BuckleySandler & PLI Release 2015 Edition of “Consumer Financial Services Answer Book”

BuckleySandler LLP is pleased to announce the availability of the 2015 edition of the “Consumer Financial Services Answer Book,” published by the Practising Law Institute. Twenty-one BuckleySandler attorneys contributed to 12 chapters in this leading desk reference, which uses an easy question and answer format to address matters involving consumer financial services law. BuckleySandler Partner Richard Gottlieb also served as lead editor, a role he has held since publication of the first annual edition in 2011.

The 2015 edition of this publication continues to provide practitioners with a core understanding of the laws governing consumer financial services, addressing the latest developments in Consumer Financial Services Bureau (CFPB) enforcement activities, regulations and guidelines, fair lending, auto lending, the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA), among others.

New chapters in the 2015 edition address:

  • Credit Cards
  • Electronic Records and eSignatures
  • Short-Term Lending
  • Unfair and Deceptive Acts and Practices (UDAAP)
  • Servicemembers Civil Relief Act (SCRA)
  • Telemarketing and the Telephone Consumer Protection Act (TCPA)

From compliance counseling to enforcement, BuckleySandler has been handling precedent-setting CFPB matters since the Bureau was established in 2011 — experiences which enabled its attorneys to contribute the added insight and advice on current and emerging CFPB developments, trends, and expectations for the Answer Book.

The Consumer Financial Services Answer Book is for sale in hard copy format by the Practising Law Institute at www.pli.edu.

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Webinar Recap: The CFPB’s Expanding Oversight of Auto Finance, Part I

On October 1, 2014, BuckleySandler hosted a webinar, The CFPB’s Expanding Oversight of Auto Finance, Part One. Through an examination of the Consumer Financial Protection Bureau’s (CFPB) authority, recent enforcement activities, and discussion of the exam process, Kirk Jensen, John Redding, Michelle Rogers, Marshall Bell and Lori Sommerfield explored the different areas of the auto finance industry coming into the CFPB’s focus.

BuckleySandler will present The CFPB’s Expanding Oversight of Auto Finance, Part Two on October 30, 2014.

Explaining the Larger Participant Rule

Since its creation, the CFPB has held statutory authority to supervise nonbank institutions who are “a larger participant of a market for other consumer financial products or services.” On September 17, 2014, the CFPB proposed a rule defining a market for “automobile financing” and “larger participants” within that market. Under this proposed rule:

  • A nonbank institution is a larger participant in the auto finance market if it “has at least 10,000 aggregate annual originations,” which includes:
    • Credit granted for the purpose of purchasing an automobile
    • Refinancings
    • Automobile leases
    • Purchases of extensions of credit and leases
  • An “automobile” includes any self-propelled vehicle used primarily for a consumer purpose for on-road transportation, except for certain identified vehicle types, including recreational vehicles, motor scooters and limited others
  • Affiliates are included in calculations but dealers are excluded

Read more…

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Proposed Changes to the TILA-RESPA Integrated Disclosure Rule

On October 10, the CFPB issued a proposal to modify and make technical amendments to the TILA-RESPA Integrated Disclosure Rule, issued in November of 2013. Specifically, the CFPB proposes to (i) relax the timing requirements associated with the redisclosure of interest rate dependent charges and loan terms after consumers lock in a floating interest rate, such that creditors would have until the next business day after a consumer locks in a floating interest rate to provide a revised disclosure; and (ii) add language to the Loan Estimate form that creditors could use to inform a consumer that the consumer may receive a revised Loan Estimate for a construction loan that is expected to take more than 60 days to settle. In addition, the Bureau proposes non-substantive changes such as technical corrections and corrected or updated citations and cross-references in the regulatory text and commentary, minor word changes throughout the regulatory text and commentary, and an amendment to the 2013 Loan Originator Rule, to provide for placement of the NMSR ID on the integrated disclosures. The CFPB is accepting comments on the proposed changes through November 10, 2014. The CFPB noted its intention to finalize the proposed amendments quickly in order to provide the industry adequate time to implement any resulting changes by August 1, 2015, the effective date of the TILA-RESPA Integrated Disclosure Rule.

