey, BillingTree found that concerns over CFPB regulations ranked lower than all other compliance issues, including payment card industry (PCI) compliance, mandates from NACHA – The Electronic Payments Association, as well as obligations under the Electronic Fund Transfer Act (EFTA) and Regulation E.

BillingTree contends this overall trend is consistent with prior survey predictions after the emergence of the PCI 3.0 compliance rule changes in 2015.

“However, with CFPB plans to release a proposed rule concerning collectors’ communications practices and consumer disclosures (involving the Fair Debt Collection Practices Act), there is a chance this area will experience further disruption,” survey orchestrators said.

Beyond compliance concerns, BillingTree highlighted survey results — collected from more than 150 agencies of all sizes — cited innovative technologies to expand payment channels and enhance collection effectiveness as top factors for growth.

Survey results mentioned the growing consumer demand for mobile payments is driving change, with text payments cited by respondents as the most desired payment option.

However, rather than mobile text to pay being held back by technology limitations, BillingTree learned it is the perceived compliance risks putting the brakes on adoption. This technology out-ranked agent-assisted payment authorization and notification as the payment option carrying the greatest compliance risk.

One respondent stated, “These technologies are available, but with no safe harbor.”

When asked about future technology plans, the survey showed mobile device presentment and payment ranked second at 29 percent, just behind online portals at 31 percent.

Alternative forms of payment including PayPal, e-cash and Bitcoin ranked high, with 24 percent of respondents considering adoption, which suggests recover organizations are ready to embrace consumer technology trends and expand payment channels.

Consistent with prior years, the BillingTree survey indicated Interactive Voice Response (IVR) adoption continues to grow, with 36 percent relying on IVR compared to 28 percent in 2017.

BillingTree will be presenting the survey findings during a free webinar on Thursday beginning at 1 p.m. ET. Registeration can be completed here.

To request a complimentary copy of the 2018 ARM Industry Operations, Technology & Payments report, go to this website.

Trump signs resolution negating auto lending guidance


The 2013 indirect auto lending guidance from what was previously called the Consumer Financial Protection Bureau now is officially off the books.

On Monday, President Trump signed into law a bipartisan Congressional resolution disapproving a rule that was in the form of guidance issued by the regulator that now calls itself the Bureau of Consumer Financial Protection about indirect auto finance company compliance with the Equal Credit Opportunity Act (ECOA) and its implementing regulation.

“I thank the President and the Congress for reaffirming that the bureau lacks the power to act outside of federal statutes,” acting director Mick Mulvaney said in a statement released by the regulator. “As an executive agency, we are bound to enforce the law as written, not as we may wish it to be. In this case, the initiative that the previous leadership at the Bureau pursued seemed like a solution in search of a problem. Those actions were misguided, and the Congress has corrected them.

“I want to make it abundantly clear that the bureau will continue to fight unlawful discrimination at every turn. We will vigorously enforce fair lending laws in our jurisdiction, and will stand on guard against disparate treatment of borrowers,” Mulvaney continued.

“I am heartened that the people, through their elected representatives, have corrected this instance of bureau overreach. I look forward to working with the Congress to bring much-needed structural accountability to the Bureau so that our cherished democratic principles are supported and the rights of every American consumer are always protected,” Mulvaney went on to say.

The stroke of Trump’s pen came with cheers from the industry.

“This is a great day for consumers, as Congress and the president have helped to preserve their ability to receive auto loan discounts from local dealerships,” National Automobile Dealers Association president Peter Welch said in this blog post.

“NADA congratulates the U.S. House and Senate for their focus and perseverance on this issue, and the president for signing the new law to protect consumers,” Welch continued.

American Financial Services Association president and chief executive officer Chris Stinebert shared a similar sentiment.

“We welcome the action of Congress and the President,” Stinebert said in a statement sent to SubPrime Auto Finance News. “We are working with our members to assess the impact on the vehicle financing industry as it continues to fully comply with all state laws and regulations on vehicle financing.”

Stinebert likely will be talking about this development and more when he appears during the 22nd annual Non-Prime Auto Finance Conference hosted by the National Automotive Finance Association beginning on May 30 in Fort Worth, Texas.

Before the measure landed on Trump’s desk, the House earlier approved S.J. Res. 57, which was written to overturn the much-criticized guidance document under the authority of the Congressional Review Act, by a bipartisan 234-175 majority. The Senate had already passed the joint resolution on April 18 by a 51-47 margin.

Mulvaney went into more detail regarding the impact of what Trump and federal lawmakers have done.

“The enactment of this Congressional Review Act (CRA) resolution does more than just undo the bureau’s guidance on indirect auto lending. It also prohibits the bureau from ever reissuing a substantially similar rule unless specifically authorized to do so by law,” Mulvaney said.

