I am writing to highlight some recent issuances by the CFPB. First, the CFPB is issuing a series of Requests for Information to obtain feedback from the public regarding the CFPB’s operations, which it is calling its “Call for Evidence.” The CFPB has already issued several, which are summarized below, and plans to issue several more. Second, the CFPB issued a new Strategic Plan in February, which signals a new direction for the CFPB in terms of its focus on UDAAP, enforcement, and regulatory reform. I hope you find this information helpful. Please let me know if you have any questions.
I. CFPB’s “Call for Evidence” on its Operations
A. The Call for Evidence
On January 17, 2018, the CFPB issued a press release announcing that it planned to issue a series of Requests for Information (“RFIs”) seeking comment on enforcement, supervision, rulemaking, market monitoring, and education activities. The CFPB stated that the purpose of these RFIs is to “ensure the Bureau is fulfilling its proper and appropriate functions to best protect consumers.”
This represents an excellent opportunity for the industry to inform changes at the CFPB, considering that the CFPB’s new leadership is likely more receptive to the industry’s concerns. Some have suggested that this RFI process might not result in real change, because Acting Director Mulvaney’s position is temporary under the Federal Vacancies Reform Act (“FVRA”) and new permanent leadership may not focus on this endeavor or the RFIs. But consider that Acting Director Mulvaney could be at the CFPB for a while, as he is permitted to serve under the FVRA while a nomination for Director is pending in the Senate, and there is another 210-day clock that begins to run if that nominee is rejected or withdrawn. Mulvaney is also permitted to serve while a second nomination is being considered by the Senate, and he also gets another 210-day clock if that nominee is rejected or withdrawn. This means Mulvaney could potentially be in his acting role for some time, and he could accomplish some significant changes during his tenure. In addition, the Trump administration could appoint a new Director who is also interested in reforming the CFPB’s activities, and the administrative record from this RFI process would provide a very useful resource to a new Director’s reform efforts.
Please note, though, that if you would like to comment on any of these RFIs, it may be prudent to comment anonymously through a third party, such as a law firm or trade association, for a number of reasons. This may be especially true for certain RFIs. For example, comments will become part of the administrative record, which will be publicly available, and institutions may not want to identify themselves as being familiar with the CFPB’s CID or enforcement processes. In addition, an institution may be concerned about submitting negative comments on particular experiences with CFPB processes, as they could be tied back to its previous interactions with the CFPB, and possibly with particular staff members. There are other reasons why an institution may wish to comment anonymously. Please contact me for assistance with commenting on any of these RFIs.
B. The RFIs Issued to Date
The CFPB has issued the following RFIs so far, with the following comment deadlines:
i. CIDs. This RFI was published on January 26, 2018. It requests information on the CFPB’s CID processes “to consider whether any changes to the processes would be appropriate.” The CFPB asked questions on specific topics such as:
- “Specific steps that the Bureau could take to improve CID recipients’ understanding of investigations, whether through the notification of purpose included in each CID or through other avenues;”
- “The nature and scope of requests included in Bureau CIDs, including whether topics, questions, or requests for written reports effectively achieve the Bureau’s statutory and regulatory objectives, while minimizing burdens;” and
- “The timeframes associated with each step of the Bureau’s CID process, including return dates, and the specific timeframes for meeting and conferring, and petitioning to modify or set aside a CID.”
The comment deadline is March 27, 2018. As explained above, this is a particularly sensitive topic for many reasons and it may be prudent for institutions to comment anonymously through third parties, such as trade associations or law firms.
ii. Administrative Adjudication. This RFI was published on February 5, 2018. It requests information on the CFPB’s rules for administrative enforcement proceedings under 12 C.F.R. Part 1081. The RFI requests comments on certain specific topics, including:
- “Whether, as a matter of policy, the Bureau should pursue contested matters only in Federal court rather than through the administrative adjudication process;”
- The requirements for the contents of the CFPB’s notice of charges; and
- The requirement that respondents file an answer to a notice of charges within 14 days.
