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On March 21, the House Financial Services Committee voted 35-25 to approve a bill that would amend the Fair Debt Collection Practices Act to exclude lawyers and law firms from the definition of a “debt collector” when such entities are engaged in “activities related to legal proceedings.” Introduced by Rep. Alex Mooney (R-W.Va.) in February, H.R. 5082, titled the “Practice of Law Technical Clarification Act of 2018”, will also amend the Consumer Financial Protection Act of 2010 to restrain the Consumer Financial Protection Bureau’s oversight and enforcement authority over lawyers.

If the bill proceeds, it would add the following language to definition of a debt collector under the FDCPA:

The term [debt collector] does not include –

****

(F) any law firm or licensed attorney, to the extent that –

(i) such firm or attorney is engaged in litigation activities in connection with a legal action in a court of law to collect a debt on behalf of a client, including –

(I) serving, filing, or conveying formal legal proceedings, discovery requests, or other documents pursuant to the applicable statute or rules of civil procedure;

(II) communicating in, or at the direction of, a court of law (including in depositions or settlement conferences) or in the enforcement of a judgment; or

(III) any other activities engaged in as a part of the practice of law, under the laws of the State in which the attorney is licensed, that relate to the legal action; and

(ii) such legal action is served on the defendant debtor, or service is attempted, in accordance with the applicable statute or rules of civil procedure.

The bill now moves to the full House for further consideration. Should it proceed to become law, the bill would undoubtedly have a significant impact on the debt collection industry as a whole as well as the role of the CFPB in regulating the industry.

We will continue to monitor this bill as it moves through the legislative process.

Senator Jerry Moran (R-Kan.) recently introduced a resolution to overturn guidance promulgated by the Consumer Financial Protection Bureau in 2013. The resolution seeks to invalidate the Bureau’s guidance under the Congressional Review Act, the same statute that permitted Congress to overturn the arbitration rule. 

The guidance at issue is the CFPB’s highly controversial Bulletin 2013-02, which set forth the CFPB’s interpretation of the Equal Credit Opportunity Act (“ECOA”) as applied to pricing in the indirect automobile lending space. The Bulletin targeted dealer markups, a practice whereby an automobile dealer charges a consumer a higher interest rate than the rate by which an indirect lender is willing to purchase the consumer’s retail installment contract. The Bureau specifically expressed concern that indirect lenders afforded too much pricing discretion to dealers, potentially opening the door to discrimination. Further, the Bureau also announced in the Bulletin its intent to use a disparate treatment or disparate impact theory to examine an indirect auto lender’s ECOA liability for prohibited pricing differences created by a dealer’s pricing strategies. 

This is not the first time Bulletin 2013-02 has come under fire. In March 2017, Senator Pat Toomey (R-Pa.) asked the Government Accountability Office whether the Bulletin qualified as a rule. The GAO concluded that the Bulletin was indeed a rule and, as a result, should have been subject to Congressional review. While this likely was the death knell for the Bulletin, a formal invalidation of the guidance could occur if Moran’s resolution, co-sponsored by Toomey, is successful. 

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

On June 9, 2017, under the leadership of its former director, the Consumer Financial Protection Bureau issued a modified civil investigative demand, or “CID,” containing the following Notification of Purpose: 

The purpose of this investigation is to determine whether a [sic] student-loan servicers or other persons, in connection with servicing of student loans, including processing payments, charging fees, transferring loans, maintaining accounts, and credit reporting, have engaged in unfair, deceptive or abusive acts or practices in violation of §§ 1031 and 1036 of the Consumer Financial Protection Act of 2010, 12 U.S.C. §§ 5531, 5536; or have engaged in conduct that violates the Fair Credit Reporting Act, 15 U.SC. §§ 1681, et seq., and its implementing Regulation V, 12 C.F.R. Part 1022. The purpose of this investigation is also to determine whether Bureau action to obtain legal or equitable relief would be in the public interest. 

