Spring KASRO 2012 Conference
DISCLAIMER
 The information presented in this session represents the views
and opinions of the presenters and does not constitute the
opinion or endorsement of, or promotion by Todd, Bremer &
Lawson, Inc. or the presenter.
 This session is for information purposes only and should not be
construed as legal advice. The reader or audience participant is
encouraged to consult with legal counsel before making any
policy decisions based on the information contained herein.
Consumer Financial Protection Bureau CFPB

Created by Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010

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Independent bureau within Federal Reserve System,
run by Director who is Presidential Appointee,
confirmed by Senate.
Authority to issue rules for all financial institutions,
including rules under Truth in Lending Act, Fair Debt
Collection Practices Act, Equal Credit Opportunity
and Real Estate Settlement Procedures Act.
Section 1021 of Dodd Frank Act
 CFPB is authorized to exercise its authorities for the
purpose of ensuring that:
 1) Consumers are provided with timely and
understandable information to make responsible
decisions about transactions involving consumer
financial products and services;
 (2) Consumers are protected from unfair, deceptive, or
abusive acts and practices and from discrimination;
 (3) Outdated, unnecessary, or unduly burdensome
regulations concerning consumer financial products and
services are regularly identified and addressed in order
to reduce unwarranted regulatory burdens;
 (4) Federal consumer financial law is enforced
consistently, without regard to status as a depository
institution, in order to promote fair competition; and
 (5) Markets for consumer financial products and
services operate transparently and efficiently to facilitate
access and innovation.
Scope Of CFPB’s Duties
 The CFPB supervises banks with more than $10 billion of
assets, credit unions, and other non-bank financial
companies
 Non-banks include payday lenders, mortgage brokers,
student loan lenders
 The CFPB enforces federal consumer laws such as the
Truth in Lending Act
Scope Of CFPB’s Duties
 The CFPB was prohibited from beginning supervision of
non-bank financial firms, such as those that provide
student, payday and mortgage loans, until it has a
confirmed director.
 But its power to supervise firms such as Bank of America
Corp., Citigroup Inc. and J.P. Morgan Chase & Co. went
into effect on July 21, 2011.
Consumer Financial Protection Bureau
 Huge process: Combining offices, hiring 1,000
federal employees
 Transfer of responsibilities from existing regulators
to bureau: July 21, 2011
 Many of employees will come from other agencies
– Fed, FDIC, FTC, OTS, NCUA, HUD, Comptroller,
Treasury in general
 Fed will have 50 rulemakings, sets of formal guidelines
to produce
 250 associated projects
CFPB - Leadership
 Elizabeth Warren, former Harvard professor, who advised
The President picked to organize BCFP as a special advisor.
CFPB - Leadership
 Emphasizing oversight of non-banks
 Warren: “When the costs of student lending are clearer, then
the pressure on universities to control increases in tuition will
be more intense,” - DailyNorthwestern.com
 Regarding bankruptcy discharge: "Why should students who
are trying to finance an education be treated more harshly
than someone who negligently ran over a child or someone
who racked up tens of thousands of dollars gambling?“
-- The Northern Iowan
CFPB - Leadership
 The President nominated Richard Cordray, former Ohio
Attorney General, to run the CFPB
 Senate would not confirm
 President made a recess appointment of
Mr. Cordray on January 4th, 2012.
GOP Demands Changes To CFPB
 In a letter to President Obama 44 Republican senators
said they won't confirm anyone as director until certain
changes are made
 Since Senate confirmation requires 60 votes, the
Republican resistance ensures no nominee will be
confirmed
GOP Proposed Changes
 Replace the position of CFPB director with a five-member
commission
 Give Congress authority over CFPB funding, and
 Design ways to make it easier to overturn CFPB rules
CFPB - Budget
 The CFPB receives up to 10% of the operating budget of
the Federal Reserve ― as much as $500 million.
 The CFPB will be somewhat a part of the Federal Reserve
Board, but not subject to the Fed’s authority.
CFPB - Budget
 The CFPB will decide its own budget and will not be
required to ask Congress for money.
 The CFPB will have no governing board, only a director
whose rulings can’t be vetoed.
CFPB - Unfair Or Deceptive Acts Or
Practices
 “Unfair or deceptive acts or practices” have been subject
to federal jurisdiction. Since 1938 the Federal Trade
Commission has enforced the rule
 For the CFPB, the word “abusive” was added
 The CFPB will define what is abusive and what isn’t
What is “abusive”?
 Any financial service or activity that takes advantage of a
consumer’s inability to understand the risks, costs or
conditions of loans, mortgages and credit cards.
 The CFPB will not formally define what
is “abusive”.
CFPB Priorities
 Rulemaking deadlines of the Dodd-Frank Act
 Regs regarding international money transfers
 rule determining which nondepository covered persons are subject to
the CFPB’s supervision authority as “larger participant[s]” of “other
markets” for consumer financial products and services.
 Consolidated mortgage loan disclosures and related rules under the
Truth in Lending Act and Real Estate Settlement Procedures Act
 Regulations defining lenders’ obligations to assess borrowers’ ability
to repay mortgage loans, including certain protections from liability
for “qualified mortgages.”
 Regulations to implement other requirements concerning mortgage
origination and servicing under title XIV of the Dodd-Frank Act.
CFPB and Student Loans
 www.consumerfinance.org
 CFPB Student Loan Ombudsman, Rohit Chopra
 Coordinating with Ed Ombudsman
 Student Loan Complaint System
 Student Loan Debt Repayment Assistance
 Financial Aid Comparison Shopper
CFPB and Student Loans
 Student Loan Report
 Section 1077 of Dodd-Frank Act
 Due to Congress on 7/21/12
 Written with with involvement of ED, the Department
of Justice, and the FTC.
 Report is likely to include recommendations (including
legislative changes) for “effective” disclosures and
communications with borrowers (including co-signers)
What Might The Future Hold?
Theories run the gamete:
 CFPB will gain the capability to gather more data and build the
capability to analyze it to detect violations
 All lenders and servicers will be required to obtain a federal license
 The licensed lender will be required to provide information to the
CFPB about its activities. These documents must be sent by request
from the CFPB and they will also be used by other regulatory
agencies to monitor transaction activities. Failure to send a report
upon request would be grounds for legal penalties, as student loan
companies will be expected to comply with regulatory rulings
designed to facilitate monitoring, regulation, and consumer safety
How To Prepare For CFPB
 Strengthen the compliance function
 Punitive loan provisions? Be conservative
 Get a feel for the flow of regulatory direction
 Know your appetite for risk
 Stay in touch with colleagues and your trade associations
Consumer Financial Protection
Bureau
 Bureau has huge authority
 Rulemaking – Perhaps the most significant authority of the
Bureau
 Supervisory
 Enforcement*

