A few weeks ago I wrote in this column that the CHOICE Act, which amends Dodd Frank in several respects, had passed the Financial Services Committee of the House of Representatives. I described that as a small step in the right direction. Now it has passed the full House and has been sent to the Senate. That is a big step. From a compliance standpoint, the most signiﬁcant elements of the CHOICE Act are a complete restructuring of the Consumer Financial Protection Bureau and a harnessing of the enforcement of unfair, deceptive or abusive acts or practices. At the same time, the Treasury Department has published a paper harshly critical of both. At present the CFPB is a government agency responsible to no one. Congress does not have the authority to review either its actions or its budget. The President can remove the director only for cause. In other words, the CFPB can do literally anything that it wants to do and no one can do anything about it. The new legislation will create a ﬁve person commission to run the agency and there will be congressional oversight and approval of its budget.
The Treasury paper is particularly critical of the CFPB's enforcement of the UDAAP provisions. Rather than issuing deﬁnitive guidelines or regulations deﬁning UDAAP, the CFPB has adopted new interpretations by enforcement actions whenever it identiﬁes a practice it wishes to prohibit. Often these are practices that previous regulators have had no issue with. It is like playing a football game where actions that were ﬁne in the ﬁrst quarter bring a ﬁfteen yard penalty in the fourth quarter, and there was no warning to the players or the coaches that the rules were changing.
Treasury was also critical of the CFPB for publishing consumer complaints against ﬁnancial institutions in circumstances where the ﬁnancial institution violated no law or regulation.
Hopefully the wiser minds in the Senate will realize what a mess Dodd Frank has created in these regards and send the legislation to the President for signature.
Fair Credit Reporting Act
The Fair Credit Reporting Act provides that an employer may obtain an employment applicant's credit report if it obtains the person's written consent in advance, and the consent must be on a form that contains nothing but the consent. An employer was sued because the consent form also contained a waiver of liability statement. The court rules that was a violation of the Act. Check your employment application documents and make sure that the credit report consent is on a separate piece of paper and that it contains nothing but the request for consent.
There Has To Be Damage
The FACT Act makes it a violation for anyone to print on a credit card receipt, card information other than either the last ﬁve digits of the card or the card's expiration date. A restaurant printed both and a customer ﬁled a class action law suit. First the court denied class action status and then dismissed the suit because the customer suﬀered no harm. When the erroneous receipt was printed it was immediately given to the customer so there was no potential that a third person saw it. In some cases, such as the giving of erroneous TIL disclosures there is a presumption of damage. Where that does not exist actual damages must be proven. A violation alone does not entail liability.
Nicole is a Busy Beaver
Nicole is the name the CFPB uses to try to humanize the consumer advice that it publishes. Nicole has published valuable advice such as if you pay your bills on time it will improve your credit score and if you pay a higher rather than a lower interest rate your payments will be higher. The CFPB has also published a ﬁve question ﬁnancial literacy test. I have no idea how much money the CFPB spends on providing consumer advice, but it has to be a bunch. The problem is that when you are trying to give advice to 300 million individual unique consumers the only advice you can give use be so generic that it is worthless. Hopefully, if the CFPB is restructured it will quit trying to give advice.