Consumer Financial Protection Bureau (CFPB)

On September 12, the Consumer Financial Protection Bureau issued an interim final rule which provided a model Summary of Rights form, a form that both consumer reporting agencies (CRAs) and employers doing background checks use for compliance with the Fair Credit Reporting Act. CRAs and employers are required to implement revisions to the form by September 21, 2018.   

In May of this year, Congress passed the Economic Growth, Regulatory Relief and Consumer Protection Act, which, among other changes, amended the Fair Credit Reporting Act to require new language to be added to the FCRA Summary of Rights form, published as Appendix K to Regulation V, regarding a consumer’s right to obtain a security freeze. As we previously reported, both consumer reporting agencies and users of consumer reports should take action to update their Summary of Rights forms prior to the September 21 effective date.  

Users of consumer reports are required to provide the FCRA Summary of Rights form prior to taking any employment adverse action based upon the use of a consumer report. Consumer reporting agencies are required to provide the form at various times, including, for example, to consumers when making a file disclosure pursuant to 15 U.S.C. § 1681g(c)(2).   

The CFPB has stated that it will deem users of consumer reports and CRAs as being in compliance by using the new form by the September 21 effective date, or by providing a separate statement along with the prior version of the official form that includes the new security freeze disclosure. 

The CFPB will accept comments on the interim final rule for a period of 60 days after the date the rule is published in the Federal Register. 

Troutman Sanders will continue to monitor important developments involving the CFPB and FCRA and will provide updates accordingly.

A Fifth Circuit panel has rejected an administrative subpoena from the Consumer Financial Protection Bureau that sought documents and other information from a Texas-based public records search company, marking only the second time that an appeals court has declined to enforce one of the consumer watchdog agency’s so-called civil investigative demands.

In six-page decision filed Thursday, the three-judge panel said the CID issued to The Source for Public Data LP had failed to give adequate notice of what conduct the CFPB was investigating and what law the agency thought might have been broken.

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In a case of first impression, the United States District Court for the Western District of Michigan held that direct-to-voicemail messages qualify as a “call” under the Telephone Consumer Protection Act.  The Court’s opinion thus subjects another modern technology to the requirements of express consent and other strictures of the TCPA.

Defendant debt collector Dyck-O’Neal, Inc. delivered 30 messages to plaintiff consumer Karen Saunders’ voicemail using VoApp’s “DirectDROP” voicemail service.  The service did what it was supposed to do by delivering the voicemail messages through the telephone service provider’s voicemail server without actually calling Saunders’ phone number.  Saunders sued under the TCPA, and Dyck-O’Neal filed for summary judgment on the grounds that “ringless voicemails” are not subject to the TCPA.

The Court began its analysis by drawing predictable parallels to traditional voicemails and text messages which are subject to the TCPA.  The Court quoted from the FCC’s infamous 2015 Order, stating that Congress intended to protect consumers from “unwanted robocalls as new technologies emerge” (emphasis added).  The Court examined the technology behind the ringless voicemails, which included the fact that the technology did not call a telephone number assigned to a cell phone account – the statutory prerequisite for applying the TCPA provision at issue.  Nevertheless, the Court gave credence to the calls’ “effect on Saunders” rather than the fact that no call was made to a cell phone number.  According to the Court, that effect was “the same whether the phone rang with a call before the voicemail is left, or whether the voicemail is left directly in her voicemail box.”  The Court reasoned that Dyck-O’Neal did nothing other than reach Saunders on her cell phone through a “back door,” and failure to regulate this “back door” through application of the TCPA would be an “absurd result.”

Many collection agencies and marketing companies have been successfully using the direct-to-voicemail messages, and many others have considered following suit.  The Court’s decision is part of the risk-benefit analysis but, in the age of a quickly-evolving TCPA jurisprudence, another court may reach a different result.  This decision, facially at odds with the statutory text, could turn out to be an outlier or could mark the beginning of a trend.  Troutman Sanders will continue to monitor this line of cases.

With debts rising faster than new graduates’ starting salaries, a student debt crisis has the potential to haunt the nation much in the way the mortgage crisis did 10 years ago. In general, the roots of this problem lie, in part, in the private student loan, or PSL, market created by and in response to the Higher Education Act of 1965, or the HEA. The federal government’s commitment to funding post-secondary education spawned new lenders, borrowers and servicers, all operating within a regulatory regime administered by the U.S. Department of Education for more than 50 years. In the last decade, as borrowers assumed more unsustainable debts, federal actors, from the DOE to the Consumer Financial Protection Bureau, turned their attention to the behavior of private lenders and servicers of both federal and private loans. In this pursuit, federal authorities relied upon numerous consumer protection statutes and aligned themselves with many state-level agencies, including state attorneys general, from across the country.

