The Consumer Financial Protection Bureau (CFPB) yesterday sued Military Credit Services, LLC (MCS) for making loans with improper disclosures, according to a press release. This is the CFPB’s second enforcement action against MCS. In 2014, the CFPB, along with the states of North Carolina and Virginia, sued the company for similar violations, and the company was ordered to revise its contract disclosures in 2015. In yesterday’s action, the CFPB ordered the company to ensure that its contracts comply with the law. It also required the company to hire an independent consultant to review its practices and to pay a $200,000 civil penalty.
Three reverse mortgage companies were collectively fined $790,000 by the Consumer Financial Protection Bureau (CFPB) for using deceptive advertising that claimed consumers could not lose their homes, USA Today reported today. American Advisors Group, Reverse Mortgage Solutions and Aegean Financial reached consent agreements with the CFPB after the regulator's investigation found they used ads whose scripts featured similarly misleading though reassuring claims. Consumers with reverse mortgages can "live in your home for the rest of your life" "stay in your home forever" and "never ever be forced from your home,” according to the ads. Reverse Mortgage Solutions based in Houston and licensed in 48 states, said it was pleased with the settlement and "will continue to focus our efforts on improving our procedures for the future." American Advisors Group, licensed in 49 states and the District of Columbia, said in a formal statement that it takes its regulatory responsibilities seriously and has made a significant investment in its compliance and legal infrastructure to conform to all marketing laws and rules. Along with paying the financial penalties, the companies are required to make clear and prominent disclosures in their reverse mortgage ads and use internal oversight systems to ensure they are obeying all laws.
The Consumer Financial Protection Bureau on Friday requested that a federal court hear arguments again in a case that called into question whether the independent agency’s governance structure is constitutional, MorningConsult.com reported. The CFPB’s petition seeks the reconsideration of an October ruling from the U.S. Court of Appeals for the District of Columbia Circuit that gave the president the ability to fire the CFPB’s director. The majority opinion in PHH v. CFPB, written by Judge Brett Kavanaugh, said the agency would be better served by a regulatory commission structure, a major victory for conservative critics of the CFPB who say its single-director structure makes it unaccountable and subject to overstepping its authority. That ruling, the CFPB argued in Friday’s petition, would impact the five-year-old agency and could hurt operations at other single-director agencies like the Social Security Administration and Federal Housing Finance Agency.
House Financial Services Committee Chairman Jeb Hensarling said he’s willing to tweak his plan to overhaul the Dodd-Frank Act before reintroducing it to Congress early next year, Bloomberg News reported yesterday. The committee is “interested in working on a 2.0 version,” Hensarling said. “Advice and counsel is welcome.” The Texas Republican’s comments come amid speculation that his Choice Act could serve as a blueprint for how Donald Trump overhauls financial reforms enacted after the 2008 economic crisis. During the event, Hensarling said that the committee has been in “fairly constant dialogue” with Trump’s transition team about his legislation, but it hasn’t been explicitly endorsed by the president-elect. Last week Trump’s transition team reiterated the campaign promise to scrap Dodd-Frank. A financial policy team is working on crafting measures that would dismantle the 2010 law and replace it with new policies that encourage economic growth and job creation, according to a statement on the transition team’s website. Read more.
In related news, key Democrats on the Senate Banking Committee said this week they are willing to work with the incoming Trump administration and the Republican Congress on potential changes to the 2010 Dodd-Frank Act, but only to a small extent, MorningConsult.com reported today. Ohio Sen. Sherrod Brown, the panel’s ranking member, and Sen. Jon Tester of Montana said they would be OK with discussing scaled-back regulations on community banks, for example. “If he’s talking about giving some reg relief to those community banks, I’ll work with him,” Tester said. “If he’s talking about giving reg relief to Wall Street, then we’ve got a problem because, frankly, that’s where the risk of a financial meltdown comes from.” Read more.
Republican lawmakers and business groups are crafting plans to rein in the federal government’s consumer-finance watchdog in the wake of Donald Trump’s presidential victory, the Wall Street Journal reported today. The trade group for credit unions has demanded that the Consumer Financial Protection Bureau immediately “cease its pending rulemaking” affecting its members, seeking to give the new administration a chance to cast a more skeptical eye on the proposals than the current Democratic White House would provide. The agency has “stifled” the industry’s ability to serve its customers, Jim Nussle, head of the Credit Union National Association, said on Friday. Industry experts say that it could be a year or so until a significant structural change could be made to the CFPB. That is in part due to a pending court case in which a panel of federal judges in October ruled the bureau’s single-director unconstitutional and ordered a new structure giving the president the power to dismiss the director at will. CFPB Director Richard Corday’s term runs until 2018. Under current law, Trump couldn’t force him out without cause.
