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.
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.
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.
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.
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.
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.
On September 18, the Senate passedby voice vote H.R. 5062, a bipartisan bill that will amend the Consumer Financial Protection Act with respect to the supervision of nondepository institutions to require the CFPB to coordinate its supervisory activities with state regulatory agencies that license, supervise, or examine the offering of consumer financial products or services. The bill declares that the sharing of information with such state entities does not waive any privilege claimed by nondepository institutions under federal or state law regarding such information as to any person or entity other than the CFPB or the state agency. The bill was passed by the U.S. Housein late July, and will take effect on the same day it is signed by President Obama and becomes law.
On September 16, the CFPB filed a civil action against a for-profit college for allegedly engaging in an “illegal predatory lending scheme.” Specifically, the CFPB alleges that the school engaged in unfair and deceptive practices by: (i) inducing enrollment through false and misleading representations about job placement and career opportunities; (ii) inflating tuition to require students to obtain private loans in addition to Title IV aid; (iii) persuading students to incur significant debt through private loans that had substantially high interest rates (as compared to federal loans) and required repayment while students attended school; (iv) misleading students to believe that the school did not have an interest in the private loans offered; and (v) knowing its students were likely to default on the private loans made. In addition, the CFPB alleges that the school violated the FDCPA by taking aggressive and unfair action, including pulling students out of class, blocking computer access, preventing class registration, and withholding participation in graduation, to collect payments on the private loans as soon as they became past due. The CFPB is seeking to permanently enjoin the school from engaging in the alleged activity, restitution and damages to consumers, disgorgement, rescission of all private loans originated since July 21, 2011, civil money penalties, and costs and other monetary relief. Read more…
On September 12, the CFPB finalized a rule that allows it to supervise larger participants in the international money transfer market. In particular, this rule, which finalizes the proposed rule the CFPB issued in January 2014, allows the CFPB to supervise nonbank international money transfer providers that provide more than $1 million in international transfers annually, for compliance with the Remittance Rule under the Electronic Fund Transfer Act. The final rule will be effective December 1, 2014.
The CFPB will seek to ensure that these providers comply with a number of specific consumer-protection provisions, including the following:
- Disclosures: The CFPB will examine providers to determine that consumers receive the Remittance Rule-required disclosures in English as well as in any other language the provider uses to advertise, solicit, or market its services, or in any language in which the transaction was conducted. These disclosures inform consumers of the exchange rate, fees, the amount of money that will be delivered abroad, and the date the funds will be available.
- Option to Cancel: The CFPB will examine transfer providers to ensure that consumers receive at least thirty minutes to cancel the transfer if it has not yet been received, and that consumers receive a refund regardless of the reason for the cancellation.
- Correction of Errors: The CFPB will insist that remittance transfer providers properly investigate certain errors, and, if a consumer reports an error within 180 days, the CFPB will examine providers to determine that they have investigated and corrected certain types of errors. The CFPB will also examine providers to ensure that they are held accountable for the actions of any agents they use.
The CFPB used the authority granted to it in the Dodd-Frank Act to supervise “larger participants” in consumer financial markets, and this is the Bureau’s fourth larger participant rule. The CFPB indicates that it will use the same examination procedures for nonbank providers as it does for bank remittance providers, and the CFPB intends to coordinate with state examiners in its supervision.
The CFPB estimates that nonbank international money transfer providers transfer $50 billion each year, and 150 million individual international money transactions occur each year through these institutions, with seven million U.S. households transferring funds abroad each year through a nonbank.
On September 17, the CFPB released new information about its plans to supervise and enforce auto finance companies’ compliance with consumer financial laws, including fair lending laws. As it indicated it would earlier this year, the CFPB released a proposed rule that would allow it to supervise certain nonbank auto finance companies. Also as previously promised, the CFPB published a white paper on its method to proxy for race and national origin in auto finance transactions. Finally, the CFPB published its most recent Supervisory Highlights report, which is dedicated to its supervisory findings at depository institutions with auto finance operations.
The CFPB released the materials in connection with its September 18th field hearing on auto finance issues. These actions come roughly 18 months after the CFPB first provided guidance to auto finance companies regarding its expectations related to dealer “reserve” (or “participation”) and fair lending. Read more…
To address frequently asked questions regarding the TILA-RESPA Integrated Disclosure Rules that take effect next August, CFPB staff provided non-binding, informal guidance in a webinar hosted by the Federal Reserve Board on August 26.
