March 27 (Reuters) – The new Consumer Financial Protection Bureau said it planned to play an active role in court cases involving disputes over consumer lending laws.
The agency, which opened its doors in July, is charged with policing markets for financial products such as credit cards and mortgages.
On Tuesday, the agency said it had filed a friend-of-the court brief in a truth in lending law case before the Denver-based U.S. 10th Circuit Court of Appeals.
“We are committed to making sure that borrowers can exercise their rights to the full extent allowed under this law,” CFPB Director Richard Cordray said in a release.
The agency said it planned to file these types of amicus briefs whenever it feels its views can help a court.
“Amicus briefs are an important way for the CFPB to ensure that the statutes it oversees are correctly and consistently interpreted by the courts, even in cases in which the CFPB is not itself a named party,” the bureau said in a release.
The bureau was created by the 2010 Dodd-Frank financial oversight law and has been a source of tension between the banking industry and the administration of President Barack Obama and other supporters of the new watchdog.
The purpose of the bureau is to make sure lending terms are clear and borrowers are not being fleeced.
The lending industry has said, however, that a too-heavy regulatory hand will limit what products can be offered and lead to higher borrowing costs.
In the brief filed this week, the bureau takes aim at past rulings involving the truth in lending law, saying some courts have misinterpreted the statute to the detriment of borrowers.
The case in question — Rosenfield v. HSBC Bank, USA — revolves around when a lender can cancel certain types of home loans, such as home equity lines of credit and second mortgages.
The law in question allows a borrower to cancel, or rescind, these loans within three days of signing to provide time to make sure they fully understand the terms of the agreement. That period is extended to three years if the borrower does not get proper paperwork.
The law does not apply to first mortgages.
The court is considering whether a borrower must also file a lawsuit against the lender within the three-year time period in order to cancel the loan, a move the bureau says is not required despite earlier rulings.
“These courts have erroneously dismissed rescission lawsuits as untimely, leaving consumers unable to litigate their claims on their merits,” the bureau said in its brief.
CFPB said it was not taking any position on the specific allegations made by the borrower in the case and is weighing in only on the question of what is allowed under the law.
By Dave Clarke