Republicans — as well as many lobbyists — have long vilified the controversial Consumer Financial Protection Bureau for having scant accountability and writing rules that harm banks and when the party controls both the U.S. Congress and White House, they’re finally in a position to do something about it, Bloomberg reported today. President-elect Donald Trump could sign legislation that would put the agency under Congress’s thumb. Lawmakers could also overturn specific CFPB regulations, including one loathed by the industry that made it easier for consumers to sue their banks. Most importantly, Republicans are poised to get the chance to replace Richard Cordray. His term is up in 2018, but Trump might be able to replace him even sooner if a recent court ruling is upheld that gave the president more leeway to oust the agency’s director. Trump would be expected to replace Cordray with someone far less interested in pursuing tough oversight. Regardless, Sen. Elizabeth Warren and other progressive Democrats will be on the defensive. There are procedural ways for senators to try to block legislation, and Warren has already said she would protest any changes Trump seeks to make to the agency she helped create.
Regulations on payday lending will be on the ballot in South Dakota next week, providing an opportunity for critics of the industry to advance their agenda even as the federal government readies new nationwide rules, the <em>Washington Examiner</em> reported today. South Dakota voters will be asked if they want to cap interest rates on short-term loans at 36 percent, a rule that advocates believe would eliminate payday loans that trap borrowers in a cycle of debt. Annual percentage rates on such loans in the state currently can go over 500 percent. That provision would go beyond the regulations that the federal Consumer Financial Protection Bureau is set to impose. The bureau is not allowed to directly cap interest rates. The industry, however, is fighting back in South Dakota with another ballot measure that would amend the state constitution to impose an 18 percent cap on short-term loans but would not apply to loans set in writing, meaning that all existing payday loans would be exempted.
The Consumer Financial Protection Bureau (CFPB) on Monday urged a federal appeals court to let the agency revive an investigation into an accreditor of for-profit colleges after a trial judge scuttled the probe and scolded the agency for straying outside its jurisdiction, the National Law Journal reported yesterday. U.S. District Judge Richard Leon in April said that the CFPB lacked authority to investigate the college accreditation process, striking down an administrative subpoena the agency issued to the Accrediting Council for Independent Colleges and Schools. Leon said that the CFPB chose to “plow [headlong] into fields not clearly ceded to them by Congress.” The decision was a setback for the CFPB and more broadly gave ammunition to the U.S. Chamber of Commerce and businesses that are working to restrict the investigative scope of the agency. The CFPB said in its opening brief on Monday in the U.S. Court of Appeals for the D.C. Circuit that Leon wrongly spiked the investigation of the college accreditor.
A lawsuit in North Dakota federal district court could provide an early test of the reach of a federal appeals court decision that confronted what the judges called the “massive, unchecked power” of the Consumer Financial Protection Bureau, the National Law Journal reported today. In June, the CFPB sued payment processor Intercept Corp., alleging that the company and two of its executives allowed clients to make unauthorized and illegal withdrawals from consumers’ accounts. The CFPB’s complaint in U.S. District Court for North Dakota alleged that Intercept ignored red flags — such as warnings from banks and complaints from consumers — and “knew or consciously avoided knowing that many of the transactions initiated by those companies were fraudulent or illegal.” Lawyers for Intercept seized on a Washington federal appeals court ruling last week that struck down as unconstitutional the structure of the CFPB. A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit ruled that too much power was vested in the CFPB’s director, Richard Cordray, whom Judge Brett Kavanaugh described as “the single most powerful official in the entire U.S. government, other than the president.” The D.C. Circuit decision wiped out a $109 million fine against the mortgage loan provider PHH Corp. and cost Cordray some measure of job security. The appeals court said the president could remove the agency’s director at will rather than only “for cause.” The appeals panel expressly declined to address whether its ruling would affect earlier CFPB enforcement actions. The court sent the PHH case back to the agency for further review. Intercept’s defense team alerted the North Dakota court to the D.C. Circuit action in the hope the local judge finds it persuasive and dismisses the CFPB’s case. The ruling in Washington does not dictate the outcome in North Dakota.
A federal court’s decision last week to make the director of the Consumer Financial Protection Bureau report to the president sounded alarm bells in Washington, D.C.’s business and legal community, MorningConsult.com reported yesterday. Financial professionals say that the decision will likely have two major effects on CFPB operations: First, the agency’s prioritization of rules and enforcement actions could change because they fear a court’s reprisal. Second, the next president could opt to terminate the current director, Richard Cordray. A panel of three judges on the U.S. Court of Appeals for the District of Columbia circuit ruled in PHH Corp. vs. CFPB that the 2010 Dodd-Frank Act crafted the director’s position in a manner that consolidated too much power at the top. Judge Brett Kavanaugh, who authored the majority opinion, argued that the CFPB’s director has more power than virtually any other government official, save the president. To remedy this, Kavanaugh ruled that the director must report to the president. The agency’s Republican opponents viewed the ruling as a victory for their efforts to overhaul the CFPB, and Democrats largely brushed off the decision as a minor setback.