Beginning in 2016, a new mood dampened the federal bureaucracy’s regulatory pace. The DOE, led by Secretary Elisabeth DeVos displayed decreased enthusiasm for regulation and litigation. Once John Michael “Mick” Mulvaney arrived at the CFPB, he brought a similar wariness for administrative and legal activism, one sure to be continued by any likely successor.

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On July 13, 2018, in Dutta v. State Farm Mutual Automobile Insurance Company, the Ninth Circuit affirmed the district court’s decision granting summary judgment to State Farm in a putative Fair Credit Reporting Act class action. The decision presents another helpful application of the U.S. Supreme Court’s 2016 Spokeo decision. The Dutta decision highlights the importance of continuing to challenge standing at all stages of a case even in the face of a statutory violation.


In Dutta v. State Farm, the plaintiff Bobby S. Dutta alleged that State Farm violated section 1681b of the FCRA, by failing to provide him with a copy of his consumer report, notice FCRA rights and an opportunity to challenge inaccuracies in the report before State Farm denied his employment application. As background, Dutta applied for employment with State Farm through the company’s Agency Career Track, or ACT, hiring program. State Farm examines the 24-month credit history of every ACT applicant, and if an applicant’s credit report indicates a charged-off account greater than $1,000, the applicant is automatically disqualified.

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On June 21, 2018, the U.S. District Court for the District of Oregon dismissed a putative class action complaint alleging that a potential employer violated the disclosure and pre-adverse action notification requirements of the Fair Credit Reporting Act in Walker v. Fred Meyer Inc.[1] The Walker decision highlights several key lessons associated with FCRA class actions, particularly related to the disclosures employers must provide to prospective employees.


Daniel Walker applied for a job with Fred Meyer Inc. As part of the application process, Fred Meyer provided Walker with separate disclosure and authorization forms regarding its intent to procure a background report on Walker. Fred Meyer presented the disclosure and authorization forms together, each in separate documents. The disclosure form mentioned both a general consumer report and an investigative consumer report.

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On July 19, the Trump Administration’s nominee for director of the Consumer Financial Protection Bureau, Kathy Kraninger, faced harsh scrutiny from Democrats on the Senate Committee on Banking, Housing and Urban Affairs regarding her qualifications for the position, reflecting the heated partisan divide since the Bureau’s inception in 2010.  

Kraninger is currently an associate director with the Office of Management and Budget, where she oversees budget development and execution for several executive branch agencies and manages roughly $250 billion in federal government programs, including the Department of Homeland Security. The Committee questioned Kraninger’s intentions to continue the governing approach taken by acting Director Mick Mulvaney, who is also Kraninger’s current boss as Director of the OMB. 

Mulvaney’s Influence on Kraninger 

Mulvaney took over as acting Director of the CFPB in November 2017 following the exit of Richard Cordray, who is now running as the Democratic candidate for governor of Ohio. Mulvaney, who has called for increased transparency and accountability of the Bureau and even called for its abolition, immediately began implementing foundational reforms, including requesting a zero-dollar budget for the second quarter of 2018 and putting a 30-day freeze on new regulations. 

When pressed, Kraninger would not clearly state whether she would follow Mulvaney’s approach toward governing the Bureau, including whether she would re-institute a rule limiting payday lenders, which Mulvaney rolled back. However, it seems more than likely that Kraninger will follow Mulvaney’s attitude toward the CFPB and the changes he feels are needed to alter the agency’s course.  

Kraninger explained that she would strive for transparency and fairness in leading the agency, including limiting and reviewing the Bureau’s prior “regulation by enforcement” approach. “[I]t is critical to have clear rules so that the lenders and creditors and consumers themselves know what the rules are and that they are not somehow told after the fact that they broke a rule that they weren’t even aware of or that it had somehow changed,” Kraninger said before the Senate.  

Stressing that the Bureau should “empower consumers to make good choices and provide certainty for market participants,” Kraninger seemed focused on making use of costbenefit analysis “to facilitate competition and provide clear rules of the road.”  Kraninger maintained that while the rules of the game should be clearer for lenders, “the Bureau will take aggressive action against bad actors who break the rules by engaging in fraud and other illegal activity.” 

Political Divide 

The Committee appears to be split down party lines in evaluating Kraninger.  Many on the right believe the CFPB requires extreme overhaul (or complete elimination) due to its unusual structure led by a single, autonomous director who is difficult to remove, has no oversight from Congress, and isn’t held accountable to the companies the CFPB fines or the public it is entrusted to protect.  Conversely, those on the left side of the aisle generally view the CFPB’s current structure as necessary to protect consumers from predatory lending practices. 

