<ul class="font_8"> <li> <div class="font_8">Staying ahead of state mini-CFPBs</div></li> <li> <div class="font_8">California's Consumer Privacy Act and other data security regulations</div></li> <li> <div class="font_8">Update on the latest AG enforcement actions</div></li> </ul> [toggle title="TRANSCRIPT"] <div class="transcript-scroll-box">00:00With me here I have Michael Belvoir, the partner at Hudson, and Kenneth Royce, a managing partner at Eastman and Elliot. 00:09 Please join me in welcoming these two distinguished panelists. 00:16 I'd like them to I'd like to give them an opportunity to introduce themselves and give us a brief background on their background as it relates to auto finance. So Michael, will you please start us 00:27 off? Sure. And thanks, everybody, for being here on the last day of the conference. always appreciate that. Many of you know me, I have been in this business for the last 25 or so years, focused primarily on auto finance and over the years, focused on different things. I've always had a strong compliance practice in the last eight or 10 years. It has morphed also into and investigations and examination of Practice helping clients with with the advent of the CFPB. And the recent activities at the state level from state agencies and that sort of thing. 01:10 We're finding more and 01:11 more of our focus in the firm is helping clients navigate their way through investigations. So I am referred to as a car guy and Ken has to but 01:27 the firm has given me the opportunity to have this 01:32 to grow in this practice and have this platform and I'm very grateful to them for that. Very happy to be here. 01:38 Yes, thanks to the Ico also very happy to be here. It's a little warmer here in San Diego of in Chicago, but not by much. I think things are starting to warm up in the Windy City. 01:50 But first of all, I appreciate the opportunity to share some insights with Michael and my background is actually started in the year. corporate environment and I was in house making a turn for what was then known as content bank. And that started off as a bank regulatory career. Then I got involved with GE Capital in their auto finance division in the late 80s, early 90s. And many of you may know during that time period t capitalism gogo years of auto finance, they were the largest independent lessor in the country. They established the second largest auto auction chain, and they were really slow retail inventory finance products. But as that relationships with the industry have evolved, I had an opportunity to get into private practice and join the Citadel in 1991. And in 1991, there were a lot of joint ventures that needed legal support and I thought we had a good chance at working for developing BMW financial services because of during my tenure at GE Capital, I was counsel for BMW credit, and that became BMW financial services. So, in 1992, that opportunity was presented and we were able to through our private practice, so BMW financial services. And with that kind of springboard, we've launched into representing quite a number of the major captive finance companies on the slow retail solid sale and inventory finance, as well as the banks credit unions in attendance and the service industries that surround the auto finance arena. So it's been a nice ride, 03:41 and 03:43 it's again, it's great to be here. 03:47 Thank you. Thank you for the introductions. And before we get started, I just wanted to remind everyone to send any questions you may have through a mobile app. I've just remembered myself. So we're in session nine years ago. Any questions you have to start us off here? We've been seeing a couple of states make the move to establish their own mini CFPB, if you will, can you give us a brief background on which states you have seen stepped up their regulatory enforcement in this matter? 04:18 So I'll take a stab at starting on that. There's several states who had sort of developed their own mini cmdbs, Pennsylvania, New Jersey, come to mind, California, and Maryland tried and started setting one up and then it kind of fizzled out, didn't get its charter, I guess, didn't get renewed. So the legislation that authorized it sunset recently, but I think the attention to that is sort of a natural in on the one hand, it's sort of a natural outcropping of The activities of the CFPB and a change of administration from a less business friendly illustrations to more business friendly administration. I think the state some of the states at least saw an opportunity to pick up what they anticipated would be some slack on the part of the federal government in consumer protection. Other states may have seen it as a revenue opportunity with their states that would not be heard of it sometime probably saw it as potent when Mick Mulvaney took over as the acting director of the CFPB. He actually publicly invited the SES to pick up more of the enforcement work. And so in doing that, I think some of the states realized that their attorney general offices had rather broad experience and enforcement, but not a tremendous amount of substantive experience in financial services enforcement. So I think that also goes a little bit to the genesis 06:13 of these 06:14 kinds of activities. That that 06:20 trend, if you will, is just getting started. And I think that we can expect to see writer that started that was about 06:28 