Compliance

Mississippi attorney general subpoenas Credit Acceptance

SOUTHFIELD, Mich. - 

For the second time in about a year, Credit Acceptance is dealing with an attorney general subpoena.

The finance company acknowledged late on Friday through a filing with the Securities and Exchange Commission that it received a subpoena from the Mississippi attorney general on Aug. 14. Credit Acceptance said the subpoena is relating to the origination and collection of non-prime vehicle installment contracts in the state of Mississippi.

“We are cooperating with the inquiry and cannot predict the eventual scope, duration or outcome at this time,” the company said in the filing. “As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.”

The matter in Mississippi arrived 16 months after Credit Acceptance revealed a similar situation originating from the top law enforcement officer in Maryland.

Credit Acceptance confirmed in a regular filing with the SEC that the company received a subpoena from the Maryland attorney general on March 18, 2016, relating to the company’s repossession and sales policies and procedures within that state.

Senior vice president and treasurer Doug Busk touched on that matter during Credit Acceptance’s conference call when the finance company discussed its second-quarter results.

“In terms of the Maryland matter, as we disclosed, the subpoena is focused on our repossession and sale policies and procedures in the state of Maryland,” Busk said. "Not unusually in these types of matters, we don’t really have any insight into why we received the subpoena. We are in the process of providing responsive information to the AG in the state of Maryland.

“I don't think there’s any commonality relative to this and other subpoenas or regulatory actions. I think it’s just more evidence of a very heightened regulatory environment out there,” he continued.

“In terms of the collection practices, being in business as long as we have, we’ve been focused on doing things right from a regulatory perspective. So we assess the (Consumer Financial Protection Bureau’s) position on that and really anything else and make changes to our business if we think it’s necessary to meet their expectations,” Busk went on to say.

ProMax enhances certified integration with Dealertrack

DAVENPORT, Iowa - 

Dealer Marketing Services, the makers of ProMax, on Monday announced significant enhancements to its certified integration with Dealertrack.

ProMax is a certified partner of most major dealer management systems, and has offered a certified integration with Dealertrack since 2009. The newly updated two-way integration with Dealertrack further facilitates the automated transfer of data between ProMax and Dealertrack, including inventory, repair orders, customers, service and delivered deals.

The company insisted this data flow, updated multiple times daily, can enable dealers to streamline their processes and improve accuracy.

“With the continued growth and evolution of technology and data in automotive retail, it’s a strategic advantage to work with innovative partners such as ProMax to expand and enhance our Opentrack DMS program,” said Candy Lucey, senior director of marketing at Dealertrack.

“Opentrack substantiates our vision of an open platform approach designed to give third-party partners such as ProMax the maximum flexibility to use our platform to best meet the needs of our dealers,” Lucey continued.

“This enhanced integration is great news for our mutual dealer customers,” said ProMax chief executive officer John Palmer, whose company provides lead-generation solutions along with other products associated with credit reports, dealer websites and more.

“We’re always looking for ways to help our dealers succeed, and this updated integration will go a long way towards doing that,” Palmer went on to say.

NAF Association launches Phase 2 of Collector and Underwriter Compliance Certificate Programs

HANOVER, Md. - 

Along with highlighting seven major findings and availability of the 2017 Non-Prime Automotive Financing Survey, the National Automotive Finance Association on Friday announced the next stage of its compliance training offerings.

Building off of the momentum generated by wide-spread leveraging of its Compliance Certification Program, the NAF Association launched what it’s calling Phase 2 for the Collector and Underwriter Compliance Certificate Programs. The NAF Association believes Phase 2 of these programs provides the necessary second educational step for collectors and underwriters to stay compliant in a difficult regulatory environment.

“We have found that many NAF Association member finance companies rely on the Compliance Certificate Program to provide necessary front line education for their staff,” said Jack Tracey, executive director of the National Automotive Finance Association.

"Phase 2 of the program equips company management with the opportunity to assess how collectors and underwriters have retained the compliance knowledge acquired in Phase I as well as providing education on current compliance issues,” Tracey continued.

