There is no practice more dangerous than borrowing money for

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Introduction of the Consumer Financial
      Protection Bureau (CFPB)

                  Nick Rathod
Assistant Director for Intergovernmental Affairs
               A (very brief) timeline
2007
 • The United States starts facing its most significant financial crisis since the
   Great Depression.

2009
 • President Obama proposes a consumer-protection bureau as part of Wall
   Street reform.

July 21, 2010
 • The Dodd-Frank Wall Street Reform and Consumer Protection Act
   becomes law. Implementation of CFPB begins immediately under the
   Treasury Department.

July 21, 2011
 • The CFPB becomes a bureau.

                                                                                     3
                   Timeline cont.




•   CFPB marks its first anniversary.
                                        4
                         Our Vision

A consumer finance marketplace…
where customers can see prices and risks up front and where
they can easily make product comparisons;

in which no one can build a business model around unfair,
deceptive, or abusive practices;

that works for American consumers,
responsible providers and the economy as a whole.



                                                              5
                                 Our Mission

The consumer bureau is a 21st Century agency that helps make
consumer finance markets work for all consumers -- whether they
are applying for a mortgage, choosing among credit cards, or
using any number of other consumer financial products.

 Among other things, the Bureau is working to:
        – Educate: An informed consumer is the first line of defense against abusive
               practices.

             – Enforce: The CFPB supervises banks, credit unions, and other financial
               companies, and we will enforce Federal consumer financial laws.

             – Study: The Bureau gathers and analyzes available information to better
               understand consumers, financial services providers, and consumer financial
               markets.



                                                                                            6
   CFPB
The Toolbox




              7
CFPB Organizational Units
            The CFPB Toolbox:
        Many Different Approaches


Supervision/Examination
Consumer Response
Enforcement
Consumer Engagement
Research, Markets & Regulations
External Affairs

                                    9
                   Consumer Response
               www.consumerfinance.gov
• As of July 21, 2011, began receiving credit card-related
  complaints and now taking complaints on all consumer finance
  related products.
• Receive information from consumers for all matters via Tell
  Your Story portal
• Call centers provide services for hearing and speech-impaired,
  accommodate public in 189 languages
• (855) 411-CFPB (2372) (Eng./Esp.)
• TTY/TDD (855) 729-CFPB (2372)




                                                                   10
          Specialized Functions and Offices




                               Office of Servicemember Affairs




Office of Older Americans                Fair Lending
                                                                 11
                         External Affairs

 Engages with external stakeholders on information sharing,
  collaboration, coordination, and other initiatives.
      Intergovernmental Affairs
      Community Affairs
      Legislative Affairs
      Media
      Community Banks and Credit Unions
 Intergovernmental Affairs
      Attorneys General
      Governors
      State Legislatures
      Local government (cities, towns, counties)
      Tribal governments

                                                               12
                            External Affairs

   Attorneys General
       Essential partners who let us know what we should be watching—
        where our supervision and enforcement teams should focus their
        attention and what works in improving consumer education—and
        what our policymaking staff should consider.
       As law enforcement closest to consumers, Attorneys General have
        the opportunity to educate, empower, and protect their citizens.
       IGA is your front door to the CFPB




                                                                           13
                     External Affairs

 Field Events
    Birmingham, Alabama- Payday Lending (January 19, 2012)
    New York, New York- Checking Accounts (February 22,
     2012)
    Durham, North Carolina- Prepaid Cards (May 23, 2012)
    Tampa, Florida- Reverse Mortgages (June 25, 2012) (rained
     out)
    Detroit, Michigan- Credit Reporting (July 16, 2012)




                                                            14
      The Creation of the CFPB … One Year Later




• Voters favor the Dodd Frank financial reform law by
  a 53-point margin (73-20).

• Voters support the CFPB by a 40-point margin. Two-
  thirds (66 percent) of voters overall agree that the
  CFPB is needed.




