A New Spring in the CFPB's Step

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With a new administration incoming at the Consumer Financial Protection Bureau (CFPB) and the country turning the corner in its fight against the pandemic, the CFPB has begun to flex its regulatory muscles once again. From ensuring LGBTQ- and COVID-19-related protections to rescinding or delaying the implementation of Trump Administration-era rules and policy statements, the CFPB has been very active in recent weeks reasserting itself.

Protections for Disadvantaged Populations

Since its inception, the CFPB has promoted the rights and protections of disadvantaged populations through the release of policy statements and rules, as well as its enforcement of regulations like the Equal Credit Opportunity Act and Regulation B. In the past few weeks, the Bureau has taken robust action to enhance such protections.

First, as previously discussed by DWT, the CFPB issued an Interpretive Rule on March 9, 2021, clarifying that the Equal Credit Opportunity Act's discrimination protections apply to sexual identity, gender identity, actual or perceived nonconformity with sex-based or gender-based stereotypes, and an applicant's "associations."

Second, the Bureau rescinded a January 24, 2020, policy statement that limited its pursuit of penalties for abusive acts or practices. In rescinding the policy statement, the Bureau notes that the statement had "undermined deterrence and was contrary to the CFPB's mission of protecting consumers." The rescission statement reminds readers of the standards for an abusive act or practice laid out by Congress in the Dodd-Frank Act:

Materially interfering with someone's ability to understand a product or service; Taking unreasonable advantage of someone's lack of understanding; Taking unreasonable advantage of someone who cannot protect themself; and Taking unreasonable advantage of someone who reasonably relies on a company to act in their interests.

During a 2019 CFPB symposium on the abusiveness standard, there was an argument put forth by panelists that the standard should be used to better protect and assist vulnerable populations like the elderly, servicemembers, students, the differently abled, and those with limited English proficiency. It remains to be seen whether the CFPB will adopt this approach, but recent actions taken related to English proficiency, immigrant populations, and student loans suggest that the reasoning expressed at the symposium may carry some weight at the Bureau.

Third, the CFPB has been proactive in requiring pandemic-related protections for homeowners, tenants, and the recipients of stimulus payments. Preventing another foreclosure crisis has been at the forefront of the CFPB's recent activity. "Unprepared is unacceptable," the Bureau warned mortgage servicers in an April 1, 2021, Compliance Bulletin, followed by a Notice of Proposed Rulemaking to amend Regulation X's mortgage servicing rules with updates intended to stave off a potential wave of foreclosures as homeowners exit COVID-related mortgage payment forbearances throughout the coming year.

Such protections have become a priority for the CFPB. In a series of three recent blog posts, Acting Director David Uejio indicated the need for "aggressive action" to protect the housing insecure and make the "housing market work better for all Americans." In another post, the Acting Director lamented consumer harms in the small dollar lending market, particularly with respect to payday loans and vehicle title loans, and highlighted the CFPB's continued belief in the importance of ability-to-repay underwriting standards.

Rescinding and Delaying Trump-Era Policy Statements and Rules

On March 31, 2021, the CFPB made a stark break with Trump Administration and pandemic-era policies by rescinding seven 2020 policy statements and one 2018 bulletin on supervisory communications. Although the rescinded policy statements related to the Bureau's COVID-19 response, critics have argued that the rescinded statements were indicative of the CFPB's more flexible approach to enforcement under the Trump Administration generally.

The seven rescinded policy statements are as follows:

  • Statement on Bureau Supervisory and Enforcement Response to COVID-19 Pandemic, March 26, 2020 – The CFPB would take into account financial institution staffing and resource challenges stemming from the pandemic as they related to the Bureau's supervisory and enforcement activities.
  • Statement on Supervisory and Enforcement Practices Regarding Quarterly Reporting Under the Home Mortgage Disclosure Act, March 26, 2020 – The CFPB would not take action against an institution for failure to report quarterly Home Mortgage Disclosure Act data.
  • Statement on Supervisory and Enforcement Practices Regarding Bureau Information Collections for Credit Card and Prepaid Account Issuers, March 26, 2020 – The CFPB would not take action against financial institutions for failure to submit information required by Regulations E and Z associated with collections related to credit cards and prepaid accounts.
  • Statement on Supervisory and Enforcement Practices Regarding the Fair Credit Reporting Act and Regulation V in Light of the CARES Act, April 1, 2020 – The CFPB would provide some flexibility in its supervisory and enforcement approach associated with the FCRA and Regulation V, taking into account good faith efforts to comply.
  • Statement on Supervisory and Enforcement Practices Regarding Certain Filing Requirements Under the Interstate Land Sales Full Disclosure Act and Regulation J, April 27, 2020 – The CFPB would not take action against land developers for delays in the filing of annual reports and financial statements.
  • Statement on Supervisory and Enforcement Practices Regarding Regulation Z Billing Error Resolution Timeframes in Light of the COVID-19 Pandemic, May 13, 2020 – The CFPB would not cite a violation in examination or bring action against creditors for certain billing error violations under Regulation Z where creditors made a good faith effort to comply.
  • Statement on Supervisory and Enforcement Practices Regarding Electronic Credit Card Disclosures in Light of the COVID-19 Pandemic, June 3, 2020 – The CFPB would not bring action against financial institutions for certain E-Sign violations.

In addition to the policy statements, the CFPB also rescinded a September 2018 Bulletin that articulated CFPB findings categories including Matters Requiring Attention (MRAs) and Supervisory Recommendations (SRs) such as examination reports and supervisory letters. The bulletin indicated that although the Bureau would communicate its findings to covered institutions through MRAs and SRs, neither MRAs nor SRs were to be considered "legally enforceable." Along with the rescission of the September 2018 bulletin, the CFPB has issued a new Bulletin that emphasizes that the Bureau "will continue to rely on MRAs" but "discontinue use of Supervisory Recommendations."

Along with the rescissions, the CFPB has also announced the delay of the General Qualified Mortgage Rule, as well as the Debt Collection Rules. The CFPB explained that its decision to delay the mandatory compliance date of the Mortgage Rule is intended to give more flexibility and choice to both lenders and homeowners still in flux as the result of COVID-19. According to Acting Director Uejio:

At a time when so many consumers are struggling and at risk of losing ground, particularly Black and Hispanic consumers, we need to do all we can to help people stay in their homes and to ensure the availability of responsible, affordable mortgages. In proposing to extend the date by which lenders must comply with the CFPB's new General QM definition, we are working to provide needed options for both homeowners and lenders during a time of uncertainty and hardship.

The CFPB proposed to extend the effective date of the Debt Collection Rules for similar reasons, arguing that affected parties should have more time to comply due to the hardships imposed by the pandemic.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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