Wireless Access Code: 9166703926

Wireless Access Code: 9166703926 Download the agenda PDF at: www.cwagweb.org/Disneyland/agenda.html

Introduction of the Consumer Financial Protection Bureau (CFPB) Nick Rathod Assistant Director for Intergovernmental Affairs

A (very brief) timeline

Timeline cont. • CFPB marks its first anniversary.

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.

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.

CFPB The Toolbox

CFPB Organizational Units

The CFPB Toolbox: Many Different Approaches Supervision/Examination Consumer Response Enforcement Consumer Engagement Research, Markets & Regulations External Affairs

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)

Fair Lending Office of Servicemember Affairs Office of Older Americans Specialized Functions and Offices

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

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

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)

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.

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.”

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

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: Depository Institution Supervision Non-Depository Institution Supervision Fair Lending and Equal Opportunity Office of Enforcement

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.

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

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)

Office of Fair Lending and Equal Opportunity • Leads the 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.

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

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

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”

A (very brief) Primer on CFPB-related law • Title X of the Dodd Frank Act: Unfair, Deceptive, Abusive Acts and Practices. • Enumerated consumer protection statutes.

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.

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).

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

Scope of Enforcement 10 of these statutes directly effect the residential mortgage market • Alternative Mortgage Transaction Parity Act • Consumer Leasing Act • Electronic Fund Transfer Act • Equal Credit Opportunity Act • Fair Credit Billing Act • Fair Credit Reporting Act • Home Owners Protection Act • Fair Debt Collection Practices Act • Federal Deposit Insurance Act (selected sections) • Gramm-Leach-Bliley Act (selected sections) • Home Mortgage Disclosure Act • Home Ownership and Equity Protection Act • Interstate Land Sales Full Disclosure Act • Omnibus Appropriations Act of 2009 (section 626) • Real Estate Settlement Procedures Act • S.A.F.E. Mortgage Licensing Act • Truth in Lending Act • Truth in Savings Act

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.”

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 Statemay 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.”

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 Statemay 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.”

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.”

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— • the identity of the parties; • the alleged facts underlying the proceeding; and • 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.

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.

Wireless Access Code: 9166703926