The comment deadline is April 6, 2018.
iii. Enforcement. This RFI was published on February 12, 2018. It requests information on the CFPB’s enforcement processes to assist the CFPB in considering changes to its processes. The CFPB requested comment on specific topics, including:
- “Communication between the Bureau and the subjects of investigations, including the timing and frequency of those communications, and information provided by the Bureau on the status of its investigation;”
- “The length of Bureau investigations;” and
- The CFPB’s Notice and Opportunity to Respond and Advise (NORA) process;
- The calculation of civil money penalties (CMPs); and
- The standard provisions in CFPB consent orders.
The comment deadline is April 13, 2018. As explained above, this is a particularly sensitive topic for many reasons and it may be prudent for institutions to comment on this RFI through a third party.
iv. Supervision Program. This RFI was published on February 20, 2018. It requests information on the CFPB’s supervision program to assist the CFPB in considering changes to the program. The CFPB requested comment on specific topics, including:
- “The timing, frequency, and scope of supervisory exams;”
- “The timing, method or process used by the Bureau to collect information and documents from a supervised entity prior to the commencement of an examination;”
- “The effectiveness and accessibility of the CFPB Supervision and Examination Manual;”
- “The efficiency and effectiveness of onsite examination work;” and
- “The effectiveness of Supervision’s communications when potential violations are identified, including the usefulness and content of the potential action and request for response (PARR) letter.”
The comment deadline is May 21, 2018. It may also be prudent for institutions to comment on this RFI anonymously through a third party.
v. External Engagement. This RFI was published on February 26, 2018. It requests information on the CFPB’s public and non-public engagement processes, including its field hearings, town halls, roundtables, and meetings of the Advisory Board and Councils. The CFPB requested comment on specific topics, including:
- “Strategies for seeking public and private feedback from diverse external stakeholders on the Bureau’s work;”
- “Processes for transparency in determining topics, locations, timing, frequency, participants, and other important elements of both public and private events;”
- Methods of soliciting input from outside of Washington, DC;
- Strategies for promoting transparency of external engagements; and
- Other methods not currently utilized by the CFPB.
The comment deadline is May 29, 2018. One of frequent criticisms I have heard about the CFPB’s work is that it does not solicit enough input from the public, or it does not obtain input from the most knowledgeable sources. This RFI, in light of the CFPB’s change in leadership, represents a great opportunity to try and improve the CFPB’s engagement with the public.
vi. Consumer Complaints. This RFI was issued on March 1, 2018, and is expected to be published in the Federal Register on March 6, 2018. It requests information to assist the CFPB in, “assessing potential changes that can be implemented to the Bureau’s public reporting practices of consumer complaint information.” The CFPB requested comment on specific topics, including:
- Reporting on State and local complaint trends;
- “Whether it is net beneficial or net harmful to the transparent and efficient operation of markets for consumer financial products and services for the Bureau to publish the names of the most-complained-about companies;”
- “Whether the Bureau should provide more, less, or the same data fields in the Consumer Complaint Database;” and
- “Whether the Bureau should supplement observations from consumer complaints with observations of company responses to complaints.”
The comment deadline should be on or about June 4, 2018 (it will be 90 days after publication in the Federal Register). I frequently hear criticisms of the CFPB’s consumer complaint database, including its publishing of unverified consumer narratives and its public reporting (or shaming) on complaints, such as its monthly complaint “snapshots.” In fact, I wrote an article that addresses the potential consumer confusion from and the CFPB’s lack of research on the issue of its publishing of unverified consumer complaint narratives in the database, which is available here: http://journals.ama.org/doi/10.1509/jppm.17.037. This RFI represents an excellent opportunity to achieve change in the CFPB’s consumer complaint database and reporting.
