United States: CFPB: March Roundup

Last Updated: April 17 2012
Article by Suzanne F. Garwood

Taking the student loan, vehicle and consumer lending industries by surprise, the CFPB launched a number of new complaint databases overnight in the midst of a website redesign. The CFPB also:

  • Weighed in with an amicus brief in a TILA rescission case;
  • Launched a new "Ask CFPB" consumer inquiry tool;
  • Requested comment on a short-term lending hearing; and
  • Proposed a much-needed regulation to protect privileged information shared with the CFPB.

Complaint Database

On the morning of March 5, the CFPB unveiled a new "look" to its website, which included the launch of complaint databases for student loans, deposit products, and vehicle and consumer loans. From the perspective of the consumer, it would appear that the CFPB will be handling all complaints for these various new products that consumers submit via the CFPB complaint database portal. This, however, is not the case.

At present, with respect to vehicle and consumer loan complaints, the CFPB will refer all complaints to the FTC Sentinel, with the exception of those relating to large depository institutions over which the CFPB has supervisory jurisdiction. For those unfamiliar with it, the FTC Sentinel is an online database of consumer complaints accessible only to law enforcement that helps them respond to consumer complaints.

The CFPB, however, is working diligently to get the database operational for segments of the market beyond large depositories, and participants in those industries should anticipate being brought online before the end of the year.

With respect to the database covering "deposit products," the CFPB is accepting consumer complaints about bank accounts, including checking accounts, savings accounts, CDs, and related services. The CFPB concedes that despite the fact that deposit products are

Taking the student loan, vehicle and consumer lending industries by surprise, the CFPB launched a number of new complaint databases overnight in the midst of a website redesign. The CFPB also:

  • Weighed in with an amicus brief in a TILA rescission case;
  • Launched a new "Ask CFPB" consumer inquiry tool;
  • Requested comment on a short-term lending hearing; and
  • Proposed a much-needed regulation to protect privileged information shared with the CFPB.

Complaint Database

On the morning of March 5, the CFPB unveiled a new "look" to its website, which included the launch of complaint databases for student loans, deposit products, and vehicle and consumer loans. From the perspective of the consumer, it would appear that the CFPB will be handling all complaints for these various new products that consumers submit via the CFPB complaint database portal. This, however, is not the case.

At present, with respect to vehicle and consumer loan complaints, the CFPB will refer all complaints to the FTC Sentinel, with the exception of those relating to large depository institutions over which the CFPB has supervisory jurisdiction. For those unfamiliar with it, the FTC Sentinel is an online database of consumer complaints accessible only to law enforcement that helps them respond to consumer complaints.

The CFPB, however, is working diligently to get the database operational for segments of the market beyond large depositories, and participants in those industries should anticipate being brought online before the end of the year.

With respect to the database covering "deposit products," the CFPB is accepting consumer complaints about bank accounts, including checking accounts, savings accounts, CDs, and related services. The CFPB concedes that despite the fact that deposit products are commonplace, they can be complex and confusing.

As with the databases for credit cards and mortgage loans that came before them, the CFPB expects entities to respond to complaints within 15 days of receipt and to close all complaints within 60 days. Consumers are given a tracking number after submitting a complaint; they are then able to log in to the CFPB website at any time and check the status of their case (not unlike tracking a package with FedEx). Each complaint will be processed individually, and consumers will have the option to dispute a bank's resolution.

As of February 22, 2012, the Bureau had received over 20,000 complaints, including nearly 7,000 on mortgages and almost 12,000 on credit cards.

Amicus Brief

The Consumer Financial Protection Bureau filed an amicus brief in the United States Court of Appeals for the Tenth Circuit in Denver, Colorado in Rosenfield v. HSBC Bank, USA .

According to TILA, if a consumer does not receive all "material disclosures" on a rescindable loan, then the consumer's right to rescind the loan extends from three business days to three years from the date of consummation. If the borrower rescinds within that time frame, then the lender must return interest and fees charged on the loan and release the lien. The borrower, in return, must tender the principal of the loan.

