Today's Trends in Credit Regulation

CFPB Watch for Auto Dealers
By Michael A. Benoit

In this issue, we report developments from the Consumer Financial Protection Bureau, the Federal Reserve Board, the Federal Trade Commission, and Congress.

CFPB Reports on Supervisory Actions.

On November 3, the CFPB announced that it had recovered $107 million in relief for more than 238,000 consumers through supervisory actions. These recoveries resulted from creditor problems discovered by the CFPB in connection with its examinations of various entities over which it has supervisory jurisdiction. The Bureau found violations in the student loan servicing, mortgage origination and servicing, consumer reporting, and debt collection markets. A couple items caught my eye.

The first involved credit reporting practices. Examiners found a lack of reasonable written policies and procedures for accurately reporting information to consumer reporting agencies. The CFPB found that many furnishers did not have systems to properly receive, evaluate, and respond to consumer disputes about information provided to consumer reporting agencies. In particular, examiners found that certain furnishers did not notify consumers about the outcomes of investigations of disputes. In other instances, furnishers did not notify consumers when they took adverse action against them based on information in their reports.

The other item that caught my eye involved debt collection. The CFPB found that collectors used illegal tactics to contact consumers. At least one debt collector's employees violated federal law by failing to identify that they were collectors during calls with consumers. Examiners also found instances where one or more collectors illegally continued to contact consumers by phone at work after consumers verbally told them to stop.

Reforming the CFPB?

On November 18, the U.S. House of Representatives approved H.R. 1737, titled the "Reforming CFPB Indirect Auto Finance Act," by a vote of 332-96. The bill, supported by all 244 Republicans and 88 of the 184 Democrats voting, nullifies CFPB Bulletin 2013-02 and requires the CFPB to satisfy certain procedural steps before issuing future guidance related to indirect auto financing.

House Committee Fires a Shot over the CFPB's Bow.

On November 24, the U.S. House Financial Services Committee, chaired by Rep. Jeb Hensarling of Texas, released a report titled "Unsafe at Any Bureaucracy: CFPB Junk Science and Indirect Auto Lending." The 54-page report is a broadside attack on the Bureau's attempt to regulate auto financing practices of dealers exempt from its jurisdiction.

No Change in TILA and CLA Coverage Amounts.

On November 25, the CFPB and the FRB announced that they are not adjusting the dollar amount thresholds in Regulation Z (Truth in Lending Act) and Regulation M (Consumer Leasing Act) for exempt consumer credit and lease transactions. The Dodd-Frank Act provides that the dollar amount thresholds for TILA and the CLA must be adjusted annually by any annual percentage increase in the consumer price index. Because the consumer price index showed a decrease as of June 1, 2015, there will be no 2016 adjustment. Therefore, the protections of TILA and the CLA generally will apply to consumer credit transactions (other than private education loans and loans secured by real property, such as mortgages) and consumer leases of $54,600 or less in 2016 - the same thresholds for 2015.

The FTC Asks for "Holder Rule" Comments.

On November 25, the FTC announced that it is seeking public comment on the efficiency, costs, benefits, and impact of the Holder Rule. The Rule, formally called the "Trade Regulation Rule Concerning Preservation of Consumers' Claims and Defenses," protects a consumer when a merchant, such as a car dealer, sells a consumer's credit contract. Specifically, it preserves a consumer's right to assert the same legal claims and defenses he or she would have against the seller who originally provided the credit against anyone who buys the credit contract. Under the Rule, a consumer can cite a seller's misconduct to defend against a creditor's lawsuit for money owed under the contract or to seek a refund of money paid under the contract.

Michael A. Benoit is a partner in the Washington, D.C., office of Hudson Cook, LLP. He is a frequent speaker and writer on a variety of consumer credit topics. Michael can be reached at 202-327-9705 or by email at

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