Alston & Bird Consumer Finance Blog

#FCRA

CFPB Issues FCRA Advisory Opinions Addressing Background Screenings and Credit File Sharing Practices

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What Happened?

On January 11, 2024, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued two separate advisory opinions interpreting consumer reporting agencies’ (“CRAs”) obligations under the Fair Credit Reporting Act (“FCRA”). First, the Bureau issued an advisory opinion on background check reports, which highlights that such reports must be complete, accurate, and free of information that is duplicative, outdated, expunged, sealed, or otherwise legally restricted from public access (the “Background Screening Opinion”). The Bureau’s second advisory opinion addresses file disclosure obligations under the FCRA, and “highlights that people are entitled to receive all information contained in their consumer file at the time they request it, along with the source or sources of the information contained within, including both the original and any intermediary or vendor source” (the “File Disclosure Opinion”).  The Bureau issued the advisory opinions to “ensure that the consumer reporting system produces accurate and reliable information and does not keep people from accessing their personal data.”

Why Is It Important?

The Background Screening Opinion

Section 607(b) of the FCRA requires that CRAs “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” The Background Screening Opinion asserts that “[i]n many instances, background screening reports contain inaccurate information about consumers,” such as information about the wrong consumer, information that is duplicative, or that omits existing disposition information. The Bureau also found that some background screening reports “include arrests, convictions, or other court records that should not be included because they have been expunged or sealed or otherwise legally restricted from public access.”

Accordingly, the CFPB issued the Background Screening Opinion to “underscore obligations that the FCRA imposes when background screening reports are provided and used.” Specifically, the opinion affirms that CRAs must comply with their FCRA obligation to “follow reasonable procedures to assure maximum possible accuracy” under section 607(b). Specifically, the Background Screening Opinion provides that:

  • A CRA that reports public record information does not comply with section 607(b) if the CRA does not have reasonable procedures in place to ensure that the CRA:
    • does not report duplicative information or information that has been expunged, sealed, or otherwise legally restricted from public access in a manner that would prevent the user from obtaining it directly from the government entities that maintain the records, and
    • includes any existing disposition information if it reports arrests, criminal charges, eviction proceedings, or other court filings.
  • When CRAs include adverse information in consumer reports, the occurrence of the adverse event starts the running of the reporting period for adverse items under FCRA 605(a)(5), which is not restarted or reopened by the occurrence of subsequent events.
  • A non-conviction disposition (i.e., a dismissal or a similar disposition of criminal charges such as dropped charges or an acquittal) of a criminal charge cannot be reported beyond the 7-year period that begins to run at the time of the charge.

Accordingly, the Background Screening Opinion provides that CRAs “thus must ensure that they do not report adverse information beyond the reporting period” in section 605(a)(5) of the FCRA “and must at all times have reasonable procedures in place to prevent reporting of information that is duplicative or legally restricted from public access and to ensure that any existing disposition information is included if court filings are reported.”

The File Disclosure Opinion

Under the FCRA, CRAs are generally required to disclose to consumers all information in their file upon request. Specifically, section 609(a) of the FCRA provides that, upon request, a CRA must clearly and accurately disclose to the consumer “[a]ll information in the consumer’s file at the time of the request,” including the sources of the information. A “file” is defined as “all of the information on that consumer that is recorded and retained by a [CRA], regardless of how the information is stored.”

The File Disclosure Opinion clarifies that an individual requesting their files:

  • Only needs to make a request for their report and provide proper identification – they do not need to use specific language or industry jargon to be provided their complete file.
  • Must be provided their complete file with clear and accurate information that is presented in a way an average person could understand.
  • Must be provided the information in a format that will assist them in identifying inaccuracies, exercising their rights to dispute any incomplete or inaccurate information, and understanding when they are being impacted by adverse information.
  • Must be provided with the sources of the information in their file, including both the original and any intermediary or vendor source or sources.

What Do You Need to Do?

These advisory opinions follow President Biden’s October, 2023 Executive Order on the Safe, Secure and Trustworthy Development and Use of Artificial Intelligence (the “EO”).  Among other obligations, the EO encourages the CFPB to consider using its authority to use appropriate technologies including AI tools to ensure compliance with FCRA to address discrimination against protected groups.  These advisory opinions serve as a reminder of the importance of ensuring compliance with the FCRA, and that the use of data can lead to discriminatory outcomes under Federal law.

HELOCs On the Rise: Is Your Servicing CMS Ready?

