CFPB

Analysis: CFPB finalizes changes to annual privacy notice

ATLANTA - 

The Consumer Financial Protection Bureau (CFPB) has issued its final rule adopting changes to Regulation P, which governs the requirements for financial institutions to issue privacy notices to its customers.

The final rule implements new timing requirements for sending annual privacy notices pertaining to financial institutions that no longer qualify for the exception and eliminates the “alternative delivery” option for annual privacy notices. The most significant impact of the final rule is the creation of an exception which permits financial institutions to avoid sending annual privacy notices to its customers under certain circumstances.

The final rule will have the biggest impact on financial institutions who do not share nonpublic personal information with unaffiliated third parties. However, with recent amendments to the Gramm Leach Bliley Act (GLBA) and Regulation P regarding privacy notices, all financial institutions should evaluate their current privacy policies and procedures.

The final rule will become effective on Monday.

Creation of annual privacy notice exception

The changes to Regulation P are intended to align the rule with amendments made by Congress to the Gramm Leach Bliley Act (GLBA) in 2015. Under Regulation P, financial institutions are required to send a privacy notice to all customers every 12 months without exception. This includes information such as whether the financial institution shares consumer information with nonaffiliated third parties, how the financial institution protects nonpublic personal information obtained from customers, and whether the customer has the right to opt-out of the sharing of that information.

The final rule now creates an exception to this rule and exempts financial institutions from this requirement if it satisfies two conditions:

1. The financial institution does not share nonpublic personal information with nonaffiliated third parties.

2. The financial institution must not have changed its “policies and procedures with regard to disclosing nonpublic personal information” from the policies and procedures outlined in the most recent privacy notice sent to the consumer.

This exception only applies to annual privacy notices and does not impact current requirements regarding initial privacy notices or amended privacy notices.

Amendment to timing requirements

In addition to creating the annual privacy notice exception, the final rule also adopted new timing requirements for issuing annual privacy notices in the event that a financial institution has made changes to its privacy policies and procedures and no longer qualifies for the exception. The timing requirements are rather nuanced but essentially require a financial institution to issue an annual privacy notice either:

1. Before implementing the changes in the policy or practice which trigger the obligation to send a revised privacy notice

2. Within 100 days after adopting a policy or practice that eliminates the financial institution’s notice exception but the changes did not trigger the obligation to send a revised privacy notice.

Removal of “alternative delivery” method

Finally, as part of its changes to Regulation P, the CFPB eliminated the “alternative delivery” method for annual privacy notices.

Under the “alternative delivery” method, financial institutions were permitted to satisfy the annual privacy notice requirement in certain circumstances by posting a copy of the annual notice on its website. However, the CFPB rationalized that many of the requirements permitting a financial institution to use the “alternative delivery” method were the same as the requirements for a financial institution to qualify for the new annual privacy notice exception and, therefore, the method was now irrelevant.

As regulators continue to amend privacy notice requirements, it is imperative that financial institutions monitor their privacy practices to remain in compliance.

Alexander Koskey, an associate in Baker Donelson’s Atlanta office, represents individuals, businesses and financial institutions on a wide range of regulatory and compliance issues, real estate and commercial matters. He can be reached at [email protected]



CFPB focuses latest supervisory highlights on repo and insurance issues

WASHINGTON, D.C. - 

The Consumer Financial Protection Bureau concentrated the auto-finance portion of its latest supervisory highlights on two of the most complicated matters when someone needs credit to acquire a vehicle — repossession and the application of insurance proceeds.

Before deploying a repossession agent to find and take back a vehicle, the CFPB acknowledged that many finance companies provide options to consumers in an effort to avoid repossession when a contract is delinquent or in default. The bureau also recognized in the summertime update that finance companies may offer formal extension agreements that allow consumer to forbear payments for a certain period of time or may cancel a repossession order once a consumer makes a payment.

But then, problems came to light, at least according to the CFPB’s investigations.

“One or more recent examinations found that servicers repossessed vehicles after the repossession was supposed to be cancelled. In these instances, the servicers incorrectly coded the account as remaining delinquent, or customer service representatives did not timely cancel the repossession order after the consumer’s agreement with the servicers to avoid repossession. The examinations identified this as an unfair practice,” bureau officials said in the supervisory highlights.

"The practice of wrongfully repossessing vehicles causes substantial injury, because it deprives borrowers of the use of their vehicles and potentially leads to additional associated harm, such as lost wages and adverse credit reporting,” officials continued.

“Such injury is not reasonably avoidable when consumers take action they believed would halt the repossession, and there is no additional action the borrower can take to prevent it,” the CFPB went on to say.

