According to Lucy Morris, a former bureau deputy enforcement
director, now a partner at Hudson Cook LLP in Washington, “The
emphasis appears to be on resolving cases rather than expending resources to litigate over a few extra dollars.”7 In addition,
Mulvaney has indicated that the scale and frequency of a violation as well as the strength of the supporting evidence will be
factors in decisions on whether to bring an enforcement action. 8
The bureau—as well as the federal banking agencies—have
announced that enforcement actions will be based on laws and
regulations and not on guidance. “A law or regulation has the
force and effect of law. Unlike a law or regulations, supervisory
guidance does not have the force and effect of law, and the agencies
do not take enforcement actions based on supervisory guidance.” 9
To be clear, the CFPB is not abandoning enforcement. In recent months, the bureau has picked up the pace of enforcement
activity as evidenced by new investigations, issuances of “notice
and opportunity to respond and advise” (NORA) letters, and announcements of consent orders. Based on recent statements from
CFPB staff, enforcement priorities in the near future will focus on
student loan originations, (including underwriting and pricing),
debt collection (specifically, auto finance, credit cards, and use of
models for collection purposes), and use of third-party score models.
Director Mulvaney expects (and has specifically invited) states
to take a more active leadership in enforcement. 10 As Charlotte
Corley, Commissioner of the Mississippi Department of Banking
and Consumer Finance pointed out, the bureau will continue to
have a role in state enforcement, citing the states’ information
sharing agreement with the bureau and noting, “Mississippi succeeded in closing down a rogue player with CFPB playing a helpful,
supporting role, which might be the model that Mulvaney has
in mind in banking and nonbanking alike. This model relies on
state regulators taking the lead and being committed to action.” 11
Furthermore, several states, (e.g., Pennsylvania, Virginia, and New
Jersey) have created new consumer protection divisions. Maryland established a financial consumer protection commission.
Attorneys general in other states, such as New York, California,
Massachusetts, Illinois, Washington, and Colorado, continue to
be active in the consumer financial protection area.
Changes in Future Rulemaking
The change in the bureau’s leadership affects not only its enforcement activities but also its rulemaking, where change may not be
as immediate, but arguably will be more significant. Future rules
are expected to be less complex and more targeted to address
specific causes of consumer harm compared to previous rules,
such as those exemplified by the mortgage, small dollar lending,
and prepaid card rules which sought to remake entire markets. 12 In
addition, the bureau will be more sensitive to regulatory burden,
especially with regard to community banks and small businesses,
and it will put greater emphasis on, and be more transparent about,
a proposal’s underlying cost-benefit analysis and supporting data.
Rules will protect consumers as appropriate, but they will also
reflect more respect for consumer choice.
The CFPB’s most recent Unified Regulation Agenda (Agenda),
released October 17, 2018, 13 provides insight into its rulemaking
priorities and schedule. Top on the list are rules related to the
payday, vehicle title, and certain high-cost installment loans14
(small dollar lending) rule, the Fair Debt Collection Practices
Act, (FDCPA), and the Home Mortgage Disclosure Act (HMDA).
Amendments to the small-dollar lending rule have been slightly
accelerated from February to January, 2019. The bureau plans
to address changes to both the compliance date and the modification or elimination of the problematic ability-to-repay provision, though not the payment provisions that limit the number
of withdrawal attempts.
The bureau continues to project that it will issue a FDCPA proposal
in March 2019. However, that proposal will likely align more to
the industry perspective than the proposal outlined during the
Small Business Regulatory Flexibility Act process. It is widely
expected to include much-needed clarifications regarding how
collectors can use voicemail, text, and email to contact customers
and communicate about delinquent debt. It is not expected to
include proposed restrictions on the numbers of collection calls
due to concern about the unintended consequences of limiting
a creditors ability to communicate with a borrower.
In April 2019, the bureau expects to propose amendments to
Regulation C (HMDA) to reconsider the 2015 final rule. According to the Spring 2018 Agenda, this could involve issues such as
the “institutional and transactional coverage tests and the rule’s
discretionary data points.” It will also consider making permanent the increased threshold for the exemption from HMDA
data collection and reporting requirements for institutions that
originate fewer than 500 open-end lines of credit. In addition, it will
incorporate the August 2018 interpretive rule that implemented
the partial exemptions the Economic Growth, Regulatory Relief,
and Consumer Protection Act of 2018 created.
Small Business Lending Data Collection
Among the long-term rulemaking projections is the small business
lending data collection, which has moved from its spring pre-rule
status. In May 2017, the bureau, under Director Cordray, issued a
request for information about how small businesses engage with
financial institutions. Its Fall 2018 Agenda indicates it intends to
continue certain market monitoring and research activities to
facilitate resumption of the rulemaking.
Formal Rulemaking on
Abusive Acts and Practices
The bureau’s long-term rulemaking plan also includes defining abusive acts and practices, which are expected to provide clarity about
the meaning of the term. It appears from a memo to staff that the
industry will be much better informed about the regulatory process.
The memo included the statement, “On regulation, it seems that