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Education

The CFPB's active Indeed, the CFPB levels fines as if it were Oprah or Ellen
during their December giveaway specials. Generally,
past, uncertain the bureau orders between $500 million and $1 billion in
fines annually; 2014 proved to be a notable year: it issued
more than $3 billion in fines, with $2 billion in penalties
future stemming from one case alone involving mortgage service
violations by Ocwen Financial Corp. and Ocwen Loan
Servicing LLC.
By Brett Husak
National Bank Services Financial institutions such as JPMorgan Chase and Bank
of America are other big CFPB targets. In 2016, the agency
here is a constant flow of change through the charged Wells Fargo a $100 million fine after the discovery
payments industry whether it be credit card ter- that employees had opened unauthorized customer
minals, startups, POS systems or more gateways accounts in an effort to meet sales goals.
T than you can keep track of. But if you have not Crippling scrutiny
yet heard of the Consumer Financial Protection Bureau's
involvement in the business, you might need to check your Hitting closer to home, the CFPB has taken action against
pulse. processors, which has crippled some verticals that most
payment providers were once able to service. In April 2015,
The agency was legislated in 2010 as part of the Dodd-Frank the CFPB sued Global Payments Inc. because the company
Act, which was created in response to the financial crisis of ignored red flags for a few companies processing for debt
2008. According to its director Richard Cordray, the CFPB collection services. That vertical has been complicated to
is tasked to protect consumers from "unfair, deceptive or navigate since then.
abusive practices and take action against companies that
break the law." It is also a watchdog for mortgage servicers, Over the past year alone, payment processors have been
payday lenders and debt collectors. facing increased scrutiny by the CFPB. Enforcement and
litigation by this bureau are highlighting regulations on the
Indeed, the CFPB has been extremely busy over the past processing industry based on their role as intermediaries
five years. It has obligated lenders to verify the ability of or "gatekeepers" to the banking system. The CFPB is
borrowers to repay loans and has mandated enhanced particularly interested in the processors' unique position of
disclosures in mortgage, credit card, and student loan enabling businesses, including those that are high risk, to
forms and statements. In sum, this agency has gained obtain funds from consumer's bank accounts.
acclaim among those concerned with consumer rights, as
it has provided almost $12 billion in rewards to about 27 The CFPB noted that, "gatekeepers to a system in which
million consumers since 2011. so much money changes hands, third-party payment
processors as well as the banks they work with have
Differing views of the bureau responsibilities to monitor their transactions for suspicious
Some may view this agency as a government arm of activity and not enable fraud on the ACH network." The
advocacy that is there to protect and maintain the checks CFPB has chosen to supervise such entries into the financial
and balances of financial companies. Others might say it system with customized management. Industry insiders
is an extension of the government that is operating under can gain insight by understanding the agency's perception
the guise of activism, but is more or less a rogue regulatory of payment processors. This should allow them to dodge or
unit whose purpose, structure and reach are borderline prepare for possible regulatory examinations that may not
illegal. be typically expected. The CFPB has proven through past
The CFPB has proven to be a force to be reckoned with
during its short existence. It has taken regulations to
a new level and has disrupted the financial industry The following resources were used in researching this article:
in various ways. Critics are concerned by the seeming
unaccountability of this Washington organization, which • www.bna.com/bloomberg-law-insights-n73014448387/
does not employ elected officials or have any required • www.bloomberg.com/news/articles/2016-11-17/the-glory-days-of-
presidential oversight.
elizabeth-warren-s-cfpb-are-numbered
John Berlau, Senior Fellow at the Competitive Enterprise • www.cnbc.com/2017/02/16/courts-just-threw-a-lifeline-to-the-
Institute, alleges CFPB rules make consumer financing consumer-financial-protection-bureau.html
more difficult and likely impossible for the poorest • www.insidearm.com/news/00041798-total-cfpb-penalties-top-5b/
Americans. He also accuses the bureau of inundating
financial companies with "burdensome mandates" while • www.themreport.com/daily-dose/03-21-2017/questioning-
imposing large fines. constitutionality-cfpb

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