New York was the latest to join the fray. Not surprisingly, they have been one of the more active in the area of consumer protection enforcement through both the Attorney General's offices in New York department for the institutions. And Pennsylvania law has, I think they were maybe the first one they have a Consumer Protection Bureau, which is running from the Pennsylvania Attorney General's office. Just to give you an idea, they are they are not sitting around there. They think they can't see enforcement actions ready and just wondering what examples or attention there was a case coming out in April this year, involving a dealer where the Consumer Protection Bureau Pennsylvania, some claim was particular dealer where they were selling three year lease context ditional warranties to lessees as they have either little value. And I think as we heard from the federal regulatory side from both the FTC these are the types of things whether it's ancillary products or other products that the regular service we're looking at, are you giving them as if something is finance in the context of a retail store? Or is value provided kind of breached example, case was Commonwealth of Pennsylvania versus tax that associates April 2019. And I think it was the predicate for liability here was so unfair method of cop petitioned and deceptive trade practices. So this is something that I think we're going to continue to see in this arena. 08:07 And just want to comment about Pennsylvania to show you what a small world is. The young man who heads up that office next month, was a student of Elizabeth Warren's at Harvard Law School. He followed her to the Treasury Department when she was a Special Assistant to the President for purposes of standing up the CFPB. And then he was a his first actual legal job was as an enforcement attorney at the CFPB which is not the best place to learn the law, but he was a smart kid and he, I was across the table with him on one investigation and he he was a quick learner. But when he moved back to Pennsylvania for family reasons, I was not surprised. See him take a roll like this. And I think it's probably just a matter of time before we see him running for Congress or something like that. So okay. 09:10 Ken, before you mentioned, New York was the latest into join, and you said, unsurprising. So can you tell us maybe some sort of patterns that you're seeing in the states are opting to establish these types of regulatory bodies? Well, well, there's 09:25 actually one very recent and active example coming out of the New York department, financial institutions. And again, this is not the mini CFPB. That is the regulatory agency that regulates sales spikings companies, and I think many of you are aware that there is a territorial battle ongoing as we speak between the OCC and the state regulatory agencies. And that has it a year ago. The The New York Times General New York Department of Financial Services brought an action or attempted to bring an action in court to the OCC from issuing special charters for FinTech companies. And they saw this as a threat to their regulatory domain. The first case was dismissed because the issue was right. The OCC at that point had not been granted special purpose charters. But now, at the second wave of litigation, New York was able to prevail in the first wave of procedural issues and they survived a motion to dismiss which means the case will eventually be heard. And if New York is successful, that could be a major setback to the OCC and their goal to regulate non bank financial services companies but New York I think this is the forefront of that activity. And that's one that we all need to close to watch. Because it will have ramifications as to whether the OCC can offer these FinTech companies, a, you know, a one stop shop, so to speak. So you don't have to get licensed on a 50 state basis. But at the same time, you've got not only the New York department for the institutions, but all the other states that have a major regulatory interest in in controlling, reviewing and monitoring the non baby financial services activities. 11:28 Right, so, you know, Pennsylvania, New Jersey, California, New York, those are seven states that have opted to set up these types of regulatory bodies. Where are you? Are there any trends or patterns that you see? That might point us in the direction of knowing which other states may join, join the Friday? 11:50 Well, I'd start with the blue states 11:54 because that's where the interest is going to be, but it can be up to 30,000 feet and you look up What's happening? You know, there was some significant legislation that was signed last night in Alabama, for example, there is a renewed interest in the states and federalism and a renewed interest in in the states battling the federal government further premacy, if you will, over the affairs within the state. And I don't think this is a passing sort of event. I think that this is more of a trend line. And I think that over the next 10 to 20 years, we're going to see those battles continuing between the states and the federal government where the state is looking to exercise more power over what they what they're doing, but the idea of a mini CFPB is illogical to a large extent. So I would say trend wise, look at the blue states first. 12:59 I concur. 