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A&B ABstract:

The Consumer Financial Protection Bureau (“CFPB” or “Bureau”) has moved to clarify its regulatory authority at a time when the economic climate is ripe for a resurgence in HELOC lending. In an amicus brief filed by the CFPB on November 30, 2022 (the “Amicus Brief”), the Bureau acknowledged that its Mortgage Servicing Rules, which, in 2013, amended Regulation X, RESPA’s implementing regulation, and Regulation Z, TILA’s implementing regulation, do not apply to home equity lines of credit (“HELOCs”).  This is consistent with the Bureau’s guidance in the preamble to the CFPB Mortgage Servicing Rules under RESPA, wherein the Bureau recognized that HELOCs have a different risk profile, and are serviced differently, than first-lien mortgage loans, and that many of the rules under Regulation X would be “irrelevant to HELOCs” and “would substantially overlap” with the longstanding protections under TILA and Regulation Z that apply to HELOCs.

During this past refinance boom, consumers refinanced mortgage loans at record rates. Moreover, according to a recent report by the Federal Reserve, consumers are sitting on nearly 30 trillion dollars in home equity.  HELOCs allow consumers the opportunity to extract equity from their homes without losing the low interest rate on their first-lien loan. Generally, a HELOC is a revolving line of credit that is secured by a subordinate mortgage on the borrower’s residence that typically has a draw period of 5 or 10 years.  At the end of the draw period, the outstanding loan payment converts to a repayment period of 5 to 25 years with interest and principal payments required that fully amortize the balance.

Issues to Consider in Servicing HELOCs

Servicing HELOCs raise unique issues given the open-end nature of the loan, the typical second lien position, and the different regulatory requirements.  HELOC servicers will need to ensure their compliance management systems (“CMS”) are robust enough to account for a potential uptick in HELOC lending. Among many other issues, servicers will want to ensure their operations comply with several regulatory requirements, including:

Offsets: In the Amicus Brief, the CFPB argues that HELOCs accessible by a credit card are subject to the provisions of TILA and Regulation Z that prohibit card issuers from using deposit account funds to offset indebtedness arising out of a credit card transaction.

Disclosures: Long before the CFPB Mortgage Servicing Rules, TILA and Regulation Z contained disclosures applicable to HELOCs. As a result, the provisions of the CFPB Mortgage Servicing Rules under Regulation Z governing periodic billing statements, adjustable-rate mortgage (ARM) interest rate adjustment notices, and payment crediting provisions do not apply to HELOCs as these provisions are specifically limited to closed-end consumer credit transactions. However, the payoff statement requirements under Regulation Z are applicable both to HELOCs and closed-end consumer credit transactions secured by a dwelling. In addition to certain account-opening disclosures, a HELOC creditor (or its servicer) must make certain subsequent disclosures to the borrower, either annually (e.g., an annual statement) or upon the occurrence of a specific trigger event, such as the addition of a credit access device, a change in terms or change in billing cycle, or a notice to restrict credit. It is also worth noting that Regulation Z’s mortgage transfer notice (commonly referred to as the Section 404 notice) applicable when a loan is transferred, sold or assigned to a third party, applies to HELOCs. In contrast, RESPA’s servicing transfer notice does not apply to HELOCs.

Periodic Statements: TILA and Regulation Z contain a different set of periodic statement requirements, predating the CFPB Mortgage Servicing Rules, which are applicable to HELOCs. Under TILA, a servicer must comply with the open-end periodic statement requirements. That is true even if the HELOC has an open-end draw period followed by a closed-end repayment period, during which no further draws are permitted. Such statements can be complex given that principal repayment and interest accrual vary based on draws; there will be a conversion to scheduled amortization after the draw period ends; and balloon payments may be required at maturity, resulting in the need for servicing system adjustments.

Billing Error Resolution: Instead of having to comply with the Regulation X requirements for notices of error, HELOCs are subject to Regulation Z’s billing error resolution requirements.

Crediting of Payments: A creditor may credit a payment to the consumer’s account, including a HELOC, as of the date of receipt, except when a delay in crediting does not result in a finance or other charge, or except as otherwise provided in 12 C.F.R. § 1026.10(a).

Restrictions on Servicing Fees: Regulation Z restricts certain new servicing fees that may be imposed, where such fees are not provided for in the contract, because the credit may not, by contract or otherwise, change any term except as provided in 12 C.F.R § 1026.40.  With the CFPB’s increased focus on fees, this provision may be an area of focus for the Bureau and state regulators.

