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How will the CFPB maintain its focus on compliance and enforcement in 2023?
2023 PRINDBRF 0036
• Practitioner Insights Commentaries
• January 23, 2023
(January 23, 2023) - Matt Petersen and Kaitlin DeWulf of Bryan Cave Leighton Paisner discuss the Consumer Financial Protection Bureau's continued focus on credit reporting, overdraft fees and crypto-assets despite challenges to the constitutionality of its funding structure.
In the US, the CFPB has taken an aggressive approach to financial services regulation and compliance in 2022, while also fighting challenges to its constitutionality.
Of particular significance, in October 2022, the Fifth Circuit invalidated the CFPB's payday lending rule and found that the CFPB's funding structure violates the Appropriations Clause. While the potential implications of this ruling are significant, it is an outlier. Most courts have rejected such challenges, holding that the CFPB's funding structure is constitutional.
Despite this ruling, we have seen the CFPB continue to focus on compliance enforcement in 2022, and we do not anticipate this slowing down in 2023:
Credit reporting
Throughout 2022, the CFPB focused on the credit reporting industry.1 In October, the CFPB issued an advisory opinion2 instructing credit reporting agencies to ensure that "junk data" is removed from credit reports.
The CFPB described "junk data" as logically inconsistent account information and statuses, such as an account "whose status is paid in full, and thus has no balance due but nevertheless reflects a balance due" or "reflects an 'Original Loan Amount' that increases over time." The CFPB advised that failing to remove such items from a consumer's report violates an agency's obligation to reasonably assure accuracy.
A November 2022 circular,3 puts credit reporting agencies and those who furnish credit information on notice that the CFPB is focusing on investigative failures. The circular noted that regulators may bring actions against furnishers and agencies that do not investigate or seek to avoid investigations into consumer disputes.
The CFPB has made it clear that it will continue to closely watch credit reporting agencies and furnishers in 2023.
Overdraft fees
In an October 2022 circular,4 the CFPB addressed "unanticipated overdraft fee assessment" by financial institutions.
While the CFPB noted that certain types of overdraft fees are permissible, it concluded that imposing overdraft fees where a consumer does not anticipate them (e.g., if insufficient funds only become an issue after the transaction occurs) could violate the Consumer Financial Protection Act, Truth In Lending Act, and Electronic Fund Transfer Act. We believe that the CFPB will continue to watch these fees throughout 2023.
Crypto-assets
The CFPB also has its eye on crypto-assets. In a November 2022 bulletin,5 the CFPB discussed the types of complaints that it has received in connection with crypto-assets, which it defines as "various digital financial assets and their associated products and services," including specifically "a private sector digital asset that depends primarily on cryptography and a distributed ledger (such as a blockchain) or similar technology."
The CFPB put the crypto-asset industry on notice that it has received more than 8,000 crypto-asset complaints from consumers. The CFPB will continue to investigate "bad actors leveraging crypto-assets to perpetrate fraud on the public" into 2023.
Conclusion
In the US, the CFPB is battling on multiple fronts. On one front, the CFPB is fighting whether it is constitutionally funded and permitted to regulate the financial services industry. Elsewhere, the CFPB continues to monitor several other areas where consumers are submitting complaints, including credit reporting, overdraft fees, and crypto-assets.
Notes
1 See BCLP's summary here: http://bit.ly/3XK3TKH
2 https://bit.ly/3iMwQHi
3 https://bit.ly/3iMwQHi
4 http://bit.ly/3D3bvA0
5 https://bit.ly/3QT9yMc
Matt Petersen is a partner based in Bryan Cave Leighton Paisner's Denver and Chicago offices. His nationwide litigation practice concentrates on food and agribusiness litigation with a focus on claims of crop loss and breach of contract, and consumer litigation with a focus on the Fair Credit Reporting Act. He has handled numerous class actions, often obtaining dismissals before class certification, and has tried cases before state courts and arbitration panels. He can be reached at [email protected]. Kaitlin DeWulf is an associate in the firm's Denver office. She assists in litigation matters, with a focus on trade secrets and competition, complex commercial disputes, and food and agribusiness. She has assisted in successful appeals to the 9th U.S. Circuit Court of Appeals and the Colorado Supreme Court. DeWulf also has extensive experience handling landlord-tenant issues and provides pro bono eviction defense. She can be reached at [email protected]. This article was originally published Jan. 19, 2023, on the firm's website. Republished with permission.
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Kaitlin DeWulf| End of Document | © 2024 Thomson Reuters. No claim to original U.S. Government Works. |