January 4, 2018

Both sides grossly overstate consumer watchdog's impact

In light of the recent change in leadership at the Consumer Financial Protection Bureau (CFPB), a debate about the utility and performance of the CFPB has resurfaced.

Most of the ink spilled falls into two camps. The first is courtesy of Sen. Elizabeth Warren (D-Mass.) and most self-appointed consumer advocacy groups: The CFPB is the only thing stopping Wall Street bandits from breaking into your home and prying money out of your calloused, hard-working, blue-collar hands.

The second argument comes courtesy of Rep. Jeb Hensarling (R-Texas), Wall Street Journal op-eds penned by highly paid industry lobbyists and disgruntled former CFPB employees that want jobs in the Trump administration:

The CFPB is an unaccountable bureaucratic government monster that didn't sue Wells Fargo fast enough or for enough money - but sued everyone else for too much money - and is preventing banks from giving more money at better rates to more consumers even though those banks really really want to.

I am proud to have worked at the CFPB for three years. Now, I am proud to advocate for clients with matters before the CFPB and clients in industries that are regulated by the CFPB. I don't know if I'm the best voice to opine on the societal value of the CFPB, but I can tell you that everything you're hearing about the CFPB from those two deeply entrenched camps is either false or grossly overstated.

The bureau has done some good things for consumers and for stability in consumer financial services markets, but they could also probably do more - sometimes by doing less. Most banks and financial services providers do well by their customers and consumers are, by and large, happy with their financial services providers; if they weren't, they wouldn't continue to do business with them. Read more at THE HILL
Dreher Tomkies LLP
Mulvaney Updates CFPB Mission

Just before the holidays, as a federal judge heard arguments about whether Leandra English or Mick Mulvaney should be the interim leader of the Consumer Financial Protection Bureau (that case is still pending), Acting Director Mulvaney officially changed the Bureau's mission statement.

Here's what it was under Director Cordray:

"The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives."

Here's what it is now:

"The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations, by making rules more effective, by consistently enforcing federal consumer financial law, and by empowering consumers to take more control over their economic lives." (emphasis added)

What's new here is the concept of identifying unnecessary or burdensome regulations -- one we've heard from President Trump in his earliest days in office -- and a change in enforcement focus from CFPB rules to "federal consumer financial law." Oh, and the word "fair" was removed.

This change has of course made CFPB proponents, including the Bureau's founder Sen. Elizabeth Warren, apoplectic. Read more at INSIDEARM
Will the New Year Bring a New CFPB? Planning in the Wake of Uncertainty. by Stinson Leonard Street LLP

The Consumer Financial Protection Bureau (CFPB) was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in July 2010 in the wake of a financial crisis, as an independent agency tasked with preserving the rights of consumers utilizing consumer financial products and services.

In the last 12-18 months, the structure of the CFPB has come under fire, being challenged both in the courts, in Congress, and politically, creating uncertainty for the consumer financial industry.

Court Challenges

In the past year, the structure of the CFPB has been challenged as unconstitutional in several cases in federal court, including:

October 2016 (U.S. Court of Appeals for the District of Columbia Circuit; PHH case) -in a unanimous three-panel decision the Court finds the structure of the CFPB unconstitutional citing that "[b]ecause the Director alone heads the agency without Presidential supervision, and in light of the CFPB's broad authority over the U.S. economy, the Director enjoys significantly more unilateral power than any single member of any other independent agency." The CFPB won the right for the case to be reheard in front of all the justices of the Court of Appeals, essentially wiping out the first decision. A decision is expected by the end of 2017. Read more at LEXOLOGY
CFSA Conference
CFPB Report: Consumer Credit Market Remains Largely Stable

The report finds that more consumers are signing up for secured cards that require a cash depost.

The Consumer Financial Protection Bureau's biennial report on the credit card market found that credit lines, number of accounts, average card debt, and enrollment in online services have increased over the past several years, according to a news release from the CFPB. The report also found that cardholders average fewer credit cards than before the recession, and more customers are signing up for secured cards that require a cash deposit.

Congress requires the bureau to monitor the credit card marketplace and to produce a report on a biennial basis. This report, the bureau's third, found that the cost of card credit in general and across credit score tiers has remained largely stable since the bureau's last report in 2015.

The composition of overall consumer costs-interest rates and fees-has also proved largely stable since the bureau's last report. The report also found that delinquency and charge-off rates, which were high during the financial crisis and then fell to historical lows in the years following the recession, have modestly increased over the last two years.

Other key findings in the report, according to the CFPB news release, include:

Wait, scrapping regulations is not the job of the Consumer Financial Protection Bureau?

Among the list of things Republicans are contractually obligated to vilify like a deranged evangelical preacher railing against the sins of the Village People, the Consumer Financial Protection Bureau ranks near the top. Despised by the G.O.P. since the day it was formed by Dodd-Frank, the C.F.P.B. has been deemed a "dictator" that steals money from consumers and subjects financial institutions to the type of treatment you'd expect in the Gulag. And though scrapping it entirely was always the dream, in November Donald Trump was able to install Mick "I don't like the fact that C.F.P.B. exists" Mulvaney as the agency's head, which essentially amounted to the same thing. Now, rather than going to the trouble of abolishing the bureau, Mulvaney can simply undermine its mission from the inside. And apparently he's not being shy about it!

