On June 26, 2013, the Consumer Financial Protection Bureau (“CFPB”) published a final rule that establishes procedures to implement section 1024(a)(1)(C) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. That statutory provision authorizes the CFPB to supervise a nonbank covered person when the CFPB has reasonable cause to determine that such person is engaging, or has engaged, in conduct that poses risks to consumers with regard to the offering or provision of consumer financial products or services. It is likely that consumer complaints will be one of the main sources of information used to determine how risky the entity is. In order to aid this process, CFPB’s Consumer Debt Collection Complaint Portal is expected to launch in July. If the CFPB has reasonable cause to determine a law firm may pose a risk to consumers, the procedure will be as follows:
- CFPB will send a notice to the law firm;
- The law firm will have 30 days to write a response, but an oral response may also be requested;
- An Associate Director will determine whether there is reasonable cause to determine the law firm’s acts and conduct pose risks to consumers and make a recommendation to the Director;
- The Director will make a final decision whether the law firm should be subject to supervision based upon the risk;
- CFPB will supervise the law firm for two years if it has reasonable cause to determine a law firm poses a risk to consumers;
- After the two years pass, the law firm may petition the CFPB to terminate its supervision.
Many companies and individuals submitted comments to the CFPB on the proposed rule, but the CFPB declined to adopt most of the changes suggested. CFPB agreed with certain NARCA recommendations and made the following changes to the rule: originally the rule allowed only 20 days for response to the Notice, but that was amended to 30; initially a Notice of Reasonable Cause would only state the basis for the CFPB’s assertions, but it was amended to also include a summary of the documents, records, or other items relied on; extension of time to respond was strongly disfavored originally, but now it is granted for a good cause shown; supplemental oral responses were allowed only by telephone in the original rule, but now the option to appear in-person is allowed as well.
On June 25, 2013, the CFPB issued Bulletin 2013-06 titled “Responsible Business Conduct: Self-Policing, Self-Reporting, Remediation, and Cooperation”. This bulletin describes how supervised entities can take certain actions which may favorably influence the CFPB regarding its enforcement. This bulletin helps in providing practical insight into what factors and questions the CFPB considers in exercising its enforcement authority.
The CFPB also announced on its blog, that there will be a Field Hearing in Portland, Maine, on July 10, 2013 at 11:00 am EDT. This event will feature remarks from CFPB Director Richard Cordray and the testimony from industry representative, consumer groups, and members of the public. This event will be informative, and thus recommended for all affected entities.