The bureau made one more point about the ramifications of errors happening during the repossession process, stating a financial injury is not outweighed by countervailing benefits to the consumer or to competition.

“No benefits to competition are apparent from erroneous repossessions. And the expense to better monitor repossession activity is unlikely to be substantial enough to affect institutional operations or pricing,” the CFPB said.

In response to the examination findings, the bureau indicated finance companies are stopping the practice, reviewing the accounts of consumers affected by a wrongful repossession and removing or remediating all repossession-related fees.

Insurance issues

Before delving into the repossession world, the CFPB recapped what’s happened when it’s investigated finance companies in connection with insurance.

The bureau shared in the supervisory highlights that one or more examinations observed instances in which notes required that insurance proceeds from a total-vehicle loss be applied as a one-time payment to the contract with any remaining balance to be collected according to the consumer’s regular billing schedule.

However, in some instances after consumers experienced a total-vehicle loss, the CFPB said finance companies sent billing statements showing that the insurance proceeds had been applied to the loan payments so that the loan was paid ahead and that the next payment on the remaining balance was due many months or years in the future.

“Servicers then treated consumers who failed to pay by the next month as late, and in some cases also reported the negative information to consumer reporting agencies,” bureau officials said.

“The examination found that servicers engaged in a deceptive practice by sending billing statements indicating that consumers did not need to make a payment until a future date when in fact the consumer needed to make a monthly payment,” they continued. The billing statements contained due dates inconsistent with the note and the servicer’s insurance payment application.

Such information would mislead reasonable consumers to think they did not need to make the next monthly payment. The misrepresentation is material because it likely affected consumers’ conduct with regard to auto loans,” the bureau went on to say.

Had the information been presented differently?

“Consumers would have been more likely to make a monthly payment if they knew that not doing so would result in a late fee, delinquency notice or adverse credit reporting,” the bureau said in its latest compliance update.

In response to examination findings, the CFPB state that finance companies are sending billing statements that accurately reflect the account status of the contract after applying insurance proceeds from a total-vehicle loss.

14 AGs implore CFPB to enforce Equal Credit Opportunity Act

NEW YORK - 

Attorneys general are continuing to implore the Consumer Financial Protection Bureau to be an aggressive regulator.

Through a letter delivered on Wednesday, New York attorney general Barbara Underwood — part of a coalition of 14 AGs — called on the CFPB and acting director Mick Mulvaney to continue protecting the rights of consumers against credit discrimination under the Equal Credit Opportunity Act (ECOA). The attorneys general share authority with the CFPB to enforce regulations regarding the ECOA and lead antidiscrimination efforts in their own states. As such, they are calling on the CFPB to continue enforcing the ECOA, including its provision for disparate impact liability.

The letter was signed by the attorneys general of North Carolina, California, Illinois, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Vermont, Virginia and the District of Columbia.

“The Equal Credit Opportunity Act was enacted because of our country’s sordid history of credit discrimination — and it’s unbelievable that the CFPB is considering refusing to use it to protect consumers,” Underwood said. “As we’ve shown, my office won’t hesitate to uphold the law and protect those we serve, even if the CFPB won’t.”

The ECOA is the principal federal antidiscrimination law for all forms of credit except home mortgage lending. It prohibits creditors from discriminating against consumers on the basis of race, color, religion, national origin, sex, marital status and age.

The ECOA also protects people from discriminatory intent and unconscious prejudices that do not mention race, color, religion, national origin, sex, marital status, or age, but still have a discriminatory effect that prevents equality of opportunity; this is called disparate impact liability.

The state officials added the CFPB is charged with oversight and enforcement of federal laws relevant to nondiscriminatory lending and credit practices, which includes interpreting the ECOA.  

In their letter, the attorneys general say they “will not hesitate to uphold the law if CFPB acts in a manner contrary to law with respect to interpreting ECOA.”

COMMENTARY: Discussion about CFPB’s structure about to get more interesting

MEMPHIS, Tenn. - 

Senior U.S. District Judge for the Southern District of New York Loretta Preska issued an opinion on June 21 that has set the consumer finance world a, sparking discussions of a potential review by the Supreme Court.

In her opinion, Preska, a 1992 George H.W. Bush appointee, ruled that the structure of the Consumer Finance Protection Bureau violates the Constitution’s separation of powers and, as such, terminated the bureau’s status as a party to a lawsuit. She went on to say that she would strike an entire section of the 2010 Dodd-Frank Act relating to the establishment of the CFPB, rather than overhauling it, as other judges have suggested.

