CFPB Announces Priorities for the Next Two Years

On February 25, 2016, the CFPB released a strategy identifying the nine priority goals it intends to work toward during the next two years.  In addition to supervision and enforcement, the CFPB’s near-term priority goals where it “hopes to make substantial progress over the next two years,” include:  arbitration, consumer reporting, debt collection, demand-side consumer behavior, household balance sheets, mortgages, open-use credit, small business lending, and student lending.

For each goal, the CFPB provided an overview of the specific financial product or financial service, its vision for the market, and how it intends to use its tools over the next two years to eliminate or lessen consumer harm.  With respect to the mortgage industry, the CFPB “envisions a mortgage market where lenders serve the entire array of credit-worthy borrowers fairly and in a non-discriminatory manner, servicers’ processes result in fair and efficient outcomes for consumers, and new mortgage rules are implemented in a manner that supports a sustainable mortgage market.”  To achieve these goals, the CFPB intends to ensure that the Home Mortgage Disclosure Act is successfully implemented, that its supervisory and enforcement programs ensure that consumers have equal and fair access to mortgage credit, and that servicers properly implement the new servicing rules with a focus on protecting delinquent borrowers.  The CFPB also said that it will work with institutions to support implementation of the mortgage rules and assess the effectiveness of the new rules.

Other notable CFPB priorities include:

• Debt Collection – The CFPB stated that it receives more complaints from consumers about collections than any other area.  The CFPB intends to “initiate the rulemaking process with the goal of finalizing a rule that will establish clear rules of the road to ensure that debt collectors (both first-party and third-party) treat consumers with dignity and respect, obtain and retain the information necessary to substantiate the debts they collect on, and provide consumers with appropriate information about their rights and the debt collection process.”
• Arbitration – The CFPB’s focus on the arbitration agreements tied to many consumer financial products and services continues.  The CFPB intends to release a new rule based on the results of a recent study, which it claims will “enable consumers to effectuate their rights and hold institutions accountable for unlawful conduct.”
• Consumer Reporting – The CFPB indicated that it may consider rulemaking around furnisher and consumer reporting accuracy, dispute resolution, and institutional accountability.
• Open-Use Credit – The CFPB confirmed that it defines “open-use credit” as “any credit product that is offered without an expectation that the loan will be used for a specific purchase, such as to buy a home or a car, or to finance higher education.  Open-use credit may be secured (backed by collateral, such as a car) or unsecured.”  This means that any rules issued by the CFPB related to the open-use credit market, may target credit cards, overdraft products, payday loans, auto title loans, and installment loans.   The CFPB also said that it intends to propose a “larger participant rule” for the installment lending market that will expand its supervisory scope over the lending markets.

The CFPB stated in a blog post that, “we selected these goals based on the extent of the consumer harm that we identified and our capacity to eliminate or lessen that harm.”  Specifically, the priorities were set with a focus on four types of problems that consumers face in the financial market:

• Deception, or situations where the costs and risks of a financial decision are hidden or unclear;
• Debt traps, or practices that trigger a cycle of debt where consumers rack up substantial costs over time;
• Dead ends, or situations where people cannot simply walk away when they are treated unfairly; and
• Discrimination, or unequal treatment based on characteristics such as race, gender or other factors that the law prohibits.

The CFPB also noted that while the goals it announced primarily focus on forward-looking priorities, “there are some priority work streams that are well-established and ongoing, and we will see that work through to completion.  This includes, in particular, our fair lending oversight of indirect auto lenders and our rulemaking on prepaid cards.”

The details about the CFPB nine regulatory near-term priorities are available here: http://files.consumerfinance.gov/f/201602_cfpb_policy-priorities-over-the-next-two-years.pdf.