Although the full impact
of the Dodd-Frank Act
will take several years, it
is clear that the CFPb was
intended to be, and will be,
a major force in consumer
As the article pointed out, the Dodd-Frank Act is “broad, complex, and represents sweeping change.” With respect to consumer
compliance, the act requires changes in the structure and approach
to bank supervision, increases bank supervision, heightens the
focus on consumer protection, and increases the regulation of
mortgage lending and servicing. The most visible section of the
act— and the section that promises to have the greatest impact
with respect to consumer compliance—is Title X, which calls for
the creation of Consumer Financial Protection Bureau (CFPB).
The bureau’s goals include the following:
■ ■ timely and understandable information (disclosures)
■ ■ protecting consumers from unfair, deceptive, or abusive acts
or practices (Office of Fair Lending)
■ ■ ensuring transparent and efficient operations of markets for
consumer financial products
■ ■ enforcing federal consumer financial laws consistently, without
regard to status of a depository institution (size, regulator,
Although the full impact of the Dodd-Frank Act will take
several years, it is clear that the CFPB was intended to be, and
will be, a major force in consumer compliance.
The DOJ has been active so far in this decade, with three suits
and consent orders alleging discrimination in lending. Two cases,
Nara Bank and AIG Federal Savings Bank/Wilmington Finance,
Inc., alleged pricing discrimination, specifically noting the failure
to supervise or monitor loan fees charged by dealers and brokers.
In another case, First Lowndes Bank, the DOJ alleged that the
bank’s pricing with respect to manufactured housing loans was
The banking agencies issued five consent orders alleging unfair
or deceptive acts or practices in the first three years of this decade,
exceeding the number issued during the entire last decade. They
alleged that Wachovia failed to protect consumers from fraud
committed by telemarketers and that Advanta’s cash-back rewards
program on its credit card was not as advertised. Woodforest,
FSB was accused of not imposing a limit on overdraft charges or
allowing customers the opportunity to cease the imposition of
additional daily fees for remaining overdrawn. In another order,
CompuCredit, regulators alleged that certain marketing and solicitation techniques with respect to credit cards were deceptive.
During 2008 and 2009, the agencies made 59 referrals to the
DOJ. If this pace continues, the number of referrals for this decade
will exceed those made in the previous decade.
Judging from the first several years, the current decade of
compliance will be marked by enforcement actions alleging
nondiscrimination and unfair or deceptive acts or practices.
We see behind us, in four-plus decades of consumer compliance,
a strong emphasis on nondiscrimination in lending and a more
recent but clear emphasis on fairness. These are evident in the
legislation enacted as well as in the actions of the DOJ and the
agencies. In the future, because of the changes dictated by the
Dodd-Frank Act and because of initiatives in place at the DOJ,
the focus will continue to be on nondiscrimination and fairness
but in a broader sense than in the past. Here is an educated guess
as to the consumer compliance changes will see in the future:
■ ■ A new, expanded definition of “fair.” Compliance officers often
think of “fair” lending as “nondiscrimination.” In the future,
“fair” will be more than nondiscrimination. It will approach, if
not become, “responsible,” and will carry with it an expectation
to act in the consumer’s best interest.
■ ■ “Fair lending” will grow to “fair banking.” Products and services
other than lending will be under the microscope. Look for
emphasis on overdrafts, money transferring, debit cards, and
deposits, in addition to lending.
■ ■ More emphasis on discrimination in small business lending.
The Dodd-Frank Act calls for collecting data on small business loans. This data, like the early HMDA data, will be used to
detect possible discrimination in lending to small businesses.
■ ■ Expansion of “consumer” compliance to “customer” compliance.
With greater emphasis on small business lending, “consumer”
will not be limited to individuals or personal or household-related banking services.
■ ■ Continued and increased emphasis on pricing in terms of both
nondiscrimination and fairness. The anger, hostility, and com-