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  • Congress Seeks Answers from Bank CEO and Federal Bank Regulators

    Consumer Finance

    On September 20, the CEO of a major national bank faced questions from the House Financial Services Committee over consumer account practices uncovered during a recent enforcement action by the CFPB. The CEO will return to Capitol Hill on September 29 for additional testimony in front of the Committee. In addition, the Director of the CFPB and the Comptroller of the Currency faced scrutiny from the Senate Committee on Banking, Housing & Urban Affairs on their agencies awareness of, and failure to prohibit, the bank’s alleged actions for more than two years. In prepared testimony, Director Cordray indicated that the civil penalty levied against the bank was the “largest fine by far that the Consumer Bureau has imposed on any financial company to date” calling it a “dramatic amount as compared to the actual financial harm to consumers” but also “justified here by the outrageous and abusive nature of these fraudulent practices on such an enormous scale.” Director Cordray further stated that this enforcement action should help clarify how the CFPB will continue to analyze and enforce the prohibition on “abusive” practices under its mandate.  Meanwhile Comptroller Curry explained how this enforcement action demonstrates the complimentary roles played by the OCC and the CFPB in supervising bank practices.

    CFPB OCC U.S. Senate U.S. House Senate Banking Committee House Financial Services Committee

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  • CFPB Responds to Senators' Request to Tailor Regulations to Exempt Smaller Financial Institutions

    Consumer Finance

    On August 17, CFPB Director Cordray responded to a request, from a 70 senator coalition spearheaded by Senators Donnelly (D-IN) and Sasse (R-NE), that the CFPB further tailor its regulations that may be “unduly burdensome” for community banks and credit unions. In Cordray’s response, he stated that the CFPB is committed to achieving well-tailored and effective regulations within the provisions of Dodd-Frank. Further, Cordray outlined already-in-place exemptions for small creditors, various actions taken to ensure the CFPB’s “commitment” to maintaining effective regulations, and highlighted the Small Business Regulatory Enforcement Act (SBREFA) panel as “just one part of the Bureau’s broader initiatives to address the unique issues facing small financial institutions.” Cordray did, however, note that one of the CFPB’s objectives is to “enforce Federal consumer financial law ‘consistently, without regard to the status of a person as a depository institution.’”

    CFPB Dodd-Frank U.S. Senate Community Banks Small Business Regulatory Enforcement Fairness Act

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  • Senate Judiciary Committee Holds Hearing to Discuss FCC's Proposed Privacy Rules

    Privacy, Cyber Risk & Data Security

    On May 11, the Subcommittee on Privacy, Technology and the Law of the Senate Judiciary Committee held a hearing titled “Examining the Proposed FCC Privacy Rules.” Present at the hearing were witnesses FCC Chairman Thomas Wheeler, FCC Commissioner Ajit Pai, FTC Chairwoman Edith Ramirez, and FTC Commissioner Maureen Ohlhausen. The focal point of the hearing was the FCC’s proposed rule (which comes after its Open Internet Order released in February 2015, designed to preserve net neutrality) on broadband internet services, which is, according to proponents of the proposal, intended to ensure that consumers’ personal information is adequately protected when Internet Service Providers (ISP) collect information on consumers using their products. According to FCC Chairman Wheeler’s opening remarks, the FCC’s proposed rule governing the privacy and security of consumer data is built on “transparency, choice, and security.” Commission members Pai and O’Reilly oppose the proposal, with Commissioner Pai commenting at the hearing that the proposal imposes “stringent regulation” on ISPs, in spite of Commissioner Wheeler’s November 2015 statement before the House Energy and Commerce Committee’s Subcommittee on Communications and Technology that the FCC “would ‘not be regulating the edge providers differently’ from ISPs.” In contrast to the FCC’s proposal, the FTC maintains a unified approach toward regulating ISPs and other online actors. Speaking to the FTC’s efforts to protect consumer information, Chairwoman Ramirez’s and Commissioner Ohlhausen’s joint testimony summarized the FTC’s enforcement, policy, and education work related to consumer privacy and highlighted recent FTC and FCC joint enforcement actions. According to Senator Leahy’s (D-VT) opening remarks, the FCC’s recent proposal raises the question as to whether FCC regulation of specialized broadband privacy issues is “unnecessary in light of the FTC’s general enforcement power.” Advocates of the FCC’s proposal, such as Senator Leahy, maintain that the FTC’s case-specific enforcement power cannot be a substitute for the FCC’s “expert rulemaking process”; while those in opposition, such as FCC Commissioner Pai, argue that the proposal “makes little, if any, sense.” Comments on the FCC’s proposal are due by May 27, 2016, with the reply comment period ending June 27, 2016.

