#registry

Last week, we provided clients with an in-depth analysis of the CFPB’s latest nonbank registry as well as a hard look at its impact on mortgage securitization.  Any nonbank subject to the CFPB will find its legal arsenal much depleted by the registry’s requirements, a point already well understood by opponents.  Far less noticed but of still greater consequence to all consumer-finance companies is another implication of the Bureaus actions here and in another recent registry proposal:  even where the CFPB has little to no regulatory authority, it will deploy its formidable ability to gain public attention to make unbearable the reputational risk of any practice it abhors.

Justice Brandeis is often quoted as saying that sunshine is the most powerful disinfectant and Director Chopra clearly plans to cast companies under a scorching sun.  That is works was demonstrated by his decision to detail the ways in which he believes overdraft fees support predatory earnings at considerable cost to vulnerable consumers.  That most banks charged overdraft fees in strict compliance with current rules made enforcement action at best a challenging route to reform.  Rewriting the rules would have gotten the Bureau where it wanted to go, but only over at least a year of wrangling.  Set out in the merciless sun by Mr. Chopra and Congressional Democrats, many banks decided that the political and reputational risk of continuing overdraft fees was just too high.

Overdraft reform thus proved easy to say and then to do.  So it is …