By Kyle Correa-Brady, Katherine Sear and Michelle Layser
The number of enforcement1 actions initiated by the Consumer Financial Protection Bureau (CFPB) has increased each year since it began enforcement activity in summer 2012. This has led to speculation that the CFPB prefers to regulate through enforcement rather than through rulemaking. The upward trend in enforcement activity continued in 2015, and the CFPB's 56 formal enforcement actions marked a nearly 65 percent increase over the number of actions initiated in 2014 and the largest year-over-year increase in the history of the agency.2 Notably, the CFPB began 2015 with the appointment of Anthony (Tony) Alexis, a former federal prosecutor, as the agency's new enforcement director.3 With the CFPB's continued growth and expansion, the consumer financial services industry is eager to understand where the agency's focus will be in the coming months and years.
This white paper contains data and analysis of CFPB enforcement actions in order to identify new trends that emerged in 2015 and areas where the CFPB has been particularly consistent over time. Key conclusions detailed in this white paper include:
• Targeted Activity and Institutions.The CFPB's enforcement activity in 2015 focused on debt collection violations, deceptive advertising, deceptive communications with debtors/consumers, deceptive enrollment tactics and loan servicing misconduct. The CFPB also began to more actively supervise the activities of small loan and payday lenders, student loan lenders and auto loan lenders, and the agency's enforcement activity generally reflected this additional focus. Though banks and loan servicers continue to be targeted by the CFPB, 2015 saw a sharp increase in enforcement activity against debt collection companies and mortgage companies, as well as the first examples of enforcement activity against lead aggregators. Lead aggregators are companies that collect consumer information, such as names, addresses, phone numbers, etc., and sell that information to consumer-facing companies.
• Individuals. The majority of enforcement actions do not involve individuals as parties to the action; however, the number of actions involving individuals was higher in 2015 than in any previous year. When individuals are respondents/defendants, they are most often the principal, owner, president or CEO of the company involved. Individuals are most likely to be targeted in actions involving debt settlement and relief services companies, debt collection companies and law firms. The types of issues in these cases varies, but those that occurred with the greatest frequency are deceptive advertising, deceptive communications with debtors/consumers, illegal fees, loan servicing misconduct and loan modification violations. Since 2012, the CFPB has imposed civil money penalties in actions involving individuals just 50 percent of the time, as compared to in 70 percent of actions overall. The frequency of civil money penalties in actions involving individuals was lower in 2015 (37 percent), but the variation is likely an anomaly.
• Penalties and Remediation. Civil money penalties (CMPs) are regularly imposed in enforcement actions. In 2015, just over 70 percent of the enforcement actions imposed a CMP, which was consistent with the rate seen in previous years. The average penalty amount in 2015 was just over $5 million, which was also in line with previous years; however, the CFPB imposed its largest CMP to date in 2015 in a joint action with the OCC against Citibank for illegal credit card practices. In that case, the CFPB ordered Citibank to pay a $35 million CMP, and the OCC imposed a separate $35 million CMP. Though only 13.6 percent of CMPs imposed since 2012 (and 10 percent in 2015) have exceeded $10 million, 83 percent of those actions involving large CMPs have been joint or concurrent actions brought with another federal agency. Large CMPs are also most common in actions involving banks, credit card companies and online lenders.
In addition to CMPs, the CFPB imposed monetary remediation requirements in 57 percent of all actions in 2015, a rate comparable to prior years. Monetary remediation may include judgments, damages, equitable relief, disgorgements, redress, refunds and loan forgiveness. The CFPB has also imposed non-monetary remediation in almost 94 percent of its enforcement actions. Non-monetary remediations may involve bans on providing certain products or services within an industry, and less commonly may include permanent bans from participation within an industry.
In 2015, the CFPB initiated 56 enforcement actions against a variety of bank and nonbank institutions, and most of these actions cited multiple consumer protection violations. The activities that were most frequently subject to enforcement actions were deceptive advertising (appearing in 21 actions), deceptive communications with debtors or consumers (appearing in 18 actions), debt collection violations (appearing in 15 actions), loan servicing misconduct (appearing in 11 actions) and deceptive enrollment tactics (appearing in 9 actions). See Fig. 1. The number of enforcement actions based on each of these issues was higher than in 2014, but the increase was most significant with respect to the number of actions involving deceptive enrollment, deceptive communications with debtors or consumers and debt collection violations. SeeFig. 2. This may suggest that the CFPB's interest in these types of violations has increased.
