Two attorneys who spent part of their legal careers with the Consumer Financial Protection Bureau and are now in private practice described how the regulator can claim some victories since the latest federal court action deemed the agency is constitutional.
However, these experts also pointed out the opinions shared by the D.C. Circuit Court of Appeals left the CFPB with some ongoing challenges.
Lucy Morris is a partner with Hudson Cook and a founding member of the CFPB Implementation Team that organized the CFPB after passage of the Dodd-Frank Act. Morris served as a CFPB deputy enforcement director for four years and shared her assessment of the ruling that arrived on Wednesday.
“It affirms the CFPB’s independence as a consumer watchdog and shows that the CFPB is here to stay,” Morris said. “At the same time, the opinion represents a setback for the bureau because it reinstates the earlier circuit opinion on the merits, including the ruling against the CFPB that it is subject to the statute of limitations in its administrative forum.
“It also means that President Trump will have the opportunity to name a new director who will be able to remain in place for the full term, regardless of what happens in the next presidential election,” Morris continued in a message to SubPrime Auto Finance News.
Ori Lev is a partner in Mayer Brown’s Washington D.C., office and a member of the firm’s financial services regulatory and enforcement practice and the consumer financial services group. Like Morris, Lev also was a deputy enforcement director at the CFPB and also led the office of enforcement at the Office of Foreign Assets Control (OFAC).
In a message to SubPrime Auto Finance News, Lev began by explaining where the court seemed to agree with former CFPB director Richard Cordray with regard to Real Estate Settlement Procedures Act (RESPA), the regulation at the heart of this case involving the bureau against PHH Corp.
It’s perhaps a point that might be most interesting to auto finance companies, especially ones that have felt the wrath of the bureau’s enforcement.
“The one thing that everyone seems to agree on — including those judges who think Cordray’s interpretation of RESPA was correct — is that an agency cannot seek penalties for past conduct that violates a novel legal interpretation first advanced in an enforcement case,” Lev said.
“That is, ‘regulation by enforcement’ is OK as a way to announce new legal principles, but it can’t be a basis to penalize past conduct, because of due process concerns,” he added.
More industry and consumer advocate reaction
Richard Hunt, president and chief executive officer of the Consumer Bankers Association (CBA), shared his assessment of the court’s opinion.
“We applaud the court’s decision to repeal the amplified penalty on PHH, which undermined the longstanding application of RESPA,” Hunt said.
“While the court ruled the CFPB’s governing structure was not unconstitutional, it does not mean the current structure is appropriate for the bureau’s long-term credibility,” he continued.
“Congress should create a bipartisan commission at the CFPB, in place of a sole director, to uphold the bureau’s mission of consumer protection and would establish transparency, diversity of thought, additional industry insight and rule makings beneficial to consumers, the industry and the economy,” he went on to say.
Allied Progress executive director Karl Frisch also cheered what the appeals court did, but for much different reasons.
“This isn’t just a victory for the Consumer Financial Protection Bureau. This is a victory for consumers everywhere,” Frisch said. “The D.C. Circuit has soundly rejected attempts by Wall Street special interests to cripple the Bureau by challenging its constitutionality.
“Equally important, the court has reaffirmed the CFPB’s independence from the Trump administration, rejecting the notion that a president should be able to replace the agency’s director without cause. The majority decision called this case a ‘wholesale attack on independent agencies’ and we couldn’t agree more,” he continued.
“Beyond this decision, the Trump administration’s attack on Consumer Bureau continues. An affront to the very notion of an independent agency free from executive interference, Trump has installed Mick Mulvaney, a current member of his administration, to serve part-time as ‘acting director,” Frisch went on to say.
“While this case is an important victory, the fight continues to protect consumers and defend the mission of the CFPB to hold big banks, predatory lenders and other financial bad actors accountable,” he added.
Lawmaker response
Meanwhile, U.S. House Financial Services Committee chairman Jeb Hensarling, a Texas Republican, expressed his regret the court didn’t find the CFPB unconstitutional. Hensarling is an outspoken CFPB detractor and clashed with Cordray several times during the semiannual hearing on Capitol Hill.
“I am deeply disappointed with the court’s decision and hope the Supreme Court will review the ruling in short order,” Hensarling said.
“In the meantime, I take great solace in the fact that Mick Mulvaney can use his unchecked, unilateral powers to continue the agency’s transformation into one that will, as he said, ‘exercise [its] statutory authority to enforce the laws of this nation … execute the statutory mandate of the bureau to protect consumers’ and go no further,” Hensarling continued.