13:01 So we've been seeing a number of multi state settlements in the news recently. What does this increase in cooperation among multiple states mean for the industry from a compliance perspective? 13:16 Well, I think this is a couple of levels. You have the Attorney General's sharing information. And probably the most recent and high profile example that was the huge settlement that was extracted 13:31 with the Wells Fargo 13:33 mortgage and all filings activities. And there was over 570 $5 million involved in that. And it's extraordinary to see all 50 State Attorney Generals get on board. California clearly got the largest slice of that pie. But that was based on the proportion of Wells Fargo's customers in that domain. At Issue in the auto finance space where the climate protection issue issues, the handling of gap refunds saw but that is a prime recent example of how the states are are getting together sharing information. And where they see a major problem in the area of consumer protection, they will not hesitate to to get the ball rolling. 14:21 Do you think we can expect to see more of this multi state settlement action coming in the future? 14:27 There could be I know I, I would say that, you know, probably not in the scale we saw with the last run up situation, but I think the most Fargo is kind of an extreme 14:36 example. One of the things that the CFPB does, from an examination perspective, is when they're trying to determine who it is that they're going to examine. And when they're going to examine them. They actually confer with the state regulators as well. And what they try to do from an examination perspective is they try to combine the exam The state exams at the CFPB exam. And they rely on the state's to give them guidance on who they think the bad actors are, and that sort of thing. There is some efficiency to be gained as an industry participant, there's some efficiency to having a multi state examination type of thing going on. The challenges is that that often turns as to or can turn into a multi state investigation, which then what you're dealing with is in multiple investigations that may address the same behavior, but different kinds of liability, different different kinds of contact conduct impediments in the States, so it can get a little bit confusing in that regard, but I think they do like to work together. And again that was from that was a courtroom. idea. Mulvaney kept that going and I don't see cragar 16:12 backing away from that. 16:15 Bianca and Michael one point to note here we're talking about state aid Geez. There is a an opportunity or potential for those Attorney General's to politicize the environment and engage in what we call one upsmanship. where, you know, if they're trying to make yourself first of all a name and get to the governor's or some other higher political office, oftentimes the Attorney General platform is that is that launching it so to speak. So in you put the put that in the fuel environment of consumer protection, the opportunity for the California he cannot do it all the way out to the New York 17:01 So, you know, that's the sort of thing to be on the lookout 17:06 for the old saying is that everybody knows what he means it means almost. 17:15 So what are some recent examples of regulators stepping onto their data security provisions? 17:23 Well, here in the state of California, 17:27 we were about to they're about to launch the California consumer Privacy Act. And if we didn't have no acronyms, that's gonna be known as the ccpa. And that's going to regulate PII, which is 17:45 so if you want to put down for acronyms today, it would be ccpa PII FYI ASAP 17:56 this is happening. 80 to 90% of the regular As the place was passed earlier, in terms of the major contours of the regulation, but I just want to quickly walk through the 50,000 foot level of what we're talking about. it pertains to California permanent residence. And maybe by show of hands here in today's audience, how many of you are here represented for profit entities that raise your hand? for profit entities, most of them most of them are raise, right? Everybody's a nonprofit. Well, okay. Now, how many of those are the other hands up? Are you generating more than $25 million of gross revenues? It's called fair number. Okay, well, the ccpa is gonna apply to you. Also, if you receive or share information with over 50,000 California residents annually that will be a trigger point, or as you drive 50% or more of your revenue from selling or processing information from California roses and so it's geared to the to the larger businesses. It's not going to touch the the mom and pop shops. So we're talking about for profit entities that are collecting and processing personally identifiable information PII. And what are some examples of PII? Well, the classic ones are social security numbers, driver's license, email address, credit card numbers, purchases, trees, other types of protocols that may be on your mobile devices. And the type of activities that they will be regulating will be opt out notices, access to PII, our nature and our that information. The restrictions on processing and the ability of consumers to identify who may have access to your PII and you know, there's going to have this This statute is going to have some teeth to it. There are a couple yet with fines for private action of 100 to $750 with a damages 2500 in state regulatory penalties for unintentional violations and 7500 for intentional violation. So it does get on board January 1 of 2020. And we would urge you, if you if you qualify for regulations under the CCP that you, you actually get started now, and don't wait until January in the enforcement will kick in into July 1 of 2020. But this is not something that you can wait to the 11th. But this is this statute is probably the first of a wave of other data privacy, state statutes that will come into play. As we heard from some of the panels yesterday. I think it's anticipated that we will not see A federal statute totally at the end of 2020, or maybe 2021. So the states will be reading the charter. 