BuckleySandler has prepared a transcript of the webinar that incorporates the CFPB’s slides. The transcript is provided for informational purposes only and does not constitute legal opinions, interpretations, or advice by BuckleySandler. The transcript was prepared from the audio recording arranged by the Federal Reserve and may have minor inaccuracies due to sound quality. In addition, the transcripts have not been reviewed by the CFPB or the Federal Reserve for accuracy or completeness.
Questions regarding the matters discussed in the webinar or the rules themselves may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.
- Jeffrey P. Naimon, (202) 349-8030
- Clinton R. Rockwell, (310) 424-3901
- Joseph J. Reilly, (202) 349-7965
- John P. Kromer, (202) 349-8040
- Joseph M. Kolar, (202) 349-8020
- Jeremiah S. Buckley, (202) 349-8010
- Benjamin K. Olson, (202) 349-7924
- Jonathan W. Cannon, (310) 424-3903
- Brandy A. Hood, (202) 461-2911
On September 8, the CFPB released an updated Small Entity Compliance Guide for its TILA-RESPA Integrated Disclosure Rule, which becomes effective next August. The updates include information on where to find additional resources on the rule, additional clarification on questions relating to the Loan Estimate and 7 day waiting period, and additional clarification on questions relating to the timing for revisions to the Loan Estimate. The new guides follow a recent webinar hosted by the CFPB and the Federal Reserve Board to address rule implementation.
On September 9, the Federal Reserve Board and the CFPB announced an increase in the dollar thresholds in Regulation Z and Regulation M for exempt consumer credit and lease transactions. Transactions at or below the thresholds are subject to the protections of the regulations. Based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers as of June 1, 2014, TILA and Consumer Leasing Act generally will apply to consumer credit transactions and consumer leases of $54,600 or less beginning January 1, 2015—an increase of $1,100 from 2014. Private education loans and loans secured by real property, used or expected to be used as a principal dwelling, remain subject to TILA regardless of the amount of the loan.
On August 28, the OCC issued Bulletin 2014-43, which announces the issuance of a revised “Electronic Fund Transfer Act” booklet of the Comptroller’s Handbook. This booklet replaces the similarly titled booked issued in October 2011, and provides updated guidance to examiners and bankers relevant to recent changes made to Regulation E regarding remittance transfers. Specific updates address: (i) the transfer of rulemaking authority for the EFTA from the Board of Governors of the Federal Reserve System to the CFPB; (ii) Dodd-Frank’s amendments to the EFTA, which create a new system of consumer protections for remittance transfers; and (iii) the issuance of the CFPB’s final rule that restructures Regulation E and provides specific requirements for remittance service providers in new subpart B.
On September 3, the CFPB published Bulletin 2014-02 warning credit card issuers of the risk of engaging in deceptive or abusive acts and practices in connection with solicitations offering a promotional annual percentage rate (APR). In particular, the bulletin discusses the risk associated with balance transfer solicitations that fail to clearly disclose all material costs of the promotional APR offer, including the failure to disclose that consumers will lose their interest-free grace periods on new purchases if the entire statement balance—including the transferred balance—is not paid in full. The bulletin warns that, depending on the facts and circumstances, card issuers’ solicitations may be considered deceptive and/or abusive if they do not disclose that transferring an outstanding balance may result in additional interest charges for new purchases until a consumer’s grace period is restored by paying in in full. Furthermore, the bulletin notes that while Regulation Z does not require marketing materials to include additional disclosures alerting consumers to the potential effect of accepting a promotional APR offer, some offers may risk being deceptive or abusive even if Regulation Z is not violated. In a press release regarding the bulletin, Director Cordray stated, “[W]e are putting credit card companies on notice that we expect them to clearly disclose how these promotional offers apply to consumers so that they can make informed choices about their credit card use.” Finally, the bulletin states that the CFPB expects card issuers to incorporate adequate measures into their compliance management systems in order to prevent violation of Federal consumer financial laws, including the prohibition on deceptive, unfair, or abusive practices. These measures should include steps to ensure that all marketing materials clearly, prominently, and accurately describe the effect of promotional APR offers on the grace period for new purchases.