This month The Trump administration, through acting CFPB Director Mick Mulvaney, announced sizeable restrictions to CFPB’s enforcement and day-to-day oversight of the financial industry’s fair lending practices. The move comes shortly after Mulvaney was installed as Acting Director following the departure of Richard Cordray. Speculation of the CFPB’s impending dismantlement under the Trump Administration has been swirling since the election and this is just one of the latest in a series of moves pertaining to the CFPB that lends some credence to that speculation. The decision will restrict the role of the Office of Fair Lending and Equal Opportunity – the fair lending enforcement arm of the CFPB – to one strictly focused on education and advocacy. The Office was also moved under the direct oversight of the Director’s Office, placing even more first-hand control with the Director. Additionally under Mulvaney’s direction, the bureau has dropped several payday loan cases and has announced plans to review current restrictions on payday lenders recently put in place by the CFPB under the Obama Administration. You may be more familiar with payday loans as a cash advance or paycheck loan. They are short term loans given at significantly higher interest rates. They are typically requested for immediate funds available in advance of a payroll check, with the principle and interest being paid shortly (typically after a paycheck is received).

What’s the CFPB’s role in fair lending enforcement?

Critics of the CFPB have long claimed that the bureau over-extends itself in terms of regulation and oversight. A prominent component of its oversight responsibilities focus on fair lending enforcement; ensuring that consumers are not discriminated against by lenders. This means, that you cannot be denied credit based on superficial terms such as race, sex, or religion. Have you ever heard the term “redlining”? It is a term used by the financial industry to describe lenders refusing credit based on residential demographics. Essentially, if you live in an area that the lender deems high-risk, they may reject your loan application. Of course this is completely illegal, but it hasn’t stopped lenders from trying. And this, along with other forms of discrimination, are exactly what the CFPB has been tasked with monitoring.

Looking for redlining and other lending discrimination

There are the few things that the CFPB looks at when a bank or lender is suspected of engaging in discriminating practices:

• Comparisons with other loan applications and originations in a minority area
• Where physical branches and offices are located
• Marketing scope and practices
• Current lending policies

Curbing predatory payday loans

In addition to ensuring that consumers have fair, equitable access to credit options, the CFPB has also played a considerable role in protecting consumers from being victimized by predatory loan practices. Most specifically, as they relate to payday loan or cash advance loan programs. The CFPB has aggressively gone after payday lenders in the past, including bringing lawsuits against those that the bureau alleged engaged in deceitful and predatory practices.

Why the changes to fair lending enforcement?

Since the bureau’s inception as part of Dodd-Frank, the Office of Fair Lending and Equal Opportunity has pursued lending discrimination, bringing several high-profile cases against lenders. Not only did it aggressively pursue discriminatory mortgage lenders, but other institutions as well, including automotive lenders. Herein lies the issue with most opponents of the bureau: Why, as measure created out of housing lending crisis and created to address oversight and enforcement for mortgage lending, intervening in auto lending enforcement? Well Dodd-Frank grants broad access for the CFPB, through the Office of Fair Lending and Equal Opportunity, to oversee and enforce fair lending practices. Under the Act, the Office of Fair Lending is tasked with:

• Providing fair lending enforcement under federal guidelines, including oversight for:
  • Equal Credit Opportunity Act (ECOA)
  • Home Mortgage Disclosure Act (HMDA)
• Coordinating fair lending enforcement efforts with federal and state regulators
• Working with private sector fair lending advocates

Essentially, this means that the CFPB has had a say (one with the authority to force compliance) in any form of consumer credit offering… but moves under the current administration are setting the stage for a drastically different CFPB.

What roll-backs at the CFPB mean for consumers

So how does the changing role of the CFPB affect you and other credit consumers? First, this does not mean the end of fair lending enforcement and consumer credit protection. The CFPB’s fair lending oversight responsibilities were concurrent with the regulation and oversight duties of other organizations. However, the relative autonomy in exercising its enforcement policies made the CFPB an aggressive and effective regulator in the financial lending industry. Critics of the announcement worry that the move will greatly reduce the CFPB’s efficiency in addressing lending discrimination.

There are also concerns raised over the pull-back by Mulvaney on the CFPB’s efforts to try payday lending discrimination cases. Under the Acting Director, the bureau has dropped several payday lending lawsuits, including one lawsuit file just a year ago, involving four different lending firms. Additionally, Mulvaney has announced plans for a review (and potential roll-back) on legislation the CFPB put in place this past October regarding payday lending regulation. The new regulations, which were set to take effect in January, would address lenders properly vetting loan applicants as well as set restrictions on certain lending practices. Unfortunately, this puts even more oneness on you as a credit consumer to be diligent when consider loans or other financing options. It’s now even more important to make sure that you completely understand all details of a potential loan, including repayment structure and fees and penalties. While there are other agencies tasked with reviewing and regulating fair lending enforcement, the recent announcement most likely means a decrease in efficiency and effectiveness in addressing discrimination cases as they will now be encompassing roles and responsibilities previously occupied by the CFPB.

Resources

Do you have questions about current loan programs in which you are enrolled or would like further information on how the CFPB’s decision will affect future credit applications, contact our team to discuss. You can also get more info on lending and investment information from our blog page.