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Of the types of financial institutions targeted by the CFPB, over a quarter were banks or loan servicers, a percentage consistent with that of previous years (see Fig. 3); however, the CFPB began to more actively target several new types of nonbank financial institutions in 2015. See Fig. 4. Debt collection companies, in particular, were more frequently targeted in 2015 than in prior years. The CFPB initiated seven enforcement actions against debt collection companies in 2015, more than tripling the number of actions that were initiated against debt collectors in previous years. Similarly, the total number of enforcement actions the CFPB has brought against mortgage companies more than doubled in 2015. Thirteen enforcement actions were initiated against mortgage companies, which had been the subject of only 12 actions in the four preceding years.
Also notable in 2015 were enforcement actions against student loan lenders, small loan and payday loan lenders and auto finance companies, which in each case paralleled the agency's rulemaking agenda. The supervisory and enforcement focus on these areas reflects the CFPBs growing interest in regulating smaller, nonbank loan products. Finally, the CFPB initiated enforcement actions against lead aggregators for the first time in 2015. Each of these trends is discussed in greater detail below.
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Enforcement actions based on deceptive enrollment tactics emerged as an important subject of interest to the CFPB. Deceptive enrollment actions, which were seen only four times in the four preceding years, appeared nine times in 2015 and were responsible for $21,100,001 in aggregate CMPs. Deceptive enrollment includes steering consumers into high-interest rate loans; using deceptive practices when enrolling customers for credit cards, add-on products or renewals of credit cards; providing deceptive information about a product or failing to disclose terms of a loan; and entering deceptive service agreements with customers.
The largest settlement over deceptive enrollment tactics occurred in May with online lender Paypal, Inc. and its online credit product Paypal Credit (formerly Bill Me Later, Inc.). CFPB Director Richard Cordray stated at the time: “Online shopping has become a way of life for many Americans and it's important that they are treated fairly. The CFPB's action should send a signal that consumers are protected whether they are opening their wallets or clicking online to make a purchase.”4 That action may have signaled a broader trend toward CFPB focus on online lending activity. A second deceptive enrollment enforcement action against an online lender, Integrity Advance, LLC, was still pending at the end of 2015.5 Other nonbank financial services companies, including but not limited to small loan lenders and mortgage companies, were also subject to enforcement actions based on deceptive enrollment.
The number of enforcement actions based on deceptive communications with debtors or consumers increased 125 percent over 2014 numbers, reflecting 18 enforcement actions with $74,645,000 in aggregate CMPs. Deceptive communications with debtors or consumers include false statements that cause harm to debtors or consumers, such as falsely instructing debtors to stop paying down debt or to contact their lenders, or falsely stating that an inaccurate report to credit agencies has been corrected.
The CFPB's largest settlement to date involved an enforcement action that included deceptive communication violations. The settlement was with Citibank, N.A., Department Stores National Bank and Citicorp Credit Services, Inc. (USA) for $35,000,000. A central allegation in the enforcement action was that Citibank and its affiliates had misrepresented or omitted the costs, benefits or terms and conditions of various credit card add-on products like identity protection services.6According to the CFPB and other regulators, confusing text and other problems increased the likelihood that consumers might unknowingly apply for certain products.7 That action was understood to signal the CFPBs particular interest in the marketing of credit card add-on products, and former CFPB policy fellow Prof. Dalie Jiminez told Bloomberg BNA that “[a]nyone who's still doing business in this area should be very careful about the representations they make to consumers.”8
Credit card add-on products aren't the only products associated with deceptive communication violations, however. In 2015, similar allegations were made against a range of nonbank consumer finance companies with respect to their dealings in mortgage loans, auto loans, small loans and payday loans. As detailed below, each of these products has been the subject of increased CFPB enforcement activity over the past year.
The CFPB has authority to enforce the Fair Debt Collection Practices Act (FDCPA), and it has directly supervised large participants in the debt collection industry since October 2012. Rulemaking related to debt collection activities was an agency priority in 2015, but no final rules were issued. Nevertheless, enforcement actions based on debt collection violations rose 87 percent over 2014 numbers, reflecting 15 enforcement actions and accounting for $111,250,000 in CMPs. Debt collection violations include deceptive debt collection practices, such as the use of threats, intimidation, false allegations and/or harassment to collect any type of consumer debt.
Debt collection complaints have been steadily growing ever since the CFPB began accepting complaints about debt collection in July 2013, and Bloomberg BNA reporters noted in early 2015 that category has become a leading complaint topic in the CFPB's database.9 CFPB Director Richard Cordray has said about consumer complaints: “We know that if we hear about a particular problem from fifty consumers, it likely looms larger than if we hear about it from two … . We know that if we begin to see a disturbing trend, we should consider allocating some of our limited resources to combat that particular problem.”10 This indicates that debt collectors and debt collection practices will continue to be a strong focus of CFPB supervisory and enforcement activities.