“Even though I have total confidence in acting director Mulvaney’s vision, the fact remains that no one person in America — especially someone who is unelected — should have the authority to unilaterally control whether working Americans can get a mortgage or a checking account,” Hensarling went on to say.
“The bureau’s consumer protection mission is important, but no government agency — no matter how well-intentioned — should be able to evade common sense checks and balances that are necessary for accountability,” he added. “Republicans stand ready to work with Democrats to reform the CFPB into a law enforcement agency that truly protects consumers and is accountable to the people’s elected representatives.”
Hensarling’s colleague on the House Financial Services Committee took a much different view. Rep. Maxine Waters is the ranking member and a Democrat from California.
“Today, the full U.S. Court of Appeals for the District of Colombia Circuit confirmed what we have always known: the Consumer Bureau is constitutional and is here to stay,” Water said. “This is an important ruling for America’s consumers and should send a clear warning to predatory actors that despite the unlawful actions of the Trump Administration toward the Consumer Bureau, the courts can clearly and correctly interpret congressional intent.
“I am pleased that the court followed established precedent and preserved the structure of the agency that Congress envisioned,” she continued.
“When Congress drafted and passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, we intentionally created a strong, independent Consumer Bureau to better protect consumers after millions were ripped off by predatory lenders in the lead up to the 2008 financial crisis,” Waters went on to say. “The independence of the Consumer Bureau is essential to ensure that the agency can operate as a tough regulator that stands up for consumers.”
Well, here is an interesting twist, since probably the last thing that auto finance companies or dealerships feel if they’ve been contacted by the Consumer Financial Protect Bureau is that they’ve won the lottery.
There have been several times that the CFPB has issued civil investigative demands (CIDs) alleging auto finance providers used deceptive practices, especially in activities such as collections.
As the bureau is looking for comments about how the CID process unfolds, the CFPB now says it’s also dealing with a situation where scammers are using the bureau’s name to swindle consumers.
Here are the details.
In a recent blog post, Stacy Canan, who is the CFPB’s assistant director for the Office for Older Americans, explained that scammers who are claiming to be the bureau official are contacting people saying they have won a hefty lottery prize. Canan explained this scam has four basic parts:
—Individuals receive a call notifying them that they’ve won a lottery or sweepstakes prize. Several other calls will follow.
—One of these calls may come from an imposter claiming to be Canan, or another CFPB or U.S. government agency official who confirms that you’ve won the prize.
—Later, the consumer is told that in order to collect the prize, taxes must be paid upfront.
—Individuals send the money to pay the taxes and never hear from any of the callers again.
“I’m never going to call you to confirm that you have won a lottery or sweepstakes,” Canan wrote in the blog post.
When an auto finance provider does receive a call from the CFPB, it’s likely to be associated with a CID. To assess the efficiency and effectiveness of its existing CID processes, the CFPB published the request for information (RFI) about the bureau’s CIDs that was announced as part of acting director Mick Mulvaney’s call for evidence of the bureau's effectiveness.
The bureau reiterated that 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 bureau is issuing this request for information seeking public comment on how best to achieve meaningful burden reduction or other improvement to the CID processes while continuing to achieve the bureau’s statutory and regulatory objectives,” officials said.
The CFPB also reminded the industry that all submissions in response to this request for information, including attachments and other supporting materials, will become part of the public record and subject to public disclosure.
“Sensitive personal information, such as account numbers or Social Security numbers, or names of other individuals, should not be included. Submissions will not be edited to remove any identifying or contact information,” officials said.
Complete details about this RFI are available here.
While a consumer advocate in a note to SubPrime Auto Finance News called the action “an insane development,” industry representatives cheered the request by the acting director of the Consumer Financial Protection Bureau for evidence of the regulator’s effectiveness.
On Wednesday, the bureau announced that it is issuing a call for evidence to ensure the CFPB is fulfilling its "proper and appropriate" functions to best protect consumers. The bureau indicated that in the coming weeks, it will be publishing in the Federal Register a series of requests for information (RFIs) seeking comment on enforcement, supervision, rulemaking, market monitoring and education activities.
Acting director Mick Mulvaney explained these RFIs will provide an opportunity for the public to submit feedback and suggest ways to improve outcomes for both consumers and covered entities.
