Right out of the gate, the Consumer Financial Protection Bureau (CFPB) has had a busy 2023.
The pace won’t slow as the year goes on, with small business lending, nonbank oversight, account fees and more in the crosshairs.
The impact of possible fines, of new guidelines and rules, has the potential to reshape how a broad range of companies do business, and how they interact with their end customers.
Most recently, the CFPB issued guidance focused on “negative option” subscription services.
Those subscriptions are the ones that automatically renew unless the consumer cancels, or that start with a lower fee and then automatically shift to a higher one. As per the guidance, the subscription providers must disclose the terms and obtain informed consent, and they must not make it unreasonably difficult for subscribers to cancel.
And also this week, the CFPB is examining — and may restrict — fees themselves that are charged on each transaction as workers and families send money to one another across the globe via remittance payments. The CFPB is also looking into the differences between money transfer firms over disclosure of exchange rates and fees and whether those fees are in compliance with the agency’s own remittance rules.
The major credit reporting bureaus also got some input from the CFPB this month, as Equifax, TransUnion and Experian were advised to consider the burden placed on the consumer when implementing automated processes. Specifically, it said, they should consider whether any new automated processes will require consumers to do more work to exercise their legal rights.
The input and advisement, and intent to examine business practices, signal that there could be some changes afoot in how companies conduct business, and what they can charge consumers. There have also, in recent weeks, been settlements and fines.
In a January announcement over debt collection, the CFPB said it settled a lawsuit and reached an agreement that bars the firm Forster & Garbus from filing any new lawsuit against a consumer unless it has specific documents supporting the debt and certifies that an attorney reviewed those documents. Forster & Garbus also will pay a $100,000 penalty to the CFPB victim’s relief fund. That penalty is dwarfed by the $3.7 billion penalty levied against Wells Fargo last month over the mismanagement of accounts.
This year is already shaping up to see its share of legal actions from the agency. At the beginning of the month, the CFPB and the New York State Office of the Attorney General said they had filed suit against subprime auto lender Credit Acceptance Corp. for allegedly misrepresenting the cost of credit and tricking customers into high-cost loans.
The semiannual regulatory agenda published by the agency — and which in this case covers the period that extends to November 2023 — shows that nonbank financial service providers will be under the proverbial microscope. A proposed rule would require supervised nonbank financial companies to submit terms and conditions in their form contracts so that they can be posted in a public registry. The agency is also set to begin various rulemaking activities that would place limits on account fees, including overdraft fees.
And as soon as next month, we may see rule-making governing consumer control over their personal financial data. As has been noted by the CFPB, according to Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, financial service providers “must make available to consumers, upon request, transaction data and other information concerning a consumer financial product or service that the consumer obtains from the covered entity.” The CFPB, in turn, can provide rules that promote standards for that data sharing.