Despite telling confused staffers that he had no plans to "set the place on fire or blow it up or lock the doors," Mulvaney kicked off his first day on the job by imposing a 30-day freeze on hiring and new rule-making. And just before Christmas, apparently figuring that there was no longer any reason to beat around the bush, the C.F.P.B changed its mission statement from this:
No, the two people who claim to run the Consumer Financial Protection Bureau have not met yet

Mick Mulvaney laid out a tentative plan Monday for remaking the Consumer Financial Protection Bureau, including adding more political appointees and launching a review of the watchdog's more than 100 active investigations and lawsuits.

Mulvaney said he plans to bring a more traditional structure to the bureau, borrowing ideas from the Office of Management and Budget, which he also leads. "We're running the place like any other new management team would," he said.

Trump appointed Mulvaney to the temporary post last week after the agency's former director, Richard Cordray, announced he was stepping down. But by then, Cordray had already named his former chief of staff, Leandra English, as acting director, setting up a legal battle that both sides acknowledge could linger for weeks or months. A federal judge is scheduled to hold another hearing on the matter Tuesday.

Meanwhile, Mulvaney and English have yet to meet in person.

"Yes, Ms. English is in the building from time to time. I have had no interaction with her" except through email, Mulvaney said during a meeting with reporters. English sometimes works out of another CFPB building, and they have not run into each other, he said.
CFPB's Payday Loan, Auto Lending Rules in Jeopardy. by Manatt Phelps & Phillips LLP

More Consumer Financial Protection Bureau rules may be reversed as lawmakers moved to dismantle both the payday loan rule and the auto lending rule. Meanwhile, a kinder, gentler CFPB announced its intent to revise its final prepaid accounts rule and apply a more lenient approach to HMDA data submission errors.

What happened

Since President Donald J. Trump took office in January, Republican lawmakers have leveraged the change in the administration to chip away at the CFPB's rulemaking efforts. Now under Trump administration control, the CFPB has even changed how it describes itself in press releases, adding as its mission, to "help[] consumer finance markets work by regularly identifying and addressing outdated, unnecessary, or unduly burdensome regulations."

Earlier this year, lawmakers passed H.J. Res. 111, which nullified the Bureau's controversial arbitration rule pursuant to the Congressional Review Act (CRA). The President signed the resolution into law in October. More recently, Acting Director Mick Mulvaney has announced several new staff political hires, with the apparent purpose of stocking the Bureau with personnel more friendly to the current administration.

Payday Loan Rule-Again looking to utilize the CRA-which permits the repeal of an agency rule if both branches of Congress pass a resolution of disapproval by a simple majority vote within 60 legislative days of the rule's finalization-legislators have now turned their focus to the CFPB's payday loan rule.

As we have previously reported, the Bureau's final rule on payday, vehicle title and other so-called high-cost installment loans created new consumer protections for a wide variety of short-term loans and provided official staff interpretations of the rules. Nearly 1,700 pages in length, the rule was issued on Oct. 4. Read more at LEXOLOGY
Alternative credit could help automotive dealers reach new customer demographics

The value of alternative credit in auto financing

Credit is the mountain individuals climb to establish respectable financial standing. However, this doesn't mean it should also be a Sisyphean burden, especially not for those without unreasonable debt. A credit score calculated per the standard FICO model will almost always prevent an individual from receiving any substantial bank loan, securing the lease for an apartment or financing a car.

The latter doesn't happen as often as the former two, but bad FICO scores usually lock auto buyers into usurious loans. As such, it's no surprise a 2013 study by Javelin Strategy found 44 percent of those classifiable as "low-income" never applied for an auto loan, nor had 28 percent of the underbanked. They cited late payments as a frequent reason why.

While this may understandably spook some lenders, these individuals may have other financial-history aspects that at least balance the debt. Thus, we'll examine why alternative credit calculation models may benefit auto dealers interested in how to market to millennials but who are unsure about these potential buyers' finances. Read more at MICROBILT
A_S Management
Voluntary benefits are the weapon that employers can use to differentiate themselves and attract and retain an engaged workforce. recommended by David Kilby, President at FinFit

Emerging Workplace Benefits Heading into 2018

Peter Marcia, CEO at YouDecide talks about how HR teams can identify potential gaps in healthcare benefits and decrease out-of-pocket expenses for employees in 2018.

With the new year approaching, HR managers are shifting their focus to benefit planning for the 2019 plan year. While questions loom about what direction healthcare benefits will take, the stability of voluntary benefits continue to be top of mind for many employers . Savvy benefit planners recognize that these programs round out compensation packages and contribute to their employees' financial wellness.

Understanding potential gaps in medical plans, HR managers are working to decrease out-of-pocket expenses for employees by offering worksite benefits that complement the core medical plan. Employers are also using voluntary benefits to enhance their benefits offerings to attract and retain competitive talent.

Here are three voluntary benefits offerings that gained traction in 2017 and we expect will continue the momentum into the coming year. When properly communicated, these benefits, can add tremendous value to your employees and drive overall engagement within your workforce.
O_Keefe _ O_Malley
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