                                                         15
  Cooperative Consumer Protection:
The CFPB and State Attorneys General

            Christopher L. Peterson
Senior Counsel for Enforcement Strategy, West Region
             CFPB Office of Enforcement
       John J. Flynn Endowed Professor of Law
                  University of Utah
  George Washington on Consumer Finance

“There is no practice more dangerous than
  borrowing money … for when money
  can be had in this way, repayment is
  seldom thought of in time … Exertions
  to raise it by dint of industry ceases. It
  comes easy and is spent freely and
  many things indulged in that would
  never be thought of, if to be purchased
  by the sweat of the brow. In the mean
  time, the debt is accumulating like a
  snowball in rolling.”
  George Washington on Consumer Finance

“There is no practice more dangerous than
  borrowing money … for when money
  can be had in this way, repayment is
  seldom thought of in time … Exertions
  to raise it by dint of industry ceases. It
  comes easy and is spent freely and
  many things indulged in that would
  never be thought of, if to be purchased
  by the sweat of the brow. In the mean
  time, the debt is accumulating like a
  snowball in rolling.”
  George Washington on Consumer Finance

“There is no practice more dangerous than
  borrowing money … for when money
  can be had in this way, repayment is
  seldom thought of in time … Exertions
  to raise it by dint of industry ceases. It
  comes easy and is spent freely and
  many things indulged in that would
  never be thought of, if to be purchased
  by the sweat of the brow. In the mean
  time, the debt is accumulating like a
  snowball in rolling.”
  George Washington on Consumer Finance

“There is no practice more dangerous than
  borrowing money … for when money
  can be had in this way, repayment is
  seldom thought of in time … Exertions
  to raise it by dint of industry ceases. It
  comes easy and is spent freely and
  many things indulged in that would
  never be thought of, if to be purchased
  by the sweat of the brow. In the mean
  time, the debt is accumulating like a
  snowball in rolling.”
  George Washington on Consumer Finance

“There is no practice more dangerous than
  borrowing money … for when money
  can be had in this way, repayment is
  seldom thought of in time … Exertions
  to raise it by dint of industry ceases. It
  comes easy and is spent freely and
  many things indulged in that would
  never be thought of, if to be purchased
  by the sweat of the brow. In the mean
  time, the debt is accumulating like a
  snowball in rolling.”
  George Washington on Consumer Finance

“There is no practice more dangerous than
  borrowing money … for when money
  can be had in this way, repayment is
  seldom thought of in time … Exertions
  to raise it by dint of industry ceases. It
  comes easy and is spent freely and
  many things indulged in that would
  never be thought of, if to be purchased
  by the sweat of the brow. In the mean
  time, the debt is accumulating like a
  snowball in rolling.”
              Overview

1. An introduction to the CFPB’s
   Department of Supervision,
   Enforcement and Fair Lending
2. A very short primer on law relevant to
   the CFPB
3. CFPB Office of Enforcement
   Cooperation with State Attorneys
   General
                                            23
CFPB’s Department of Supervision, Enforcement
              and Fair Lending
CFPB’s Department of Supervision, Enforcement
              and Fair Lending

This department is divided into four
offices:
1.Depository Institution Supervision
2.Non-Depository Institution Supervision
3.Fair Lending and Equal Opportunity
4.Office of Enforcement

                                            25
     Depository Institution Supervision
 CFPB    has authority to supervise and examine banks and
  credit unions with assets exceeding $10 billion, their
  affiliates and their service providers. CFPB currently has
  identified 111 such entities.
 Dodd-Frank defines "affiliates" to include any person that
  controls, is controlled by, or is under common control with
  another person. (Sec. 1002(1))
 "Service providers" are defined as companies providing a
  material service to a covered institution. (Sec. 1002(26))
 "Material services" include designing, operating, or
  maintaining a consumer financial product or service and
  processing related transactions.
                                                          26
                Non-Depository Supervision
Firms Subject to CFPB’s Nonbank Supervision Program Under Section 1024


The Office of Non-Depository Supervision has
jurisdiction over all sizes of nonbank firms that
offer or provide:
   • Origination, brokerage, or servicing of
     residential mortgage loans, or loan
     modification and foreclosure relief services
     related to such loans
   • Payday loans
   • Private education loans
                                                                         27
                Non-Depository Supervision
Firms Subject to CFPB’s Nonbank Supervision Program Under Section 1024

