CFPB Goes Public and Steps Up Enforcement Activity

by Polsinelli

The Consumer Financial Protection Bureau (CFPB) recently announced what may be its boldest move yet: a $63 million enforcement action in coordination with the Federal Trade Commission (FTC) against Minnesota-based mortgage servicer, Green Tree Servicing, LLC. The Green Tree enforcement action follows quickly on the heels of several smaller enforcement actions by the CFPB, including complaints filed against an alleged robo-call phantom debt collection scheme and another action against a company accused of wrongfully using the logos of the Department of Veterans Affairs (VA) and Federal Housing Administration in advertisements for mortgage loans. And even more recently, in the CFPB's first overdraft enforcement action, it announced that it had fined a bank nearly $7.5 million to resolve allegations that the bank had charged consumers unlawful overdraft fees.

Companies operating in the consumer financial industry, from mortgage servicers to debt collectors, should take note of the CFPB's increased oversight activity. Given the breadth of its enforcement powers, e.g., it can obtain immediate injunctive relief halting business operations and freezing business assets, as well as civil damages and fines, a CFPB enforcement action could be crippling to your business.

The increase in enforcement activity by the CFPB comes in conjunction with the announcement that the CFPB will publicly disclose consumer complaints received through the CFPB's web-based complaint database. Businesses should take note because by going public with the complaint database and increasing its high-profile enforcement, the CFPB is moving beyond its infancy into a more aggressive role in the consumer finance industry.

The CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) passed by Congress in 2010. Under the Dodd-Frank Act, the CFPB can investigate and request information from covered persons or entities, issue subpoenas or civil investigative demands, conduct hearings and adjudication proceedings, and commence civil actions in federal court seeking any appropriate or equitable relief against any person that violates a federal consumer financial law. In particular, the CFPB can seek civil enforcement under the Dodd-Frank Act when it believes that a covered person or entity has engaged in unfair, deceptive, or abusive acts or practices. The CFPB also can take civil enforcement action under the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and the Real Estate Settlement Procedures Act. Despite the enforcement powers given to it by the Dodd-Frank Act, the CFPB had until recently focused its efforts largely on regulatory and investigative matters.

Yet the recent enforcement actions, including most notably the multimillion dollar action against Green Tree, suggest that the CFPB now intends to aggressively wield its enforcement powers against alleged violators in the consumer financial industry. Indeed, the CFPB proudly proclaims on its website that its recent enforcement action against a mortgage company for allegedly misleading consumers about the VA and home mortgages was the fifth enforcement action taken by the CFPB against companies using deceptive mortgage advertising in the last two months. The CFPB's recent actions against companies ranging from small-time debt buyers to large, multi-billion dollar mortgage servicers also make it clear that the CFPB intends to exercise its authority in all of the various consumer financial fields over which the CFPB has jurisdiction and that no consumer financial services company is immune from CFPB scrutiny. Additionally, by coordinating with the FTC on the Green Tree action, the CFPB has shown a willingness to increase the scope of its investigative and enforcement powers by collaborating with other government agencies.

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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