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  • OCC Acting Comptroller Reiterates Request for CFPB Arbitration Rule Data

    Agency Rule-Making & Guidance

    On July 17, OCC Acting Comptroller Keith Noreika delivered a letter to the CFPB reiterating his request to review the supporting data used to develop the Bureau’s final arbitration rule prohibiting the use of mandatory pre-dispute arbitration clauses in certain contracts for consumer financial products and services. While the CFPB issued assurances that the final rule would not impact the safety or soundness of the financial banking system, Noreika argued that because the Bureau is not a “safety and soundness prudential regulator,” the OCC, as the prudential regulator for the federal banking system, should be allowed to review the underlying data to address potential concerns under Section 1023 in Title X of the Dodd-Frank Act. In response, CFPB Director Richard Cordray stated his team is in the process of gathering the requested data but questioned the “plausible basis” for Noreika’s claim that the final arbitration rule could pose a safety and soundness issue.

    Agency Rule-Making & Guidance Arbitration CFPB OCC Prudential Regulators Dodd-Frank

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  • CFPB Extends Comment Deadline for Small Business Lending Request for Information

    Agency Rule-Making & Guidance

    On July 12, the CFPB issued a notice in the Federal Register announcing that, in response to a request from 13 industry trade associations for an additional comment period extension, the Bureau has extended the comment period of the “Request for Information Regarding the Small Business Lending Market” for another 60 days. As previously covered in InfoBytes, the Bureau is seeking responses to its questions regarding the small business lending market and how the implementation of Section 1071 Dodd-Frank Act will affect small business financing. The Bureau also hopes to receive feedback on privacy concerns related to the Section 1071 disclosures. In light of the extension, comments must now be received by September 14.

    Agency Rule-Making & Guidance Federal Issues CFPB Dodd-Frank Small Business Lending Federal Register

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  • House Passes Financial CHOICE Act of 2017

    Federal Issues

    On June 8, by a vote of 233-186 with no Democrats voting in favor of the bill and one Republican voting against, the House passed the Financial CHOICE Act of 2017 (H.R. 10), as amended, which would repeal or modify provisions of Dodd-Frank and restructure the CFPB. Committee Report 115-163 accompanying House Resolution 375, which provided for consideration H.R. 10 and recommended that the resolution be adopted, outlines the provisions introduced to overhaul existing financial regulations. Included were five additional amendments incorporated into H.R. 10 introduced by members of Congress:

    • Rep. Jeb Hensarling (R-Tex.): “Revises provisions subjecting certain FDIC and National Credit Union Association functions to congressional appropriations, relating to appointments of positions created by [H.R. 10], and providing congressional access to non-public [Financial Security Oversight Council] information”;
    • Rep. Joseph Hollingsworth (R-Ind.): “Allows closed-end funds that are listed on a national securities exchange, and that meet certain requirements to be considered ‘well-known seasoned issuers’”;
    • Rep. Lloyd Smucker (R-Pa.): “Expresses the sense of Congress that consumer reporting agencies and their subsidiaries should implement stronger multi-factor authentication procedures when providing access to personal information files to more adequately protect consumer information from identity theft”;
    • Rep. Martha McSally (R-Ariz.): “Requires the Department of Treasury” to submit a report to Congress regarding its efforts to work with Federal bank regulators, financial institutions, and money service businesses to ensure that legitimate financial transactions along the southern border move freely”; and
    • Rep. Ken Buck (R-Colo.), “Requires the [General Services Administration] to study the [Consumer Law Enforcement Agency’s] real estate needs due to changes in the Agency’s structure. It would then authorize the GSA to sell the current CLEA building if CLEA’s real estate needs have changed and there is no government department or agency that can utilize the building.”

    See previous InfoBytes here and here for additional coverage.

    The bill now advances to the Senate where it is unlikely to pass in its current form—a fact acknowledged by both Democrats and Republicans.