The NAF Association — also one of the industry partners in the orchestration of Used Car Week that begins on Nov. 13 in Palm Springs, Calif. — highlighted both the collector and underwriting courses include coverage of the Equal Credit Opportunity Act (ECOA), the FTC Act and Unfair, Deceptive or Abusive Acts or Practices (UDAAP) and updates on other recent regulatory developments.

To learn more about the Collector and Underwriter Compliance Certificate Programs, go to www.nafassociation.com.

The growth in education offerings arrives as the non-prime automotive financing sector experienced the sixth consecutive year of market growth in 2016, according to the 2017 Non-Prime Automotive Financing Survey co-sponsored by the National Automotive Finance Association and American Financial Services Association.

Through the combined efforts of both associations, 54 companies participated in this year’s survey. This is the 21st year of the survey, started by the NAF Association, and the third year both trade associations have teamed up as co-sponsors. This effort is thought to be the most comprehensive survey of the non-prime auto financing sector.

Over the past few years, significant improvements to the survey have been made. For example, an easier data gathering approach through a web survey and a new reporting format give the report broader and more comprehensive coverage and provides information that cannot be found anywhere else.  Contributing to the report are TransUnion, FactorTrust and Black Book, which are providing additional market insight by supplying data and analysis on nonprime auto financing. 

Key findings from the survey include:

• Sixth consecutive year of market growth

• Competition increases, pace slows

• Banks led market share development with positive gain in 2016

• Several indicators showed a trend towards improved quality including higher credit scores for new and used, decreases in payment-to-income, decreases in average annual net charge-off and annualized repossession rate. 

• Delinquency increases

• Operating expenses increase

• Profit reduction

Benchmark Consulting International administered the survey and provided the report analysis. Participating finance sources responded to survey questions covering topics such as originations, servicing and loss management. The results are illustrated in 129 graphs.

The survey report is distributed at no cost to finance company participants. Others may purchase a copy of the report for $500. To purchase, contact Diane Merino at the National Automotive Finance Association at (717) 676-1533 or Diane.merino@nafassociation.com.  

More than 10K professionals have completed RISC’s compliance certification program

TAMPA, Fla. - 

Recovery Industry Services Co. (RISC) recently reached a new threshold of industry professionals completing its Certified Asset Recovery Specialist (CARS) and CARS-FC certification program.

Since it was launched in 2002, RISC tabulated that it has certified more than 10,000 individuals through its recovery agent training offering that is geared to meet the demands an ever-increasing focus on compliance.

RISC insisted that finance companies, forwarders and repossession professionals have sought standardized training programs and reporting to internal and third party auditors as well as the Consumer Financial Protection Bureau. The industry’s focus on compliance has created a surge in the number of companies that require CARS certification for all employees.

“Since June, more than 3,000 individuals have become CARS certified, with another 2,800 professionals currently preparing for the exam,” RISC founder Stamatis Ferarolis said.

“By the end of Q3, the nation’s five largest forwarding companies had certified all of their employees with CARS-FC, and more than 600 repossession companies have begun the process of having all their employees, not just their drivers, CARS trained,” Ferarolis continued.

“We are proud to be the only compliance certification program accepted nationwide by all lenders and forwarders,” he went on to say. “From the CARS certification program to vendor vetting to lot inspections, RISC has developed a comprehensive solution that ensures compliance by enforcing standards and teaching individuals how recover vehicles safely and handle sensitive data.”

This spring, at finance companies’ request, RISC created the Certified Asset Recovery Specialist-Forwarding Company (CARS-FC) training program as an extension of the industry standard CARS program. CARS-FC consists of a comprehensive set of applicable laws and regulations specific to forwarding company personnel to provide standardized training in all areas of compliance.

RISC recognized the following forwarding companies that committed and certified their personnel on the standard RISC CARS-FC program. RISC praised the commitment to the effort of standardized compliance of these firms, including:

• Primeritus Financial Services
• ALS/Resolvion
• American Recovery Service
• Del Mar Recovery Solutions
• MVTRAC         
• Plate Locate
• Synergetic Communication

For questions about the RISC CARS or RISC CARS-FC program, or to sign up your company, contact RISC president and chief operating officer Holly Balogh at holly@riscus.com.