Mortgage companies have been increasingly targeted each year through CFPB enforcement actions. The number of mortgage companies involved in enforcement actions in 2015 was more than double the number targeted in 2014. Mortgage companies are susceptible to CFPB enforcement activity because they offer a range of financial services monitored by the CFPB. Common violations in this industry include deceptive advertising, loan servicing misconduct and deceptive communications with debtors/consumers.
The rapid increase in 2015 coincided with the TILA-RESPA Integrated Disclosure Rule (TILA-RESPA Rule)11 that went into effect on October 3, 2015. Now that the TILA-RESPA Rule has been fully implemented, the CFPB is likely to continue to increase its focus on mortgage companies. The CFPB has a full page of resources devoted to assist regulated entities understand the TILA-RESPA Rule.12
The CFPB's interpretation of RESPA has been challenged as part of an appeal in the U.S. Court of Appeals for the District of Columbia Circuit. In that case, the mortgage company has challenged the CFPB's interpretation as “a radical new interpretation” of the rule.13 The mortgage industry has generally considered the CFPB's interpretations of TILA and RESPA to be onerous, and the outcome of this case may further solidify that sentiment if the court rules in favor of the agency.
Though the CFPB had initiated enforcement actions against payday lenders prior to 2015, it was not until March 2015 that the CFPB announced that it was planning to propose rules to end payday debt traps.14 The CFPB published an outline of the payday lending proposals and sought feedback from small loan lenders.15 Meanwhile, the pace of CFPB enforcement activity against payday lenders picked up slightly in 2015 and addressed a range of allegations related to debt collection violations, deceptive communication tactics, deceptive advertising, loan servicing violations and UDAAP violations. Large civil money penalties were imposed in all but one enforcement action involving either a payday or small loan lender, with the smallest penalty reaching almost half a million dollars. Several actions involved three to five million dollar penalties.
The CFPB expects to release its proposed rule covering payday lenders in 2016, so it is likely that the agency will pick up the pace in its enforcement activity against payday lenders. This is an evolving area, and until the proposed rule is released, the only available guidance is the CFPB Factsheet and the Outline of Proposals under Consideration.16
The CFPB also picked up the pace of enforcement actions initiated against auto finance companies in 2015. In previous years, the CFPB had initiated a small number of enforcement actions against auto finance companies for abuses against service members,17 inaccurate credit reporting18 and debt collection violations.19 The CFPB has also collected data on so-called “dealer markups” by auto lenders since early 2012, and it began to notify auto lenders in 2013 that it had grounds to sue them for fair lending violations.20 The agency signaled in 2014 that it was closely monitoring these alleged fair lending violations by auto lenders,21 but at the time the agency lacked the authority to regulate nonbank auto finance companies directly. However, in June 2015, the CFPB published a new rule allowing it to supervise larger participants in the nonbank auto finance industry. The rule, which extended the CFPB's supervisory authority to any nonbank auto finance company that makes, acquires or refinances 10,000 or more loans or leases in a year, was estimated to cover about 34 nonbank auto finance companies and their affiliates.22
Meanwhile, the CFPB strengthened its enforcement efforts against indirect auto loan lenders and servicers with five new enforcement actions in 2015. In one of these actions, the CFPB continued to target indirect auto lenders involved in fair lending violations. The CFPB reached a settlement with American Honda Finance Corp., one of the country's largest indirect auto lenders. That action was the result of a joint CFPB and Department of Justice (DOJ) investigation that began in April 2013, under which the agencies had investigated the company's compliance with the Equal Credit Opportunity Act.23 The settlement required the company to pay $24 million in restitution to customers, to impose lower caps on discretionary markups and to make changes to its compensation system to better ensure fair lending to consumers.