“Given a recent Supreme Court decision distinguishing between antidiscrimination statutes that refer to the consequences of actions and those that refer only to the intent of the actor, and in light of the fact that the bureau is required by statute to enforce federal consumer financial laws consistently, the bureau will be reexamining the requirements of the ECOA,” he continued.

“Today’s action also clarifies that a number of bureau guidance documents may be considered rules for purposes of the CRA, and therefore the bureau must submit them for review by Congress,” Mulvaney went on to say.

“The bureau welcomes such review, and will confer with Congressional staff and federal agency partners to identify appropriate documents for submission,” he added.

Credit Acceptance sees increased activity for originations and compliance


As the subprime auto finance company’s field representatives are generating more business from their active dealer network, state and federal regulators are keeping the compliance team at Credit Acceptance busy, too.

The latest filing to the Securities and Exchange Commission showed Credit Acceptance has encountered nine different regulatory matters since December 2014, including actions from the attorneys general in New York, Massachusetts, Maryland and Mississippi, as well as officials from the Consumer Financial Protection Bureau and the Federal Trade Commission.

The newest addition came when Credit Acceptance indicated that on April 10 the company was contacted by the New York Department of Financial Services, Financial Frauds & Consumer Protection Division (DFS). According to the SEC paperwork, Credit Acceptance said that DFS believes that the company may have:

— Violated the law relating to fair lending

— Misrepresented to consumers information related to GPS starter interrupt devices

— Provided inaccurate information in the course of a DFS supervisory examination

“We have not received any written communication from the DFS regarding its conclusions,” Credit Acceptance said in the filing. “We have provided information to the DFS, as requested, but cannot predict the eventual scope, duration or outcome at this time. As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this inquiry.”

During the company’s quarterly conference call with investment analysts, Credit Acceptance Brett Roberts chief executive officer responded as to whether state regulators are taking a great interest in how GPS and starter interrupt devices are being used since the company previously has been questioned about them by the FTC.

“I think it’s hard to compare at this point. It’s very early,” Roberts said. “I think what we disclosed is really what we know at this point. We had a call. The substance of the call is what’s described in the 10-Q, and we're waiting for something in writing.”

Later in the call, Roberts also addressed how the regulatory environment has intensified.

“I think that maybe the main point here is in the last four years, as you point out, we have seven, eight, nine things that we’ve disclosed now. I think in the 24 years I was with the company before that, I don't think we had any. So clearly, something's changed in the regulatory environment,” Roberts said.

“We’re under a lot of scrutiny. We have been for quite a while now,” he continued. “The regulators have a job to do. We respect that. They certainly have their prerogative to ask questions and challenge the things that we’re doing, and it’s our job to operate in a highly compliant way, and we take that seriously. And what’s disclosed in the 10-Q is just where all those matters stand at this point.

“As you said, I don’t want to generalize. We've been asked a lot of questions. We’ve provided a lot of answers, and that’s where it stands at this point,” Roberts went on to say.

First-quarter performance

During the first quarter, Credit Acceptance generated an 18.5-percent year-over-year increase in the number of contracts originated through its active dealer network, which grew by 11.6 percent.

All told, Credit Acceptance added 112,345 contracts to its portfolio in Q1 through 8,762 active dealers, which the company defines as a store that finalizes at least one deal during the quarter.

The average volume per active dealer rose 5.8 percent to nearly 13 contracts per store.

When addressing that growth, Robert told a Wall Street watcher “that could cause you to conclude that the environment was easier. But at the same time, we've made a big investment in our sales force, which could also be driving that number. It’s hard to break out what’s internal and what’s external there.

Roberts added later in the call, “We can see the growth that came from the people that we’ve hired since the expansion started. In rough terms, they grew about twice as fast as the overall book did, so that still leaves decent growth in the sales reps that were here before the expansion started. So we’re seeing faster growth from the new group but strong growth from everywhere.”

That Q1 origination activity as well as collection on the contracts already in its portfolio all combined to push Credit Acceptance to post consolidated net income of $120.1 million, or $6.17 per diluted share. That’s up from $93.3 million, or $4.72 per diluted share, for the same period in 2017.

The company computed that its adjusted net income, a non-GAAP financial measure, for the three months that ended March 31 came in at $118.9 million, or $6.11 per diluted share, compared to $92.3 million, or $4.67 per diluted share, a year earlier.

Accounting discussion

Credit Acceptance senior vice president and treasurer Doug Busk responded to multiple questions about how the company is bracing for Current Expected Credit Loss (CECL) requirements outlined by the Financial Accounting Standards Board (FASB). Some organizations have to begin complying with these new mandates by the end of next year.

After being peppered earlier in the call, Busk offered his understanding of what accounting regulators are asking finance companies like Credit Acceptance to do.

