Treliant Takeaway…The CFPB’s Spring 2023 Semi-Annual Report

Semi-Annual Report of the Consumer Financial Protection Bureau – Spring 2023

• Source: consumerfinance.gov

Takeaway:

The Consumer Financial Protection Bureau (CFPB) continues to be actively engaged in rule making and enforcement activities. As detailed in the semi-annual report, the CFPB is expanding its consumer protection agenda.

Treliant assists firms with the end-to-end design and implementation of strong compliance management systems (CMS) and fair and responsible banking programs. These programs do more than meet supervisory expectations—they are necessary to effectively manage ongoing risks associated with consumer regulations and compliance. Moreover, a sound CMS and fair and responsible banking program can prevent violations of law and enforcement actions and helps to ensure that customers are treated fairly.

Highlights:

The 79-page document, published in November 2023, highlights the CFPB’s activities and priorities. Key areas include:

• Rules and orders adopted by the CFPB.
• Initiatives conducted by the CFPB.
• Plans for future rules, orders, and initiatives.
• Analysis of complaints data.
• Supervisory and enforcement actions.
• Fair lending activities.

Final Rules Issued

Three Final Rules are highlighted in the report, including:

1. Final Rule: Prohibition on Inclusion of Adverse Information in Consumer Reporting in Cases of Human Trafficking (Regulation V)

This Rule establishes a method for a victim of trafficking to build or rebuild financial stability.

2. Final Rule: Supervisory Authority Over Certain Nonbank Covered Persons Based on Risk Determination, Public Release of Decisions, and Orders

This Rule finalized changes to its procedures for establishing supervisory authority over non-bank covered persons based on risk.

3. Final Rule: Small Business Lending Under the Equal Credit Opportunity Act (Regulation B)

This Rule, also referred to as “1071”, will have significant impact on covered financial institutions (FIs). This Rule amends the Equal Credit Opportunity Act (ECOA) requiring FIs to collect and report data on applications for credit for small businesses, particularly those owned by women or minorities.

For in-depth analysis, see Treliant’s recent Takeaways addressing the CFPB Section 1071 Final Rule

• https://www.treliant.com/knowledge-center/treliant-takeaway-injunction-on-cfpb-section-1071-final-rule/
• https://www.treliant.com/knowledge-center/1071-the-final-rule-is-out-for-small-business-lending-now-what/

Proposed Rule Making

A few proposed rules all FIs and non-banks should keep an eye on include:

1. Proposed Rule (amendment to Regulation Z): Credit Card Penalty Fees

In this Proposed Rule the CFPB is seeking to make credit card late fees more “reasonable and proportional.” The CFPB has proposed adjusting late fees to $8 and eliminating higher late fees for subsequent violations; ending the annual inflation adjustment for late fees; and establishing late fee limits not to exceed 25 percent of the required payment.

2. Proposed Rule: Registry of Nonbank Covered Persons Subject to Certain Agency and Court Orders.

In this Proposed Rule the CFPB is looking to require certain non-bank covered entities offering or providing a consumer financial product or service to report such to a CFPB registry. The CFPB is also proposing a requirement that certain supervised nonbanks submit annual written attestations regarding the entity’s relevant systems and procedures for achieving compliance.

3. Proposed Rule: Registry of Supervised Nonbanks that Use Form Contracts to Impose Terms and Conditions that Seek to Waive or Limit Consumer Legal Protections

The Proposed Rule seeks to require that non-banks, subject to CFPB supervision, register with the CFPB and include information about their use of certain terms and conditions in form contracts for consumer financial products and services that pose risks to consumers annually.

CFPB’s Priorities

The semi-annual report also provides insight into the CFPB’s initiatives and priorities. Areas of interest, include:

• Consumer Use of Buy Now, Pay Later
• Debt Collection Practices
• Access to Banking Services
• Marketing of Consumer Products
• Credit Decisioning and Adverse Action
• Use of Consumer Reports
• Clean Energy Financing
• Residential Real Estate Valuations
• Abusive Acts or Practices
• Medical Credit Cards and Financing Plans
• Employer-Driven Debt
• Contactless Payment

Complaints Trends

The CFPB reported receiving over 1.3 million consumer complaints for the 12-month period ending March 31, 2023. This number is an increase over the previous reporting period. The leading drivers of consumer complaints were credit or consumer reporting followed by debt collection practices. Expect increased scrutiny around consumer compliant handling in the coming year.

Enforcement Actions

The CFPB Report also details public enforcement actions. For the 12-month period ending March 31, 2023, the CFPB was a party in over 50 enforcement actions.

CFPB’s Fair Lending Mission

During the reporting period the CFPB performed 11 supervisory activities to determine compliance with federal laws, including ECOA and the Home Mortgage Disclosure Act and reported that it found improvement over the previous reporting period with fewer Matters Requiring Attention or memoranda of understanding (MOUs).

The most frequent issue noted was related to discrimination by mortgage lenders when granting pricing exceptions.

The CFPB is continuing its efforts to inform and educate consumers, industry, academia, and government agencies on fair lending risk and issues.

What Does This Mean for Financial Institutions?

These initiatives reflect the CFPB’s ongoing efforts to address a range of issues related to transparency in consumer finance, fair lending practices, financial technology, and protections for vulnerable consumer groups. This multi-faceted approach suggests a continued commitment to supervision and enforcement, as needed. Financial institutions should build these priorities into their compliance programs and regularly assess potential risks in the coming year.