The lawsuit, filed by the bureau and the people of the State of New York, alleged that a New Jersey company had defrauded former NFL players suffering from brain injuries and Sept. 11 emergency medical workers anticipating money from large settlements to the tune of millions, thereby violating provisions of the Consumer Financial Protection Act (CFPA). One can’t ask for more sympathetic plaintiffs, right? The defendants moved to dismiss the action on several bases, including the assertion that the CFPB is not structured in compliance with the U.S. Constitution and thus lacks authority to bring claims under the CFPA.

Though Preska denied the crux of defendants’ motion, allowing the claims of the State of New York to stand, she wrote that “because the CFPB’s structure is unconstitutional, it lacks the authority to bring claims under the CFPA and is hereby terminated as a party to this action” (emphasis added). BOOM! She reasoned that the fact that the bureau was set up as a completely independent agency, with a single director who cannot be fired by the president (except for cause), places it squarely outside the confines of constitutional fitness. In the decision, Judge Preska acknowledged the en banc holding of the Court of Appeals for the District of Columbia Circuit in PHH Corp. v. CFPB, 881 F.3d 75 (D.C. Cir. 2018), which reversed a lower court ruling and held that the CFPA statute was indeed constitutionally sound. However, in a statement demonstrating a bit of judicial sass, Preska wrote, “Of course, that decision is not binding on this court.”

Instead, Preska largely adopted the findings of Judge Kavanaugh’s dissent in PHH, asserting that, “based on considerations of history, liberty, and presidential authority, Judge Brett Kavanaugh concluded that the CFPB ‘is unconstitutionally structured because it is an independent agency that exercises substantial executive power and is headed by a single director.’“ She parted ways with Judge Kavanaugh, however, when it came to the overall constitutional health of the CFPA. Kavanaugh asserted that the remedy to the problem was to completely overhaul the CFPA. Preska, conversely, claimed that she “would strike Title X in its entirety,” a step that would require the shuttering of the bureau altogether. She went on to say that the constitutional issues relative to the CFPB’s structure are not cured by President Trump’s appointment of Mick Mulvaney as Interim Director because, as defendants so accurately pointed out, “the relevant portions of the Dodd-Frank Act that render the CFPB’s structure unconstitutional remain intact.” Even the President’s appointment on June 18 of Kathleen Kraninger as director (an action that was not acknowledged in the opinion) doesn’t remedy the problem, as Kraninger’s position is still subject to the unconstitutional “for cause” provision of Dodd-Frank.

Because the court let the claims of the state stand, there is no “final” ruling from which the CFPB can currently appeal. In order to obtain a review of Preska’s decision, the bureau would thus have to obtain leave to appeal … from the very judge who terminated its status as a party to the action. Because of the difference of opinion between Circuits on this issue, however, this is most certainly not the last we’ll hear on the constitutionality of the CFPB’s structure. There are rumors in the consumer financial services community that this issue will end up before the U.S. Supreme Court for a final determination of the CFPB’s constitutionality and perhaps even that of Dodd-Frank Section X, as a whole.

Stay tuned. This is going to get interesting.

Blair Evans, of counsel in Baker Donelson’s Memphis, Tenn., office, is a creditors’ rights, collections and business litigator with experience representing major automotive and commercial equipment creditors, banks, credit unions and nonbank auto finance companies in replevin, government seizure and collection actions in state and federal courts. She can be reached at [email protected]

CFPB establishes Office of Innovation as director nominee faces Senate

WASHINGTON, D.C. - 

Coinciding with Kathleen Kraninger telling the Senate Banking Committee this week how she would oversee the regulator as its new director, the Consumer Financial Protection Bureau outlined the head of a new division — the Office of Innovation.

Acting director Mick Mulvaney announced that he has selected Paul Watkins to run the recently created Office of Innovation, which is designed to focus on encouraging consumer-friendly innovation. Mulvaney stressed that innovation is now a key priority for the bureau as work that was being done under Project Catalyst will be transitioned to this new office.

Mulvaney explained the CFPB intends to fulfill its statutory mandate to promote competition, innovation and consumer access within financial services. To achieve this goal, the new office will focus on creating policies to facilitate innovation, engaging with entrepreneurs and regulators, and reviewing outdated or unnecessary regulations.

“I am delighted that Paul Watkins is bringing his deep expertise, track record of protecting consumers and commitment to innovation to the bureau,” Mulvaney said.

“I am confident that, under his leadership, the Office of Innovation will make significant progress in creating an environment where companies can advance new products and services without being unduly restricted by red tape that belongs in the 20th century,” Mulvaney continued.

Watkins comes to the CFPB from the office of the Arizona attorney general, where he was in charge of the office’s fintech initiatives. He managed the FinTech Regulatory Sandbox, the first state fintech sandbox in the country, which allows a company limited access to the marketplace in exchange for relaxing some regulations.

Watkins was also the chief counsel for the civil litigation division. In that role, he managed the state’s litigation in areas such as consumer fraud, antitrust and civil rights.

