CFPB Eases Oversight as TransUnion Consent Order Ends Early

The Consumer Financial Protection Bureau has finalized its consent order with TransUnion after nearly three years. It indicates a transition toward less strict supervision than in the past.

Acting Director Russell Vought signed this consent order on Oct. 31. First, he verified that TransUnion has settled by forking over a $5 million fine and $3 million in restitution.

The 2023 consent order was the result of violations of the Fair Credit Reporting Act as well as the Consumer Financial Protection Bureau’s UDAAP prohibition on unfair, deceptive, and abusive practices.

Regulators say these firms didn’t properly request or lift credit freezes. The agreement was supposed to last for five years. Now, it is reduced by nearly half.

This is by no means the first time the CFPB has taken this type of action, having:

• Waived Bank of America’s 2023 mortgage data consent order early
• Settled Citibank’s 2023 discrimination order early
• Waived Trustmark Bank’s 2024 order related to VyStar Credit Union 

Since February, it has dismissed nearly four dozen enforcement actions and stopped nonbank supervision. In addition, it proposed trimming nearly 90% of its staff compared to what it did under the former administration. That was when it was known for aggressive supervision.

Regulator Is in Retreat

Non-enforcement can lower the cost of compliance — in the short term. Early terminations can represent quick remediation. But it can have a negative long-term effect on lenders who must rely on enforcement.

Consumer activists say that fewer people are scrutinizing FAIR credit practices. Enforcement fatigue can occur. This is when authorities withdraw their attention before all affected consumers have been made whole.

Without audits, problems such as incompletely refunded amounts might not be detected. This is particularly true for nonprime consumers. They rely on redress programs for correcting credit reporting disputes.

The CFPB says it accepted early exits only after remediation and audits. The standards now appear to be more lenient. Vought prioritizes actual payment amounts and system updates over long-term compliance. 

What It Means for Subprime Lenders

This lenient policy will decrease the cost of supervision. But it will create uncertainty in complying with regulations.

The bureau’s abdication of responsibility will not last forever. Today’s developments could have a quick impact on subprime lenders regarding prices, terms, and risk. These developments taken together signal a whole new realm of uncertainty with respect to issues of compliance.

An early exit can amount to cost savings. But responsibility on both sides will be blurred.

Bottom Line

The CFPB’s early exit from TransUnion’s consent order reflects a broad rollback. The lighter touch decreases short-term pressure. But it increases longer-term questions about consumer protection and enforcement.