The stAI informed Podcast
We hope by now you have discovered (and are enjoying) the stAI informed podcast. Airing bi-weekly, it’s a great source of educational information on the regulatory landscape (CFPB), the world of income verification, fraud detection, auto finance, consumer lending and so much more. The podcast is co-hosted by Jessica Gonzalez and Tom Oscherwitz and features a wide array of guest speakers.
A recent episode, “What to Expect from the CFPB this year,” was so good, we’re sharing excerpts from it here. The episode hosted by Tom, himself a CFPB alum, featured two experts who’d done lengthy stints at the CFPB. Nora Rigby, Partner, Consumer Financial Services, Data and Technology Practice Group, at Akerman LLP. And Gary Stein, a Partner and Cofounder of 99FinTech.
Here are excerpts from their conversation (edited for clarity):
Tom: It’s rare to get three long-time CFPB insiders in the room at one time. For folks who don’t know much about the Bureau, insights or experience can you share that might surprise listeners? For example, though the Bureau has a single director, it has many divisions such as Supervision, Enforcement, and Regulations. And all of these different areas wrestle with each other to work on policy.
Gary: People might be surprised that attitudes and interests of people at the Bureau don’t automatically align with the President. In fact, we had, not only different interests based on roles [in the Bureau], but different interests and viewpoints on how to approach the market. And. what to do when we see potential consumer harm.
Nora: One thing people might find surprising is that the CFPB isn’t quite as omnipotent and coordinated as everyone thinks. People assume there’s some scary intent when a rule takes awhile to come out after the comment period closes. They think that something nefarious is happening. When, in fact, there’s just a lot of work to be done. And it takes a while.
Tom: There you have it, folks – an insider’s inside perspective. When we planned this podcast, we didn’t realize there would be a Supreme Court decision coming out affecting the CFPB. Nora, perhaps you could give us a summary of what happened and share some observations.
Nora: Sure. What happened is that there was a lawsuit ostensibly about the CFPB payday lending rule. That was the context of the argument. But the argument before the Supreme Court was not limited to that particular rule. It was about whether the agency as a whole is constitutionally funded. The argument had to do with the appropriations clause of the Constitution. And, the plaintiffs argued the CFPB was not constitutionally funded, because it was not appropriated by Congress. Without going into the weeds, seven of the nine justices held that the bureau is constitutionally funded.
Tom: In an election year, it’s probably a good idea to talk about something relatively new – the Congressional Review Act. Nora, why is the congressional review act relevant?
Nora: The Congressional Review Act is almost 30 years old. It permits Congress to pass what’s called a “resolution of disapproval” of any regulation finalized by any federal agency. And this can happen at any time, but it really only matters when the presidency changes from one party to another. This is because if you have a Democratic President (for example, Biden) and Democratic heads of agencies, you assume you’re going to have rules that the President agrees with.
And, that he would veto a resolution of disapproval for the regulations that came out of his own administration. So, if we get another Trump presidency, there is a possibility that any regulation passed at the end of the Biden administration could be disapproved by Congress and Trump would permit that disapproval to stand.
Tom: Let’s get down to the rules. Gary, can you update us on what some of the rules that are in play right now are?
Gary: Sure. One of the biggest ones that I worked on prior to leaving the Bureau is Section 1033 – Personal Data rights. You might think of it as open banking, giving a consumer access to their financial data. This is part of the statute that created the Bureau, which means that when Congress created the Bureau over 10 years ago, it instructed the Bureau to write a rule to ensure that consumers have electronic access to account data.
There may have been some notion early on that this meant that consumers could take their account histories from a checking account and move providers at will. That’s not realistic, because currently payments aren’t all instantaneous.
We’ve seen over the last dozen years, use cases where consumers use a third party app to tap into their account information to help them budget and accelerate an application process for maybe an auto loan or a mortgage by bringing in information to help them qualify. Things like utility payments, if they don’t have credit scores. To date, there hasn’t been a rule in place that governs how all that works, and a lot of it’s done through screen scraping and sharing credentials. The Bureau has gone through a pretty methodical process to ensure consumers’ financial protection principles.
Then last fall, they proposed a rule that would do a lot of things. For this audience, it would restrict how data is shared and who has to share it, but it pertains only to checking account, digital wallet, and credit card providers. So auto loan providers, for example, would not be required to share according to the rule. This would include things like making old data available, ensuring response times and not in charging a fee for data access.
The Bureau has kind of cheekily introduced a lot of staggered implementation timelines. People love and hate that as you can imagine. Nobody completely loves any rule that the bureau puts out! I think a big issue for this is because the bureau limited the scope of types of account providers to those three. So how does this play out in the auto or mortgage investment world because for example, insurance isn’t even a product that the bureau regulates. I think that’s a very open question – how it plays out while certain institutions are required to comply immediately and others have two years.
Tom: Just to provide a broader brush of all the rules that are in play right now. I thought it’d be useful to give an overview. There’s been an effort to focus on junk fees. And the idea that businesses may sell services that consumers aren’t getting value from, most recently focused on the airline industry. Then there’s something called the CARS rule at the FTC. We’ve heard about overdraft fees, credit card penalty fees, and Fair Credit Reporting Act rulemaking. Nora, can you talk about some of these?
Nora: So you mentioned those three. And there’s one that has to do with supervising larger participants in the payments market, which basically would mean that the CFPB has the authority to go in and examine certain payments providers like they do banks, even though these are non banks. So that wouldn’t mean imposing any particular new regulations on them, but just giving the CFPB the authority to go in and do an examination on a regular basis and see if they’re complying with the law.
There’s another one that has to do with NSF fees, which are insufficient funds fees. That’s when a consumer might try to write a check or make a payment with a debit card, and doesn’t have enough money in their account to cover that the transaction. Banks sometimes impose a fee for that and the CFPB has proposed a rule to prohibit those fees in certain circumstances.
The conversation went on from there talking about comment letters, tips for working effectively with the bureau, and the pros and cons of sharing data. The total run time of the podcast episode was around 45 minutes. Give it a listen – it’s hard to imagine another opportunity to get this much expert commentary delivered straight to you!
Have an idea for an episode or would like to appear as a guest? Reach out and let us know!