Previously, Watkins practiced at Covington & Burling LLP in San Francisco and Simpson and Thacher & Bartlett LLP in Palo Alto, Calif.

FinTech innovation is the focus of the Automotive Intelligence Summit, which begins on Tuesday in Raleigh, N.C. There is still time to register and attend by going to .

Kraninger on Capitol Hill

Roughly a month after she was nominated by President Trump to be the next director of the CFPB, Kathy Kraninger testified in front of the Senate Banking Committee, outlining what she described as four initial priorities should lawmakers confirm her for the post.

If approved by the Senate, Kraninger would be transitioning from leadership positions previously held within the Office of Management and Budget, Department of Transportation and Department of Homeland Security, as well as three separate Congressional committees.

“First, the bureau should be fair and transparent, ensuring its actions empower consumers to make good choices and provide certainty for market participants,” Kraninger began. “In particular, the bureau should make robust use of cost benefit analysis, as required by Congress, to facilitate competition and provide clear rules of the road. In my experience, effective use of notice and comment rulemaking is essential for ensuring the proper balancing of all interests. It also enables consideration of tailoring to reduce the burden of compliance, particularly on consumers and smaller marketplace participants.

“Second, the bureau should work closely with the other financial regulators and the states on supervision and enforcement. Nothing is more destructive to competitive markets and consumer choice than fraudulent behavior,” she continued. “Under my stewardship, the bureau will take aggressive action against bad actors who break the rules by engaging in fraud and other illegal activity.

“Third, the bureau must recognize its profound duty to the American people to protect sensitive information in its possession,” Kraninger added. “Under my leadership, the bureau would limit data collection to what is needed and required under law and ensure that data is protected. This issue clearly needs more attention, particularly because many consumers are unaware of the vulnerabilities or unsure of what actions to take to protect themselves.

“And, fourth, the bureau must be accountable to the American people for its actions, including its expenditure of resources,” she went on to say.

In her opening remarks, Kraninger mentioned that while attending college in her native Ohio, she served an internship for Sen. Sherrod Brown while he was still a member of the House. Brown now is the ranking member of the Senate Banking Committee and highly questions whether Kraninger is fit to lead the CFPB.

“For months, I urged the administration to nominate someone to lead the CFPB who had a track record of working for consumers.  Unfortunately, Ms. Kraninger has no experience whatsoever in consumer protection,” Brown said in his opening remarks during the hearing. “Mr. Mulvaney argues she should be approved because of her management and budget experience.  It is hard to see how that is enough, especially given the nominee’s refusal to provide information requested by committee members.

Every one of us on this side of the dais wanted this hearing postponed until we got information about that experience,” Brown continued. “When the nominee and I met, she said it was out of her hands and would try to get a response. That was over a week ago. Still nothing. What are they hiding?

“Here is what we do know. At the Office of Management and Budget, she signed off on a $1.9 trillion tax break for millionaires. To pay for it, she helped write a budget that would triple the rent for families that are already struggling to get by,” Brown went on to say.

“She has been involved in the management of one disastrous policy after another. … Management is supposed to be Ms. Kraninger’s one qualification,” Brown added. “Nobody wants Mr. Mulvaney out of the CFPB faster than I do. But American consumers can’t afford five years of someone who stands with the bankers in this administration and on Wall Street. We need a CFPB director who will sit with hardworking families at their kitchen tables.”

Another federal judge calls CFPB unconstitutional

CARY, N.C. - 

In a case unrelated to auto finance, a ruling by a New York federal judge released this week found the Consumer Financial Protection Bureau to be unconstitutionally structured; an action that disagreed with the D.C. Circuit Court of Appeals stating to the contrary from earlier this year.

Hudson Cook partner Lucy Morris looked to explain potential ramifications triggered by U.S. District Judge Loretta Preska in a New York case involving a company allegedly scamming first responders injured during the Sept. 11 attacks. Prior to joining Hudson Cook, Morris served as a deputy enforcement director at the CFPB and served as a founding member of the CFPB implementation team that organized the bureau after passage of the Dodd-Frank Act.

In a 108-page document that , Preska described the CFPB as unconstitutional seven different times. Her assessment disagrees with the en banc review by the D.C. Circuit Court of Appeals that surfaced back in January when the majority opinion declared that the CFPB structure can stand.

So how should the industry react to what came out of a Manhattan federal court this week?

“The court’s opinion is long and dense when it comes to the underlying merits, but short and succinct on the constitutional issue — according to the court, the bureau’s structure is unconstitutional, and there’s no way for a court to fix it,” Morris said in an assessment delivered to SubPrime Auto Finance News.

