Page 70 - Pay Magazine s2014

Government watch
CFPB’s Enforcement Lessons for the Payments Industry
ViewpoinT
By Adam Maarec, Davis Wright Tremaine LLP
Chris Chamness, Davis Wright Tremaine LLP
In Viewpoints, payments professionals
share their perspectives on the industry. Paybefore’s goal is to present many points
of view to o er readers new insights and information. The opinions expressed in View- points are not necessarily those of Pay- before. This article is intended for general information purposes only and should not be construed as legal advice. Readers are urged not to act upon the information without rst consulting an attorney.
The Consumer Financial Protection Bureau actively has enforced federal con- sumer nancial laws in the ve years since its creation, touch- ing a diverse array of products, practices and companies. Past cases provide a lens into the bureau’s priorities, strategies and areas of focus in the future.
In part 1 of this article, we ex- amine recent enforcement action data, including the agency’s use
of its authority to prevent unfair, deceptive, or abusive acts or practices (UDAAPs). In part 2, we discuss the bureau’s more recent venture into data security. In part 3, we discuss enforcement actions involving payment processors and the CFPB’s selection of defendants. In part 4, we discuss the recent trend by defendants to c1hallenge the authority of the CFPB.
CFPB Enforcement
in the First Half of 2016
The activities that the CFPB consid- ers to be a UDAAP violation con- tinue to evolve as this principle is applied to speci c facts and cir- cumstances, especially for “abusive” violations. The CFPB has urged companies to review past enforce- ment actions to better understand their compliance obligations and CFPB Director Richard Cordray famously said earlier this year that failing to monitor these enforcement actions for lessons would amount to “compliance malpractice.” That monitoring obligation can be a challenge for nancial institution compliance teams given the volume of CFPB enforcement activity.
The CFPB has brought 16 en- forcement actions in the rst half of 2016. Of those actions,13 involved UDAAP claims. Eleven
of the 13 cases were settled at
the time they were announced and two of the cases were subject to contested litigation. The actions have involved payment systems, auto lending, credit card debt collection and mortgage lending, to name a few a ected industries.
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The charts that follow examine
the total number of enforcement actions, including actions involving UDAAP claims, along with those actions that were settled or liti- gated over the last several years. While litigated cases are presented to a court for a determination of their legal validity, settled cases are limited to allegations of wrong- ful conduct that are resolved without a legal determination of whether the allegations were true or actual violations of law given the facts and circumstances.