On June 15, the deputy director of the CFPB, Zixta Martínez, delivered a opening speech to the 2022 Consumer Assembly of the Consumer Federation of America. The deputy director focused on four key areas of consumer protection during her speech:
Payday loans: The CFPB released an investigative report in April focused on payday loans and the state laws that allow payday lenders to operate. Only 16 states of the 26 states that allow payday lenders to operate require/allow lenders to offer extended payment plans, according to the Deputy Director. The CFPB “will continue to evaluate payday loans and small dollar credit practices” more generally, he said.
Rent-A-Banks: The Deputy Director identified the evolution of the small dollar credit market as an area of interest for the CFPB. Small lenders can use bank relationships to evade state interest caps and licensing laws by claiming the bank is the lender in rent-a-bank schemes, according to the Deputy Director. The CFPB is “taking a close look” at these schemes.
Bank fees: According to the Deputy Director, big banks penalize customers who can least afford them with complicated banking fees and overdraft practices that put families deeper into debt. While smaller banks, credit unions and startups rely on business models that don’t use “exploitative penalties,” Martinez noted that it can be difficult for these companies to get into business and for customers to switch accounts: the CFPB seeks to promote “vigorous competition” in this area.
Credit reports and medical debt: Consumers with unpaid medical bills, in addition to their concerns about insurance and hospital bureaucracy, often worry about the impact of their medical debt on their credit. The CFPB is “looking at everything” to find solutions to the crossover problem of medical debt and credit reporting, the deputy director said, including evaluating whether unpaid medical debt should be included on credit reports.
Putting it into practice: The Deputy Director’s comments serve as an important indicator of the CFPB’s enforcement priorities. Of particular note is the suggestion that the Office may consider asserting claims against non-bank parties in rent-a-bank schemes. Additionally, a change in the content included in credit reports would have a significant impact on both consumers and lenders.
Credit reporting agencies and users of credit reports have received significant attention from the CFPB in recent months (we previously discussed this trend in previous blog posts). here, hereY here). Today, the CFPB issued a advisory opinion to ensure that businesses using and sharing credit reports and background checks have a purpose permitted under the FCRA. The CFPB’s new advisory opinion makes it clear that credit reporting companies and users of credit reports have specific obligations to protect the privacy of public data. The notice also reminds covered entities of possible criminal liability for certain misconduct.