The Office of Non-Depository Supervision has also has
jurisdiction over a “larger participants” in other markets of
consumer financial products or services.
     These participants are still being defined, but will include:
     •Credit Reporting Agencies with more than $7 million in
     annual receipts from consumer reporting activities,
     •Large third party debt collection agencies.
Other entities which may be posing risks to consumers when (if
the CFPB has reasonable cause to determine, after notice and
opportunity to respond, that the company has engaged in
conduct that poses risks to consumers)
                                                                         28
 Office of Fair Lending and Equal Opportunity

 Leadsthe CFPB’s efforts to ensure fair, equitable, and
 nondiscriminatory access to credit for both individuals and
 communities
 Working with other CFPB units, this office:
    Reviews lenders’ policies, procedures, and lending
     activity to detect and address potential
     discriminatory practices.
    Brings enforcement actions to stop discriminatory
     practices and remedy harm to consumers.


                                                          29
   Office of Enforcement: Powers
 Investigations:  Power to issue civil investigative demands
  (CIDs) for the production of documents or oral testimony
     Rules: 12 CFR part 1080
     Modeled on FTC Act and FTC Rules
 Administrative Hearings: Ability to hold hearings and
  adjudication proceedings to obtain cease and desist orders,
  penalties, or equitable relief
     Rules: 12 CFR part 1081
     Expedited procedures; affirmative disclosure; no
      discovery depositions
 Litigation: Power to commence civil actions for legal and
  equitable relief
                                                                30
 Office of Enforcement: Remedies

• Sec. 1055 allows for “any appropriate legal or
  equitable relief with respect to a violation of Federal
  consumer financial law.”
• Relief includes, but is not limited to:
       Rescission or reformation of contracts
       Refund of money or return of real property
       Restitution
       Disgorgement for unjust enrichment
       Payment of damages or other monetary relief
       Public notification regarding the violation
       Limits on the activities or function of the person
       Civil monetary penalties
       Recovery of costs

                                                             31
       Enforcement Office Civil Money Penalties
                      Section 1055(c)
• Civil money penalties available both administratively and in
  federal court.
• Three tiers of penalties:
    • Up to $5,000/day
    • Up to $25,000/day for reckless violations
    • Up to $1,000,000/day for knowing violations
• Statutory factors :
    • Size, resources, and good faith
    • Gravity of violation
    • Severity of consumer risks or losses, including number of
      products/services sold/provided
    • History of previous violations
    • “other such matters as justice may require”
                                                                  32
 A (very brief) Primer on CFPB-related law


1. Title X of the Dodd Frank Act: Unfair,
   Deceptive, Abusive Acts and Practices.
2. Enumerated consumer protection
   statutes.



                                             6
Unfair, Deceptive, or Abusive Acts and Practices

 UDAAP: Title X prohibits any covered person or
  service provider from engaging in unfair, deceptive,
  or abusive acts or practices relating to consumer
  financial products and services. Sec. 1031, 1036.
 Aiding and abetting liability: For “knowingly or
  recklessly provid[ing] substantial assistance” to a
  covered person or service provider in violation of
  1031. Sec. 1036(a)(3).
 Regulations: The Bureau may also promulgate
  regulations under Title X to define UDAAP acts and
  practices. Sec. 1031.                                  6
        Covered Persons or Service Providers


• Covered Persons: any person that engages in
  offering or providing a consumer financial product
  or service; and affiliates of such a person if the
  affiliate acts as a service provider. Sec. 1002(6).
• Service Provider: any person that provides a
  material service to a covered person in connection
  with the offering or provision of a consumer
  financial product or service. Sec. 1002(26).


