Under the leadership of its newly appointed first
director, Richard Cordray, the Consumer Financial Protection Bureau (Bureau)
has laid out its top three priorities: (1) nonbank supervision; (2) protection
against unfair, deceptive, or abusive acts or practices (UDAAP), and (3)
Watch for the Bureau to use its new supervisory and enforcement powers to
"level the playing field" between banks and nonbanks (i.e., a "company that
offers or provides consumer financial products or services but does not have a
bank, thrift, or credit union charter"). Effective immediately, we
expect the Bureau to focus its new supervisory and enforcement powers on
mortgage originators and servicers, student lenders, debt collectors, and payday
lenders. Use of these powers against other types of consumer financial
companies is likely to follow.
UDAAP. While he was the Attorney
General of Ohio, Mr. Cordray aggressively used Ohio statutes prohibiting unfair
and deceptive acts or practices against banks and consumer financial services
companies. We expect him to do the same with Dodd-Frank's UDAAP provisions
which, in addition to adding a new term to the vernacular ("abusive"), have
real teeth. Among other things, the Bureau can seek penalties of $1 million per
day for knowingly committing UDAAP violations.
Since its inception, the Bureau has pushed its "Know Before You Owe" program,
designed to help consumers understand the terms of their credit agreements,
including mortgages, credits cards, and student loans. To that end, the Bureau
has in the works a simplified disclosure form for mortgages, a financial aid
shopping sheet for student loans, and a two-page template for credit card terms
and conditions. Expect to see final versions before the summer.
Foley & Lardner LLP is closely watching developments
at the Bureau. For continued monitoring of CFPB developments, as well as other
financial services legal issues, be sure to visit our blog, The CFSL Bulletin.