Wireless Access Code: 9166703926

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

Introduction of the Consumer Financial Protection Bureau (CFPB)

Nick RathodAssistant Director for Intergovernmental Affairs

A (very brief) timeline

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Timeline cont.

4• CFPB marks its first anniversary.

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 Vision

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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.

Our Mission

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CFPBThe Toolbox

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CFPB Organizational Units

The CFPB Toolbox:Many Different Approaches

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Supervision/ExaminationConsumer ResponseEnforcementConsumer EngagementResearch, Markets & RegulationsExternal Affairs

Supervision/ExaminationConsumer ResponseEnforcementConsumer EngagementResearch, Markets & RegulationsExternal Affairs

Consumer Responsewww.consumerfinance.gov

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• 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)

Specialized Functions and Offices

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Office of Older Americans

Office of Servicemember Affairs

Fair Lending

Engages with external stakeholders on information sharing, collaboration, coordination, and other initiatives.

Intergovernmental AffairsCommunity AffairsLegislative AffairsMediaCommunity Banks and Credit Unions

Intergovernmental AffairsAttorneys GeneralGovernorsState LegislaturesLocal government (cities, towns, counties)Tribal governments

External Affairs

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Attorneys GeneralEssential 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

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Field EventsBirmingham, 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)

External Affairs

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• 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.

The Creation of the CFPB … One Year Later

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Cooperative Consumer Protection: The CFPB and State Attorneys General

Christopher L. PetersonSenior Counsel for Enforcement Strategy, West Region

CFPB Office of Enforcement John J. Flynn Endowed Professor of Law

University of Utah

“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.”

George Washington on Consumer Finance

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

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Overview

CFPB’s Department of Supervision, Enforcement and Fair Lending

This department is divided into four offices:1.Depository Institution Supervision2.Non-Depository Institution Supervision3.Fair Lending and Equal Opportunity4.Office of Enforcement

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CFPB’s Department of Supervision, Enforcement and Fair Lending

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.

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Depository Institution Supervision

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 SupervisionFirms Subject to CFPB’s Nonbank Supervision Program Under Section 1024

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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)

Non-Depository SupervisionFirms Subject to CFPB’s Nonbank Supervision Program Under Section 1024

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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.

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Office of Fair Lending and Equal Opportunity

Investigations: Power to issue civil investigative demands (CIDs) for the production of documents or oral testimony

Rules: 12 CFR part 1080Modeled 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 1081Expedited procedures; affirmative disclosure; no discovery depositions

Litigation: Power to commence civil actions for legal and equitable relief

Office of Enforcement: Powers

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• 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 contractsRefund of money or return of real propertyRestitutionDisgorgement for unjust enrichmentPayment of damages or other monetary reliefPublic notification regarding the violationLimits on the activities or function of the personCivil monetary penaltiesRecovery of costs

Office of Enforcement: Remedies

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• 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”

Enforcement Office Civil Money PenaltiesSection 1055(c)

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1. Title X of the Dodd Frank Act: Unfair, Deceptive, Abusive Acts and Practices.

2. Enumerated consumer protection statutes.

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A (very brief) Primer on CFPB-related law

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.

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Unfair, Deceptive, or Abusive Acts and Practices

• 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).

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Covered Persons or Service Providers

Alternative Mortgage Transaction Parity Act

Consumer Leasing ActElectronic Fund Transfer ActEqual Credit Opportunity ActFair Credit Billing ActFair Credit Reporting ActHome Owners Protection ActFair Debt Collection Practices

ActFederal Deposit Insurance Act

(selected sections)Gramm-Leach-Bliley Act

(selected sections)

18 Enumerated Statutes

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 ActTruth in Savings Act

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Alternative Mortgage Transaction Parity Act

Consumer Leasing ActElectronic Fund Transfer ActEqual Credit Opportunity ActFair Credit Billing ActFair Credit Reporting ActHome Owners Protection ActFair Debt Collection Practices

ActFederal Deposit Insurance Act

(selected sections)Gramm-Leach-Bliley Act

(selected sections)

Scope of Enforcement10 of these statutes directly effect the residential mortgage market

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 ActTruth in Savings Act

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• 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.”

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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.”

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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.”

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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.”

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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.”

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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.”

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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.

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

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.

George Washington on Consumer Finance

CFPB Enforcement Office Regional Structure and Cooperation

Manuel AlvarezEnforcement Attorney, West Region

CFPB Office of Enforcement

PARTNERSHIPS:Collaboration and Cooperation

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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

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Enforcement Opportunities to Coordinate and Partner:Law Enforcement

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CFPB’s Regions

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

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Other Opportunities to Coordinate and Partner

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

Partnership in Action

Nicholas RathodAssistant Director, Intergovernmental Affairs

Nicholas.Rathod@cfpb.gov(202) 435-7796

Christopher PetersonSenior Counsel for Enforcement Strategy, West Region

Office of EnforcementChristopher.Peterson@cfpb.gov

(202) 754-0176

Manuel P. AlvarezEnforcement Attorney, West Region

Office of EnforcementManuel.Alvarez@cfpb.gov

(202) 384-7976

www.ConsumerFinance.gov

Wireless Access Code: 9166703926

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