Along with other federal and state regulators, supervisory, regulatory, and enforcement attorneys from the Consumer Financial Protection Bureau spoke at the Practising Law Institute’s "22nd Annual Consumer Financial Services Institute" in Chicago. The PLI conference, which took place on May 4 and 5, not only surveyed developments and prominent issues in the consumer financial services field during the past year, the program also focused on the anticipated actions of the CFPB and the other federal and state regulators in the coming year.
During "The CFPB Speaks" portion of the PLI program, the CFPB attorneys fielded questions posed by moderator and Co-Chair Alan Kaplinsky (Ballard Spahr LLP, Philadelphia).
CFPB supervision. In response to Kaplinsky’s query about how the CFPB supervisory branch determines whether to submit a matter to its enforcement branch, Peggy Twohig, Assistant Director for Supervision Policy at the CFPB, emphasized that the number as well as the magnitude of problems cited during supervisory reviews certainly increases the likelihood of a referral to the CFPB’s enforcement branch. Twohig recommended that the industry consult the CFPB’s periodic "Supervisory Highlights" issuances for guidance in this area.
CFPB regulation. Kaplinsky asked Kelly Cochran, Assistant Director for Regulations at the CFPB, about what new regulatory undertakings might be in store for the CFPB in the coming year. Cochran noted that the CFPB’s first order of business has been to complete the Dodd-Frank mandates and directives. At the same time, in connection with the CFPB’s defining "larger participants" of certain consumer financial product and service markets, Cochran pointed to small-dollar lending and vehicle-title lending as the next area for the CFPB to explore. She indicated that the CFPB has not yet set a timeline for this.
On the topic of potential regulatory activity by the CFPB, panelists Christopher Willis (Ballard Spahr LLP, Atlanta) and Eric Mogilnicki (Covington and Burling LLP, Washington, D.C.) both noted the difficulty of prognosticating in this area, especially with the Congressional Review Act lurking in the background. Still, Willis was more inclined to view the regulatory front as one in which the CFPB likely would be cautious and reluctant to "poke the sleeping bear" in the room, given the current political climate. While Mogilnicki did not disagree, he also thought it couldn’t be ruled out that the CFPB might take a more aggressive regulatory approach—to get as much rulemaking "out the door" before the CFPB’s director or structure might be subject to change, given the current political climate.
CFPB enforcement. Kaplinsky noted the industry’s need for a clarification of the CFPB’s interpretation of the "abusive" prong of "unfair, deceptive, or abusive acts or practices" (UDAAP).
In response, Kristen Donoghue, the CFPB’s Principal Deputy for Enforcement, first underscored the statutory language of the Dodd-Frank provision. Next, she stressed that, in addition to the many precedents derived from past Federal Trade Commission litigation on the "unfairness" and "deceptive" prongs of UDAAP, the CFPB itself was developing case law on the "abusive" prong. Four key trial court rulings on a motion to dismiss in U.S. district courts in California, New York, Indiana, and Illinois have provided further guidance in this area, Donaghue stated. Moreover, Cochran seemed to imply that because the "abusive" prong of UDAAP is very "fact sensitive," the CFPB would not be contemplating any rulemaking on UDAAP at the present time.
Mogilnicki commented that while the CFPB’s developing case law on the "abusive" prong might provide a little bit of help, the financial services industry is primarily interested in knowing how to comply presently; further illumination of UDAAP is still needed.
Federal, state regulators. During the "Federal Regulators Speak: Priorities and Coordination" segment of the PLI program, Kenneth Lennon, Director of the Community and Consumer Law Division of the Office of the Comptroller of the Currency, noted a trend for many financial institutions in the automobile financing marketplace: although portfolios for auto lending generally have increased, the quality of these loans has declined.
Along these lines, Quyen Truong (Stroock & Stroock & Lavan, Washington, D.C.) who formerly worked at the CFPB, remarked that auto lending, along with fair lending, has increasingly received more attention from federal and state regulators in recent times. In a number of instances, these regulators have coordinated or combined their efforts in this regard, she said.
Similarly, during the "State Regulatory Initiatives and Developments" portion of the conference, Thomas James of the Illinois Attorney General’s Office and Shannon Smith of the Washington Attorney General’s Office indicated that multistate AG efforts and actions have generally increased, and they have worked with the CFPB as well. James also remarked that Illinois has increasingly focused its attention on the subprime auto financing arena.
Other topics covered. Along with Kaplinsky, Julia B. Strickland (Stroock & Stroock & Lavan LLP, Los Angeles), Beth E. Terrell (Terrell Marshall Law Group, Seattle), and Elizabeth Ryan (Bailey & Glasser LLP, Boston) served as Co-Chairs of the conference and moderators of other sessions. These session topics included: (i) fair lending (ii) fair credit reporting; (iii) debt collection issues; (iv) class action developments and settlements; (v) emerging payment systems; and (vi) data security and privacy issues.
Attorneys: Kelly Cochran, Kristen Donoghue, and Peggy Twohig of the Consumer Financial Protection Bureau. Alan S. Kaplinsky and Christopher J. Willis (Ballard Spahr LLP). Elizabeth Ryan (Bailey & Glasser LLP). Julia B. Strickland and Quyen T. Truong (Stroock & Stroock & Lavan LLP). Beth E. Terrell (Terrell Marshall Law Group). Eric J. Mogilnicki (Covington and Burling LLP). Kenneth Lennon, Office of the Comptroller of the Currency. Thomas James, Illinois Attorney General’s Office. Shannon Smith, Washington Attorney General’s Office.
Companies: Practising Law Institute
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