CFPB Update – CFPB Reform Bills Introduced

June 5, 2015

By: Victor Kang, Partner

H.R. 1266 – Financial Product Safety Commission Act of 2015 – Introduced by Congressman Randy Neugebauer (R-CA) – The CFPB would be renamed as the Financial Product Safety Commission and replace the CFPB director with a five-member bi-partisan commission. The members would be appointed by the President and subject to Senate confirmation.

H.R. 1261 – The Bureau of Consumer Financial Protection Accountability Act of 2015 – Introduced by Congressman Sean Duffy (R-WI) – This bill would make the CFPB subject to regular congressional appropriations process.

H.R. 1262 – The Consumer Right to Financial Privacy Act of 2015 – Introduced by Congressman Sean Duffy (R-WI) – This bill requires the CFPB to notify and obtain permission from a consumer before collecting nonpublic personal information about such consumer.

H.R. 1263 – The Consumer Financial Protection Safety and Soundness Improvement Act of 2015 – Introduced by Congressman Sean Duffy (R-WI) – This reduces the number of Financial Stability Oversight Council members needed to set aside a CFPB regulation from a two-thirds vote to a majority vote.

H.R. 1264 – The CFPB Pay Fairness Act of 2015 – Introduced by Congressman Sean Duffy (R-WI) – This bill which would require the salaries of CFPB employees to be set in accordance with the regular government pay scale instead of the currently higher schedule used by the Federal Reserve.

CFPB: Blotter Report

The following are true stories; the names have been changed to protect the innocent.

As we enter into the second half of the year, the CFPB continues to dole out penalties despite increasing calls for reform and oversight. They continue to mete out heavy fines that are often custom-fit to penalize the offender. With the above-referenced reforms being introduced, we could potentially see the CFPB attempt to dish out more penalties while they still can. Below is quick rundown of some of the CFPB’s enforcement actions in the past year or so.

Unlawful Overdraft Practices – $7.5 Million in penalties and $49 Million in refunds to consumers:  The CFPB severely punished a national bank for charging overdraft fees to consumers who had not opted-in for overdraft coverage. The bank also charged overdraft and non-sufficient funds fees on its deposit advance produce despite claims that it would not.

Servicing issues related to loss mitigation- $48 Million to borrowers; $15 million in fines:  A servicer was fined for allegedly mistreating borrowers who were trying to save their homes. The mortgage servicer failed to honor modifications for loans transferred from other servicers, demanded payments before providing loss mitigation options, delayed decisions on short sales, and harassed and threatened overdue borrowers.

Deceptive advertising by mortgage lender – $250,000 in civil penalties:  A mortgage lender was fined for advertisements that purported to be letters sent by the VA or HUD. Letters to consumers included warnings citing the US Code and threatened fines and imprisonment for tampering with the letters. The ads also misrepresented interest rates and estimated monthly payments, including whether the interest rate was fixed or variable.

Illegal debt collection by national debt collector – $50,000 in civil penalties:  A national debt collector was penalized for using deceptive threats of criminal prosecution and jail time in order to intimidate consumers into paying debts for bounced checks. The debt collectors also misled consumers into believing they had to enroll in expensive and unnecessary programs to avoid further criminal charges.

Loan origination issues for referral kickbacks and deceptive advertising – $2 million in penalties:  A mortgage lender was penalized by the CFPB for deceptive advertising and kickbacks that preyed on veterans. The mortgage lender paid for an arrangement to be named the “exclusive lender” of a veterans’ group and the veterans’ group was also given lead generation fees. The lender did not disclose that they had paid for this title and claimed that the lender was selected based on its high standards and excellent value.

Illegal fees by credit card company – $2.7 Million in refunds and $250,000 in civil penalties:  A subprime credit card company was accused of misrepresenting certain fees and overcharging other fees. The credit card company materials were misleading about monthly fees and charged fees that were over 25 percent of the consumer’s credit limit.