Best of Times, Worst of Times for CFPB

October 17, 2018 at 9:01 am Leave a comment

The Bureau that I used to lovingly refer to as the “Bureau That Never Sleeps” has entered into a long and welcomed Trump imposed slumber. But even as it does so, it continues to make big news, some of it good, some of it disturbing.

First for the good news that will directly impact your credit union. Critics of the Bureau including yours truly, have long complained that Congress gave it too much power, not only because of the number of regulations directly overseen by a single person; not only because the Bureau exercises examination authority over larger institutions but also because it has the authority under Dodd-Frank to penalize entities engaged in Unfair and Deceptive Acts and Practices (UDAAP). CFPB aggressively utilized this power and also put all entities on notice that it considered its enforcement actions which banks and credit unions were supposed to follow.

Why is this a bad thing? Because UDAAP is such a broad and vague power that in the wrong hands it can be used to penalize legal conduct that regulators don’t like. If you think I’m exaggerating, read this July 2013 memo from the CFPB explaining the criteria it uses in determining whether or not to bring UDAAP action. Credit unions have not been immune from the CFPB’s UDAAP wrath.

Against this backdrop, I was happier than a Yankee fan finding out that David Price is scheduled to pitch against them to see that Mick McMulvaney – yes, he’s still the Director – announced before gathering of the mortgage bankers in Washington that the CFPB would be issuing guidance defanging its UDAAP powers. He was quoted in this article in the American Banker as explaining, “I think ‘unfair’ is fairly well-established in the law, ‘deceptive’ is very well-established in the law and to my knowledge, I don’t think ‘abusive’ is nearly as established in the law.” He also proclaimed that “regulation by enforcement is done.”

Remember, the CFPB has not used this power against credit unions.

This is great news but remember, CFPB’s UDAAP power is in statute. Administrations come and go but so long as the statute remains in place. It will hang like an anvil to be used by future generations of regulators.

Now for the bad news. As you may have heard, Eric Blankenstein, a policymaker at the Bureau who is reportedly responsible for overseeing the enforcement of anti-discrimination laws including the Equal Credit Opportunity Act, is under scrutiny for racially tinged blogs he published more than fifteen years ago in which he criticized an anti-discrimination policy at the University of Virginia. Mulvaney originally said that he would not take action against the employee but it now appears that the Bureau’s Inspector General will investigate the comments.

Stay tuned.

Entry filed under: General, Mortgage Lending. Tags: , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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