“CECL is an accounting methodology where, as opposed to recognizing a loss when some event occurs, a certain amount of delinquency or a repossession or a sale of a car, you anticipate that loss at the time you originate the loan, and then book a loss upfront,” Busk said. “The flip side of that is, over time, cash equals accounting, so you'd end up recording some loss at loan origination, and then, conceptually here, then recognizing more revenue over time.

“The fair value option is, you're looking at coming up with an estimate of the forecasted cash flows that the portfolio would generate, and you’re basically calculating an exit price, which represents the fair value of the portfolio at that point, which as I mentioned earlier, would include an estimate of a discount rate, which would represent the return associated with exiting the portfolio,” he continued.

What investment analysts want to know is exactly how Credit Acceptance is going to handle these changes.

“Well, we’re still assessing both alternatives, and our objective would be to end up with the accounting that most closely reflects the economic reality of our business,” Busk said. “So we’re in the process of assessing both of those things. Once we have something material to report, we’ll disclose it in our public filings.

“If neither of those methods line up with the underlying economics of our business, we'll continue to include non-GAAP information in our press release to give shareholders better insight into how the business is actually performing,” he continued.

“We’re obviously working on it. We're working on it hard, but we're not in a position to disclose anything until we've completed our work and fully understand all the issues,” he added.

House passes resolution effectively repealing CFPB vehicle finance guidance


Now it just needs President Trump’s signature.

Much to the delight of industry leaders, the U.S. House of Representatives voted on Tuesday to repeal the Bureau of Consumer Financial Protection’s controversial 2013 guidance on indirect auto financing.

The House approved S.J. Res. 57, which would overturn the much-criticized guidance document under the authority of the Congressional Review Act, by a bipartisan 234-175 majority. The Senate had already passed the joint resolution on April 18 by a 51-47 margin.

“The CFPB’s 2013 indirect auto lending guidance was a harmful, ill-advised solution that purported to solve the problem of a disparate impact theory that only existed in some mythical CFPB fairyland,” National Independent Automobile Dealers Association chief executive officer Steve Jordan said.

“The reality is automobile dealers had a rich history of using indirect lenders to provide financial transactions in the best interests of the driving public long before the CFPB decided to interfere. NIADA is thrilled Congress has removed the CFPB from that equation,” Jordan continued.

The guidance, issued in March 2013, claimed dealer discretion on interest rates creates a “significant risk” of unintentional disparate impact discrimination and spelled out the bureau’s intention to pursue enforcement actions on that basis.

“This vote indicates that American consumers have spoken to their elected representatives to say they want competitive pricing on vehicle loans,” said Chris Stinebert, president and CEO of the American Financial Services Association, a trade association representing vehicle finance companies.

“We are an industry that competes for consumers’ trust as well as their business while helping them acquire vehicles that support their transportation needs,” Stinebert continued.

AFSA explained The CFPB’s vehicle finance lending policy, issued through guidance, directed fundamental market changes to the industry, which was already regulated by other federal agencies and state laws and regulations. AFSA added the guidance was issued without any public comment, consultation with other federal agencies or transparency.

Its repeal will once again allow dealers to set contract terms and rates for third-party financing without being subject to CFPB enforcement.

“Today’s action furthers the bipartisan effort that began more than five years ago to preserve the ability of local dealerships to offer discounted auto loans to their customers. We commend House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and Rep. Lee Zeldin (R-N.Y.) for their leadership on this issue. As the measure has now cleared Congress, we look forward to the expected signature by the president,” National Automobile Dealers Association president and CEO Peter Welch said.

“The joint resolution is a measured response to the CFPB’s attempt to avoid congressional scrutiny by issuing ‘guidance’ that imposed a new policy without necessary procedural safeguards. Enactment of S.J.Res. 57 will help ensure every consumer’s right to get a discounted loan in the showroom,” Welch continued.

“Every customer deserves to be treated honestly and fairly when purchasing or financing a car or truck, and there is no room for discrimination of any kind, period. We continue to encourage all local dealerships to take up NADA’s voluntary fair credit compliance program, which is based on a U.S. Department of Justice model. It helps eliminate fair credit risk in auto lending while ensuring a competitive marketplace,” Welch went on to say.

Critics have pointed out the CFPB’s theory is based on shaky methodology for determining disparate impact, and the guidance was put in place without comments from stakeholders, public hearings or studies of its effect on the cost of credit to consumers.

“Without seeking any public comment or studying the impact on consumer credit,” NIADA senior vice president of legal and government affairs Shaun Petersen said, “and with no evidence to back up its claim, the bureau issued a rule under the guise of guidance to limit dealers’ ability to meet their customers’ needs when shopping for credit.

“We applaud Congress for taking steps to rescind the bureau’s overreach,” Petersen added.

The resolution followed a December opinion from the Government Accountability Office that defined the guidance document as a CFPB rule for the purposes of the CRA, which meant it could be struck down by a simple majority vote of both houses of Congress.

