The George Mason University School of Law, Law & Economics Center recently hosted a conference titled “Understanding the Consumer Financial Protection Bureau,” through GMU’s Attorneys General Education Program. Founded in 2009, the program was created to provide economic and public policy educational programming to state attorneys general and their staff attorneys from across the country. The conference was well attended by attorneys general and staff from over 25 states, as well as members of the private legal and business communities.
In the keynote address, Acting Deputy Director of the CFPB, Steve Antonakes, stated that the Bureau will be turning its attention to firms that offer short-term, high-cost loan products, such as payday lenders. Mr. Antonakes also discussed the CFPB’s criteria for prioritizing its supervision schedule. Going forward, the Bureau will attempt to prioritize examinations across product types, based on the following factors: (i) market size; (ii) market share; (iii) product risk; and (iv) field intelligence regarding the quality of management, other enforcement actions, and complaints.
During the mortgage lending initiatives session, Ben Olson (CFPB’s Deputy Assistant Director of the Office of Regulations) summarized the Bureau’s January 2013 mortgage regulations, covering ability to repay/qualified mortgages, mortgage servicing rules, loan originator compensation, high-cost home loans, and escrow accounts. On the topic of qualified mortgage standards, Mr. Olson affirmed the Bureau’s past guidance that the temporary qualified mortgage inclusion of loans eligible for sale to Fannie Mae or Freddie Mac may depend on unique facts and circumstances. Other panelists emphasized that the coverage can depend on the requirements of a purchase agreement between a GSE and a particular lender. As expected, Mr. Olson confirmed that the CFPB will focus next on RESPA/TILA disclosure integration and the HMDA changes mandated by the Dodd-Frank Act.
Jon Seward (Deputy of the Housing and Civil Enforcement Section at the Department of Justice) spoke regarding the DOJ’s fair lending enforcement activities. Echoing the CFPB’s March 21, 2013 bulletin on indirect auto finance and fair lending compliance, Mr. Seward indicated that the DOJ is also focusing on the auto finance industry. During the ensuing panel discussion, in response to concerns regarding the use of proxy data in fair lending enforcement against the indirect auto finance industry, Mr. Seward indicated that there will be further discussion among regulators and law enforcement on the use of such data, with the potential for an expansion of HMDA-like reporting requirements into the auto industry. While it is very clear that there will be an enforcement focus on fair lending in the auto finance industry, it appears that regulators are still working out the manner in which they will build a fair lending case in this area. Due to the lack of existing demographic tracking and reporting requirements (necessitating the use of proxy data to infer disparate impact), and the necessity to target purchasers of retail installment contracts for the actions of the auto dealers actually negotiating those contracts, use of the statistical analysis currently favored in disparate impact cases will extend the doctrine onto even more dubious ground.
The panel on enforcement actions featured CFPB Enforcement Attorney Deborah Morris. Ms. Morris focused on the collaboration between the CFPB, state attorneys general, and other regulatory entities, in recent enforcement actions. According to Ms. Morris, almost all of the CFPB’s enforcement actions and litigation to date have originated from referrals, investigations or examinations conducted by other regulatory agencies, as opposed to CFPB exams.