A FIRM HAND

As the CFPB shifts away from its ‘flexible’ approach, what are the key Compliance and Regulatory trends for 2022?

As the United States transitions out from the COVID-19 pandemic, where is the Consumer Financial Protection Bureau likely to focus its regulatory and compliance efforts in 2022?

The Consumer Financial Protection Bureau (CFPB) and its new director, Rohit Chopra, are shifting to an aggressive compliance agenda as we head into 2022.

The COVID-19 pandemic significantly affected the financial sector, causing the CFPB to begin 2021 with a “flexible” policy towards compliance. As the sector has adapted, the CFPB has swung its agenda back to normal, and has signalled that certain areas will be subject to more aggressive compliance, including likely enforcement actions and activities.

CFPB trends that we have seen throughout 2021 and into 2022 include:

Pandemic Compliance

The CFPB monitored compliance with consumer financial laws throughout the COVID-19 pandemic. In April 2020, the CFPB issued a policy statement (see link) promoting a tone of compliance “flexibility,” and indicating that it would be looking for financial institutions to show “good faith” efforts to comply with applicable laws. Two months later, the CFPB (see here) confirmed the “good faith” compliance standard.

However, in April 2021, the CFPB rescinded its pandemic policies and returned compliance to normal because financial institutions had been given a year to adapt their operations to the difficulties posed by the pandemic (see link). The CFPB confirmed this return in its June 2021 report, which highlighted a number of areas where financial institutions were failing to comply with the Fair Credit Reporting Act (FCRA) (see link). In 2022, financial institutions should remain focused on compliance because a good-faith effort will no longer cut it.

“Big Tech” and Payment Systems

The CFPB is expanding its focus to real-time consumer payment systems developed by “Big Tech.” In October 2021, Director Chopra told the House of Representatives Committee on Financial Services (see link) that the CFPB issued orders to certain “Big Tech” firms (see link) requesting information about their business plans and practices. The CFPB believes that the information obtained through these orders will allow it to ensure that the payment systems sector “is in alignment with our national interest.”

Thus, in 2022, the CFPB will take a more active role in payment systems, which may overlap with similar activities by the Federal Reserve Board (the “Fed”) and the Office of the Comptroller of the Currency (OCC). This move will not only place additional regulatory requirements on a growing industry, but also likely on enforcement activities as the CFPB gets a better handle on the players in the industry and their business practices. Of course, such regulatory and enforcement activities will result in significantly greater costs, among other obligations, for the payment systems sector.

Fair and Equal Access to Credit

The CFPB recently confirmed a “commitment” to promoting fair and equitable access to credit, which is an area also subject to the OCC’s oversight (see link). Director Chopra’s statement to the House Committee on Financial Services in October 2021 (see link) highlighted that the CFPB intends to use its tools to ensure equitable and inclusive practices in the financial sector. One such tool was a CFPB report published in September 2021 (see link), which concluded that complaints from minority communities more frequently involve credit reporting, identity theft, and delinquent servicing.

Another report, released in November 2021 (see link), found that minority consumers with lower credit scores are more than twice as likely to have disputes appear on their credit reports. The CFPB’s focus on fair and equal access to credit, which may overlap with OCC regulation, is likely to result in greater compliance and enforcement actions in the credit reporting, identity theft, and servicing industries that are highlighted as impediments to truly fair and equal access to credit in all communities.

Debt Collectors and Revised Regulation F

The CFPB promulgated a revised debt collection rule called “Regulation F,” 12 C.F.R. § 1006.34(c)(1)-(4), which implements the Fair Debt Collection Practices Act (FDCPA) and became effective November 30, 2021 (see link). Under this rule, a “debt collector” as defined by the FDCPA, is required to provide five categories of information to a consumer who owes a debt including consumer protection information and consumer response information. The CFPB issued written guidance in October 2021 (see link) confirming that debt collectors, including loan servicers, will be able to comply either by using the model form provided in an appendix to Regulation F or by using their own form that provides the same information. In short, debt collectors will be facing increased compliance obligations—and the resulting enforcement activities—in 2022 as the CFPB ensures compliance with Regulation F.

Moving into 2022, the CFPB will be focusing its compliance efforts on growing areas, like payment systems, and also to its commitment to ensuring equitable and inclusive business practices in the financial sector.

CONCLUSION

The CFPB has moved beyond COVID-19 compliance flexibility and is looking towards an aggressive compliance and enforcement agenda in 2022. The CFPB - potentially in tandem with the Fed and OCC - expects to focus on growing areas, like "Big Tech", and on ensuring equal access to credit in the financial sector.

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MATT PETERSEN

Partner, Denver

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