The Consumer Finance Protection Bureau turned five years old last week. Created as a result of the 2008 financial crisis and part of the 2010 Dodd Frank Act for financial reform, it has done some good things such as:
- Requiring mortgage lenders to ascertain a person’s income and viability to make good on a mortgage loan before granting one (which was badly needed).
- Forced two major U.S. banks to reimburse credit card holding consumers more than a combined $14 million for misleading them into buying add-ons such as additional security features.
We are not alone among payment processors, however, in feeling that, at times, the CFPB has overstepped its bounds. For the providers of merchant services to high risk industries, we feel, between the CFPB and Operation Choke Point, there could be some tough times ahead.
Changes Forthcoming for Lenders, Debt Collectors
Back in March, the Consumer Finance Protection Bureau released a draft of payday lending regulations, with the full article expected by the end of the year. Included is a piece taken from the CFPB’s playbook on mortgage lenders:
- Payday lenders must evaluate and establish a consumer’s ability to repay a loan.
- Payday lenders may have trouble gaining access to consumer bank accounts for recurring payments, instead relying on another form of payment.
- In collecting late payments, lenders should maintain their best behavior. Threats and increased pressure on consumers is an invitation for an investigation from the CFPB.
- Finally, as we blogged in May, lenders and collections agencies may have to register with the CFPB, according to a May 20 article in American Banker.
In dealing with forthcoming changes with the CFPB and high risk merchants, the best resource we can recommend is the Electronic Transactions Association Guidelines on Merchant and ISO Underwriting and Risk Monitoring – 126 pages of tools and best practices.
Keep Your Eye on November
If you are a high risk merchant, particularly in the lending or debt collection industry, you will want to keep your eye on the presidential election on Nov. 8. Republicans, by and large, want to eliminate the Consumer Finance Protection Bureau, which is overseen by Richard Cordray, a democratic former attorney general from Ohio, and was devised by Sen. Elizabeth Warren (D, Mass.).
Whatever the presidential outcome is in November, the CFPB will be affected for better or worse.
We’d Like to Hear From You
Has your business been affected by the Consumer Finance Protection Bureau? How so? We encourage you to leave us a comment below.