CFPB to Pursue Disparate-Impact Claims under ECOA
The CFPB said in an April 18 blog posting that it was giving “fair notice on fair lending,” and “letting both lenders and consumers know that in our examination and enforcement work, we will combat unlawful, discriminatory practices—including those that have an illegal disparate impact on protected borrowers.” In a related compliance bulletin, the bureau spelled out its intent to pursue disparate-impact claims under the Equal Credit Opportunity Act. The CFPB announced the initiative in conjunction with a broader effort to crack down on discriminatory lenders, as outlined in another CFPB blog post the same day. The agency also posted a consumer brochure on identifying and reporting discriminatory lending practices.
CFPB Considers Reversing Fed Decision on Card Fees
On April 12, the CFPB published a proposal to remove a cap on credit card fees assessed prior to the opening of the cardholder’s account. The Federal Reserve Board had issued a 2011 rule that interpreted the provisions of the 2009 Credit Card Act to include application and other fees that preceded the opening of the account. But the Federal District Court for South Dakota blocked the cap, citing what the CFPB referred to as the “plain language of the statute that applied restrictions on fees only after a credit card account has been opened by a customer.” The bureau solicited public comment on the rule proposal in a blog item posted the same day, asking whether it should “conform the rule to the court ruling so that it no longer applies to fees charged prior to account opening.”
President Signs Order on Practices Targeting Servicemembers
President Obama on April 27 signed an Executive Order designed to stop deceptive and misleading practices by educational institutions that target veterans, servicemembers, and their families. The order requires schools to provide more transparent information about costs and outcomes. “Of the ten educational institutions collecting the most Post 9/11 GI Bill benefits between 2009 and 2011, eight were for-profit schools. Six of these schools had bachelor student withdrawal rates above 50 percent,” the White House said in a press release. Holly Petraeus, head of the CFPB’s Office of Servicemember Affairs, blogged about the order in advance of accompanying President Obama to its signing.
CFPB Warns on Service Providers
The CFPB warned financial institutions in an April 13 bulletin that they may be held responsible for the actions of service providers with which they contract. Supervised banks and nonbanks are expected to request and review a service provider’s policies, procedures, internal controls, and training materials; include clear compliance expectations and consequences of compliance failure in service contracts; and establish ongoing monitoring of the service providers.
CFPB Launches Arbitration Inquiry
The CFPB said in an April 24 press release that it has launched a public inquiry into arbitration clauses in consumer financial products and services. The Dodd-Frank Act required the agency to study the issue. The bureau is asking about the prevalence of the clauses, the types of claims brought by both consumers and companies, and how both parties are affected by them. The deadline for comments is June 23, according to the Federal Register notice.
Hawaii AG Sues Card Lenders
Hawaii AG David Louis announced on April 12 that he had filed suit in First Circuit Court against seven credit card companies, and alleging that they improperly charged customers for unrequested or unnecessary products. He requested injunctive relief, restitution, and penalties of the seven banks: Bank of America, Barclays, Capital One, JPMorgan Chase, Citigroup, Discover, and HSBC.
CFPB Clarifies Reciprocity in LO Licensing
The CFPB clarified the scope of interstate reciprocity for loan originator licenses in an April 19 bulletin. Among other things, the bulletin said the Secure and Fair Enforcement for Mortgage Licensing Act allows states to grant loan originators a transitional license based on a valid license from another state. However, the bureau said in a press release accompanying the bulletin that its regulations “do not allow states to provide for transitional licensing for registered but unlicensed loan originators who leave banks to act as loan originators while pursuing a state license.”
Extended Comment Deadline for Overdraft Programs
The CFPB in an April 25 Federal Register notice extended the deadline for public comments regarding overdraft programs and their costs, benefits, and risks to consumers. The original April 30 commenting deadline was pushed forward to June 29.
American Bar Association Asks CFPB to Withdraw Privilege Proposal
An April 12 letter from the American Bar Association urged the CFPB to withdraw a proposal in which the bureau asserted it had the authority to compel privileged information – an authority, the organization argued, the agency does not have. “If the bureau decides to move forward with its proposed rule, the ABA urges it to modify the rule to clarify that while the bureau expects supervised entities to provide all relevant factual information that may be requested during examinations and its other supervisory and regulatory practices, the bureau will respect legitimate claims of attorney-client privilege and work product protection by supervised entities and will not seek to compel the production of privileged information or materials,” the letter said.
The CFPB published its first annual plain language compliance report on April 13, outlining the agency’s compliance plan pursuant to the Plain Writing Act. The agency’s plain writing Web page is here.