We’ve heard about the bailouts, the role big-name banks played in the credit market collapse in 2008, the business litigation and contract disputes that followed and how people and businesses have called for fair lending practices amid an economy that needs to be stabilized.

However, big-name banks are not the only ones who will be regulated in the wake of the credit market collapse. Many smaller businesses in Louisiana and across the country could now be involved in a new type of legal action involving a new government agency.

The new government agency, the Consumer Financial Protection Bureau, has recently re-focused efforts on regulating lending practices. The agency also intends to regulate markets for financial products and services (including small business lending and mortgages) by extending its reach to entities beyond U.S. mega banks.

The CFPB is an agency that has been given Congressional rulemaking and rule-enforcement authority in the consumer financial arena. The newest rules have expanded the CFPB’s efforts by focusing on those other, non-bank players in the market for financial products and services, including:

  • Debt collection companies
  • Credit reporting agencies
  • Mortgage brokers
  • Student loan providers
  • Payday lenders

Regulatory agencies like the CFPB typically start enforcement actions for one of its rules by receiving consumer complaints. Once the agency receives a complaint, it can conduct an investigation. If it finds enough evidence that a business has violated a rule, the agency can proceed with an enforcement action. It can also bring lawsuits under current laws addressing unfair, deceptive and abusive lending practices.

The start of an enforcement action against a company is similar to the filing of a lawsuit in court. The company has the right to be notified of the nature of the enforcement action and the information the agency received prior to starting the enforcement action. The company also has the right to be heard. Just like a lawsuit, businesses can help protect themselves from CFPB enforcement actions by having experienced legal representation in any matters brought by the agency.

Source: Bloomberg Businessweek, “Cordray Appointment Activates Full Powers of New Consumer Bureau,” Carter Dougherty, Jan. 6, 2012