It was only just over a month ago that President Biden selected David Uejio, a long-time senior leader at the CFPB with a low public profile, to lead the agency temporarily as Acting Director. But already, Mr. Uejio has made very significant changes at the agency, implementing what he calls a “change of direction” with sweeping announcements on a weekly basis. Even as the Senate prepares to consider President Biden’s nominee, current FTC Commissioner Rohit Chopra, to lead the CFPB for a full term at a March 2 hearing, it is time to assess where the agency stands after the Biden Administration’s first month and the likely changes still to come.
1. Oversight & Enforcement
In his first week, Mr. Uejio announced that as part of the “change in direction,” the CFPB would “be reversing policies of the last administration that weakened enforcement and supervision.” The most obvious reversal to date has been with respect to the prior Administration’s approach to staffing and resources. Largely because of attrition and a two-year hiring freeze, the agency’s headcount dropped from a peak of 1,712 under former Director Cordray in 2017 to just over 1,400 last year. Mr. Uejio, by contrast, announced in a February 9 blog post that the agency was “Calling all attorneys interested in joining the CFPB,” at “all experience levels.” Beefing up staff, the post explained, was necessary to conduct “vigorous oversight of all applicable Federal laws and the fullest utilization of our legal authorities” — a clear indication that the agency plans to use additional staff to be more aggressive.
Mr. Uejio also had made specific personnel changes, with the most significant to date being the appointment of Cara Peterson as the agency’s new head of enforcement, according to the press reports. Ms. Peterson replaces Thomas Ward, a former political appointee at the Justice Department whom former Director Kraninger brought over early last year. Still to come: Mr. Uejio also plans “to rescind public statements” by the prior Administration “conveying a relaxed approach to enforcement of the laws in our care.”
2. Racial Equity
Mr. Uejio also has announced that it is “time for the CFPB to take bold and swift action on racial equity,” one of his top priorities. In his view, “practices and policies of the financial services industry have both caused and exacerbated racial inequality.” As expected, this means that fair lending enforcement will once again be a “top priority” at the agency. But Mr. Uejio also wants the agency to “look more broadly, beyond fair lending, to identify and root out unlawful conduct that disproportionately impacts communities of color and other vulnerable populations.” This clearly means an emphasis on disparate impact liability under the Equal Credit Opportunity Act, and likely an exploration of disparate-impact theories for consumer financial services outside of lending as well.
More specifics on how the agency intends to tackle “racial equity” may depend on the outcome of internal studies that Mr. Uejio has required. In particular, he asked the Division of Research, Markets and Regulation on February 4 to immediately prepare an analysis of “the most pressing consumer finance barriers to racial equity.” Further, going forward, all policy proposals at the agency will have to explicitly describe “the racial equity impact of the policy intervention.”
3. “Companies Responsible for COVID Relief”
Mr. Uejio’s other top priority, beyond racial equity, is “relief for consumers facing hardship due to COVID-19 and the related economic crisis.” In that regard, he is focused especially on compliance by mortgage servicers, student loan servicers and others required to provide relief under the CARES Act and similar laws. Vowing to take “aggressive action to ensure that regulated companies follow the law,” he expanded the scope of “Prioritized Assessments” of companies subject to those laws.
Early on, Mr. Uejio announced a general goal of “assessing regulatory actions taken by the previous leadership and adjusting as necessary and appropriate those not in line with our consumer protection mission and mandate.” Already, the agency this week delayed the July 1, 2021 mandatory effective date for its overhaul of the “general QM” category of mortgage loans, thereby allowing lenders to continue to rely on GSE standards for QM status. The agency also confirmed this week that it will likely reconsider all of the QM rules finalized last fall by the prior Administration.
Similarly, Mr. Uejio has signaled that the agency may reopen the rules finalized last fall by the Trump Administration under the Fair Debt Collection Practices Act, now scheduled to take effect on November 30, 2021. Given the enormous efforts undertaken to promulgate the QM and debt-collection rules under the agency’s prior leadership and the importance of those rules to industry practices, these potential changes in policy direction are very significant.
Mr. Uejio also asked the agency’s rule-writing Division to consider rules for the mortgage servicing industry that will “avert, to the extent possible, a foreclosure crisis when the COVID-19 forbearances end” in the next few months. These rules will likely expand on the pandemic-specific, temporary changes to Regulation X servicing standards that appeared last June.
In a February 10 blog post about consumer experiences, Mr. Uejio described consumer complaints as the agency’s “lifeblood,” adding that he was determined to ensure “that consumers who submit complaints to us get the response and the relief they deserve.” He expressed particular concern that “some companies have been lax in meeting their obligation to respond to complaints,” and cited analyses by unnamed consumer advocates purporting to show “disparities in some companies’ responses to Black, Brown, and Indigenous communities.” As a result, the agency will be publishing “a report highlighting the companies with a poor track record” on responding to complaints. The “senior leadership of these companies,” Mr. Uejio added, “can expect to be hearing from me.”
In light of this blog post, firms supervised by the CFPB should ensure their complaint management programs can withstand close scrutiny. In addition to ensuring that all responses to complaints are timely, substantive and complete, companies should conduct periodic reviews to: (1) ensure consistent treatment; and (2) spot trends that will serve as a basis for corrective action.