Through a second action, the CFPB similarly ordered Fifth Third Bank to pay $21.5 million in relief to borrowers harmed by the bank's discriminatory markup practices. In another joint investigation with the DOJ, the agencies found that Fifth Third's policies resulted in minority borrowers paying higher markups on auto loans through car dealerships.24 After the settlement, the CFPB said the action was part of a larger joint effort between the CFPB and DOJ to address discrimination in the indirect auto lending market.25
The CFPB has also continued to initiate enforcement actions against indirect auto lenders based on its power to prevent unfair, deceptive, or abusive acts or practices (UDAAP).26 In June, the CFPB sued the Security National Automotive Acceptance Company, LLC for various debt collection and UDAAP violations. This case marked the first time the CFPB had sued an auto finance company in federal court. The CFPB alleged that the company had used aggressive debt collection tactics against service members, such as illegal threats and deceptive claims to collect debts. The court issued a judgment banning the entity from using aggressive tactics. The company also entered into a consent order with the CFPB that included a $1 million penalty.27
Finally, the CFPB initiated two enforcement actions against indirect auto lenders for engaging in deceptive communication tactics. First, the agency fined Interstate Auto Group, Inc. $6,465,000 for deceptive communication tactics, deceptive advertising and credit scoring violations. The company, which is better known as CarHop, is one of the country's biggest “buy-here, pay-here” auto dealers.28 Buy-here, pay-here auto dealers not only sell cars, but they also originate and service auto loans. Second, the agency initiated an enforcement action against loan servicer Westlake Services, LLC and Wilshire Consumer Credit for deceptive communication tactics, including calling under false pretenses, using fake caller ID information, falsely threatening to refer borrowers for investigation or criminal prosecution, and illegally disclosing information about debts to borrowers' employers, friends and family.29
Given the agency's expanded supervisory authority and continued enforcement focus on indirect auto finance companies, it is likely that auto lending and auto finance companies will continue to be targeted by the CFPB in the coming year.
The CFPB's focus on student loan violations was evident in 2015 and is likely to continue or increase in the coming year. The agency has collected complaints about student loan practices since March 2012, and it began enforcement in response to student loan violations in 2014 with actions against for-profit student lenders ITT Educational Services, Inc. and Corinthian Colleges, Inc. The agency also initiated two enforcement actions in late 2014 against a student loan processing company and debt-settlement company, in each case alleging various deceptive practices and illegal fees.
The CFPB announced early in 2015 that it planned to review loan modifications offered by private student lenders.30 In May, the CFPB joined with the Department of Education and the Treasury Department to request comments from the public on student loan servicing.31 In response, the agencies received over 30,000 comments describing student loan servicing problems.32 In September, the agencies issued a Joint Statement of Principles on Student Loan Servicing that presented a framework for improving student loan servicing practices.33 Director Cordray has compared the country's student loan debt to the mortgage crisis, stating that student loan servicing practices bear “'an uncanny resemblance’ to what homeowners encountered with mortgage servicers during the 2008 financial crisis.”34
Meanwhile, the agency continued to target companies for student loan violations by initiating three new enforcement actions, including a large settlement with Discover Bank. The CFPB alleged that Discover had overstated minimum amounts due on billing statements, denied borrowers information they needed to obtain federal tax benefits and engaged in illegal debt collection tactics.35 The agency ordered Discover to return $16 million to consumers through account credits and reimbursements and to pay a $2.5 million civil penalty.36 Other student lenders were targeted by the CFPB for using deceptive enrollment tactics, engaging in deceptive advertising and charging illegal fees.
The CFPB's interest in student loan violations was evident throughout the year and is expected to continue. Many regulatory lawyers consider student loans to be a likely area for increased enforcement activity.37
A new type of institution that emerged as a CFPB target in 2015 was lead aggregators. Lead aggregators are companies that collect consumer information, such as names, addresses and phone numbers, and sell that information to consumer-facing companies. The first example of an enforcement action against lead aggregators appeared in the second quarter of 2015. Since then, two additional actions against lead aggregators were initiated in December. Director Cordray called these actions “a reminder to the middlemen who traffic in personal information: if you ignore warning signs that those buying this data are violating the law, you risk the consequences for the harm you are doing to people.”38 Though it is too early to predict whether lead aggregators will continue as a CFPB target, this is an emerging area of interest to the CFPB that should be closely watched.
Those individuals most likely to be named as a respondent/defendant are principals, owners, presidents and CEOs. See Fig. 6. This remained true in 2015, as 75 percent of the actions against individuals involved at least one person holding such a title. However, this past year, the CFPB brought more actions against non-owner/executives than ever before. Prior to 2015, a non-owner/executive was the sole named individual defendant in only one action, which involved a civil investigative demand (CID).40 Yet in 2015, the CFPB brought four actions involving non-owner/executive individuals. Two involved CIDs issued against employees,41 a third named a loan officer and his wife as individual defendants,42 and a fourth named three managers/managing members as defendants.43 This shows that the CFPB is continuing to broaden its enforcement powers both in terms of the industries and institutions that it regulates, as well as over the types of individuals who work at these institutions.
