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Consumer Financial Protection Bureau Update

The Dodd-Frank Wall Street Reform and Consumer Protection Act created the Consumer Financial Protection Bureau ("CFPB" or "Bureau") to watch out for consumers' interests in the financial marketplace and, in so doing, to oversee a number of financial products and services. The creation of the CFPB marked the first time in decades that Congress had formed a new federal agency.

Because the Bureau became operational in 2011, there was a focus last year on building the Bureau. However, the Bureau managed to undertake numerous efforts, including the issuance of interim final rules on the Alternative Mortgage Transaction Parity Act, the TILA-RESPA single integrated disclosure project, issuance of a notice and request for comment regarding the definition of "larger participants in certain markets," and publication of interim final rules restating (and renumbering) the regulations inherited from other agencies. In addition, CFPB was very active in initiating its "Know Before You Owe" campaign with respect to mortgage loans, credit cards and student loans.

On January 4, 2012, Richard Cordray began serving as the Bureau's first Director. Director Cordray previously held the role of enforcement chief for the CFPB, and he is known for vigorously pursuing enforcement actions against banks, insurers, and brokers. In the past few months, the Bureau has been very active in pursuing its mission.

On January 20, 2012, the Bureau entered into a Memorandum of Understanding with the Federal Trade Commission ("FTC") "to prevent duplication of efforts, provide consistency and ensure a vibrant marketplace for consumer financial products and services."

On January 25, 2012, the CFPB announced that it would join efforts with the state Attorneys General and the Department of Defense to track companies and individuals who repeatedly target the military community and to crack down on financial scams directed at military service members, veterans and their families. This joint endeavor has been named the Repeat Offenders Military Database.

On February 17, 2012, the CFPB proposed a rule that would bring the nation's debt collection and consumer reporting industries under the Bureau's supervision. The Bureau is also looking into possible abuses with respect to checking account overdraft fees charged to consumers. In addition, the CFPB announced on March 14 that it has begun sharing consumer complaints with the FTC's Consumer Sentinel database.

Other items on the Bureau's agenda for 2012 include: 1) the issuance of a final "ability to repay" mortgage rule (including protection from liability for "qualified mortgages"); 2) issuance of proposed rules to implement changes to laws governing the mortgage industry (including origination and servicing practices, loan originator compensation, high-cost loan restrictions and escrow account maintenance); and 3) issuance of proposed rules to expand the Bureau's capacity to handle consumer complaints with respect to all products and services within its authority. In fact, the Bureau reports that since it began fielding consumer complaints related to credit card accounts and mortgages, it received over 13,000 complaints through December 31, 2011 and had facilitated company responses to over 88 percent of the submitted complaints.

In the enforcement arena, the Bureau has created a joint task force to target scams aimed at consumers seeking mortgage modifications through the Home Affordable Modification Program and has also set up a whistleblower hotline for the public to submit tips regarding potential violations of federal consumer protection laws. Look for more news from this very active agency throughout 2012.

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