When using artificial intelligence (AI) or complex credit models, can lenders rely on the checklist of reasons provided in Regulation B sample forms for adverse action notices? According to today’s guidance issued by the Consumer Financial Protection Bureau (CFPB or Bureau), the answer to that question is, in many circumstances, no.
The Consumer Financial Protection Bureau (CFPB) has issued a final rule adjusting the Truth in Lending Act (TILA) dollar amounts for certain provisions, including under the Home Ownership and Equity Protection Act of 1994 (HOEPA), and the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), where appropriate, based on the annual percentage change reflected in the consumer price index (CPI). The rule takes effect on January 1, 2024.
On September 14, a federal district court in the Eastern District of Kentucky became the second court to issue an order granting, in part, a plaintiffs’ motion for a preliminary injunction enjoining the Consumer Financial Protection Bureau’s (CFPB or Bureau) from enforcing its final rule under § 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Final Rule) against the plaintiffs and their members. (A discussion of the first injunction issued by a Texas federal court can be found here.) The injunction in The Monticello Banking Company v. CFPB will dissolve if the U.S. Supreme Court reverses the Fifth Circuit in the Community Financial Services Association (CFSA) v CFPB case, which found the CFPB’s funding structure unconstitutional and, therefore, rules promulgated by the Bureau invalid.
On September 11, the Consumer Financial Protection Bureau (CFPB) announced that it issued a consent order against Tempoe, LLC, a nonbank consumer finance company, for alleged violations of the Consumer Financial Protection Act (CFPA), Consumer Leasing Act, and Regulation M. That same day, it was announced that Tempoe also entered into a parallel settlement with 41 states and the District of Columbia resolving a multi-state investigation into the same alleged misconduct. Under the terms of the CFPB consent order, Tempoe was banned from consumer leasing activity and must pay $1 million to the CFPB and $1 million to the states and jurisdictions participating in the settlement.
On July 26, the Consumer Financial Protection Bureau (CFPB or Bureau) released the summer edition of its Supervisory Highlights report, providing a high-level overview of alleged unfair, deceptive, or abusive acts or practices (UDAAP) identified by the agency during examinations from July 1, 2022 to March 31, 2023. The findings included in the report cover examinations in the areas of auto origination, auto servicing, consumer reporting, debt collection, deposits, fair lending, information technology, mortgage origination, mortgage servicing, payday and small dollar lending, and remittances.
As recently discussed on our podcast here, section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) amended the Equal Credit Opportunity Act (ECOA) to require lenders to collect information about small business credit applications they receive, including geographic and demographic data concerning the principal owners, lending decisions, and the price of credit. The Consumer Financial Protection Bureau (CFPB or Bureau) issued its proposed rule in 2021, and after considering the over 2,500 comments it received, on March 30, 2023, the CFPB issued the massive, highly technical, and complicated Final Rule. The Final Rule and its accompanying discussion and analysis, as well as the Official Commentary totals 888 pages exclusive of the 123-page Filing Instruction Guide and numerous other documents released by the Bureau. In this fourth in a multi-post blog series (first post available here, second here, third here), we will take a closer look at the anti-discouragement provisions in the Final Rule.
Deceptive advertisements, market manipulation, misappropriation of customer funds, and “Ask Me Anything (AMA)” sessions served as the catalysts of a civil enforcement action the Federal Trade Commission (FTC) recently filed against bankrupt digital asset services provider Celsius Network LLC (Celsius) and its co-founders on July 13. This is a groundbreaking move by the FTC for two reasons. First, it marks the first time that the agency has filed suit against a digital asset-based company. Second, the FTC’s request for civil money penalties is predicated on a novel theory under the Gramm-Leach-Bliley Act (GLBA). Alongside the FTC, the Department of Justice has filed criminal charges against ex-CEO Alexander Mashinsky, and the Securities and Exchange Commission and the Commodity Futures Trading Commission have filed separate civil enforcement actions against Celsius.
As discussed here, on October 19, 2022, the Fifth Circuit Court of Appeals in Community Financial Services Association of America, Limited (CFSA) v. Consumer Financial Protection Bureau (CFPB) held that the CFPB’s funding mechanism violates the appropriations clause because the CFPB does not receive its funding from annual congressional appropriations like most executive agencies, but instead, receives funding directly from the Federal Reserve based on a request by the CFPB’s director. In response, the CFPB filed a petition for a writ of certiorari to the U.S. Supreme Court. On February 27, 2023, the U.S. Supreme Court granted the CFPB’s petition (discussed here).
As recently discussed on our podcast here, section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) amended the Equal Credit Opportunity Act (ECOA) to require lenders to collect information about small business credit applications they receive, including geographic and demographic data concerning the principal owners, lending decisions, and the price of credit. In September 2021, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a proposed rule with more than 900 pages of supplementary material. The Bureau also issued a summary of the proposed rule and a chart of the data points that the rule would require creditors to collect, and it accepted approximately 2,100 comments on the proposal in January 2022. The Bureau then issued the Final Rule on March 30, 2023, with a host of supplementary materials. In this third in a multi-post blog series (first post available here, second here), we will take a closer look at what changed between the proposed rule and the Final Rule.
On June 26, Florida Governor Ron DeSantis signed the Florida Commercial Financing Disclosure Law (FCFDL). As discussed here, the FCFDL mandates that covered commercial financing companies provide consumer-like disclosures for certain commercial financing transactions. The law also defines and prohibits specific acts by brokers of those transactions, including the collection of advance fees.
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