Hudson Cook’s Musselman named vice chair of ABA Banking Law Committee

HANOVER, Md. - 

Meghan Stringer Musselman, a partner in the Maryland office of Hudson Cook, has been appointed vice chair of the American Bar Association (ABA) Banking Law Committee for a three-year term.

With approximately 1,950 members, the mission of the Banking Law Committee is to act as principal Business Law Section Committee dealing with laws relating to banking and financial services activities conducted through banks and other regulated intermediary financial institutions.

In her practice, Musselman advises banks, sales finance companies, installment lenders and other similar creditors in the development and maintenance of consumer credit programs, compliance management systems and vendor management programs. On behalf of investor clients, she conducts due diligence for consumer credit programs, including auto finance companies, online lending platforms, mortgage loan companies, mortgage loan servicers and consumer finance companies.

Musselman also counsels clients on privacy and data security issues under the Gramm-Leach-Bliley Act and the Fair Credit Reporting Act.

In addition to her participation on the Banking Law Committee, Musselman is also active in the ABA Consumer Financial Services Committee and currently serves as vice chair of the Executive Council of the Federal Bar Association’s Banking Law Section.

“We are proud that Meghan has been appointed to this committee during such a significant time for the banking industry,” Hudson Cook chair Michael Benoit said. “Meghan’s deep experience working in banking and consumer financial services law makes her an excellent choice to serve as vice chair of this committee.”

From the editor: The CFPB and a fire alarm

WASHINGTON, D.C. - 

There didn’t appear to be any obvious connection between a representative from the Consumer Financial Protection Bureau finishing his presentation during the National Policy Conference hosted by the National Independent Automobile Dealers Association and the hotel fire alarm activating as a question-and-answer session started.

While not trying to perpetuate some wild conspiracy theory, perhaps the underlying simmering of dealers in the room triggered the fire alarm on Tuesday morning.

The CFPB’s Damion English took the stage in front of what could have been considered a hostile audience — nearly 200 independent dealers and other automotive industry service providers who might have had varying assessments of how the bureau is impacting and possibly curtailing their businesses. English serves as the bureau’s auto finance program director and came to the agency after prior positions with Regional Acceptance, Capital One Auto Finance, American Honda Finance and as finance manager for the Victory Automotive Group.

English insisted the bureau is trying to gather all the information it can about how vehicle financing and deliveries happen, stressing that the CFPB wants input from dealers “because you know your business better than we do.” 

Apparently making a favorable impression, an abbreviated Q&A segment started with one dealer telling the gathering that English was “the coolest person I’ve seen from the CFPB.” English welcomed the kind words by replying, “Thank you. I appreciate that. I’m going to tell my mom!”

Then moments later, the fire alarm began and the staff at the Dupont Circle Hotel asked us all to depart the facility. Outside, as the Washington, D.C. Fire Department arrived to confirm it was a false alarm, several dealers approached English and his two other CFPB colleagues for informal conversations. They all appeared civil but certainly intense.

Dealers are concerned about the CFPB’s new rule regarding arbitration. NIADA came out with multiple efforts to keep it from going into effect as it is on track to do so early next year.

NIADA pointed out that the CFPB’s study on arbitration found consumers receive on average more than $5,000 in arbitration hearings compared to roughly $32 in class-action litigation — if they receive anything at all.

“We are disappointed that the bureau has decided to adopt this ill-conceived rule,” NIADA chief executive officer Steve Jordan said when the bureau finalized the rule back in July. “(This) action shows the CFPB has decided to put the interests of class-action lawyers above those of the very consumers the bureau is mandated to protect.

“Arbitration has proven to be a faster, less expensive and more effective means of resolving consumer disputes than class-action lawsuits. And consumers who receive an award in arbitration almost always receive more than they would in a class-action lawsuit, a point proven by the CFPB’s own research,” Jordan continued.

“This rule will force small businesses to bear additional costs in defending class-action litigation, particularly meritless suits,” Jordan went on to say. “Those costs will ultimately be borne by consumers, and in the case of those who are credit-challenged, it could prove to be too much.”

