Consumer Finance Law Blog : Consumer Finance Lawyer & Attorney : Kelley Drye & Warren Law Firm : Financial Privacy & Security

The Consumer Financial Protection Bureau (CFPB) plans to begin accepting consumer complaints regarding the debt collection industry in the second quarter of this year, according to a report issued yesterday by Bloomberg News. The CFPB presently accepts complaints regarding a limited number of CFPB-regulated products and services, including bank accounts, credit cards, credit reporting, money transfers, mortgages, student loans, and vehicle or consumer loans.

The Dodd-Frank Wall Street Reform Act requires the CFPB to “facilitate the centralized collection of, monitoring of, and response to consumer complaints regarding consumer financial products and services.” The CFPB complaint system is distinguishable from other agency complaint systems in that CFPB will follow-up with the consumers to describe the steps taken by the CFPB or another agency in response to the complaint and whether the entity complained of has responded. Certain non-confidential complaint information is subsequently published in the CFPB’s complaint database, including the product and issue involved, the company complained of, and the company’s response.

The expansion of CFPB’s consumer complaint collection to the debt collection industry follows the release of the “Larger Participant” rule in October 2012, which defined “larger participant” for the purposes of entities engaging in the consumer debt collection market, and the beginning of the Bureau’s supervision program over debt collectors on January 2, 2013. Debt collection industry participants should take note as the CFPB continues to ramp up its oversight in this field.

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On Monday, the Federal Trade Commission ("FTC") announced that it had, in partnership with the Consumer Financial Protection Bureau ("CFPB"), sent warning letters to 20 real estate agents, home builders, and lead generators, advising them to review their advertisements to ensure compliance with the Mortgage Acts and Practices-Advertising Rule, Regulation N ("MAP-AD Rule") and the FTC Act. The CFPB also sent warning letters to approximately 12 additional mortgage brokers and lenders.

The FTC and CFPB share enforcement authority over non-bank mortgage advertisers and reviewed over 800 mortgage advertisements for compliance with the MAP-AD Rule, which prohibits material misrepresentations in communications regarding the terms of mortgage financing. The agencies were particularly concerned by advertisements that: (1) offered low “fixed” mortgage rates without disclosing significant terms; (2) suggested the advertiser’s affiliation with a government agency; and (3) “guaranteed” approval and low monthly payments without disclosing significant terms. Companies found in violation of the Rule face civil penalties.

As a result of the partnership, both the FTC and CFPB have opened non-public investigations into mortgage advertisers suspected to be in violation of federal law, with the CFPB announcing that it has launched formal investigations into six companies in particular. Marketers should expect to see more cooperation and collaboration between the agencies in the future.

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On August 2, 2012, the Consumer Financial Protection Bureau (CFPB) issued its second Semi-Annual Report to Congress. The report provides an update on the CFPB's activities since its first report in January 2012 as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Many of the agency's initiatives have been previously discussed, such as the implementation of statutory protections for consumers using financial products and services, and the launch of programs for supervising large banks and other financial companies. However, this report releases new analytics on consumer complaints related to certain financial products and services that provide valuable insight into the CFPB's likely enforcement strategy.

Between July 21, 2011 and June 20, 2012, the CFPB received approximately 55,300 consumer complaints. The largest category of complaints (43%) related to mortgages, of which transactions involving consumers' inability to pay (i.e., loan modifications, collection, and foreclosure) were among the most common complaints. The report notes that consumer confusion persists around the process and requirements for obtaining loan modifications and refinancing, especially regarding document submission time frames, payment trial periods, allocations of payments, treatment of income in eligibility calculations, and credit bureau reporting during the evaluation period. These widespread consumer concerns were the likely impetus behind the CFPB's first enforcement action filed on July 18, 2012, against a law firm offering mortgage assistance relief services. According to the complaint, the firm engaged in an ongoing, unlawful mortgage relief scheme that falsely promised financially distressed homeowners a loan modification in exchange for an advance fee. This is likely the first of many enforcement actions involving loan modifications and foreclosure relief services.