The (AIADA) today applauded the United States House of Representatives' passage of a joint resolution annulling the Consumer Financial Protection Bureau's controversial auto lending guidance, which sought to limit a consumer's ability to receive a discounted auto loan from a dealer. The resolution, already passed by the Senate, will now go to President Trump's desk for his signature.

“Today’s vote by the House is a reminder that our government can still stand up for the little guy,” American International Automobile Dealers Association President and CEO Cody Lusk said. “Auto dealerships are primarily small family businesses, and never should have been targeted by the CFPB, which has strayed from its mission of regulating massive Wall Street financial institutions.

“Today's vote allows dealers to return to offering their customers more competitive financing choices and opportunities,” Lusk went on to say.

The White House has issued a statement in support of the resolution, and President Trump is expected to sign it into law.

“CBA members are committed to ensuring strong fair lending policies and practices are in place at their banks. However, the bureau’s 2013 Auto Bulletin was a backdoor attempt at rulemaking and failed to provide banks with a clear blueprint to ensure compliance,” Consumer Bankers Association president and CEO Richard Hunt said.

“We thank Representative Lee Zeldin (R-N.Y.) for leading the effort in the House and Speaker Paul Ryan for bringing the resolution to the House floor for a vote. We also thank Senators Jerry Moran (R-Kan.), Pat Toomey (R-Penn.) and Majority Leader Mitch McConnell for their efforts in the Senate. We encourage President Trump to sign this resolution,” Hunt went on to say.


Wells Fargo enters consent orders with $1 billion civil penalties


Wells Fargo said Friday it has entered consent orders with the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau, under which the company will have to pay civil penalties totaling $1 billion.

The consent orders with the OCC and CFPB deal with matters involving Wells Fargo’s compliance risk management program in addition to “issues regarding certain interest rate-lock extensions on home mortgages and collateral protection insurance (CPI) placed on certain auto loans,” the company said in a news release.

Wells Fargo said the issues around interest rate-lock extensions and CPI have been disclosed previously.

The consent order also requires Wells Fargo to submit plans on how it is continuing to augment compliant and risk management as well as how it is approaching customer remediation.  Those plans are to be reviewed by the Wells Fargo board.

“For more than a year and a half, we have made progress on strengthening operational processes, internal controls, compliance and oversight, and delivering on our promise to review all of our practices and make things right for our customers,” said Timothy Sloan, president and chief executive officer of Wells Fargo, in a news release.

“While we have more work to do, these orders affirm that we share the same priorities with our regulators and that we are committed to working with them as we deliver our commitments with focus, accountability, and transparency,” Sloan said. “Our customers deserve only the best from Wells Fargo, and we are committed to delivering that.”

4 trade associations cheer Senate vote to repeal CFPB auto finance bulletin


Four of the industry associations with significant presence on Capitol Hill celebrated on Wednesday after the U.S. Senate passed a Congressional Review Act Resolution (S.J. Res. 57) to repeal the 2013 Auto Finance Bulletin issued by the Consumer Financial Protection Bureau.

To recap, industry representatives maintained that the CFPB’s 2013 Bulletin on indirect auto financing and fair lending guidance was issued “without any public comment, consultation with other regulatory agencies or transparency." They added the 2013 bulletin created an “environment of uncertainty, where greater clarity is needed, and should have been provided as a formal notice and comment rulemaking, with appropriate input from all stakeholders.”

On Wednesday, the Senate approved S.J. Res 57 by a 51-47 vote. The vote on the resolution, under the Congressional Review Act (CRA), disapproves of the guidance.

“The vehicle finance market in the United States is a highly-competitive market, which benefits consumers as dealers and lenders discount pricing and loan rates to sell and finance new and used vehicles,” said Chris Stinebert, president and chief executive officer of the American Financial Services Association, a trade association representing vehicle finance companies. “The vote today is in the best interests of the car-buying public.”

The House of Representatives is expected to vote on its version of the bill soon, according to industry representatives.

“CBA member banks are strongly committed to ensuring fair lending policies and practices while fulfilling consumers’ financial needs. For that reason, it is critical to have clear rules and guidance from regulators so our member banks can be certain of compliance. The CFPB’s 2013 Auto Bulletin was a backdoor attempt at rulemaking without notice or comment and lacked the clarity needed by lenders,” Consumer Bankers Association President and CEO Richard Hunt said.

“We thank Senators Jerry Moran (R-Kan.) and Pat Toomey (R-Penn.) for leading the effort in the Senate and Majority Leader Mitch McConnell for bringing the resolution to the Senate floor for a vote,” Hunt continued. “We encourage the House to swiftly pass this resolution as well.”

From the dealer side, the sentiment poured in with similar tones, starting with National Automobile Dealers Association president and CEO Peter Welch.