“In this New Year, and under new leadership, it is natural for the Bureau to critically examine its policies and practices to ensure they align with the bureau’s statutory mandate. Moving forward, the Bureau will consistently seek out constructive feedback and welcome ideas for improvement,” said Mulvaney, who was appointed by President Trump to replace Richard Cordray after he left the regulator to run for governor in Ohio.
“Much can be done to facilitate greater consumer choice and efficient markets, while vigorously enforcing consumer financial law in a way that guarantees due process. I look forward to receiving public comments in response to this call for evidence and encourage all interested parties to participate,” Mulvaney went on to say.
The first RFI issued by the bureau will seek public comment on Civil Investigative Demands (CIDs), which are issued during an enforcement investigation.
Officials noted that comments received in response to this RFI will help the bureau evaluate existing CID processes and procedures, and to determine whether any changes are warranted.
A legal practitioner who has been involved in a few CIDs associated with finance companies and dealerships applauded Mulvaney’s move.
“The bureau’s proposed RFIs represent a first step in ensuring fair, but effective, federal regulation,” Hudson Cook partner Allen Denson told SubPrime Auto Finance News in a message on Wednesday afternoon.
“For too long, subjects of CFPB investigations have faced burdensome investigations that are fraught with strong-arm tactics designed to result in settlement. This announcement suggests a reconsideration of these tactics,” continued Denson, who served as an expert during a panel discussion on compliance during Used Car Week that can be watched here.
Consumer Bankers Association president and chief executive officer Richard Hunt described a similar reaction to the CFPB’s request for feedback on its operations.
“Many actions conducted previously by the CFPB certainly warrant a thorough review,” Hunt said. A balanced approach to regulation is essential to a healthy banking sector, and preserving consumer choice and access to credit.
“We look forward to working with the CFPB to ensure consumers and the banking industry benefit from any potential changes,” Hunt added.
Meanwhile, Allied Progress executive director Karl Frisch used several vivid analogies to express his assessment of what the bureau is doing under Mulvaney’s leadership.
“This is essentially like asking the fox, in what order it would like to eat the hens? It is a troubling move from a man who is clearly hell bent on dismantling the agency he has been tasked with overseeing when he should be fulfilling its mission to protect consumers and hold bad financial actors accountable,” Frisch said.
“Mulvaney has taken $1.28 million from industries that are regulated by the Consumer Financial Protection Bureau. These same industries have spent tens of millions of dollars trying to destroy the CFPB from day one. Now, like a parent appeasing a spoiled child, Mulvaney is asking for industry’s wish list — a development that is frankly, insane,” Frisch continued.
“This is a conflict to end all conflicts and makes clear that Mulvaney can't be trusted. It is time for President Trump to nominate someone free of conflicts who will fight to protect consumers, not Wall Street special interests and financial predators,” Frisch concluded.
Akerman recently bolstered its stable of legal talent by adding another former high-ranking official from the Consumer Financial Protection Bureau.
The law firm’s consumer financial services practice Group welcomed Kathleen “Kitty” Ryan from Buckley Sandler as a partner in the Los Angeles office. Ryan previously served as the CFPB’s deputy assistant director for the Office of Regulations. Prior to joining the CFPB, she was senior regulatory counsel at JP Morgan Chase.
“Kitty’s extensive experience as a regulator, combined with her work as in-house counsel, makes her an invaluable asset to our clients, particularly within the areas of CFPB rulemaking and compliance,” said William Heller, chair of Akerman’s consumer financial services practice group. “Her impressive financial services background builds upon our team’s national strengths in the home loan space and adds a deep understanding of laws governing bank and non-bank consumer debt originators and servicers.”
Ryan focuses her practice on fair lending and regulatory compliance matters, particularly on issues related to the Fair Housing Act, Equal Credit Opportunity Act, Home Mortgage Disclosure Act, Community Reinvestment Act, Truth in Lending Act and UDAAP. She has applied her knowledge of regulations across the spectrum of consumer financial services and products — including mortgages, auto finance contracts, installment lending and prepaid cards.
During her time at CFPB, Ryan oversaw the completion of the TILA-RESPA Integrated Disclosure rulemaking — also known as Know Before You Owe — and the HMDA rulemaking that completely rewrote Regulation C. She also oversaw the development of CFPB’s debt collection rulemaking and extensive amendments to the CFPB’s mortgage servicing rules, and is well-versed in the CFPB’s 2017 small dollar lending rule. Ryan also advised on enforcement and supervisory matters — including matters involving fair lending, RESPA and UDAAP.
