NAAG/CFPB Partnership = Increased Compliance Risk

Posted by Anthony Demangone

Monday evening, the Consumer Financial Protection Bureau and the National Association of Attorneys General announced a partnership that they hope will better protect America's consumers from unlawful acts and practices. The agreement lays out a set of "joint" principles.  I would read each one closely.  Here is the list, with my own emphasis added:

• Develop joint training programs and share information about developments in federal consumer financial law and state consumer protection laws that apply to consumer financial products or services;
• Share information, data, and analysis about conduct and practices in the markets for consumer financial products or services to inform enforcement policies and priorities;
• Engage in regular consultation to identify mutual enforcement priorities that will ensure effective and consistent enforcement of the laws that protect consumers of financial products or services;
• Support each other, to the fullest extent permitted by law as warranted by the circumstances, in the enforcement of the laws that protect consumers of financial products or services, including by joint or coordinated investigations of wrongdoing and coordinated enforcement actions;
• Pursue legal remedies to foster transparency, competition, and fairness in the markets for consumer financial products or services across state lines and without regard to corporate forms or charter choice for those providers who compete directly with one another in the same markets;
• Develop a consistent and enduring framework to share investigatory information and to coordinate enforcement activities to the extent practicable and consistent with governing law;
• Share, refer, and route complaints and consumer complaint information between the CFPB and the state attorneys general;
• Analyze and leverage the input they receive from consumers and the public in order to advance their mutual goal of protecting consumers of financial products or services; and
• Create and support technologies to enable data sharing and procedures that will support complaint cooperation.​

If you think this is window dressing, I would review the agenda for this week's NAAG Presidential Initiative Conference. As I understand it, the Presidential Initiative Conference is a place where the president of the NAAG lays out what he or she hopes to accomplish during his or her term. Both Elizabeth Warren and Holly Petraeus spoke at the conference.  The conference agenda lays out sessions that include the following:

• Enforcement after Dodd-Frank
• Preempted or Not ‐ Reshaping of Federal and State Powers under Dodd‐Frank
• The Power of Data Sharing and Usage
• Too Big to Fail? How Best to Regulate and Structure Financial Institutions to Ensure Future Economic Prosperity
• Just Over the Horizon – Emerging Consumer Financial Protection Issues
• Looking Back / Looking Forward – What Triggered the Financial Crisis and How Best To Avoid Another

This agenda makes one thing very clear.  State Attorney Generals are very interested in what we're doing and how they can stop practices that they feel are unlawful, unfair or deceptive.  

I'll just make a few points.

• For those who thought the CFPB would not greatly affect the affairs of federal credit unions, this development paints a clear picture of why they were mistaken.  State attorneys general were able to drop the HVCC on an entire industry.  If I were a betting man, I'd lay a wager that the AG mortgage servicing "agreement" will find its way into law, regulation, or guidance.  Add to the mix the CFPB/NAAG Partnership, and the state AGs practically have a green light to scrutinize every aspect of our industry.
• The time for complaining is over.  This is the new world in which we operate.  At this point, it may serve us best to take every opportunity we have to educate the CFPB and state attorneys general that credit unions are the best friend a consumer has in the financial arena.  If they regulate or litigage with flamethrower, they'll end up harming consumers in the end. 
• This development increases what I call "Regulatory Risk."  Another actor, the state Attorneys General, can affect the rules of the game.  The HVCC mortgage valuation system and the AG mortgage servicers agreement came out of left field.  There will be more issues like those as we move forward.
• I don't want to steal my own thunder, but I feel the timing is right.  In May, I'll speak before NAFCU's Annual Volunteer's Conference in Savannah, Georgia.   Today, I'll give you the conclusion to my speech that I'll give in May:

Today's chaotic environment favors financial institutions with the following traits:

1. Strong corporate governance
2. Strong employee skill sets
3. Strong analysis and decision processes
4. Nimble and responsive operations

Take a look at your own shop, and take measure.  The next few years will be bumpy at best.  As I like to say, buckle up, buttercup. 

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