Last December, I looked into my crystal ball to discuss the trends and topics we might see unfold this year. Below we’ll review what I predicted and give an overview of how the year played out.
CFPB focus on access to credit
The rise in interest rates throughout 2023 was a front-of-mind issue for lenders on many fronts. The Consumer Financial Protection Bureau (CFPB) did not walk back its focus on access to credit, which became an operational issue for lenders. Tensions between underwriting criteria and providing access to credit will continue into 2024.
CFPB on ‘junk fees’
The CFPB indeed went all-in on restricting so-called junk fees this year, issuing unprecedented two-part supervisory highlights in March and October. In the motor vehicle space, the March issue focused on operational issues related to traditional finance fees such as overcharging late fees, charging late fees post-repossession and the impact of estimating fees on repossession. The follow-up highlights issued in October focused on refunds for voluntary protection products which were terminated either through early payoff or contractually permissible cancellation.
Initially, junk fees seemed to broadly encompass charges that don’t provide any value to the consumer. The concept of junk fees has now seemingly evolved to include operational practices and otherwise permitted fees and processes, with the CFPB prioritizing refunding payments directly to the consumer rather than offsetting an outstanding account balance.
Congress challenges ‘regulation via press release’
Under CFPB Director Rohit Chopra, it’s been argued that the bureau has engaged in rulemaking through every manner other than the formal rulemaking process. With Congress’ current composition and posture, there doesn’t seem any viable threat or challenge to that method of procedure any time soon.
Supreme Court addresses CFPB’s constitutionality
We’re still in a holding pattern to see how the U.S. Supreme Court will rule on the constitutionality of the bureau’s funding mechanism after oral arguments were heard in the fall.
Last December, I asked, “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?” That answer remains to be seen in 2024.
What wasn’t on my bingo card?
I did not foresee the rapid implementation of artificial intelligence that occurred this year. The applications of large language models and generative AI are having a big impact on consumer finance as they are in every other industry and practice globally. We’re seeing the continued tension between fear and adoption, with somewhat bipartisan Congressional concern regarding the spread of AI in every facet of our lives.
It will be interesting to mark the evolution on this point as it relates to the financial services industry in a year’s time.
Mark Edelman is a member and the chair of consumer financial services practice at McGlinchey.