On January 22, the CFPB and Maryland Attorney General announced an enforcement action against two banks, as well as a former loan officer and his wife, for alleged violations of RESPA and state law. The complaint filed in the District of Maryland alleges that loan officers at the banks accepted leads and marketing assistance from a title company in exchange for the referral of settlement service business to the title company. The parties filed Stipulated Final Judgments and Orders, under which one bank will pay approximately $10.8 million to consumers and $24 million in penalties, and the other bank will pay $300,000 to consumers and $600,000 in penalties. The individual loan officer and his wife will pay a combined $30,000 penalty.
As previously reported in our Special Alert on January 20, the CFPB finalized certain amendments to its TRID rule, which combines the mortgage disclosures consumers receive under the Truth in Lending Act and the Real Estate Settlement Procedures Act. Significant amendments include: (i) allowing three business days for providing a revised Loan Estimate after an interest rate is locked (instead of the current same day requirement and the original proposal’s one business day requirement); and (ii) permitting the inclusion of certain information about construction loans on the Loan Estimate. The final rule, as amended, takes effect August 1. For more information, please visit our TRID Resource Center.
On January 21, the Committee on Financial Services, in a voice vote, agreed to a new oversight plan that identifies the areas that the Committee and its subcommittees plan to oversee during the 114th Congress. Notable sections of the oversight plan include: (i) examining the governance structure and funding mechanism of the CFPB; (ii) reviewing recent rulemakings by the CFPB and other agencies on a variety of mortgage-related issues; (iii) examining the effects of regulations promulgated by Dodd-Frank on community financial institutions; and (iv) examining proposals to modify the GSEs.
On January 20, 2015, the CFPB finalized amendments to the TILA-RESPA Integrated Disclosure (“TRID”) rule that make a number of amendments, clarifications, and corrections, including:
- Relaxing the redisclosure requirements after a rate lock. The final rule permits creditors to provide a revised Loan Estimate within three business days after an interest rate is locked, instead of the current requirement to provide the revised Loan Estimate on the date the rate is locked (and instead of the proposed rule that would have allowed only one business day)
- Creating room on the Loan Estimate for the disclosure that must be provided on the initial Loan Estimate as a condition of issuing a revised estimate for construction loans where the creditor reasonably expects settlement to occur more than 60 days after the initial estimate is provided
- Adding the Loan Estimate and Closing Disclosure to the list of loan documents that must disclose the name and NMLSR ID number of the loan originator organization and individual loan originator under 12 C.F.R. § 1026.36(g)
- Providing additional guidance related to the disclosure of escrow accounts, such as when an escrow account is established but escrow payments are not required with a particular periodic payment or range of payments
- Clarifying that, consistent with the requirement for the Loan Estimate, the addresses for all properties securing the loan must be provided on the Closing Disclosure, although an addendum may be used for this purpose
On January 13, the CFPB published a report based on results from its recent survey of consumers who had recently taken out new mortgages. The survey, jointly conducted by the CFPB and the FHFA, found that (i) almost half of consumers who take out a mortgage fail to shop around prior to application; (ii) three out of four consumers only apply with one lender or broker; (iii) 70% of consumers report relying on their lender or broker to get information about mortgages; and (iv) consumers who are knowledgeable about the mortgage process are more likely to shop around for loans. Along with the survey results, and as part of the CFPB’s Know Before You Owe initiative, the Bureau unveiled an interactive online tool called “Owning a Home,” which is designed to inform consumers shopping for a mortgage. The tool takes the borrower from the start of the home-buying process — with a guide to loan options, terminology, interest rates and costs — to the closing table with a closing checklist.
On January 14, the CFPB issued a press release seeking public comments on its “Safe Student Account Scorecard.” The scorecard is a tool for colleges and universities to solicit information on the fees and features of financial products before selecting a financial institution partner. It would enable colleges and universities to evaluate the costs and benefits of financial products based on a variety of different factors including fees, product features, sales and marketing practices, and how much financial institutions earn for each account opened. The Bureau is interested in receiving comments from students, parents, colleges and universities, and financial institutions by March 16, 2015.
On January 6, the CFPB appointed former federal prosecutor Tony Alexis as the head of its enforcement division. Alexis has served as the acting Director for over a year while his predecessor, Kent Markus, has been on medical leave. Markus is expected to return later this month to the Bureau as a senior adviser to Deputy Director Steve Antonakes.
On December 29, the CFPB released a report highlighting its concern that loopholes in the Military Lending Act (MLA) have allowed companies to offer costly credit products to military personnel and their families. The report findings are included in a comment letter urging the Department of Defense to finalize its proposal to expand the scope of the MLA to include deposit advance products and more types of payday, auto title, and installment loans. Passed in 2006, the MLA protects military personnel – active and reserve – and their dependents from predatory lending practices.
On December 29, the CFPB published final rules adjusting the asset-size thresholds under HMDA (Regulation C) and TILA (Regulation Z). Both rules take effect on January 1, 2015.
HMDA requires certain lenders to collect and report data about mortgage application, origination, and purchase activity, and to make such data available to the public. Institutions with assets below certain dollar thresholds are exempt from the HMDA collection and reporting requirements. The final rule increases the asset-size exemption threshold for banks, savings associations, and credit unions from $43 million to $44 million, thereby exempting institutions with assets of $44 million or less as of December 31, 2014, from collecting and reporting HMDA data in 2015.
