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

The FTC’s final Statement of Policy Regarding Communications in Connection with the Collection of Decedents’ Debts was published on July 27, 2011 in the Federal Register. The policy statement clarifies that the agency will not take enforcement action under the Fair Debt Collection Practices Act (FDCPA) or the FTC Act against a debt collector for communicating with certain classes of individuals specified in the FDCPA or an individual who has the authority to pay debts out of the assets of the decedent’s estate. This final Statement will be effective on August 29, 2011.

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Starting August 1, Raj Date will replace Elizabeth Warren to run the day-to-day operations at the Consumer Financial Protection Bureau ("CFPB") until a director is appointed.  Mr. Date currently serves as a top deputy to Ms. Warren as the Associate Director of Research, Markets, and Regulations, focusing on credit cards and mortgages. Most recently, the White House was reportedly considering nominating Mr. Date as the director of the new agency. The White House ended up nominating Richard Cordray, a former Ohio attorney general, last week. 

Prior to joining the CFPB, Mr. Date founded Cambridge Winter Associates, a research organization, and pushed for the creation of the CFPB as part of Dodd-Frank. He is also a former banker with Capital One Financial Corp. and Deutsche Bank AG. In his current role at the CFPB, earlier this month he testified before Congress regarding mortgage servicing standards.

The CFPB began formal operations on July 21, while Mr. Cordray awaits Senate confirmation, which could be an uphill battle. Many Republicans plan to block any nominee unless President Obama agrees to significant structural changes for the CFPB. In the meantime, Ms. Warren plans to return to her teaching position at Harvard Law School this fall.

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The CFPB released a “progress report” on Monday tracking its achievements over the past year and goals for the immediate future, all part of the lead-up to the transfer of its authority from other agencies on July 21. The full report is available here. Describing itself as a “21st century agency,” the report outlines current projects, such as simplifying mortgage disclosure forms, and pending activities, such as the initial “larger participant” rule. The report also highlights the CFPB’s efforts to engage the public and the financial sector, detailing Elizabeth Warren’s speaking schedule over the past year, and summarized the current organizational structure and key hires. Finally, the report describes several Memoranda of Understanding signed by CFPB with other federal agencies and non-government entities to permit sharing of information and cooperation. Followers of the CFPB’s development during this start-up time will find the report a helpful summary of its activities.

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After much speculation concerning who would be nominated to head the Consumer Financial Protection Bureau (CFPB), President Obama announced plans to nominate former Ohio Attorney General Richard Cordray for the post at a White House event tomorrow. Mr. Cordray, who is now the CFPB’s top enforcement official, previously clerked for Supreme Court Justices Byron R. White and Anthony M. Kennedy, and was a litigator with the law firm Kirkland & Ellis for over ten years. As Ohio Attorney General, he brought several lawsuits against global banks, mortgage servicers, credit rating agencies, subprime lenders, and other financial institutions.

In a statement, President Obama praised Mr. Cordray’s track record in “advocating for middle class families” and “looking out for ordinary people in our financial system.”

Professor Elizabeth Warren, who for a while had been the frontrunner for the nomination, also received praise from President Obama for devising the idea for the new agency and for getting it off the ground. More recently, President Obama had considered former banker Raj Date as a frontrunner for the position.

Mr. Cordray’s nomination still must clear the hurdle of Senate approval, and Senate Republicans have reiterated their opposition to any nominee so long as the agency’s structure is not modified. Thus, the White House’s plan to obtain Senate confirmation within the next two weeks, before the August 8 planned start of Senate recess, seems unlikely. Senate Republicans may also attempt to prevent the Senate from breaking for recess in the first place in order to preclude President Obama from making a recess appointment. In any event, the agency, which is scheduled to open for business on July 21, is likely to do so without a director and hence will probably be unable to exercise some of its powers.

Over the next few weeks, one can expect a dramatic showdown between President Obama and Senate Republicans, as they escalate the dispute over Mr. Cordray’s candidacy and the structure of the CFPB.

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Though still without a director, the Consumer Financial Protection Bureau ("CFPB") has published its first notice and request for comment in the Federal Register (76 Fed. Reg. 38,059 (June 29, 2011)). The CFPB seeks comment on development of a rule to define the “larger participants” who will be subject to supervision for compliance with federal consumer laws. The Frank-Dodd Act limits the scope of the CFPB’s oversight over non-depository covered person to “a larger participant of a market for other consumer financial products or services,” and directs the CFPB to define, by rule, what that means. CFPB rulemakings may progress under the Treasury Secretary’s 1066(b) authority even if a director is not named by the July 21, 2011 transfer date.

The CFPB seeks comment on two main issues: (1) the criteria to be used to define a “larger participant,” and (2) the categories of markets that should be covered in the initial rule. Criteria may be tailored by market and may be either absolute or relative. The CFPB is also considering using multiple criteria in combination. Among the markets currently being considered for inclusion in the initial rule are debt collection, consumer reporting, consumer credit and related activities, money transmission/check cashing, pre-paid cards, and debt relief services. These markets cover a wide range of companies and are in line with the enforcement priorities articulated by Elizabeth Warren in her March 17 testimony before the House Subcommittee on Financial Institutions and Consumer Credit Committee on Financial Services.

The CFPB is also considering the establishment of a registration program for some or all covered persons in accordance with the Consumer Protection Act §§ 1022(c)(7) and 1024(b)(7). Any such registration program could increase regulatory reporting burdens for entities that fall within the scope of the CFPB’s supervisory authority.

Obviously, the proposal could have far-reaching consequences for companies that are deemed “larger participants,” including exposure to periodic examinations and requirements to file compliance reports. Companies who wish to participate in the CFPB’s maiden rulemaking will have until August 15, 2011 to submit their written responses. The final rule must be issued by July 21, 2012.
 

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