The US Court of Appeals for the Ninth Circuit on May 6 upheld the constitutionality of the structure of the Consumer Financial Protection Bureau (CFPB). In CFPB vs. Seila Law LLC, a panel of the court determined that the limitation on the president’s authority to remove the CFPB director, other than for cause, did not impede the president’s authority under the US Constitution’s Appointments Clause. Citing longstanding US Supreme Court precedent established in Humphrey’s Executor v. United States, 295 U.S. 602 (1935) (upholding President Franklin Roosevelt’s removal of an FTC Commissioner), and Morrison v. Olson¸487 U.S. 654 (1988) (upholding the Independent Counsel Act as then constituted), the Ninth Circuit panel concluded that the CFPB’s structure is constitutionally permissible.
The Consumer Financial Protection Bureau (CFPB, the Bureau) today issued a Notice of Proposed Rulemaking (the Proposal) to establish implementing regulations for the Fair Debt Collection Practices Act (FDCPA). Although it has been more than 40 years since President Jimmy Carter signed the FDCPA into law, if implemented, these would be the first authoritative regulations to clarify key aspects of what is permissible under the federal debt collection laws.
Stepping in to fill a perceived regulatory and enforcement void at the federal level, the governor of New York and his acting superintendent of the New York Department of Financial Services (DFS) have created a division within DFS that amounts to a mini-(federal) Consumer Financial Protection Bureau (CFPB). Because there are few major financial institutions that do not have significant business contacts with New York, the new division will have broad-based authority over large volumes and many types of financial consumer transactions, and its impact will not be held back by the current federal administration’s commitment to “regulatory rollback.”
The Consumer Financial Protection Bureau (CFPB) recently advised that it has significantly changed its Civil Investigative Demand (CID) process to increase transparency and to better permit targets and subjects to understand the nature of an investigation. The changes will bring the CFPB into compliance with opinions rendered by two Federal Circuit courts as well as policy changes implemented by the Federal Trade Commission (FTC). The change may well have some persuasive impact on other enforcement agencies, such as state attorneys general, who enforce many of the same laws as the CFPB and generally have CID authority as well.
The Federal Reserve Board (Fed) released on April 23 a notice of proposed rulemaking to clarify the standards and criteria under which one company “controls” another company under the Bank Holding Company Act (BHCA) and the Savings and Loan Holding Company Act (SLHCA). This long-awaited proposal, which Fed officials have stated for some time was in the works, is notable for several reasons—primarily because if adopted, it will bring much-needed clarity to an area of banking law that historically has been notoriously opaque.
Kathleen Kraninger, only the second Senate-confirmed director of the Consumer Financial Protection Bureau (CFPB) in its almost eight-year existence, recently gave her first public remarks. The priorities Director Kraninger laid out will materially impact the CFPB’s direction and mission until the end of her term in December 2023. Director Kraninger, appointed by President Donald Trump, succeeds the first CFPB director, Richard Cordray, who was appointed by President Barack Obama.
In a recently published statement, the Basel Committee on Banking Supervision (BCBS) has raised concerns relating to the risks that crypto-assets pose to the global financial system. While it acknowledges that banks do not currently have significant exposure to crypto-assets, it warns that these assets are increasingly becoming a threat to financial stability.
These concerns are founded on the volatility, constant evolution, and lack of standardization of crypto-assets, which the BCBS believes exposes banks to liquidity, credit, operational, money laundering, legal, and reputational risks. It considers that crypto-assets should not be referred to as “cryptocurrencies,” given that they fall short of being currencies that are safe mediums of exchange.
In separate remarks delivered before the annual Washington meeting of the Institute for International Bankers on March 11, FDIC Chair Jelena McWilliams and Comptroller of the Currency Joseph Otting both said that the federal financial regulatory agencies are actively considering revisions to the Volcker Rule regulations, including a reconfiguration of the interagency Volcker Rule regulatory proposals published in June 2018. Ms. McWilliams, among other things, indicated that “all options are on the table," and stated that the federal agencies “need to right size the rule's extraterritorial scope while also minimizing competitive inequities between U.S. banking entities and their foreign counterparts…” with a particular focus on foreign funds.
The Federal Trade Commission (FTC) will hold public hearings on March 25-26 in Washington, DC, on “Competition and Consumer Protection in the 21st Century.” Titled, “The FTC’s Role in a Changing World,” the hearings pose downstream risk to the fintech community, especially to smaller enterprises that may lack the resources and knowledge to comply with any complex new regime.
When the US Court of Appeals for the Second Circuit issued its decision in Madden v. Midland Funding in 2015, it sent shockwaves through the financial community for its unexpected ruling that nonbank assignees of a national bank did not get the benefit of National Bank Act “preemption” permitting lenders to charge any interest rate provided it does not exceed the rate permitted in the bank’s home state. After an unsuccessful attempt to get the US Supreme Court to review the decision, the Second Circuit’s decision remains binding precedent in federal courts sitting in New York, Connecticut, and Vermont. The case returned to the district court and has quietly been litigated over the last two years. On March 1, the final chapter began when the parties filed a motion for preliminary approval of a settlement of the action, as described below.