CFPB’s New Acting Director Signals Significant Shifts in Agency Direction, Policies, and Priorities

Shortly after the inauguration of President Joe Biden on January 20, former Consumer Financial Protection Bureau (CFPB or Bureau) Director Kathleen Kraninger submitted her resignation. Soon after that, the president announced that he had appointed David Uejio, a veteran CFPB official who most recently served as the Bureau’s chief strategy officer, to serve as acting director until the Senate confirms Rohit Chopra, his nominee for director.

In the short time since the inauguration, the Bureau has released guidance to assist military families manage their finances during and after the pandemic; to individuals choosing or being forced, due to the pandemic, to retire; and on current loan and housing protection measures. In addition, Acting Director Uejio has been meeting with the staff of the Bureau’s divisions, and has both conveyed his broad vision for the Bureau in the coming months as well as directed key Bureau divisions to take some immediate actions. In keeping with the broader priorities of the Biden administration, the CFPB’s stated policy priorities are: (1) relief for consumers facing hardship due to the coronavirus (COVID-19) pandemic and the related economic crisis; and (2) racial equity. We have summarized the key elements below.

Supervision, Enforcement, and Fair Lending (SEFL) Division

Continued Impact of COVID-19 Pandemic

Acting Director Uejio stated that the Bureau will immediately focus its supervision and enforcement tools on overseeing the companies responsible for COVID-19 relief. He is “concerned” about the findings described in the Bureau’s recent Supervisory Highlights COVID-19 Prioritized Assessments Special Edition that companies are failing to properly administer relief through the pandemic. In a series of prioritized assessments conducted in 2020, Bureau examiners found the following:

• Mortgage servicers gave consumers incomplete and inaccurate information about CARES Act forbearances, failed to process forbearance requests, and collected and assessed late fees despite having approved forbearances
• Servicers withdrew money even though consumers were in deferment
• One student loan servicer denied thousands of forbearance extensions because the loan holder never responded
• Companies across markets misreported accounts to credit bureaus and violated CARES Act amendments that added protections to the Fair Credit Reporting Act
• Some banks set off stimulus payments and unemployment insurance benefits in order to cover bank fees and other debts
• Examiners found that the widely used policy of banks only taking PPP applications from pre-existing customers may have a disproportionate negative impact on minority-owned businesses

Uejio states that moving forward, the Bureau “will take aggressive action to ensure that regulated companies follow the law and meet their obligations to assist consumers during the COVID-19 pandemic.” He also has directed the SEFL Division to “always determine the full scope of issues found in its exams, systemically remediate all of those who are harmed, and change policies, procedures, and practices to address the root causes of harms.” For the Prioritized Assessments that do not already take these steps, Uejio has requested for supervision to follow up to ensure these steps are implemented and completed, without conducting new follow-up exams. Uejio also noted that companies that have not already received instructions from Bureau examiners “should expect to receive letters in the mail soon.” In some cases, Uejio warns that penalties may be necessary. Uejio also has directed the SEFL Division to expedite enforcement investigations relating to COVID-19 “so that [the Bureau] can take action now to ensure that industry gets the message that violations of law during this time of need will not be tolerated.”

Reversing Certain CFPB Policies Implemented During the Trump Administration

Uejio stated that as of January 28, it is now the official policy of the Bureau to supervise lenders with regard to the Military Lending Act. In 2018, the Bureau stopped supervising creditors for MLA compliance based on the absence of language in the Dodd-Frank Act or the MLA giving the Bureau authority to conduct MLA examinations. However, even in the absence of such examinations, the Bureau under the prior leadership brought several enforcement actions against companies it alleged had been violating the MLA. Uejio also announced that the CFPB is planning to rescind public statements “conveying a relaxed approach to enforcement of the laws in [the Bureau’s] care.”

Racial Equity

According to Uejio, it is “also time for the CFPB to take bold and swift action on racial equity,” and he pointed to how the practices and policies of the financial services industry “have both caused and exacerbated racial inequality.” Uejio plans to elevate and expand existing investigations and exams and add new ones to ensure the Bureau has “a healthy docket intended to address racial equity.” While this inevitably means that fair lending enforcement is a top priority for the agency and will be emphasized accordingly, the Bureau also intends to look more broadly, beyond fair lending, to “identify and root out unlawful conduct that disproportionately impacts communities of color and other vulnerable populations.”