21:09 There's there's one piece of good news with the ccpa. Not that anything about it is good news. But there is a carve out for information that's governed by the gramm Leach bliley act. So that governs any PPI, nonpublic personal information. So, the place where you can trip up on this is that the the carve out is for the information that's covered by GLP. So, to the extent that you're collecting other information that's not TLB related information. You have to kind of parse which information is covered which information 21:56 that doesn't lead to a question I wanted to ask. But before get to that there is an audience question here as part of the ccpa. is the definition of PII being changed or expanded? 22:11 I think it's, it's, I think neither I think it's probably the same as nonpublic personal information. There may be some other, you know, characteristics, but 22:21 we're waiting for regulations to come out. And that 22:27 is supposed to clarify things will probably just make it much easier. But, you know, that's that's a challenge when you're trying to manage a compliance program about how do we comply with this law where they haven't written the regulations yet to tell you, you know, explain what it is that we need to do. So it will be a work in progress for quite a while. The one place where I think that this is going to have a huge effect, and probably pretty quickly, because I think your dealers are going to be the ones on the front lines of the plan of spar attack. Because dealers are notoriously loose with how they manage their information and not terribly sophisticated in in managing to parse information information in terms of, you know, what's covered what's not covered and and that sort of thing. And plus they rely on that information and moving that information around to multiple places to make their their business work. In that 23:35 regard, likely the dealers could be viewed as the first line of offense, as opposed to the first one. Don't be the first most potentially get problems. 23:48 Right. So from a best practices perspective, I know that some of these regulations haven't been implemented yet. We're still waiting to see what the details actually look like. But what There are some best practices that lenders can start implementing now into their institutions. So that when they are in when they are live, you know, they're ready. 24:11 This is a place where I think, you know, having good compliance is very, very important. But part of that is understanding how data moves within and without your organization. One of the things that I never cease to be amazed by in doing exam prep for clients, is whenever asked the question of show me a map of how you were your data moves, you know, some people have taken a crack at it. Some people have done what they thought was a very good job of it. And when you start asking about do you do this, do you do this? Do you do this? We didn't think of that. You really have to get down in the weeds I think and think about how And moves both within your organization and without your organization and then understand the law well enough to be able to apply controls to the information movement. In order to manage that, that's going to be a heavy lift, and it's not going to be easy. And like I said before the statutes going to be a work in progress. Compliance is going to be a work in progress, I think for a long time. 25:28 Absolutely. It to amplify your point there with respect to best practices in the auto finance arena. On goods starting point would be, even though we're talking about real estate issues, the CFPB published in 2015, the exam module for auto finance so that that provides a fairly detailed checklist of the types of questions and issues in the CFA CFA exam we'll be looking at with incentive money. organization. And we have seen from our experience that some of the states are tracking those, you know, not surprising because they're looking at the same type of issues. 