The recipient of this CID was Heartland Campus Solutions ECSI, a division of Heartland Campus Solutions and a large servicer of student loans. Within twenty-one days, Heartland filed a petition to set aside or modify this request in the United States District Court for the Western District of Pennsylvania. The District Court rejected the petition. 

Background 

Statutory Framework  

Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”)—the Consumer Financial Protection Act (“CFPA”)—established the CFPB to “regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws” and “to implement and . . . enforce Federal consumer financial law.” One of the CFPB’s “primary functions” is to “supervis[e] covered persons for compliance with Federal consumer financial law, and tak[e] appropriate enforcement action to address violations of Federal consumer financial law[.]” For years, the CFPB has investigated for-profit colleges for allegedly deceptive practices in connection with their student-lending activities. 

Pursuant to its investigative authority, the CFPB may issue CIDs so as to investigate and collect information “before the institution of any proceeding.” These demands may require the production of documents and oral testimony from “any person” that it believes may be in possession of “any documentary material or tangible things, or may have any information, relevant to a violation” of the sundry laws over which it enjoys jurisdiction. Statutorily, each CID must “state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation.” As CIDs are not self-enforcing, a recipient’s refusal compels the CFPB to file a petition in federal court to secure compliance.  

D.C. Circuit’s Test 

In Consumer Financial Protection Bureau v. Accrediting Council for Independent Colleges and Schools, 854 F.3d 683 (D.C. Cir. 2017) (“ACICS”), the D.C. Circuit formulated the test now used for analyzing the enforceability of a CID. In that case, the CID’s Notification of Purpose declared:  

The purpose of this investigation is to determine whether any entity or person has engaged or is engaging in unlawful acts and practices in connection with accrediting for-profit colleges, in violation of sections 1031 and 1036 of the Consumer Financial Protection Act of 2010, 12 U.S.C. §§ 5531, 5536, or any other Federal consumer financial protection law. The purpose of this investigation is also to determine whether Bureau action to obtain legal or equitable relief would be in the public interest. 

Affirming the district court’s decision that this CID was unenforceable – “other than noting that an agency may define the scope of its investigation in general terms, the Bureau wholly fails to address the perfunctory nature of its Notification of Purpose” – the D.C. Circuit summarized its guiding principles. “[R]eal limits on any agency’s subpoena power” exist, it warned, and “the deference courts afford agencies does not ‘eviscerate the independent role which the federal courts play in subpoena enforcement proceeding.’” Instead, “[t]he statutory power to enforce CIDs in the district courts . . . [implicitly] entrusts courts with the authority and duty not to rubber-stamp the . . . [CFPB’s] CIDs, but to adjudge their legitimacy.” Simply put, “[a]gencies are also not afforded ‘unfettered authority to cast about for potential wrongdoing.’” Therefore, “[b]ecause the validity of a CID is measured by the purposes stated in the notification of purpose,” courts must carefully assess “the adequacy of the notification of purpose,” a critically “important statutory requirement.” In general, no court should “enforce a CID when the investigation’s subject matter is outside the agency’s jurisdiction” or honor a demand “where there is too much indefiniteness or breadth in the items requested.” 

Guided by these precepts, ACICS gave content to CIDs’ minimal “adequacy” requirement. “A notification of purpose may use broad terms to articulate an investigation’s purpose.” However, to satisfy the statute, that notice must still provide a recipient “with sufficient notice as to the nature of the conduct and the alleged violation under investigation.” 

The D.C. Circuit applied this standard—and found the CFPB’s CID to be inadequate. While the Notification of Purpose defined “the relevant conduct as ‘unlawful acts and practices in connection with accrediting for-profit colleges,’” it “never explain[ed] what the broad and non-specific term ‘unlawful acts and practices’ means in this investigation.” Reasonably read, the CFPB’s explanation of its investigative purpose provided “no description whatsoever of the conduct the CFPB is interested in investigating” or “sa[id] nothing” at all about any potential link between the relevant conduct and the alleged violation. The D.C. Circuit concluded, “[W]ere we to hold that the unspecific language of this CID is sufficient to comply with the statute, we would effectively write out of the statute all of the notice requirements that Congress put in.” 