Other possible enforcement targets are credit card companies and banking services engaging in unlawful financial practices. The agency reports that the second largest category of complaints (34%) related to credit cards, of which consumer billing disputes was the most common type of complaint (14%). Consumers are confused and frustrated by the process and limits to challenging inaccuracies on their monthly billing statements. The third largest category of complaints addressed bank account and service complaints (15%), of which the most common type of complaint related to the opening, closing, or managing of accounts. These complaints in particular addressed issues such as confusing marketing, denial, fees, statements, and joint accounts.

The CFPB's enforcement priorities are those violations of law that cause the greatest harm to consumers. It warns that investigations "currently underway span the full breadth of the Bureau's enforcement jurisdiction." However, companies implicated by consumer complaints are in large part reacting in a timely and sufficient manner. The report indicates that 90% of companies reported having closed 85% of the complaints submitted against them. Consequently, companies seeking to avoid becoming an enforcement target are advised to immediately address consumer complaints directed to them by the CFPB and to look for opportunities to mitigate consumer confusion in the processing and billing of financial products and services.
 

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On July 16, 2012, the Consumer Financial Protection Bureau (CFPB) issued a final rule granting it supervisory authority over leading credit reporting agencies. Those firms newly subject to the CFPB's oversight include the big three consumer reporting agencies, Equifax, Experian, and TransUnion, as well as nonbank entities engaging in consumer reporting activities with more than $7 million in annual revenue. This is the first in a series of rules to be issued by the CFPB to define "larger participants" of certain consumer markets for purposes of establishing the scope of the CFPB's nonbank supervision program under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

Director Richard Cordray announced the issuance of this final rule at a credit reporting field hearing in Detroit, Michigan. Given the critically important role credit reporting agencies play in ensuring consumers' financial stability, Director Cordray explained the need for federal supervision of a market that up to this point has been subject to limited regulation. According to various federal reports cited by the CFPB, each of the big three consumer reporting agencies is estimated to maintain credit files on more than 200 million customers. Approximately three billion consumer reports are issued every year, and 36 billion updates are made yearly to consumer files at consumer reporting agencies. In light of this activity, the CFPB believes that supervising this market will further its mission to ensure consumer access to fair, transparent, and competitive markets for financial products and services.

Among the more significant provisions, the final rule defines the "consumer reporting market" to include the following entities: consumer reporting agencies selling consumer reports; consumer report resellers, which are typically those entities that purchase consumer information from agencies and then resell the reports to lenders and other users; analyzers of consumer reports and other account information, for example, those entities that develop and sell credit scoring services and products; and specialty consumer reporting agencies, such as those that focus on payday loans and checking accounts. The final rule establishes the following test to assess whether a nonbank covered person is a "larger participant" of the credit reporting market: more than $7 million in annual receipts resulting from relevant consumer reporting activities. Covered persons meeting the test are accordingly subject to the CFPB's supervision authority under the Dodd-Frank Act.

This final rule has an effective date of September 20, 2012. All affected entities are strongly encouraged to review their consumer reporting practices in light of the CFPB's new supervisory authority.
 

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On June 29, 2012, the CFPB issued two Rules of Practice separately governing the agency’s adjudication proceedings and investigational, nonadjudicative matters. In addition, the CFPB issued its final State Official Notification Rule. These rules codify the interim final rules promulgated on July 28, 2011, previously discussed here, and have an immediate effective date. Also on June 29th, the CFPB issued an interim final rule with request for comment entitled the Equal Access to Justice Act Implementation Rule. The key provisions of each rule are summarized below.

Rules of Practice Governing Adjudication Proceedings

In promulgating the final rule governing adjudication proceedings, the CFPB seeks to promote the expeditious resolution of claims while ensuring that parties receive a fair and impartial hearing. The final rule is modeled on the rules of practice of other federal agencies, including the Federal Trade Commission (FTC), the Securities and Exchange Commission (SEC), and the prudential regulators.