Restriction on Changing the APR: The creditor may not, by contract or otherwise, change the APR of a HELOC unless such change is based on an index that is not under the creditor’s control and such index is available to the general public.  However, this requirement does not prohibit rate changes which are specifically set forth in the agreement, such as stepped-rate plans or preferred-rate provisions.

Terminating, Suspending or Reducing a Line of Credit: TILA and Regulation Z restrict the ability of the creditor to prohibit additional extensions of credit or reduce the credit limit applicable to an agreement under those circumstances set forth in 12 C.F.R § 1026.40.  Similarly, TILA and Regulation Z impose restrictions on when the creditor may terminate and accelerate the loan balance.

Rescission: Similar to closed-end loans, the consumer will have a right of rescission on a HELOC; however, the right extends beyond just the initial account opening. During the servicing of a HELOC, the consumer has a right of rescission whenever (i) credit is extended under the plan, or (ii) the credit limit is increased. But there is no right of rescission when credit extensions are made in accordance with the existing credit limit under the plan. If rescission applies, the notice and procedural requirements set forth in TILA and Regulation Z must be followed.

Default: Loss mitigation and default recovery actions may be limited by the firstien loan. That’s because default or acceleration of the first-lien loan immediately triggers loss mitigation and default recovery to protect the second-lien loan.  The protection of the second-lien loan may involve advancing monthly payments on the first-lien loan.  Foreclosure pursued against the first-lien loan will trigger second lien to participate and monitor for protection and recovery. Even though not applicable to HELOCs, some servicers may consider complying with loss mitigation provisions as guidelines or best practices.

ECOA and FCRA: Terminating, suspending, or reducing the credit limit on a HELOC based on declining property values could raise redlining risk, which is a form of illegal disparate treatment in which a lender provides unequal access to credit or unequal terms of credit because of a prohibited characteristic of the residents of the area in which the credit seeker resides or will reside or in which the residential property to be mortgaged is located. Thus, lenders and servicers should have policies and procedures in place to ensure that actions to reduce, terminate or suspend HELOCs are carried out in a non-discriminatory manner.  Relatedly, the CFPB’s authority under the Dodd-Frank Act to prohibit unfair, deceptive or abusive acts or practices will similarly prohibit certain conduct in connection with the servicing of HELOCs that the CFPB may consider to be harmful to consumers.  It is also important to remember that ECOA requires that a creditor notify an applicant of action taken within 30 days after taking adverse action on an existing account, where the adverse action includes a termination of an account, an unfavorable change in the terms of an account, or a refusal to increase the amount of credit available to an applicant who has made an application for an increase.  Similar to ECOA, FCRA also requires the servicer to provide the consumer with an adverse action notice in certain circumstances.

State Law Considerations: And let’s not forget state law issues. While most of the CFPB’s Mortgage Servicing Rules do not apply to HELOCs, many state provisions may cover HELOCs.  As most HELOCs are subordinate-lien loans, second lien licensing law obligations arise. Also, sourcing, processing and funding draw requests could implicate loan originator and/or money transmitter licensing obligations. Also, at least one state prohibits a licensee from servicing a usurious loan.  For HELOCs, the issue is not only the initial rate but also the adjusted rate (assuming it is an ARM).  There may also be state-specific disclosure obligations, as well as restrictions on product terms (such as balloon payments or lien releases), fees, or credit line access devices, to name a few.

Takeaway

The servicing of HELOCs involve many of the same aspects as servicing first-lien residential mortgage loans.  However, because of the open-end credit line features and the typical second-lien position, there are several unique aspects to servicing HELOCs.  And, because there are no industry standard HELOC agreements, the terms of the HELOC (e.g., the length of draw and amortization periods, interest-only payment features, balloon, credit access, etc.) can vary greatly.  The economic climate is poised for a resurgence in home equity lending.  Now is the time to ensure your CMS is up to the task.

 

CFPB Publishes Fall 2022 Supervisory Highlights

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A&B ABstract:

On November 16, 2022, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) released its Fall 2022 Supervisory Highlights (Issue 28) (the “Supervisory Highlights”), which, among other things, announces the creation of a Repeat Offender Unit and highlights supervisory observations from examinations conducted by the Bureau in the first half of 2022.  Below we discuss some of the key takeaways from the Supervisory Highlights.