“If the court is correct, then it calls into question not just this single enforcement action, but everything the bureau has done since its inception, whether by (Richard) Cordray or (Mick) Mulvaney,” she continued. “While this is only one federal district court opinion — and contrary to other courts’ rulings on the bureau’s structure — I expect it will create more litigation against the bureau and add more uncertainty for industry and consumers alike.  

“For this reason, the ruling may be the catalyst for Congress to pass legislation making the bureau a bipartisan commission, fixing any constitutional flaw in its current structure,” Morris went on to say.

Having a commission is a move that’s been suggested many times by both the American Bankers Association as well as the Consumer Bankers Association.

ABA president and chief executive officer Rob Nichols said the organization is still reviewing the ruling from the federal district court in New York.

“Other federal courts have ruled differently, so the implications of this decision remain unclear,” Nichols said.

“ABA has long believed that the bureau should be more accountable to Congress and that a five-member, bipartisan commission — as originally envisioned in drafts of the Dodd-Frank Act — would balance the bureau’s needs for independence and accountability, while broadening perspectives on rulemaking and enforcement. Today’s ruling does not alter that view,” Nichols went on to say.

Earlier this month, CBA president and CEO Richard Hunt testified before the U.S. House Financial Institutions and Consumer Credit Subcommittee on ways to improve transparency and accountability at the CFPB.

“Improving the financial lives of consumers is a goal that unites lawmakers, regulators and industry,” Hunt told lawmakers. There are many changes that can be made to enhance the functioning of the bureau and increase access to credit for consumers, but improving the governance structure at the bureau underpins them all. A bipartisan commission at the bureau will depoliticize it, bring long-term stability, and benefit consumers and small businesses.

“When Congress created the bureau, it was granted jurisdiction over more than 11,000 banks and credit unions as well as countless non-depository institutions. All of that power was given to a single director,” he continued. “It also means the next director has the sole authority to undo every one of those actions — like a political pendulum, swinging with each new administration.”

“As Congress contemplates changes to the bureau, any meaningful discussion should start with the bureau’s leadership structure,” he added.

COMMENTARY: Considering all-in-one pricing for repossession services

CHARLOTTE, N.C. - 

During the past 12 to 18 months, there has been a real increase in interest by lenders around the idea of establishing “all-in-one pricing” (AiO) with their repossession forwarders. Most of this interest has been spurred by concerns expressed by the Consumer Financial Protection Bureau regarding ancillary fees as well as a desire by lenders to simplify the invoicing/payment process.

AiO can, indeed, offer benefits in these areas. However, as many lenders have come to understand, it must be approached very carefully and requires fairly deep analytics to gain a clear view of where the pricing should fall.  While many lenders have been examining the strategy, at this point, very few have adopted it as they have come to realize they simply don’t have the data points necessary to gain a solid understanding.

The remainder of this article will examine the key issues surrounding AiO pricing with the aim of giving you a better understanding of the dynamics that come into play.

What Is AiO pricing?

Perhaps the answer is obvious, but we have found that different lenders do have different views. In its purest form, AiO pricing is a single flat fee that covers the cost of the repossession and all ancillary services that might come into play to complete the processes required by the specific case.  This may include:

• Key cutting
• Personal property
• Storage
• Redemption
• Use of flatbeds
• Transportation to auction

It would be great if the full cost of these services could just be added to the cost of every repossession. However, since all, some or none of these services may come into a play on a given case, simply adding the full fee to each obviously would result in an AiO fee that would be ridiculously high.

So, the challenge lies in understanding the utilization factors relating to the various ancillary services possibilities. Unfortunately, the utilization factors can vary tremendously from portfolio to portfolio and, therefore, detailed analytics are required to come up with a fee that makes sense for both your customer and your vendor partner.

Let’s take a look at some of these variables and how they can impact the pricing model.

Key cutting

As we all know, sometimes a key is obtained when a car is recovered and many times one is not. To determine a key cost factor that can be applied to every repossession, you have to make an assumption about what percent of recoveries will require a key. This is data that we are able to track in our proprietary database and I can tell you we see a wide variation, ranging from 2 to 3 percent to as much as 10 percent where keys have been provided.

Another very significant factor is the mix of the types of keys required. Again, it can be very portfolio specific. For instance, we have one large captive lender client that was an early leader in the deployment of proximity keys which are very expensive. The average key cost is off the chart. Conversely, we have title lending clients where exactly the opposite is true. 

The chart below summarizes the impact both can have on the AiO price.

  Captive Lender Title Lender
 Percent of Vehicles Keys Must Be Cut  10%   10%
 Average Key Cost (based on mix)  $235   $144
 AiO Cost Factor  $24  $13

 

Your institutions’ policy regarding keys can also have a major impact. Some lenders want operational keys available on all cars prior to transport. Others only want keys cut if required to access the vehicle for personal property determination.  Several considerations, and we have only covered keys!