In particular, it sets forth the authority of a hearing officer to conduct administrative proceedings and issue recommended decisions. Similar to the SEC rules, the final rule permits the hearing officer a specified period of time - 300 days from service of the notice of charges or 90 days after briefing is complete - to issue a recommended decision. If a recommended decision is appealed, the director must issue his final decision within 90 days. Extensions of time are generally disfavored.

Further, the final rule contains provisions for the deposition of witnesses unavailable for trial, the use of subpoenas to compel the production of documentary or tangible evidence, and expert discovery. Similar to the SEC's affirmative disclosure approach, the CFPB must provide any party in an adjudicative proceeding the opportunity to inspect and copy certain documents obtained in connection with the underlying investigation and certain non-privileged documents created by the CFPB. In addition, the final rule establishes the procedures by which parties may request confidential treatment of filings or disclose confidential information received by a third party, including the third party's right to intervene for purposes of protecting its confidential information.

Rules Relating to Investigations

The final rule relating to investigations describes a number of CFPB policies and procedures that apply in an investigational, nonadjudicative setting. Among other things, the final rule sets forth (1) the CFPB's authority to conduct investigations under Federal consumer financial law, and (2) the rights of persons from whom the CFPB seeks to compel information. This rule is modeled on investigative procedures of other law enforcement agencies, including the FTC, the SEC, and the prudential regulators.

In pertinent part, the final rule authorizes the director and certain other officials to issue civil investigative demands (CIDs) for documentary materials, tangible things, written reports, answers to questions, or oral testimony. The rule also details the authority of CFPB investigators to conduct investigations and to hold investigational hearings pursuant to CIDs for oral testimony. With regard to the rights of persons subject to an investigation, the final rule sets forth certain notification requirements and procedures to petition for CID modification or set-aside. The rule further describes the process by which persons may obtain copies of or access to documents provided in response to a CID, and details the rights of witnesses in investigations, in particular, the parameters under which witnesses may be accompanied, represented, and advised by counsel during an investigational hearing.

State Official Notification Rule

Applicable federal law mandates that the CFPB establish procedures by which state officials notify the CFPB of actions brought under the Dodd-Frank Act. Under the final rule, state officials must provide notice to the CFPB at least ten days before initiating an action under section 1042(a) of the Dodd-Frank Act. For matters of emergency, if state officials initiate an action to protect the public interest or prevent irreparable and imminent harm, they must notify the CFPB within 48 hours of filing the action. The notice must include information such as the names of parties involved and the nature of claims. In response, the CFPB can intervene and participate in the action as appropriate.

Equal Access to Justice Act Implementation Rule

The Equal Access to Justice Act (EAJA), 5 U.S.C. 504, requires agencies that conduct adversary adjudications to award attorneys fees and other litigation expenses to certain parties other than the United States in certain circumstances. The EAJA also requires that these agencies establish procedures for the submission and consideration of applications for the award of fees and other expenses. The CFPB's interim final rule establishes those procedures. Under the interim rule, a party subject to a CFPB adjudication is eligible to receive an award in two instances: first, when it is the prevailing party, unless the CFPB's position in the proceeding was substantially justified or special circumstances make an award unjust; or second, when the CFPB's demand is substantially in excess of the decision of the adjudicative officer and is unreasonable when compared with that decision, unless the party has committed a willful violation of law or otherwise acted in bad faith.

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All affected companies and businesses are strongly encouraged to carefully review the CFPB's new Rules of Practice relating to adjudicative processes and investigative proceedings, and the State Official Notification Rule. In addition, interested parties are encouraged to submit comments on the interim final rule relating to the Equal Access to Justice Act prior to the deadline of August 28, 2012.

