Though CFPB is in flux, compliance efforts still benefit auto finance providers


Even before the wrangling over who will lead the Consumer Financial Protection Bureau intensified earlier this week, Craig Nazzaro emphasized that the heavy compliance lifting done by auto finance companies still has plenty of value.

Nazzaro, who is of counsel in the Atlanta office of Nelson Mullins Riley & Scarborough, made the point before a federal judge scheduled a hearing as the court conflict continues since Richard Cordray departed the CFPB at the end of November.

“I believe the controls that were put in place by the auto finance companies will remain valuable in the future,” Nazzaro said in a message to SubPrime Auto Finance News. “While the new director can have an immediate effect on the supervision and enforcement activities of the bureau, he cannot immediately repeal any rules and/or regulations.

“Those within the industry that have conformed to all guidance and/or updated their practices to be in line with various enforcement actions and continue to do so will remain positioned to be less of a CFPB target,” he continued. “I would caution against those in the industry who believe that a new director means that compliance with existing regulations can be relaxed. Remember that the CFPB is staffed with examiners and staff attorneys who believe in the bureau’s mission. That approach cannot be turned around on Day One.

“If your entity is non-compliant with regulations that are currently in place, you will still face a great deal of regulatory risk, no matter who the director is,” Nazzaro went on to say. “The biggest change, I believe, that we will see is that the CFPB should cease to overstep its authority. For example, we should not see any future rules with the scope we saw in the arbitration rule or enforcement actions with the new interpretation of industry practices with absurd fines like we did in the PHH matter.”

Undoubtedly, auto finance compliance department will be watching what develops out of the court system. Washington D.C. District Court Judge Timothy Kelly scheduled preliminary injunction hearing for Dec. 22 as the court clash continues between Mick Mulvaney, who President Trump installed as the temporary CFPB director; and Leandra English, who was selected the bureau’s deputy director just before Cordray departed on his way toward running for governor in Ohio.

In light of the attention the CFPB has created since its inception, SubPrime Auto Finance News asked Nazzaro if he was surprised, and why or why not, in the way Cordray departed the agency and how a new director was established.

“I was not surprised about the timing, but was surprised how haphazard the choice and promotion of Leandra English to deputy director seemed to be,” Nazzaro continued. “Director Cordray knew the choice and the manner of the promotion would be attacked, and the choice seemed to have very little strategic planning behind it, making it easier to attack.” 

Nazzaro also shared what element of the CFPB’s future he plans to watch the closest and why going forward.

“In the short term, I am interested in the pace and structure of the enforcement actions that are announced. I will be analyzing which entities they choose to move forward against and the severity of those actions,” he said.

“I am also looking forward to seeing if there will be a noticeable change in the tone and approach to their supervision activity,” Nazzaro continued.

“For the long term, I will be looking to see if the single director structure can be successfully challenged,” he went on to say. “The choice of Mick Mulvaney, the anti-Cordray, will wind up sustaining the partisan approach the CFPB has taken in years past and will not lead to even-keeled, logical regulation that the industry will need for growth.” 


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