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CFPB Report Analyzes Private Student Loan Borrowers’ Complaints

On October 16, the CFPB announced the findings of its annual student loan ombudsman report. Analyzing over 5,000 private student loan complaints that the CFPB received from October 1, 2013 through September 30, 2014, the report highlights the struggle private loan borrowers face in repaying their loans, noting that many are driven into default because practical repayment options are not available to them. The report outlines three main reasons why many private student loan borrowers default: (i) they are unaware of the loan modifications available to them; (ii) they do not have the same affordable options that federal student loan borrowers are entitled to by law; and (iii) the temporary forbearance options that some lenders offer often result in “burdensome enrollment fees and processing delays.” In connection with the report, the CFPB released a sample letter that consumers can edit and send to servicers to request lower monthly payments and information on available repayment plans, as well as a sample financial worksheet to assist borrowers to determine maximum funds available to pay their student loans.

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CFPB And FTC To Hold Roundtable On Debt Collection In The Latino Community

On October 23, the CFPB and the FTC will hold a roundtable to discuss the effects of debt collection and credit reporting in the Latino community. The event will focus on the customers with limited English proficiency, and is scheduled to take place from 9 a.m. to 5 p.m. in Long Beach, CA.

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CFPB Publishes Proposed Policy Regarding No-Action Letters

On October 10, the CFPB published for comment a proposal for a limited No-Action Letter policy, which appeared in the Federal Register on October 16. The proposed policy aims to “create a process to reduce the regulatory uncertainty that may exist for certain emerging products or services which stand to benefit consumers.” Specifically geared towards financial products and services for which existing statutes and regulations are vague, the proposed policy allows for a CFPB staff member to inform a company that “staff has no present intention to recommend initiation of an enforcement or supervisory action against the requester” by sending a No-Action Letter. The proposed policy requires that the financial product or service that is the subject of a No-Action Letter have substantial consumer benefit when issues of uncertainty regarding certain provisions of statutes implemented by the Bureau arise.

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Special Alert: Class Action Suit Filed Based on CFPB Consent Order

In what may be the first action of its kind, a consumer who received restitution under the CFPB consent order has filed a class action lawsuit based on the same alleged violations.  While this litigation is still in its early stages, it serves as an important reminder that an institution’s exposure does not end when it reaches a public settlement with a regulator and may, in fact, increase.

Settlement of CFPB Action

As previously discussed in a BuckleySandler webinar, on July 24, 2013, the CFPB filed suit against Castle & Cooke Mortgage LLC, its President, and its Senior Vice President of Capital Markets, alleging that the defendants “developed and implemented a scheme by which the Company would pay quarterly bonuses to loan officers in amounts that varied based on the interest rates of the loans they originated” in violation of the Truth in Lending Act’s loan originator compensation rules.

On November 7, 2013, the defendants entered into a consent order with the CFPB, agreeing to pay $9.2 million for restitution and a $4 million civil penalty to resolve the allegations.  Consistent with current CFPB practice, the consent order stated that “[r]edress provided by the Company shall not limit consumers’ rights in any way” – in other words, affected consumers are not required to sign releases in order to receive remediation. Read more…

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BuckleySandler & American Bankers Association Release CFPB Mortgage Origination Deskbook

BuckleySandler is pleased to announce the availability of “The New CFPB Mortgage Origination Rules Deskbook,” by partner Joseph Reilly. The CFPB Deskbook, published in partnership with the American Bankers Association, is an all-inclusive compilation of all the mortgage origination rules made by effective by the Consumer Financial Protection Bureau (CFPB) in January 2014, including:

  • Ability-to-Repay and Qualified Mortgage requirements
  • Points and Fees
  • Loan Originator Compensation
  • Appraisals
  • High-Cost Mortgages
  • Qualified Mortgage Provisions for Federal Housing Administration and Veterans Affairs loans
  • Summary of the TILA-RESPA disclosure integration taking effect in 2015

“Our goal was to consolidate the numerous sources of CFPB regulatory guidance into a clear, organized format,” said Reilly. “We wanted to provide comprehensive descriptions from not just the rule text and official commentary but also from CFPB webinars, compliance guides, preamble material from federal register releases and informal compliance discussions with CFPB staff.  We hope this will be a ‘one-stop shop’ for origination compliance.”