Written by Christie G. Thompson and Sherrie Kim Schiavetti

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The Federal Trade Commission (FTC) today announced its settlement with Spokeo, Inc. for alleged violations of the Fair Credit Reporting Act (FCRA) and Section 5(a) of the FTC Act. As part of the FTC's ongoing enforcement of the FCRA to regulate the collection, dissemination, and use of consumer credit information, this is the first case to involve the sale of social media data in the employment screening context.

Spokeo is a self-proclaimed "people search engine." According to the complaint, Spokeo assembles consumer information from hundreds of online and offline sources, including social networking sites, to create searchable consumer profiles. These profiles contain individuals' full name, physical address, phone number, age range, and email address, as well as other information such as hobbies, ethnicity, religion, participation in social networking sites, and photos. Spokeo promotes its service as providing "coherent people profiles" and "powerful intelligence," and sells this information through paid subscriptions and application program interfaces (API).

FCRA

The FTC alleged that for a two-year period, Spokeo operated as a consumer reporting agency by marketing consumer profiles as an employment screening tool to human resources professionals and job recruiters. Spokeo specifically exhorted recruiters to "Explore Beyond the Resume" by using the company’s services to capture job applicants' personal interests and online activities. According to the complaint, Spokeo violated the FCRA by failing to ensure that the information it sold was accurate and would be used only for legally permissible purposes, and by failing to tell prospective employers about their obligations under the FCRA, including the requirement that consumers be notified when adverse actions are taken against them based on information contained in the profiles.

FTC Act

In addition to the FCRA violations, the FTC alleged that Spokeo directed employees to post endorsements of its services on third party websites using fake account names in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). According to the FTC, Spokeo misled consumers by representing that these comments were independently generated by ordinary consumers or business users. These misrepresentations allegedly constitute unfair or deceptive acts or practices prohibited by the FTC Act.

Settlement Terms

Under the proposed settlement terms, Spokeo will pay an $800,000 civil penalty. The settlement bars Spokeo from future violations of the FCRA and the FTC Act. Undoubtedly this is the first of many cases of alleged FCRA violations for the use of social media data in the employment screening context. This settlement serves as a cautionary tale that the FCRA will apply with full force when a consumer reporting agency assembles or evaluates consumer report information, including data collected from social networking sites, to be used for employment screening purposes.
 

Written by Christie G. Thompson and Sherrie Schiavetti. 

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Last week, the Consumer Financial Protection Bureau (“CFPB”) finalized three rules and issued one interim rule outlining procedures related to violations of consumer protection laws. The press release announcing the final and interim rules is available here. The final rules take effect upon publication in the Federal Register.

• Rule on Investigations. The CFPB drew heavily from the FTC's current and proposed nonadjudicative procedures. The final rule is largely based on section 20 of the FTC Act and its corresponding regulations with a few notable distinctions, as discussed below.

Consistent with analogous FTC provisions, the CFPB’s final rule establishes the following: (1) the CFPB’s authority to conduct investigations in the interest of the public; (2) procedures for issuing information requests and civil investigative demands (“CIDs”); and (3) the rights of recipients of CIDs. While the CFPB has broad discretion in opening and closing investigations, the power to issue a CID is limited to the CFPB Director, Assistant Director of the Office of Enforcement, and Deputy Assistant Director of the Office of Enforcement. Consistent with the Dodd-Frank Act, the rule permits the CFPB to share confidential information with other agencies to the extent the disclosure is relevant to the agency’s authority. CID recipients have the right to (1) be notified of the investigation and the applicable provision of law; (2) retain or request a copy of everything submitted in response to a CID or document request; and (3) obtain counsel. The rule also allows the CFPB to refer investigations to appropriate Federal, State, or foreign government agencies with authority.

