CFPB Releases FDCPA Report to Congress Covering Debt Collection Activities in the Previous Year

On March 23, 2021, the CFPB submitted its report to Congress covering its administration of the Fair Debt Collection Practices Act (“FDCPA”) during 2020.  Because the CFPB shares responsibility for enforcing the FDCPA with the FTC, the report also describes the FTC’s activities relating to debt collection.  Notable developments include the effect of the COVID-19 pandemic on the debt collection industry and a description of the CFPB’s recently issued final debt collection rules.

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CFPB Rescinds Abusiveness Policy Statement

On March 11, 2021, the Consumer Financial Protection Bureau (the “CFPB” or “Bureau”) announced it was rescinding its “Statement of Policy Regarding Prohibition on Abusive Acts or Practices” (the “2020 Policy Statement”).  The rescission is the latest in a series of actions under Acting Director David Uejio that demonstrate a recalibration in the Bureau’s regulatory and enforcement priorities from those of previous leadership.  The Bureau has signaled with the rescission that as part of its enforcement review going forward, it will pursue abusiveness claims without necessarily adhering to the boundaries set by the 2020 Policy Statement.

The now-rescinded 2020 Policy Statement, which was issued under the direction of former CFPB Director Kathy Kraninger, provided a framework for interpreting the scope of the Bureau’s supervisory and enforcement authority with respect to abusive conduct under section 1031(d) of the Dodd-Frank Act.  In describing this framework, the 2020 Policy Statement set forth three principles:

  • First, the Bureau would focus on citing conduct as abusive only when the harms to consumers outweighed the benefits to consumers.
  • Second, the Bureau would generally avoid challenging conduct as abusive where it was relying on all or nearly all of the same facts that the Bureau alleged were unfair or deceptive. This principle was intended to provide clarity to industry participants regarding the specific facts that would give rise to an abusiveness claim.
  • Third, the Bureau would generally not seek certain types of monetary relief for abusiveness violations where a financial institution was making a good-faith effort to comply with the abusiveness standard.

At the time, Director Kraninger praised the framework as “prevent[ing] consumer harm while promoting the clarity needed to foster consumer beneficial products as well as compliance in the marketplace, now and in the future.”

In rescinding the 2020 Policy Statement, the Bureau rebuked the Bureau’s prior work, citing its “review of, and experience in applying, the Policy Statement.”  Moving forward, the Bureau indicated that it will assert abusiveness claims, regardless of whether they overlap with claims of unfair or deceptive conduct, and may seek the full array of potential penalties, regardless of whether the financial institution was attempting in good faith to comply with the abusiveness standard.  To do less, the Bureau argued, would be “contrary to the Bureau’s current priority of achieving general deterrence through penalties and other monetary remedies.” The Bureau did not provide new guidance on the contours of the abusiveness standard or its approach to its enforcement except to state that it “intends to exercise its supervisory and enforcement authority consistent with the full scope of its statutory authority under the Dodd-Frank Act as established by Congress,” and that, “[g]oing forward, the CFPB intends to consider good faith, company size, and all other factors it typically considers as it uses its prosecutorial discretion.”

CFPB Issues Interpretive Rule Clarifying that ECOA’s Prohibition of Discrimination Based on Sex Extends to Sexual Orientation and Gender Identity

On March 9, 2021, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued an interpretive rule clarifying that the Equal Opportunity Credit Act (“ECOA”) and its implementing regulation, Regulation B, prohibit discrimination based on sexual orientation and gender identity.  The CFPB made clear that this prohibition also extends to “actual or perceived nonconformity with traditional sex- or gender-based stereotypes, and discrimination based on an applicant’s social or other association.”  Specifically, the Bureau found that, under ECOA and Regulation B:

  • (1) “sexual orientation discrimination and gender identity discrimination necessarily involve consideration of sex”;
  • (2) “an applicant’s sex must be a ‘but for’ cause of the injury, but need not be the only cause”; and
  • (3) “discrimination against individuals, and not merely against groups, is covered.” Continue Reading

The UK Independent Anti-Slavery Commissioner’s January 2021 Report: Mitigating Modern Slavery in Financial Services

The UK Independent Anti-Slavery Commissioner’s January 2021 report—entitled “Preventing Modern Slavery & Human Trafficking: An Agenda for Action across the Financial Services Sector” (the “report”)—has concluded that there is a significant lack of awareness of modern slavery risks within the financial services sector (the “sector”).