The thought that dealers could face class-action lawsuits instead of settling matters via arbitration is leaving NIADA members uneasy to say the least. Later on Tuesday when the Small Business Administration made its conference presentation, multiple attendees fervently implored that the government entity designed to aid businesses such as independent dealers to intervene.

“Somebody in this town has got to help us,” one attendee said at the venue located less than a test-drive distance away from the White House and Capitol Hill.

The House approved resolution on July 25 leveraging authority provided under the Congressional Review Act (CRA) to stop the CFPB’s final rule prohibiting the use of class action waivers in arbitration clauses. Despite all House Democrats and one Republican voting against H.J. Res 111, the resolution cleared the chamber by a vote of 231-190.

Ever since, it’s been the Senate’s turn, but various online reports have indicated the margin for a similar resolution getting the necessary 51 votes for approval is slim — if it exists at all.

By now, dealers who went to our nation’s capital this week likely have returned to their stores to secure inventory, finalize deliveries and complete a long list of other chores necessary to remain a profitable enterprise. I applaud those dealers who participated in NIADA’s activities. Any fruits from the efforts might take some time to ripen, but at least they were planted.

Nick Zulovich is senior editor of SubPrime Auto Finance News and can be reached at nzulovich@cherokeemediagroup.com.

FTC reinforces auto industry enforcement priorities

WASHINGTON, D.C. - 

Coinciding with the regulator offering a deeper explanation of its revamped Used Car Rule, Tom Pahl of the Federal Trade Commission made the opening presentation during the National Policy Conference, hosted this week by the National Independent Automobile Dealers Association.

Pahl covered a variety of topics during his 45-minute opportunity behind the lectern at the Dupont Circle Hotel, located less than a test drive distance away from the White House and Capitol Hill. Pahl told nearly 200 dealers, service providers and other industry representatives that working with organizations such as NIADA is beneficial to helping consumers understand the intricacies of acquiring and financing a vehicle.

Pahl also recapped some of the most recent FTC actions. What might be a thorn for dealers and finance companies, Pahl noted that the regulator is trying to make civil investigative demands “more streamlined” and “more transparent of what info we’re seeking.”

Reinforcing the assessment of compliance expert Randy Henrick, who described the situation in more detail here, Pahl also mentioned how the FTC is continuing to watch dealer advertising closely when it comes to stores promoting financing options. Many FTC investigations are connected to “truthful statements in advertising to consumers,” according to Pahl, who back in February was appointed as acting director of the FTC’s Bureau of Consumer Protection.

While certainly busy, Pahl went on to point out that the FTC likely won’t be highly active in rule making, rather focusing on regulations already in place.

Pahl urged dealers and finance companies to leverage the guidance available on the FTC’s website as a path to making business decisions that are compliance with the regulator’s mandates. Another example is what the FTC just delivered in response to a request from the National Automobile Dealers Association.

The legal team at Hudson Cook highlighted that the FTC issued a guidance document answering certain frequently asked questions about the revised Used Car Rule and the revised Buyers Guide.

The material that’s available here explained that the 2016 amendments don’t change the essential requirements of the Used Car Rule. The regulator insisted the changes include certain revisions to the Buyers Guide to give consumers more information and to make it easier for dealers to disclose manufacturer and third-party warranties. Here is a summary of what’s new:

—The revised Buyers Guide recommends that consumers get a vehicle history report before buying a used car and sends them to ftc.gov/usedcars for more information on how to get one.

—The revised Buyers Guide directs consumers that before buying a vehicle, they should visit safercar.gov to check for safety recalls.

—There’s a new description in the revised Buyers Guide of an “As Is” sale to clarify that “As Is” refers only to whether the vehicle is offered with a warranty from the dealer.

—The revised Buyers Guide adds boxes dealers can check to indicate whether a vehicle is covered by a third-party warranty and whether a service contract may be available.

—The revised Buyers Guide adds a box dealers can check to indicate that an unexpired manufacturer’s warranty applies.

—The new English-language version of the Buyers Guide adds a statement in Spanish advising Spanish-speaking consumers to ask for the Buyers Guide in Spanish if the dealer is conducting the sale in Spanish.

