CFPB actions put financial firms on alert

Bill Himpler

Since the operational beginning of the Consumer Financial Protection Bureau, the agency has issued more than 100 subpoenas and initiated dozens of investigative probes into the practices of industries that affect the U.S. consumer.

The bureau’s enforcement actions have pressured credit card companies, payday lenders and banks to make changes quickly, though many of the firms are reluctant to discuss the agency’s actions as the regulator continues to pinpoint industries for regulation.

“The CFPB is a new animal, and they have to establish their turf and a way of doing business,” Jack Conway, Kentucky’s attorney general, said, Petoskey News reports. “If that breaks from standard practice of other regulators, I don’t have a huge problem with it.”

The agency has been highly controversial, with many critics contending that the government has overextended its reach by imposing costs on companies that operate legally but are now required to prove it. The CFPB’s enforcement actions will likely come up during a Thursday Senate Banking Committee hearing where Richard Cordray, director of the CFPB, is set to testify.

The CFPB’s subpoena and enforcement actions have brought about some changes. American Express is in the process of making changes to marketing policies and setting aside money that it may be ordered to return to customers.  Capital One, America’s fifth-largest credit card issuer, agreed to refund $150 million to 2.5 million customers following allegations that the company was using deceptive marketing technique, according to Petoskey News.

Though the CFPB cannot criminally charge individuals or firms found to be in violation of the law, it can file civil charges against violators found to be in violation of consumer laws regarding any financial product or service used by American consumers.

Bill Himpler, the vice president of the American Financial Services Association, a trade group representing mortgage lenders, card companies and finance companies, said that the CFPB’s tactics put firms on the defensive.

“It doesn’t leave somebody with the best feeling that what they’re trying to do is ensure compliance so much as create a gotcha situation,” Himpler said, Petoskey News reports.

Smaller firms also have a harder time adjusting to the bureau’s demands, as they now must engage in extensive record-keeping and hire defense lawyers. Oversight of many of these firms used to be the responsibility of the Federal Trade Commission.

“It’s the FTC on steroids,” Jonathan Pompan, an attorney who represents companies being investigated by the CFPB, said, according to Petoskey News.