Sen. Thom Tillis (R-N.C.) has been among the most vocal critics of the CFPB, calling it “the first agency of its kind that is not accountable to anybody.”  Expressing similar concerns, Kraninger stated during her hearing that “ Congress, through [the] Dodd-Frank Act gave the Bureau incredible powers and incredible independence from both the president and the Congress in its structure. I’ve noted that my focus is on running the agency as Congress established it but … I am very open to changes in that structure that will make the agency more accountable and more transparent.” 

Banking Committee Chairman Mike Crapo (R-Idaho) has also praised Kraninger, stating that he has the “utmost confidence” that her experience budgeting for various agencies at the OMB has given her the ability to run the CFPB.  However, not all senators are as convinced. 

Sen. Elizabeth Warren (D-Mass.), who was a key player in the Bureau’s creation, accused Kraninger of dodging Democrats’ pointed questions that her experience creating budgets was insufficient to lead the CFPB. “The one thing you’ve done in your career that is related to the CFPB is to come up with the budget number and the budget number simply does not add up. It does not reflect and acknowledge the CFPB or a commitment to the CFPB’s central mission of trying to protect consumers and level the playing field,” Sen. Warren said. 

Sen. Sherrod Brown (D-Ohio) also criticized Kraninger based on the expectation that she will follow Mulvaney’s lead, who many Democrats feel has made the agency too friendly to the financial industry. 

Committee members from both parties recognize that the next director of the Bureau will usher in a new environment of consumer finance regulatory enforcement that will last for years to come. Accordingly, the debate over Kraninger and her qualifications is likely to continue. 


Despite the partisan debate, it is likely that Kraninger will be confirmed and that drastic budgetary and regulatory cutbacks could be in store for the CFPB. 

Prior to the Senate’s vote, Mulvaney will continue as the CFPB’s acting director, triggering a provision in the Federal Vacancies Reform Act.  Mulvaney may stay at the CFPB for 210 days or until the Senate votes on Kraninger’s confirmation.  If Kraninger is rejected or she withdraws, Mulvaney would be able to serve for an additional 210-day term.

On June 6, the Consumer Advisory Board’s twenty-two members were informed that they would no longer serve on the CAB and could not reapply for their former positions.

Through June 5, the Consumer Financial Protection Bureau had four advisory bodies: the Academic Research Council, the Community Bank Advisory Council, the Credit Union Advisory Council, and the Consumer Advisory Board. By law, the CFPB must meet twice a year with the CAB to discuss trends in the financial industry, regulations, and the impact of financial products and practices on consumers. Tellingly, the CFPB’s acting director, Mick Mulvaney, has canceled several meetings between the CFPB and its advisory groups during his short tenure.

For the CAB’s former members, the coup de grace came on June 6 when, in an afternoon call, Anthony Welcher, the Bureau’s recently hired Policy Associate Director for External Affairs, informed them that they were terminated. This move came after several members criticized Mulvaney’s leadership and implored him to keep this week’s scheduled—and just cancelled—meeting on the books.

“We’re going to start the advisory groups with sort of a new membership, to bring in these new perspectives for these new dialogues,” Welcher said on the call. “We’re going to be using the current application cycle to populate these memberships in the new groups. So we’re going to be transitioning these current advisory groups over the next few months.”

In the memo announcing the members’ terminations, the CFPB defended this “[r]evamping” as necessary to “increase high quality feedback” and mentioned plans to hold more town halls and roundtable discussions and reduce the new CAB’s ranks. As a later released statement argued, “[b]y both right-sizing its advisory councils and ramping up outreach to external groups, the Bureau will enhance its ability to hear from consumer, civil rights, and industry groups on a more regular basis.” In response to press queries, a CFPB spokesman not only denied the members’ characterization of the agency’s action—“The Bureau has not fired anyone”—but also accused these “outspoken” officials of “seem[ing] more concerned about protecting their taxpayer funded junkets to Washington, D.C., and being wined and dined by the Bureau than protecting consumers.”

On May 21, President Donald Trump signed a bill repealing the Consumer Financial Protection Bureau’s Bulletin 2013-02, a controversial bulletin addressing auto finance.  As we reported here, the House passed a resolution officially disapproving of the Bulletin in early May, following in the footsteps of the Senate, which passed the same resolution a few weeks earlier.