—On the back of the revised Buyers Guide, air bags and catalytic converters have been added to the list of major defects that may occur in used vehicles.

3 more reports question CFPB’s actions and structure

WASHINGTON, D.C. - 

Recent projects completed by the Competitive Enterprise Institute and the Cato Institute again delved into unsatisfactory assessments of the Consumer Financial Protection Bureau.

Coinciding with House Republicans chastising the CFPB over its investigation of Wells Fargo, a wide-sweeping survey conducted by the Cato Institute found that participants agree with an assertion previously made by the Consumer Bankers Association — that the bureau should be run by a commission rather than a single director.

According to a blog post by Emily Ekins, a research fellow and director of polling at the Cato Institute, Americans support changing the structure of the CFPB as nearly two-thirds (63 percent) say the CFPB should be led by a bipartisan commission of Democrats and Republicans, rather than by a single director. A third (33 percent) think a single director should run the federal agency instead.

Ekins noted that support is post-partisan with strong majorities of Democrats (67 percent) and Republicans (64 percent) in support of a bipartisan commission leading the agency.

Notably, Ekins went on to mention majorities of Americans support a bipartisan commission leading the CFPB regardless of whether one has a positive opinion (55 percent) or negative opinion (63 percent) of the agency.

Beyond how the CFPB leadership is structured, the Cato Institute 2017 Financial Regulation Survey showed that support for CFPB independence is more controversial than changing its structure.

Ekins shared that 54 percent of Americans say Congress should have limited oversight of the CFPB and should not set its budget, while 42 percent say Congress should closely oversee and set the budget for the agency.

Moreover, Ekins added that partisans disagree about the level of oversight needed for this federal agency. Reluctance for more Congressional oversight is perhaps unsurprising given that only 7 percent of Americans have a lot of confidence in Congress to run things.

Bottom line: the Cato Institute asked 2,000 Americans 18 years of age and older between May 24 and 31 this simple question. Has the CFPB achieved its mission?

From its inception, Ekins insisted that the bureau has been tasked with making it easier for consumers to understand the terms and conditions of credit cards and other financial products. However, six years into the agency’s tenure, she reported that few Americans (26 percent, to be exact) believe the CFPB has achieved its mission to make financial products’ terms and conditions clearer.

That survey sentiment coincided with analysis presented by the Competitive Enterprise Institute (CEI). Its report documented what the firm described as the harm inflicted on ordinary consumers of financial products by the bureau that remains unaccountable to Congress, the president and the courts.

The report available here urges Congress to make drastic reforms to the CFPB or even abolish it.

“The Consumer Financial Protection Bureau was set up under the Dodd-Frank act of 2010 in violation of constitutional norms ostensibly to protect consumers from bad actors in the banking and financial services industry, but the agency is instead actively harming consumers, pressing ahead with regulations even when the benefit to consumers is likely to be outweighed by the costs,” said Iain Murray, vice president for strategy at CEI and author of the report titled, “The Case against the Consumer Financial Protection Bureau: Unconstitutionally Structured and Harmful to Consumers.”

Murray added, “The CFPB would be far less able to abuse its power and make bad decisions if it were held accountable. It’s urgent that Congress take action to stop the CFPB and restore constitutional checks and balances aimed at protecting Americans from abuses of government power.”

Each effort by the Cato Institute and the Competitive Enterprise Institute arrived as the House Financial Services Committee released a second interim staff report on its investigation into the Wells Fargo fraudulent account scandal and the CFPB enforcement action on the matter.

An internal CFPB “Recommendation Memorandum” for the director — improperly withheld from the committee for more than a year according to lawmakers — revealed the bureau failed to fully and adequately investigate Wells Fargo.  Instead, the report said the bureau rushed to settle with Wells Fargo for less than 1 percent of the CFPB’ss own estimate of the bank’s statutory civil monetary penalty. 

Not only does the Recommendation Memorandum fail to justify the CFPB’s settlement, the report said the document calls into question the accuracy of CFPB director Richard Cordray’s testimony before Congress and his claims that the bureau had conducted an “independent and comprehensive investigation.”