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Although the CFPB has gone after individuals owning or working for a wide variety of institution types, three particular institution types have been involved in half of all actions with a named individual respondent/defendant. Those three institution types are debt settlement and relief services companies, debt collection companies and law firms. The focus on individuals associated with debt collection companies was new in 2015, as three of the five total actions against such individuals were brought during this past year. This may simply correlate with the CFPB's increased attention on debt collection companies generally, but it highlights that the CFPB is not only cracking down on debt collection companies, but also on the individuals associated with those companies.
In 2015, the CFPB also initiated its first ever actions against individuals associated with banks and lead aggregators. This past year, the CFPB brought an action against Wells Fargo, JPMorgan Chase, a loan officer who worked at Wells Fargo and the loan officer's wife in connection with an illegal mortgage kickback scheme.44 The individuals involved received a penalty separate from that of the banks.45 The CFPB also brought three cases against the owners or employees of lead aggregators.46 These cases indicate that the CFPB continues to broaden its reach over individual respondents/defendants in a growing number of industries.
Among the 40 total enforcement actions that named an individual as a respondent/defendant, the issues that appear with the most frequency are: (1) deceptive advertising (45 percent of actions); (2) deceptive communications with debtors/consumers (45 percent of actions); (3) illegal fees (37.5 percent of actions); (4) loan servicing misconduct (22.5 percent of actions); and (5) loan modifications (17.5 percent of actions). See Fig. 7. Thus, when an individual is a named respondent/defendant, one of these five issues is likely to be a focus of the enforcement action.47
Additionally, when the CFPB has targeted a company for compliance violations or loan modifications, the CFPB has named an individual as a respondent/defendant in every action. It should be expected that when one of these two issues appears in an action, individuals are very likely to be named as respondents/defendants.
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In 2015, a CMP was imposed in just over 37 percent of actions involving individuals. This is the lowest annual percentage to date, and a decline from 2014 when a CMP was imposed in just over 64 percent of actions involving individuals. However, since 2012, the CFPB has imposed CMPs in actions involving individuals just over 50 percent of the time, making the drop in 2015 a likely anomaly. Looking ahead, when an individual is named in a CFPB action, there still is a high likelihood that a CMP will be imposed.
The CFPB also continued to impose large CMPs in 2015 in certain actions involving individuals, as one-third of the penalties imposed were $2 million or higher. The highest penalty in such actions, $8 million, was imposed against a subprime credit reporting company and its owner for illegally obtaining consumer credit reports and not properly investigating consumer disputes.48 Across all of its enforcement actions with a named individual respondent/defendant, the average penalty size is just over $3 million. Thus, when an individual is named in an enforcement action, the possibility of a significant CMP should not be ignored.
When an individual is named as a respondent/defendant, the CFPB is more likely to file the action in court than resolve it administratively. To date, 75 percent of actions that involved individuals have been filed in court. This trend continued in 2015, as just over 68 percent of actions involving individuals were filed in court rather than being resolved through the administrative process.
The CFPB has collected hundreds of millions of dollars in CMPs from its enforcement actions. As of September 30, 2015, the CFPB collected $183.1 million in CMPs in fiscal year 2015 alone.49 The CFPB also imposes monetary and non-monetary remediations, such as permanent bans from the industry and prohibitions on providing certain products or services within an industry. Thus, it is important for companies and individuals to understand the likely consequences of a CFPB enforcement action.
Across all of its enforcement actions since 2012, the CFPB has imposed a CMP in 70 percent of its actions. This trend continued in 2015, as CMPs were imposed in just over 71 percent of actions. SeeFig. 8. When an enforcement action is filed, the company defending the action should expect to pay a CMP. This is especially true for banks. Since 2012, a bank has been involved in 27 percent of the actions where a CMP was imposed. This trend continued this past year, as a bank was involved in 22.5 percent of 2015 actions when a penalty was imposed.
Average penalty amounts remained constant in 2015 as well. The average penalty amounts did not change between 2014 and 2015, averaging just over $5 million. These numbers are down from the average penalty amounts in 2012 and 2013, although the combination of a handful of very large penalties and the smaller total number of enforcement actions in the first two years of CFPB enforcement activity skewed the 2012 and 2013 averages upwards. SeeFig. 9. Across all four years, the average penalty size is just over $6.5 million. Moreover, an analysis of CFPB penalties by penalty range shows that the majority of penalties imposed are less than $2.5 million. Since 2012, exactly 50 percent of the CMPs imposed have fallen below $2.5 million. This trend continued in 2015, as 55 percent of the penalties imposed this past year fell within this range. These figures indicate that a company defending an enforcement action is likely to pay a CMP, but about half of the time, that penalty will be under $2.5 million.
