MICK MULVANEY IS REQUIRED BY LAW TO MEET WITH HIS CONSUMER ADVISORY BOARD. BUT HE’S REFUSING, BOARD MEMBERS SAY

By David Dayen

THE LEADERSHIP OF the Consumer Financial Protection Bureau is required by law to hold in-person meetings with its consumer advisory board, yet according to more than a dozen of its members, they are refusing to do so.

“It appears the bureau does not want to engage with us,” said Ann Baddour of the consumer organization Texas Appleseed and chair of the current Consumer Advisory Board, or CAB, who joined a conference call Monday with other board members who have decided to speak publicly. “Staying silent would violate our ethical responsibility to the bureau and the American people.”

The CFPB, under Acting Director Mick Mulvaney, has canceled two in-person meetings with the CAB, as well as numerous conference calls. Contact has been limited to one phone call in March that was supposed to last one hour but ended after 20 minutes. The most recent cancellation was for a scheduled meeting this week; members only found out about it when they coordinated with CFPB to make travel arrangements.

Section 1014 of Dodd-Frank mandates the creation of a consumer advisory board of experts to consult with the CFPB about emerging practices and concerns within the lending industry and across the country. The board, whose 25 members are drawn from academia, consumer groups, and the financial services industry, “at a minimum, shall meet at least twice in each year,” per the statute.

Under previous CFPB Director Richard Cordray, the CAB met in two-day sessions three times a year, with Cordray or senior staff present for the entire period. The CAB would discuss rule-making, enforcement issues, financial education materials, and more. “Since the change in leadership we’ve seen a change in the lines of communication,” Baddour said.

CAB members released two letters to Mulvaney, one from May 18 from Baddour, and another from 15 members on May 25, after they learned of the most recent cancellation. “The undersigned members of the CAB are extremely concerned that that our collective input is not valued,” the members wrote.

Read on.

RICHARD CORDRAY SETS UP TITANIC STRUGGLE FOR CONTROL OF THE CONSUMER PROTECTION BUREAU WITH LAST-MINUTE MOVE

SIGNALING AN EPIC fight over control of the Consumer Financial Protection Bureau, the agency on Friday named Leandra English as Deputy Director. English had been serving as Richard Cordray’s chief of staff.

Hours later, Cordray officially resigned. Under the statutory line of succession spelled out in the law that created the agency, the deputy director automatically replaces him, with full powers of the office, until the Senate formally confirms a new director selected by the president.

President Trump had planned to name Mick Mulvaney, current director of the Office of Management and Budget, as interim director, wresting immediate control of CFPB without having to go through Congress. The administration would have relied on the Federal Vacancies Reform Act, which allows the president to make appointments to federal agencies in certain cases. But as The Intercept reported earlier this week, there was a hitch in that plan: The temporary pick is not legally Trump’s to make. (See the update below: Trump made the pick regardless late on Friday evening.)

The appointment of English, just moments before Cordray’s departure, suggests that CFPB will make the case that Trump can’t appoint anyoneon an interim basis, and that only the deputy director can replace an absent or unavailable director. The FVRA says specifically that it doesn’t apply to agencies where “a statutory provision … designates an officer or employee to perform the functions and duties of a specified office temporarily in an acting capacity.”

If Trump decides to appoint Mulvaney or another interim director anyway, it could set up a titanic battle, with effectively two different people claiming leadership of the agency — one who expressly opposes its mission, and one who supports it. The courts would have to sort out the aftermath, determining whether Trump’s appointee or Deputy Director English hold actual control.

Read on.

DOJ will be allowed to join Ocwen’s challenge to constitutionality of CFPB

Ocwen Financial could soon get a big boost in its fight against the Consumer Financial Protection Bureau from a once-unlikely source – the Department of Justice.

In defending itself against the CFPB’s claims that Ocwen illegally foreclosed on borrowers, ignored customer complaints, mishandled borrowers’ money, and failed at the most basic of mortgage servicing actions, Ocwen asked a federal judge to declare the CFPB unconstitutional and toss out the CFPB’s lawsuit against the company.

Read on.

CFPB slaps JPMorgan Chase with $4.6M penalty over checking account problems

The Consumer Financial Protection Bureau hit JPMorgan Chase with a $4.6 million penalty for failures related to information it provides for checking account screening reports.

Under the current process, the bureau explained that banks screen potential customers based on reports about prior checking account behavior created by consumer reporting companies.

Banks, like JPMorgan Chase, that supply information for those reports are legally required to have proper processes in place for reporting accurate information.