                                                    35
                18 Enumerated Statutes
   Alternative Mortgage Transaction        Home Mortgage Disclosure Act
    Parity Act                              Home Ownership and Equity
   Consumer Leasing Act                     Protection Act
   Electronic Fund Transfer Act            Interstate Land Sales Full Disclosure
   Equal Credit Opportunity Act             Act
   Fair Credit Billing Act                 Omnibus Appropriations Act of 2009
   Fair Credit Reporting Act                (section 626)
   Home Owners Protection Act              Real Estate Settlement Procedures
                                             Act
   Fair Debt Collection Practices Act
                                            S.A.F.E. Mortgage Licensing Act
   Federal Deposit Insurance Act
    (selected sections)                     Truth in Lending Act
   Gramm-Leach-Bliley Act (selected        Truth in Savings Act
    sections)

                                                                              36
                          Scope of Enforcement
       10 of these statutes directly effect the residential mortgage market

   Alternative Mortgage Transaction          Home Mortgage Disclosure Act
    Parity Act                                Home Ownership and Equity
   Consumer Leasing Act                       Protection Act
   Electronic Fund Transfer Act              Interstate Land Sales Full Disclosure
   Equal Credit Opportunity Act               Act
   Fair Credit Billing Act                   Omnibus Appropriations Act of 2009
   Fair Credit Reporting Act                  (section 626)
   Home Owners Protection Act                Real Estate Settlement Procedures
                                               Act
   Fair Debt Collection Practices Act
                                              S.A.F.E. Mortgage Licensing Act
   Federal Deposit Insurance Act
    (selected sections)                       Truth in Lending Act
   Gramm-Leach-Bliley Act (selected          Truth in Savings Act
    sections)

                                                                                37
  Cooperation with Attorneys General: Dodd-Frank
     Grants new Federal Power to State A.G.s

• Congress has given state Attorneys General new
   enforcement authority as a matter of federal law.
• 12 USC § 5552:
“[T]he attorney general (or the equivalent thereof) of any
   State may bring a civil action in the name of such State in
   any district court of the United States in that State or in
   State court that is located in that State and that has
   jurisdiction over the defendant, to enforce provisions of
   this title or regulations issued under this title, and to
   secure remedies under provisions of this title or
   remedies otherwise provided under other law.”

                                                            38
  Cooperation with Attorneys General: Dodd-Frank
     Grants new Federal Power to State A.G.s

• Congress has given state Attorneys General new
   enforcement authority as a matter of federal law.
• 12 USC § 5552:
“[T]he attorney general (or the equivalent thereof) of any
   State may bring a civil action in the name of such State in
   any district court of the United States in that State or in
   State court that is located in that State and that has
   jurisdiction over the defendant, to enforce provisions of
   this title or regulations issued under this title, and to
   secure remedies under provisions of this title or
   remedies otherwise provided under other law.”

                                                            39
  Cooperation with Attorneys General: Dodd-Frank
     Grants new Federal Power to State A.G.s

• Congress has given state Attorneys General new
   enforcement authority as a matter of federal law.
• 12 USC § 5552:
“[T]he attorney general (or the equivalent thereof) of any
   State may bring a civil action in the name of such State in
   any district court of the United States in that State or in
   State court that is located in that State and that has
   jurisdiction over the defendant, to enforce provisions of
   this title or regulations issued under this title, and to
   secure remedies under provisions of this title or
   remedies otherwise provided under other law.”

                                                            40
  Cooperation with Attorneys General: Dodd-Frank
     Grants new Federal Power to State A.G.s

• Congress has given state Attorneys General new
   enforcement authority as a matter of federal law.
• 12 USC § 5552:
“[T]he attorney general (or the equivalent thereof) of any
   State may bring a civil action in the name of such State in
   any district court of the United States in that State or in
   State court that is located in that State and that has
   jurisdiction over the defendant, to enforce provisions of
   this title or regulations issued under this title, and to
   secure remedies under provisions of this title or
   remedies otherwise provided under other law.”

                                                            41
  Cooperation with Attorneys General: Dodd-Frank
     Grants new Federal Power to State A.G.s

• Congress has given state Attorneys General new
   enforcement authority as a matter of federal law.
• 12 USC § 5552:
“[T]he attorney general (or the equivalent thereof) of any
   State may bring a civil action in the name of such State in
   any district court of the United States in that State or in
   State court that is located in that State and that has
   jurisdiction over the defendant, to enforce provisions of
   this title or regulations issued under this title, and to
   secure remedies under provisions of this title or
   remedies otherwise provided under other law.”