Unlike the FTC’s rules, the CFPB's final rule includes a provision disfavoring extensions of time for petitions to modify or set aside a CID. The CFPB believes this is appropriate in light of its significant interest in promoting an efficient process for seeking materials through CIDs. In addition, though both agencies' regulations require a statement of the nature of the conduct at issue and the relevant provisions of law, the FTC rule additionally requires that the recipient of the CID be advised of the "purpose and scope" of the investigation. Commenters expressed concern that the CFPB's exclusion of this phrase would lead to requests for material outside the scope of an investigation. The CFPB disagreed, noting that its notice provisions are consistent with the Dodd-Frank Act and provides for sufficient notice to recipients of CIDs.

• Rule on Adjudicatory Proceedings. The CFPB incorporated the adjudicatory rules of other agencies to create an efficient yet fair resolution of matters. Under this final rule, hearing officers must issue recommended decisions in each adjudication. Parties have the right to contest the recommended decision by filing a notice of appeal. The rule also grants parties access to non-privileged documents and reduces pre-trial procedures.

• State Official Notification Rule. This final rule provides how States should update the CFPB on actions they bring under the Dodd Frank Act. State officials must provide notice to the CFPB at least ten days before initiating an action under section 1042(a) of the Dodd-Frank Act. For matters of emergency, if State officials initiate an action to protect the public interest or prevent irreparable and imminent harm, they must notify the CFPB within 48 hours of filing the action. The notice must include information like the names of parties involved in the action and the nature of claims. In response, the CFPB can intervene and participate in the action as appropriate.

The CFPB also issued an interim final rule implementing the Equal Access to Justice Act (EAJA). The EAJA allows certain prevailing parties in administrative proceedings to recover attorney fees and expenses.

Companies should watch how the CFPB enforces these rules to avoid possible violations under the Dodd-Frank Act. The CFPB will begin accepting comments on this interim final rule after it is published to the Federal Register. Comments must be submitted 60 days after publication.
 

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On May 25, 2012, the CFPB released a proposed rule outlining its process for determining whether a covered person has engaged, or is engaging in, conduct that poses risks to consumers related to the offering or provision of consumer financial products or services. The proposed rule sets out the procedures under which the CFPB may subject a nonbank covered person to the CFPB's supervisory authority, including requiring reports from and conducting examinations of the subject entity. In addition to the CFPB's specific grant of authority to supervise certain nonbank covered persons, such as those engaged in activity related to residential mortgage loans, the Bureau has the authority to supervise any nonbank covered person that it "has reasonable cause to determine, by order, after notice and a reasonable opportunity to respond" that the person is engaged in conduct posing a risk to consumers based on reasonable cause from complaints or information collected from other sources.

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On May 23, 2012, the Consumer Financial Protection Bureau (CFPB) officially launched its prepaid card initiative. In addition to issuing an Advance Notice of Proposed Rulemaking (ANPR), the CFPB hosted a field hearing in Durham, North Carolina, on general purpose reloadable prepaid cards, a rapidly growing segment of prepaid cards. Current and entering industry members are strongly advised to educate themselves on the imminent regulatory changes to the prepaid card ecosystem and actively participate in the CFPB's new initiative.

North Carolina Congressman David Price introduced CFPB Director Richard Cordray, who provided a brief overview on the current state of prepaid cards. Two panels representing industry experts and consumer and civil rights advocates were asked to briefly comment and then the floor was opened to the public. In his opening remarks, Director Cordray noted that more than 7 million Americans currently use prepaid cards. Prepaid cards offer services ranging from general purpose reloadable use to government disbursements, payroll, employee benefits, health care, and gift giving. They are particularly popular among the 9 million U.S. families who lack any type of checking, debit, or credit cards, colloquially referred to as "unbanked," and the 21 million "underbanked" who have bank accounts but heavily rely on nonbank products such as prepaid cards and payday loans. According to the two largest program managers of prepaid cards, the number of active cards in use increased from 3.4 to 7 million in the past three years, and is estimated to grow by 40% each year through 2014. Industry analysts predict $167 billion will be loaded onto prepaid cards in the next two years. Though they operate similarly to a debit card, prepaid cards are not linked to a bank account and are outside the reach of federal consumer protections applicable to debit and credit cards. Further, consumer protections such as redress for theft, loss, or unauthorized charges vary from program to program, and many prepaid card services lack clear disclosures of overdraft fees and surcharges.

