Last month, I reported on how the regulatory year progressed in 2022. I suppose in 2023 we should be accustomed to surprises, but the industry can still prepare for certain trends in the market and in regulatory oversight to continue. Without further beating the drum regarding inflation, below are some topics that lenders should keep on their radar as we ring in the new year.
Looking at 2023, one big question will be: How will the Fed’s actions impact the economy generally? If we see a downturn, as predicted, how will performance of existing accounts be affected? What underlying policies and controls will finance companies need to monitor while protecting themselves against reduced payment performance across their portfolios, from account management and deferral programs to collections processes?
In some regards this is nothing new, as we saw similar activity after the COVID-era supplements drew to a close in 2021. Lenders can expect regulators — from states to the CFPB — to increase their oversight in the interest of protecting consumers.
CFPB concerns
On the topic of the CFPB, we expect to see — based on issues they’ve already discussed — concerns about consumers’ access to credit because of rising interest rates. Finance companies should be prepared to document and show consistency regarding credit decisions to steer clear of inquiries related to fair lending practices.
Will we also see expanded enforcement by CFPB on their pay-to-pay restrictions on fees, utilizing their UDAAP authority to question the actions of creditors when collecting on their own accounts? Is this the dreaded “straw that broke the camel’s back” that triggers the expansion of the Fair Debt Collection Practices Act and Regulation F restrictions to creditors?
Capitol Hill pressures
Finally, with the new composition of Congress, we’ve already started to hear rumblings of challenges to CFPB’s current posture of “regulation via press release.” How will the Bureau react to increased pressure from Congress?
And nearby on Capitol Hill, how will the Supreme Court address the Fifth Circuit’s October decision regarding the constitutionality of the Bureau overall and the split in the Circuits? Will the Fifth Circuit decision be reversed? Will it be a narrow, precision-based decision, ruling on the specific issue at hand in the Community Financial Services case, or will the Court decide to overturn the entire federal regulatory system as we’ve known it since 2011?
With an industry constantly in flux, compliance issues will certainly arise that we have not yet considered. From emerging areas like electric vehicle lending and financing the overall “electrification” of your customer’s daily life, to continued scrutiny of GAP and voluntary protection products, we’ll update you throughout the year on ways your compliance programs can support your business goals and protect your assets.
Mark Edelman is the chair of national consumer financial services compliance practice group at McGlinchey.
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