The Commissioner, Dame Sara Thornton, notes that “modern slavery has been estimated to generate $150 billion in profits annually” constituting “one of the top three international crimes alongside drug trafficking and trade in counterfeit goods.”  The report accordingly calls on the sector to “detect and disrupt this serious organised criminality” and to take proactive steps to mitigate the various risks associated with modern slavery, including financial, regulatory, legal, governance and reputational risks.

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CFTC MRAC Meeting Features Discussion of Climate Risk

The Market Risk Advisory Committee (“MRAC”) of the Commodity Futures Trading Commission (“CFTC”) met last week to discuss reports from its subcommittees on the following issues: Climate-Related Market Risk, CCP Risk and Governance, Market Structure, and Interest Rate Benchmark Reform.  The meeting also featured a panel discussion on diversity and inclusion in the derivatives and related financial markets.  The discussion on Climate-Related Market Risk featured discussion of the Climate-Related Market Risk Subcommittee’s report: Managing Climate Risk in the U.S. Financial System (“Report”), which it previously released on September 9, 2020.  Subcommittee Chair Robert Litterman addressed the MRAC to discuss the Report’s findings and issue a call to action on climate change.

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Sustainability in Financial Services: The EU Sustainable Finance Disclosure Regulation and the Taxonomy Regulation

A heightened focus on green finance and green investments has renewed legislative impetus, culminating in a series of regulatory developments across the European Union and more recently, the UK.  Some of these notable developments encompass green efforts by the Task Force on Climate-related Financial Disclosures; the European Non-Financial Reporting Directive 2014/95/EU; and the European Commission’s ongoing Sustainable Finance Action Plan.

At the end of December 2019, as part of a package of legislative reforms published by the European Commission (the “Commission”) in March 2018, the EU Regulation on sustainability-related disclosures in the financial services sector (Regulation (EU) 2019/2088) (the “Disclosure Regulation”) came into force, with most of its provisions due to take legal effect by March 2021. Continue Reading

European Crowdfunding Regulation

A. Overview

On 20 October 2020, Regulation (EU) 2020/1503 of 7 October 2020 on European crowdfunding service providers for business (“Crowdfunding Regulation”), which applies from 10 November 2021, was published in the Official Journal of the European Union. This is the first regulation of crowdfunding services on a European level. Up to now, crowdfunding has been governed under the various national laws of the Member States. A consequence of this is the fragmentation of applicable regulatory regimes which makes the provision of cross-border crowdfunding services almost impossible. The key aim of the Crowdfunding Regulation is to change this position by fostering cross-border crowdfunding services in the Union while at the same time to ensure a high level of investor protection. Continue Reading

UK Government Consultation on the UK Funds Network

On 25 January, the UK Treasury launched a wide-ranging Consultation on how to make the UK a more attractive location to set up, manage and administer funds.  The objective being to create a destination which will support a wider range of more efficient investments, better suited to investors’ needs.  The consultation has a deadline for input of 20 April 2021.

The UK Government recognizes that the UK asset management sector is already highly attractive and that the UK is a market leader in portfolio management and fund administration. These activities are key to the management of the savings and pensions of millions of people.

The Consultation stresses the UK Government’s continued commitment to supporting portfolio delegation from and to the UK as a means to promote market efficiency, investor choice and to reflect the international nature of financial markets.

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Review of the Future Regulatory Framework

As a reminder, the UK Treasury (HMT) published its Consultation on the Second Phase of the Future Regulatory Framework Review (FRFR) in October 2020.  The Consultation is open for input until 19 February 2021.

The FRFR aims to set out how the UK’s financial services regulatory framework should change in light of the UK’s exit from the EU. The Government seeks to use the UK’s departure from the EU as an impetus to create a more coherent financial services regulation system in the UK.

Content of Review

Phase I of the Review focused on the question of coordination between the regulatory authorities in the UK. The Second Phase tackles the wider regulatory structure in the UK’s financial services – it is on this element that HMT is consulting, with a view to ascertaining the shape of a blueprint which will be the subject of a further consultation exercise later in 2021.

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Federal Agencies Jointly Release Responses to FAQs on SARs and Other AML Considerations

On January 19, 2021, the Federal Reserve Board, FDIC, OCC, FinCEN, and NCUA (collectively, the “federal agencies”) issued answers to frequently asked questions (“FAQs”) regarding suspicious activity reports (“SARs”) and other anti-money laundering (“AML”) considerations for financial institutions subject to SAR requirements in response to recent recommendations from the Bank Secrecy Act Advisory Group. The FAQs state that they are intended to assist financial institutions with their AML compliance obligations, and do not have the force of law or create any new supervisory expectations. Continue Reading

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