As in-house counsel at JPMorgan Chase, Ryan analyzed a range of consumer financial products and practices across multiple business lines and provided legal and regulatory guidance and support. She also spent more than 10 years in the Federal Reserve Board’s Division of Consumer and Community Affairs, where she led several TILA, ECOA, HMDA and CRA rulemakings, including the 2002-2004 HMDA amendments and the 2008 Regulation Z Higher-Priced Mortgage Loan amendments, as well as the mortgage loan originator compensation rules.
Ryan is the latest former CFPB official to join Akerman’s Consumer Financial Services Practice Group. The team previously welcomed Washington, D.C., partners Mary “Molly” Calkins and Thomas Kearney. Calkins served under the CFPB’s Division of Supervision, Enforcement & Fair Lending, as well as the Professional Liability & Financial Crimes Section of the Federal Deposit Insurance Company. Kearney served within the CFPB’s Office of Regulations where he worked closely with Ryan.
Together with Ryan, they collectively enhance Akerman’s team of federal and state compliance lawyers, including Tobias Moon, who brings deep in-house experience in servicing and originations from his work for Bank of America, Citi and Capital One. The team is well-positioned to provide regulatory compliance and enforcement guidance to consumer financial services providers — including mortgage, Fintech and other small dollar installment lenders and servicers.
Even before the wrangling over who will lead the Consumer Financial Protection Bureau intensified earlier this week, Craig Nazzaro emphasized that the heavy compliance lifting done by auto finance companies still has plenty of value.
Nazzaro, who is of counsel in the Atlanta office of Nelson Mullins Riley & Scarborough, made the point before a federal judge scheduled a hearing as the court conflict continues since Richard Cordray departed the CFPB at the end of November.
“I believe the controls that were put in place by the auto finance companies will remain valuable in the future,” Nazzaro said in a message to SubPrime Auto Finance News. “While the new director can have an immediate effect on the supervision and enforcement activities of the bureau, he cannot immediately repeal any rules and/or regulations.
“Those within the industry that have conformed to all guidance and/or updated their practices to be in line with various enforcement actions and continue to do so will remain positioned to be less of a CFPB target,” he continued. “I would caution against those in the industry who believe that a new director means that compliance with existing regulations can be relaxed. Remember that the CFPB is staffed with examiners and staff attorneys who believe in the bureau’s mission. That approach cannot be turned around on Day One.
“If your entity is non-compliant with regulations that are currently in place, you will still face a great deal of regulatory risk, no matter who the director is,” Nazzaro went on to say. “The biggest change, I believe, that we will see is that the CFPB should cease to overstep its authority. For example, we should not see any future rules with the scope we saw in the arbitration rule or enforcement actions with the new interpretation of industry practices with absurd fines like we did in the PHH matter.”
Undoubtedly, auto finance compliance department will be watching what develops out of the court system. Washington D.C. District Court Judge Timothy Kelly scheduled preliminary injunction hearing for Dec. 22 as the court clash continues between Mick Mulvaney, who President Trump installed as the temporary CFPB director; and Leandra English, who was selected the bureau’s deputy director just before Cordray departed on his way toward running for governor in Ohio.
In light of the attention the CFPB has created since its inception, SubPrime Auto Finance News asked Nazzaro if he was surprised, and why or why not, in the way Cordray departed the agency and how a new director was established.
“I was not surprised about the timing, but was surprised how haphazard the choice and promotion of Leandra English to deputy director seemed to be,” Nazzaro continued. “Director Cordray knew the choice and the manner of the promotion would be attacked, and the choice seemed to have very little strategic planning behind it, making it easier to attack.”
Nazzaro also shared what element of the CFPB’s future he plans to watch the closest and why going forward.
“In the short term, I am interested in the pace and structure of the enforcement actions that are announced. I will be analyzing which entities they choose to move forward against and the severity of those actions,” he said.
“I am also looking forward to seeing if there will be a noticeable change in the tone and approach to their supervision activity,” Nazzaro continued.
“For the long term, I will be looking to see if the single director structure can be successfully challenged,” he went on to say. “The choice of Mick Mulvaney, the anti-Cordray, will wind up sustaining the partisan approach the CFPB has taken in years past and will not lead to even-keeled, logical regulation that the industry will need for growth.”
The flurry of activity associated with the Consumer Financial Protection Bureau, its leadership and the regulation of auto financing intensified again this week.
