CFPB Finalizes Rule Defining Larger Participants Of The International Money Transfer Market

On September 23, the CFPB issued a Final Rule that defines which nonbank covered persons are designated “larger participants” for purposes of the international money transfer market. In particular, this rule, which finalizes a January 2014 proposed rule, defines an entity as a larger participant if it has at least one million aggregate annual international money transfers. The final rule will be effective December 1, 2014. In addition, the Final Rule defines an international money transfer market to cover certain electronic transfers of funds sent by nonbanks that are international money transfer providers. These transfers must be requested by a sender in a State to be sent to a designated recipient in a foreign country. While the Final Rule’s definitions are modeled in part on the definitions of “remittance transfer” and related terms in the Electronic Fund Transfer Act (EFTA) and its implementing regulation, Regulation E, there are some substantive differences. For example, transfers of $15 or less can be ‘‘international money transfers’’ but not “remittance transfers.” The CFPB provides a procedure for a person to dispute whether it qualifies as a larger participant in the international money transfer market and also asserts that there are only approximately 10 potential larger participants that qualify as small businesses.

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CFPB Updates Reverse Mortgage Guide

On September 24, the CFPB published an updated reverse mortgage guide on its blog to account for HUD’s recent changes to reverse mortgage programs. The blog post highlights new limits to lump sum, first-year payouts under reverse mortgages, as well as HUD’s new protections for non-borrowing spouses. For example, non-borrowing eligible spouses no longer need to choose between paying off the reverse mortgage or moving out when their borrowing spouse dies; instead, depending on the circumstances, they may be able to stay in the home. Consistent with its first reverse mortgage guide, issued in July 2012, the Bureau’s new guide strongly encourages consumers to consider all options before obtaining a reverse mortgage and points to HUD-approved housing counselors as their best resource.

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FFIEC and CFPB Announce Updates To Web-Based HMDA Database And Tools

On September 22, the FFIEC announced an update to its online database for analyzing HMDA data and the CFPB announced updates to the agency’s corresponding HMDA tools. Originally launched in September 2013, the tool focuses on the number of mortgage applications and originations, in addition to loan purposes and loan types, and allows the public to see nationwide summaries or employ interactive features to isolate the information for metropolitan areas. The updated database includes 2013 data of approximately 17 million records from 7,190 financial institutions. In both Director Cordray’s 2013 remarks and blog post, the CFPB appeared to indicate that HMDA data may be used to identify institutions that may be discriminating against protected classes of borrowers. On Monday, the Bureau encouraged the public to view the introductory video, maps and charts, data, and share their ideas and findings through its Twitter account.

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GAO Report On CFPB Data Collection And Privacy Practices Finds Room For Improvement

On September 22, the GAO issued a report regarding the privacy and data security implications of the CFPB’s data collection practices. The report, performed in part based on a request by Senator Crapo, notes the CFPB’s data includes three one-time collections of data that contain information that directly identifies individuals: arbitration case records, deposit account data regarding deposit advance products, and borrower-level activity regarding storefront payday loans. The report highlights several areas for improvement: (i) development of written procedures and documentation regarding data intake and information security risk assessments; (ii) implementation of privacy control steps and information security practices; and (iii) Paperwork Reduction Act compliance regarding credit card data. In a comment appended to the report, the CFPB outlines the reasons for its data collection efforts and concurs with the GAO’s recommendations addressed to the CFPB.

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SEC Announces Largest Whistle-Blower Award In Program’s History.

On September 22, the SEC announced that it expects to award more than $30 million to a whistleblower who provided key information in connection with an ongoing fraud enforcement action. The award will be the largest to date for the SEC’s whistleblower program and the fourth award to a whistleblower living overseas. The program offers rewards to whistleblowers who provide high-quality, original information that results in an SEC enforcement action with sanctions exceeding $1 million. Awards are funded by an investor protection fund established by Congress and financed by sanctions imposed on securities law violators. Awards can range from ten to thirty percent of the money collected from the enforcement action.