The Supervisory Highlights

CFPB’s New Repeat Offender Unit

The CFPB announced the creation a Repeat Offender Unit (“ROU”) to focus its supervision on repeat offenders with the intent to recommend specific corrective actions to stop recidivist behavior. The ROU intends to engage in closer scrutiny of repeat offenders’ compliance with certain orders, along with the following activities:

  • Reviewing and monitoring the activities of repeat offenders;
  • Identifying the root cause of recurring violations;
  • Pursuing and recommending solutions and remedies that hold entities accountable for failing to consistently comply with federal consumer financial law; and
  • Designing a model for review of orders and monitoring that reduces the occurrences of repeat offenders.

The creation of the ROU is not surprising given Director Chopra’s prior statements signaling that the Bureau would focus its efforts on reining in corporate recidivism in the financial services industry. For example, in March 2022, Director Chopra delivered a speech to the University of Pennsylvania Law School, entitled Reining in Repeat Offenders, in which the Director noted that “[a]t the CFPB, we have plans to establish dedicated units in our supervision and enforcement divisions to enhance the detection of repeat offenses and corporate recidivists and to better hold them accountable…[and that] for serial offenders of federal law, the CFPB will be looking at remedies that are more structural in nature, with lower enforcement and monitoring costs…[including] seek[ing] ‘limits on the activities or functions’ of a firm for violations of laws, regulations, and orders.”

Supervisory Observations

The Supervisory Highlights identifies numerous supervisory observations pertaining to consumer reporting, debt collection, mortgage origination, mortgage servicing, and payday lending, among other topics. We discuss several of the Bureau’s notable observations below.

Consumer Reporting

With respect to credit reporting, the CFPB found violations of the Fair Credit Reporting Act and/or Regulation V involving the following issues:

  • Certain nationwide consumer reporting agencies failed to provide reports to the CFPB regarding consumer complaints received from consumers that the Bureau transmits to the credit reporting agency if those complaints are about “incomplete or inaccurate information” that a consumer “appears to have disputed” with the agency;
  • Some furnishers, including third-party debt collection furnishers, continue to: (1) inaccurately report information despite actual knowledge of errors; (2) fail to correct and update furnished information after determining such information is not complete or accurate; and (3) fail to establish and follow reasonable procedures to report the appropriate date of first delinquency on applicable accounts; and
  • Some furnishers also continue to fail to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of furnished information, such as by verifying random samples of furnished information, and fail to conduct reasonable investigations of direct disputes by neglecting to review relevant information and documentation.

Debt Collection

In recent examination activity, the CFPB has identified certain violations of the Fair Debt Collection Practices Act, such as:

  • Examiners found that certain larger participant debt collectors engaged in conduct intended to harass, oppress, or abuse consumers during telephone calls by continuing to engage in conversation even after consumers stated that the communication was causing them to feel annoyed, harassed, or abused.
  • Examiners found that debt collectors engaged in improper communication with third parties about a consumer’s debt when communicating with a person who had a similar or identical name to the consumer.

Mortgage Origination

Regarding mortgage origination, the CFPB found violations of Regulation Z and deceptive acts or practices prohibited by the Consumer Financial Protection Act (“CFPA”), such as:

  • Examiners found that certain entities improperly reduced loan origination compensation based on a term of a transaction by failing to use actual costs and fee amounts that were accurate and known to loan originators at the time initial disclosures were provided to consumers. Subsequently at closing, consumers were provided a lender credit when the actual costs of certain fees exceeded the applicable tolerance thresholds, which led entities to reduce loan originator compensation after loan consummation by the amount provided in order to cure the tolerance violation. Notably, the Bureau found that in each instance, the settlement service had been performed and the loan originator knew the actual costs of those services. The loan originators, however, entered a cost that was completely unrelated to the actual charges that the loan originator knew had been incurred, resulting in information being entered that was not consistent with the best information reasonably available. Thus, examiners found that the unforeseen increase exception permitted by Regulation Z did not apply to these situations.
  • Examiners also identified a waiver provision in a loan security agreement, which was used by certain entities in one state, that was determined to be deceptive in violation of the CFPA. The waiver provided that borrowers who signed the agreement waived their right to initiate or participate in a class action. The language was found to be misleading because a reasonable consumer could understand the provision to waive their right to bring a class action on any claim, including federal claims, in federal court, which is expressly prohibited by Regulation Z.

