It's What You Don't Hear About the CFPB that Can Hurt You

MAY 27, 2014 2:26pm ET
Comments (4)

In a statement released by the Consumer Financial Protection Bureau last week, the agency announced that it had issued over $70 million in fines to non-bank entities, including mortgage companies, all of which have been through private settlement agreements. While the agency did not specify which particular mortgage lending practices had precipitated the fines, the announcement strikes home the point that the CFPB’s reach and influence goes beyond the larger multi-million-dollar news-worthy resolutions that get the most press. Further, this does not include the millions of dollars in fines issued by state regulators following CFPB standards and protocols.

In my experience, the hot issues the CFPB is focusing on involve marketing arrangements, improper compensation, and “unlicensed” activities. In particular, the CFPB pays attention to practices and behavioral patterns beyond the terms of mere agreements. In other words, agreements can get you in trouble but will not rescue an otherwise demonstrably improper arrangement. The CFPB heavily relies upon email communications, and horizontal audits, and in almost every case is well-prepared, having done advance homework before initiating any investigatory demand.

It is critical for lenders that have any profit-based compensation of managers, or who have non-originating supervision of branches to establish written protocols and agreements reviewed by legal counsel. Similarly, in the case of marketing arrangements, all documentation, practices and policies need to be reviewed by counsel to ensure that the structure, negotiation, implementation and maintenance of such agreements are consistent with an advertising based relationship. By the time the CFPB and/or state regulators issue investigative demands, it is usually too late—being prepared before you hear about regulatory action involving your company is essential.

Comments (4)
if the mortgage brokers/originators/hypothecators/derivatives creators, and bundlers of questionable mortgage-backed securities won't or can't regulate themselves for whatever reason, all hail the CFPB and the work it is doing.
Posted by david h | Wednesday, May 28 2014 at 3:54PM ET
When the CFPB is necessary to restore confidence in the US banking system, what does it say about the financial "maestros" who wasted billions in shareholder value to evade "supervision" and refuse to acknowledge that their financial "engineering" was more about feathering their personal nests than adding value to their companies? How is the US going to restore international investor confidence when the bank CEOS refuse to admit their mistakes--much less a compensation "adjustment."

When the Foxes are allowed to guard the FINANCIAL Henhouse, is there any surprise that there aren't any eggs left for the credit starved middle class to purchase a house? Instead, capital is easily available for the new Guilded Age Mansions of the uber riche! Let's hope that they eventually become extensions of university campuses for reflection on this indolent phase of materialist excess rather than burned out shells that were rallying cries of revolting and revolted masses...
Posted by ROBERT D M | Wednesday, May 28 2014 at 5:56PM ET
Kudos to dch and r.manning to say the least......BRAVO ! & SO well said !
We all know this "condition" we find ourselves in re: massive and pervasive "financial markets" fiasco is the ultimate case study in how indescribably inept and complicit our so called (non) regulators, and even worse, our congressmen/women & senators ARE. It's an epic disaster by any definition, despite the complete avoidability of it all.
What's woefully lacking in this whole mess is MUCH more severe punishment provisions. And while we're at it, would it be asking too much of all of our nations business colleges to formalize a uniform code of ethics signed and agreed to by their students that provides that ANYONE that earns a degree from these institutions, respectively, that dishonors them shall forever have their names "memorialized" permanently on a national "wall of shame" and have their degree(s) revoked..........among other more creative sanctions than I can offer immediately here. This is NOT exactly rocket science as the saying goes. Rather, this absurd, contrived and exclusionary complexity is ROBBING simplicity in the process of practically wiping out any sense of trust on the part of our whole society in our most important institutions. There is simply NO WAY to put a VALUE/COST on THAT.
Posted by John D | Wednesday, May 28 2014 at 10:30PM ET
@DCH and Cmon...
Its funny to read folks comment on things they truely dont understand, and only read whats in the newspaper. Especially both of you sound very uninformed, which i can lump the 2 of you into the general public arena if you believe that CFPB is working for you.

DCH... your first sentence says it all for me "if the mortgage brokers/originators/hypothecators/derivatives creators, and bundlers of questionable mortgage-backed securities...", you clearly dont know that its the SEC the monitors Derivatives and the Mortgage Back Securities. Strike 1 on you. Brokers and Originators arent the ones that created the mortgage products, they only sold the products that the "BANKS" created. Strike 2. If you believe that Dodd Frank Bill, of which Finance Reform bill along with the CFPB derived from has made a difference, Derivatives are still around, CDS's are still around, rating agencies are still around. What has been reformed? NOTHING... what happen in 06-08 can happen again.

Whats even more funny is that the CFPB is here to protect consumer from unfair practices and yet this agency is openly discriminatory to its own employees... but sadly it can do whatever it wants since there is ZERO oversight on them. When the house oversight committee asked them to talk to them about this problem of theirs, they, which is laughable, didnt show up. They werent Subpoena, because congress has no jurisdiction over them.

Keep on reading the headlines, Ignorance is bliss
Posted by | Friday, May 30 2014 at 1:19PM ET
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