On November 12, 2014, the New York Times published an article entitled “Debts canceled by bankruptcy still mar consumer credit scores.” In the article, the author, Jessica Silver-Greenberg, explains that “Tens of thousands of Americans who went through bankruptcy are still haunted by debts long after — sometimes as long as a decade after — federal judges have extinguished the bills in court.” This article was also featured in the Tampa Bay Times on Friday, November 21, 2014. Lawyers with the United States Trustee Program, a group charged with overseeing federal bankruptcy cases, are investigating certain banks, such as JPMorgan Chase, Bank of America, Citigroup and Synchrony Financial (f/k/a GE Capital Retail Finance), because these banks are suspected of violating bankruptcy law and ignoring the discharge injunction. Section 524 of the bankruptcy code provides a “discharge injunction” where creditors are no longer allowed to pursue debts canceled or discharged in the bankruptcy case. The banks allegedly ignore the discharge injunction when they know (or should have known) the debt was canceled but still seek to collect the debt, whether by continuing to report it on the person’s credit report, sending letters, or making telephone calls about the canceled debt. Often times, these are not clerical errors, but debt-collection tactics. In some cases, the banks purportedly refuse to correct the “mistakes,” insisting that the canceled debt be paid. An example cited in the article was The Vogts, a couple in Denver, who paid JPMorgan $2,582 on a debt that was discharged in bankruptcy because they needed a clean credit report to get a mortgage. In Florida, can you sue a creditor when that creditor attempts to collect a debt that you had previously discharged in bankruptcy? The answer is yes. Although there is no private right of action under the bankruptcy code for violation of the discharge injunction, the courts have recognized that a person could sue a creditor for pursuit of a debt canceled in bankruptcy under both the Fair Debt Collections Practices Act, 15 U.S.C. §§ 1692 et seq. (“FDCPA“) and the Florida Consumer Collection Practices Act, Fla. Stat. §§ 559.55 et seq.(“FCCPA“). See Bacelli v. MFB, Inc., 729 F. Supp. 2d 1328 (M.D. Fla. 2010). In the Bacelli case, the debtor filed chapter 7 bankruptcy in 2008. In her bankruptcy schedules, the debtor listed that she owed $459.15 to St. Joseph’s Hospital in Tampa, Florida. An initial bankruptcy notice was mailed to St. Joseph’s Hospital and, later, a notice of the debtor’s discharge was mailed. Nevertheless, the hospital sent two collection letters and hired a debt collector after the discharge. Ms. Bacelli, the debtor, ultimately sued St. Joseph’s Hospital and its debt collector for violations of the FDCPA and its Florida law counter part, the FCCPA. As reported in Bacelli, “[t]he FDCPA provides a civil cause of action against any debt collector who fails to comply with its requirements. Edwards v. Niagara Credit Solutions, Inc., 584 F.3d 1350, 1352 (11th Cir. 2009) (citing 15 U.S.C. § 1692k(a)). The FDCPA prohibits debt collectors from using any false representation as to the “legal status of any debt.” 15 U.S.C. § 1692e(2)(A). A demand for immediate payment while a debtor is in bankruptcy (or after the debt’s discharge) is “false” in the sense that it asserts that money is due, although, because of the automatic stay (11 U.S.C. § 362) or the discharge injunction (11 U.S.C. § 524), it is not.” Randolph v. IMBS, Inc., 368 F.3d 726, 728 (7th Cir. 2004) (dicta); see also Ross v. RJM Acquisitions Funding LLC, 480 F.3d 493, 495 (7th Cir. 2007) (“Dunning people for their discharged debts” is prohibited by 15 U.S.C. § 1692e(2)(A)); cf. Turner v. J.V.D.B. & Assocs., Inc., 330 F.3d 991, 995 (7th Cir. 2003)(“Turner I”) (reversing summary judgment in favor of debt collector on claim under 15 U.S.C. § 1692e(2)(A) in part because a reasonable jury could conclude debt collector’s collection letter implied that the discharged debt was still payable). The FDCPA also prohibits debt collectors from using “unfair or unconscionable” debt collection methods, 15 U.S.C. § 1692f, and (with exceptions not relevant here) from communicating with a consumer in connection with the collection of a consumer debt “if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney’s name and address . . . .” 15 U.S.C. § 1692c(a)(2).” Accordingly, Ms. Bacelli was allowed to sue St. Joseph’s Hospital and its debt collector for the alleged transgressions of the discharge injunction. In short, a Floridian is entitled to sue a creditor under the FDCPA and FCCPA if that creditor continues to report or pursue a debt after the debt has been discharged or canceled by the bankruptcy court. This cause of action might provide relief to the “Tens of thousands of Americans who went through bankruptcy are still haunted by debts long after — sometimes as long as a decade after — federal judges have extinguished the bills in court,” as reported in the New York Times. If you (or you know somebody who) has been pursued by a creditor after the debt has been discharged in bankruptcy, please contact Savage, Combs & Villoch, PLLC, for a free consultation and to speak about your rights under bankruptcy law, the FDCPA, and the FCCPA. Our number is 813-200-0013 or please visit www.savagelaw.us today!