In light of these shortfalls, Director Cordray identified safety and transparency as the two key goals of the CFPB's new initiative. Echoing these sentiments, panelists and audience participants collectively recommended that the following practices be implemented: expanding the current regulatory framework for credit and debit cards to prepaid cards; imposing FDIC insurance requirements; and mandating clear, standardized disclosures for fees and surcharges. Other recommendations included complete prohibition of practices such as overdraft fees, credit product tie-ins, and arbitration clauses. Though panelists and community participants emphasized the potential abuses in the prepaid card ecosystem, a number of notable advantages were identified. This included the prepaid card's convenience and utility in budget-monitoring. Some panelists suggested that the CFPB do more to use prepaid cards as a vehicle for the unbanked and underbanked to gain access to traditional financial services like checking and savings accounts. In those instances, prepaid cards could provide financial products to the underbanked community at very low costs. Though the current lack of regulation and unbridled abusive practices weaken the value proposition of prepaid cards, panelists and audience participants expressed optimism in the creation of a stronger, more robust financial product.

The CFPB concluded the hearing by asking that consumer experts, industry stakeholders, and the public continue the conversation by submitting comments on the ANPR on or before July 22, 2012.

Written by Christie G. Thompson and Sherrie Schiavetti.

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Continuing its recent activity on prepaid cards, the CFPB released an Advance Notice of Proposed Rulemaking today seeking comment, data, and information about general purpose reloadable prepaid cards (GPR cards). The CFPB intends to issue a proposal extending Regulation E to cover GPR cards and, as a result, the ANPR seeks information on ten broad questions. The questions pertain to GPR cards, a specific type of prepaid card issued for a set amount in exchange for payment by a consumer and reloadable by adding funds to the card. The CFPB noted that while the ANPR refers to a "card," "these devices may include other mechanisms, such as a key fob or cell phone application, that access a financial account." The ANPR does not, however, apply to "closed loop" cards, such as debit cards linked to a checking account, non-reloadable cards, payroll cards, electronic benefit transfers, or gift cards.

The CFPB grouped ten questions into four broad categories: (a) regulatory coverage of products by some or all of Regulation E, (b) product fees and disclosures, (c) product features, and (d) other information on GPR cards. Specific questions include the definition of GPR cards in the context of Regulation E, potential disclosure requirements related to fees, and additional features related to GPR cards, such as overdraft, savings accounts, or the opportunity to improve credit. The CFPB's proposed rulemaking, coupled with its field hearing conducted today, show that the Bureau is moving forward on regulating the prepaid card market and participants should consider weighing in during these early stages of proposed regulation.

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The CFPB announced today that it will hold a "field hearing" in Durham, North Carolina on the topic of prepaid cards on Wednesday, May 23, 2012. Director Richard Cordray will present remarks and the CFPB will hear testimony from consumer and civil rights groups, industry representatives, and members of the public.

The CFPB has not yet issued a proposed rule defining "larger participants" for prepaid cards but specifically identified prepaid cards as a market under consideration in its Notice and Request for Comments published on June 29, 2011, along with Debt Collection; Consumer Reporting; Consumer Credit and Related Activities; Money Transmitting, Check Cashing, and Related Activities; and Debt Relief Services. The CFPB proposed a rule defining larger participants in Debt Collection and Consumer Reporting on February 17, 2012 but has not yet issued a rule on larger participants for prepaid cards. This field meeting, therefore, may provide insight into the CFPB's direction on supervision and examination of prepaid card market participants.
 

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Earlier today, the Federal Trade Commission (FTC) issued an advisory opinion affirming broad consumer rights under the Holder in Due Course Rule ("Holder Rule"). The National Consumer Law Center (NCLC), joined by Public Citizen, the Center for Responsible Lending, the National Association of Consumer Advocates, and the federation of state Public Interest Research Groups, requested this opinion.

