CFPB Enforcement Actions Fall Off in Second Quarter

By Jeff Bater

Enforcement activity by the Consumer Financial Protection Bureau tailed off sharply in the second quarter, with no crackdowns against a bank.

CFPB enforcement actions fell to six April through June, compared to 17 in the first quarter of 2017, according to Bloomberg Law’s CFPB Enforcement Tracker and CFPB Enforcement Analytics.

The first three months of the year marked the second-busiest quarter in CFPB history, signaling 2017 could turn out to be very active for the bureau. But the second quarter saw fewer CFPB actions than any quarter in 2015 or 2016.

Gerry Sachs, of counsel at Paul Hastings LLP in Washington, said he thinks the bureau pushed a lot of enforcement actions to resolution just after the election.

“As a result, there’s a lull in investigations,” he told Bloomberg BNA. “I would suspect that in the second quarter, what they have been doing is initiating investigations for later in the year.”

Last year, CFPB enforcement activity picked up in the latter half. The bureau took 16 actions during the first six months, while there were 26 crackdowns announced July through December.

“What you can’t see is their decision-making on opening investigations,” Ronald L. Rubin, a former CFPB enforcement attorney and now a writer whose pieces focus on the bureau, told Bloomberg BNA. “You don’t know what is or isn’t in the pipeline.”

Nonbank Targets

Lately, the agency’s actions have been for rather small sums. At the end of the second quarter, it announced cracking down on credit repair companies for allegedly charging illegal fees and misleading customers. The affected parties agreed to pay around $2 million to settle the charges.

“Many of those are nuisance settlements,” Rubin said. “When you see a settlement in the neighborhood of $1 million, you should remember that the defendant would have paid his lawyers that much to fight and win.”

The level of enforcement against banks is far less aggressive than in the past, according to a tracking of the bureau’s activity. The agency brought 188 enforcement actions since it began enforcement activity in 2012. Of those 188 actions, 37 of them — or 19.7 percent — have concerned banks, while 151— or roughly 80 percent — involved nonbanks.

Yet in the first six months of the year, only one enforcement action was taken against a bank. The bureau announced in January it was suing TCF National Bank for allegedly tricking consumers into costly overdraft services.

Pushing Back

A notable enforcement action in the second quarter was an April lawsuit against Ocwen Financial Corp., a mortgage servicer, for allegedly making widespread errors and illegally foreclosing. The CFPB said Ocwen botched basic functions like sending accurate monthly statements, crediting payments and handling taxes and insurance from escrow accounts.

But the company has pressed back on the CFPB over the suit, challenging whether the bureau is unconstitutional.

“The targets are pushing back now,” Rubin said. “They’re not caving. The bureau used to be judge, jury, and executioner. People thought it was impossible to fight them. Since the PHH decision, the first thing any defendant does is challenge the bureau’s constitutionality.”

PHH is a New Jersey mortgage company that challenged a $109 million disgorgement order by CFPB Director Richard Cordray in 2015. PHH sought review and a federal court panel ruled in its favor last October.

To contact the reporter on this story: Jeff Bater in Washington at jbater@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

For More Information

Bloomberg Law's CFPB Enforcement Tracker is available to subscribers at: https://www.bloomberglaw.com/product/bankfinance/page/enforcement_tracker_cfpb

Bloomberg Law's CFPB Enforcement Analytics is availalbe to subcribers at: https://www.bloomberglaw.com/product/bankfinance/secondary_page/enforcement_analytics_cfpb

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