This is quite a tall order for an agency that was recently reduced to a shell of itself. Perhaps that is why there is also a call for more attorneys to join the ranks at the CFPB. That is right; not only are they talking about more enforcement, they are actively putting plans in place to make sure it happens. We are going to be hearing a lot more from the CFPB and it is likely to happen a lot sooner than some might have hoped.
Stronger States
As if a stronger, more aggressive CFPB was not enough to keep you up at night, states have also started working double time to increase their enforcement power, by way of creating their own mini-CFPBs. The mini-CFPB idea started when Virginia created a predatory lending enforcement unit to investigate violations of consumer lending statutes. By the end of 2018, Pennsylvania, Maryland, and New Jersey had all created a similar state level CFPB.
In May 2019, New York joined the mix and elevated the mini-CFPB game by bringing in Leandra English, former CFPB Deputy Director, to work in the Department of Financial Services’ new “Consumer Protection and Financial Enforcement Division.” They have fined multiple settlement service providers in the last year and a half. Most recently, in March, they fined a mortgage company $1.5 million for failing to adequately respond to a data security breach.
Last year, the California Department of Business Oversight was officially changed to the Department of Financial Protection and Innovation, in a move that created the second largest CFPB in the country. It is led by Manuel P. Alvarez, a former CFPB enforcement attorney. California’s updated agency is self-described as the “premier financial regulator and national model for consumer protection.”
The mini-CFPB trend may not have hit your state yet, but California’s statement signals to state regulators that it may just be a matter of time. In the last couple of months, we have heard from many more Washington state brokers upset by their state audits, as well as clients reporting stricter guidelines in Alaska, Hawaii, and Oregon.
Be Prepared
In preparation for the stricter guidelines and enforcement, you will want to ensure that all areas of your Compliance Management System are operating smoothly. Take any suggestions or guidance received from state auditors and go one step further than they ask to proactively protect yourself. Go back through old audit questionnaires and double check to ensure that you are still in compliance with your responses. Double-check your processes against your policies and procedures to make sure they line up. Review and stay up to date with your company’s training schedule.
With more than 11 million people in forbearance, it is my prediction that it will not be long before the mortgage industry becomes a big target for the CFPB. Based on Chopra’s experience with student loan and payday lenders, it may not be his first target, but it will not be far behind, especially as he looks to protect consumers who were affected by the COVID-19 pandemic and requested forbearance. In fact, as this issue was going to press, the CFPB did indeed make a really big initial move.
“Emergency protections for homeowners will start to expire later this year and by the fall, a flood of borrowers will need assistance from their servicers,” CFPB Acting Director Dave Uejio said. “The CFPB is proposing changes to the mortgage servicing rules that will ensure servicers and borrowers have the tools and time to work together to prevent avoidable foreclosures, which disrupt lives, uproot children and inflict further costs on those least able to bear them.”
To help homeowners who are behind on their mortgages, the CFPB is proposing a new rule that would establish a “temporary Covid-19 emergency pre-foreclosure review period” that would essentially block mortgage servicers from starting the foreclosure process until after December 31, 2021. It is likely that the 2008 mortgage meltdown is indelibly imprinted on President Biden’s mind, so he will probably pull out all the stops to ensure that consumers' homes are protected during his term. The last thing he needs is for nearly a tenth of American households to lose their homes to foreclosure or eviction. You better believe he will be leaning heavily on the CFPB to ensure that consumers are protected.
That means it is time to refocus your compliance efforts... or get ready to duck and cover.