26:12 Right. Michael, I have a question for you. What are some of the commonly missed areas that make lenders say, Oh, I didn't think of that. 26:28 So oftentimes, lenders who run, for example, run pre screen programs, 26:39 from offers of credit programs, will use third parties to do some of those activities. They use agents to do some of those activities. And sometimes they'll do those in concert if it's a captive or they'll do it in concert with a manufacturer. There's a lot of information moving around through a lot At different parties, and those sorts of situations, and invariably, people aren't clear necessarily with how that information moves. And that process, it may be in the hands of four or five different users of the information at any given time. But that's, that's one of the places and it's not necessarily that you can't do that it's just a thing. It says it's just a question of understanding how your information travels and how it moves both within and without the organization, 27:33 another area of concern, or a soft point for compliance with the third party vendor management. And this has come to the forefront in a number of cases. But you know, everyone here their organization needs to understand that you decide to outsource servicing activities. You're not exonerated from liability, that you are still alive and based on your choices that service provider. So you do clearly have an affirmative duty to lie To turn that service provider to engage in extensive due diligence, you should have very robust policies that, you know, the third party servicer should meet before they bring them on board. And you will also have to once they're onboard, you have to take a look at what they're doing. And also if they decide to some sort of tertiary level that's concerned. 28:26 Switching gears here to the latest ag enforcement actions, what are some growth areas you've seen, that have come under heightened scrutiny that lenders should be aware of? 28:38 Well, there have been a few important state actions recently. I'm not sure if there is a trend just yet. But some of the things that have come up or you know, things that we've been talking about for years, can I, the other lawyers in the room that you don't always think about and that's For example, when something is when something is a finance charge for truth or money purposes, but not a finance charge, I'm sorry for truth and lending purposes, but is a finance charge for, say usury purposes. So one company entered into a settlement Massachusetts recently where there was no problem with the Truth in Lending disclosure of the gap product and it wasn't included in the finance charge. But they were far enough up close to the maximum rate allowable in Massachusetts, that when you added the gap costs to the finance charge for usury purposes, you exceed you ended up exceeding the maximum finance charge. So it is important to understand that there's a difference between terms of money disclosures, and state usury disclosures and what goes into one's two doesn't necessarily match what goes into the other stuff. So your LMS systems need to be a And particularly if you're working near the top of the range of maximum finance charge, your computer systems need to be able to run the calculation with the products that are excluded from the finance charge for truth and lending purposes in the finance charge for non trivial lending purposes. seen a lot of FCRA 30:29 servicemembers civil Relief Act 30:32 illegal, illegal or 30:34 impermissible repossession, they possess a vehicle without a court order. 30:41 There's a fair number 30:43 of 30:46 things going on around 30:53 the, the how you calculate the refund amount when a lease is terminated early. Those are Not it's not state. But the other things are dealing with primarily things that you would think about as kinds of problems and underwriting 31:14 improper loan servicing 31:21 failure to provide a fair call of the law, Connecticut, put one out recently against a large lender where the alleged mistake was basically not calculating the deficiency amount correctly. And there's a special way to do it in Connecticut law, and not providing the notices that are required under Connecticut law. those are those are avoidable mistakes. And so one of the first things that we tell our clients is, you know, evaluate where your risks are, and don't get tripped up on the ones that are where there's a clear roadmap about how to How do they size, there's another 32:01 area of emerging liability coming out of massive Massachusetts and Delaware. And this is happened recently in April 2019. Exit or finance which is about major sub finance institution entered into settlements with the Attorney General's of Delaware and Massachusetts for making subprime. extending credit to subprime retail solid motor vehicle retail installment sale markets where they did not have a basis to believe that the borrower be able to repay their obligations of the contract. And so this is a new theory that, you know, could could get lacks, we've only seen it in the subprime area. It deals with the ability to repay the focus here would be on you know, were these creditor or this particular creditor that they today realistically about Wait, the income report the credit application. And, and obviously in this case, Massachusetts and Delaware felt that they did not. And the appellees were pretty severe there was 5.5 million to remediation in Massachusetts, and 500,000 in Delaware. So this is somebody that Be on the lookout at the Attorney General's because they have this issue of unfair trade practices and deceptive trade practices. You think of a painter. They're painting with a very broad brush, they're not just touching upon the corners, they're taking a white brush and saying, Alright, we're going to create this new theory of liability. We're going to paint with a broad variety. And we're going to serve notice to the subprime markets, at least for the time being that you do have to take a look at your underwriting standards in 33:51 these cases, you know, put put have some lines. 