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Governor Powell Speaks At The Community Banking Research And Policy Conference

On September 23, Federal Reserve Governor Jerome Powell spoke at the second annual Community Banking Research and Policy Conference, co-sponsored by the Federal Reserve and Conference of State Bank Supervisors. Governor Powell commented on the decline in the number of community banks over the past three decades, stating those remaining community banks have “struggled to survive” in the face of significant challenges, including the burden of regulatory compliance. The research presented at the conference focused on the following four main issues: (i) bank formation, behavior, and performance; (ii) the effects specific government policy has on community bank behavior; (iii) the effects government policy has on the profitability and viability of community banks; and (iv) how regulatory policy affects the structure of the U.S. banking system and the viability of community banks.

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Ginnie Mae Publishes Position Paper Describing Response To Changes In Mortgage Lending Market

This month, Ginnie Mae published a position paper titled “An Era of Transformation,” which describes changes in the mortgage lending market that stem from the 2007-08 financial crisis, and explains how Ginnie Mae intends to react to those changes. The key change in the mortgage lending market that the paper focuses on is the “rapid, substantial increase in the presence of non-depository institutions” in the face of the retreat of commercial banks from mortgage lending and servicing. In the face of this trend, Ginnie Mae intends to make a number of changes that issuers should take note of, including modifying its MBS program to accommodate the larger role of non-depository lenders; upgrading its abilities to assess the financial and operating capacity of its issuers; and taking steps to ensure liquidity in the market for MSRs. Ginnie Mae also intends to actively police that issuers are in compliance with program requirements, and when issuers fail, to move MSR portfolios to other approved issuers rather than seize and manage the assets itself.

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Attorney General Eric Holder Announces Plan To Depart DOJ

On September 25, Attorney General Holder announced his plan to leave the DOJ. Holder returned to the DOJ in February of 2009 as the Attorney General, after having previously worked as a corruption prosecutor and as deputy attorney general during the Clinton administration. Holder intends to remain at the DOJ until the confirmation of his successor.

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FTC Announces Settlements Against Debt Collection Practice And Its Principles

On September 23, the Federal Trade Commission released a statement announcing the settlement of claims and a default judgment against a debt collection operation based out of Atlanta and Cleveland and its principles, barring them from debt collection activities and subjecting the defendants to a judgment of over $9.3 million. According to the release, the defendants violated FDCPA by threatening consumers with legal action unless they rendered payment on debts that the consumer, in many cases, did not actually owe. The defendants were alleged to use fictitious business names that implied affiliation with a law firm to harass consumers, through robocalls and voicemails, to make payments on these non-existent debts.

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SEC Finalizes Rule On Asset-Backed Securities

On September 24, the SEC issued a final rule adopting significant revisions to regulations governing the disclosure, reporting, registration and the offering process for asset-backed securities (“ABS”). The revised rules aim to increase investor protection in the ABS market by making it easier for investors to review and analyze the credit risk of ABS, and limit reliance on the ratings provided by credit agencies. The rule mandates that issuers provide standardized asset-level disclosures for ABS backed by residential mortgages, commercial mortgages, auto loans, auto leases, and debt securities at the time of the offering and on an ongoing basis. The rule also modifies asset-level disclosures for RMBS and securities backed by auto loans and leases in order to reduce potential privacy risks to obligors. The rule requires ABS issuers using a shelf registration statement to file a preliminary prospectus at least three business days before the first sale of securities in the offering. Further, the regulations revise the eligibility requirements for ABS shelf offerings and require additional changes to the procedures and forms related to shelf offerings. Specifically, the rules adopt four transaction requirements for ABS shelf eligibility (certification by the CEO, asset review provision, dispute resolution provision, and disclosure of investors’ requests to communicate) and remove the prior investment-grade rating requirement in order to reduce undue reliance on credit ratings. The rule will become effective on November 24, 2014.