Redemption fees

Pricing for the costs related to the redemption of the vehicle by the customer is one of the trickiest aspect of AiO pricing. 

The first hurdle is to understand the average redemption rate on the portfolio. To predict the variable with any confidence/accuracy, one must have at least six (preferably 12) months of history tracking the issue. Not only do redemption rates vary significantly by lender, but they also vary significantly by portfolio within the lender.

For instance, a post charge off skip portfolio will have a much lower redemption rate than a first placement pre-charge off portfolio.

To put the issue in context, we have one lender whose first placement business redeems at a 24-percent rate and another that redeems at a 42-percent rate. Assuming that the agent will be limited to a maximum total fee of $150 per actual redemption, the impact on the AiO rate would be:

AiO Cost Factor
Port A (42%)  Port B (24%)
 $63   $36

 

The other very important component of the redemption related costs is the amount the agents are allowed to charge the lender in redemption situations.  Any redemption has a potential combination of personal property, administrative and storage related cost that the agent does expect to invoice.  Historically, these costs have varied by region and even by agents operating in the same region.  However, for an AiO approach to work, these fees must be standardized across all forwarders/agents. 

The approach to doing so is all over the board. We will leave that for another article.

Personal property — no redemption

In many cases, a car is not redeemed but the customer does want to retrieve personal property. Due to CFPB concerns, most lenders do not want the agent collecting any personal property related fees from the customer. However, it properly accounts for these fees in the AiO model, one must make assumptions on what percent of recovered vehicles will involve retrieval of personal property. 

Again, it varies meaningfully by portfolio.

Storage

Excess storage fees must also be accounted for in the model. Most repossession come with a certain amount of free storage, but what happens when that is exceeded?  The AiO model must anticipate that possibility and assign a cost for it.  Again, that can vary significantly by portfolio.  We work with one lender that generally moves cars off the lot to transport within four to five days and another that averages almost 20 days.

Clearly the AiO pricing model has many moving parts.  If you want the right price and you want to feel confident that your vendors will be able to live with that price for a reasonable period of time, you will need to be able to provide very solid data on your portfolio.

Final thoughts

If you are unable to do so, our recommendation is to have a very transparent process with your vendors in which all assumptions are provided along with the resulting pricing model. With that in place, all parties can monitor the actual performance and agree to make adjustments accordingly.

Mike Levison is the chief executive officer of ALS Resolvion. More details about the company can be found at .

14 AGs push back to keep CFPB complaint database publicly available

NEW YORK and WASHINGTON, D.C. - 

As the Consumer Financial Protection Bureau continues to modify how it operates, more than a dozen state attorneys general are pushing the CFPB not to change its practices regarding consumer complaints.

New York attorney general Barbara Underwood recently led a coalition of 14 attorneys general in urging the CFPB to retain its public database of consumer complaints. Underwood explained the joint letter emphasizes the numerous benefits of a public database to state law enforcement, honest businesses and the public at large. 

Underwood noted the letter was in response to a March 1 request for information (RFI) issued by the CFPB, seeking comments from the public “to assist the bureau in assessing potential changes that can be implemented to the Bureau’s public reporting practices of consumer complaint information.” 

Underwood said, “The CFPB public database represents an admirable commitment to transparency.  By moving to eliminate public access to the database, the Trump administration is yet again putting corporate interests over those of consumers, shielding corporate wrongdoing from public view.”

The letter was led by Underwood and also signed by the attorneys general of:

— California
— Delaware
— Hawaii
— Illinois
— Iowa
— Maryland
— Massachusetts
— Minnesota
— North Carolina
— Oregon
— Pennsylvania
— Vermont
— Washington

The letter also was signed by the Hawaii Office of Consumer Protection.

The attorney general actions arrived on the heels of the CFPB disbanding its Consumer Advisory Board; a move that members called a “firing.”

Along with the RFI Underwood referenced, the bureau also issued another Request for Information on its handling of consumer complaints and inquiries in April. The bureau is seeking comments and information from interested parties to assist the CFPB in assessing its handling of consumer complaints and consumer inquiries and, consistent with law, considering whether changes to its processes would be appropriate.

As of April, the bureau said it has received 1.5 million consumer complaints.

“Though the bureau is required to establish reasonable procedures to provide timely responses to consumer complaints and consumer inquiries, certain aspects of the complaint and inquiry handling processes were developed in furtherance of those statutory requirements but are not directly mandated by statute,” officials said in the April RFI.

