CFPB shake-up: What administration changes may mean for auto lenders

© Can Stock Photo / zolnierek

Things are quickly changing at the Consumer Financial Protection Bureau. President Joe Biden made Dave Uejio acting director of the CFPB on January 20, and nominated former FTC Commissioner Rohit Chopra for director.

The “new” CFPB has begun unwinding previous decisions and policies, and in its enforcement, examinations and rule writing is likely to pick up where former Director Richard Cordray left off in 2017.

What has been done so far?

The CFPB rescinded its own 2020 guidance constraining its authority to cite abusive conduct. And responding to findings the Kathy Kraninger-era CFPB reported, including that “companies across markets misreported accounts to credit bureaus and violated [Coronavirus Aid, Relief and Economic Security] Act amendments,” the CFPB promised to “take aggressive action to ensure that regulated companies follow the law and meet their obligations to assist consumers during the COVID-19 pandemic,” and to expedite enforcement investigations relating to COVID-19 so that the “industry gets the message that violations of law during this time of need will not be tolerated.”

The findings stemmed from COVID-related “prioritized assessments” previously undertaken by the Bureau that were not designed to identify violations of law, but “rather to spot and assess risks and communicate these risks.”

In addition to its focus on COVID-related matters, the CFPB announced that racial equity is another immediate priority. It issued an interpretive rule clarifying that Regulation B of the Equal Credit Opportunity Act extends to sexual orientation and gender identity, and it seems likely that the Office of Fair Lending and Equal Opportunity will resume its former enforcement and examination roles — and that tough fair-lending enforcement and examinations will follow.

Congress notably used the Congressional Review Act to reject the CFPB’s previous disparate impact analyses of dealer-markup practices, but this may not be the last word on fair lending in the automobile finance market.

The CFPB delayed proposed revisions to the qualified mortgage rule and asked its complaint division to prepare a report highlighting any company with a poor track record responding to complaints, particularly when based on race. The CFPB also announced that it will again supervise lenders’ Military Lending Act compliance, a policy rescinded by prior leadership. The Bureau also announced its planned rescission of public statements conveying a “relaxed approach to enforcement of the laws in our care.”

In addition to the rescinded abusive-conduct guidance, this statement regarding  the approach to enforcement of laws may refer to the CFPB’s prior COVID guidance that companies would not be cited for the following reasons: failing to investigate consumer disputes within Federal Credit Reporting Act-required time frames; failing to submit credit card and prepaid account information; or providing disclosures to consumers orally that must be in writing. The statement also may refer to prior guidance allowing institutions to request early termination of consent orders, or to tech-friendly policies like the compliance-assistance sandbox, no-action letters and advisory opinions.

What comes next?

In the future, the CFPB again could revise its small-dollar lending rule and take another look at its recent debt-collection rules. In his confirmation hearing, Commissioner Chopra expressed concern about mass data collection, consumer privacy, and algorithmic credit decision-making (i.e., underwriting). Privacy and fair lending rulemakings could follow.

The CFPB also could evaluate a COVID-related servicing rulemaking, perhaps under its Unfair, Deceptive and Abusive Acts or Practices authority. Additionally, it could revisit past agendas, including student loan servicing, overdrafts and larger participant rulemakings for installment lenders — broadening the CFPB’s authority to supervise them.

The CFPB also could propose a larger participant rulemaking for fintech companies. And although the CFPB is unlikely to implement many ideas proposed by its 2020 Taskforce on Federal Consumer Financial Law, it could repurpose one. In particular, the task force recommended that the CFPB be authorized to license companies and preempt certain state laws. Instead, the CFPB could require companies to register and provide information about their activities, which, based on prior published rulemaking agendas, the CFPB once considered.

As U.S. Sen. Elizabeth Warren intended, the 2021 CFPB seems more aggressive and philosophically aligned with consumer advocates. More enforcement and punchier headlines may follow.

Brian Fink is Of Counsel in McGlinchey’s Washington, D.C., office. He is a former regulator within the CFPB’s Office of Supervision Policy.

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