As 2019 nears an end, the Consumer Financial Protection Bureau (CFPB or Bureau) has remained busy, challenging a class action settlement in Maryland, seeking public comment on the TRID disclosure rule, releasing its latest rule-making agenda and its eighth annual Ombudsman Office report, reaching a settlement with a military travel lender and servicer—and preparing for a now-scheduled court date in early 2020 over its constitutionality.
What happened
A roundup of the latest CFPB activity:
Maryland appeal amicus. In a move that would have been expected in the Cordray era of the CFPB, but is somewhat more surprising now, the Bureau filed an amicus brief in an appeal to Maryland’s highest appeals court, asking the court to affirm an intermediate appeal ruling that rejected a class action settlement. The reason? The CFPB argues that the settlement would impinge on the CFPB’s authority because it would have forced class members to release claims for relief obtained by the Maryland attorney general, as well as recoveries that could be paid out of the CFPB’s civil penalty fund. Wrote the CFPB, if the deal were approved, “it would pervert the purposes of the [Civil Penalty] Fund by diverting payments Congress intended the Bureau to provide to the victims of unlawful conduct to the very entities whose unlawful conduct caused their victims’ harm. Such a result would prevent the Bureau from compensating [defendant’s] victims as Congress intended, either because the payments would be assigned to [defendant] or because, to avoid giving [defendant] a windfall, the Bureau would exercise its discretion to decline to make them. Assignment of these payments to the entities who caused their victims’ harm would offend fundamental equitable principles.”
Input on the TRID rule. To “celebrate” five years of TRID, the Bureau is required by the Dodd-Frank Act to conduct an assessment on the effectiveness of every “significant” rule, and the TRID rule—which combines required disclosures under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA)—qualifies.
To aid the review, the CFPB has requested public comment on the feasibility and effectiveness of its plans for the assessment, as well as recommendations for modifying, expanding or eliminating the TRID rule. Data and information about the benefits, costs and effectiveness of the rule would also be helpful, the Bureau said.
The TRID rule took effect in 2015, implementing the Dodd-Frank Act’s requirement to combine certain mortgage disclosures that consumers receive under TILA and RESPA. Creditors are also required to provide loan estimates and closing disclosures within three business days.
Since then, the Bureau has twice amended the rule, first in 2017 and again in 2018.
Comments will be accepted until Jan. 21, 2020.
Ombudsman’s Office Report issued. The CFPB Ombudsman’s Office is an independent, impartial and confidential resource that seeks to resolve individual and systemic process issues with the Bureau. In its eighth such annual report, the Office focused on two systemic issues: (1) CFPB handling of consumer complaints and (2) disclosures to consumers regarding defendant-administered redress. The report also updates the public on four prior reviews and notes the upcoming reviews, which include various enumerated ways that the office can better assist consumers.
Rule-making agenda. As the year comes to a close, rule-making continues. The CFPB issued a request for information (RFI) concerning proposed changes to the Remittance Rule, and laid out its rule-making priorities for the period from Oct. 1, 2019, to Sept. 30, 2020, promising that its long-awaited debt collection rules should be final in the coming year.
The Remittance Rule, a rule promulgated under the Electronic Fund Transfers Act (EFTA), imposes requirements on companies that send international money transfers, or “remittance” transfers, on behalf of consumers. Among its requirements, the rule mandates that providers generally must disclose the exact exchange rate, the amount of certain fees and the amount expected to be delivered to the recipient. In an RFI concerning proposed rule changes, the Bureau seeks information and evidence related to the scope of coverage of the Remittance Rule, including whether to change a safe harbor threshold in the rule that determines whether a person makes remittance transfers in the normal course of its business, and whether an exception for small financial institutions may be appropriate.
Separately, the CFPB is promising something more concrete on debt collection. In its May 2019 proposal, it proposed applying the Fair Debt Collection Practices Act (FDCPA) to modern forms of communication, such as text messages.
Also on the agenda: a final rule rescinding the ability to repay provisions of the Payday, Vehicle Title and Certain High-Cost Installment Loan Rule—estimated to arrive in April 2020—and a final rule coming in March 2020 on the Home Mortgage Disclosure Act (HMDA) concerning the permanent thresholds for both open-end credit lines and closed-end mortgage loans.
Additional rule-making on the HMDA will follow, the Bureau said, with the release of a Notice of Proposed Rulemaking on the collection of HMDA data points and the disclosure of such data set for July 2020.
2020 will also bring a final rule on Property Assessed Clean Energy (PACE) financing, which often takes the forms of loans to facilitate residential solar energy and other home improvement projects.
Settlement reached with military travel lender, servicer. The CFPB announced a deal with a Kentucky-based military travel lender, its principal and the related servicer of the loans. The lender offered and extended financing for airline tickets to military service members and their families.
According to the Bureau, however, the lender misrepresented the true cost of the credit in violation of the Consumer Financial Protection Act (CFPA) by charging a fee to consumers who obtained financing above the fee it charged to consumers who paid in full and, further, failing to include the fee in the finance charge or the annual percentage rate for those who obtained credit.
Representatives of the lender quoted “falsely low” monthly interest rates to consumers, the Bureau alleged, and the company failed to provide consumers with required information about the terms of credit (such as the amount financed) in violation of TILA and Regulation Z.
As for the servicer, the CFPB said it overcharged service members and their families for a debt-cancellation product and never established, reviewed or updated any written policies or procedures regarding the accuracy and integrity of the consumer information it furnished to consumer reporting agencies. These actions constituted violations of the Fair Credit Reporting Act and deceptive practices in violation of the CFPA, the Bureau alleged.
To settle the charges, the lender and its principal are subject to a suspended judgment of $3,468,224 and must pay a civil money penalty of $1. They are also prohibited from future consumer lending targeted to service members and their families. The consent order with the servicer requires a payment of $54,625 in restitution and a civil money penalty of $25,000.
March 3, 2020, is the day. There are two new developments as Seila Law hurtles toward a resolution. First, the Supreme Court kept matters simple by denying a petition for writ of certiorari filed in the related All American Check Cashing case, a petition we reported on previously. Second, the Supreme Court scheduled oral argument in the battle over the CFPB’s constitutionality for the first week of March.
The justices have agreed to answer two questions: “Whether the vesting of substantial executive authority in the [CFPB], an independent agency led by a single director, violates the separation of powers” and “whether, if the [CFPB] is found unconstitutional on the basis of the separation of powers, [the provision creating the ‘for cause’ removal of the director] can be severed from the Dodd-Frank Act?”
Following the March 3 oral argument, a decision is expected from the Court by the end of the term, or June 2020.
To view the Maryland amicus brief, click here.
To view the notice and comment on the TRID Rule, click here.
To view the 2019 Annual Report to the Director from the CFPB Ombudsman’s Office, click here.
To read the fall 2019 rule-making agenda, click here.
To read the consent order with the military travel lender, click here.
To read the consent order with the military travel servicer, click here.
Note: We report separately on a student lending-related suit filed against the CFPB here.
Why it matters
Is TRID in trouble? Don’t count on it. TRID (while plainly imperfect) is a product of congressional directive and a lengthy implementation process. But this process could lead to some simplification to end much of the confusion in the disclosures.
Otherwise, as the CFPB prepares for its showdown in the Supreme Court, the Bureau continues to act as though nothing will stand in the way of its new centrist posture. The Bureau fall rule-making agenda for the coming months will focus on several significant issues from payday lending to debt collection, with a new request for public comment as part of its review of the TRID rule.