Regulatory Developments
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Consumer Financial Protection Bureau. Credit card late fees. On May 10, 2024, a federal district judge in the Northern District of Texas granted a preliminary injunction that for now stays CFPB's rule capping most credit card late fees at $8. The court's injunction was issued just days before the fiercely contested amendment to Regulation Z was scheduled to take effect on May 14.
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Consumer Financial Protection Bureau. Agency funding. On May 16, 2024, CFPB released a statement after the Supreme Court reversed the Fifth Circuit and held that CFPB's statutory funding mechanism does not violate the requirements of the Appropriations Clause of the U.S. Constitution. In her concurring opinion, Justice Ketanji Brown Jackson noted that "Congress chose to fund the [CFPB] outside of the annual appropriations process … to protect the [CFPB] from the risk that powerful regulated entities might capture the annual appropriations process." The agency called the decision "a resounding victory for American families and honest businesses alike."
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Consumer Financial Protection Bureau. Credit reporting changes. On May 21, 2024, CFPB Director Rohit Chopra implied that a rule banning medical bills and other consumer financial data from credit reports could be announced in June. "This stuff is out of control, and we need to put a stop to it," Chopra said at an anti-monopoly event, according to Bloomberg Law. The agency last September began a rulemaking process to remove medical bills from Americans' credit reports. "Mistakes and inaccuracies in medical billing are common and can be compounded by problems such as disputes over insurance payments or complex billing practices," CFPB said last fall. The new rule would "prohibit creditors from using medical collections information when evaluating borrowers' credit applications," the agency said.
Rulemaking Updates
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Federal Reserve Board. CAMELS rating system. On May 17, 2024, FRB denied Bank Policy Institute's 2020 request that the agency change the methodology used to determine a financial institution's CAMELS score, an acronym of the six evaluation components: Capital, Asset Quality, Management, Earnings, Liquidity, and Sensitivity to Market Risk. The changes suggested by BPI would "result in a version of the ratings system that would diverge sharply" from the framework used by other federal financial regulators, FRB said in its response.
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Consumer Financial Protection Bureau. Buy now, pay later. On May 22, 2024, CFPB released an interpretive rule affirming the classification of Buy Now, Pay Later lenders as credit card providers. Such lenders qualify as "card issuers" under Regulation Z and must provide consumers with some of the key legal protections that apply to traditional credit cards, CFPB said. According to the new rule, Buy Now, Pay Later lenders must investigate customer disputes, issue refunds for returned products or canceled services, and provide periodic billing statements.
Research & Analysis
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Financial Stability Oversight Council. Nonbank mortgage servicing. On May 10, 2024, FSOC made several recommendations to bolster the resilience of nonbank mortgage servicers. The suggestions include the enhancement of prudential regulations by state regulators and the establishment of a fund to provide liquidity to bankrupt or failing nonbank servicers. The recommendations were made as part of the committee's report documenting the growth of nonbank mortgage servicing in recent years.
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Federal Deposit Insurance Corp. Risk. On May 22, 2024, FDIC published its annual risk review of banking conditions in 2023. The agency looked at market risks, credit risks, operational risks, crypto-asset risks, and climate-related financial risks. When looking at credit risk, FDIC found commercial real estate and consumer loans to have the highest rate of asset quality deterioration.
Other News of Note
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Consumer Financial Protection Bureau. Illegal lending. On May 14, 2024, CFPB said it had sent more than $384 million to approximately 191,000 U.S. consumers related to its case against online lender Think Finance. The agency sued Think Finance in 2017, alleging that the Texas firm deceived consumers into repaying loans they didn't owe. Think Finance demanded and collected payment on loans that were void under state usury laws and lender licensing requirements, according to CFPB.
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South Carolina Governor's Office. Earned wage access. On May 21, 2024, Gov. Henry McMaster of South Carolina signed a new law that governs earned wage access services. The state law requires earned wage access providers to give consumers one or more options to receive their wages at no cost to the consumer. Kansas, Missouri, Wisconsin, and Nevada are the only other states with laws regulating the services.
Orla McCaffrey is a regulatory analyst with Davis Wright Tremaine LLP.
