Category Archive: Supervision Fair Lending and Enforcement

  1. Federal Judge Sanctions CFPB

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    Earlier this week, a federal judge in Atlanta sanctioned the Consumer Financial Protection Bureau (CFPB) for its conduct in a recent enforcement action against several debt collection agencies in Georgia and New York. U.S. District Judge Richard Story claimed that the CFPB “willfully violated” his repeated instructions to identify the factual basis for its claims against the agencies.

    The CFPB’s enforcement agency dates back to 2015, when the agency sued a dozen debt collection entities and dept payment processors for allegedly collecting “phantom debts” from consumers. But, according to Story, the CFPB failed to provide enough proof. In his words, CFPB attorneys exhibited “blatant disregard” for judicial instructions. The federal judge proceeded to dismiss four payment processing companies from the CFPB’s case, exempting them from the agency’s continued overreach.

    The decision comes at an inconvenient time for Director Richard Cordray, who is reportedly planning a 2018 run for governor in Ohio. At the same time, he’s directing his agency to ram through last-minute financial regulations hassling employers. The Republican Governors Association has suggested that Cordray is in violation of the Hatch Act, which prohibits government officials from engaging in political activity. As we’ve covered before, Cordray’s political aspirations could translate to illegal activity—another blemish on the CFPB’s tarnished reputation.

    Shoddy enforcement actions and political posturing. What else is new?

  2. CFPB Moves Forward with Another Costly Rule

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    The latest out of Washington is that the Consumer Financial Protection Bureau (CFPB) has come close to finalizing yet another burdensome mandate. In the next two or three months, the CFPB is expected to issue its final arbitration ban, limiting the use of class-action waivers.

    What does that mean? The proposed rule would bar financial institutions from using arbitration agreements that prevent consumers from filing or joining class action lawsuits in court. The proposal encompasses credit card companies, traditional banks, and different types of lenders, which are disproportionately prone to costly class actions. It could open the door to widespread class-action litigation risk for almost all consumer finance companies that currently utilize arbitration language in contracts with customers, leaving these companies vulnerable to significant legal fees and damages—justified or not. In the CFPB’s own words, “hundreds of millions of dollars” are at stake.

    While Congress is expected to override the rule, it still goes to show the outsized influence of the CFPB’s unelected bureaucrats.