Case at Hand

Application of ACICS’ Standard 

Heartland “relie[d] almost exclusively” upon the test fashioned and utilized in ACICS. Although the District Court agreed that ACICS sets forth the correct legal test for analyzing the enforceability of a CID, it rejected Heartland’s central argument: that the CID issued to it by the CFPB was just as vague because it “merely categorize[s] all aspects of a student loan servicing operation.” 

Instead, the District Court saw two pivotal distinctions between the two notices. First, “the CFPB has broad statutory authority to investigate student lending practices,” unlike the its questionable prerogative to investigate college accreditation in ACICS. Second, the CID issued to Heartland lacked any “catch-all” provision for “any other” consumer financial law violations, again distinguishing it from the capacious and virtually unlimited CID in ACICS. Indeed, the CID in Heartland referred to two violations—engaging in Unfair, Deceptive or Abusive Acts or Practices (“UDAAP”) and violation of the Fair Credit Reporting Act (“FCRA”)—that the CFBP is statutorily obliged to enforce. 

As to Heartland’s alternative argument—that the CID was improper because it covered all the operations of a student loan servicer’s business—the District Court deemed it a “red herring.” Heartland itself, it noted, had acknowledged the CFPB’s broad authority to investigate violations of consumer financial laws. Per Dodd-Frank, as long as oversight of each operation lies within the CFPB’s purview, a CID may reasonably cover a company’s every endeavor. As the District Court observed, Heartland had cited “no authority . . . holding that the CFPB is barred from investigating the totality of a company’s business operations, rather than a mere subset of its operations, when it has a legitimate reason to believe that violations have occurred.” For its part, the District Court could find not a shred of legal support for this assertion. 

Accordingly, as Heartland had “not argue[d] that the information requested in . . .  [the] CID is unreasonably broad or burdensome, only that the Notification of Purpose is inadequate,” the District Court deemed “the Notification of Purpose set out in the June 9 CID . . . [to be] sufficient to provide Respondent with fair notice of the CFPB’s investigation” under the ACICS standard. 

Two Take-Aways: Two Ways to Defeat CIDs and CFPB’s Unchanged Character   

Heartland holds several lessons for lenders, servicers, and their counsel. First, these opinions, if only because of the scarcity of any others, will likely set the rules for the cases to follow. Under ACICS and Heartland, firms and individuals receiving CIDs can object to them on two bases: (1) that the CID is beyond the scope of the CFPB’s authority to investigate, and (2) that the CID is not specific enough to put the recipient on notice of the alleged illegal conduct. Whether or not the CFPB responds with more thorough descriptions, both ACICS and Heartland point to two promising avenues for beating back an unduly capacious CID. 

Second, the Heartland case suggests a nuanced approach to the CFPB, even under its more pro-business director. Apparently, the CFPB is still willing to continue with its investigations and enforcement activity in the student–financing field. In addition, it appears prepared to pursue ongoing enforcement investigations and to sue to enforce CIDs where the activities implicated fall readily within its jurisdiction. 

How other courts make use of ACICS and Heartland in the years ahead is a story worth following.

On February 28, Mick Mulvaney, the acting director of the Consumer Financial Protection Bureau, delivered remarks at the winter meeting of the National Association of Attorneys General (“NAAG”) in which he outlined the CFPB’s strategic vision and enforcement priorities.

More Enforcement Leadership from State Attorneys General

In his comments, Mulvaney stressed that, moving forward, the CFPB will rely much more on state attorneys general for the enforcement of consumer protection laws.  “We’re going to be relying on you folks a lot more,” he said.  “We’re going to be looking to the state regulators and the states’ attorneys general for a lot more leadership when it comes to enforcement.”

