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CFPB, Capitol Hill Intel and Upcoming Regulations

Thu, Oct 13, 2016

District Of Columbia

While the spotlight is on the presidential race, there is still a lot happening in the legislative and regulatory arenas.

Our sources have shared with us that at the CFPB, the number of comments the CFPB has received on the Payday Lending Rules has topped 1.7 million.  The tally will continue, but the CFPB source estimated that close to 1 million of the comments are "AstroTurf" grassroots generated by the payday lending industry.  The NCUA and SBA are the only two federal agencies to submit comments, both are urging CFPB to reconsider the direction they are taking.  The sheer volume of comments may result in CFPB slowing this rulemaking considerably and they may not be able to finalize the regulations anytime soon, even given the volume of ‘AstroTurf’ involved.

On the Prepaid Card Rule which was issued last week, the CFPB briefed Congressional staffers who in turn briefed the association. The regulation will:

  • Limit consumer liability on lost or stolen cards to $50 for an unauthorized transaction;
  • Create uniform fee disclosures so consumers can compare more easily;
  • For “hybrid” pre-paid cards that allow consumers to spend more than is on the card initially, issuers must determine “ability to repay”;
  • Restrict financial institutions from offering credit features on pre-paid cards for the first 30 days after purchase;
  • Take effect October 1, 2017.

Covered pre-paid cards include: cards sold by American Express, Discover, MasterCard, and Visa, employer payroll cards, and government benefit account cards.  Branded single-store gift cards are excluded from the rule. 

On Capitol Hill,  in another clear ramification of the Wells Fargo scandal, Senate Banking Committee  staff have informed us that Ranking Member Sherrod Brown (D-OH) is in the process of drafting a bill that will significantly alter the way financial institutions can apply arbitration clauses.  Although details are being finalized, the bill would likely enable consumers to sue a financial institution even if a legal arbitration agreement is currently in place. 

The staff stressed that this is a big difference from the CFPB proposed rule, which would only affect arbitration agreements signed after their regulation is finalized and goes into effect.  It is also worth noting that, it has not been decided if the legislation will only apply to financial institutions above a certain threshold, or to ones that engage in certain activities.  Brown has told reporters that this is a direct result of the Wells Fargo situation. Brown is targeting introduction of this bill shortly after the Senate returns post-election on Nov. 14. 

On another issue, House Judiciary Committee staff forwarded this new report (attached) released last week by the FTC that adds important support for patent reform legislation in the next Congress.  The report essentially accepts the argument made by credit unions and other proponents of reform that there are firms set up solely to file frivolous patent infringement lawsuits. 

The section containing recommendations for fixes was particularly interesting.  Specifically, FTC suggests:

  • Litigation cost sharing;
  • Judicial combining of multiple cases related to the same lawsuit; and
  • Mandating more information about patent plaintiffs that could be used by courts and patent defendants.

Based on the initial reaction by Congressional staff, it is very possible that this report could give some impetus to patent reform early in the next Congress. 

For information contact: Glen Cooney, 443-325-0775,