“Mindful of the bureau’s statutory objective to provide consumers with timely and understandable information about consumer financial products and services so they can make responsible decisions, as well as its statutory obligations to establish reasonable procedures to provide consumers with timely responses and centralize the collection of consumer complaints about consumer financial products or services, the bureau has used back from a variety of stakeholders to establish and refine its processes over time to improve stakeholders’ experience, handle large volumes of complaints and inquiries and increase overall efficiency,” officials went on to say.

Since the complaint database went live on June 19, 2012, Underwood’s office reiterated that more than a million consumers have filed complaints, and 97 percent of these consumers received a response from the company that was the subject of their complaint. 

In the joint letter, the attorneys general underscore that:

• The large number of complaints and functionality of the database — which can allow users to narrow searches by company, state, product, etc. — have enabled their offices to identify patterns of widespread misconduct that have led to investigations into debt collection companies, student loan servicers, for-profit universities, and other companies whose misconduct was initially brought to our attention through a critical mass of complaints filed with the CFPB. 

• The database arms consumers with information so they can make informed decisions and avoid bad actors in the marketplace. 

• The database benefits responsible companies because it allows them to better understand their customers, and provides them the opportunity to identify problems and take corrective action. 

While auto financing wasn’t specifically mentioned, the bureau is still sharing some details about the complaints it’s receiving. The latest complaint snapshot offered by the CFPB just after Memorial Day focused primarily on debt collection.

Since July 2011, the bureau said it has received approximately 400,500 debt collection complaints, which is 27 percent of the total complaints the agency has received.

“Some common themes emerged in our analysis of these complaints,” the CFPB said. “For example, some people reported that there were debts on their consumer credit reports, but that they did not have prior written notice of the existence of the debt.

“Some people stated in their complaints that they felt uncomfortable disclosing personal information to people who called asking for it because they were not sure whether the person calling was a legitimate debt collector,” the bureau continued. “People also complained about the communication tactics companies used when attempting to collect a debt.”

The CFPB added that credit or consumer reporting was the most-complained-about financial product or service category in March as 37 percent of the approximately 30,300 complaints received during that month revolved around credit or consumer reporting.

Debt collection was the second most-complained-about consumer product, accounting for 27 percent of the monthly total.

The third most-complained-about financial product or service was mortgages, representing about 10 percent of complaints.

The CFPB’s public complaint database was created as part of a lengthy, thorough, and thoughtful process in which the CFPB solicited and considered the views of all stakeholders, including industry groups.  Moreover, as set forth in the letter, a public database of consumer complaints is consistent with the CFPB’s statutory mandate contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which charged the CFPB with, among other things, collecting consumer complaints, publishing information relevant to consumer financial products and services, providing consumers with information needed to make informed financial decisions, and ensuring transparency in the consumer financial products and services market. 

Getting back to the action led by Underwood, her office pointed out that the 14 attorneys general who submitted the letter collectively represent more than 131 million Americans, or 40 percent of the U.S. population. 

According to a news release distributed by Underwood’s office, “The attorneys general expressed concern that the CFPB carefully consider facts and arguments in favor of continuing the public database, particularly in light of press reports indicating that acting director (Mick) Mulvaney may have already made up his mind to eliminate the database. In a recent speech to the American Bankers Association, acting director Mulvaney suggested that the decision to shut down the database was a foregone conclusion.”

CFPB disbands Consumer Advisory Board

WASHINGTON, D.C. - 

An official from the Consumer Financial Protection Bureau described this week’s moves as “transforming the way we engage.” Meanwhile, members of bureau’s Consumer Advisory Board called it a “firing.”

The contrasting views about this segment of the regulator surfaced through a CFPB blog post and a news release distributed by the National Consumer Law Center. Let’s begin with what was stated by the bureau’s Anthony Welcher, who indicated that the CFPB has started the process of “transforming” its stakeholder outreach and engagement work that includes transitioning from former modes of outreach to a new strategy to increase high quality back.

Earlier this year, Welcher recapped the bureau put out a request for information (RFI) on external affairs’ external engagements, a process that culminated last week.

“The comments we received informed our shift to expand external engagements and modify our advisory board and councils to be one focused tool in the evaluative process,” Welcher wrote

Welcher continued that the bureau will continue to fulfill its statutory obligations to convene the Consumer Advisory Board and will continue to provide forums for the Community Bank Advisory Council and the Credit Union Advisory Council. He added the bureau will continue these advisory groups and will use the current 2018 application and selection process to reconstitute the current advisory groups with new, smaller memberships.

“By both right-sizing its advisory councils and ramping up outreach to external groups, the bureau will enhance its ability to hear from consumer, civil rights and industry groups on a more regular basis,” he said.