Benjamin K. Olson, BuckleySandler partner and former Deputy Assistant Director in the CFPB’s Office of Regulations who was involved in the development of many of the rules covered by the CFPB Deskbook, describes it as “an invaluable resource with the potential to change the way regulations are understood.”

The CFPB Deskbook is available in PDF and hard copy formats. Requests for copies should be sent to CFPBDeskbook@buckleysandler.com.

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Special Alert: Proposed Amendments to the TILA-RESPA Integrated Disclosure (“TRID”) Rule, Transcript of CFPB Webinar on the Loan Estimate Form, and Introducing BuckleySandler’s TRID Resource Center

BuckleySandler is pleased to announce our new TILA-RESPA Integrated Disclosure (“TRID”) Resource Center.  The TRID Resource Center is a one-stop shop for TRID issues, providing access to BuckleySandler’s analysis of the TRID rule and the CFPB’s amendments, transcripts of CFPB webinars providing guidance on the rule, and other CFPB publications that will facilitate implementation of the rule.  In particular, the TRID Resource Center will address the following recent developments:

  • Proposed amendments. On October 10, 2014, the CFPB proposed amendments to the TRID rule that, if adopted, would: (1) allow creditors to provide a revised Loan Estimate on the business day after the date the interest rate is locked, instead of the current requirement to provide the revised Loan Estimate on the date the rate is locked; and (2) correct an oversight by creating room on the Loan Estimate form 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.  The proposal would also make a number of additional amendments, clarifications, and corrections, including:
    • Add 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);
    • Provide 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; and
    • Clarify 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.

    Comments on the proposal are due by November 10, 2014. For your convenience, we have updated our summary of the TRID rule to identify the most significant proposed changes.

Read more…

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CFPB And FDIC Develop Spanish-Language Tool To Stop Financial Exploitation of Older Adults

On October 7, the CFPB and the FDIC announced a Spanish-language version of Money Smart for Older Adults, a free financial resource tool intended to prevent the elder financial exploitation that is affecting millions of senior citizens each year. The English-language version, which “includes practical information that can be put to use right away,” was jointly developed by the two agencies last year. The Spanish-language participant/resource guide and power point slides can be downloaded for free at the FDIC’s website, or can be ordered as hard copies on the CFPB’s website.

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CFPB Holds Forum On Access To Checking Accounts

On October 8, the CFPB held a forum on consumers’ access to checking accounts. The event featured remarks from Director Cordray, as well as presentations from federal and local government officials, consumer groups, and industry representatives. Director Cordray noted the following three main issues of concern regarding the checking account application process, specifically in connection with the reports generated by specialty consumer reporting agencies and sold to banks and credit unions for use in determining whether to approve or reject a consumer for a checking account: (i) the accuracy of the information in the reports; (ii) the consumer’s ability to access the reports and dispute any inaccurate information; and (iii) the use of the reports to exclude consumers from basic financial services.  According to Cordray, while credit reporting agencies are required to report accurate information, the “institutions vary in their abilities to conduct the careful investigations needed to differentiate between accountholders who perpetrate fraud versus those who are victims of fraud.” The Bureau plans to explore alternative procedures for screening consumers, hopeful that better data might enable a financial institution to make more nuanced decisions in account screening rather than simply reaching a “yes or no” result.