Research, Markets, and Regulations (RMR) Division

As he did for the SEFL Division, as outlined above, Uejio also conveyed his broad vision for the RMR Division in the coming months in a staff communication, which he also has shared publicly. As discussed above, Uejio’s policy priorities for the Bureau are (1) relief for consumers facing hardship due to COVID-19 and the related economic crisis; and (2) racial equity. He expects the RMR Division’s work, as across the Bureau, “to be centered on responding to those two crises with urgency and immediacy.”

Market Analysis, Research Reports, and Data

Uejio stated that he will rely on the RMR Division’s “rigorous, routine internal reporting on key market metrics like foreclosures, charge offs, auto loans, checking account closures, and more. These metrics will help [the Bureau] gauge the health of consumer finance markets and guide [the Bureau’s] focus. [He] will look to the RMR Division for a robust research agenda that examines the impact of specific industry practices on consumers’ daily budget and overall bottom line in order to target effective policy interventions.” He expects the RMR Division to publish regular research reports addressing both COVID-19 and racial equity “so that the public has the benefit of [the Bureau’s] high-quality analysis.” In addition, Uejio expects the CFPB to make maximum use of the data available to it. “To the extent the Bureau lacks access to data it needs, [he] will be authorizing use of [the CFPB’s] 1022(c)(4) data collection authority.”

Among the immediate steps he is asking the RMR Division to take are the following:

• Prepare an analysis on housing insecurity, including mortgage foreclosures, mobile home repossessions, and landlord-tenant evictions
• Prepare an analysis of the most pressing consumer finance barriers to racial equity to inform research and rulemaking priorities
• Explicitly include in policy proposals the racial equity impact of the policy intervention
• Resume data collections paused at the beginning of the pandemic, including Home Mortgage Disclosure Act (HMDA) quarterly reporting and the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) data collection, as well as the previously completed Dodd-Frank Act Section 1071 small business lending data collection and the ongoing PACE data collection

Rulemaking Agenda

Uejio announced that he will be assessing regulatory actions taken by the previous leadership and “adjusting as necessary and appropriate those not in line with [the Bureau’s] consumer protection mission and mandate.” Uejio also has pledged the RMR Division “the support it needs” to implement the Dodd-Frank Act-required small business lending data collection rulemaking “without delay.”

In addition, Uejio has directed the RMR Division to “focus rulemaking on the pandemic response and to preserve, where possible, maximum policy flexibility for the president’s nominee once confirmed.” To that end, he has asked the RMR Division to

• focus the mortgage servicing rulemaking on pandemic response to avert, to the extent possible, a foreclosure crisis when the COVID-19 forbearances end in March and April; and
• explore options for preserving the status quo with respect to QM and debt collection rules.

Consumer Education and External Affairs (CEEA) Division

As he did for the SEFL and RMR Divisions, as outlined above, Uejio also conveyed his broad vision for the CEEA Division in the coming months in a staff communication, which he also has shared publicly.  According to Uejio, the CEEA Division should redouble its efforts moving forward to elevate the voices of those consumers who are suffering due to the COVID-19 pandemic and from racial inequity.  In his view, the “most important way to ensure that the CFPB is doing the best we can for those who need our help the most at this moment in history” is to ensure that consumers and their experiences are at the foundation of CFPB policymaking.  

Consumer Complaints

One of Uejio’s top priorities is ensuring that consumers who submit complaints to the Bureau “get the response and the relief they deserve.  Consumer complaints are [the Bureau’s] lifeblood; [the Bureau’s] direct connection to consumers in distress, and they are at an all-time high right now.”  In noting his understanding that some companies “have been lax in meeting their obligation to respond to complaints,” Uejio warned that it is the Bureau’s expectation that “companies provide substantive responses that address the issues consumers describe in their complaints.”  Additionally, he noted his further understanding that consumer advocates have found disparities in some companies’ responses to Black, Brown, and Indigenous communities – findings which he labels “unacceptable.”  Uejio has directed Consumer Response to prepare a report highlighting the companies with “a poor track record on these issues.”  Along with publishing this analysis, Uejio stated his intent to speak directly with the senior leadership of these companies.

