Unofficial Transcripts of the ABA Briefing/Webcast “Mortgage Q&A with the Consumer Financial Protection Bureau”

To address outstanding questions regarding the new mortgage rules that took effect in January 2014, CFPB staff provided non-binding, informal guidance in a webinar hosted by the American Bankers Association (ABA). Specifically, CFPB staff answered questions regarding the mortgage origination rules and the mortgage servicing rules on April 22, 2014.

With the ABA’s consent, BuckleySandler has prepared a transcript of the webinar that incorporates the ABA’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 ABA and may have minor inaccuracies due to sound quality. In addition, the transcripts have not been reviewed by the CFPB or the ABA 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.

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CFPB Adjusts CARD Act, HOEPA, And Ability To Repay Thresholds

On August 14, the CFPB issued a final rule to re-calculate certain threshold amounts under Regulation Z. With respect to certain amounts under the CARD Act, effective January 1, 2015, the minimum interest charge disclosure thresholds will remain unchanged, while the permissible penalty fees safe harbor will increase to $27 for a first late payment and $38 for each subsequent violation in the following six months. With respect to HOEPA loans, effective January 1, 2015, the adjusted total loan amount threshold will be $20,391, and the adjusted statutory fee trigger will be $1,020. Also effective January 1, 2015, for the purpose of a creditor’s determination of a consumer’s ability to repay a transaction secured by a dwelling, a covered transaction will not be a qualified mortgage unless the transaction’s total points and fees do not exceed: (i) 3% of the total loan amount for a loan greater than or equal to $101,953; (ii) $3,059 for a loan amount greater than or equal to $61,172 but less than $101,953; (iii) 5% of the total loan amount for a loan greater than or equal to $20,391 but less than $61,172; (iv) $1,020 for a loan amount greater than or equal to $12,744 but less than $20,391; and (v) 8% of the total loan amount for a loan amount less than $12,744.

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CFPB Fines Online Mortgage Company And Its Owner For Alleged Deceptive Rate Advertising

On August 12, the CFPB announced a consent order with a nonbank mortgage lender, its affiliated appraisal management company (AMC), and the individual owner of both companies to resolve allegations that the lender deceptively advertised mortgage rates to consumers, improperly charged fees before providing consumers with Good Faith Estimates (GFE), and failed to disclose its affiliation with the AMC while allowing the AMC to charge inflated fees.

Allegations

As explained in the consent order, the lender primarily conducts business online through its own website, and also advertises its mortgages through display ads on independent websites and the website of an unaffiliated third-party rate publisher. The CFPB asserts that, over a roughly two-year period, a “systemic problem” caused the lender to list on the rate publisher’s website lower rates for certain mortgages than the lender was willing to honor, and that the lender supplied other rates to the rate publisher that were unlikely to be locked for the majority of the lender’s borrowers. The CFPB claims that the lender failed to perform systematic due diligence or quality control to ensure the accuracy of listed rates, even though the lender was made aware through consumer complaints that certain rates were inaccurate. Read more…

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CFPB Announces Two Actions Related To Virtual Currencies

On August 11, the Consumer Financial Protection Bureau (the CFPB or Bureau) issued a “consumer advisory” concerning virtual currency and also announced that it would begin accepting consumer complaints about virtual currency or virtual currency companies. These actions are the consumer agency’s first foray into virtual currencies, and they follow a recent GAO report that recommended the CFPB play a larger role in the development of federal virtual currency policy. Read more…

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CFPB Pressures Banks To Disclose Campus Marketing Agreements

On August 6, the CFPB’s Student Loan Ombudsman, Rohit Chopra, published a blog post addressing the financial arrangements between financial institutions and institutions of higher education that market financial products to students. Last year, the CFPB urged banks to disclose any agreements with colleges and universities to market debit, prepaid, and other products to students and warned that “[t]he CFPB prioritizes its supervisory examinations based on the risks posed to consumers” and “[failing to make] college financial product arrangements transparent to students and their families . . . increase[s] such risks.” In this latest review, the CFPB assessed the  Big Ten schools and found that at least 11 have established banking partners to market financial products to students. Of those 11, the CFPB found only four contracts on the bank websites, and it characterized three of those four contracts as “partial”—i.e. in the CFPB’s view, the disclosed agreements “did not contain important information, such as how much they pay schools to gain access to students in order to market and sell them financial products and services.” Concurrent with the blog post, the CFPB sent letters to schools asserting that “their bank partner has not yet committed to transparency when it comes to student financial products.”