More Cooperation and Consultation

Mulvaney also said that, under his leadership, the CFPB would do a better job of seeking constructive input from stakeholders, including state attorneys general, consumer groups, and industry groups.  He acknowledged that the CFPB has been criticized for not listening and for seeking input from stakeholders only after the agency has made a final decision about how to proceed.  Mulvaney promised to change that.

Consumer Education

Mulvaney stressed that the CFPB will focus much more on consumer education.  He noted that the CFPB has a statutory mandate to educate consumers about their financial decisions.  He also said, however, that in reviewing the CFPB’s recent enforcement actions he was “shocked” by the voluntary but harmful behavior that so many consumers engage in.  The prevalence of that behavior, according to Mulvaney, indicates that the CFPB has not done enough to educate consumers about their financial decisions.

No More Pushing the Envelope

Mulvaney reiterated his frequent refrain that the CFPB would no longer be “pushing the envelope” or “regulating via enforcement actions.”  He said that the agency learned a valuable lesson in several of the recent cases it has lost, where it had brought creative claims that were ultimately unsuccessful.  In the future, he said, the CFPB would make sure that firms “know what the rules are before we accuse them of breaking those rules.”

You can hear Mulvaney’s full speech to NAAG here.

In a new article detailing its Stats for December 2017 and Year in Review, WebRecon presented data showing a slight decrease in the number of consumer litigation lawsuits filed in 2017 compared to other years. We previously reported on WebRecon’s consumer litigation statistics for May of 2017, where we found the number of new consumer finance lawsuits filed in 2017 were on pace with 2016.

Despite what the May 2017 numbers suggested, the overall number of new Fair Debt Collection Practices Act and Telephone Consumer Protection Act lawsuits decreased from 2016. There were 9,788 FDCPA lawsuits filed in 2017, a 5.7% decrease since 2016 and a 20% decrease since 2011, the most active year for FDCPA lawsuits. This is the second straight year the number of FDCPA lawsuits has decreased. However, it is worth noting that FDCPA lawsuits still represented almost 53% of the consumer litigation lawsuits filed in 2017. Similarly, there were 4,392 TCPA lawsuits filed in 2017, representing a 9.2% decrease since 2016 and the first year the filing of TCPA lawsuits has decreased since 2002.

In contrast to actions filed under the FDCPA and TCPA, lawsuits under the Fair Credit Reporting Act increased by 9% since 2016, with a total of 4,346 lawsuits filed in 2017. Overall, there were just under 3% fewer consumer litigation lawsuits filed in 2017 when compared to 2016. In addition, complaints filed with the Better Business Bureau and Consumer Financial Protection Bureau were up 1.3% and 18.5%, respectively.

The data for the month of December also reflects that the same jurisdictions continue to receive the majority of consumer litigation lawsuits as in months previous. The Eastern District of New York led the way in December 2017, with 148 new lawsuits. The next closest jurisdiction was the Northern District of Illinois with 77 new lawsuits.

Troutman Sanders will continue to monitor and report on emerging trends in consumer finance litigation.

On February 12, 2018, the Consumer Financial Protection Bureau (“CFPB”) released its strategic plan for 2018 through 2022. The plan, which will take two years to implement, calls for placing new restrictions on the CFPB’s enforcement authority. “The proposed reforms would impose financial discipline, reduce wasteful spending, and ensure appropriate congressional oversight,” according to a statement also released on that date. Mick Mulvaney, acting interim director of the CFPB, stated that the Bureau’s new direction will provide “clarity and certainty to market participants.”

Under the proposal, which also is included in President Trump’s 2019 budget plan, the CFPB would be funded by Congress rather than the Federal Reserve. This change would arguably give lawmakers more oversight and influence over the agency’s priorities – a common complaint from critics of the CFPB. The CFPB’s 2019 budget also would be capped at its 2015 level – $485 million – compared to a projected $630 million this year.