“S.J.Res. 57 continues the bipartisan effort that began years ago to preserve the ability of local dealerships to offer discounted auto loans to their customers, and Sen. Moran is to be commended for his leadership on this issue,” Welch said.

“S.J.Res. 57 is a narrowly-tailored joint resolution that does not amend or change any fair credit law or regulation or impair their enforcement. The legislation is a measured response to the CFPB’s attempt to regulate the $1.1 trillion auto financing market, avoid congressional scrutiny by issuing ‘guidance,’ and impose a new policy without necessary procedural safeguards,” Welch continued.

“We hope this CRA resolution sees swift action in the House of Representatives, which has already demonstrated strong bipartisan support for repealing the CFPB’s flawed guidance and preserving important auto loan discounts for consumers,” Welch went on to say.

Cody Lusk, who is president and CEO of the American International Automobile Dealers Association, also shared his upbeat reaction.

“The CFPB, established to regulate Wall Street, never should have involved itself in dealership operations,” Lusk said. “Today’s vote is confirmation to dealers everywhere that the agency overreached when issuing its 2013 indirect auto financing guidance. The agency concluded, without accurate supporting data, that dealerships were using race as a determining factor when issuing loans. Today the senate has righted a wrong.”

Not all assessments about Wednesday’s developments were as rosy as what these four associations shared. For example, when asked about the Senate’s attempt to roll back the effort to prevent “discrimination” in auto-finance market, Buckley Sandler partner John Redding recently made these points.

“While the CFPB’s 2013 Bulletin on dealer markup is considered offensive by many in the industry, the Senate bill introduced last month to eliminate it is not going to change much,” Redding said.

“The pursuit to eliminate the bulletin may have more to do with the fact that the ‘industry has found it offensive that (lenders) be responsible at the finance source level for actions that they don’t undertake,” he continued.

“If you get rid of the bulletin,” Redding went on to say, “I’m not sure it changes a whole lot at the bureau except for the ability of industry to point at the bulletin and say, ‘I did everything you told me to do in your rule, and yet you are coming after me for doing exactly that.’”

Even more extreme was the negative reaction from Jerry Robinson, a former worker at Santander Consumer USA and a member of the Committee for Better Banks, which describes itself as a coalition of bank workers, community and consumer advocacy groups and labor organizations coming together to improve conditions in the banking industry.

“I worked in auto lending for almost six years,” Robinson said in a statement sent to SubPrime Auto Finance News. “Most of my customers desperately needed a car to drive to work and support their family, and Santander Consumer was all too willing to capitalize on that desperation — with tricks like impossibly high interest rates and discriminatory loans.

“The Senate’s actions today were a big win for injustice and inequality — and they endanger working communities across the United States,” Robinson added.

CFPB roundup: Measures to remove auto finance guidance and Mulvaney on the Hill


In another busy week of activities associated with the Consumer Financial Protection Bureau, the American Financial Services Association joined with the National Automobile Dealers Association and other sister trade associations in supporting S.J. Resolution 57 to disapprove the CFPB’s 2013 auto finance guidance.

On March 22, Sen. Jerry Moran (R-Kan.) introduced S.J. Res. 57. This legislation has been co-sponsored by 20 senators. Then earlier this week, Rep. Lee Zeldin (R-N.Y.) introduced H.J Resolution 132, the House companion to S.J. Res. 57.

AFSA explained these two pieces of legislation are unique Congressional Review Act (CRA) resolutions. As such, these resolutions need only a simple majority to pass and cannot be filibustered in the Senate.

The associations reiterated that the CFPB auto financing policy, issued through guidance, directed fundamental market changes “without a transparent rulemaking process to assess the impact on consumers.

“This guidance was issued without any public comment, consultation with CFPB’s sister agencies or transparency,” AFSA continued in a statement.

“AFSA supports Sen. Moran and Rep. Zeldin for taking the lead on this initiative. A vote in Congress is possible later this month,” the organization went on to say.

NADA explained that it supports S.J. Res. 57/H.J. Res. 132 because the CFPB’s guidance pressured indirect auto finance companies to eliminate consumer discounts on auto credit by dealers. 

“This policy, issued without prior notice or public comment, would have raised credit costs for auto buyers,” NADA said.

“Additionally, many members of Congress view the CFPB’s guidance as a roundabout attempt to regulate dealers, despite the dealers’ statutory exemption from the CFPB’s jurisdiction (Sec. 1029(a) of Dodd-Frank).

Enactment of S.J. Res. 57/H.J. Res 132 would deter similar improper regulatory action in the future,” according to NADA, which also told dealers that they are encouraged to contact their senators and representatives to voice their support for this legislation.

Mulvaney on Capitol Hill

Also this week, acting director CFPB director Mick Mulvaney appeared during hearings orchestrated by both the House Committee on Financial Services as well as the Senate Banking Committee.