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Republican Committee Leaders Question CFPB On Recess Appointment Activities

On July 29, House Financial Services Committee Chairman Jeb Hensarling (R-TX) and Senate Banking Committee Ranking Member Mike Crapo (R-ID) sent a letter to CFPB Director Richard Cordray questioning the CFPB’s authority to take certain actions during the period of Mr. Cordray’s recess appointment—January 4, 2012 through July 16, 2013—which was made in the same manner and on the same day as other appointments that were subsequently invalidated by the Supreme Court. Citing the Dodd-Frank Act, the letter asserts that new CFPB authorities created by the Act—as opposed to those transferred from another agency—could only be exercised by a Senate-confirmed director. The lawmakers state that as a result of the Supreme Court’s decision on recess appointments, two primary legal questions now exist regarding the CFPB’s authority during the relevant time: (i) whether the Director had authority to exercise CFPB powers as a recess appointee; and (ii) whether the Director’s ratification of actions taken during his recess appointment is valid. The letter asks the CFPB to produce by September 1, 2014: (i) “a full accounting of all CFPB actions taken” during the recess appointment period that were not derived from transferred authorities; (ii) all documents related to the validity or standing of CFPB actions taken during the recess appointment period that were not derivative of the transferred powers; (iii) all documents justifying the CFPB’s authority and the Director’s standing to ratify past actions; and (iv) all documents related to the impact of the Supreme Court’s recess appointment decision. The requests include internal documents and those involving outside counsel.

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CFPB Extends Deadline To Comment On Complaint Narrative Proposal

On July 29, the CFPB announced that it extended 30 days to September 22, 2014 the deadline for submitting comments on its proposal to publish consumer complaint narratives. In doing so, the CFPB again defended the proposal as consistent with practices at other government agencies and as an extension of its efforts to give voice to consumers’ concerns. The extension followed a request from a group of industry trade associations that noted the numerous legal and practical issues raised by the proposal.

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CFPB Concerned Overdraft Opt-In Requirement Not Protecting Consumers

On July 31, the CFPB released its latest assessment of overdraft data it has collected from large banks. The report provides the following summary findings:

  • Overdraft and non-sufficient funds (NSF) fees constitute the majority of the total checking account fees that consumers incur. For opted-in consumers, overdraft and NSF fees account for about 75% of their total checking account fees and average over $250 per year.
  • Most overdraft fees are paid by a small fraction of bank customers—8% of customers incur nearly 75% of all overdraft fees.
  • Opted-in accounts are three times as likely to have more than 10 overdrafts per year as accounts that are not opted in. And opted-in accounts have seven times as many overdrafts that result in fees as accounts that are not opted in.
  • Transactions that lead to overdrafts tend to be small—for debit card transactions, the median amount that leads to an overdraft fee is $24 and the median amount of a transaction that leads to an overdraft fee for all types of debits is $50.
  • Most consumers who overdraft bring their accounts positive quickly.
  • Younger customers tend to overdraft more than older customers.

Read more…

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CFPB, State AGs Announce Joint Enforcement Action Against Military Consumer Lender

On July 29, the CFPB and 13 state AGs announced a consent order that requires a consumer lender currently in Chapter 7 bankruptcy to provide $92 million in debt relief for about 17,000 U.S. servicemembers and other consumers harmed by the company’s alleged predatory lending scheme. The lender offered credit to consumers purchasing computers, videogame consoles, televisions, or other products, which typically were purchased at mall kiosks near military bases. In some cases the lender was the initial creditor, and in other cases, the lender provided indirect financing by agreeing to buy the financing contracts from merchants who sold the goods. Read more…

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CFPB Proposes Rule To Implement Dodd-Frank HMDA Changes

On July 24, the CFPB issued a proposed rule to expand the scope of HMDA data reporting requirements. Section 1094 of the Dodd-Frank Act transferred responsibility for HMDA and Regulation C to the CFPB and directed the CFPB to conduct a rulemaking to expand the collection of mortgage origination data to include, among other things: (i) the length of the loan; (ii) total points and fees; (iii) the length of any teaser or introductory interest rates; (iv) the applicant or borrower’s age and credit score; and (v) the channel through which the application was made. The Dodd-Frank Act also granted the CFPB discretion to collect additional information as it sees fit. The proposed rule would implement all of the new data points required by the Dodd-Frank Act, and also would utilize the CFPB’s discretionary authority to substantially expand the number of new data points required to be reported. In addition, the CFPB’s proposal would require reporting for all dwelling-secured loans, which would include some loans not currently covered by Regulation C, including reverse mortgages, and all home equity lines of credit irrespective of their purpose. The proposal follows a review initiated by the CFPB earlier this year to assess of the potential impacts of a HMDA rulemaking on small businesses. The CFPB released a summary of that review with the proposed rule. Comments on the proposal are due by October 22, 2014. We are reviewing the proposed rule and plan to provide a more detailed summary in the coming days.

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CFPB, FTC, And State Authorities Coordinate Action Against Foreclosure Relief Companies

On July 23, the CFPB, the FTC, and 15 state authorities coordinated to take action against foreclosure relief companies and associated individuals alleged to have employed deceptive marketing tactics to obtain business from distressed borrowers. The CFPB filed three suits, the FTC filed six, and the state authorities collectively initiated 32 actions. For example, the CFPB claims the defendants (i) collected fees before obtaining a loan modification; (ii) inflated success rates and likelihood of obtaining a modification; (iii) led borrowers to believe they would receive legal representation; and (iv) made false promises about loan modifications to consumers. The CFPB and FTC allege that the defendants violated Regulation O, formerly known as the Mortgage Assistance Relief Services (MARS) Rule, and that some of the defendants also violated the Dodd-Frank Act’s UDAAP provisions and Section 5 of the FTC Act, respectively. The state authorities are pursuing similar claims under state law. For example, New York Attorney General Eric Schneiderman announced that he served a notice of intent to bring litigation against two companies and an individual for operating a fraudulent mortgage rescue and loan modification scheme that induced consumers into paying large upfront fees but failed to help homeowners avoid foreclosure.