In its strategic plan, the CFPB lays out revised mission and vision statements:

Mission: To regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws and to educate and empower consumers to make better informed financial decisions.

Vision: Free, innovative, competitive, and transparent consumer finance markets where the rights of all parties are protected by the rule of law and where consumers are free to choose the products and services that best fit their individual needs.

The CFPB also lists three long-term strategic goals and objectives that will drive the Bureau’s mission:

Goal 1: Ensure that all consumers have access to markets for consumer financial products and services.
Goal 2: Implement and enforce the law consistently to ensure that markets for consumer financial products and services are fair, transparent, and competitive.
Goal 3: Foster operational excellence through efficient and effective processes, governance, and security of resources and information.

Regarding the CFPB’s enforcement goal, the Bureau notes that an important objective of the Dodd-Frank Act is to ensure federal consumer laws are enforced consistently for banks and nonbanks alike. Nonbank entities include “mortgage companies, payday lenders, private education lenders, and larger participants in other markets as defined by rules issued by the Bureau.” According to the CFPB, because “[i]ndustry structure is always changing . . . so too will the number of institutions that fall under the Bureau’s supervisory authority.”

In terms of the CFPB’s rulemaking authority, the plan lists several strategies which are particularly relevant to the financial services industry, including:

  • Conducting empirical assessments to evaluate the effectiveness of significant Bureau rules in achieving the purposes and objectives of the Dodd-Frank Act and the CFPB’s specific goals.
  • Engaging in rulemaking where appropriate to address unwarranted regulatory burdens.
  • Carefully evaluating the potential benefits and costs of contemplated regulations.
  • Promoting practices that benefit consumers, responsible providers, and the economy as a whole.

In addition, the Strategic Plan notes the importance of the CFPB keeping pace with changing technology. “In recent years, evolving technologies have driven rapid change in the consumer financial marketplace,” states the plan. “The swift pace of change can provide benefits, opportunities, and risks to both consumers and institutions. The Bureau must keep pace with the evolution of technology in consumer financial products and services in order to accomplish its strategic goals and objectives.” This is especially important to debt collectors and mortgage servicers who communicate with consumers through electronic means that did not exist when the Fair Debt Collection Practices Act was first approved in 1977.

The 16-page strategic plan deviates considerably from the draft of the report that was released last October prior to Mulvaney assuming leadership of the CFPB. The revised strategic plan echoes Mulvaney’s previous statements that the CFPB would dampen aggressive enforcement and regulatory actions that he viewed as the hallmark of the previous administration. As the report states, the CFPB will now operate “with humility and moderation.”

As we reported earlier this month, Mulvaney has indicated that he will reserve administrative enforcement actions for only the most egregious violations of consumer protection law. Mulvaney has further emphasized his intent to rely on formal rulemaking to provide institutions under the CFPB’s purview with notice of “what the rules are before being charged with breaking them.”

The Bureau already has taken measures to apply Mulvaney’s vision, including the recent dismissal of a four-year-old payday lending lawsuit and the announcement that the CFPB would reconsider a controversial rule affecting the payday and auto-title lending industries.

We will continue to monitor the actions of the CFPB and other regulatory agencies for future developments.

On January 30, the Consumer Financial Protection Bureau issued its 2018 list of consumer reporting companies, which contains information regarding the nationwide consumer reporting agencies as well as companies operating in specialized areas such as employment screening, tenant screening, utilities, and gaming. The list includes the following:

  • Information to request a report. This includes the latest company name and contact information from the three nationwide consumer reporting companies (Equifax, Experian, and TransUnion) and dozens of specialty reporting companies.
  • New tips on which specialty reports might be important for consumers to fact-check depending on their specific situation.
  • Useful identity verification information about how consumer reporting companies try to make sure consumers are who they say they are.
  • Free reports guide. Companies on this list will provide information to consumers for free once every twelve months if requested.
  • Companies that will provide free scores along with free reports.
  • New security freeze information about how some of the consumer reporting companies will limit third-party access to consumer data if a consumer requests it through a security freeze.

