An article in Law360.com reports that the Consumer Financial Protection Bureau has rescinded a series of policy statements it issued at the beginning of the COVID-19 pandemic that exempted lenders from some consumer credit oversight reporting requirements. The guidance was intended as a way to help financial institutions transition to remote operations and relieve the burden caused by pandemic-related staff shortages.
For the past twelve months lenders have been allowed to operate under loosened control, with flexible deadlines for investigating credit reporting disputes and more leeway to classify disputes as erroneous. The rescinded policy also suspended reporting requirements for mortgage lenders and allowed credit card lenders to forego submitting card agreements to the CFPB.
While meant as a temporary measure, the guidance has remained in place for over a year, allowing financial institutions to function with less oversight and consumer protections in place. It is rather surprising that the lenient policy has been reversed only 12 months into the pandemic as most lending institutions have long transitioned to remote work and have continued business as usual.
“The policy statements, which were issued under former CFPB Director Kathleen Kraninger, a Trump appointee, provided leeway on consumer credit report dispute investigation deadlines, suspended certain reporting requirements for mortgage lenders and credit card issuers, and offered accommodations tied to agency exams and enforcement, among other things.
But the CFPB said it is revoking those statements effective April 1 and “intends to exercise the full scope of the supervisory and enforcement authority provided under the Dodd-Frank Act,” the law that created the agency.
“Because many financial institutions have developed more robust remote capabilities and demonstrated improved operations, it is no longer prudent to maintain these flexibilities,” Dave Uejio, the CFPB’s acting director, said in a statement. “The CFPB’s first priority, today and always, is protecting consumers from harm.”
The seven policy statements being rescinded were issued between late March and early June last year when the rapidly unfolding COVID-19 crisis threw millions of U.S. consumers out of work and triggered a wave of stay-at-home orders and other public health restrictions to contain the virus.”
The return of increased oversight has been welcomed by the consumer protection community and can be interpreted as one of the first manifestations of the expected tightening of regulatory controls by the Biden administration.
The increased oversight is particularly relevant for stakeholders in the credit card industry, which have seen an almost percentage point year-over-year increase in transaction volumes (dollar terms) in 2020. The reversed policy of lenience will hopefully help keep credit card and mortgage debt default risks under control, a much needed guarantee of stability in an economy that is reeling from a deep recession.
Overview by Sam Klebanov, Research Analyst at Mercator Advisory Group