    FTC FCC U.S. Senate Privacy/Cyber Risk & Data Security

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  • Democratic Senators Commission GAO to Study Fintech Industry


    On April 18, Senators Sherrod Brown (D-OH), Jeffrey Merkley (D-OR), and Jeanne Shaheen (D-NH) sent a letter to the Government Accountability Office (GAO) requesting that it complete a study on the fintech industry. Under the Dodd-Frank Act, the GAO is required to examine the regulatory structure of person-to-person (P2P) lending. While the letter recognizes that the GAO issued a report on P2P lending in 2011, the senators urged the GAO to recognize that the lending platforms of financial technology firms (often called fintech) “has changed dramatically and evolved beyond consumer lending,” and that “P2P lending, now generally called marketplace lending, is not the only form of fintech that has developed over the last several years.” The letter further cautions that, “gaps in understanding and regulation of emerging financial products may result in predatory lending, consumer abuse, or systemic issues.” Finally, Senators Brown, Merkley, and Shaheen urged the GAO to provide responses to questions relating to, among other things, (i) the size and structure of the loan portfolios maintained by privately owned fintech lenders; (ii) how fintech lenders’ relationships with financial institutions impact both the financial system at large and regulatory framework; (ii) whether the risks that may arise from the investor base shifting from individual investor to institutional investor have grown since this issue was first noted in the GAO’s 2011 report; and (iii) the anti-money laundering, data security, and privacy requirements fintech companies are subject to.

    Anti-Money Laundering U.S. Senate Online Lending GAO Fintech Privacy/Cyber Risk & Data Security Marketplace Lending Peer-to-Peer Predatory Lending

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  • Congress Passes Bill to Extend Foreclosure Protection Element of the SCRA


    On March 21, the U.S. House of Representatives passed S.B. 2393, which extends through 2017 the provision of the Servicemembers Civil Relief Act’s (SCRA) that protects servicemembers against foreclosure without a court order or waiver for one year following completion of their service. On January 1, 2016, the foreclosure protection provision reverted back to the period of active duty military service plus 90 days, rather than the period of active duty military service plus one year. Upon the President’s signature, the SCRA’s protection against foreclosure without a court order or waiver will return to the period of active duty military service plus one year through December 31, 2017.       

    Foreclosure Servicemembers SCRA U.S. Senate U.S. House

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  • Senator Murray Sponsors Bill to Expand and Strengthen the SCRA

    Consumer Finance

    On March 17, Senator Patty Murray (D-WA) sponsored the SCRA Enhancement and Improvement Act of 2016 (the Act). The Act focuses especially on student loan servicers, but encompasses all financial institutions covered by the SCRA. Although the text of the Act is not yet available, the recently issued press release on the Act describes its proposed changes to the SCRA. Among other changes, the Act would revise the SCRA by: (i) requiring automatic application of the SCRA’s interest rate cap; (ii) ensuring that student loan servicers have a dedicated SCRA representative; (iii) reducing the SCRA’s interest rate cap from 6% to 3%; (iv) protecting servicemembers when their loans are transferred or sold by requiring “sufficient notice”; (v) forgiving all federal and private student loan debt if a servicemember dies in the line of duty; (vi) expanding the interest rate cap to all debts, no matter when incurred; (vii) clarifying that servicemembers may bring a private right of action under the SCRA; (viii) doubling the fines for violations of the SCRA; and (ix) expanding certain protections on mortgages, leases, and cable and internet contracts.

    Student Lending SCRA U.S. Senate

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  • State AGs Urge Senate to Pass Bill Banning Debt Collection Robocalls

    Consumer Finance

    On February 10, Indiana Attorney General Greg Zoeller and Missouri Attorney General Chris Koster, along with 23 other state attorneys general, wrote to the Senate Committee on Commerce, Science, and Transportation (Committee) urging it to pass legislation repealing a recent amendment to the Telephone Consumer Protection Act (TCPA) that allows debt collection robocalls to consumers’ cellphones. According to the AGs’ letter, the TCPA currently “permits citizens to be bombarded by unwanted and previously illegal robocalls to their cell phones if the calls are made pursuant to the collection of debt owed to or guaranteed by the United States.” The letter references the FCC’s efforts to slow the proliferation of robocalling and calls the recent amendment to the TCPA a “step backward in our law enforcement efforts” to protect consumers from “unwanted and unwelcome robocalls.”