“The CFPB’s handling of this matter and its refusal to fully comply with the Congressional subpoena are a slap in the face to millions of Americans who were harmed by Wells Fargo and further evidence of the CFPB’s unaccountable structure and leadership.  The premature suspension of its investigation means that the CFPB also potentially lost the opportunity to discover recently revealed instances of further consumer harm,” committee chairman Jeb Hensarling said.

How repossession practices could improve based on latest CFPB report

WASHINGTON, D.C. - 

Hudson Cook partner Allen Denson read through the auto-finance portion of the latest Supervisory Highlights shared by the Consumer Financial Protection Bureau and immediately thought of another credit segment. The CFPB’s report described problems bureau representatives found with vehicles being repossessed after contract holders evidently made catch-up payments or entered into agreements to avoid repossession.

In the report, the CFPB acknowledged that contract holders give creditors a security interest in their vehicles. When a borrower defaults, the CFPB said a creditor can exercise its rights under the contract and repossess the secured vehicle.

The bureau also pointed out that servicers may have formal extension agreements that allow borrowers to forbear payments for a certain period of time or may cancel a repossession order once a borrower makes a payment.

“In one or more recent exams, examiners found that one or more entities were repossessing vehicles after the repossession was supposed to be cancelled,” the CFPB said in the report. “In these instances, the servicer(s) wrongfully coded the account as remaining delinquent, customer service representatives did not timely cancel the repossession order after borrowers made sufficient payments or entered an agreement with the servicer to avoid repossession, or repossession agents had not checked the documentation before repossessing and thus did not learn that the repossession had been cancelled.

“Bureau examiners concluded that it was an unfair practice to repossess vehicles where borrowers had brought the account current, entered an agreement with the servicer to avoid repossession, or made a payment sufficient to stop the repossession, where reasonably practicable given the timing of the borrower’s action,” the report continued.

Upon reviewing that update, Denson arrived at this assessment.

“The problems with repossession highlighted in the most-recent version of the CFPB’s Supervisory Highlights are reminiscent of financial regulators concerns about alleged wrongful foreclosures during the mortgage crises,” Denson said in a message to SubPrime Auto Finance News. “There, mortgage servicers on occasion foreclosed on consumers who were involved in loan modification or workout pipelines. 

“The same circumstances appear to apply here: Consumers may have had their vehicles repossessed while they were part of a workout agreement,” continued Denson, who is set to be a part of a regulatory discussion during Repo Con at Used Car Week, which begins on Nov. 13 in Palm Springs, Calif.

After the CFPB discovered what the regulator deemed to be an improper practice, the bureau’s report shared what happened next.

“Supervision directed the servicer(s) to stop the practice,” the report said. “In response to our examiners’ findings, the servicer(s) informed supervision that the affected consumers were refunded the repossession fees.

“The servicer(s) also implemented a system that requires repossession agents to verify that the repossession order is still active immediately prior to repossessing the vehicle, for example, through a specially designed mobile application for that purpose,” the report added.

Upon seeing how the CFPB handled the matter, Denson closed with an upbeat recommendation of how the auto finance industry can move forward to avoid these problems down the road.

“The Supervisory Highlights, while noting the problem, also seem to contain a proposed solution,” Denson said. “Servicers should develop methods to ensure real-time or near real time status updates of accounts before repossession and should develop procedures whereby repossession agents confirm that a repossession should occur immediately prior to the event. 

“In the case of the servicer highlighted in Supervisory Highlights, a ‘high-tech’ solution in the form of an app was adopted,” he continued. “However, services could adopt more manual procedures as well. The key is having open information channels and checks against alleged wrongful repossessions.”

New York governor and AG take aggressive actions over Equifax breach

NEW YORK - 

Two of the highest ranking officials in New York are using the Equifax security breach to intensify actions within the Empire State, bringing Experian and TransUnion into the matter, too.

On Tuesday, Gov. Andrew Cuomo directed the New York Department of Financial Services to issue new regulation making credit reporting agencies register with New York for the first time and comply with what the state has called a first-in-the-nation cybersecurity standard.

