At the end of February 2016, the Consumer Financial Protection Bureau (CFPB) announced nine priority goals for the next two years. According to its press release, the CFPB set these priorities by balancing the amount of consumer harm observed against the Bureau’s capacity to eliminate or mitigate that harm. The CFPB identified three core tools available to reach these goals: (1) setting the “basic rules of the road,” (2) educating consumers and (3) holding institutions accountable, i.e. taking enforcement actions.
The following is a summary of the Bureau’s nine near-term priority goals, which it set forth alphabetically:
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Arbitration. Concerned that pre-dispute arbitration clauses can generally bar consumers from initiating lawsuits, including class actions, the CFPB intends to continue its rulemaking process to propose a rule that will “enable consumers to effectuate their rights and hold institutions accountable for unlawful conduct.” We have continued to report on these developments since we initially reported on the CFPB’s October 7, 2015, announcement.
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Consumer Reporting. Concerned consumer credit reporting companies control information that impact many aspects of daily life. The CFPB aims for a reporting system where companies “maintain and distribute data that are accurate and inclusive of more consumers.” Further, the CFPB aims to ensure consumers have dispute resolution alternatives where reporting companies maintain inaccurate consumer data. The CFPB intends to continue reviewing this area, possibly propose rulemaking, and initiate consumer outreach.
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Debt Collection. Estimating there are more than 6,000 debt collection firms in the United States, the CFPB wants to ensure that any debt collection – including those not covered by the Fair Debt Collection Practices Act – is fair. This means the collector “substantiates the debts they are collecting, accurately identifies debtors, provides debtors with appropriate information, and communicates with debtors about their debts in a respectful, lawful, consumer-oriented way.” In addition to the rulemaking process, the CFPB intends to complement its efforts with “rigorous supervision and enforcement.”
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Demand-Side Consumer Behavior. The core of this concern is the lack of financial sophistication possessed by the average consumer. To remedy this, the CFPB intends to build awareness and create financial decision-making tools. Further, the Bureau will enable existing social service providers, youth services, and K-12 organizations to help additional young consumers develop financial skills and awareness.
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Household Balance Sheets. Concerned that consumers do not appreciate how individual financial decisions may impact their overall financial health, the CFPB intends to initiate a research program and develop data resources to research and better understand the dynamics of household balance sheets.
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Mortgages. Estimated at a value of $10 trillion, the CFPB envisions a mortgage marketplace where credit-worthy borrowers obtain fair and non-discriminatory treatment, and where “new mortgage rules are implemented in a manner that supports a sustainable mortgage market.” CFPB’s principal focus will be to ensure successful implementation of the Home Mortgage Disclosure Act and CFPB’s servicing rules, “protecting delinquent borrowers still suffering from the aftermath of the crisis or other economic setbacks.”
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Open-Use Credit. Open-use credit is credit obtained without a specific purpose, and it may be secured or unsecured. These products include credit cards, overdraft products, payday loans, auto title loans, and installment loans. The CFPB aims to create a market where consumers can repay their debts when due (over 80 percent of payday loans are rolled over or followed by another loan within two weeks). The Bureau will continue the small-dollar rulemaking process to assist consumers from “debt traps associated with unaffordable loans.” The Bureau also plans to initiate a rulemaking process to make the overdraft market fairer and more transparent. And of course, the Bureau intends to hold institutions accountable for deceptive and illegal debt collection practices.
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Small Business Lending. The CFPB is focused on a small business lending market that is fair, and where creditors have access to data needed to identify business and community development needs and opportunities for women-owned, minority-owned, and small businesses. CFPB intends to create a small business lending team to begin market research and outreach.
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Student Lending. Since 2007 the student debt market has doubled to nearly $1.2 trillion owed by 40 million consumers. The CFPB envisions a market where student loan originators and servicers facilitate repayment consistent with consumer interests, fairly and transparently, and with incentives to encourage these outcomes. The Bureau will work with the Department of Education on these goals and, where necessary, use enforcement actions to hold servicers accountable.
Over the last several years, the CFPB has not hesitated to change and enforce the rules of the road to further its mandates. With these policy pronouncements, it is a good time for financial institutions and businesses offering these types of services to examine their current state of compliance, assess vulnerabilities, and most importantly, remain vigilant as the CFPB contemplates new rulemaking or takes enforcement actions.