“In addition to the advisory groups, the bureau will increase its strategic outreach to encourage in-depth conversations, sharing information and developing partnerships focused on consumers in underserved communities and geographies,” Welcher continued.

“These engagements will include regional town halls, roundtable discussions at the bureau’s headquarters with consumer finance experts and representatives, regional roundtables and regular national calls,” he went on to say.

Meanwhile, according to that news release from the National Consumer Law Center, Welcher also hosted a conference call to inform Consumer Advisory Board members and members of two other CFPB advisory boards that their terms were terminated and that they were not permitted to re-apply. The center indicated this action took place two days after 11 consumer advocates and academics shared their concern over the cancellation of the only two CAB meetings scheduled for this year.

“Firing the current CAB members is another move indicating Acting Director Mick Mulvaney is only interested in obtaining views from his inner circle, and has no interest in hearing the perspectives of those who work with struggling American families,” Consumer Advisory Board chair Ann Baddour said in the news release.

In a call with advisory board members this morning, Welcher, who the National Consumer Law Center called a “political hire” brought in by acting director Mick Mulvaney, cited these reasons for the changes:

“The bureau wanted to save a few hundred thousand dollars, which is estimated to be less than .08 percent of the agency’s overall budget. This is despite the fact that members on today’s call offered to pay to attend meetings from their own budgets,” the release said.

“The bureau cited responses to a Request for Information (RFI) on external engagement as a justification for the change. When pressed, Welcher admitted that the decision was made before the Request for Information had closed, and he could point to no RFI response calling for dissolving the advisory boards. A review of the RFI responses reveals there was no response calling for a restructuring or dissolution of the current advisory boards,” the release continued.

“The bureau cited wanting a more diverse, smaller and inclusive group of people involved. Yet, the advisory groups are inherently a small, diverse group of members, based on the Dodd-Frank Act. Members questioned how acting director Mulvaney could have come to this conclusion based on the fact that there had been no meaningful interaction with members,” the release went on to note.

“One of the additional explanations for the firing of the advisory board members is a ‘new’ plan to hold town hall meetings and intimate roundtable discussions — two long-standing practices of the CFPB — and therefore not a justification for firing over 60 committed and diverse volunteers,” the release added.

National Consumer Law Center attorney Chi Chi Wu and member of the bureau’s Consumer Advisory Board reiterated concerns at the close of the news release.

“Firing current members of the advisory board is a huge red flag in this administration’s ongoing erosion of critical consumer financial protections that help average families,” Wu said. “Apparently acting director Mulvaney is willing to listen to industry lobbyists who make campaign contributions, but not the statutorily appointed Consumer Advisory Board members.”

This development continues a string of major changes associated with the CFPB so far this year, including the end of the indirect auto finance guidance as well as four other major proposals from Mulvaney.

RISC acquires Recovery Standard Training

TAMPA, Fla. - 

The compliance education and training offerings from Recovery Industry Services Company (RISC) just became much more robust.

On Tuesday, RISC announced the acquisition of Recovery Standard Training, which is curriculum created and maintained by Hudson Cook.

Officials highlighted the program will soon be added to RISC’s CARS certification and continuing education programs. Hudson Cook will continue to support and update the Recovery Standard curriculum and provide oversight and updates to the CARS curriculum, ensuring third-party vendors and lenders are kept up-to-date with the latest government regulations.

“We are excited about this transaction, which represents unification of robust education curriculum offered to the collateral recovery industry,” RISC founder and chief executive officer Stamatis Ferarolis said.

“The course material and software platform developed by Recovery Standard adds extensive value to RISC’s industry leading CARS certification program,” Ferarolis continued. “This acquisition helps standardize vendor training and certification allowing repossession companies, national forwarders and lenders access to the most comprehensive option for ongoing compliance training.”

Ferarolis went on to stress that auto finance companies expect third-party vendors to meet ongoing compliance standards while ensuring agents are annually trained and comprehensively vetted.

The addition of Recovery Standard Training, which comes one year after RISC’s acquisition of Recovery Compliance Solutions’ vendor vetting services, reinforces RISC’s commitment to consistently offer the best-in-class vendor vetting and compliance training.

Recovery Standard Training materials will be added to RISC’s CARS continuing education program over the course of the next three months. In addition, RISC will add a new course for finance companies, covering skip tracing, cyber security and repossession agent scenarios.

“I am pleased to join forces with RISC to deliver the most up-to-date compliance curriculum for third-party vendors and automotive lenders. RISC’s advocacy for professional repossession demonstrates a commitment to compliance, much like our mission at Recovery Standard Training, making it a clear choice to move forward with this opportunity and bring more unification to the collateral recovery industry,” said Brad Shrader, chief executive officer of Recovery Standard Training.

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