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Compliance

CFPB in 2017

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

In January of this year, President Trump issued an Executive Order which required agencies like the Consumer Financial Protection Bureau (CFPB) to re-address how they issue new regulations. The order required agencies to eliminate two regulations each time they issue a new one. Because of this, we saw very little activity coming out of the bureau on issuing new regulations.

In addition, criticism of the CFPB reached a tipping point, forcing politicians to take a hard look at the powers granted the bureau. A good example of this is the Arbitration Rule that the CFPB tried to force through Congress in the third quarter. While the rule initially passed Congress, it was nullified by President Trump in November.

The latest news surrounding the bureau focuses on the change of leadership, as Richard Cordray stepped down from the position of Director. With the CFPB embroiled in internal politics, we can expect another year of limited activity. However, it is no longer a fiscally sound or viable idea to return to the auto lending practices of yesterday.

Regardless of any legislative changes, compliance will continue to be in the spotlight in the coming years. Whether or not the CFPB functions under more strict parameters, we can expect a heightened level of oversight from the Department of Justice, the Federal Trade Commission, and consumer advocacy groups.

For this reason, it’s important that you foster a collaborative compliance platform for your dealer partners. Ask yourself:

When discussing compliance with a dealer, do I ask about their compliance goals and best practices? Or, is the discussion more of a lecture on how I expect dealers to comply with my compliance goals?

The path forward in compliance is by cultivating a dialogue with dealers on how to work together towards shared compliance goals.

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Business Growth Compliance Featured

Staying Ahead of the CFPB Arbitration Rule

Mark Rappaport President Simplicity Division EFG Companies
Contributing Author:
Mark Rappaport
President
Simplicity Division
EFG Companies

When the CFPB was created, the Dodd-Frank law gave the CFPB authority to study mandatory, predispute arbitration agreements. Before the CFPB could do anything, they needed to conduct this study, report to Congress, and then propose whatever rule they deemed in the consumer’s best interest.

Last summer, the CFPB proposed a rule that would limit finance companies’ ability to use mandatory predispute arbitration agreements. Under the proposed rule, consumers would not be prohibited from participating in a class-action law suit. The CFPB also put a provision in the proposed rule that would require companies to report individual arbitration awards to the CFPB.

On July 10, 2017, the Consumer Financial Protection Bureau announced its final version of the rule on arbitration. The final rule has almost all of the exact same provisions as the proposed version from last summer.  The rule specifically states that while finance companies may use arbitration agreements, they are prohibited from preventing consumers from engaging in a class action law suit.

This week, the U.S. House of Representatives voted 231 – 190 to revoke the rule, using authority under the Congressional Review Act. A similar resolution is on tap to be debated in the Senate in the coming weeks.

While the rule is currently under debate, lenders everywhere await very eagerly for the final outcome. In the auto finance industry, the rule could put both dealers and lenders at a greater risk for class-action law suits.

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Compliance

CFPB Upheaval

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 defending itself. In the process of appealing the ruling from the U.S. Court of Appeals for the District of Columbia calling the CFPB “unconstitutionally structured,” the Department of Justice (DOJ) and 15 state Attorneys General joined the fray of government entities agreeing with the initial ruling.

The DOJ told the D.C. Circuit Court 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. Just recently, the American Financial Services Association (AFSA) has joined the call to curb CFPB authority when they submitted a list of suggested regulatory reforms to the Trump administration. At the top of their list, was, of course, a halt to CFPB examinations and a moratorium on the use of disparate impact theory.

Lastly, in the case of Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., the Supreme Court ruled that Congress specifically intended to include disparate impact claims in the Fair Housing Act, but required plaintiffs to prove that a defendant’s policies could cause disparity. This ruling has significant implications for the CFPB in terms of how it determines disparate impact in auto finance.

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