Addressing the Continuing Impact of COVID-19 on Consumers and Racial Equity

Uejio highlighted the urgency of engaging consumers about their rights amidst the ongoing pandemic as support for the need for the Bureau to make swift efforts to reach those whose financial lives “are most precarious in this moment.” To help consumers navigate the housing protections for those affected by COVID-19, he has asked the CEEA Division to:

• Target Bureau resources to reach and help struggling homeowners in delinquency or at risk of foreclosure and renters at risk of eviction to ensure they know their rights
• Ramp up coordination efforts with other agencies to provide help and information to at-risk homeowners and renters
• Collaborate with coalitions of stakeholders, including consumer advocates, civil rights groups, grassroots, community-based organizations, and individual consumers to get these messages to homeowners in languages and terminology they understand
• Help ensure homeowners and renters can access HUD-approved housing counseling organizations to help them manage the challenges they face due to financial hardships brought on by COVID-19

In what he describes as an effort to “re-orient” the Bureau’s work squarely on consumers, Uejio has also directed the CEEA Division to:

• Lead a refresh of the Bureau’s website's look-and-feel so it is more user friendly, focused on consumers’ rights, “and signals that in no uncertain terms, [the Bureau is] on their side.  And expand [the Bureau’s] social media presence so that [the Bureau hears] directly from the people [it] serve[s].  To reach consumers where they are, [the Bureau] must keep up with how people access information regardless of device or form.”
• “Aggressively rebuild and repair” [the Bureau’s] relationships with consumer, civil rights, racial justice, and tribal and Indigenous rights groups.  “[The Bureau] cannot execute on these bold ideas unless [the Bureau] robustly engage[s] with external stakeholders who support economically vulnerable consumers.”

According to Uejio, the Bureau “must transition from treating consumer input as mere anecdotes or stories to a world in which the experience of our neighbors, our families, and our communities serve as crucial data that drives [the Bureau’s] policymaking.” 

Takeaways

• Acting Director Uejio’s statements and policy directives signal that he intends to make significant changes at the Bureau even before Rohit Chopra, President Biden’s nominee for CFPB director, is confirmed by the US Senate and sworn in.
• The impact of Uejio’s statements and directives on recent Bureau rulemakings finalized during the last months of the Trump administration remains unclear. As noted above, he has directed the RMR Division to “explore options for preserving the status quo” for recently-issued Bureau rules, including the qualified mortgage and debt collection rules which have been finalized but are not yet effective. It is not yet clear whether the new Bureau leadership will take any formal action to reverse or modify any of these recent rulemakings, but this is a key compliance issue for industry to closely monitor.
• Be aware and mindful of the Bureau’s heightened focus on the continuing impact of COVID-19 on consumers and the observations and findings contained in the Bureau’s recently-issued Prioritized Assessments report. The Bureau appears intent on using all of the levers at its disposal – including consumer education tools and its rulemaking, supervisory, and enforcement functions – to ensure relief for consumers facing hardship due to COVID-19 and the related economic crisis.
  
  In addition to the sharpened consumer focus, note the Bureau’s increased focus on small businesses. A large part of Uejio’s reasoning behind expediting the Bureau’s Section 1071 small business lending data collection rulemaking is his desire to make sure that the Bureau is doing all that it can for the small businesses across the country “that are on the brink of extinction.” This rulemaking will supplement and further support the Bureau’s enforcement of laws that protect small business owners, including from discrimination, in their access to and use of credit.

• Make racial justice and equality a priority in all aspects of your business.
• Be mindful of, and make sure to closely monitor, consumers’ rights amidst the ongoing pandemic provided under federal, state, and local laws, including with respect to consumers at risk of foreclosure or eviction.
• Pay close and careful attention to consumer complaints, and prioritize efforts to ensure that appropriate, timely, and substantive responses are made to address the issues consumers describe in their complaints. When reviewing and resolving consumer complaints, be especially mindful of how the pandemic has hit certain populations especially hard, including for: servicemembers and their families impacted by National Guard and Reserve activations; current college students and recent graduates facing substantial student debt during uncertain economic times; those in elder care and nursing homes facing death toll and economic stress; and Black, Brown, and Indigenous communities dealing with continued racial inequality challenges.
• These actions evidence a revived aggressive consumer protection approach and mission by this independent agency which, it should be remembered, does not depend on Congress for its appropriations, is not subject to the level of regulatory scrutiny by the Office of Management and Budget (OMB) as is most of the rest of the government, and has independent litigating authority. Financial institutions subject to enforcement and regulation by the Bureau should undertake a thorough review in order to assure that they are in scrupulous compliance with these laws.

Contacts

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Washington, DC
Nicholas M. Gess

Dallas
David I. Monteiro
Michael A. Cumming