Thursday, February 26, 2015

Cordray Addresses National Association of Attorneys General

For the fourth consecutive year, CFPB Director Richard Cordray addressed the National Association of Attorneys General.  Cordray’s remarks focused on his “Four Ds” – deceptive marketing, debt traps, dead ends and discrimination.  His remarks touched on imminent rulemaking in several areas including pay day lending, debt collection, and credit reporting.  Highlights of the remarks are as follows:

Deceptive Marketing:  Cordray noted that financial contracts often create confusion by their “density and their sheer length”.  Cordray highlighted the Bureau’s “Know Before You Owe” initiatives.  Cordray went on to note the Bureau's focus on the for-profit college industry and the Bureau’s enforcement action against Corinthian Colleges.

Debt Traps: Cordray’s comments on this “D” focused on pay day lending.  The CFPB is the first federal agency to supervise pay day lenders for compliance with federal consumer finance laws.  Key to his remarks was confirmation that the CFPB takes the position that ownership or affiliation with Indian tribes does not exempt lenders from compliance with state laws.  More importantly, Cordray confirmed the Bureau is in the latter stages of formulating new rules to reform the market.  Cordray acknowledged that states have been regulating pay day lending since before the inception of the CFPB and his remarks suggest that the federal rules are likely to reflect the state approaches to regulating pay day lending.

Dead Ends:  Cordray’s remarks focused on credit reporting and debt collection.  As to credit reporting, Cordray touted the Bureau’s work with the three major credit reporting agencies in making modifications to E-Oscar (the electronic dispute system) and indicated that the Bureau is “establishing clear and regular oversight by supervising the larger credit reporting companies and many of their largest furnishers. " As to debt collection, no time table was provided for rule making, but Cordray did state that the Bureau is “hard at work analyzing and preparing the details of proposed policy measures, which could lead to the most significant changes in federal law in this area in almost forty years.” 

Discrimination:  Cordray’s comments focused on two industries: the mortgage industry and the auto lending industry (both direct and indirect).  Cordray indicated that the Bureau is moving forward with a proposed rule to begin exercising supervisory oversight over the larger non bank auto finance companies, as well as the Bureau’s focus of resources on the indirect auto lending market.

Other Comments of Note: The CFPB is providing state agencies with access to its complaint data and encouraging them to take advantage of this access.  To date, 22 attorneys general and 28 state banking regulators have signed up for access.  Additionally, Cordray announced that the CFPB’s public enforcement actions have thus far resulted in $5.3 billion in relief and over $200 million in civil penalties.

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