The CFPB has been a political hotbed since its origin. Created under the guise of Dodd-Frank, the independent agency became the subject of a Supreme Court decision, which settled the issue of how and why its leadership could change. One leading law firm summarized the case presented to the court, which suggested the design “violates the separation of powers of the US Constitution.”
There were short-lived leaders, a political hot potato during the Trump administration, a silly attempt to change the agency’s name, and even a shift to a short-lived business-friendly position. In 11 years of its existence, seven people have been at the helm, including Richard Cordray, who had the post for more than five years.
The CFPB mantra, however, remains constant. In its official mission statement, the promise is:
To make markets for consumer financial products and services work for Americans by promoting transparency and consumer choice and preventing abusive and deceptive financial practices.
Overall, the CFPB maintained this mission, despite the political drama. Enforcement actions peaked during 2015, fell significantly during the Trump administration, then rebounded to 48 events in 2020. But although a visit from a regulator may have all the joys of a root canal, as a former banker, I’d say that the industry must maintain clarity, integrity, and liquidity. That might be called Pollyanna, but this is more about truth, justice, and the American way than politics.
Today’s latest news is that the CFPB is not only suing TransUnion for non-compliance to prior enforcement action, but it also brought in the former business leader specifically. Usually, if an action is taken, the defendant is the corporation rather than the individual. While we do not comment on the merits of the CFPB’s outstanding case against TransUnion, we point out the vigor of the claim.
In the complaint, posted on the CFPB website, the allegation begins with:
In 2017, the Bureau found that Corporate Defendants had engaged in deceptive acts and practices in violation of the CFPA in connection with their marketing and sale of credit scores, credit reports, and credit-monitoring products to consumers. The Bureau agreed to resolve those findings without litigation through a consent order (the Order, which is Appendix A to this Complaint) that required corporate Defendants to pay restitution and a civil penalty and abide by certain conduct provisions.
Corporate Defendants have violated the Order since the day it went into effect. Corporate Defendants failed to implement the Order’s core requirements, including (i) ensuring that consumers were not misled about the nature and terms of their credit-monitoring product; (ii) adding a checkbox to their trial offer subscription products to ensure consumers consented to enrolling in such products; and (iii) providing a way for consumers to immediately and easily cancel their subscriptions and obtain refunds instead of facing roadblocks. 3. Not only did Corporate Defendants violate the Order and continue engaging in the same deceptive acts that necessitated it, but they also engaged in numerous other misleading tactics to cause consumers to enroll in their subscription products and prevent them from canceling.
Further, Corporate Defendants engaged in additional violations of Federal consumer financial laws; they failed to properly obtain consumers’ authorization to make recurring withdrawals from their bank accounts—violating EFTA and Regulation E—and included misleading advertisements on annualcreditreport.com that diverted consumers seeking their free annual credit report to an indefinite paid subscription for credit monitoring. John T. Danaher, the long-time and now former President of TUI, also violated the Order. Danaher had the authority and obligation to ensure Corporate Defendants complied with the Order but failed to do so. Instead, he allowed Corporate Defendants to defy the law and continue engaging in misleading marketing, even in the face of thousands of consumer complaints and refund requests.
The United States District Court of the Northern District of Illinois will decide the case, but what is notable is the vigor with which the CFPB addresses the non-compliance issue and how it brings the enforcement issue to both the company and an individual.
Now is a good time to review the CFPB’s long list of enforcement actions, which spans 13 pages on their website, including auto finance companies, banks, collection agencies, consumer lenders, credit bureaus, credit card lenders, fintechs, student loans, and others. Issues range from lending clarity and fairness to deceptive practices. To be specific, the second time around will be a much more painful experience than the first.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group