Promulgated in 1976, the Holder Rule protects consumers who enter into credit contracts with a seller of goods or services by preserving their right to assert claims and defenses against any holder of the contract, even if the seller subsequently assigns the contract to a third-party creditor. In particular, the Holder Rule requires sellers that arrange or offer credit to finance consumers' purchases to include in their credit contracts the following disclosure:

ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED . . . . RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.

Thus, according to the Rule, a creditor or assignee of the contract is subject to all claims or defenses that the consumer could assert against the seller. As a result, consumers are permitted to assert a seller's misconduct in two situations: (1) to defend against a creditor's lawsuit for amounts owed, and (2) to maintain a claim against the creditor for a refund of money. The only limitation included in the Rule is that a consumer's recovery "shall not exceed amounts paid" under the contract.

Some courts have barred consumers from affirmative recoveries unless rescission is warranted under state law. In light of this practice, NCLC and the other entities sought affirmation by the FTC of consumers' broad rights under the Holder Rule. The FTC's opinion letter affirms that the Rule unambiguously places no limits on a consumer's right to an affirmative recovery of payments already made under a credit contract. According to the FTC, this interpretation gives full effect to its original intent of the Rule to hold sellers and creditors responsible for misconduct and to shift seller misconduct costs away from consumers. The advisory opinion provides a good reminder for companies offering credit to check contractual terms to ensure they meet federal requirements and to evaluate current practices.

Written by Christie G. Thompson and Sharon Kim Schiavetti
 

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Today the Federal Trade Commission ("FTC"), Consumer Financial Protection Bureau ("CFPB"), and Department of Justice ("DOJ") filed a brief supporting the constitutionality of the Fair Credit Reporting Act ("FCRA").  FCRA limits the use of credit report information, protecting the privacy of the information, and establishes procedures for correcting mistakes in credit reports.  The brief addresses a provision of FCRA (§ 1681c) that bars a credit reporting agency ("CRA") from disclosing individuals' arrest records or other adverse information that is more than seven years old.

The government filed the brief in King v. General Information Services, Inc., which is pending in the Eastern District of Pennsylvania District Court.  The defendant argues that the FCRA provision is an unconstitutional restriction of free speech.  Contrary to that position, the government argues that the provision satisfies the applicable Central Hudson test for restrictions on commercial speech and should not be invalidated, despite the U.S. Supreme Court's recent ruling in Sorrell v. IMS Health Inc.  The brief concludes, "The law directly advances the government’s substantial interest in protecting individuals’ privacy and is no more extensive than necessary to protect that interest while also accommodating businesses’ competing interest in obtaining complete information about people to whom they are considering offering a loan, an insurance policy, or a job."

The brief demonstrates the cooperation expected between the FTC and CFPB as they jointly enforce FCRA.  In July 2011, the FTC issued "40 Years of Experience with the Fair Credit Reporting Act," a staff report "to share [the FTC's] extensive experience with the CFPB and the public through a summary of its key interpretations and guidance" developed through its 40 years of enforcing FCRA.  Companies subject to FCRA should continue to watch for coordination between the agencies as the enforcement roles evolve.

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The CFPB has extended the amount of time for comments on overdraft programs from the end of April to June 29, 2012. The original Notice and Request for Information, published on February 22, 2012, asked for information from the public, including consumers, overdraft program processors, and financial institutions, on how overdraft programs work, including information on:
• How consumers utilize overdraft programs,
• The information provided to consumers that inform their everyday banking decisions,
• Alternatives consumers have for meeting short-term shortfalls,
• How recent regulations and changes in bank products and terms have impacted overdraft incidence, and
• The costs financial services providers incur to provide banking and overdraft services.
The CFPB has already received over 200 comments to date but this extended period of time provides financial service providers and others with an opportunity to review the existing comments and submit their own.
 

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