By Jon Hill

Law360 (March 31, 2021, 8:50 PM EDT) -- The Consumer Financial Protection Bureau is taking back seven policy statements from last spring that granted temporary regulatory relief to financial services providers in light of the coronavirus pandemic, measures the agency's acting director said Wednesday are "no longer prudent."

The policy statements, which were issued under former CFPB Director Kathleen Kraninger, a Trump appointee, provided leeway on consumer credit report dispute investigation deadlines, suspended certain reporting requirements for mortgage lenders and credit card issuers, and offered accommodations tied to agency exams and enforcement, among other things.

But the CFPB said it is revoking those statements effective April 1 and "intends to exercise the full scope of the supervisory and enforcement authority provided under the Dodd-Frank Act," the law that created the agency.

"Because many financial institutions have developed more robust remote capabilities and demonstrated improved operations, it is no longer prudent to maintain these flexibilities," Dave Uejio, the CFPB's acting director, said in a statement. "The CFPB's first priority, today and always, is protecting consumers from harm."

The seven policy statements being rescinded were issued between late March and early June last year when the rapidly unfolding COVID-19 crisis threw millions of U.S. consumers out of work and triggered a wave of stay-at-home orders and other public health restrictions to contain the virus.

By cutting financial institutions some slack with these policy statements, the CFPB was acknowledging the staffing and operational difficulties facing companies during this period of turmoil and hoped to give firms more bandwidth to prioritize their customers.

But Democrats and consumer advocates have since pushed for much of this regulatory relief to be revoked, arguing it is no longer necessary and risks leaving struggling families exposed at a time when it's critical for the industry to be on its best behavior.

Uejio, who was tapped by President Joe Biden to succeed Kraninger on an interim basis after her January resignation, picked up on some of these concerns in his statement, which noted that the COVID-19 crisis is now "over a year" old.

"The virus has affected industry as well as consumers, but individuals and families have been hardest hit by the pandemic's health and economic impacts," Uejio said. "Providing regulatory flexibility to companies should not come at the expense of consumers."

Among the statements being scrapped is the CFPB's March 2020 guidance allowing mortgage lenders to skip their quarterly data submissions under the Home Mortgage Disclosure Act.

The CFPB said Wednesday it expects these quarterly filings to resume with data from the first quarter of 2021, which will be due by May 31. As for HMDA data from last year, the agency said it still doesn't plan to take supervisory or enforcement action against anyone for not having made the requisite quarterly filing at the time.

But while the agency is also retracting a separate March 2020 statement that advised CFPB supervision and enforcement "will be sensitive to good-faith efforts demonstrably designed to assist consumers," the CFPB said Wednesday it "continues to encourage institutions to meet the financial services needs of their customers affected by the COVID-19 pandemic."

The agency also said it will leave in place its April 2020 pledge not to penalize companies for "furnish[ing] information to consumer reporting agencies that accurately reflects the payment relief measures they are employing."

That pledge came from a larger policy statement on consumer credit reporting that is otherwise being rescinded, however, including a section that consumer groups have campaigned against where the CFPB said it wouldn't hold companies to strict statutory deadlines for investigating potential errors flagged by consumers on their credit reports.

Consumer advocates cheered the CFPB's move to reverse course on this relief and the other policy statements, with the National Consumer Law Center's associate director, Lauren Saunders, saying it "sends an unequivocal message" that the agency is "back in the business of putting consumers first."

"Using the excuse of the coronavirus crisis to give industry unnecessary flexibility about whether to comply with consumer protection laws is inconsistent with its core consumer protection mission," Saunders said in a statement on Wednesday.

At the same time, Saunders' colleague Alys Cohen, staff attorney at the NCLC, urged the CFPB to go even further and pull out of an April 2020 interagency statement that told mortgage servicers they could let certain regulatory deadlines slip for reaching out to delinquent borrowers and sending hardship program-related notices.

The CFPB lifted those deadlines "without providing similar flexibility for homeowners struggling to avoid foreclosure," Cohen said in a statement Wednesday. "The bureau should rescind this one-sided policy to help prevent avoidable foreclosures, especially in communities of color."

Although the CFPB's Wednesday announcement focused mostly on pandemic-related policy statements, the agency also said it is doing away with so-called supervisory recommendations, an examiner communication tool introduced in 2018 as a lower-stakes channel for giving formal feedback to companies about potential compliance weaknesses.

The CFPB explained in a new bulletin that its examiners will be using only the more familiar "matters requiring attention" for these purposes going forward, describing them as a more effective tool for communicating supervisory expectations.

"While MRAs are not legally enforceable, the bureau expects supervised entities to correct the matters identified in MRAs promptly and effectively," the bulletin said.

--Editing by Janice Carter Brown.

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