On Tuesday, Washington D.C. District Court Judge Timothy Kelly scheduled preliminary injunction hearing for Dec. 22 as the court clash continues between Mick Mulvaney, who President Trump installed as the temporary CFPB director; and Leandra English, who was selected the bureau’s deputy director just before Richard Cordray departed on his way toward running for governor in Ohio.
Then, Thomas Armstrong, general counsel for the Government Accountability Office (GAO), delivered a letter to Sen. Patrick Toomey indicating that the bulletin the CFPB issued back in 2013 involving indirect auto financing and compliance with the Equal Credit Opportunity Act (ECOA) actually is a “rule” for purposes of the Congressional Review Act (CRA). This ultimately means that it must be submitted to Congress for review.
“GAO’s decision makes clear that the CFPB’s back-door effort to regulate auto loans, which was based on a dubious legal justification, did not comply with the Congressional Review Act,” said Toomey, a Pennsylvania Republican.
“GAO’s decision is an important reminder that agencies have a responsibility to live up to their obligations under the law,” he continued. “When they don't, Congress should hold them accountable. I intend to do everything in my power to repeal this ill-conceived rule using the Congressional Review Act.”
Part of what triggered the bulletin issued in March 2013 was the CFPB’s contention about discriminatory issues arising in connection with dealer markup when a customer applies for financing through the dealership’s F&I office to the store’s network of finance companies.
Armstrong explained that the CFPB discusses the legal theories under which indirect auto finance companies that are determined to be creditors under ECOA could be held liable for pricing disparities on a prohibited basis when such disparities exist within an indirect auto lender’s portfolio.
Armstrong wrote in the letter available here that, “In its final section, the bulletin states that indirect auto lenders ‘should take steps to ensure that they are operating in compliance with the ECOA and Regulation B as applied to dealer markup and compensation policies,’ and then lists a variety of steps and tools that lenders may wish to use to address significant fair lending risks.”
Armstrong made several other points in the letter to Toomey that could interest finance companies and dealerships.
“At issue here is whether a nonbinding general statement of policy, which provides guidance on how CFPB will exercise its discretionary enforcement powers, is a rule under CRA. CFPB states, and we agree, that the Bulletin ‘is a non-binding guidance document’ that ‘identifies potential risk areas and provides general suggestions for compliance’ with ECOA and Regulation B. Moreover, the bulletin is a general statement of policy that offers clarity and guidance on the bureau’s discretionary enforcement approach,” Armstrong wrote.
Armstrong also explained that the CRA excludes three categories of rules from coverage, including:
—Rules of particular applicability
—Rules relating to agency management or personnel
—Rules of agency organization, procedure or practice that do not substantially affect the rights or obligations of non-agency parties
“CFPB did not raise any claims that the bulletin would not be a rule under CRA pursuant to any of the three exceptions, and we can readily conclude that the bulletin does not fall within any of the those exceptions. The bulletin is of general and not particular applicability, does not relate to agency management or personnel, and is not a rule of agency organization, procedure or practice,” Armstrong wrote.
“The bulletin is a general statement of policy designed to assist indirect auto lenders to ensure that they are operating in compliance with ECOA and Regulation B, as applied to dealer markup and compensation policies. As such, it is a rule subject to the requirements of CRA,” he went on to state.
Depending on how lawmakers assess the bulletin, plenty of action could involve the CFPB director; a position that has been in flux since Cordray said he would be departing the bureau.
Kelly’s decision is continuing the matter that initially triggered a ruling on Nov. 28 against English in her motion for a temporary restraining order against Mulvaney as acting director of the CFPB.
No matter what happens in court, Consumer Bankers Association president and chief executive officer Richard Hunt continues to maintain how the bureau should be led by more than just a single person.
“We look forward to working with acting CFPB director Mick Mulvaney to bring transparent and balanced consumer protections to all customers and small businesses. Many actions conducted previously by the CFPB as well as those that are pending warrant a thorough review and we support Mr. Mulvaney’s previous comments concerning a five-person bipartisan commission,” Hunt said.
“If the CFPB were structured as a bipartisan commission, as originally intended, we could have avoided this circus,” Hunt continued. “A Senate-confirmed, bipartisan commission at the CFPB would ensure consumers benefit from a fair and accountable rulemaking process. Having a sole director structure, with unilateral rulemaking authority, does not provide the long-term stability and certainty consumers deserve.”
A pair of users who have deployed Recovery Connect, MBSi’s next generation recovery assignment management platform, described the successes each one has enjoyed with the solution.