Troutman Sanders will continue to monitor CFPB developments and provide further updates as they are available.

Today, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) issued its en banc decision in the closely-watched PHH Corp. v. Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) matter. In short, the D.C. Circuit upheld the constitutionality of the structure of the CFPB, reversing its 2016 panel decision.

I.  BACKGROUND

As we previously reported, on October 11, 2016, a panel of the D.C. Circuit held that the Director of the CFPB had too much unilateral, unchecked power. The portion of the Dodd-Frank Act providing that the Director can only be removed by the President “for cause” was deemed unconstitutional. The 2016 panel found that “the CFPB, lacks that critical check and structural constitutional protection, yet wields vast power over the U.S. economy.”

The panel limited the remedy to the problem, however, by striking the “for cause” portion of the law and held that the President supervises the Director, and the President may remove the Director without cause. The Court also declined to shut down the entire CFPB even after finding the Bureau constitutionally flawed.

The case originally began as a bid by mortgage servicer PHH to overturn a $109 million CFPB penalty for violations of the Real Estate Settlement Procedures Act (“RESPA”). But as a result of the 2016 panel decision, the case changed focus to the broader constitutional question.

II.  EN BANC DECISION

The D.C. Circuit “granted en banc review to consider whether the federal statute [the Dodd-Frank Act] providing the Director of the [CFPB] with a five-year term in office, subject to removal by the President only for ‘inefficiency, neglect of duty, or malfeasance in office,’ . . . is consistent with Article II of the Constitution.”

On January 31, 2018, the full D.C. Circuit issued its 7-3 opinion reversing the 2016 panel decision. The Court held that the Dodd-Frank Act provision “shielding the Director of the CFPB from removal without cause is consistent with Article II.” In the 68-page opinion, the Court ruled that the original panel’s decision was incorrect in finding that the CFPB’s structure was unconstitutional: “Applying binding Supreme Court precedent, we see no constitutional defect in the statute preventing the President from firing the CFPB Director without cause.”

The Court then held: “Congress’s decision to provide the CFPB Director a degree of insulation reflects its permissible judgment that civil regulation of consumer financial protection should be kept one step removed from political winds and presidential will. . . . Congress made constitutionally permissible institutional design choices for the CFPB with which courts should hesitate to interfere.”

III. GOING FORWARD

The case is not over. There is a chance that PHH appeals the en banc decision to the U.S. Supreme Court, where the case would take on heightened scrutiny and political ramifications. However, the practical effects of the ruling could be favorable to PHH.

Regardless of whether the case is appealed to the Supreme Court, the October 2016 RESPA rulings of the three-judge panel were reinstated by the en banc Court. As a reminder, the panel was unanimous in holding that Section 8 of RESPA permits captive reinsurance arrangements so long as mortgage insurers pay no more than reasonable market value for reinsurance. And, even if Director Cordray’s contrary interpretation (that RESPA flatly prohibits tying arrangements) were permissible, the panel held, it was an unlawful, retroactive reversal of the federal government’s prior position. Finally, according to the panel, a three-year statute of limitations applies to both administrative proceedings and civil actions enforcing RESPA. According to today’s en banc decision, all of those RESPA rulings have been reinstated. This mean that the CFPB’s prior interpretation was based on an incorrect legal theory and, therefore, the CFPB must revisit the entire case in light of the panel’s rulings.

Critically, in accordance with the prior panel ruling, the CFPB’s prior $109 million fine against CFPB has been effectively vacated and remanded to the CFPB for further proceedings. Given the new administration’s position on the CFPB and the appointment of a new director (Mick Mulvaney), the CFPB’s new ruling may prove different under the correct legal standard and/or the fine may be reduced or eliminated altogether.

Troutman Sanders will continue to monitor this case – and all CFPB-related decisions – for future developments.