    Federal Issues House Financial Services Committee Financial CHOICE Act Congress Federal Legislation Dodd-Frank FDIC NCUA FSOC CFPB Treasury Department

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  • White House Issues Statement Supporting Substitute Amendment to H.R. 10; CBO Releases Cost Estimate

    Federal Issues

    On June 6, the White House Administration issued a statement supporting the Substitute Amendment to the Financial CHOICE Act of 2017. In the statement, the White House announced it is “committed to reforming the Nation’s financial system” and believes the substitute amendment drafted by House Financial Services Committee Chairman, Jeb Hensarling (R-Tex.) reflects the Administration’s Core Principles in a number of ways. Specifically, the Administration supports the following provisions outlined in H.R.10: (i) eliminating taxpayer bailouts; (ii) simplifying regulations and holding regulators accountable; (iii) facilitating capital formation to encourage economic growth; (iv) allowing identified financial institutions to “opt out of certain regulatory requirements”; (v) reducing the independence of the CFPB; (vi) increasing the use of cost-benefit analysis by financial regulators; and (vii) easing regulatory burdens for community banks.

    “The administration supports these provisions, and looks forward to working with Congress to undo additional mandates from the Dodd-Frank law that unnecessarily raise costs and limit choices for consumers,” the White House asserted in the statement.

    On the same day the White House issued its statement, the Congressional Budget Office (CBO) released a requested analysis of Hensarling's amendment for H.R. 10. The CBO discovered that the changes from the version the House Financial Services Committee initially approved would reduce deficits by an additional $9.5 billion, for a total reduction of $33.6 billion over the 2017-2027 period. CBO stated the majority of the budgetary savings comes from “eliminating the FDIC’s authority to use the Orderly Liquidation Fund and changing how the [CFPB] and certain other regulators are funded.” However, CBO noted it would cost an estimated $11.6 billion over the referenced time period to implement the bill.

    Federal Issues POTUS Financial CHOICE Act Federal Legislation House Financial Services Committee CFPB Dodd-Frank

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  • Senators Introduce Bill to Provide Relief to Community Banks

    Federal Issues

    On May 26, Senators Orrin Hatch (R-Utah), Angus King (I-Me.), and Bill Nelson (D-Fla.) introduced bipartisan legislation intended to provide regulatory relief to small financial intuitions. According to a press release issued by Sen. Hatch’s office, the Community Bank Relief Act (S. 1284) would increase the asset threshold from $1 billion to $5 billion, thereby expanding the number of institutions covered by the Small Bank Holding Company Policy Statement (Statement). Based on FDIC data, raising the asset threshold would affect 443 bank holding companies (BHC) and other financial institutions. Additionally, 96 percent of BHCs and savings and loan holding companies would be covered by the Statement compared to 87 percent as of December 31, 2016, according to the Federal Reserve (Fed). The legislators believe the bill will improve the Dodd-Frank Act “without compromising safety standards” and help “small financial institutions provide households and small businesses more quality-based loans” that will advance economic growth. Notably, the Fed will still be able to exclude any BHC or savings and loan company if it determines the action is warranted.

    Federal Issues Community Banks Federal Legislation FDIC Federal Reserve Dodd-Frank Bank Holding Companies

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  • CFPB Seeks Public Comment on its Plans for Assessing the Ability-to-Repay/Qualified Mortgage Rule

    Consumer Finance

    On May 25, the CFPB issued a request for comment on its plans for assessing the 2014 Ability-to-Repay/Qualified Mortgage Rule’s effectiveness in meeting the purposes and objectives outlined in the Dodd-Frank Act, which requires the Bureau to assess each significant rule or order it adopts under Federal consumer financial laws. According to the request for comment, and a May 25 blog post on the CFPB’s website, the self-assessment will focus on objectives to ensure that: (i) consumers are provided with timely and understandable information to make responsible decisions about financial transactions; (ii) consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination; (iii) outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens; (iv) federal consumer financial law is enforced consistently, without regard to the status of a person as a depository institution, in order to promote fair competition; and (v) markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.

    The Dodd-Frank Act established new standards for mortgage lending and created a class of “qualified mortgage” (QM) loans. The standards required lenders to assess consumers’ ability to repay (ATR). Dodd-Frank also provided for a class of QM loans that must not have “certain risky product features and are presumed to comply with the ATR requirement.”

    The CFPB issued rules to make ATR and QM standards “clear and effective” in January 2013. As previously covered in a Special Alert, the rule and its amendments that took effect on January 10, 2014 provide a mechanism for curing point-and-fees overages on QM loans as well as more minor amendments to its mortgage origination and servicing rules.

