Tidbits on CFPB Risk

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Mar 17 2017
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The PHH case is red hot. This is the one that may be the giant-killer, since the first big effect was a federal court decision that a CFPB action was unconstitutional, violated due process and started a protracted battle that may topple the CFPB. Here are other tidbits:

1. No Statute of Limitations in RB4:   Referred to in the PHH v. CFPB Amicus Brief from the Chamber of Commerce as a “breathtaking assertion of raw administrative power that, if permitted to stand, would open the door to similarly unfair and unauthorized sanctions by the bureau under its broad enforcement authority,” the Director’s office of the Bureau first increased the money penalty by over $100 million for RESPA violations, then announced that statutes of limitations (SOL) don’t apply to administrative proceedings under RESPA. The issues are still pending but it’s hard to believe that the Bureau can pick and choose which parts of a statute it wants to honor and which parts it will deny. PHH claims protection of the SOL stated as 3 years in the statute; the CFPB’s answer is that, not withstanding the actual statute language, there is no 3 yr SOL stated in the CFPB Act that confers enforcement authority on the CFPB. And on the referral commissions issue, there was a quid pro quo in the room, AND although it was recognized by the Bureau as common practice in the industry, AND there was no referral compensation paid AND the reinsurance was delivered at the market price, BUT the action had not been run past the CFPB for their approval. This is classic RB4.

2. Consent orders apply to everyone under RB4:   Consent Orders, says the CFPB Director, provide detailed guidance to all companies on how to handle similar situations. “Indeed,” says the Director, “it would be ’compliance malpractice’ for executives not to take careful bearings from the contents of these orders.It’s time for everyone to study consent orders to avoid “compliance malpractice.” In other words, the Bureau is saying that Consent Orders apply to everyone who is a covered entity related to a Consent Order. These orders are accelerating. One measurement found a 300% increase in the number of Consent Orders for the most recent year measured. In keeping with the growth of RB4, the favorite venue has moved from federal court to administrative, over half by Oct. 2015.

3. Family Ties Win at RB4:  Auto dealers are exempt from CFPB enforcement. It says so in Dodd-Frank. Well, the exemption is in the statute BUT it doesn’t matter what’s in a statute anymore; through joint-agency enforcements and such door-openers as UDAAP and the FTC, autodealers are corralled into CFPB enforcement. Twelve Consent Orders were on auto lending. And the year long enforcement project in 2015 with State, Local law enforcement OPERATION COLLECTION PROTECTION w/70 partners nationwide against deception/ abuse in debt collection practices resulted in over $5 million in fines for over 2 dozen defendants. Now the CFPB has opened four regional offices for supervision and enforcement nationwide and
partnerships are active with all federal agencies, including the criminal side (DOJ) as well as state agencies and state Attorneys General.

4. Little Things Mean a Lot (NATIONAL CONSUMER ASSISTANCE PLAN):  From the offices of State Attorneys General in over 30 states comes a bundle of substantial changes in debtor law. This is an event of rulemaking similar to PCI-DSS. It appears to issue from a
New York task force that decided the three credit bureaus should adhere to the new 2016 rules. These are now in effect and concern collections, primarily. It's move from a 30-state mandate to all of us.expected to

MEDICAL DEBT—180 day waiting period before being reported to the bureaus. This helps protect consumer who wait for insurance claims to be approved and paid. And the CRAs must remove from credit reports any previously reported medical debts that were
paid or are being paid by insurance.

DATE OF BIRTH—DOB is a new global requirement. A furnisher cannot report an authorized user without a date of birth, and CRAs must reject debtors in their system who don’t show a DOB. 

ALL REPORTED DEBT MUST ARISE FROM A SIGNED CONTRACT— CRAs (credit reporting agencies) will eliminate the reporting of debt if there is no signed contract or document (a new perspective on verifying documentation). The
responsibility is with the CRAs to confirm or reject (?) This will be a substantial challenge to the debt buying industry.

CONSISTENT STANDARDS WORKING GROUP (for all data furnishers) - To seek uniformity of data transmissions COMMENT– Many questions and very little information found on how this will
all work. Metro2 will play a big part. And there are some 400 CRAs.





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