CFPB UPDATE
The CFPB Is Coming! The CFPB Is Coming!
2014
NCHER
Fall
Legal Meeting
November 7, 2012
NCHER
Knowledge
Symposium
September 26, 2014
Washington, D.C.
John L. Culhane, Jr., Partner
Consumer Financial Services Group
215.864.8535
culhane@ballardspahr.com
Christopher J. Willis, Partner
Consumer Financial Services Group
678.420.9426
willisc@ballardspahr.com
Copyright 2014 by Ballard Spahr LLP
CFPB v. ITT
•
CFPB sued ITT Educational Services, Inc. in federal
district court in Indiana (S.D.) on February 26, 2014
•
Complaint alleged numerous UDAAPs (misrepresentation
and coercion) and also alleged violations of TILA
•
Motion to dismiss deemed filed on May 19, 2014
(Constitutional, jurisdictional, and pleading deficiencies)
•
Opposition to motion to dismiss filed on June 12, 2014
followed by Reply on July 2, 2014
•
CFPB Notice of Supplemental Authority (Alta case) filed
on Sept. 8, 2014 with Response on Sept. 19, 2014
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CFPB v. Corinthian
•
On Sept. 16, 2014, the CFPB sued Corinthian Colleges in
federal court in Chicago.
•
Claims revolve around several alleged themes:
•
-
Deception in connection with job placement/career services/job
success of graduates
-
Failure to disclose Corinthian’s interest in loans
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Making loans with knowledge that many borrowers would
default
-
Debt collection practices, such as blocking delinquent students
from attending class
No response to the complaint is due until mid-November.
3
CFPB v. Hanna
•
In July 2014, the CFPB filed its first lawsuit against a debt
collection law firm, in federal court in Georgia.
•
The lawsuit asserts two legal theories:
1.
That the firm’s attorneys did not have “meaningful involvement”
in the decision to sue a particular consumer, because the firm
used automated scrubs and non-lawyer staff to screen cases for
suit.
2.
That the firm failed to monitor clients’ execution of affidavits to
ensure that they were executed by persons with personal
knowledge of the facts.
•
Motion to dismiss filed and being briefed now
•
Several other law firm investigations are ongoing now
4
Debt Collection Rulemaking
•
The CFPB’s massive debt collection rulemaking started
with an ANPR in late 2013; comments closed in early
2014; comments on survey closed on August 22, 2014
•
Topics covered include contact methods and frequency;
disputes and validation requests; use of social media; and
legal collections
•
The rulemaking is potentially very far-reaching, covering
every aspect of first-party and third-party debt collection
•
Unclear if SBREFA panels will be established; if not,
proposed rules are the likely next step; timing is unknown
5
Fair Lending Developments
•
April 2014 Fair Lending Report says fair lending CMS
should include statistical analysis of student loans
•
Special edition of Supervisory Highlights released on
September 17, 2014 discloses multiple non-public,
supervisory resolutions (auto only – not student loans?)
•
White paper released at same time explains CFPB’s use of
BISG to proxy for race and ethnicity (obvious deficiencies
include over-estimating number of minorities in portfolio)
•
Will CFPB now return to CDR and other fair lending
issues it previously raised with private student loans?
6
CFPB Complaint Portal
•
April 2014 update on student loan complaints focused on
certain cosigner issues (now part of exams and CIDs)
•
Annual snapshot of complaints reported 11,400 student
loan complaints (biggest issue – repayment)
•
Proposed to expand complaint portal to include narratives
released on July 16, 2014 (comment period just closed)
•
Coincidentally, CFPB began “sharing stories about
navigating consumer financial markets” on July 17, 2014
•
Are unverified narratives the equivalent of adverse
postings on Yelp? Worse?
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Presenter – John L. Culhane, Jr.
•
Partner at Ballard Spahr and a member of the firm’s Consumer Financial
Services and Higher Education Groups as well as the firm’s Fair Lending Task
Force and Collection Documentation Task Force
•
Higher education practice emphasizes counseling clients on the development,
implementation and operation of innovative and traditional student loan
programs, tuition payment plans, and school payment card programs
•
Regulatory practice includes preparing clients for banking agency and CFPB
targeted and full spectrum compliance examinations as well as assisting in the
defense of consumer class actions, attorney general investigations, and agency
enforcement actions
•
Charter member of the American College of Consumer Financial Services
Lawyers
•
Former Chair of the Subcommittee on Fair Lending of the ABA Committee
on Consumer Financial Services
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Presenter – Christopher J. Willis
•
Partner at Ballard Spahr and a member of the firm’s Consumer Financial Services,
Higher Education, and Mortgage Banking Groups
•
Counsels financial institutions on regulatory matters, advises them on compliance with
consumer financial services laws, and defends them in both individual and class action
lawsuits, as well as governmental enforcement actions (including CFPB investigations)
•
Chairs the firm’s Fair Lending Task Force and Collection Documentation Task Force
•
Recognized by Chambers USA for nationwide financial services regulation: consumer
finance (litigation)
•
Named in The Best Lawyers in America for banking and finance litigation and commercial
litigation for 2013 & 2014
•
Member of the American College of Consumer Financial Services Lawyers
•
Frequent author and speaker on issues relating to consumer financial services regulation
and litigation
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Questions / Resources – Ballard Spahr
If you have any questions about anything we covered today, please contact:
John L. Culhane, Jr., Partner
Consumer Financial Services Group
215.864.8535
culhane@ballardspahr.com
Christopher J. Willis, Partner
Consumer Financial Services Group
678.420.9426
willisc@ballardspahr.com
Visit our blog, the CFPB Monitor, at www.cfpbmonitor.com.
Subscribe to our e-alerts at www.ballardspahr.com (click “subscribe”).
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