To recap, the Recovery Connect mobile app can connect finance companies with recovery agents in real-time allowing both to make decisions related to asset recovery, transport and remarketing, regardless of whether the finance company uses a direct or forwarding company assignment strategy.
Justin Zane, co-founder of Clearplan, confirmed the improvements in data integrity and the importance of timely information for agents using Recovery Connect.
“Our users immediately noticed the Recovery Connect data from MBSi was more accurate and could be confidently relied upon to make decisions in the field, which isn’t necessarily the case with the integrations from other platforms,” Zane said.
MBSi explained the recovery professional in the field oftentimes is several systems removed from the finance company’s collection system of record which causes an individual to manually enter crucial account information from system to system. Errors are easily copied from one system to another, which creates compliance complications with finance company’s downstream processes, such as sending the Notice of Intent to Sell and redemption forms. When coupled with delays, the finance company is unable to recall a recovery in the field due to receiving payment and wrongful repossessions occur.
In addition to preventing wrongful repossession, MBSi highlighted that Recovery Connect can open up opportunities for the client to improve processes that have traditionally plagued finance companies.
Once a recovery agent recovers a vehicle, the information gathered in the mobile app enables the lender to start processing the recovery, verify storage location, send Notice of Intent to Sell letters, arrange for transport and optimize remarketing channels. Each process can be started within minutes, not days, of the recovery.
Here are some of the unique features, and how they can help finance companies improve their processes:
• Pre-Recovery Status Check: ensures that the field agent has the latest account status prior to recovery and restricts access to recovery capabilities if the assignment is “closed” or “hold.”
• On Hook: Status that immediately notifies lenders when an asset is recovered and to not accept payment.
• Storage Lot Validation: Directs asset to only be stored in an approved and inspected storage lot through MBSi’s integration with Recovery Industry Services Company (RISC).
• Agent Compliance: Ensure that field agents who come in contact with consumers have proper training and certifications, and block assignment access for any agency or field agent who falls out of compliance.
• Quick Update: Recovery agents review and update assignment information. Updates are immediately sent back to the forwarder and/or finance company.
• Instant Condition Report: Images and data gathered through the recovery process produces a detailed condition report and photos available within minutes of the repossession.
“The Recovery Connect mobile app allows the agent to take pictures creating vehicle condition reports within minutes of the recovery which save us, as well as our agents, countless hours,” said Josh Elias, president of Del Mar Recovery, one of the nation’s leading forwarding companies.
“For Del Mar, it is more than condition reports. It has eliminated wrongful repossessions caused by the delay in information passing through various industry software platforms. Regardless of the software system the agent uses, we can immediately update the field agent when our clients change an assignment status,” Elias continued.
The Summer Supervisory Highlights from the Consumer Financial Protection Bureau recognized the importance of timely information and the use of “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.”
Cort DeHart, corporate strategy manager of MBSi, reiterated why this tool can accomplish what the CFPB described and more.
“The success of the Recovery Connect deployment lies in the groundwork that was laid,” DeHart said. “For more than two years, MBSi worked with lenders, forwarders, skip tracers, routing platforms, LPR providers, transport companies and other vendors in the industry to make the necessary real-time web service connections that allows all participants in recovery process to have the same information at the same time.”
Since deployment in May, Recovery Connect has been adopted by more than 1,500 recovery companies, with more than 5,000 users using the mobile app daily. These users have now successfully completed more than 200,000 vehicle recoveries using the mobile app saving countless hours and improving recovery compliance.
To learn more about how Recovery Connect potentially can streamline data flow and eliminate wrongful repossessions, go to www.mbsicorp.com.
It was reported by CNBC and other news outlets early Wednesday afternoon that director of the Consumer Financial Protection Bureau Richard Cordray would be stepping down from his position by the end of the month.
The news first surfaced in an email sent out by Cordray himself, announcing his plans. This new comes just a few weeks after President Trump signed H.J. Res. 111, which nullifies the Consumer Financial Protection Bureau's rule prohibiting the use of a pre-dispute arbitration agreement to prevent a consumer from filing or participating in certain class action suits.
Today, CFPB Director Richard Cordray sent an email to all CFPB staff announcing his plans to step down. When SubPrime Auto Finance News reached out to the CFPB on Wednesday, representatives said they did not have further comment at this time.
In the email written to his colleagues, Richard Cordray said, "I wanted to share with each of you directly what I have told the senior leadership in the past few days, which is that I expect to step down from my position here before the end of the month."