                                                            42
  Cooperation with Attorneys General: Dodd-Frank
     Grants new Federal Power to State A.G.s

• State Attorney Generals now have the authority to
  bring enforcement actions against national bank or
  Federal savings association.
• 12 USC § 5552:
“The attorney general (or the equivalent thereof) of any
  State may bring a civil action in the name of such State
  against a national bank or Federal savings association in
  any district court of the United States in the State or in
  State court that is located in that State and that has
  jurisdiction over the defendant to enforce a regulation
  prescribed by the Bureau under a provision of this title.”

                                                           43
  Cooperation with Attorneys General: Dodd-Frank
     Grants new Federal Power to State A.G.s

• State Attorney Generals now have the authority to
  bring enforcement actions against national bank or
  Federal savings association.
• 12 USC § 5552:
“The attorney general (or the equivalent thereof) of any
  State may bring a civil action in the name of such State
  against a national bank or Federal savings association in
  any district court of the United States in the State or in
  State court that is located in that State and that has
  jurisdiction over the defendant to enforce a regulation
  prescribed by the Bureau under a provision of this title.”

                                                           44
  Cooperation with Attorneys General: Dodd-Frank
     Grants new Federal Power to State A.G.s

• State Attorney Generals now have the authority to
  bring enforcement actions against national bank or
  Federal savings association.
• 12 USC § 5552:
“The attorney general (or the equivalent thereof) of any
  State may bring a civil action in the name of such State
  against a national bank or Federal savings association in
  any district court of the United States in the State or in
  State court that is located in that State and that has
  jurisdiction over the defendant to enforce a regulation
  prescribed by the Bureau under a provision of this title.”

                                                           45
  Cooperation with Attorneys General: Dodd-Frank
     Grants new Federal Power to State A.G.s

• To bring an action under the Dodd-Frank UDAAP rules,
  the State Attorney General simply needs to provide
  notice of the action to the CFPB.
• “The notification required under this paragraph shall, at a
     minimum, describe—
i. the identity of the parties;
ii. the alleged facts underlying the proceeding; and
iii. whether there may be a need to coordinate the prosecution
     of the proceeding so as not to interfere with any action,
     including any rulemaking, undertaken by the Bureau.”
• CFPB has the option of intervening as an additional party in a
     state action.