33:53 And the interesting thing about that particular case as Massachusetts is our sort of tea dump on that one. The Delaware consent order was public, the Massachusetts consent order was not, which I find to be something very interesting as to why that wasn't all we have out of Massachusetts as a press release. Yeah, you're 34:13 gonna have to ask those to the board. Yeah. 34:17 She has a plan. 34:19 One of the thing about Connecticut and Bianca Michael, that is, Connecticut last year came out with this highly unusual requirement for reporting information on the race and ethnicity of individuals in the retailer's local context. And this is in similar shockwaves to the industry because the whole finance space is very different for the mortgage space. And on its face, we believe, if my client were involved with talking with the Connecticut banking department directly, because they said they're going to come out with regulations and then when we pointed out through industry groups and individuals Questions that, hey, by the way, guys, you know that your laws are front directly counter to UCLA that UCLA prohibits. It's a federal level, from you asking about this information. So they went back to the drawing board, and they actually came up with a request to the CFPB saying, could you guys take a look at this? Let us know, if our proposed we're gonna suspend the regulation right now will require the supervision of auto finance lenders. And as as we sit here today, I think the CFPB is still under consideration. I'm not sure how that's gonna play out. 35:35 It's under consideration, which means it's not a priority. 35:40 We ask the question that's that's a bizarre example. And I think it's just a question of maybe the Connecticut legislature got kind of 35:48 outside of their bounds was that in the way that one came about was a little unusual that was 35:55 it was supposed to be a technical amendment without debate was the kind of amendment that she fixed punctuation and that sort of thing and a bill. And a representative, who was the chairman of the banking committee, house banking committee in Connecticut, added the senate at the very last minute on the last day of the session. And it just passed, nobody really knew it was there. And then he was since elected to the Senate, and he has no seniority in the Senate. So we can't make anything happen there. But the banking department in Connecticut, did not ask for this does not understand where it came from, or why it was a priority. And really just didn't want to touch it at all. So that's why they punted it to the CFPB and said, Tell us what you think and we're willing to wait for as long as it takes. 36:57 About questions from the audience here. Regards to Exeter. What other lenders do to ensure they are meeting the requirements that Exeter didn't when deciding their borrower's ability to repay? 37:11 I think it starts with looking at the interest income of the applicant, taking a look at a number of criteria within that framework, in terms of you know, is the income sufficient for the loan amount request or the amount financed requested, as as income establishes is regular. And the bottom line is we're looking at a, you know, a three to six year term, you know, what's the probability that that, you know, will continue to support that obligation? So, you know, I think it just requires more than just, you know, saying Alright, this person's making X amount and just ignore any other issues that potentially would be red flags to show that while the simple might may not be steady, may not be regular or could be jeopardizing 38:02 One of the things and again, like I said, the Massachusetts consent orders not available, and it would be very helpful to see that. But the allegations included, originally, that they were originating some prime AUTO CREDIT with high default rates, poor underwriting standards, and that they knew that dealers were making misrepresentations. But there's no factual data behind any of that, that would give us the kind of insight like to have to be able to advise our clients in terms of what to do right now, what they're effectively saying is subprime credit bad. You know, don't do that. Or that it's an unfair practice. 38:55 That's a fair assessment. We haven't seen that theory applied to the prime or even near prime markets. 38:59 To exactly right. 39:03 So which deceptive practices are these agencies focused on? And how might that differ from the CFPB? s focus? 39:12 Well, I think in many cases, they're somewhat aligned. And probably one of the more high profile examples is the processing of ancillary product refunds. There was a very interesting response from 39:26 Dave David English in English yesterday from the CFPB. 39:29 When the question was posed with respect to refunds of ancillary products. Does the CFPB view this as a disclosure issue or do they view this as a make sure that consumers whole issue and he clearly responded that lenders need to make sure that the consumer is taken care of and I don't know if that's a you know that. That's that was his role statement yesterday. I'm not sure that we can necessarily attribute that To official policy, but I think many lenders if you have to finance companies, as we speak, are really reviewing very thoroughly. It should be their procedures at the state level to determine do that, you know, is it appropriate to only worry