The CFPB said Chase did not have these processes in place and kept consumers in the dark about the results of their reporting disputes and key aspects of their checking account application denials.

As a result, the bureau is ordering Chase to pay a $4.6 million penalty and implement necessary changes to its policies to prevent future legal violations.

Read on.

Pennsylvania AG’s new consumer financial protection unit’s watchdog is former CFPB enforcement lawyer

Housingwire:

According to Shapiro’s office, the state’s Consumer Financial Protection Unit will “focus on lenders that prey on seniors, families with students, and military service members, including for-profit colleges and mortgage and student loan servicers.”

While there is a serious push in Washington, D.C. to blunt, if not do away with the CFPB, Pennsylvania’s Consumer Financial Protection Unit will be led by one of the attorneys that helped found the agency.

According to Shapiro’s office, the state’s new financial watchdog will be run by Nicholas Smyth, who was the CFPB’s fourth employee and served as assistant director of the Office of Attorney General’s Bureau of Consumer Protection (the precursor to the CFPB).

Smyth also helped draft the Consumer Financial Protection Act of 2010 (Title X of the Dodd-Frank Act), which created the CFPB.

MORE TRUMP POPULISM: HIRING A BANK LAWYER TO ATTACK CFPB BANK RULES

By David Dayen

The Intercept:

PRESIDENT TRUMP AND Republicans in Congress have broadcast their every intention to gut the Consumer Financial Protection Bureau. The president’s budget attempted to defund it and leading Republicans have called for its director to be fired and replaced with a more Wall Street-compliant regulator.

But much like the bulk of Trump’s agenda, that assault remains in the aspirational phase, and the agency continues to do its work. Earlier this month, the CFPB released a major new rule, flat-out barring financial institutions from using forced arbitration clauses in consumer contracts to stop class-action lawsuits.

Now, Trump has sent out his lead attack dog to overturn the arbitration rule — a former bank lawyer who has used the very tactic the CFPB wants to prevent.

Class-action lawsuits are often the only way abusive behavior is checked. Take one of the more flagrant examples relating to overdraft fees. Millions of Americans are painfully familiar with the little perforated postcard that kindly arrives in the mail, courtesy of your financial institution, informing you that you have overdrawn your bank account and have been assessed a fee. Or, sometimes, you get three of them in the mail.

In order to make sure you get three and not one, banks in the past would re-order your transactions. The case of Gutierrez v. Wells Fargo is instructive here: a federal class-action case in California, the suit charged the bank with debit card reordering, or altering the sequence of debit card withdrawals to maximize overdraft fees. So if a cardholder with $100 in their account made successive withdrawals of $20, $30, and $110 over the course of a day, instead of getting hit with one $35 overdraft fee, Wells Fargo would reorder the transactions from high to low, thus earning three fees.

The plaintiffs won a $203 million judgment in 2010. But in an appeal before the 9th Circuit in 2012, Wells’ lawyers argued that a U.S. Supreme Court ruling in 2011, AT&T Mobility v. Concepcion, gave Wells Fargo the right to compel arbitration and quash the case, even after the judgment was rendered.

The 9th Circuit ruled that Wells Fargo never requested or even mentioned arbitration for five years of litigating the case. Only after losing in court and getting a potential lifeline from the Supreme Court did the lawyers take the shot. “Ordering arbitration would … be inconsistent with the parties’ agreement, and contradict their conduct throughout the litigation,” the court ruled.

Wells Fargo eventually paid California customers, but only after six years of appeals. Yet the company is still trying to use arbitration to quash a similar class action on overdraft fees, which would affect consumers in the other 49 states. Over 30 banks have been sued for this conduct, and every one of them settled the case except Wells Fargo.

Banks have a lot riding on the CFPB rule. Luckily for Wells Fargo, a former senior attorney of theirs is now a top federal regulator. In fact, Keith Noreika worked on that class-action defense in Gutierrez v. Wells Fargo before becoming the acting chair of the Office of the Comptroller of the Currency.

In May, President Trump hired Noreika to take over OCC, in an unusual arrangement where he would serve as a “special government employee,” retained to perform “temporary duties” for not more than 130 days, and exempt from most ethics rules or Senate confirmation.

His first high-profile move is to insert himself into the CFPB rule-making process, the bureaucratic equivalent of laying down in the street in front of the bus.