Student Loans are a top priority
 CFPB has access to consumer complaints within the FTC
Consumer Sentinel database (In the past only accessible
through law enforcement agencies.)
Regulations to Comply With
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
Consumer Financial Protection Bureau
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FCRA
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FDCPA
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Red Flag Rules
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GLBA
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TILA
Telephone Consumer Protection Act
CFPB Initiatives Effecting Higher
Education
 Consumer Financial Protection Bureau now taking private student loan complaints
 Attorney General Databases
 Streamlining Regulations
 “Know Before You Owe”
 "Answers" -Portal for Financial Questions, Including Debt Collection
 Bureau proposed a role defining the scope of the nonbank supervision program to
include larger participants in the debt collection market (generally, those entities
with $10M in revenue from debt collection activities)
 Comments due April 17, 2012
The Bureau is authorized to supervise nonbank entities subject to section 1024 of
the Act by requiring the submission of reports and conducting examinations to:
(1) assess compliance with Federal consumer financial law;
(2) obtain information about such persons’ activities and compliance systems or
procedures; and
(3) detect and assess risks to consumers and to the consumer financial markets.
Service Providers
 Supervision of Service Providers
 Financial institutions under Bureau supervision may be held
responsible for the actions of the companies with which they
contract.
 Bureau’s expectation that supervised financial institutions have
an effective process for managing the risks of service provider
relationships.
 A service provider is defined in the Dodd-Frank Act as “any
person that provides a material service to a covered person in
connection with the offering or provision by such covered
person of a consumer financial product or service.”
 Ensure that business arrangements with service providers do
not present unwarranted risks to consumers.”
New Before You Owe
o
S.2280 - Know Before You Owe Private Student
Loan Act of 2012
 To amend the Truth in Lending Act and the Higher Education
Act of 1965 to require certain creditors to obtain certifications
from institutions of higher education, and for other purposes.
 5 Dem Sponsors
 Referred to Senate Banking Committee
 No movement yet

