August 5, 2022

CFPB discusses consumer finance data and sets priorities | Sheppard Mullin Richter & Hampton LLP

On June 15, the deputy director of the CFPB, Zixta Martinez, delivered a opening speech at the Consumer Federation of America’s 2022 Consumer Assembly. The Deputy Director focused on four key areas of consumer protection in her address:

Payday Loans: The CFPB released a research report in April focusing on payday loans and the state laws allowing payday lenders to operate. Only 16 of the 26 states that allow payday lenders to operate require/allow lenders to offer extended payment plans, according to the deputy director. The CFPB “will continue to assess payday loan and small loan practices” more generally, she said.

Rent-A-Banks: The Deputy Director has identified the evolution of the small dollar loan market as an area of ​​interest for the CFPB. According to the deputy director, small lenders can use their relationships with banks to evade state interest caps and licensing laws by pretending the bank is the lender in “rent-a-bank” programs. “. The CFPB “looks closely” at these devices.

Bank charges : Big banks penalize customers who can least afford it with complicated bank fees and overdraft practices that push families into deeper debt, the deputy director said. While smaller banks, credit unions and startups rely on business models that don’t use “operating penalties,” Martinez noted that it can be difficult for these companies to break into the industry. business and for customers to switch accounts – the CFPB seeks to promote “vigorous competition” in this area.

Medical debt and credit reports: Consumers with unpaid medical bills, in addition to their concerns about hospital and insurance bureaucracy, often worry about the impact of their medical debt on their credit. The CFPB is “looking at everything” to find solutions to the intersectional problem of medical debt and credit reports, the deputy director said, including assessing whether unpaid medical debts should be included in credit reports.

Put into practice : The Deputy Director’s remarks are an important indicator of the CFPB’s enforcement priorities. Of particular note is the suggestion that the Office might consider asserting claims against non-bank parties under “rent-a-bank” schemes. In addition, a change in the content included in credit reports would have significant implications for consumers and lenders.

Credit bureaus and credit report users have received considerable attention from the CFPB in recent months (we have already discussed this trend in previous blog posts here, hereand here). Today the CFPB published a Advisory opinion to ensure that companies that use and share credit reports and background reports have an authorized purpose under the FCRA. The new CFPB advisory notice makes it clear that credit reporting companies and users of credit reports have specific obligations to protect the confidentiality of public data. The Notice also reminds Covered Entities of potential criminal liability for certain misconduct.