CFPB Releases Its First Consumer Response Report

The Consumer Financial Protection Bureau this week released its first Consumer Response Report, detailing consumer complaints regarding credit cards over the first three months of the CFPB's system for Consumer Response. 

The Report makes three observations related to the initial credit card complaint data:

  • "Consumer Confusion: Many complaints show consumers struggling to understand the terms of credit cards and associated products like debt protection services. These complaints show a mismatch between consumer expectations and the way the product functions.
  • Third-Party Fraud: The complaints show some alleged fraudulent credit card charges made by third parties. The CFPB has helped to obtain redress for defrauded consumers in these instances. In some cases, the Bureau has consulted with the appropriate criminal authorities.
  • Factual Disputes: There are a large volume of complaints presenting factual disputes between consumer and issuer. The Bureau has generally found that issuers have been willing to resolve these complaints."

The CFPB also released its Proposed Policy Statement on the Disclosure of Certain Credit Card Complaint Data.

CFPB Proposes Scope of Non-Bank Supervision

The new Consumer Financial Protection Bureau has issued a Notice and Request for Comment on the proposed scope of its Dodd-Frank supervisory authority for certain non-depository institutions. The CFPB's Notice outlines potential criteria for defining the scope of this supervisory authority and  identifies six potential other markets that CFPB may supervise: (1) debt collection; (2) consumer reporting; (3) consumer credit and related activities; (4) money transmitting; (5) check cashing and related activities; (6) prepaid cards; and (7) debt relief services.

Section 1024 of Dodd-Frank grants supervisory authority to the CFPB for "covered persons" in the residential mortgage, private education lending, and payday lending markets. In other markets, CFPB would have supervisory authority only over a "larger participant."  Dodd-Frank assigned CFPB the task of issuing a rule on or before July 21, 2012, to identify these other markets and to define "larger participant."

CFPB seeks public comment on the criteria and threshold to define a "larger participant" and on the data to be used in measuring these criteria. CFPB also seeks public comment on the consideration of whether the six "other markets" should be included in the initial rule and/or whether additional markets should be included. 

Here Comes the Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau has a new website, and is making significant personnel additions, creating its internal structure, and otherwise preparing for the commencement of its official authority in July.  The CFPB is also blogging, tweeting, facebooking, youtubing, and hiring.

Among many other things, the CFPB's website defines the scope of its "Core Functions" as follows:

* Conduct rule-making, supervision, and enforcement for Federal consumer financial protection laws;
* Restrict unfair, deceptive, or abusive acts or practices;
* Create a center to take consumer complaints;
* Promote financial education;
* Research consumer behavior;
* Monitor financial markets for new risks to consumers; and
* Enforce laws that outlaw discrimination and other unfair treatment in consumer finance.

In December, the U.S. Treasury announced the creation of a new Consumer Inquiry and Complaint database, to be maintained by the CFPB, to track, collect, analyze, and refer consumer inquiries and complaints about consumer financial products and services, scheduled to take effect today.  The CFPB has also announced the creation of a future Consumer Response Center to receive consumer complaints and inquiries related to consumer financial services.

"Wall Street Reform and Consumer Protection Act" Is Now Law

President Obama today signed the "Wall Street Reform and Consumer Protection Act," which will bring comprehensive changes to consumer financial services, and to consumer finance litigation, including mortgages, credit cards, retail credit, debt collection, arbitration, preemption, and auto finance.  See details about the changes coming, as seen by the White House, and the President's signing remarks.

Conference Reaches Deal on Financial Regulatory Reform

The House-Senate Conference to reconcile financial regulatory reform reached a final agreement on the legislation on Friday.  The "Dodd-Frank Wall Street Reform and Consumer Protection Act" calls for the creation of the Consumer Financial Protection Bureau, an independent agency to be housed at the Federal Reserve, with a broad mandate to regulate consumer financial services of virtually all types.

The Consumer Financial Protection Bureau will have an independent director appointed by the President and confirmed by the Senate, with an independent budget and independent rule writing, examination, and enforcement authority.  The CFPB consolidates consumer protection responsibilities of the OCC, OTS, FDIC, Federal Reserve, NCUA, HUD, and the FTC.  Among other things, the legislation also creates a new Office of Financial Literacy to disseminate information to consumers and a new consumer hotline for consumer questions.

The legislation also provides for significant changes to regulations regarding mortgage financing, including

  • Requiring lenders to ensure a borrower's ability to repay;
  • Prohibiting yield spread premiums and pre-payment penalties;
  • Establishing new penalties for lender violations;
  • Expanding regulation of "high-cost loans;"
  • Requiring additional consumer disclosures for mortgages; and
  • Establishing an Office of Housing Counseling within HUD to boost homeownership and rental housing counseling.