According to his written testimony to each chamber and shared by the CFPB, Mulvaney gave a compliance update that likely should please auto finance companies and dealerships large and small.

“In another change, the bureau practice of ‘regulation by enforcement’ has ceased,” Mulvaney told lawmakers. “The bureau will continue to enforce the law. That is our job, and we take it seriously.  However, people will know what the rules are before the bureau accuses them of breaking those rules.

“Through the changes I have discussed and others, I am making sure the bureau is operating within its statutory mandate, is accountable for its actions, and is doing the American people’s business in ways that are efficient and effective,” he continued.

Coinciding with his visits to Capitol Hill, the bureau issued a request for information (RFI) on its handling of consumer complaints and inquiries. The CFPB is seeking comments and information from interested parties to assist the bureau in assessing its handling of consumer complaints and consumer inquiries and, consistent with law, considering whether changes to its processes would be appropriate.

To date, the bureau said it has received 1.5 million consumer complaints.

This is the 12th in a series of RFIs announced as part of Mulvaney’s call for evidence to ensure the bureau is fulfilling its proper and appropriate functions.

“This RFI will provide an opportunity for the public to submit feedback and suggest ways to improve outcomes for both consumers and covered entities,” the CFPB said.

The series of RFIs coupled with other actions by the bureau under Mulvaney’s leadership frustrated Rep. Maxine Waters (D-Calif.), ranking member of the House Committee on Financial Services.

“Let me say at the outset that Mr. Mulvaney is not the acting director of the Consumer Financial Protection Bureau,” Waters said in her opening statement during this week’s hearing.

“He was illegally appointed by President Trump in a move that blatantly contradicts the Dodd-Frank statute, which is very clear that the deputy director of the agency shall serve as acting director in the case of absence or unavailability of the director,” she continued.

“I want to be very clear that Democrats’ participation in this hearing is not in any way an acknowledgment of Mr. Mulvaney’s legitimacy at the Consumer Bureau. Nonetheless, given the many impactful and indeed harmful decisions Mr. Mulvaney is making with regard to the Consumer Bureau, it is necessary for us to engage with him in an oversight capacity here today while the courts decide who should actually be in charge,” Waters went on to say.

The California lawmaker later added, “And it is very clear that Mr. Mulvaney is indeed carrying out this president’s agenda at the Consumer Bureau. He has taken a series of actions that weaken the agency’s ability to carry out its important mission and benefit the predatory actors that the agency is designed to police.”

Mulvaney’s appearance before the House contingent can be watched here or through the window at the top of this page.

CFPB acting director requests 4 major changes to bureau operations


As another state in the Northeast established an consumer protection agency that resembles the one at the federal level, the acting director of the Consumer Financial Protection Bureau included what he called a “request that Congress make four changes to the law to establish meaningful accountability for the bureau.”

Mick Mulvaney made the declaration this week as the CFPB released its semi-annual report highlighting the bureau’s work. This is the first report issued by Mulvaney, and it includes his four recommendations for statutory changes to the bureau.

“The bureau is far too powerful, with precious little oversight of its activities,” Mulvaney said. “The power wielded by the director of the bureau could all too easily be used to harm consumers, destroy businesses or arbitrarily remake American financial markets.

“I’m requesting that Congress make four changes to the law to establish meaningful accountability for the bureau. I look forward to discussing these changes with Congressional members,” he went on to say.

In the report’s introduction letter, Mulvaney recommends four changes to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

The first recommendation is to fund the Bureau through Congressional appropriations. The second is to require legislative approval of major rules.

His third recommendation is to ensure that the director answers to the president in the exercise of executive authority. And the fourth is to create an independent inspector general for the bureau.

“I have no doubt that many members of Congress disagree with my actions as the acting director of the bureau, just as many members disagreed with the actions of my predecessor,” Mulvaney said in that opening letter. “Such continued frustration with the bureau’s lack of accountability to any representative branch of government should be a warning sign that a lapse in democratic structure and republican principles has occurred.

“This cycle will repeat ad infinitum unless Congress acts to make it accountable to the American people,” he added.

The complete semi-annual report from the CFPB can be downloaded here.

Initial reaction to Mulvaney moves

As Mulvaney reference about the assessment of bureau performance by lawmakers, observers who closely watch activities on Capitol Hill and beyond offer reaction that demonstrated the polar-opposing views of the potential CFPB changes.

Consumer Bankers Association president and chief executive officer Richard Hunt gave an upbeat assessment of Mulvaney’s recommended statutory changes to the CFPB.

“We appreciate acting CFPB director Mick Mulvaney’s goal of bringing greater accountability to the bureau,” Hunt said

“We look forward to hearing further details from acting director Mulvaney on his policy proposals in his upcoming testimony before Congress, and we strongly believe an independent, bipartisan commission at the CFPB — not subject to the political shifts of changing administrations — is the best way forward to provide for accountability, certainty and stability at the CFPB,” Hunt went on to say.

