Tag: Consumer Financial Protection Bureau

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Compliance

We’ve Been Down this Path

Contributing Author: Steve Roennau Vice President Compliance EFG Companies
Contributing Author:
Steve Roennau
Vice President
Compliance
EFG Companies

The Consumer Financial Protection Bureau (CFPB) has been in the news a lot lately.

From Acting Director Mick Mulvany’s decommissioning of the Advisory Committee, to a federal district judge ruling its structure is unconstitutional, some might think that the CFPB’s days are numbered.

But history has a lesson to offer, compliments of the Federal Trade Commission (FTC). The FTC was created on September 26, 1914, when President Woodrow Wilson signed the Federal Trade Commission Act into law. The regulatory agency opened its doors in 1915, with a mission to protect consumers and promote competition. The FTC building was finished in 1938, with President Franklin D. Roosevelt stating, “May this permanent home of the Federal Trade Commission stand for all time as a symbol of the purpose of the government to insist on a greater application of the golden rule to conduct the corporation and business enterprises in their relationship to the body politic.”

Currently, the FTC houses three bureaus:

  1. the Bureau of Consumer Protection
  2. the Bureau of Competition
  3. the Bureau of Economics

Each bureau has a set of mandates to guide its work. In the early 1970s, the agency became more aggressive in its prosecutions and sanctions. The business community and Congress criticized the FTC’s activism, claiming it had become too powerful, was insensitive to the needs of the public and business, and operated with little oversight from Congress or the president. During President Ronald Reagan’s first term, control of the FTC was moved under the president. Its direction was modified to become more cooperative with business interests, while continuing its consumer protective functions.

A Matter of Checks and Balances

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Compliance

CFPB Upheaval

Contributing Author: Steve Roennau Vice President Compliance EFG Companies
Contributing Author:
Steve Roennau
Vice President
Compliance
EFG Companies

The Consumer Financial Protection Bureau (CFPB) had a busy first quarter of 2017 defending itself. In Q4 of 2016, the U.S. Court of Appeals for the District of Columbia ruled the CFPB “unconstitutionally structured”. In Q1 of this year, the CFPB began the appeal process and it’s not looking too good for them.

Among those supporting the unconstitutional ruling are:

  • The Department of Justice (DOJ)
  • 15 state Attorneys General
  • American Financial Services Association (AFSA)

The DOJ stated that the ruling should be upheld in its entirety, including the remedy to give President Trump full authority to remove the CFPB’s director at will. In addition, the AFSA submitted a list of other suggested regulatory reforms for the CFPB to the Trump administration.

While the CFPB has been granted a rehearing of the initial case that determined the unconstitutional ruling, the regulatory agency has still had its powers significantly curbed, specifically in the case of Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc.

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Compliance

The Cost of Compliance

Contributing Author: John Stephens Executive Vice President EFG Companies
Contributing Author:
John Stephens
Executive Vice President
EFG Companies

Since July 2010, the Consumer Financial Protection Bureau (CFPB) has made significant waves in the auto finance space. In 2013, they issued their bulletin titled “Indirect Auto Lending and Compliance with the Equal Opportunity Act” stating that they would regulate lenders on unanticipated discriminatory practices. With very little guidance on how to be compliant, lenders and dealers scrambled to revamp their anti-discrimination practices to little avail.

Between 2013 and 2016, the CFPB filed 13 enforcement actions totaling upwards of $165.17 million against auto financiers, such as:

  • Toyota Motor Credit Corporation
  • Fifth Third Bank
  • American Honda Finance Corporation
  • Wells Fargo Bank, N.A.
  • JPMorgan Chase Bank, N.A.
  • DriveTime Automotive Group
  • First Investors Financial Services Group

Beyond the restitution and civil penalties leveraged against lenders, the increased compliance oversight also had direct impact on dealer profit margins, consumer prices, and the national GDP.

According to a 2014 study of the auto finance regulatory environment by the Center for Automotive Research (CAR), regulations pertaining to employment, accounting and vehicle financing made up more than 63 percent of all estimated federal regulatory compliance costs. The administration of vehicle financing alone accounted for 71 percent of all vehicle finance compliance costs and 26 percent of total dealership compliance costs.

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