He went on to share that it has been the "joy" of his life to have the opportunity to serve as the first director of the CFPB.
"Together we have made a real and lasting difference that has improved people’s lives, notably: $12 billion in relief recovered for nearly 30 million consumers; stronger safeguards against irresponsible mortgage practices that caused the financial crisis and hurt millions of Americans; giving people a voice by handling over 1.3 million complaints that led to problems getting fixed for vast numbers of individuals, and creating new ways to bring financial education to the public so that people can take more control over their economic lives," Cordray said.
That said, he made a note of pointing out that more work still lies ahead.
Immediately after the news broke, statements from finance associations started surfacing, as well. The American Financial Services Association (AFSA) was one of the first.
“While not always agreeing with Director Cordray’s decisions and rationale for those decisions, we wish him well in his future endeavors,” Chris Stinebert, president and chief executive officer of AFSA, said. ““We appreciate his dedication to the interests and the protection of consumers. Unfortunately, his decisions were not always completely developed and created undue burden on consumers’ access to credit, which curtailed lending to the consumer that the Bureau is mandated to protect.”
AFSA said it “looks forward to working with Cordray’s successor in the protection of consumers and providing safe, affordable access to credit in communities across the United States.”
Mayer Brown Consumer Financial Services partner and former CFPB official Ori Lev also released a statement shortly after the news broke, noting that while he also didn’t always agree with Cordray’s “aggressive enforcement approach,” the public servent “worked tirelessly” on behalf of America’s consumers.
Consumer watchdog group Allied Progress responded to the news of Cordray resigning from the CFPB later this month with an air of wariness towards President Trump’s process as he chooses a replacement for Cordray.
Allied Progress executive director Karl Frisch had this to say: “The CFPB’s mission has never been about one person or one administration. Its statutory mission is to protect consumers from the type of reckless practices that led to the economic collapse of 2008. That’s why a vast majority of Americans from across the political spectrum support the CFPB and the important work it does to protect them from the worst practices of big banks, credit card companies and other financial predators.
“Moving forward, President Trump will have the opportunity to nominate a new director. He has a choice. Will he pick a champion of consumers in the mold of Richard Cordray or a champion of big banks and Wall Street? His rumored short list is not encouraging. That’s why Allied Progress will fight to ensure that the next director follows the law and continues to hold powerful financial institutions accountable for fraudulent activities and abusive practices,” Frisch concluded.
As for what’s in store for the future, according to Lev, of Mayer Brown Consumer Financial Services, we will just have to wait and see.
“It is unlikely that today’s announcement will have any immediate impact on pending CFPB litigation. Once a new director is named by President Trump – either on an acting basis under the Federal Vacancies Reform Act or on a permanent basis after Senate confirmation – the new director may review pending litigation to determine if he or she wishes to continue to take the same legal positions the agency has been taking,” he said.
“It wouldn’t be surprising if the agency backed off some of its more aggressive legal positions. In the interim, defendants in such cases will likely seek to delay proceedings pending new CFPB leadership," Lev concluded.
Stay tuned to further coverage from SubPrime Auto Finance News as this news develops.
The company that deemed itself an alternative credit bureau now is a part of what traditionally has been one of the Big 3 credit history providers.
Late on Tuesday, TransUnion announced the acquisition of Used Car Week sponsor FactorTrust, a provider of alternative credit data, analytics and risk scoring information that can empower auto finance companies and other lenders to make more informed decisions while possibly increasing financial inclusion to a wider population of consumers.
The acquisition closed on Tuesday, and financial terms were not disclosed, according to a news release shared by TransUnion.
TransUnion highlighted the acquisition reinforces the company’s position as a provider of consumer reporting models that capture a wide range of positive payment behaviors.
Officials mentioned the addition of FactorTrust’s short-term and small dollar lending data to TransUnion’s suite of credit solutions gives lenders the information they need to offer responsible borrowers a broader range of credit products, supported by TransUnion’s robust data security, technology and customer service infrastructure.
The companies explained short-term and other small dollar loans are the largest category of consumer credit obligations not currently part of nationwide credit reporting agency databases. In many cases, historically underbanked consumers have selected short-term loans because an insufficient credit history left them with few options.
Officials went on to point out the breadth of data offered through TransUnion’s purchase of FactorTrust will provide finance companies and other lenders with a more comprehensive view of consumers’ financial obligations and payment performance, expanding consumer choice.
