CFPB Compliance - Connecting the Dots

• Oct 9, 2022
• By CUBN News Desk

Pulling out the December 16, 2015 consent order for EZCORP, in-person debt collection tactics were criticized, including wearing company name tags and stating the company name when going to borrowers’ homes or places of work. The CFPB even issued a bulletin titled “In-person Collection of Consumer Debt” along with the EZCORP consent order, where it stressed the heightened risk associated with committing unfair acts or practices when conducting in-person debt collection efforts. Yet in neither the EZCORP consent order nor the bulletin can the industry find how to handle those activities in a compliant manner. The industry was warned, yet it was given zero guidance. For the financial services industry to connect the dots, we need to look more broadly. For example, when companies sell add-on products, a good place to start is the CFPB’s “Examination Manual for Credit Cards, Module 6: Marketing, Sale and Servicing of Credit Card Add-on Products.” No, it doesn’t matter if you aren’t working for a credit card company. That portion of the manual lays out seven practices the CFPB has found to be deceptive. The fifth deceptive practice listed is representing that the products would improve the consumer’s credit score. It would take considerable effort to find where that practice was found deceptive in a consent order since the CFPB has issued over 100 such orders, but the Bureau made it easier to find by adding it to the 1,000⁺-page manual. Sometimes the industry needs to look beyond the CFPB’s actions. Redlining refers to the practice of denying services to consumers based on race or ethnicity. As an example, last fall the CFPB found that a New Jersey bank was engaged in redlining in the following ways:

• The bank avoided locating branches and loan officers in majority Hispanic and/or African-American communities.
• The bank avoided using mortgage brokers in these communities.
• The bank even excluded majority Hispanic and/or African-American communities from its marketing strategy and credit assessment.

For compliance-focused executives, it might be easy to check this one off and say, “This is a mortgage-related issue and not our concern.” Yet by following Department of Justice press releases, you would discover that reverse redlining was a legal theory applied to “Buy Here, Pay Here” auto dealers. Two auto dealers were found to be intentionally targeting African-American customers for the extension and servicing of credit on unfair and predatory terms, such as:

• Locating dealerships in areas where a majority of residents were African-American
• Offering sale prices, down payments and interest rates disproportionately higher than other subprime used car dealers

These practices resulted in default and repossession rates that were higher than other subprime used car dealers. To develop a comprehensive picture of the compliance landscape, enforcement actions by the DOJ, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and even the Federal Trade Commission have to be monitored to put the CFPB’s actions into....--> BY JOHN SHORT Does your credit union know the right way to handle debt collection? If not, you’re not alone. The Consumer Financial Protection Bureau’s guidelines are vague at best and slippery at worst. Rather than wading through the CFPB’s thousands of pages, read this article first to set the compliance matter straight. The Consumer Financial Protection Bureau (CFPB) has been widely criticized for regulating by enforcement actions – rather than embarking on rulemaking proceedings – in delineating the regulatory rules of the road for the financial services industry. In a March 9, 2016 speech, Director Cordray endeavored to explain the method to the CFPB’s enforcement madness. While understanding the director’s perspective is helpful, that speech failed to conn...

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