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I have written about the CFPB in this Blog Series almost as often as I have written about collections! My most recent post on this subject can be found here. Well, it is time to talk CFPB again.

President Biden has chosen Rohit Chopra to lead the CFPB. Chopra helped Massachusetts Sen. Elizabeth Warren establish the Bureau; and he served as a CFPB assistant director and as student loan ombudsperson after the agency was launched in 2011. He has served as a Federal Trade Commissioner since 2018. The FTC and the CFPB are the nation’s pre-eminent consumer protection agencies.

Chopra has let it be known that his top priorities at the CFPB include ramping up enforcement of the fair lending laws in addition to taking on the payday lending industry.  He is also expected to expand what counts as an Unfair, Deceptive or Abusive Act or Practice (UDAAP) under the Dodd-Frank Act. And this is what I want to focus on for a few minutes.

We have preached the importance of compliance management tools for years. Those creditors who paid attention to their knitting never heard much from the CFPB. Their state regulators have also appreciated their focus on compliance.

The past four years saw a marked de-emphasis on compliance, as there was not much supervision and enforcement of the fair lending laws. It is reasonable to assume that under Director-designee Chopra this may change. While Mr. Chopra must be confirmed by the Senate, there seems little doubt but that the CFPB will return to a more activist agency.

I believe that there are two specific matters to be faced now by the installment lending industry. The first is compliance management—nothing new here.  

But, the second matter—also not new—is the lingering problem of distinguishing installment lending from other forms of small dollar/short term lending. It is time that the industry draws a “bright-line” to distinguish itself from payday and title pawn lending.  This can be done by law or by regulation. In my judgment, the benefits to lenders, consumers and regulators from such a demarcation outweigh the risks.  

I am sure that there will be much attention paid to this issue in the months and years to come.

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