“Access to credit is the building block of a strong American middle-class economy,” said Jim Peck, TransUnion’s president and chief executive officer. “With the acquisition of FactorTrust, we will be able to capture a wider variety of positive data that can be a stepping stone to building consumers’ credit profiles, helping people access credit and, ultimately, improve their standard of living.”
TransUnion leadership also highlighted that adding small dollar loan data to its credit reporting framework also positions the company to help customers streamline compliance with the Consumer Financial Protection Bureau’s new small dollar lending rule. The rule is designed to protect consumers from securing short-term and balloon-payment loans without the ability to repay according to the terms of the agreement.
With visibility into consumers’ traditional and alternative credit obligations, TransUnion contends that it will be able to provide all of the data lenders need to comply.
Meanwhile, the acquisition continues what has been a robust couple of years for FactorTrust.
Back in November 2015, FactorTrust closed on a $42 million investment led by ABS Capital Partners, a late-stage growth company investor, and MissionOG, an early to growth stage investor. Since that financial resource injection, FactorTrust added a former top official at the CFPB to its board of directors and made multiple appearances on the Inc. 5000 list that recognizes growth.
And now, FactorTrust is a part of TransUnion.
“Joining TransUnion is a great match for FactorTrust,” FactorTrust CEO Greg Rable said. “We share a commitment to serving consumers and customers with the highest ethical and compliance standards.
“Our products complement TransUnion’s slate of online and batch solutions, and our combined data will expand options for consumers and lenders,” Rable went on to say.
Now with FactorTrust as a part of its portfolio, TransUnion reiterated how the acquisition reinforces the company’s long history of market innovations that promote financial inclusion.
A pioneer in trended data, TransUnion believes its CreditVision Link Scores are the only scores in the market that combine directional trended data and alternative credit data, such as payment history and small dollar lending. CreditVision Link Scores allow lenders to score more than 60 million more people versus traditional models, and are proven to accurately score more than 90 percent of applicants typically returned as no-hit or thin-file.
FactorTrust’s short-term and small dollar loan data extends this inclusiveness.
“FactorTrust is a strong addition to TransUnion’s business,” said Steve Chaouki, executive vice president of TransUnion’s financial services business unit. “FactorTrust’s approach to complete tradeline reporting aligns with TransUnion’s business model, and the inclusion of more alternative data in financial institutions’ credit and underwriting decisions will enable our customers to better segment risk, allowing them to serve a broader set of customers across the credit spectrum.”
The leadership at Recovery Industry Services Co. (RISC) heard panel discussions and networking dialogue from industry participants during Used Car Week about the importance of compliance for third-party vendors. The situation reinforced why RISC rolled out its latest offering on Tuesday.
RISC’s Lot Inspection Service includes current reports on more than 1,500 recovery companies that collectively operate more than 3,000 recovery storage lots nationwide. Together, RISC estimated these lots store more than 95 percent of the repossessed vehicles recovered throughout the United States each year.
“Regardless of a lenders assignment strategy, annual inspections can be difficult to schedule, perform and maintain. In turn, the repossession company gets inundated with inspection requests from forwarders and lenders taking valuable time away from repossessions they need to perform,” RISC founder Stamatis Ferarolis said.
“This coupled with variations in reports drove the initiative for RISC to perform and maintain standard lot inspections across the country,” Ferarolis continued.
RISC’s Lot Inspection Service includes:
—Office inspection
—Vehicle security
—Key storage and security
—Personal property security
—IT security
Ferarolis emphasized that two industry problems are solved with this solution.
First, the finance company can be alleviated from managing this portion of the vendor vetting process mandated by the Consumer Financial Protection Bureau.
Second, the recovery agency is relieved of the burden of having multiple lenders inspect the same lot.
“RISC’s Lot Inspection Service saves time and resources for all parties,” Ferarolis said, “and provides the lender with a single source to quickly, and economically, gain access to current, comprehensive lot inspections on every lot in which a consumer’s vehicle may be stored.”
Inspectors must complete Inspector Education, RISC’s proprietary training program. This training was developed specifically for repossession lot inspectors to ensure an objective report of the property. Each report is accessible online so it is easy for lenders to gather the necessary documentation required by auditors or third party regulators such as the CFPB.
Between now and the end of the year, finance companies can take advantage of RISC’s free vendor compliance analysis. This vendor analysis will provide the lender with a snapshot of their vendor’s compliance status, which will include information on lot inspections as well as business license, insurance, background checks and other vital compliance data.
To sign up and get your free analysis, go to www.riscus.com.