Meanwhile, consumer advocacy organization Allied Progress sent a press release to SubPrime Auto Finance News in which the subject line blared, “Mulvaney Goes in for the Kill, Asks Congress to Cripple the CFPB.”

Karl Frisch, executive director of Allied Progress, elaborated on the organization’s stance.

“Mick Mulvaney knows the work of the CFPB is extremely popular with consumers. That is why he didn’t propose the outright elimination of the bureau – though that is effectively what he is seeking. The CFPB was designed to be an independent financial watchdog so that politicians in D.C. who take millions from Wall Street special interests can’t easily stop its important work,” Frisch said.

He continued, “Mulvaney wants to put members of Congress in charge of the CFPB’s funding and require congressional approval of its consumer protection rules because he knows it will grind the bureau’s work holding big banks, predatory lenders and other bad financial actors to a halt. Who better to go to bat against the CFPB than a bunch of D.C. politicians on the take from Wall Street special interests.”

“The courts have already ruled that it is perfectly constitutional to prohibit the President from firing the CFPB’s director without cause. Under the law, the President can appoint a new director when the previous director steps down or their five-year term expires. That’s not a good enough for Mulvaney and Wall Street. They won’t stop until the CFPB’s director constantly wonders if defending consumers and holding industry accountable on any given day will cost them their job,” Frisch concluded.

CFPB-like agency now in New Jersey

In related developments, New Jersey joined Pennsylvania in creating a regulator that acts similar to the CFPB, but on a state level.

New Jersey attorney general Gurbir Grewal recently announced that Governor Phil Murphy will nominate Paul Rodriguez to serve as the director of the New Jersey Division of Consumer Affairs, the lead state agency charged with protecting consumers’ rights, regulating the securities industry and overseeing 47 professional boards.

Grewal explained Rodriguez’s selection highlights the administration’s efforts to fill the void left by the Trump Administration’s “pullback” of the CFPB, fulfilling one of Murphy’s promises to create a “state-level CFPB” in New Jersey.

Rodriguez, a New Jersey native, is currently serving as acting counsel to New York City Mayor Bill de Blasio where he provides advice and strategic guidance to the mayor and top administrative officials on legal, management and policy objectives. As a member of Mayor de Blasio’s senior management team, Rodriguez was dedicated to ensuring a fairer and more just city for all.

“As the federal government abandons its responsibility to protect consumers from financial fraudsters, it is more important than ever that New Jersey picks up the mantle to protect its own residents,” Grewal said. “Paul has the energy and ability necessary to lead the Division as we work to protect New Jerseyans from fraud and professional misconduct in the marketplace.”

During his time in city government, Rodriguez managed numerous aspects of de Blasio’s human rights, equity and “good government” reform agendas, including transparency, worker equity and expansions to the Human Rights Law.

Before joining the de Blasio administration, Rodriguez was an associate at Simpson Thacher & Bartlett in New York City where he worked in a variety of areas, including financing transactions, securities regulation, and intellectual property. His pro bono work for the firm included assisting with the negotiation of a multi-million dollar framework agreement on behalf of indigenous tribes in Peru.

Rodriguez also served as the Simpson Thacher & Bartlett extern to Brooklyn Legal Services Corporation A, representing nonprofits dedicated to serving low-income communities. He previously served as a projects specialist and senior staff member for U.S. Senator Frank Lautenberg, specializing in transportation, infrastructure, organized labor, and homeland security.

Rodriguez will begin serving as acting director of the Division of Consumer Affairs on June 1. Murphy will formally nominate Rodriguez to the position, which is subject to the advice and consent of the State Senate.

In the interim, Kevin Jespersen will serve as acting director of the division, a position currently held by Sharon Joyce, who is transitioning to lead the Office of Attorney General’s newly created Office of the New Jersey Coordinator of Addiction Response and Enforcement Strategies (NJ CARES).

“Kevin is a consummate professional and a trusted member of my leadership team. His willingness to step in as acting cirector ensures that the Division of Consumer Affairs will be in capable hands during this time of transition,” Grewal said. “I am grateful for all Sharon has accomplished during her tenure in Newark, both as deputy director of the Division of Law and as acting director of the Division. Now that she is free to dedicate herself fully to her role as director of NJ CARES, I look forward to Sharon’s continued successes as she leads New Jersey’s fight to end the deadly scourge of addiction.”

All of the developments in New Jersey arrived less than a year after Pennsylvania’s attorney general took similar steps in creating an agency like the CFPB.

FTC responds to CFPB info request about CIDs


Industry associations and private and publicly traded companies aren’t the only entities replying to a request for information issued by the Consumer Financial Protection Bureau.

Last week, the Federal Trade Commission’s Bureau of Consumer Protection (BCP) filed a comment to the CFPB in response to that agency’s request for information to help it assess the process it uses to issue civil investigative demands (CIDs).

