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Do you remember where you were 10 years ago?  If you were in the consumer finance business, then chances are that you were in your office trying to digest the changes coming to your business life based on the passage of the Dodd-Frank Act and the creation of the Bureau of Consumer Financial Protection.  Well, in the words of that great New York Yankee Hall-of-Fame catcher and American philosopher, Yogi Berra, “It’sdéjà vu all over again!”

We will soon be faced with an activist CFPB once again.  It won’t be led by Director Richard Cordray, but it is likely to be led by an activist consumer advocate who mirrors his thinking.  Recall that during Mr. Cordray’s tenure, the Bureau secured over $600 million in civil money penalties and over $11.9 billion in relief for consumers.  There is no reason to think that the CFPB will not again take on the role of enforcer-in-chief of consumer financial protection laws.  

(I do note here, as an aside, that but for the successful Constitutional challenge to the fixed tenure of the Director, the current Director Kathy Kraninger could have been expected to serve another three years under a Biden Presidency.  I doubt that she will be invited to remain in her position.)

The difference between now, though, and 10 years ago is that we have an understanding of how the CFPB can affect our business.  We know how important compliance with the various laws, rules, and regulations can be, and we should be better prepared this time around.

So, supervision is the concept that the CFPB may serve as one of the regulators to which business answers.  For depository institutions, the main regulator continues to be the prudential regulator—such as the Federal Reserve, the FDIC, the Comptroller of the Currency, or the National Credit Union Administration.  For non-depository consumer finance companies and credit sellers, the main regulators are the CFPB, the Federal Trade Commission, and the State regulatory agencies.  CFPB supervisory authority is not singular for non-depositories.  Any number of regulators can share in supervisory responsibility.

And, the same is actually true for the enforcement powers of the regulators.  The CFPB is not alone in enforcing the federal consumer finance laws.  The FTC has a role, and the state regulators do as well. For example, the Supervisor of the Bureau of Loans in Alabama is not limited to enforcing Alabama law.  The Supervisor also has the power under the Dodd-Frank Act to enforce federal consumer finance laws, as does the Attorney General of Alabama.

We should be prepared for a new era of consumer protection pursued by the CFPB. After all, it is inevitable that the pendulum swings back. But, this time, the consumer finance industry should be better positioned to avoid claims of unfair, deceptive, or abusive acts and practices. It is time to dust off the Compliance Manuals.

Please note: This is the one hundred thirty-fifth blog in a series of Back to Basics blogs, in which relevant and resourceful information can be easily accessed by clicking here.