Are Your Business Activities On the CFPB’s Radar?


November 12, 2012
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CFPB compliance New JerseyThe U.S. Consumer Financial Protection Bureau is giving New York and New Jersey companies a glimpse of what business practices are currently on its radar. The agency recently released its first Supervisory Highlights report, which documents its supervision work over the past fiscal year.

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, a number of New York and New Jersey businesses now fall under the purview of the CFPB. The agency is specifically authorized to oversee banks with over $10 billion in assets, and their affiliates; nonbanks of all sizes that offer or provide mortgages and related services, private education loans, and payday loans; larger participants in other markets, such as consumer reporting and debt collection; and, other nonbanks that the CFPB deems pose a risk to consumers.

Over its first year in operation, the CFPB has demonstrated that it takes its regulatory role very seriously. It most recently filed enforcement actions against Capital One, Discover, and American Express for allegedly misleading credit card customers, which resulted in millions of dollars in fines and customer refunds for the companies.

For other supervised entities, below are several additional key issues identified by the CFPB:

  • Credit Cards: Bureau examiners found instances where the credit limit of a consumer who was under 21, but whose account was associated with a consumer 21 or older, was raised without consent of the co-applicant. In many cases, the institution did not have proper procedures in place to ensure that credit line increase requests are sent to the co-applicant for approval.
  • Reporting to Credit Bureaus: The CFPB found that not all relevant employees at supervised institutions had sufficient training to comply with fair credit reporting requirements, which sometimes resulted in inaccurate information about consumers’ accounts being reported to credit bureaus.
  • Mortgages: The CFPB found violations of federal consumer financial law, including failure to provide borrowers with clear and timely disclosures regarding the nature and costs of the real estate settlement process, such as through inaccurate Good Faith Estimates or HUD-1 forms. Violations also included failure to provide accurate disclosures of interest rates, payment amounts, and payment schedules.

Of course, the report only offers a brief summary of the agency’s activities over the past year. Nonetheless, it serves as a useful guide for supervised entities, as the CFPB continues to ramp up its oversight.

If you have any questions about this report or would like to discuss other CFPB compliance concerns please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work. 

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Prior to joining Scarinci Hollenbeck, Dan Brecher was the head of the Securities and Investment Banking Department of a 250 lawyer Manhattan firm and ran his own boutique securities and investment banking law firm in Manhattan. Mr. Brecher’s experience ranges from general counsel of New York Stock Exchange and NASD/FINRA member brokerage firms to representing public and private companies in securities offerings and advising institutional and high net worth investors. He is currently Counsel at Scarinci Hollenbeck, Chair of the firm's Investment Banking practice and chief editor of Business Law News.

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