The Consumer Financial Protection Bureau (CFPB) has been busy hiring staff and building a regulatory agency from the ground up since July 21, 2011, when it assumed full rulemaking, enforcement and supervisory authority over 18 of the nation’s consumer protection laws that guide financial products and services, including the Fair Credit Reporting Act, the Equal Credit Opportunity Act, The Truth in Lending Act and the Fair Debt Collection Practices Act.
In January, President Obama name Richard Cordray as the first director of the CFPB, which expanded the bureau’s authority to supervise nonbank lenders. Although the CFPB has a number of issues that it will focus on, there are several early steps that the Dodd-Frank Act requires the CFPB to take that will impact the information services industry in the near-term:
Shorten and simplify consumer disclosure forms
The CFPB has made it clear that one of its first actions will be to make the terms and conditions of financial products and services easier for consumers to understand and compare to other offers. The agency has developed model mortgage disclosure forms for consumers as part of its Know Before You Owe program, which aims to make financial disclosure forms shorter and simpler. In addition, the CFPB partnered with the Department of Education to develop a financial aid shopping sheet to assist students and their families. The bureau also released model credit card agreements that are shorter and easier for consumers to understand. The CFPB currently is reviewing comments on the proposed model forms and is likely to issue a final draft later this year.
Define other “large market participants”
In addition to specified nonbank lenders, the CFPB must define other “large market participants” involved in consumer financial markets. In February, the bureau issued a proposed rule that defined third-party debt collectors with more than $10 million in annual receipts and consumer reporting agencies with more than $7 million in annual receipts as larger market participants, making them susceptible to the bureau’s nonbank supervision program.
Clarify how credit scores affect lender decisions
Lenders are currently required to disclose the credit score that they used in all risk-based pricing notices and adverse action notices. The CFPB is expected to draft its own compliance rules, but in the meantime the FTC and Federal Reserve have jointly issued a rule that identifies the specific information that must be disclosed and provides model forms of notice.
Review debt collection practices
The CFPB now has the authority to enforce the Fair Debt Collection Practices Act and review current debt collector practices to determine whether their methods are abusive or unfair.
Increasing consumer financial literacy will also be a chief priority for the Bureau. The Office of Consumer Education and Engagement was established to organize programs that help consumers understand the costs, risks and benefits of financial products. The office will be working with the private sector, nonprofit organizations and other government agencies to develop a variety of tools and approaches to address financial literacy. Specific groups of consumers also have been identified for additional resources. The office has developed programs focusing on older Americans, students and service members.
Report on Credit Scores
As required by the Dodd-Frank Act, the bureau has stated that it will review current practices relating to disclosures of consumer credit scores. Last summer, the CFPB released a preliminary report on differences between credit scores that consumer reporting agencies provide to consumers and those that are provided to lenders. The report provides background on the issue, including how scores are obtained and used. Since the first report, the bureau has conducted further research and analysis on the issue and is expected to issue a final report soon that will quantify the differences among scores and how the variations may impact consumers.