CFPB Happenings: Workshop, TRID Guidance, Constitutionality Briefs

Financial Services Law

To close out a busier-than-expected 2019, the Consumer Financial Protection Bureau (CFPB or Bureau) held a workshop in conjunction with the Federal Trade Commission (FTC); published additional guidance under the TILA-RESPA Integrated Disclosure (TRID) Rule; issued an annual report on TILA, EFTA and CARD Act issues; and celebrated the one-year anniversary of Director Kathy Kraninger, who teased a new policy that would reward companies with the early termination of consent orders.

And the battle over the Bureau’s constitutionality waged on, as the parties filed their briefs with the Supreme Court in Seila Law v. CFPB and the countdown to the oral argument continues.

What happened

Yes, Virginia, there is still a CFPB. While nowhere near as active as in the Cordray years, the Bureau finished out 2019 with more than a whimper.

Workshop and Supervisory Highlights. Held on December 10, the joint CFPB/FTC workshop examined issues affecting the accuracy of traditional credit reports as well as employment and tenant background screening reports. In addition to remarks by Bureau Deputy Director Brian Johnson and FTC Commissioner Noah Joshua Phillips, the workshop featured four panel discussions.

Topics addressed during the panels included the current practices of furnishers of information and compliance with accuracy requirements, current accuracy topics for traditional credit reporting agencies, accuracy considerations for background screening, and navigating the dispute process.

The CFPB also released a special edition of its Supervisory Highlights dedicated to consumer reporting issues, with observations from consumer reporting companies (CRCs) and furnishers.

“Recent supervisory reviews of compliance with the [Fair Credit Reporting Act (FCRA)] and Regulation V have identified new violations and compliance management system (CMS) weaknesses at institutions within the CFPB’s supervisory authority,” according to the Supervisory Highlights.

For example, CFPB examiners found that various categories of furnishers had deficiencies in their policies and procedures. Auto loan furnishers did not provide sufficient guidance for conducting reasonable investigations of indirect disputes that contain allegations of identity theft, the Bureau said, while debt collection furnishers did not differentiate between FCRA disputes, Fair Debt Collection Practices Act (FDCPA) disputes and validation requests, resulting in the disputes and requests all being handled in the same way, without consideration of the different applicable statutory requirements.

At CRCs, the CFPB found that nationwide specialty CRCs did not follow reasonable procedures to ensure maximum possible accuracy by exempting certain furnishers from a data validation testing procedure; CRCs also neglected their duty to limit the furnishing of consumer reports for permissible purposes. Additional problems occurred with regard to dispute investigations, ranging from failures to initiate investigations after receiving notice of a dispute from a consumer to not completing investigations within the 30-day period.

The Bureau did note that examiners have “observed significant improvements” in the areas of FCRA and Regulation V protections, adding that its supervision in the consumer reporting market is “ongoing and remains a high priority.”

Research conference. The CFPB Office of Research likewise held its fourth research conference just two days later, on December 12-13, 2019. The detailed agenda included sessions such as “The Effects of Information on Credit Market Competition: Evidence from Credit Cards,” “Misfortune and Mistake: The Financial Conditions and Decision-making Ability of High-Cost Loan Borrowers” and “The Effect of Secondary Market Existence on Primary Market Liquidity: A Natural Experiment in Peer-to-Peer Lending.” If interested, you can read more here.

TRID guidance. The CFPB published two new guides addressing construction and construction-permanent loans under the TRID Rule. One guide focuses on disclosing construction and construction-permanent loans with a separate Loan Estimate and Closing Disclosure for each phase of the transaction.

The second guide concerns disclosing combined Loan Estimate and combined Closing Disclosure for both phases of a construction-permanent transaction.

Both guides provide guidance and illustrative examples for commonly asked questions about TRID and Regulation Z provisions related to completing such disclosures, the Bureau said.

Annual report on TILA, EFTA and CARD Act. The CFPB released this annual report on December 18. The Truth in Lending Act (TILA) and the Electronic Fund Transfer Act (EFTA) require the Bureau to make an annual report to Congress describing the administration of functions under TILA and EFTA, and an assessment of the extent to which compliance with TILA and EFTA has been achieved. In addition, the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) requires reporting on supervisory and enforcement activities with respect to compliance by credit card issuers with applicable federal consumer protection statutes and regulations. The data points are old, however. The report covers 2016 and 2017 only, and is valuable strictly for historical records.

Anniversary and policy change. On December 11, 2018, Kathy Kraninger took the helm of the CFPB as its second director. In recognition of her one-year anniversary in the leadership role, the CFPB issued a lengthy press release detailing her actions over the prior 12 months.

During her tenure, Kraninger has provided “clear rules of the road through rulemaking” (issuing the debt collection rule in May, for example); created “a culture of compliance,” with 133 supervisory events commenced and 147 supervised events completed, resulting in 433 matters requiring attention in fiscal year 2019; enforced the law against bad actors, announcing 22 public enforcement actions and settling six previously filed lawsuits that yielded a total of more than $777 million in consumer relief; and “enhanced inter-agency coordination,” becoming the chairperson of the Federal Financial Institutions Examination Council in April.

“It is an honor and privilege to serve and protect American consumers,” Kraninger said in a statement about her anniversary. “In this last year we’ve greatly enhanced consumer protection by harnessing the resources provided by Congress to be more effective and comprehensively utilized.”

Kraninger also discussed the possibility of a new Bureau policy that would give companies accused of wrongdoing the ability to obtain early release from consent orders if they meet the terms of the agreement.

Entities and individuals who are the subject of a consent order may request termination, and the CFPB has granted such requests in the past, Kraninger explained.

“We are currently identifying ways to improve this process to promote consistency, and we are also committed to ensuring consent orders remain in effect only as long as needed to achieve their desired effects,” she said. “The ultimate goal here is to provide clarity and consistency in our policy related to consent orders.”

The Bureau will announce the updated policy soon, Kraninger promised.

Amicus briefs filed. With oral argument now set for March 3, 2020, amici in Seila Law have filed their briefs with the justices.

The amicus briefs include filings by the Consumer Bankers Association, the Mortgage Bankers Association (MBA), the US Chamber of Commerce and law school professor Alan Morrison, among several others. Of note, all amici that argue constitutionality agree that the Bureau’s structure is unconstitutional. But three take no position at all. For those that do address the issue, each takes a different view, and a surprising number argue that the Court should strike Title 10 completely, a result that would invalidate the CFPB entirely. As an example of a more moderate position, the MBA brief took no position on constitutionality, arguing instead that if the Court finds the structure unconstitutional, the appropriate fix is simply to strike the for-cause removal provision.

For more on the workshop, click here.

To read the Supervisory Highlights, click here.

For more on the new TRID guides, click here.

To view the CFPB annual report, click here.

To review the research conference agenda, click here.

To read Kraninger’s remarks about consent orders, click here.

To read each of the briefs in the Seila Law case, click here.

Why it matters

The CFPB is under fire, and the Seila Law decision could result in invalidation of the Bureau. And yet the Bureau continues to operate at a substantially more active pace than was seen during the lengthy tenure of acting director Mick Mulvaney. With both a workshop and a special edition of Supervisory Highlights, the Bureau demonstrated a significant focus on FCRA compliance and, in particular, furnishers transmitting accurate information to consumer reporting agencies (CRAs). Lenders and others furnishing information to CRAs should take the time to review their current practices for compliance. Supervised entities should also keep an eye on the forthcoming announcement about the CFPB’s new policy on early termination of consent orders.