Then on Wednesday, New York Attorney General Eric Schneiderman announced that his office has sent formal inquiries regarding data security to Experian and TransUnion following the Equifax data breach that potentially exposed the personal information of 143 million consumers.

“A person’s credit history affects virtually every part of their lives, and we will not sit idle by while New Yorkers remain unprotected from cyberattacks due to lax security,” Cuomo said.

“The Equifax breach has left millions of New Yorkers vulnerable to identity theft and major financial issues,” Schneiderman said. “Credit reporting agencies have a fundamental responsibility to protect the personal information they’re entrusted with.

“As we continue our investigation into the Equifax breach, it’s vital to ensure that consumer data at the other major credit reporting agencies is safe,” Schneiderman added.

Under the proposed regulation, all consumer credit reporting agencies that operate in New York must register annually with DFS beginning on or before Feb. 1 and by Feb. 1 of each successive year for the calendar year thereafter. The registration form must include an agency’s officers or directors who will be responsible for compliance with the financial services, banking, and insurance laws and regulations.

The annual reporting obligation contained within the proposal also provides the DFS Superintendent with the authority to deny and potentially revoke a consumer credit reporting agency's authorization to do business with New York’s regulated financial institutions and consumers if the agency is found to be out of compliance with certain prohibited practices, including engaging in unfair, deceptive or predatory practices.

“The data breach at Equifax demonstrates the necessity of strong state regulation like New York’s first-in-the-nation cybersecurity actions,” Department of Financial Services superintendent Maria Vullo said. “This is one necessary action of several that DFS will take to protect New York's markets, consumers and sensitive information from criminals.”

The DFS Superintendent may refuse to renew a consumer credit reporting agency's registration if the superintendent finds that the applicant or any member, principal, officer or director of the applicant, is not trustworthy and competent to act as or in connection with a consumer credit reporting agency, or that the agency has given cause for revocation or suspension of such registration, or has failed to comply with any minimum standard.

The proposed regulation also subjects consumer reporting agencies to examinations by DFS as often as the superintendent determines is necessary, and prohibits agencies from the following:

—Directly or indirectly employing any scheme, device or artifice to defraud or mislead a consumer.

—Engaging in any unfair, deceptive or predatory act or practice toward any consumer or misrepresent or omit any material information in connection with the assembly, evaluation, or maintenance of a credit report for a consumer located in New York State.

—Engaging in any unfair, deceptive, or abusive act or practice in violation of section 1036 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

—Including inaccurate information in any consumer report relating to a consumer located in New York State.

—Refusing to communicate with an authorized representative of a consumer located in New York State who provides a written authorization signed by the consumer, provided that the consumer credit reporting agency may adopt procedures reasonably related to verifying that the representative is in fact authorized to act on behalf of the consumer.

—Making any false statement or make any omission of a material fact in connection with any information or reports filed with a governmental agency or in connection with any investigation conducted by the superintendent or another governmental agency.

In addition, every credit reporting agency must comply with the department’s cybersecurity regulation, on phased in schedule of compliance, starting April 4.

DFS’ cybersecurity regulation requires banks, insurance companies and other financial services institutions regulated by DFS to have a cybersecurity program designed to protect consumers' private data; a written policy or policies that are approved by the board or a senior officer; a chief information security officer to help protect data and systems; and controls and plans in place to help ensure the safety and soundness of New York's financial services industry.

“Oversight of credit reporting agencies will help ensure that personal information is less vulnerable to cyberattacks and other nefarious acts in this rapidly changing digital world,” Cuomo said. “The Equifax breach was a wakeup call and with this action New York is raising the bar for consumer protections that we hope will be replicated across the nation.”

And Schneiderman wants to know what Experian and TransUnion are doing, as well.

In letters sent to the CEOs of the two companies, the attorney general’s office asks them to detail:

—The security measures that were in place before they learned of the Equifax breach

—Steps the companies have taken since learning of the breach to ensure that they haven’t already suffered similar intrusions and won’t experience breaches moving forward

—How they will further assist consumers in protecting their personal information

Schneiderman is seeking the answers to these questions by Sept. 21 and a meeting with top executives at Experian and TransUnion by Sept. 28.

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