CFPB Discusses Consumer Finance Data, Sets Priorities – Financial Services

On June 15, CFPB Deputy Director Zixta Martinez delivered a keynote address to the Consumer Federation of
America’s 2022 Consumer Assembly. The Deputy Director focused
on four key areas of consumer protection during her address:

Payday Loans: The CFPB released a research
report in April focusing on payday loans and the state laws
allowing payday lenders to operate. Only 16 states out of the 26
states that allow payday lenders to operate require/permit lenders
to offer extended payment plans, according to the Deputy Director.
The CFPB will “continue to assess payday loan and small dollar
credit practices” more generally, she said.

Rent-A-Banks: The Deputy Director identified
the evolution of the small dollar credit market as an area of
interest for the CFPB. Small credit lenders may use relationships
with banks to evade state interest caps and licensing laws by
claiming that the bank is the lender in “rent-a-bank”
schemes, according to the Deputy Director. The CFPB is “taking
a close look” at these schemes.

Banking Fees: According to the Deputy Director,
large banks penalize customers who can least afford them with
complicated banking fees and overdraft practices that drive
families deeper into debt. While smaller banks, credit unions, and
startups rely on business models that do not utilize
“exploitative penalties,” Martinez noted that it can be
difficult for these companies to break into the business and for
customers to switch accounts—the CFPB looks to promote
“vigorous competition” in this area.

Medical Debt and Credit Reporting: Consumers
with unpaid medical bills, in addition to their concerns about
hospital and insurance bureaucracy, often worry about the impact of
their medical debt on their credit. The CFPB is “looking at
everything” to find solutions to the intersecting problem of
medical debt and credit reporting, the Deputy Director said,
including evaluating whether unpaid medical debt should be included
on credit reports at all.

Putting It Into Practice: The Deputy
Director’s remarks serve as an important indicator of the
CFPB’s enforcement priorities. Of particular note is the
suggestion that the Bureau may consider asserting claims against
nonbank parties in “rent-a-bank” schemes. In addition, a
shift in the content included in credit reports would have
significant impacts on consumers and lenders alike.

Credit reporting agencies and users of credit reports have
received significant attention from the CFPB in recent months (we
previously discussed this trend in previous blog posts here, here, and here). Today, the CFPB issued an Advisory Opinion to ensure that companies that
use and share credit reports and background reports have a
permissible purpose under FCRA. The CFPB’s new advisory opinion
makes clear that credit reporting companies and users of credit
reports have specific obligations to protect the public’s data
privacy. The advisory also reminds covered entities of potential
criminal liability for certain misconduct.

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