TILA, among other things, require creditors to establish escrow accounts when originating higher-priced mortgage loans (HPMLs). However, TILA exempts certain entities from this requirement, including entities with assets below the asset-size threshold established by the CFPB. The final rule increases this asset-size exemption threshold from $2.028 billion to $2.060 billion, thereby exempting creditors with assets of $2.060 billion or less as of December 31, 2014, from the requirement to establish escrow accounts for HPMLs in 2015.
CFPB & State Attorneys General Fine Retailer and Debt Collectors for Alleged Illegal Debt Collection Practices Against Military Servicemembers
On December 18, the CFPB and the Attorneys General of North Carolina and Virginia announced an enforcement action against three affiliated companies offering credit and financing services to military servicemembers. The complaint filed in the Eastern District of Virginia alleges that the companies used illegal tactics to collect debts in violation of Dodd-Frank, including by (i) filing illegal lawsuits; (ii) debiting consumers’ accounts without authorization; and (iii) contacting servicemembers’ commanding officers. The complaint also charges that one of the companies violated the EFTA by failing to properly disclose the terms of preauthorized transfers, while another company violated TILA by failing to properly disclose terms and interest rates on the loans it offered to servicemembers. The CFPB and the Attorneys General filed a consent order in the district court to require the companies and their owners and chief officers to provide over $2.5 million in consumer redress, pay a $100,000 civil penalty, and undergo ongoing compliance monitoring for a period of five years.
CFPB Announces Enforcement Action Against Telecommunications Company for Alleged Unauthorized Third-Party Charges
On December 17, the CFPB filed a complaint in the Southern District of New York against a telephone company for allegedly charging its customers tens of millions of dollars in unauthorized third-party charges. According to the CFPB’s press release, for roughly a decade the company “crammed” consumers’ wireless bills with illegal charges by outsourcing payment processing for digital purchases – such as apps, games, and movies – to vendors known as “billing aggregators.” The CFPB alleges that the company failed to properly monitor the aggregators’ billing of customers as a payment processor for the third parties, and violated Dodd-Frank and the CFPA by (i) allowing third party vendors to attach illegitimate charges to consumers’ bills; (ii) billing customers for the unauthorized charges without their consent; (iii) failing to heed red flags showing that the system “was a breeding ground for unauthorized charges”; and (iv) failing to respond to consumer complaints. The complaint seeks refunds for consumers and penalties.
On December 17, the CFPB announced it filed suit against a Texas-based company for allegedly deceiving consumers into paying fees to sign up for a “sham” credit card. According to the complaint filed in the Northern District of Texas, the CFPB alleges that the company falsely advertised a general-use credit card that, in actuality, could only be used to buy products from the company. The CFPB further alleges that the company deceptively implied an affiliation with unions by, among other things, using pictures of nurses, firefighters, and other public servants in its advertising. The complaint seeks compensation for consumers, a civil penalty, and an injunction against the company.
CFPB Addresses Medical Debt Collection, Requires Consumer Reporting Agencies To Provide Accuracy Reports
On December 11, the CFPB held a field hearing on medical debt collection and how it affects consumer credit reports. In his prepared remarks, Director Cordray announced the release of a white paper focused on the specific issue of medical debt collection. According to Cordray, medical debt collection presents unique challenges as compared to other industries due to inconsistent debt collection practices by medical service providers, insurance companies, and collection agencies. More broadly, Cordray addressed issues within the consumer reporting system and announced that major consumer reporting agencies will now be required to submit “regular, standardized accuracy reports” as part of its ongoing examinations efforts. Specifically, consumer reporting agencies will have to (i) identify furnishers with the most disputes; (ii) identify industries with the most disputes, and (iii) provide peer group ranking of furnishers consumer disputes relative to their industry.
On November 18, the CFPB presented Part 4 in its series of webinars (hosted by the Federal Reserve) addressing frequently asked questions regarding the TILA-RESPA Integrated Disclosure (“TRID”) rule. In this session, the CFPB addressed questions on completing the Closing Disclosure form. As with past CFPB webinars on the TRID rule, 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. In addition, please visit our TRID Resource Center for additional information about the TRID rule and related materials.
- Jeffrey P. Naimon, (202) 349-8030
- Clinton R. Rockwell, (310) 424-3901
- Benjamin K. Olson, (202) 349-7924
- Joseph J. Reilly, (202) 349-7965
- John P. Kromer, (202) 349-8040
- Joseph M. Kolar, (202) 349-8020
- Jeremiah S. Buckley, (202) 349-8010
- Jonathan W. Cannon, (310) 424-3903
- Brandy A. Hood, (202) 461-2911
On December 4, the CFPB fined a New Jersey-based debt-settlement service provider $69,075 in civil monetary penalties for alleged violations of the FTC’s Telemarketing Sales Rule (TSR). The CFPB alleged that the firm charged upfront fees to consumers which are prohibited for debt-settlement services. Further, the CFPB charged that the firm failed to provide debt-settlement services to consumers which harmed their credit history. In addition to the civil money penalty, the consent order requires the firm submit a compliance plan that includes (i) written policies and procedures designed to prevent violations of the TSR; (ii) training programs addressing the TSR and Federal consumer financial laws; (iii) written compliance monitoring processes; (iv) consumer complaint monitoring process; and (v) specific deadlines for when the compliance plan will be completed.