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GAO Publishes Report Regarding Proposed Changes To The Single-Family Housing Finance System

On October 7, the GAO published a report to help policymakers assess proposals for changing the single-family housing finance system and consider ways to make it more effective and efficient. To this end, the report first describes the market developments since 2000 that have led to changes in the federal government’s role in single-family housing finance. Most notably, the GAO found that as the market share of nonprime mortgages grew before the 2007-2009 financial crisis, the share of new mortgage originations insured by federal entities (including Fannie Mae and Freddie Mac) fell dramatically before rising sharply again during and after the crisis. Second, the report analyzed whether and how these market developments created challenges for the housing finance system. The GAO concluded that mortgage markets since 2000 have challenged the housing finance system, revealing the following weaknesses: (i) misaligned incentives between originators and securitizers on the one hand, and borrowers and investors on the other, as the former did not share the risks of the latter; (ii) a lack of reliable information and transparency for borrowers because originators were not required to share certain information; (iii) excessive risk taking due to a loosening of underwriting standards prior to the financial crisis; and (iv) a lack of federal oversight (since addressed by Congress through the FHFA and CFPB). Finally, the report presents a nine-pronged evaluation framework for assessing potential changes to the housing finance system designed to help policymakers understand the strengths and weaknesses of competing goals and policies, to craft new proposals, and to understand the risks of transitioning to a new housing finance system.

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CFPB RESPA Enforcement Action Targets Marketing Services Agreements

On September 30, the CFPB announced a consent order with a Michigan-based title insurance company to address allegations that the company’s marketing services agreements (MSAs) with several real estate brokers violated the Real Estate Settlement Procedures Act’s (RESPA) prohibition against kickbacks in connection with real estate settlement services. According to the CFPB, the MSAs provided that the company would pay the real estate brokers for performing marketing services promoting the company. Specifically, although the MSAs provided for payment to the brokers based on the marketing services provided to the company, according to the CFPB the brokers were actually paid, in part, based on the number of referrals to the company they generated. Also, the CFPB asserted that the company entered the MSAs “as a quid pro quo for the referral of business.” In addition, the CFPB alleged that brokers that had entered into a MSA with the company referred a “statistically significant” higher amount of business than brokers who had not entered into a MSA. According to the terms of the consent order, the company must pay a $200,000 civil monetary penalty, immediately terminate any existing MSAs, and not enter into any MSAsthe future, providing a very broad and novel definition of MSAs that includes agreements with any person in a position to refer business providing for endorsements, joint advertising, access to counterparty and its employees, or marketing of the company’s services to others. However, the company may still purchase consumer-oriented advertising from companies that do not offer settlement services such as newspapers or television or radio stations, provided that the publisher does not endorse the company as part of the advertisement.

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CFPB Publishes White Paper On Manufactured-Housing

On September 30, the CFPB published a white paper claiming that manufactured-home owners typically pay higher interest rates for their loans than site-built borrowers. The white paper cites data in support showing that a greater share of manufactured-housing loans are classified as higher-priced mortgage loans or “high-cost” loans. The white paper further discusses the CFPB’s findings that: (i) manufactured homeowners are likely to be older, live in a rural area, and have a lower net worth than site-built borrowers; (ii) manufactured homes typically cost less than site-built homes; (iii) about three-fifths of manufactured-housing residents who own their home also own the land it is sited on; (iv) approximately 65 percent of borrowers who own their land and financed the purchase of their manufactured home between 2001 and 2010 did so using a chattel loan (rather than a manufactured-housing loan); and (v) manufactured-housing production contracted in the 2000s. The white paper does not propose any formal rule or guidance related to manufactured-housing. Rather, it indicates that the CFPB will continue to analyze facets of the manufactured-housing market to identify ways to fill in gaps in available data about that market. For example, the white paper states that the CFPB is considering adding a data field to the Home Mortgage Disclosure Act’s reporting requirements that would indicate whether a manufactured-housing loan is secured by real or personal property.

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President Signs Nondepository Examination and Supervisory Privilege Parity Bill

On September 26, President Obama signed into law H.R. 5062, which amends the Consumer Financial Protection Act of 2010 to specify that the CFPB is to coordinate its supervision of certain nondepositories with state agencies that license, supervise, or examine the offering of consumer financial products or services. The Act already requires the CFPB to coordinate its supervisory activities with prudential regulators and state bank regulatory authorities. The bill also amends the Act to provide that the sharing of information with such regulators, authorities, and agencies does not constitute a waiver of any privilege or confidentiality that may be asserted regarding such information (except with respect to the CFPB and such regulators, authorities, and agencies).

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