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Promontory Financial Group: Consumer Financial Protection Developments


From the editors of Sightlines

March 15, 2012

Dear Friends,

Promontory is pleased to send you Consumer Financial Protection Developments, a regular publication about regulatory initiatives influencing the consumer products and services at the heart of the financial crisis. Though a renewed regulatory emphasis on consumer protection has been widely anticipated, the scope of the change is truly momentous—and the pace is accelerating. The Consumer Financial Protection Bureau is moving forward quickly with its agenda, and prudential supervisors are also focusing on risks too often neglected in the last decade. Companies that reflect the CFPB's core mission in their own business practices are likely to be viewed more favorably by all their constituencies, and gain a competitive advantage over those that resist. As providers of consumer financial products prepare for what lies ahead, we are monitoring developments closely, and will help you keep track of those likely to have the greatest impact. In the coming weeks, we'll also offer analysis and commentary about these developments. Please click here to continue receiving this publication, and of course, let us know about topics of particular interest to you by responding to this email or contacting us directly at our addresses below.

Yours truly,

Ann Jaedicke, Managing Director
+1 202 384 1150

Ann Jaedicke

BJ Sanford, Managing Director
+1 202 384 1020

BJ Sanford

1. Debt Collection and Consumer Reporting

The CFPB proposed to supervise large debt collectors and consumer reporting agencies, citing its authority under the Dodd-Frank Act to supervise "larger participants" in the markets for consumer financial products and services. The CFPB must issue a rule defining "larger participants" by July 21. Under the proposed rule—comments on which are due by April 17—the CFPB would supervise:

Firms with more than $10 million in annual revenues from debt collection. The CFPB estimates that includes approximately 175 firms—4% of debt-collection firms, but accounting for 63% of the debt-collection market.

Firms with more than $7 million in annual revenues from consumer reporting. The CFPB estimates that includes approximately 30 companies—7% of consumer reporting agencies.

2. Confidential Treatment of Privileged Information

The CFPB on March 12 issued a proposed rule on protections for anyone submitting privileged information. The proposed rule provided that submitting privileged information to the CFPB does not waive the privilege as to any other person, even if the CFPB provides the information to another federal or state agency. Two related bills addressing the CFPB privilege issue, H.R. 4014 and S. 2009, are currently under consideration in Congress. The proposed rule will be open for comment for 30 days after it is published in the Federal Register.

3. Expanded CFPB Complaint Intake

The CFPB announced on March 5 that it will begin taking student loan complaints, following a March 1 announcement expanding complaint intake to include checking and savings accounts. The CFPB aims to expand the system to take complaints on all consumer financial products by the end of the year. CFPB Director Richard Cordray said the CFPB expects banks to respond to complaints within 15 days and close them within 60 days. Since its July 2011 launch through February 22, 2012, the bureau has received more than 20,000 complaints, including nearly 7,000 on mortgages and almost 12,000 on credit cards.

4. Overdraft Inquiry

The CFPB on February 22 launched an inquiry into overdraft programs for consumer checking accounts. In its formal Notice and Request for Information, the bureau said roughly in 1 in 20 consumers makes more than 20 overdrafts annually, incurring average fees of $1,600 a year. In an accompanying press release, the bureau said its inquiry will focus on: 1) transaction re-ordering; 2) missing or confusing information; 3) misleading marketing; and 4) disproportionate impact. The CFPB also released prototype disclosure of how overdraft fees might be presented in a consumer's monthly statement. Comments on the notice are due by April 30, 2012.

5. SAFE Act

On March 7, the CFPB issued guidance and examination procedures on the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE), which governs licensing and registration of mortgage originators. The Dodd-Frank Act transferred rulemaking authority for SAFE to the bureau from the federal banking agencies.

6. Simplified Mortgage Disclosure

In a speech to the National Association of Attorneys General on March 6, Cordray discussed the bureau's initiatives in the mortgage arena, including force-placed insurance, statements sent to consumers, and disclosures on hybrid adjustable-rate mortgages. He also said the CFPB will seek to enter into memoranda of understanding with state attorneys general to facilitate information-sharing on consumer protection. In February, the CFPB asked for feedback on prototypes of its new Loan Estimate and Settlement Disclosure forms, which it expects to propose formally in the next few months. As part of its effort to gather opinions on the forms, the bureau is meeting in Texas with industry representatives and consumers. Most of the 31 comments posted on the bureau's Web site have been constructive, if critical.

