Today's Trends in Credit Regulation

The Four Ds of the Consumer Apocalypse
By Eric L. Johnson

Nuclear war, people dying/vanishing from the earth, biological plagues, zombies, technology failing, robot uprising, natural disasters, monsters/aliens ... even snow. What do all of these have in common? Besides being enduring movie and TV disaster themes, all are different types of apocalypses. After all the pronouncements I'm hearing from the Consumer Financial Protection Bureau's Director Cordray and Deputy Director Antonakes, I'm wondering if we should add "consumer" to our list of disaster themes, as in the coming consumer apocalypse.

Like a movie director debuting at Sundance, Cordray laid out his vision for this year-round consumer apocalypse blockbuster at the winter meeting of the National Association of Attorneys General. Director Cordray spoke about the obstacles in the financial services marketplace that interfere with justice and dignity for consumers: deceptive marketing, debt traps, dead ends, and discrimination - or the "Four Ds."

Deceptive marketing. The first obstacle that Cordray addressed is deceptive marketing - when key information is deliberately withheld from a consumer or when the information provided is misleading. Deceptive marketing can lead a consumer to have a hard time making sound financial choices. The CFPB's view is that consumer financial contracts have grown too long and complicated, and contracts that are too long create consumer confusion by their density and sheer length. In addition, the CFPB views the contracts as often difficult to read.

Debt traps. The second obstacle is debt traps that cause people to get stuck in a downward spiral that can ruin their personal finances and devastate their lives. "People who do not have access to more traditional credit products and who find themselves in a tough situation with nowhere to turn" may gravitate to these types of products and get sucked into the debt trap. He touted the CFPB's enforcement actions against payday lenders and loan servicers and the CFPB's recently announced payday lending rules.

Dead ends. The third obstacle is dead ends that consumers with limited clout reach because they can't choose the businesses they must deal with and lack the control to sever ties and take their business elsewhere. Cordray touted the CFPB's consumer complaint response tool as a way for consumers to "amplify their voice" whenever they feel they're getting the runaround. Cordray also discussed the key market area where the CFPB finds many dead ends and which needs an "overhaul": debt collection. He said the CFPB is "hard at work analyzing and preparing the details of proposed policy measures, which could lead to the most significant changes in federal law in this area in almost forty years." He also confirmed that the CFPB has been seeking input from state attorneys general and the Federal Trade Commission.

Discrimination. The final obstacle is discrimination, and Cordray indicated that the CFPB is working to secure the "right to equal treatment in the financial marketplace based on individual merit and responsibility." He stated that the CFPB is keeping a watchful eye on the auto "lending" market and has "focused significant resources on rooting out discrimination in indirect auto lending." He touted that settlements have resulted in supervised institutions "paying out approximately $136 million to provide redress for up to 425,000 consumers who were discriminated against on the basis of race."

Antonakes also promoted the consumer apocalypse blockbuster at the recent Consumer Bankers Association conference in Orlando. He stated that subprime auto financing is now one of the "emerging risks" that the CFPB is closely watching. The trends of the average term of a subprime auto finance contract increasing each year and "credit losses for recent loan vintages over the past two years rising" make the CFPB worry that "subprime borrowers are being extended credit that they are unable to pay back." Might this suggest a new act to the consumer apocalypse blockbuster: conditioning an extension of auto credit on a consumer's ability to repay? He further stated that the CFPB will be keeping a "close eye on these trends to address potentially unfair, deceptive, and abusive practices" in the auto financing space.

Winter and summer apocalyptic blockbusters come and go. TV shows with apocalyptic themes rise and fall. However, I can assure you that this consumer apocalypse, at least in the CFPB's eyes, is very real. It's here to stay until those poor helpless consumers - like those actors running from the zombies, robots, earthquakes, monsters, aliens, etc. - are saved. In this case, it is the government that is trying to do the saving.

You need to take a look at your documents, products, procedures, and processes with the Four Ds in mind. Trust me, you don't want to walk down that red carpet for the premiere of a consumer apocalypse blockbuster at your company.

Eric L. Johnson is a partner in the Oklahoma office of Hudson Cook, LLP. Eric can be reached at 405-602-3812 or by email at

Article Archive

2024   2023   2022   2021   2020   2019   2018   2017   2016   2015   2014   2013   2012   2011   2010   2009  

Copyright © 2024, LLC. All rights reserved.