Bulletin 2013-02 set forth the CFPB’s interpretation of the Equal Credit Opportunity Act (“ECOA”) as applied to pricing in indirect automobile lending.  The Bulletin targeted dealer markups, a practice whereby an automobile dealer charges a consumer a higher interest rate than the rate at which an indirect lender is willing to purchase the consumer’s retail installment contract.  The Bureau expressed concern that indirect lenders afforded too much pricing discretion to dealers, potentially opening the door to discrimination against protected groups, including women, African-Americans, and Hispanics.  Further, the Bureau also announced in the Bulletin its intent to use a disparate treatment or disparate impact theory to hold an indirect auto lender liable for allowing prohibited pricing differences created by a dealer’s conduct.

In March 2017, Senator Pat Toomey (R-Pa.) asked the Government Accountability Office, Congress’ investigative wing, to determine whether the Bulletin qualified as a “rule.”  The GAO concluded that the guidance did qualify as a rule, even though Bulletin 2013-02 was not legally binding.  Senators Toomey and Jerry Moran (R-Kan.) introduced a resolution to overturn the Bulletin in March 2018, a resolution which passed narrowly along party lines.  The bill fared better in the House of Representatives, passing 234 to 175.

House Financial Services Committee Chairman Jeb Hensarling (R-Tex.) attended the signing ceremony at the White House and issued a statement hailing the measure:  “Thanks to the hard work of Republicans in Congress, today is a good day for American consumers, who would have had to pay more for their auto loans under the Bureau’s flawed guidance, and the rule of law.  Gone are the days of a rogue Bureau using its unchecked powers to sidestep due process and harm the very consumers it is charged with protecting.  I look forward to continuing to work with President Trump, Acting Director Mulvaney, and my colleagues in Congress to ensure the Bureau, as well as all other federal regulatory agencies, are held accountable for their actions and act in a transparent manner.”

On May 8, the U.S. House of Representatives passed a resolution officially disapproving Bulletin 2013-02, issued by the Consumer Financial Protection Bureau in early 2013.  The Senate passed a similar measure on April 18, meaning the resolution moves to President Trump’s desk for signature.  Though the Senate resolution passed narrowly in a party-line vote, the bill found bipartisan support in the House, passing 234 to 175.  The bill is the latest in a line of agency guidance invalidated under the Congressional Review Act (“CRA”).

The bill was initially introduced by Senator Jerry Moran (R-Kan.) in an effort to overturn Bulletin 2013-02, which set forth the CFPB’s interpretation of the Equal Credit Opportunity Act (“ECOA”) as applied to pricing in indirect automobile lending.  The Bulletin targeted dealer markups, a practice whereby an automobile dealer charges a consumer a higher interest rate than the rate at which an indirect lender is willing to purchase the consumer’s retail installment contract.  The Bureau expressed concern that indirect lenders afforded too much pricing discretion to dealers, potentially opening the door to discrimination against protected groups, including women, African-Americans, and Hispanics.  Further, the Bureau also announced in the Bulletin its intent to use a disparate treatment or disparate impact theory to hold an indirect auto lender liable for allowing prohibited pricing differences created by a dealer’s conduct.

The resolution’s passage marks the likely end of the Bulletin’s checkered history.  In March 2017, Senator Pat Toomey (R-Pa.) asked the Government Accountability Office, Congress’ investigative wing, to determine whether the Bulletin qualified as a “rule.” The GAO concluded that the guidance did qualify as a rule, even though Bulletin 2013-02 is not legally binding. Specifically, the GAO found that:

The Bulletin provides information on the manner in which the CFPB plans to exercise its discretionary enforcement power. It expresses the agency’s views that certain indirect auto lending activities may trigger liability under ECOA. For example, it states that an indirect auto lender’s own markup and compensation policies may trigger liability under ECOA if they result in credit pricing disparities on a prohibited basis, such as race or national origin. It also informs indirect auto lenders that they may be liable under ECOA if a dealer’s practices result in unexplained pricing disparities on prohibited bases where the lender may have known or had reasonable notice of a dealer’s discriminatory conduct. In sum, the Bulletin advised the public prospectively of the manner in which the CFPB proposes to exercise its discretionary enforcement power and fits squarely within the Supreme Court’s definition of a statement of policy.

In conclusion, the GAO found that the Bulletin was subject to the requirements of the CRA because it served as “a general statement of policy designed to assist indirect auto lenders to ensure that they are operating in compliance with ECOA and Regulation B, as applied to dealer markup and compensation policies.”  Because the CFPB did not present the Bulletin for Congressional review, it was, effectively, a nullity.

President Trump is almost certain to sign the bill into law when it reaches his desk, putting the final nail into the coffin of Bulletin 2013-02.

Troutman Sanders routinely advises clients on the compliance risks posed by direct and indirect auto lending. We will continue to monitor these regulatory developments.