CRA Resolutions, Last RFI and Semiannual Report—With a Twist

Financial Services Law

In Consumer Financial Protection Bureau (CFPB) news, more resolutions have been filed under the Congressional Review Act (CRA) to overturn Bureau rules, and the last in a series of 12 Requests for Information (RFIs) was released.

The Bureau also published its semiannual report, with a message from Acting Director Mick Mulvaney calling on Congress for a reduction in the CFPB’s power.

What happened

After the success of using the CRA to vacate the CFPB’s arbitration rule last year, some lawmakers are again leveraging the statute to attempt to do away with other Bureau rules. The statute 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.

In December, Rep. Dennis Ross (R-Fla.) introduced H.J. Res. 122 to overturn the CFPB’s payday loan rule. The rule, which covers payday, vehicle title and other so-called high-cost installment loans, created new consumer protections for a wide variety of short-term loans.

One of the more controversial provisions of the rule declares it an “unfair and abusive practice” for any lender to make covered short-term or longer-term balloon-payment loans, including payday and vehicle title loans, before reasonably determining that consumers have the ability to repay the loans according to their terms. Pursuant to the rule, it would also be an unfair and abusive practice to make attempts to withdraw payment from a consumer’s account after two consecutive payment attempts have failed, unless the consumer provides a new and specific authorization to do so.

H.J. Res. 122 would eliminate the rule, stating “[t]hat Congress disapproves of the rule submitted by the Bureau of Consumer Financial Protection relating to ‘Payday, Vehicle Title, and Certain High-Cost Installment Loans’ and such rule shall have no force or effect.”

Sen. Lindsey Graham (R-S.C.) followed up with his own resolution to overturn the rule in March, as the deadline approaches for the 60-day window in which the CRA has effect. Identical to the House resolution, S.J. Res. 56 was referred to the Senate Committee on Banking, Housing, and Urban Affairs.

Another Bureau promulgation potentially on the chopping block: the CFPB’s Bulletin 2013-02, a publication that provided guidance to indirect auto financing companies that took the position that the practice of “dealer markups” would be challenged by the Bureau under a disparate impact theory of discrimination.

Last year, the Government Accountability Office concluded the Bulletin is a general statement of policy and therefore a rule that may be repealed pursuant to the CRA process.

Sen. Jerry Moran (R-Kan.) responded with S.J. Res. 57, a resolution that would repeal Bulletin 2013-2. On April 18, the Senate passed the measure by a vote of 51 to 47, moving it to the House for consideration.

In other news, the CFPB brought its streak of RFIs to an end with the topic of consumer complaints and inquiries. Over the past several months, Mulvaney released a total of 12 RFIs as the first step in what he promised to be a complete review of the Bureau’s enforcement, supervision, rulemaking, market monitoring and education activities.

Topics have ranged from enforcement processes to both adopted and inherited rules. For the last RFI, the Bureau requested feedback on all aspects of its consumer complaint and inquiry handling process. The CFPB defined consumer complaints as “submissions that express dissatisfaction with, or communicate suspicion of wrongful conduct by, an identifiable entity related to a consumer’s personal experience with a financial product or service,” while consumer inquiries means “consumer requests for information—typically proffered by telephone—to its Office of Consumer Response about consumer financial products and services, the status of a complaint, an action taken by the Bureau, and often combinations thereof.”

Possible areas of input include whether the CFPB should require consumers to classify their submission affirmatively as a complaint or inquiry prior to submission and whether the Bureau should add or discontinue any channels for accepting complaints or expand, limit or maintain the ability of authorized third parties to submit complaints. To date, the agency has received more than 1.5 million consumer complaints, the RFI noted.

Comments will be accepted until July 16.

Finally, the CFPB issued its semiannual report to Congress last week, covering the Bureau’s work from April 1, 2017, through Sept. 30, 2017. In addition to discussing supervisory and enforcement efforts, the report includes a message from Mulvaney calling on Congress to make changes to the “far too powerful” Bureau.

“By structuring the Bureau the way it has, Congress has established an agency primed to ignore due process and abandon the rule of law in favor of bureaucratic fiat and administrative absolutism,” Mulvaney wrote. Legislative frustration with the Bureau—whether with himself or former Director Richard Cordray at the helm—“should be a warning sign that a lapse in democratic structure and republican principles has occurred. This cycle will repeat ad infinitum unless Congress acts to make it accountable to the American people.”

To that end, Mulvaney provided lawmakers with four changes “to establish meaningful accountability for the Bureau: (1) Fund the Bureau through Congressional appropriations; (2) Require legislative approval of major Bureau rules; (3) Ensure that the Director answers to the President in the exercise of executive authority; and (4) Create an independent Inspector General for the Bureau.”

In addition to the unusual beginning, the remainder of the report differs from those issued under prior leadership. Significantly shorter than prior reports, the Bureau dropped the use of exhibits and graphs and refrained from aggregate totals of consumer redress obtained and civil money penalties assessed by the CFPB during the relevant period.

The CFPB did provide data on consumer complaints, documenting 317,200 filed with the Bureau between Oct. 1, 2016, and Sept. 30, 2017, with roughly 80 percent submitted via the website. Debt collection was the most complained-about product or service, the CFPB reported, followed by credit reporting and mortgages.

To read the RFI, click here.

To read the CFPB’s semiannual report, click here.

Why it matters

Certain lawmakers continue their efforts to do away with Bureau rules unpopular with industry but face looming deadlines to enact resolutions prior to the end of the CRA’s 60-day window, while the weeks of RFIs on various topics have finally come to an end. As for the first semiannual report issued by the CFPB under Acting Director Mulvaney’s leadership, its length and content differ from prior publications, but it really makes its mark as the first agency report to call on Congress to cap its own powers. Whether or not Congress responds, especially with the focus turning to the upcoming midterm elections, is an open question.



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