Right before the CFPB released its final arbitration rule, Noreika charged in a letter that the rule could create “safety and soundness concerns.” On Monday, Noreika asked the CFPB to delay publishing the rule in the Federal Register until OCC could review it for safety and soundness concerns. Essentially, Noreika is saying that allowing consumers to band together to stop petty theft by banks threatens the ability of those banks to survive. The CFPB already sent the rule to the Federal Register, and called Noreika’s request “plainly frivolous.”

Noreika threatened to use Section 1023 of Dodd-Frank, which allows the Financial Stability Oversight Council (FSOC), composed of the major bank regulators, to halt CFPB rules if they put the safety, soundness, or stability of the banking system at risk. The chair of the FSOC, Treasury Secretary Steve Mnuchin, could stay the rule for 90 days pending a vote of the 10-member council. Seven votes would be needed to set aside the rule.

Consumer groups seek expansion of CFPB’s authority

Legislation would give CFPB power to enforce protections for military consumers

At a time when some in Congress are trying to reduce the power of the Consumer Financial Protection Bureau (CFPB), a coalition of consumer groups is trying to expand the agency’s authority.

Specifically, the groups – including the Consumer Federation of American, Public Citizen, Americans for Financial Reform, and the National Consumer Law Center – are backing legislation to give the agency the power to protect military consumers from exploitation.

Senate Democrats have introduced legislation that would give CFPB direct oversight of the Military Consumer Enforcement Act, a 2003 law designed to protect military personnel from abusive financial practices and predatory loans.
Read on.

CFPB Is Probing Wells Fargo’s Mortgage Practices

The Consumer Financial Protection Bureau is conducting an investigation into alleged improprieties in Wells Fargo’s mortgage fee practices.

The CFPB is looking into allegations, first reported by ProPublica in January, that the bank inappropriately charged customers fees to extend their promised interest rates when their paperwork was delayed. The CFPB probe is in its early stages, according to a person familiar with it, and there is no certainty that the agency will take action. The CFPB has the power to levy fines and seek restitution if it finds a financial firm has violated the law. A CFPB spokesperson declined to comment.

Wells Fargo is also conducting its own internal review, overseen by the law firm Winston & Strawn. The inquiry was initially limited to the Los Angeles area, but has since widened. In a sign of its escalating scope and seriousness, Wells Fargo let three top mortgages executives go last week, including Greg Gwizdz, a 25-year veteran of the bank who most recently was the head of its retail sales division. Gwizdz oversaw the bank’s more than 7,900 loan officers.

Read on.

California district court upholds constitutionality of CFPB

A U.S. district court judge in the Central District of California defended the constitutionality of the Consumer Financial Protection Bureau after rejecting multiple challenges to the bureau’s authority to issue civil investigative demands (CID),according to a blog by James Kim and Daniel Delnero, published in the CFPB Monitor.

The decision comes amid a growing amount of cases disputing the constitutionality of the bureau, which includes the landmark case between the CFPB and PHH that started oral arguments this week.

The blog explained that the judge ordered the defendant, Future Income Payments, to comply with a CID within fifteen days of the decision after the company previously attempted a John Doe challenge to the CID in the U.S. District Court for the District of Columbia.

From the blog:

The opinion is a reminder of the CFPB’s broad authority to issue a CID and the heavy burden a recipient bears of challenging it. The court joined other courts in emphasizing that an agency subpoena is valid unless jurisdiction is “plainly lacking.” Under this standard, a CID will be upheld if “there is some plausible ground for jurisdiction.”

Constitutional issues aside, the primary takeaway is that companies should think strategically when they receive a CID.

Read on.

CFPB deepens probe into Zillow for RESPA compliance

Housingwire:

This is taken from the latest Zillow earnings report:

In April 2017, we received a Civil Investigative Demand from the Consumer Financial Protection Bureau (“CFPB”) requesting information related to our March 2017 response to the CFPB’s February 2017 Notice and Opportunity to Respond and Advise (“NORA”) letter. The NORA letter notified us that the CFPB’s Office of Enforcement is considering whether to recommend that the CFPB take legal action against us, alleging that we violated Section 8 of the Real Estate Settlement Procedures Act (“RESPA”) and Section 1036 of the Consumer Financial Protection Act.

They later add they believe they fully comply with RESPA:

We believe our response to the NORA letter addresses the CFPB’s concerns related to our co-marketing program under which a lender pays us to appear in advertising alongside a real estate agent. We are continuing to cooperate with the CFPB in connection with their most recent request for information. We continue to believe that our acts and practices are lawful and that our co-marketing program allows lenders and agents to comply with RESPA.