The case is PHH Corp. v. Consumer Financial Protection Bureau, 15-1177 (D.C. Cir. October 11, 2016), and the D.C. Circuit’s recent decision can be found here.

 

On January 24, the Consumer Financial Protection Bureau (CFPB) published a request for public comments on its use of Civil Investigative Demands or “CIDs”.  The CFPB expects the request to be published in the Federal Register on January 26, and public comments will therefore be due on or around March 27.

The CFPB’s use – and, according to some, abuse – of CIDs has been a hot topic.

In February 2017, the D.C. Circuit rejected a petition filed by the CFPB to enforce one of its CIDs.  See CFPB v. Accrediting Council for Indep. Colls. & Schs., 854 F.3d 683, 685 (D.C. Cir. 2017).  The D.C. Circuit held that the CFPB had failed to meet its statutory obligation to “state the nature of the conduct constituting the alleged violation which is under investigation and the provision of law applicable to such violation.”  Id. at 685.

Then, in June 2017, the U.S. Department of Treasury issued a report that chastised the CFPB for ignoring the congressionally imposed limits on its jurisdiction and investigatory powers.  See U.S. Dep’t of Treasury, A Financial System that Creates Economic Opportunities (June 12, 2017).  Addressing the agency’s use of CIDs, Treasury’s report noted that the “CFPB’s process for issuing CIDs . . . is fraught with risks for abuse” and “should be reformed to ensure subjects of an investigation receive the benefits of existing statutory protections.”  Id. at 86, 91.

A few months later, in September 2017, the Office of Inspector General (OIG) for the Federal Reserve System and the CFPB issued a report that struck a similar note.  See Off. of the Inspector Gen., 2017-SC-C-015, Evaluation Report (Sept. 20, 2017).  The OIG’s report noted that the CFPB “can improve its guidance for crafting notifications of purpose associated with CIDs.”  Id. at 7.

The CFPB’s request for public comments on its use of CIDs is a clear signal that, under the leadership of acting director Mick Mulvaney, the agency intends to reform many of the policies and practices implemented under the agency’s former director, Richard Cordray.  Indeed, the request specifically asked for “comments and information” about “potential changes that can be implemented” to the agency’s use of CIDs.

 

On Tuesday, White House budget director and acting interim director of the Consumer Financial Protection Bureau, Mick Mulvaney, introduced his plan for a more tempered, data-driven, governing philosophy for the CFPB.

In a three-page memo sent to CFPB employees, Mulvaney emphasized the CFPB would continue to enforce consumer protection laws but stressed it would operate within the confines mandated by Congress in the Dodd-Frank Act. This is a marked change from what Mulvaney characterized as the previous governing philosophy at the CFPB to “push the envelope,” as expressed by former director Richard Cordray.  

Mulvaney expressed concern over the unintended consequences such aggressive enforcement actions could have on the economy, American citizens, and the rule of law in general. Enforcement using the “full weight of the federal government,” Mulvaney noted, should be used only as a last resort after careful consideration of all component interests and circumstances.  

To implement this philosophy, Mulvaney suggested the actions of the CFPB, in both rulemaking and enforcement, will be data driven; with an emphasis on quantitative – rather than qualitative – analysis. Further, the bureau will focus on formal rulemaking providing interested parties with notice of what the rules are, instead of “regulation by enforcement.” 

Mulvaney specifically identified that almost one third of the complaints submitted to the CFPB in 2016 were related to debt collection. A closer inspection of the 2016 Consumer Response Annual Report, reveals that roughly three-quarters of the consumer complaints dealt with continued attempts to collect debts allegedly not owed, alleged improper or insufficient disclosures, and claims of improper communication tactics. Given Mulvaney’s statement that this type of data will inform the agency’s actions going forward, the debt collection industry may expect to see that the CFPB will continue to focus on debt collection issues even under Mulvaney’s approach.

We will continue to monitor the CFPB’s actions as it begins to implement Mulvaney’s interpretation of the agency’s role in the regulatory and enforcement landscape.