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Oregon Amends Mortgage Licensing Rules

On September 16, the Oregon Department of Consumer and Business Services Division of Finance and Corporate Securities adopted a rule amending several sections of the Oregon Administrative Rules related to the licensing of mortgage loan originators. The amendment makes minor changes to sections related to (i) definitions; (ii) the license application process; (iii) criminal records check requirements; (iv) significant event and financial reporting requirements; (v) bonding calculations; and (vi) retention of advertising samples. In addition, the rulemaking added a new section that designates the filing of a report containing false or incorrect information as a practice subject to denial, suspension, or revocation of licensure. The amendment also clarifies the manner in which deposits into or withdrawals from a trust account of borrower funds must be documented. Finally, the amendment adjusts the amount of pre-licensing and continuing education required to obtain and maintain licensure. The amendments become effective on January 1, 2015.

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Eastern District Court Of Texas Enjoins Bitcoin Investment Scheme And Orders Founder To Pay Civil Penalty

On September 18, the U.S. District Court for the Eastern District of Texas held that the defendant’s bitcoin investment program was a Ponzi scheme, and enjoined the founder and the investment program from violating Section 10(b) of the Securities Exchange Act of 1934 and Sections 5 and 17(a) of the Securities Act of 1933. S.E.C. v. Shavers, No. 4:13-CV-416 (E.D. Tex. Sep. 18, 2014). The court ruled that the founder knowingly and intentionally operated the bitcoin investment program as a sham and Ponzi scheme by repeatedly making misrepresentations, both to investors and potential investors alike, concerning: (i) the use of their bitcoins; (ii) how he planned to generate the promised returns; and (iii) the safety of the investments. The founder used new bitcoins received from investors to make payments on outstanding bitcoin investments, and diverted investors’ bitcoins for his own personal use. The court granted Plaintiff’s uncontested motion for summary judgment or, in the alternative, for default judgment, and, in addition to the injunctions, ordered Defendants jointly and severally liable for disgorgement of approximately $40 million in profits, and ordered each Defendant to pay civil penalties in the amount of $150,000.

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Federal Appeals Court Upholds District Court Order Barring Telemarketers From Selling Mortgage And Debt Relief Programs

This month, the U.S. Court of Appeals for the Sixth Circuit issued a decision to uphold the District Court of Northern Ohio’s earlier ruling prohibiting the defendants from selling false mortgage assistance and debt relief programs through a telemarketing scheme. F.T.C. v. E.M.A. Nationwide, Inc., No. 1:12-CV-2394 (N.D. Ohio Aug. 27, 2013). Since at least mid-2010, the defendants were allegedly deceiving consumers by promising that the programs would “help them pay, reduce, or restructure their mortgage and other debts.” According to the FTC’s press release, in September 2012, the defendants were charged with violations of: (i) the FTC Act; (ii) the Commission’s Telemarketing Sales Rule; and (iii) the Mortgage Assistance Relief Services Rule. The court ordered the defendants to jointly pay restitution of more than $5.7 million to the consumers affected by the fraudulent practices.

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CFPB And Federal Reserve To Co-Host Third TILA-RESPA Disclosure Webinar

On October 1, the CFPB and the Federal Reserve will co-host a webinar on the TILA-RESPA Integrated Disclosures rule. By consolidating the existing mortgage disclosures required under TILA and RESPA, the integrated rule is intended to “make it easier for consumers to understand and locate key information,” while also integrating “the substantive and procedural requirements for providing these disclosures to consumers.” The webinar will address (i) questions regarding rule interpretation and implementation challenges that creditors, mortgage brokers, and others have raised to the Bureau; (ii) issues regarding how to complete the Loan Estimate; and (iii) portions of the Closing Disclosure. BuckleySandler provided a transcript of the second TILA-RESPA Disclosure webinar, which the CFPB hosted on August 26.

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CFPB To Host Forum On Access To Checking Accounts

On October 8, the CFPB will host a forum to discuss checking account screening policies and practices and how they will affect consumers. Specifically, the event will focus on how the screening system works and its potential to “improve the availability of information and products for consumers.” Director Cordray will speak at the event, in addition to consumer groups, federal and local government officials, and industry representatives.

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