Mortgage Servicing

The Bureau indicated that its mortgage servicing examinations focused on servicers’ actions as consumers experienced financial distress related to COVID-19. Mortgage servicing findings by the CFPB included the following:

  • Servicers engaged in abusive acts or practices by charging sizable phone payments fees when consumers were unaware of the fees’ existence and, if disclosures were provided, providing general disclosures indicating that consumers “may” incur a fee did not sufficiently inform consumers of the material costs;
  • Servicers engaged in unfair acts or practices by:
    • charging consumers fees during a CARES Act forbearance plan, in violation of the CARES Act’s prohibition on the imposition of “fees, penalties, or interest beyond the amounts scheduled or calculated as if the borrower made all contractual payments on time and in full under the terms of the mortgage contract”; and
    • failing to timely honor requests for forbearance from consumers;
  • Servicers engaged in deceptive acts or practices by misrepresenting that certain payment amounts were sufficient for consumers to accept a deferral offer at the end of their forbearance period, when in fact, they were not due to updated escrow payments; and
  • Servicers violated Regulation X by failing to maintain policies and procedures reasonably designed to:
    • inform consumers of all available loss mitigation options, which resulted in some consumers not receiving information about options, such as deferral, when exiting forbearances; and
    • properly evaluate consumers for all available loss mitigation options, resulting in improper denial of deferral options.

Payday Lending

Regarding payday lending, examiners found that some lenders failed to maintain records of call recordings that were necessary to demonstrate compliance with certain conduct provisions in consent orders, e.g., prohibiting certain misrepresentations. The consent order provisions required creation and retention of all documents and records necessary to demonstrate full compliance with all provisions of the consent orders. The Bureau determined that the failure to maintain the call recordings violated the consent orders and federal consumer financial law.

Although this finding was specific to payday lenders, it may have broader implications for entities subject to an active CFPB consent order, as the provision relied upon by the Bureau in making its finding is routinely found in CFPB orders.

Takeaway

The compliance issues noted in the Supervisory Highlights emphasize the importance of maintaining a strong and continually updated compliance management system. Entities should review the Bureau’s supervisory observations against their current policies, procedures, and processes to ensure consistency with the Bureau’s compliance expectations, and to determine whether enhancements and/or proactive consumer remediation may be appropriate. Finally, entities subject to active CFPB consent orders should pay particular attention to whether their current policies, procedures, and processes are sufficient to ensure compliance with applicable law and the terms of the consent order, in order to mitigate against the risk of being deemed a repeat offender and potentially subject to increased penalties or broader structural remedies such as “seek[ing] ‘limits on the activities or functions’ of a firm for violations of laws, regulations, and orders.”

Alston & Bird Adds Consumer Finance Partner Aldys London in Washington, D.C.

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Alston & Bird has strengthened and expanded its capabilities for advising companies on state and federal consumer finance regulatory compliance issues with the addition of partner Aldys London in the firm’s Washington, D.C. office. Her clients include mortgage companies, consumer finance and FinTech companies, secondary market investors, real estate companies, home builders, insurance companies, banks, and other financial institutions and settlement service providers.

“It’s a pleasure to welcome Aldys, who brings deep experience and a sterling reputation for counseling consumer financial service entities as they navigate complex regulatory issues, including licensing, the intersection of state and federal regulatory compliance, and key approvals for transactions,” said Nanci Weissgold, Alston & Bird partner and co-chair of the firm’s Financial Services & Products Group. “With our shared emphasis on collaboration and excellent service, we are confident that she will successfully draw on our firm’s vast resources and expertise to benefit her clients.”

London provides advice on state licensing for mortgage lenders and related service providers, mortgage brokers, FinTech companies, lead generators, servicers, debt collectors, and investors. She is well versed in federal registration and licensing requirements imposed by the SAFE Act, as well as state laws and regulations concerning fees, disclosures, loan documentation, interest rates, privacy, advertising, data breach, and telemarketing.  Her practice also covers seeking and maintaining approvals from state and federal agencies and GSEs.  She is adept at federal laws governing real estate mortgage transactions, including preemption, privacy, fair lending and consumer protection.

In addition, London assists a variety of consumer financial services companies in obtaining regulatory approvals for complex acquisitions, mergers, and asset transfer transactions. She performs due diligence reviews for proposed acquisitions and IPOs, reviews and prepares policies and procedures, conducts regulatory compliance audits of financial institutions, and assists with structuring and developing compliance and training programs. She also assists clients with responses to regulatory audits and investigations by state and federal regulators.