The question presented in the case is whether borrowers must do more than provide mere notice of their intent to rescind. Rather, they must also file a lawsuit against the lender to ensure that their rescission request falls within the three-year statute of limitations. Taking a technical reading of TILA, the brief argues that borrowers who did not receive their required TILA disclosures have the right to rescind their loans, provided they merely notify the lender of their intent to cancel within three years from the date of origination. The CFPB notes:

Contrary to the reasoning of the district court, § 1635 in no way mandates that consumers also file suit to rescind within that three-year period. Rescission under TILA — like rescission in many other contexts — is a non-judicial mechanism, and is accomplished by notice, not a lawsuit. Litigation may ensue, but that litigation addresses whether the consumer's rescission was valid under the Act, not whether the court should award rescission. Accordingly, it is the consumer's e xercise of the right to rescind (by providing written notice to the lender) that must occur within the three-year period — not the filing of suit to confirm the validity of the rescission.

Thus, consistent with their consumer protection-oriented mission, the CFPB urges the court in their brief to adopt the least onerous reading of TILA that could apply to consumers seeking to exercise their rescission rights.

"Ask CFPB"

In keeping with the CFPB's overarching goal to improve financial literacy and understanding of financial products, the CFPB has launched a new interactive tool (http://www.consumerfinance.gov/askcfpb/ ). The tool is a web page dedicated to frequently asked questions about mortgage loans, credit cards, credit scores and more. A sample "FAQ" is provided, below:

Where can I get my credit score?

Unlike your credit report, which you can get at no cost to you, you usually have to pay for your credit score. There are certain instances in which you are entitled to your credit score for free, for example if you are denied a loan on the basis of your credit score.

There are a variety of credit scores you can purchase in the marketplace. The type of credit score most used by lenders is a FICO score, which you can purchase at www.myfico.com . Another score also used by lenders is the Vantage Score, which you can purchase through TransUnion.

Ask CFPB contains three general categories of questions and answers:

  • Definitions: It translates the financial services jargon into clear definitions.
  • Explanations: It provides consumers with general information and explanations on terms and features of financial products.
  • Situations: It assists consumers with information and tips to help them navigate various financial situations.

Ask CFPB also lets consumers provide feedback on its answers, such as: "Helpful," "Too long," "Confusing," or "Incorrect." The database currently focuses on credit cards and mortgages but in the coming months will provide answers to questions about other financial products and services, including student loans, vehicle loans, checking and savings accounts, and prepaid cards.

Short-Term Lending

In a somewhat unusual step, the CFPB is asking the public to comment on the transcript of the CFPB's field hearing on short term lending held in January in Birmingham, Alabama.

The transcript of the hearing is over 100 pages long and, in addition to speeches from CFPB officials, contains testimonials from customers who have successfully utilized short-term credit to meet their economic needs. Consider the testimony of Tanji Thomas:

And actually the fees that I -- they -- you know, they explained the fees -- those fees to me. And the fees that I accrued from the payday loan were actually cheaper than getting a cash advance on my credit card, so it actually benefited me. And I was really glad that it was there, an option available for me. And I would like to know that in the future that it would be there in the event that I needed it also.

Notwithstanding the testimony of Mr. Thomas, and others who shared his view, the CFPB is asking the public to respond to the following questions:

  • Does the impact of payday loans and deposit-advance products vary by the type of consumer?
  • Who is helped and who is harmed by deposit-advance and payday products?
  • Does the answer vary depending on whether the product is provided by a storefront, by a bank, or online?
  • How are small-dollar loans and products marketed?

Regulations

Privilege

When Congress adopted the Dodd-Frank Act, it transferred all of the authorities under the consumer federal protection laws from existing federal banking agencies to the CFPB. What Congress failed to do, however, was to extend the protections for privileged information existing under the FDI Act to the Consumer Financial Protection Bureau. Acknowledging this problem, the CFPB published a guidance document in January assuring regulated entities that it intended to respect documents provided to the agency that are protected by attorney-client privilege. The bank and non-bank industries, however, were not satisfied. Accordingly, the financial services industry is seeking a legislative fix to ensure that there exist statutory protections for attorney-client privilege.

In light of these efforts, the CFPB has published for comment a proposed regulation to protect documents covered by attorney-client privilege. The proposed rule is intended to provide supervised entities with further assurances that providing privileged information to the Bureau will not adversely affect the confidentiality of such

information. The proposed rule also clarifies that the CFPB's transfer of privileged information to another federal or state agency does not result in a waiver of any applicable privilege.

Comments are due on the proposal by April 16, 2012.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Suzanne F. Garwood
 
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