7. CFPB Small Business Outreach

The CFPB posted on its blog a description of the agency's small business outreach program. Efforts include the Small Business Review Panel, a consortium of staffers from the CFPB, Small Business Administration, and Office of Management and Budget that will meet with representatives of small firms to minimize regulatory burden. An accompanying CFPB fact sheet said within 60 days of a meeting, the panel would complete a report on the economic impacts of proposals discussed at the meeting and recommend alternatives. The CFPB would then consider the report in preparing rules. The panel has already met with a group of small lenders, brokers, and settlement agents to discuss CFPB's proposals regarding the Truth in Lending Act and the Real Estate Settlement Procedures Act. The CFPB has provided an overview of those proposals, along with their potential implications for small businesses, as well as a list of discussion issues for small business representatives.

8. 2011 Complaint Trends for Financial Services Companies

The Better Business Bureau reported the following 2011 complaint data for financial services companies:

Collection agencies: 18,090, up 13.9% from 2010, with 83.1% of complaints resolved

Banks: 15,989, down 29.4% from 2010, with 97.5% of complaints resolved

Payday lenders: Up 159% from 2010.

Mortgage brokers: Down 31% from 2010

BBB investigators examine complaints filed by consumers against companies, and give companies 30 days to respond. About 95% of BBB complaints are resolved in this response; the rest go to mediation or arbitration.

9. White House Data Privacy Report

The White House on February 23 released "Consumer Data Privacy in a Networked World," a framework that includes a Consumer Privacy Bill of Rights, development of codes of conduct, FTC enforcement of privacy issues, and recognition of international privacy standards. The White House also announced that companies delivering nearly 90% of online behavioral advertisements have agreed to comply with consumers' online tracking choices, including through Do Not Track Web browser technology.

10. National Consumer Protection Week

President Obama proclaimed March 4 – 10, 2012, as National Consumer Protection Week, calling upon government officials and industry leaders to share information about consumer protection and rights. The NCPW 2012 website provides consumer protection resources from more than 30 federal agencies and national organizations. In conjunction with NCPW, the FDIC issued two consumer guides on credit, debit and prepaid cards, and the CFPB highlighted its consumer protection initiatives over the last year.

11. Rulemaking

CFPB notices open for comment:

CFPB Advisory Boards and Committees – closes March 29

Electronic Fund Transfers (Regulation E) – closes April 9

Defining Larger Participants in Certain Consumer Financial Product and Service Markets – closes April 17

Impacts of Overdraft Programs on Consumers – closes April 30

Streamlining Inherited Regulations – closes June 4 (extended)

CFPB final rule:

Final Remittance Rule (Amendment to Regulation E); the rule is designed to protect consumers who send money electronically to foreign countries.

FTC notice open for comment:

Public Roundtables: Protecting Consumers in the Sale and Leasing of Motor Vehicles – closes April 1

SEC and CFTC proposal open for comment:

Identity Theft Red Flags – closes May 7


Promontory's Consumer Protection Group includes:


Konrad Alt, Managing Director
+1 415 986 4160

Jeff Brown, Managing Director
+1 202 384 1040

Jeanine Catalano, Special Adviser
+1 415 321 6408

Michael Dawson, Managing Director
+1 202 384 1080

Susan Eckert, Director
+1 202 384 1125

Jennifer Faulkner, Director
+1 202 384 1126

Amy Friend, Managing Director
+1 202 384 1056

David Gibbons, Managing Director
+1 847 615 1728

Jonathan Gould, Director
+1 202 384 1018

Ann Jaedicke, Managing Director
+1 202 384 1150

Chris Lewis, Director
+1 415 321 6406

Simon McDougall, Managing Director
+44 207 377 2367

BJ Sanford, Managing Director
+1 202 384 1020


Please click here to continue receiving Consumer Financial Protection Developments.

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Promontory Financial Group, L.L.C.
801 17th Street, N.W.
Suite 1100
Washington, DC 20006

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