“Clients rely on Aldys’ sound counsel because of her technical rigor and thorough understanding of the consumer finance market,” said Stephen Ornstein, Alston & Bird partner and co-leader of the firm’s Consumer Financial Services Team. “Her legal skills, combined with her excellent business sense and ability to develop strong relationships, make her a valuable asset to our firm and our clients.”

Alston & Bird’s Consumer Financial Services Team focuses on the regulation of consumer credit and real estate, with a broad emphasis on origination, servicing, and secondary mortgage market transactions. This team addresses the compliance challenges of major Wall Street financial institutions, federal- and state-chartered depository institutions, hedge funds, private equity funds, national mortgage lenders and servicers, mortgage insurers, due diligence companies, ancillary service providers, and others.

FTC Seeks Comment on Proposed Changes to FCRA Rules for Motor Vehicle Dealers

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A&B ABstract: The FTC is seeking public comment on proposed changes to five FCRA rules aimed at clarifying that these rules, as promulgated by the FTC, apply only to motor vehicle dealers, as equivalent rules promulgated by the CFPB will apply to other entities.

The Federal Trade Commission (“FTC”) has announced it is seeking public comment on proposed changes to existing rules implementing parts of the Fair Credit Reporting Act (“FCRA”). According to the FTC, the proposed changes would clarify that five FCRA rules promulgated by the FTC apply only to motor vehicle dealers.

This clarification is needed because after the Dodd-Frank Act transferred to the Consumer Financial Protection Bureau (“CFPB”) the FTC’s rulemaking authority under certain portions of the FCRA, the FTC rescinded several of its FCRA rules, which had been replaced by rules issued by the CFPB. However, the FTC retained rulemaking authority for other rules to the extent the rules apply to motor vehicle dealers (as defined in the Dodd-Frank Act) that are predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both.

In particular, the rule changes (each of which are addressed in separate Notices of Proposed Rule Making) would apply to the following five rules:

  1. The Address Discrepancy Rule (16 CFR Part 641), which outlines the obligations of users of consumer reports when they receive a notice of address discrepancy from a nationwide consumer reporting agency (“CRA”);
  2. The Affiliate Marketing Rule (16 CFR Part 680), which gives consumers the right to restrict a person from using certain information obtained from an affiliate to make solicitations to the consumer;
  3. The Furnisher Rule (16 CFR Part 660), which requires entities that furnish information to CRAs to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the information relating to consumers provided to a CRA;
  4. The Pre-screen Opt-Out Notice Rule (16 CFR Parts 642 and 698), which outlines requirements for those who use consumer report information to make unsolicited credit or insurance offers to consumers; and
  5. The Risk-Based Pricing Rule (16 CFR Part 640), which requires those who use information from a consumer report to offer less favorable terms to consumers to provide them with a notice about the use of such data.

Each of these FTC rules, as revised, will be limited in scope to apply only in relation to motor vehicle dealers, subject to certain exceptions, and those persons and entities originally covered by these rules who are not motor vehicle dealers remain subject to similar rulemakings promulgated by the CFPB. For example, with regard to the Pre-screen Opt-Out Notice Rule, the proposed amendment would replace the general term “person” with the term “motor vehicle dealers,” as defined, thus narrowing the scope of the rule to entities that are “predominantly engaged in the sale and servicing of motor vehicles, excluding those dealers that directly extend credit to consumers and do not routinely assign the extensions of credit to an unaffiliated third party.” The proposed rule amendments also reinstate certain model notices that are otherwise identical to the CFPB’s model notices applicable to certain entities that are not motor vehicle dealers.

Additionally, the FTC is seeking comment on the effectiveness of these five rules including the following considerations:

  • whether there is a continuing need for specific provisions of each rule;
  • the benefits each rule has provided to consumers;
  • what modifications, if any, should be made to each rule to benefit consumers and businesses; and
  • what modifications, if any, should be made to each rule to account for changes in relevant technology or economic conditions.

Takeaways: These proposed amendments to the relevant FCRA rules will serve to clarify the distinction between the rules applicable to motor vehicle dealers – promulgated by the FTC ­– and rules applicable to other entities, which have been issued by the CFPB.  Comments on these issues must be submitted to the FTC within 75 days from the date the notices of proposed rulemaking are published in the Federal Register. Instructions on how to file comments will be included in the notices published in the Federal Register.