Larger CMPs are reserved for special cases. Across all enforcement actions to date, only 13.6 percent of CMPs imposed have been above $10 million. The CFPB stayed the course in 2015, as only 10 percent of the CMPs imposed were over $10 million. Those actions with the highest CMPs share some similarities. Among those actions with a CMP over $10 million, 83 percent were a joint or concurrent action brought with another federal agency. Additionally, a similarly large monetary remediation of over $10 million was imposed in 83 percent of these actions. The institution types most likely to receive a penalty over $10 million are banks, as a bank was involved in 75 percent of actions with a CMP over $10 million. Finally, three institution types, including banks, credit card companies and online lenders, have an average penalty size of at least $10 million. When these factors are present, or when one of these three institution types are defending an action, the respondent/defendant should expect to receive a higher CMP.
Finally, it is important to note that the CFPB imposed its largest CMP to date in 2015.50 In coordination with the Office of the Comptroller of the Currency (OCC), the CFPB issued a consent order against Citibank for its illegal credit card practices, specifically focusing on Citibank's deceptive advertising and unfair billing of its credit card add-on products.51 The CFPB ordered Citibank to pay a penalty of $35 million, with a separate $35 million penalty imposed by the OCC.52 In its press release, CFPB Director Richard Cordray noted that this is the tenth action the CFPB has taken against companies engaged in illegal credit card add-on activities, and that the CFPB “'will remain on the lookout for similar conduct and will address it.’”53 As noted by experts quoted in Bloomberg BNA's Banking Daily, companies operating in the credit card add-on business “'should be very careful about the representations they make to consumers,’” for the CFPB is “'closely scrutiniz[ing] the marketing and sale of these products for compliance with federal law.’”54 Otherwise, a large penalty is likely in that company's future.
The CFPB imposes both monetary and non-monetary remediations. Since 2012, a monetary remediation has been imposed in 56 percent of all enforcement actions. 2015 was no different, as a monetary remediation was imposed in 57 percent of all actions last year. In 2015, the highest monetary remediations were imposed against credit card companies and banks. The average monetary remediation imposed against credit card companies was $250.9 million, and the average monetary remediation imposed against banks was $95.3 million. Based on this data, we would expect to see a monetary remediation continue to be imposed in just over half of all actions, and credit card companies and banks should be prepared to receive some of the higher monetary remediations.
Non-monetary remediations are important as well, as the CFPB has imposed a non-monetary remediation in almost 94 percent of its enforcement actions. Two of those non-monetary remediations involve permanent prohibitions from certain activities, and are therefore of particular concern to companies and individuals. Specifically, the CFPB has imposed permanent bans from participation in an industry, as well as prohibitions on providing certain products or services within an industry.
The CFPB has imposed bans on providing certain products or services within an industry with some regularity. Since 2012, the CFPB has imposed this remediation in almost 25 percent of enforcement actions. Interestingly, the CFPB did not impose this remediation as frequently in 2015, as only 10.7 percent of respondents/defendants received this remediation. However, since the CFPB has imposed this remediation in almost a quarter of all its enforcement actions, and there are no obvious patterns yet in terms of the types of actions that receive this remediation, all companies and individuals should remain aware that this remediation is a likely possibility.
In contrast, the CFPB reserves permanent bans from participation within an industry for special circumstances. Since 2012, this remediation has only been imposed four times, one of which was in 2015. In all four actions, the principal/owner of the company was also a named respondent/defendant, and all four actions were initiated using the agency's UDAAP authority. Penalties were imposed in all four cases as well, two of which were over $15 million. The most recent 2015 action involved a loan company offering short term, high interest loans secured by a consumer's anticipated tax refund, which are known as refund-anticipation loans.55 Most of the consumers were low-income citizens of the Navajo nation.56 The complaint alleged that the defendants abusively steered customers into high-interest loans, engaged in unfair, abusive and deceptive extensions of credit, and provided inadequate and deceptive disclosures.57 When such allegations are involved, companies and individual defendants should be prepared to be permanently banned from participating in their industry, in addition to receiving other remediations and penalties.
1 1 The data appears on both platforms in the Bloomberg Law CFPB Enforcement Action Tracker.The tracker presents a snapshot of each enforcement action along with filing dates, docket information and relevant documents. It also facilitates searches based on the type of institution involved, the type of product or service at issue and the issue presented.