Finally, the CFPB has published a website that compiles its series of RFIs, which is available at: https://www.consumerfinance.gov/policy-compliance/notice-opportunities-comment/open-notices/call-for-evidence/. Please contact me if you would like assistance with commenting on any of these RFIs.
II. Strategic Plan
On February 12, 2018, the CFPB issued its Strategic Plan for the next five years, i.e., fiscal years 2018-2022. The Strategic Plan replaces the one that the CFPB issued in February 2015 that covered fiscal years 2013-2017, and finalizes a draft Strategic Plan that the CFPB posted for comment in October 2017 under former Director Cordray. The new Strategic Plan signals a change in the CFPB’s view of its unfair, deceptive, or abusive acts or practices (“UDAAP”) authority and enforcement function, and indicates a new focus on regulatory reform.
A. CFPB’s Move Away from UDAAP
One notable change is that Acting Director Mulvaney has revised the CFPB’s vision statement from its last Strategic Plan issued in 2015 to remove a reference to the agency’s authority to enforce against UDAAP. The old vision statement included a specific reference to a market “in which no one can build a business model around unfair, deceptive, or abusive practices.” But the CFPB’s new vision statement does not contain any reference to UDAAP. Instead, it contains a statement referencing only consumer choice and transparency in the market, and protecting the rights of all parties. Specifically, the CFPB’s new Vision is, “Free, innovative, competitive, and transparent consumer finance markets where the rights of all parties are protected by the rule of law and where consumers are free to choose the products and services that best fit their individual needs.”
I believe this is a signal that the days of the CFPB’s aggressive use of its UDAAP authority are over. Remember that most of the CFPB’s enforcement actions cited at least one UDAAP violation, and some enforcement actions were based exclusively on UDAAP. This UDAAP authority was the CFPB’s “go to” tool to address issues it identified in investigations or examinations that were not necessarily violations of specific requirements. In addition, some rulemakings were based substantially on UDAAP authority. For example, the CFPB’s new payday loan rule relies almost exclusively on its UDAAP authority, as there was no statutory mandate for the rule. While the reference to “transparency” in the new vision statement could mean that deception will still be a focus under UDAAP, to ensure cost information is transparent, the removal of a specific reference to UDAAP from the CFPB’s vision statement signals a change in the CFPB’s focus on UDAAP in its enforcement and regulatory activities.
B. CFPB’s Move Away From Focusing on Enforcement
It also looks like the CFPB will have a different view of its enforcement function, from being one of its primary functions to a last and final resort. The CFPB changed its first goal in the Strategic Plan from referencing enforcement to referencing access to credit. Specifically, the first goal previously was to, “prevent financial harm to consumers while promoting good practices that benefit them.” The new Strategic Plan’s first goal is to, “ensure that all consumers have access to markets for consumer financial products and services.” This focus on access to credit is significant, considering the Strategic Plan also appears to be signaling a period of regulatory reform, as described further below.
To be fair, the new Strategic Plan does reference enforcement in its second goal, but that goal also describes supervisory activities and ensuring consistent enforcement with respect to depository and non-depository institutions. But in a January 23, 2018 memorandum to staff, Acting Director Mulvaney describes enforcement as “the most final of last resorts,” to be used “only when all other attempts at resolution have failed.” It does appear that the agency will be focusing less on enforcement under Acting Director Mulvaney’s leadership.
C. CFPB’s Move Towards Focusing on the Limits of its Statutory Authorities
The Strategic Plan also appears to signal a focus on the limits of the CFPB’s statutory authority. Acting Director Mulvaney’s message accompanying the new Strategic Plan states that after reading the previous draft plan, “it became clear to me that the Bureau needed a more coherent strategic direction,” and describes the change he has made to the CFPB’s strategic direction as having “committed to fulfill the Bureau’s statutory responsibilities, but go no further.” In an apparent reference to a reported statement from a CFPB official about Director Cordray’s past leadership that Director Cordray was “pushing the envelope” during his time at the CFPB, Acting Director Mulvaney stated in his message that pushing the envelope “ignores the will of the American people, as established in law…,” and “risks trampling upon the liberties of our citizens, or interfering with the sovereignty or autonomy of the states or Indian tribes.” Along this line, the Strategic Plan states that the CFPB will work, “[a]cting with humility and moderation.” This is a clear signal that the CFPB’s focus has changed towards focusing on the limits of its statutory authorities, rather than testing them as former Director Cordray admitted to doing.
