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CFPB Weekly Update: A Referral from the CFPB Leads to a Criminal Indictment and the CFPB (Again) Goes After Financial Advisors

May 10, 2013

1.         As many of you already know, the CFPB can refer criminal cases to the appropriate federal, state or local agency arising out of information that the CFPB learns during an examination or investigation.  Earlier this week, the United States Attorney for the Southern District of New York announced that, in the first criminal referral from the CFPB leading to an indictment, it had indicted Mission Settlement Agency and some of its principals.  The indictment alleges that Mission and the principals committed mail and wire fraud against more than 1,200 people across the United States by representing to the customers that Mission could help them reduce their credit card and bank debts.  The United States Attorney alleges that the customers paid Mission for these services, but Mission failed to provide any of the promised assistance to the customers.  In a press conference, Director Cordray stated that the CFPB has made other criminal referrals that the federal and state governments are investigating and we can expect to see more indictments this year.  We will certainly keep you updated.
2.         The CFPB is continuing to make a not so subtle move towards trying to regulate the activities of financial advisors.  In our April 19, 2013 weekly update, we informed you that the CFPB issued a white paper concerning the manner in which financial advisors market securities products to older persons.  Yesterday, the CFPB hosted a twitter chat about older persons, their money and “what older Americans can do to find out if their financial advisers are really experts in their needs.”  This twitter chat would not be a big deal of the CFPB was limiting its white paper and twitter discussions to bank accounts, mortgages, loans and other areas within the CFPB’s jurisdiction.  But the CFPB is not limiting the discussion to areas within its jurisdiction.  Rather, the CFPB is entering territories that the SEC, FINRA and insurance regulators regulate and enforce.  The CFPA specifically states that the CFPB cannot regulate persons and activities that are regulated by the SEC or amount to insurance.  Insurance companies and broker dealers really need to pay attention to the CFPB—especially the insurers and broker dealers that have parent companies, subsidiaries or sister companies within the CFPB’s jurisdiction (like a large bank) because the CFPB will use the cross-selling efforts between the related companies to justify jurisdiction over an insurance company or broker dealer.

That is all for this week.  Do not forget that all of our prior weekly updates are on our website, and my twitter handle is @cfpbattorney.  Have a good weekend!

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