On its third anniversary, we can look back on the Consumer Financial Protection Bureau and make certain observations as follows:
1. The CFPB looks to the end substance of transactions. Unlike other regulatory agencies that in many cases looked at form over substance, the CFPB will ignore structures, agreements, and programs altogether when it perceives them to be a "sham" transaction. More than ever lenders need to look to the substance of what they are doing because the CFPB has the power and willingness to declare almost anything a "sham" and regulate or enforce accordingly.
2. The CFPB is interested in regulating through enforcement. Rather than simply relying on regulations and providing specific rules, the CFPB tends to make broad pronouncements and provide the specifics through enforcement. A case in point is the recent mini-correspondent bulletin where the CFPB announced broad rules and concepts. From past history, the agency will likely begin enforcement actions in several months which will provide additional specifics.
3. The CFPB will settle matters confidentially, depending on the nature and severity of the conduct alleged and the clarity of the wrongdoing, as well as the agency’s agenda to regulate through enforcement. Along these lines, the agency does appear to want to work with good companies that make mistakes, and appears to be far more concerned with lenders it perceives as systemically predatory and non-compliant.
4. It says what it means and means what it says. If you look at the guidance published by the CFPB, it tends to warn lenders and then act according to its guidance. It tends not to pay lip-service to ideas or simply issue guidance without follow up enforcement agendas.
5. The CFPB works closely and efficiently with state regulators. While many federal agencies are notorious for their inability to co-regulate, the CFPB has developed an incredible system of regulating with states, thus expanding the agency’s reach far beyond its internal resources.