Industry Expertise | The CFPB’s Summer Plans May be Heating Up
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By Suzi Straffon, Allied Solutions
June 27, 2024
Lenders are faced with renewed regulatory challenges at both the state and Federal level, and pressure is mounting in this arguably unprecedented complex and dynamic regulatory environment. The CFPB is now expected to ramp up its activity, largely due to the U.S. Supreme Court’s recent ruling affirming the constitutionality of the CFPB’s funding mechanism as set forth in the Dodd-Frank Act.
Evidence of CFPB’s potentially aggressive posture is the agency’s hiring spree that went into motion last fall. The CFPB recently revised its estimate for increased hiring of the number of attorneys in its enforcement division to about 40%. According to Eric Halperin, CFPB enforcement chief, “These additional resources will enable us to open more investigations, including matters with significant market impact and against large market actors, consistent with the Bureau’s priorities,” Halperin wrote in the memo. “We also will be in a better position to meet resource demands from our increasing number of matters in contested litigation.” Further, Jonathan Pompan, a partner and chair of the consumer financial services practice group at Venable LLP, said the ramp-up in hiring would give the CFPB the capacity to take on 25 to 30 additional investigations, plus more enforcement actions and litigation stemming from exam findings.
The Bureau’s newfound stamina, however, has not brought clarity around compliance with UDAAP. Not only do the rules remain vague, the consequences for non-compliance may be severe. In a recent blog post, AFSA President and CEO, Bill Himpler noted, “The CFPB is allowed to supervise companies that it decides ‘pose risk to consumers.’ The agency for the first time recently began using this authority, except it has never attempted to define what ‘risk’ means. Declaring a company ‘risky’ without defining risk ahead of time is like a highway patrol running a speed trap pulling over cars for speeding without posting let alone setting the speed limit.”
While clarity in the CFPB’s guidance and rulings is strongly desired, it’s not the reality we operate within currently, so lenders must be prepared for the unknown. It’s imperative that compliant, auditable, trackable processes – from product cancellation to repossessions – must be in place. In this shifting borrower-centric regulatory environment, it’s critical that lenders be over-prepared, proactive, and on their toes, ready to prove that all lending practices are compliant and aren’t violating UDAAP, under which many expect the enforcement actions will fall. Keeping audit-worthy, borrower-centric processes at the forefront may divert audit scrutiny and potential penalties down the road.
The upcoming election raises further uncertainty about the CFPB and its regulatory approach. It may be that a Biden second term or a change in administrations may lead to new leadership at the CFPB. However, the vision and legislative stamina of the CFPB may very well remain the same, so lenders must remain vigilant and committed to compliance and efficiency.
Allied Solutions is an 8-Star Premier Business Partner with AFSA. Learn more about Allied’s comprehensive recovery optimization solutions here.
June 25th, 2024