2 The CFPB initiated 35 enforcement actions in 2014. Note that 2012 is excluded from this calculation because enforcement activity did not begin until summer of that year.
3 Alexis served as acting enforcement director for several months in 2014. Jeff Bater, CFPB Selects New Enforcement Director; Tony Alexis Replaces Kent Markus, BLOOMBERG BNA BANKING DAILY (Jan. 8, 2015).
4 Press Release, CFPB, CFPB Takes Action Against PayPal for Illegally Signing Up Consumers for Unwanted Online Credit (May 19, 2015).
5 Notice of Charges, In the Matter of Integrity Advance, LLC, No. 2015-CFPB-0029 (Nov. 18, 2015).
6 Citibank, N.A., Consent Order, No. 2015-CFPB-0015 (July 21, 2015).
7 Chris Bruce, Citibank Settles CFPB, OCC Card Claims for $770 Million, BLOOMBERG BNA BANKING DAILY (July 22, 2015).
9 Michael Ferullo, Growing Complaint Volume to CFPB Reveals Consumer Sore Spots, New and Old, BLOOMBERG BNA BANKING DAILY (Jan. 9, 2015).
10 Press Release, CFPB, Prepared Remarks of CFPB Director Richard Cordray at the Bank on 2.0 Conference (Nov. 6, 2014).
11 Integrated Mortgage Disclosures Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth In Lending Act (Regulation Z), 78 Fed. Reg. 79,730 (Dec. 31, 2013).
12 CFPB, TILA-RESPA Integrated Disclosure rule implementation.
13 Motion of Petitioners for Stay Pending Judicial Review at 1, PHH Corp. v. Consumer Fin. Protection Bureau, No. 15-01177 (D.C. Cir. June 26, 2015) (appealing administrative adjudication No. 2014-CFPB-0002). SeeChris Bruce, CFPB Seeks Legal Edge in Enforcement Appeal, BLOOMBERG BNA BANKING DAILY (Nov. 6, 2015).
14 Press Release, CFPB, CFPB Considers Proposal to End Payday Debt Traps (Mar. 26, 2015).
16 CFPB, Factsheet: The CFPB Considers Proposal to End Payday Debt Traps (Mar. 26, 2015); CFPB, SMALL BUSINESS ADVISORY REVIEW PANEL FOR POTENTIAL RULEMAKINGS FOR PAYDAY, VEHICLE TITLE, AND SIMILAR LOANS,OUTLINE OF PROPOSALS UNDER CONSIDERATION AND ALTERNATIVES CONSIDERED (Mar. 26, 2015).
17 Security Nat'l Auto. Acceptance Co., LLC, Consent Order, No. 2015-CFPB-0027 (Oct. 27, 2015).
18 Interstate Auto Group, Inc., Consent Order, No. 2015-CFPB-0032 (Dec. 16, 2015).
19 Westlake Svcs., LLC, Consent Order, No. 2015-CFPB-0026 (Sept. 30, 2015).
20 Stephen Fogdall, Overview of the Federal Regulation of Fair Lending, 407 Banking Practice Portfolio Series (BNA), §I-E.
21 Gerald Sachs, Kevin Petrasic & Lawrence Kaplan, CFPB - 2014 in Review … and What's Ahead for 2015, BNA INSIGHTS (Feb. 10, 2015).
22 Press Release, CFPB, CFPB to Oversee Nonbank Auto Finance Companies (June 10, 2015).
23 Press Release, CFPB, CFPB and DOJ Reach Resolution with Honda to Address Discriminatory Auto Loan Pricing (Jul. 14, 2015).
24 Jeff Bater, Fifth Third Bank to Pay $21.5 Million, BLOOMBERG BNA BANKING DAILY (Sept. 29, 2015).
25 Press Release, CFPB, CFPB Takes Action Against Fifth Third Bank for Auto-Lending Discrimination and Illegal Credit Card Practices (Sept. 28, 2015).
26 See12 U.S.C. §5531; 12 U.S.C. §5536.
27 Press Release, CFPB, CFPB Orders Servicemember Auto Loan Company to Pay $3.28 Million for Illegal Debt Collection Tactics (Oct. 28, 2015).
28 Press Release, CFPB, CFPB Orders CarHop to Pay $6.4 Million Penalty for Jeopardizing Consumers' Credit (Dec. 17, 2015).
29 Press Release, CFPB, CFPB Orders Indirect Auto Finance Company to Provide Consumers $44.1 Million in Relief for Illegal Debt Collection Tactic (Oct. 1, 2015).
