Today's Trends in Credit Regulation

Surviving and Thriving with the CFPB

The opening of the Consumer Financial Protection Bureau business represents a major sea change for all creditors. Overby-Seawell Company asked five partners from the law firm of Hudson Cook, LLP – Thomas B. Hudson, Robert A. Cook, Michael A. Benoit, Catherine M. Brennan, and Meghan S. Musselman – to put their heads together to recommend what we all need to do to survive and thrive in this brave new world. Here are their recommendations.

Miscellaneous Fees – Banks and other creditors have come to rely on miscellaneous fees to boost revenue. These fees often catch a consumer by surprise. Although Elizabeth Warren may be leaving the CFPB, the CFPB will still be watching for consumer “gotchas” and “tricks and traps” in the form of “hidden” fees. Check your fee disclosures. Are they clear and prominent? Remember – no surprises.

Ancillary Products – Banks and other creditors have come to rely on the sales of ancillary products to boost revenue. There is a good chance the CFPB will focus on how these non-core revenue sources affect consumers. Consider how you disclose the costs and risks, as well as the benefits, of an ancillary product – particularly any exceptions that deprive the customer of the expected benefits of ancillary products. If the purchase of an ancillary product is voluntary, make sure that is clear.

Write Short, Write Big – “Clear and simple contracts.” That’s another of Elizabeth Warren’s mantras that will remain behind when she leaves the CFPB. Shortening consumer contracts and stripping out legalese is hard, and sometimes impossible, but give it a try. Consider putting important terms, costs, and exclusions up front. Use graphics. Challenge your marketing department to be balanced and your lawyers to be concise. Get rid of terms and conditions that you never use, and make the type big enough, and dark enough, to read.

Defending Our Military – Don’t forget your duties to members of the military. An entire division of the CFPB is devoted to helping servicemembers and their families. Creditors need to be partners with the CFPB as it protects the members of our armed forces.

Creativity? Innovation? – Elizabeth Warren liked “plain vanilla” credit products, but innovation and creativity still have their place. Just make sure new products are fair and balanced, and the disclosures are clear.

Preemption and the Better Part of Valor – Preemption still lives, but who really knows its new parameters. A healthy respect for state law makes sense for banks. Rely on preemption where necessary, but make sure it is necessary.

Customer Service – Resolving customer complaints promptly is always important, but never more than now. The CFPB is actively seeking consumer credit card complaints on its website and will broaden the scope of its complaint site later this year. One way to look at this is either you can satisfy an angry customer or the CFPB will.

Bears, Bulls, and Pigs – Wall Street has its own, often forgotten, allegory about risky behavior. With a new cop on the beat, creditors should keep in mind that moderation, not greed, will serve them better in the long run.

Thomas B. Hudson, Robert A. Cook, Michael A. Benoit, Catherine M. Brennan, and Meghan S. Musselman are partners in the law firm of Hudson Cook, LLP.

Tom can be reached at 410-865-5411 or by email at

Robert can be reached at 410-865-5401 or by email at

Michael can be reached at 202-327-9705 or by email at

Cathy can be reached at 410-865-5405 or by email at

Meghan can be reached at 410-865-5403 or by email at

Overby-Seawell Company is a provider of insurance outsourcing, tracking, and technology services to the financial industry.

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