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CFPB, State AGs Weigh In On TILA Rescission

This week, the CFPB and 25 states filed amicus briefs in Jesinoski v. Countrywide Home Loans, Inc., No. 13-684, a case pending before the U.S. Supreme Court that may resolve a circuit split over whether a borrower seeking to rescind a loan transaction under TILA must file suit within three years of consummating the loan, or if written notice within the three-year rescission period is sufficient to preserve a borrower’s right of rescission. In short, the CFPB argues, as it has in the past, that no TILA provision requires a borrower to bring suit in order to exercise the TILA-granted right to rescind, and that TILA’s history and purpose confirm that a borrower who sends a notice of rescission in the three-year period has exercised the right of rescission. The state AGs similarly argue that TILA’s plain meaning allows borrowers to preserve their rescission right with written notice. In so arguing, the government briefs aim to support the borrower-petitioner seeking to reverse the Eighth Circuit’s holding to the contrary. The majority of the circuit courts that have addressed the issue, including the Eight Circuit, all have held that a borrower must file suit within the three-year rescission period.

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CFPB Expands Complaint Collection To Include Prepaid Cards, Additional Nonbank Products And Services

On July 21, the CFPB announced that it is now accepting consumer complaints regarding (i) prepaid products, including gift cards, benefit cards, and general purpose reloadable cards; (ii) credit repair services and debt settlement services; and (iii) pawn and title loans.  The CFPB’s decision to field prepaid card complaints comes as the agency prepares a proposed rule related to those products. The press release states that the CFPB is planning to initiate the prepaid card rulemaking “in the coming months.”  Director Cordray recently stated the rule would be proposed at the “end of the summer.”

The CFPB provides the following options for consumers to identify the nature of their complaints:

  • Prepaid Cards – (i) managing, opening, or closing your account; (ii) fees; (iii) unauthorized transactions or other transaction issues; (iv) advertising, marketing or disclosures; (v) adding money; (vi) overdraft, savings or rewards features; or (vii) fraud or scam.
  • Credit Repair and Debt Settlement – (i) advertising and marketing; (ii) customer service/customer relations; (iii) disclosures; (iv) excessive fees; (v) unexpected/other fees; (vi) incorrect exchange rate; (vii) lost or stolen money order; (viii) lost or stolen check; or (ix) fraud or scam.
  • Pawn and Title Loans – (i) charged fees or interest I didn’t expect; (ii) can’t stop lender from charging my bank account; (iii) received a loan I didn’t apply for; (iv) applied for a loan, but didn’t receive money; (v) lender charged my bank account on wrong day or for wrong amount; (vi) lender didn’t credit payment to my account; (vii) can’t contact lender; (viii) lender sold the property / repossessed or sold the vehicle; or (ix) lender damaged or destroyed property / vehicle.

As with all of the CFPB’s complaint categories, consumers also have an opportunity to describe their complaints regarding these new products and services in narrative form. Last week, the CFPB proposed a policy change under which it would publish those consumer complaint narratives, a move it hopes will increase the number of complaints the CFPB fields. At the same time the CFPB released its latest “snapshot” of consumer complaints, which provides an overview of the complaint process and summary analyses of complaints handled by the CFPB since July 21, 2011.

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CFPB Sues Debt Collection Law Firm

On July 14, the CFPB sued a Georgia-based law firm and its three principal partners for allegedly using high-volume litigation tactics to collect millions of dollars from consumers who may not actually have owed the debts or may not have owed the debts in the amounts claimed. The suit relates to the firm’s attempts to collect, directly or indirectly, consumer credit-card debts on behalf of both credit-card issuers and debt buyers that purchase portfolios of defaulted credit-card debts. The CFPB alleges the defendants violated the FDCPA and engaged in unfair and deceptive practices by: (i) serving consumers with deceptive court filings generated by automated processes and the work of non-attorney staff, without any meaningful involvement of attorneys; and (ii) introducing faulty or unsubstantiated evidence through sworn statements even though some signers could not have known the details they were attesting to. The CFPB is seeking to permanently enjoin the firm from engaging in the alleged activity, restitution to borrowers, disgorgement, civil money penalties, and damages and other monetary relief.

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Fannie Mae, Freddie Mac Publish Additional Uniform Closing Dataset Documentation

On July 15, Fannie Mae and Freddie Mac announced the availability of additional documentation to support the mortgage industry with the implementation of the Uniform Closing Dataset (UCD), the common industry dataset that supports the CFPB’s closing disclosure. The documents provide information to supplement the MISMO mapping document released in March 2014. Fannie Mae and Freddie Mac intend to collect the UCD from lenders in the future, but have not yet determined the method or timeline for that data collection.

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