New Before You Owe
 Amends the Truth in Lending Act to require a lender, before
issuing a private education loan for a student attending an
institution of higher education (IHE), to obtain the IHE
certification of:
(1) the student’s enrollment status,
(2) the student’s cost of attendance, and
(3) the difference between that cost and the student’s
estimated financial assistance. Eliminates the requirement
that such lenders obtain a self-certification form from the
private education loan applicant.
Fair Debt Collection Practices
Clarification Act of 2012
 H.R. 4101, titled the “Fair Debt Collection Practices Clarification Act of 2012,”
specifically exempts debt collectors from liability when leaving voice messages. In
fact, the bill’s intro – often given as a “purpose” for a bill — reads:
 To amend the Fair Debt Collection Practices Act to exempt a debt collector from
liability when leaving certain voice mail messages for a consumer with respect to
a debt as long as the debt collector follows regulations prescribed by the Bureau
of Consumer Financial Protection on the appropriate manner in which to leave
such a message, and for other purposes.
 The bill appears to put the onus on the Consumer Financial Protection Bureau
(CFPB) to come up with language within six months of the bill’s passage that is
appropriate for debt collectors to use in a voice mail.
 From the bill-A debt collector may leave messages for a consumer in connection with
the collection of a debt on the consumer’s answering machine, voice messaging
system, or other similar device, including in an initial communication with the
consumer, so long as the message complies with regulations prescribed by the Bureau
to ensure the preservation of the privacy and other rights granted to the consumer.
TCPA: “Harmonizing”
Sounds Like This?
 FCC seeking to harmonize Telephone Consumer Protection Act
(TCPA) regs with FTC Telemarketing Sales Rule
 Good idea, but proposal affects non-telemarketing calls
 Use of auto-dialers, cell phones, and obtaining consent from
consumer the key issues here
 Proposal calls for “express written consent” not only from new
consumers (students), but also EXISTING CUSTOMERS for use
of pre-recorded calls on cell phones
 Definition of “auto-dialer” vs. “predictive-dialer”
also concern
TCPA
 Presidents Deficit Reduction Plan (aka Job’s Bill)
 Plans to amend the Communications Act of 1934
 Allow the use of cell phones to contact debtors who owe money to the
government
 The provision is expected to provide substantial increase in collections
 The Mobile Informational Call Act of 2011 (H.R. 3035)
 Bipartisan coalition (Rep Terry, R-NE and Rep Town, D-NY)
 Allows the use of predicative dialers in contact cell phones were
“existing business relationship exists”
 Modernizes the TCAP by exempting informational calls to wireless
phone from auto-dialer restrictions
 Clarifies the “prior express consent” requirement


(a) for the initiation of a call on behalf of entity with a person
where an established business relationship exists
(b) that is provided when person purchases a good or service
TCPA
 FCC Committee Hearing-February
 Reviewing whether to adopt express written consent for all
autodialed or prerecorded calls.
 Commission adopts prior express written consent for
autodialed or prerecorded telemarketing calls only.
 The final rules do not address informational calls, meaning
nothing has changed for the calls made by colleges and their
3rd party companies
Lori S. Hartung
Todd, Bremer & Lawson, Inc.
lori.hartung@tbandl.com
803-371-2394
Karen Reddick
National Credit Management
kreddick@ncmstl.com
314-603-9500
COHEAO Website
www.coheao.org
Consumer Finance Protection Bureau
http://www.consumerfinance.gov
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