    TCPA State Attorney General Debt Collection FCC U.S. Senate

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  • Obama Administration's FY 2017 Budget Proposal Makes Room for Small Dollar Loan Program

    Consumer Finance

    This week, the Obama Administration released the Fiscal Year 2017 Budget Proposal. President Obama’s proposed budget for the Department of the Treasury would, through the Community Development Financial Institutions (CDFI) Fund, reserve at least $10 million until September 30, 2018 to provide grants for loan loss reserve funds and to provide technical assistance for small dollar loan programs under section 1206 of the Dodd-Frank Act. The Small Dollar Loan Program, according to the budget proposal, “will support broader access to safe and affordable financial products and provide an alternative to predatory lending by encouraging CDFIs to establish and maintain small dollar loan programs.” Earlier this year, Senator Sherrod Brown (D-OH), in a letter to the President, requested that the FY 2017 budget proposal prioritize funding for small dollar loan programs, as outlined in Title XII – Improving Access to Mainstream Financial Institutions – of the Dodd-Frank Act.    

    On a similar note, the House Financial Services Committee held a hearing titled, “Short-term, Small Dollar Lending: The CFPB’s Assault on Access to Credit and Trampling of State and Tribal Sovereignty,” on February 11, which examined the short-term, small dollar credit marketplace. During the hearing, House members expressed concern that the CFPB and other government agencies are “overextending their efforts” in regulating the industry, thus limiting consumers’ access to credit. Per the CFPB’s 2015 Regulatory Agenda, the agency is “in the process of developing a Notice of Proposed Rulemaking to address concerns in markets for payday, auto title, and similar lending products.” This stimulated conversations on how the potential rule would affect consumers and existing state and tribal law. CFPB Acting Deputy Director David Silberman was present at the hearing; Silberman maintained that the CFPB’s regulatory efforts are to ensure that small dollar loans are affordable and that consumers are not “spiraling into continual debt.”

    CFPB Payday Lending Department of Treasury U.S. Senate U.S. House Obama Predatory Lending

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  • Senator Brown Requests Funding for Dodd-Frank Small Dollar Loan Programs

    Consumer Finance

    On January 6, U.S. Senator Sherrod Brown, who serves on the Senate Committee on Banking, Housing, and Urban Affairs, sent a letter to President Obama requesting that the FY 2017 budget proposal prioritize funding for programs outlined in Title XII – Improving Access to Mainstream Financial Institutions of the Dodd-Frank Act, which has yet to be implemented. According to Senator Brown, resources are needed in order to implement Title XII, which would, among other things, (i) allow the Treasury to establish partnerships with certain eligible entities to help low and moderate income individuals access accounts at banks and credit unions; and (ii) foster partnerships with non-profits, federally insured depository institutions, community development financial institutions (CDFIs), or State, local, or tribal governments to provide low-cost, small dollar loans to traditionally unbanked or underbanked Americans as a more affordable option to the more costly alternative financial services (AFS), such as payday loans, money orders, cash checking, remittances, and auto title loans.

    CFPB Payday Lending Dodd-Frank U.S. Senate

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  • Omnibus Spending Package Affects Cybersecurity Legislation

    Privacy, Cyber Risk & Data Security

    On December 15, Speaker Paul Ryan (R-WI) unveiled the omnibus spending bill, which includes the Cybersecurity Act of 2015 – legislation that would affect how businesses share information with each other and the government, and establish an information system for the government to share “cyber threat indicators and defensive measures in real time consistent with the protection of classified information” with federal and non-federal entities. The cybersecurity text included in the omnibus bill is a combination of three cybersecurity bills that were under legislative consideration this year, as follows: S. 754 - Cybersecurity Information Sharing Act of 2015; H.R. 1731 - National Cybersecurity Protection Advancement Act of 2015; and H.R. 1560 - Protecting Cyber Networks Act. Designating the Department of Homeland Security as the government’s proxy, the revised legislation provides entities with liability protections to voluntarily share with the government cybersecurity threat information. Specifically, regarding the sharing or receipt of cyber threat indicators, the legislation reads, “[n]o cause of action shall lie or be maintained in any court against any private entity, and such action shall be promptly dismissed, for the sharing or receipt of a cyber threat indicator or defensive measure under section 104(c).” Although the legislation includes text mandating that entities “implement and utilize a technical capability configured to remove any information not directly related to a cybersecurity threat that the non-Federal entity knows at the time of sharing to be personal information of a specific individual or information that identifies a specific individuals,” critics from privacy and civil liberties organizations argue that the language is vague, offering citizens little protection while enhancing intelligence agencies’ capability to invade personal privacy.

    The House is scheduled to vote on the legislation Friday, December 18, with the Senate – should the legislation pass the House – acting shortly thereafter.

    U.S. Senate U.S. House Privacy/Cyber Risk & Data Security

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