The FTC acknowledged CIDs are a key tool in investigating potential law violations and bringing enforcement actions to stop illegal conduct and provide relief to consumers. A CID from either the FTC or the CFPB may seek written answers to interrogatories, documents, tangible things, oral testimony, or some combination of all of these.

In particular, the CFPB sought input "on how best to achieve meaningful burden reduction or other improvements," while continuing to achieve its statutory and regulatory objectives. The FTC’s comment describes its experience with CIDs, including recent reforms.

“We applaud the Bureau of Consumer Financial Protection for undertaking a critical assessment of its investigative processes,” said Thomas Pahl, acting director for BCP. “We hope our comment describing BCP’s experience with CIDs, including recent reforms, is valuable to the bureau in making its investigative processes efficient and effective.

“We look forward to a continued partnership with the Bureau on this and other issues in pursuing the agencies’ shared goal of protecting American consumers,” Pahl continued.

In response to the request for comment, the FTC’s Bureau of Consumer Protection explained its procedures for issuing consumer protection CIDs, provided feedback on Bureau of Consumer Financial Protection processes in response to specific requests for information, and outlined generally reforms that the FTC’s Bureau of Consumer Protection implemented in July 2017 related to consumer protection CIDs.

Those measures include:

—Adding more detail about the scope and purpose of investigations to give companies a better understanding of the information sought

—Limiting the relevant time periods to minimize undue burden on companies and focus the commission’s finite resources on investigating harms that have an immediate impact on consumers

—Shortening and simplifying the instructions for providing electronically stored data

—Increasing response times for CIDs, where appropriate

The commission vote approving the comment was 2-0.

New House measure surfaces to establish 5-member commission at CFPB


As the Consumer Financial Protection Bureau issued another issued a request for information (RFI) — this time about its adopted regulations and new rulemaking authorities — associations strongly endorsed legislation introduced in the House of Representatives this week that would establish a Senate-confirmed, bipartisan commission at the CFPB.

A five-member body that would oversee the bureau is the foundation of H.R. 5266, which was introduced by Rep. Dennis Ross, a Florida Republican and Rep. Kyrsten Sinema, an Arizona Democrat.

During negotiations on the Dodd-Frank Act, the Consumer Bankers Association (CBA) recollected that then-House Financial Services Committee chairman Barney Frank (D-Mass.) originally drafted legislation, which Democrats supported, creating the CFPB as a bipartisan board.

Now more than five years later, H.R. 5266 is working its way through Capitol Hill as a measure also and cosponsored by Rep. David Scott (D-Ga.) and Ann Wagner (R-Mo.).

“It is beyond comprehension to give a single director nearly unilateral authority over every consumer and financial institution in the country. We applaud this bipartisan solution establishing a Senate-confirmed, bipartisan commission — like nearly all other regulatory agencies in the country — to bring greater stability and balance to the CFPB,” CBA president and chief executive officer Richard Hunt said.

“A commission prevents the regulatory pendulum from swinging wildly back-and-forth every time a new person sits in the Oval Office and will help ensure the CFPB fulfills its mission of consumer protection,” Hunt continued.

“We thank representatives Ross, Sinema, Scott and Wagner for their leadership on this important issue and acting CFPB director Mulvaney for bringing the CFPB back in line with its Congressional mandate,” Hunt went on to say.

Along with Hunt, the president and CEO of the National Association of Federally-Insured Credit Unions (NAFCU) applauded the action.

“NAFCU has long advocated for a commission structure at the CFPB to provide long term continuity and stability,” Dan Berger said. “A commission allows for input from differing views to form strong public policy. Until that point, we appreciate working with acting director (Mick) Mulvaney and note his continued support of the credit union industry.”

As lawmakers debate how the agency should operate, the CFPB is continuing on with its business with its latest RFI.

The bureau is seeking comments and information from interested parties to assist the Bureau in considering whether it should amend any rules it has issued since its creation or issue rules under new rulemaking authority provided for by the Dodd-Frank Act. This is the eighth in a series of RFIs announced as part of Mulvaney’s call for evidence to ensure the bureau is fulfilling its proper and appropriate functions to best protect consumers.

“This RFI will provide an opportunity for the public to submit feedback and suggest ways to improve outcomes for both consumers and covered entities. The next RFI in the series will address the bureau’s inherited regulations and inherited rulemaking authorities, and will be issued next week,” the agency said.

The RFI on adopted rules is available here.

The CFPB will begin accepting comments once the RFI is printed in the Federal Register, which is expected to occur on approximately March 19. The RFI will be open for comment for 90 days.

The bureau anticipates issuing RFIs on the following topics in the coming weeks:

— Inherited rules
— Guidance and implementation support
— Consumer education
— Consumer inquiries