30 Carter Dougherty, Private-Student Lenders Draw CFPB Review Over Debt Refinancing, BLOOMBERG BNA BANKING DAILY (Jan. 30, 2015).
31 K. Claire Compton, Consumer Bureau Launches Public Inquiry Into Student Loan Servicing Practices, BLOOMBERG BNA BANKING DAILY (May 15, 2015). See alsoRequest for Information Regarding Student Loan Servicing, CFPB, No. CFPB-2015-0021 (May 2015).
33 Joint Statement of Principles on Student Loan Servicing, 80 Fed. Reg. 67,389 (Nov. 2, 2015).
34 K. Claire Compton, Consumer Bureau Launches Public Inquiry Into Student Loan Servicing Practices, BLOOMBERG BNA BANKING DAILY (May 15, 2015).
35 Joint Statement of Principles on Student Loan Servicing, 80 Fed. Reg. 67,389 (Nov. 2, 2015).
36 Press Release, CFPB, CFPB Orders Discover Bank to Pay $18.5 Million for Illegal Student Loan Servicing Practices (July 22, 2015).
37 Jeff Bater, CFPB Flexes Enforcement Power to Attack Bad Practices, BLOOMBERGBNA BANKING DAILY (Sept. 18, 2015).
38 Press Release, CFPB, CFPB Takes Action Against Lead Aggregators for Online Trafficking of Personal Information (Dec. 17, 2015).
39 The number of enforcement actions per year when individuals are named as respondents/defendants are as follows: 3 actions in 2012; 7 actions in 2013; 14 actions in 2014; and 16 actions in 2015.
40 See Consumer Fin. Protection Bureau v. Stricklin, No. 1:14-cv-00578-RDB (D. Md. Feb. 27, 2014).
41 Decision and Order, In re Giampiccolo, No. 2015-CFPB-GIAMPICCOLO-0001 (Aug. 1, 2015); Decision and Order, In re Selling Source, LLC, No. 2015-MISC-Selling Source, LLC-0001 (Aug. 6, 2015).
42 Stipulated Final Judgment and Order, Consumer Fin. Protection Bureau v. Wells Fargo Bank, N.A., No. 1:15-cv-00179-RDB (D. Md. Feb. 5, 2015).
43 Complaint, Consumer Fin. Protection Bureau v. Pension Funding, LLC, No. 8:15-cv-01329-JLS-JCG (C.D. Cal. Aug. 20, 2015).
44 Press Release, CFPB, CFPB Takes Action Against Wells Fargo and JPMorgan Chase for Illegal Mortgage Kickbacks (Jan. 22, 2015).
45 Stipulated Final Judgment and Order, Consumer Fin. Protection Bureau v. Wells Fargo Bank, N.A., No. 1:15-cv-00179-RDB (D. Md. Feb. 5, 2015).
46 SeeDecision and Order, In re Selling Source, LLC, No. 2015-MISC-Selling Source, LLC-0001 (Aug. 6, 2015); Eric V. Sancho, Consent Order, No. 2015-CFPB-0033 (Dec. 17, 2015); Complaint, Consumer Fin. Protection Bureau v. D and D Marketing Inc., No. 2:15-cv-9692 (C.D. Cal. Dec. 17, 2015).
47 An analysis of the issues involved in 2015 actions with individual respondents/defendants does not accurately show trends by issue type given the small annual sample size of such actions. Thus, the analysis of these actions by issue type spans from 2012 - 2015 to provide a more clear picture of the issues involved when an individual is a named respondent/defendant.
48 Press Release, CFPB, CFPB Orders Subprime Credit Reporting Company and Owner to Pay $8 Million Penalty for Illegal Practices (Dec. 3, 2015).
49 CFPB, CFO UPDATE FOR THE FOURTH QUARTER OF FISCAL YEAR 2015 (Nov. 19, 2015).
50 Chris Bruce, Citibank Settles CFPB, OCC Card Claims for $770 Million, BLOOMBERG BNA BANKING DAILY (July 22, 2015).
51 Citibank, N.A., Consent Order, No. 2015-CFPB-0015 (July 21, 2015).
52 Bruce, supra note 50.
53 Press Release, CFPB, CFPB Orders Citibank to Pay $700 Million in Consumer Relief for Illegal Credit Card Practices (July 21, 2015).
54 Bruce, supra note 50.
55 Complaint, Consumer Fin. Protection Bureau v. S/W Tax Loans, Inc., No. 1:15-cv-00299 (D. N.M. Apr. 14, 2015).
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