                                                                46
  George Washington on Consumer Finance
It is important, likewise, that the habits of thinking
     in a free country should inspire caution, in
     those entrusted with its administration, to
     confine themselves within their respective
     constitutional spheres, avoiding in the exercise
     of the powers of one department to encroach
     upon another. The spirit of encroachment
     tends to consolidate the powers of all the
     departments in one, and thus to create,
     whatever the form of government, a real
     despotism. . . . [L]et there be no change by
     usurpation; for, though this, in one instance,
     may be the instrument of good, it is the
     customary weapon by which free governments
     are destroyed. The precedent must always
     greatly overbalance in permanent evil any
     partial of transient benefit, which the use can at
     any time yield.
  George Washington on Consumer Finance
It is important, likewise, that the habits of thinking
     in a free country should inspire caution, in
     those entrusted with its administration, to
     confine themselves within their respective
     constitutional spheres, avoiding in the exercise
     of the powers of one department to encroach
     upon another. The spirit of encroachment
     tends to consolidate the powers of all the
     departments in one, and thus to create,
     whatever the form of government, a real
     despotism. . . . [L]et there be no change by
     usurpation; for, though this, in one instance,
     may be the instrument of good, it is the
     customary weapon by which free governments
     are destroyed. The precedent must always
     greatly overbalance in permanent evil any
     partial of transient benefit, which the use can at
     any time yield.
  George Washington on Consumer Finance
It is important, likewise, that the habits of thinking
     in a free country should inspire caution, in
     those entrusted with its administration, to
     confine themselves within their respective
     constitutional spheres, avoiding in the exercise
     of the powers of one department to encroach
     upon another. The spirit of encroachment
     tends to consolidate the powers of all the
     departments in one, and thus to create,
     whatever the form of government, a real
     despotism. . . . [L]et there be no change by
     usurpation; for, though this, in one instance,
     may be the instrument of good, it is the
     customary weapon by which free governments
     are destroyed. The precedent must always
     greatly overbalance in permanent evil any
     partial of transient benefit, which the use can at
     any time yield.
  George Washington on Consumer Finance
It is important, likewise, that the habits of thinking
     in a free country should inspire caution, in
     those entrusted with its administration, to
     confine themselves within their respective
     constitutional spheres, avoiding in the exercise
     of the powers of one department to encroach
     upon another. The spirit of encroachment
     tends to consolidate the powers of all the
     departments in one, and thus to create,
     whatever the form of government, a real
     despotism. . . . [L]et there be no change by
     usurpation; for, though this, in one instance,
     may be the instrument of good, it is the
     customary weapon by which free governments
     are destroyed. The precedent must always
     greatly overbalance in permanent evil any
     partial of transient benefit, which the use can at
     any time yield.
  George Washington on Consumer Finance
It is important, likewise, that the habits of thinking
     in a free country should inspire caution, in
     those entrusted with its administration, to
     confine themselves within their respective
     constitutional spheres, avoiding in the exercise
     of the powers of one department to encroach
     upon another. The spirit of encroachment
     tends to consolidate the powers of all the
     departments in one, and thus to create,
     whatever the form of government, a real
     despotism. . . . [L]et there be no change by
     usurpation; for, though this, in one instance,
     may be the instrument of good, it is the
     customary weapon by which free governments
     are destroyed. The precedent must always
     greatly overbalance in permanent evil any
     partial of transient benefit, which the use can at
     any time yield.
CFPB Enforcement Office Regional
   Structure and Cooperation

            Manuel Alvarez
    Enforcement Attorney, West Region
        CFPB Office of Enforcement
       PARTNERSHIPS:
Collaboration and Cooperation




                                30
Enforcement Opportunities to Coordinate and Partner:
                     Law Enforcement


 Joint interest agreements for enforcement actions
 Market Sweeps and other market-wide coordinated actions
 Complimentary investigations/actions to comprehensively
  address problems
 Joint investigations (Sec. 1052(a))
 Bureau may intervene into lawsuits brought by State
  Attorneys General or State Regulators (Sec. 1042(b)(2)(A))
 Non-profit/Industry/Advocacy outreach and coordination



                                                               36
CFPB’s Regions




                 55
    Other Opportunities to Coordinate and Partner


 Providing referrals and information regarding consumer complaints
 Providing comments on rulemaking and subjects and ideas for
  research
 Partnership with consumer engagement to expand reach of consumer
  education
 Provide policy input and research findings to Research & Markets
  groups
 Other opportunities for coordinated outreach and coordination




                                                                      37
                          Partnership in Action

 CFPB PROBE INTO CAPITAL ONE CREDIT CARD
    MARKETING RESULTS IN $140 MILLION
            CONSUMER REFUND

Misinformed    about cost of the products
Enrolled   without their consent
Misled   about eligibility

Misinformed    about cost of the products
Enrolled   without their consent
Coordination    with Office of the Comptroller of the Currency (OCC)

                                                                        37
             Nicholas Rathod
    Assistant Director, Intergovernmental Affairs
             Nicholas.Rathod@cfpb.gov
                   (202) 435-7796

          Christopher Peterson
Senior Counsel for Enforcement Strategy, West Region
                Office of Enforcement
          Christopher.Peterson@cfpb.gov
                   (202) 754-0176

            Manuel P. Alvarez
        Enforcement Attorney, West Region
              Office of Enforcement
            Manuel.Alvarez@cfpb.gov
                 (202) 384-7976

        www.ConsumerFinance.gov
     Wireless Access Code:
     9166703926




Download the agenda PDF at:
www.cwagweb.org/Disneyland/agenda.html

				
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