CFPB News: Advisory Committee Changes, Constitutionality Hearing

Financial Services Law

What’s new at the Consumer Financial Protection Bureau (CFPB or Bureau)?

Recently, the Bureau announced tweaks to its advisory committees, published its annual report on Fair Debt Collection Practices Act (FDCPA) enforcement activity in conjunction with the Federal Trade Commission (FTC), issued a 50-state servicemember complaint report, and had its constitutionality debated in the U.S. Court of Appeals for the Fifth Circuit.

What happened

Advisory committees—Inspired by Director Kathy Kraninger’s three-month “listening tour,” the CFPB announced that it will enhance engagement with its advisory committee charters. “I’ve seen firsthand how the Bureau benefits from the valuable input provided by committee members,” she explained. “I have also seen how the joint committee meeting is resulting in members sharpening their ideas by engaging in a thorough dialogue.”

Effective in fiscal year 2020, the Consumer Advisory Board (CAB), Academic Research Council (ARC), Community Bank Advisory Council (CBAC) and Credit Union Advisory Council (CUAC) will expand their collective focus to “broad policy matters” and increase the frequency of their in-person meetings from the current two meetings to three times each year.

The CAB, CBAC and CUAC will continue with their joint meetings. As for the ARC, it will be elevated to a director-level advisory committee, although it will continue to hold its in-person meetings separately and twice a year.

Membership terms for the committees will grow from one year to two, with staggered terms served. All existing members are set to have their terms expire as of September 2019, but half will be provided an extension in order to achieve the staggered terms and ensure continuity, the CFPB said. Each committee will also be assigned a vice chair in addition to the current chair position.

The Bureau has begun accepting applications for members to serve on its advisory committees.

FDCPA report—In the annual joint report with the FTC on FDCPA enforcement, the CFPB disclosed that it handled roughly 81,500 debt collection complaints, with attempts to collect a debt the consumer claimed was not owed as the most common complaint, followed by written notifications about the debt and communication tactics.

Six public enforcement actions arising from alleged FDCPA violations were initiated by the CFPB in 2018. One resulted in an $800,000 civil penalty; another resulted in a judgment in favor of the defendant. The four other cases remain in active litigation.

The CFPB also filed two amicus briefs in cases raising FDCPA issues (one in the Supreme Court and a second in a federal court of appeals), identified one or more violations of the statute through its supervisory examinations, and conducted “a number” of nonpublic investigations of companies to determine whether they engaged in collection practices that ran afoul of the FDCPA.

Education and public outreach were also part of the Bureau’s FDCPA efforts, as well as research projects, which aided in the ongoing development of a potential debt collection rule. The report noted that the CFPB intends to issue a Notice of Proposed Rulemaking in the spring of 2019 on debt collection that will address issues ranging from communication practices to consumer disclosures.

Servicemember complaint snapshot—In its latest servicemember complaint survey, the Bureau documented the numbers, trends and top issues reported by servicemembers, veterans and their families on a state-by-state basis, noting a 12 percent overall increase in complaints over the prior year.

Credit or consumer reporting took the top spot with the most complaints (38 percent of the total complaints, the majority of which were about incorrect information), followed by complaints about debt collection (26 percent, with the top issue being attempts to collect a debt not owed), mortgages (trouble during the payment process taking the top spot for most complaints in this category), credit cards (receiving 8 percent of the total complaints, with problems with a purchase shown on a statement the most common), and checking or savings accounts (at just 6 percent of the servicemember complaints, with account management problems the most prevalent complaint).

Texas, California and Florida had the most complaints (likely reflecting large numbers of servicemembers and veterans), with the least coming from North Dakota, Vermont and South Dakota.

Constitutionality—Finally, the Fifth Circuit heard oral argument in the ongoing battle over the constitutionality of the Bureau in CFPB v. All American Check Cashing. The case began when the CFPB sued the check cashing company for assorted violations of the Consumer Financial Protection Act (CFPA), asserting that the company engaged in abusive, deceptive and unfair acts and practices.

All American responded with a motion to dismiss, arguing that the enforcement action was invalid because the Bureau’s structure is unconstitutional. A Mississippi federal court sided with the CFPB, citing the D.C. Circuit opinion in PHH Corp. v. CFPB for support.

The defendant appealed to the Fifth Circuit, continuing to argue that the structure of the CFPB—a single director with a fixed five-year term who can only be removed by the president for cause—is unconstitutional, therefore the enforcement action is invalid as the agency lacks the authority to bring it.

The three-judge panel heard oral argument in the case in late March.

To learn more about the CFPB’s advisory committees and apply for membership, click here.

To read the Bureau’s FDCPA report, click here.

To read the servicemember complaint snapshot, click here.

Why it matters

Bulking up the CFPB’s advisory committees is just the latest signal from Kraninger that she has opted to take a different approach than her predecessor, acting Director Mick Mulvaney, who limited his interactions with the groups. The focus on servicemember complaints in the most recent complaint snapshot highlights the Bureau’s continuing focus on servicemembers. And a decision from the Fifth Circuit could further complicate the analysis on the constitutionality of the CFPB. Although the Supreme Court has so far denied certiorari on the issue, two other federal appellate courts in addition to the Fifth Circuit are currently considering the Bureau’s constitutionality—the Ninth Circuit (which heard oral argument in CFPB v. Seila Law LLC in January) and the Second Circuit, where a New York federal court judge found the CFPB’s structure unconstitutional in a June 2018 decision in CFPB v. RD Legal Funding, LLC.