D. Regulatory Reform
This new Strategic Plan also signals that the CFPB is going to enter into a period of regulatory reform. The Strategic Plan states that the CFPB will take steps to ensure it meets its goals, which include conducting reviews of the CFPB’s existing rules and reducing regulatory burden. Specifically, these steps include:
- Launching a program to review existing regulations or subparts of major regulations to assess opportunities for clarification, updating, and streamlining;
- Forming a cross-Bureau Regulatory Burden Task Force to identify opportunities to reduce regulatory burden; and
- Develop databases that will allow the Bureau to appropriately monitor markets and conduct research to surface trends, opportunities, and risks relevant to consumers.
As you know, the CFPB has already signaled that it plans to conduct a rulemaking this year to revisit aspects of the HMDA rule, including its scope and discretionary data points, and that it plans to revisit the payday loan rule. It looks like other rules could be next. And this is in addition to the Dodd-Frank Act’s five-year lookbacks.
This represents a major opportunity for the industry to affect change in the CFPB’s rules, especially considering that this period of regulatory reform could come as the CFPB is more focused on access to credit and consumer choice, as described above. The industry should begin considering how it might respond to requests for information under such a program, such as identifying issues or concerns with particular rules and guidance, both new and old. In addition, considering the CFPB’s interest in the topic, the industry could begin submitting information regarding opportunities to streamline rules, provide clarification, or reduce regulatory burden, before such a formal process begins. Such information could be helpful to the CFPB in determining the scope and issues in future RFIs or proposed rules. Please let me know if you’d like any assistance in thinking about or submitting information to the CFPB.
E. Compliance Should Continue to be a Concern
While the CFPB’s focus has changed under its new leadership, compliance should still be a concern for the industry. At some point in the future there will be a new Director of the CFPB, and Acting Director Mulvaney’s changes to the CFPB could be changed. While changes in statutes and regulations are difficult to accomplish, changes in allocation of resources or the focus of the agency’s efforts would be relatively easy for a new Director to accomplish.
In addition, supervision and enforcement is backward looking. Violations that occur while an Acting Director Mulvaney heads the agency could be reviewed later when the CFPB has a new Director who is more inclined to use the agency’s enforcement authority. Further, state regulatory agencies will likely, and some have already signaled their intentions to, pick up the slack and increase their focus on enforcement of both technical requirements and their sources of UDAAP authority. And there is always the risk of consumer lawsuits. Many consumer protection laws provide consumers with a private right of action, meaning that civil lawsuits under both federal and state law are still possible, even if the CFPB’s priorities have changed.
This new Strategic Plan and the CFPB’s series of RFIs are positive news for the industry. The Strategic Plan signals a change to a CFPB that is less apt to test the boundaries of its enforcement authority or engage in regulation by enforcement. In addition, this signals a change to a CFPB that is more focused on maintaining access to credit and consumer choice.
In addition, this appears to be a unique moment in which the industry can affect real change at the CFPB and the rules affecting the consumer financial services markets. These RFIs represent a fantastic opportunity for industry to provide their own unique insights and information on the CFPB’s processes, which will be heard by a more sympathetic and receptive leadership. The Strategic Plan’s signal of a period of regulatory reform also represents an opportunity to inform the CFPB about issues and concerns with particular rules and guidance. I hope that many of you plan to comment on these RFIs (and responding to any future regulatory reform efforts), as having more information directly from the institutions under its jurisdiction will help the CFPB improve its processes. Please contact me if you would like assistance with commenting on any of these RFIs.