about the states, or the lender has the obligation to provide the refund in a prepayment or total loss or repossession context? Or should you take the across the board approach where regardless of what state law may dictate that it would be a best practice, but not a legal obligation, it best practice to undertake that process and say that we're going to control it. We're not going to allow the dealers to screw up. We're not gonna allow our third party services to make mistake. We're going to control and own that issue 40:58 with a caveat that I think Damien's a great guy and and knows pretty much what he's talking about. I thought his response was a little Cavalier. Because it didn't take into account the fact that it's it's difficult where the lender has no privity of contract with the absolute with the product provider to go and demand a refund or try to try to obtain a refund, 41:24 then that would be in the case of what do I call the vehicle specific ancillary products where like the cab is a retail specific or contract. 41:33 modification. It's a modification. Yep. So you're modifying 41:36 the underlying retail stall and sale versus a warranty where it's runs with the vehicle. So the contract is terminated early to Michael's point that you don't have the appropriate contract or not amending the retail installment obligation. Now, one thing I should throw out here in the course of our review of this issue, and having talked to get some feedback from some of the OCC 42:00 examiners, they have raised this issue. But 42:06 again, I think it's more than the nature the size of the OCC side of a best practice. And they understand that, you know, if a lender doesn't have a legal obligation to provide the refund or to cause a refund to be made that, you know, they may not have the ability to say to mandate and create basically, new funding law. 42:30 questions from the audience here have either been seen or experienced any regulatory concerns or models built leveraging machine learning or the incorporation of AI into business models? 42:45 So that's a great question. I think it's a little bit premature on the regulatory side. 42:54 I know that 42:57 it is. Those of us work in this area is definitely a concern because particularly machine learning side because I've actually, I've actually seen a model operate to an underwriting model operated in a machine learning environment that actually ended up using illegal redlining type of criteria to to make crediting decisions without earning. It was interesting. So that that is not obviously if people were seeing that saw that as a problem. I'm not sure we're at the point yet where we need we even know how to regulate it. You know, 43:50 and, again, underlying the, you know, regardless of what technology may choose to use it you still have to make sure that they Technology is built in the same framework to comply with federal and state laws. Then you can't have this situation where you have this machine model the AI, doing these wonderful, sophisticated and efficient things, but ignoring fundamental principles such as run lightning or ease ceiling compliance. So whatever parameters are those the technologies built, they have to be built with those issues in mind. Yeah, and one of the things to think about 44:29 giving lawyers you know, opportunity, yeah. But think about HUDs lawsuit against Facebook, about their how their advertising algorithms were targeting, or not targeting consumers on improper basis for for loans. And that was a completely out algorithmic kind of approach to targeted advertising, where you wouldn't necessarily think right away and certainly Facebook isn't in the credit business? Isn't thinking, fair lending? They're thinking about who are the right people to target for the advertisement who are going to get loans? Right. So that's what also with with how does it go. But I can say the more that we get into machine learning, the more we're going to have issues with that sort of thing. 45:23 Right. Okay. And we have one last question here from the audience. What is the likelihood of the CFPB moving to five person panel like other agencies, versus what is in place now? 45:39 If I had to answer that today, which I am, I would say slim to none. 45:46 You know, you think the democrats would think that a five person politically balanced panel would be the best thing since sliced bread. But you know, Everybody likes paid back. And that's that's where we are right now the democrats think right now that they're going to win the next election, which will put them in the position of having a democrat president, appoint the next director when Kathy kraninger his term is up. I'm not so confident that that's a slam dunk. No. 46:24 And I think current case law trends are kind of riding against that in terms of the constitutionality of having a, you know, individual director. So there are political issues, there potentially are judicial issues, and there's also which way the wind is blowing. 46:43 And that last one is the most important one. 46:46 Well, thank you so much for giving us a run down and say regulatory focus. We have a break coming up, but don't go anywhere after that because we have an amazing presentation by Hyundai castle, America. cybersecurity and as you just heard, it's gonna be a hot topic. So make sure you stick around. Thank you so much. </div> [/toggle]
