SAN DIEGO–An attorney who has represented people and organizations being investigated by the CFPB offered some issues every credit union should watch in order to avoid joining that list.
Allen Denson, a partner in the Washington firm Hudson Cook, LLP, told the CU Direct DRIVE 16 conference here that while most credit unions are not directly regulated by the CFPB, other regulators are following what the CFPB is doing with its consent orders, “and it would be wise to follow the practices that are being included in these orders.”
Denson summed up the CFPB’s approach as, “Settled for one = rule for all,” and he cited a quote from CFPB Director Richard Cordray, who said, “CFPB orders provide detailed guidance for compliance officers across the marketplace about how they should regard similar practices at their own institutions…Indeed, it would be compliance malpractice for executives not to take careful bearings from the contents of these orders about how to comply with the law and treat consumers fairly.”
Here is what Denson recommended credit unions keep an eye on:
- Collections. “I would say collections is the hot topic I’m seeing in a lot of these efforts, which I break into four areas: calls to references and Workplace; military collections, debt sales, and call tactics.” Denson said the CFPB has taken the position that the Fair Debt Collections Act basically sweeps credit unions beneath its umbrella, and that NCUA has indicated it will follow the CFPB’s lead here.
- Advertising. Citing as precedent the CFPB’s action against Herbie’s Auto Sales, which had advertised a 9% loan APR in its front window, but didn’t actually charge that rate, as well as a consent order issued to Westlake/Wilshire over how it responded to oral inquiries related to APR, as examples for why credit unions need to be very careful with the rates they advertise. “What I take from this is you really want to pay attention to your triggering terms under Regulation Z. I see a lot of people being tripped up on that. So you need to review your advertising and marketing pieces.”
- Accuracy of APRs, including voluntary charges. “The issue here is if the dealer you are working with has a required warranty of all customers, you need to make sure it is included in the finance charge, or you could potentially be on the hook if you are allowing your dealers with incorrect APRs.” Similarly, Denson cautioned that recently some state attorneys general have taken action against lenders that have not included ancillary products in the finance charge, including gap insurance. “The lesson I take from this is you need to be concerned about state law, too.
- Privacy and Data Security. Denson noted that in the case involving Dwolla, which suffered a data breach, the CFPB took action because the company had promoted that data was secure. With the breach, the CFPB rules Dwolla’s statements were a “deceptive practice.”