    Consumer Finance CFPB Mortgages Dodd-Frank Ability To Repay

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  • House to Consider Financial CHOICE Act of 2017 the Week of June 5

    Federal Issues

    On May 26, the House announced that the Financial CHOICE Act of 2017 is scheduled to hit the House floor the week of June 5. House Financial Services Committee Chairman, Jeb Hensarling (R-Tex.), drafted a Substitute Amendment and a corresponding summary of changes, which clarify that “rules promulgated under provisions of law repealed by H.R. 10 are no longer in effect.” Notably Hensarling agreed to strike Section 735, which would repeal the Durbin Amendment from the second discussion draft of the Act. The Durbin Amendment—an amendment to the EFTA added by section 1075 of the Dodd-Frank Act—requires the Federal Reserve Board to cap interchange fees that banks with assets of $10 billion or more may receive from payment card networks in debt card transactions. The decision to strike the Durbin Amendment happened despite bank support for the repeal.

    Changes to the bill also include the following, among others: (i) Section 341 will be amended to clarify that “gaps or ambiguities found by a reviewing court in a statutory or regulatory provision are not to be construed as a delegation of rule-making authority to an agency, and that a reviewing court is not to use such a gap or ambiguity as grounds for expansively interpreting the agency’s authority or deferring to the agency’s interpretation of law;” and (ii) Section 571’s amendment will suspend HMDA data reporting requirements until January 1, 2019. Looking ahead, the House Rules Committee set a June 2 deadline for lawmakers to file amendments.

    Federal Issues Financial CHOICE Act House Financial Services Committee Dodd-Frank

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  • CFPB Issues Request for Information on Small Business Lending; Prepares to Implement Section 1071 of Dodd Frank Act

    Agency Rule-Making & Guidance

    On May 10, the CFPB announced the issuance of a Request for Information on various aspects of the market for small business loans as the Bureau prepares to implement Section 1071 of the Dodd-Frank Act, which amends the Equal Credit Opportunity Act (ECOA) to require financial institutions to compile, maintain, and report information concerning credit applications made by women-owned, minority-owned, and small businesses. The Request includes questions grouped in five categories: (i) defining what constitutes a small business; (ii) data points the Bureau will require to be submitted and collected; (iii) types of lenders involved in small business lending and the appropriate institutional coverage for the data collection requirements; (iv) types of financial products offered to small businesses generally, and those owned by women and minorities in particular; and (v) privacy concerns related to the data collection.

    The CFPB also released Director Cordray’s prepared remarks in advance of a field hearing on small business lending where he introduced the Request for Information and issued a related press release. Comments are due 60 days after the Request for Information is published in the Federal Register. The Bureau also released a report, entitled “Key Dimensions of the Small Business Lending Landscape,” which presents the CFPB's perspective on the market for lending to small, minority-owned and woman-owned firms and gaps in its understanding.

    A couple of industry groups have already weighed in regarding expected difficulties with the application of Section 1071. In a letter sent Tuesday in advance of the field hearing, the National Association of Federally-Insured Credit Unions (NAFCU) urged the CFPB to exempt its members from any rulemaking that compels disclosure of business loan information. NAFCU Regulatory Affairs Counsel Andrew Morris cites the unique characteristics of credit unions, and that such data collection “may yield confusing information about credit unions and further restrict lending activity as a result of increased compliance costs.” The letter notes that “[c]redit unions serve distinct fields of membership, and as a result, institution-level data related to women-owned, minority-owned and small business lending substantially differs in relation to other lenders.”

    And, in a white paper provided to the Treasury Department, the American Bankers Association criticizes what amounts to Section 1071’s conflation of consumer and commercial lending, “recommend[ing] the elimination of any vestige of Bureau regulatory, supervisory, or enforcement authority over commercial credit or other commercial account and financial services.”

    Agency Rule-Making & Guidance CFPB Small Business Lending Dodd-Frank ECOA NAFCU ABA Treasury Department

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  • CFPB Seeks Public Comment on its Plans for Assessing RESPA Mortgage Servicing Rule

    Agency Rule-Making & Guidance

    On May 4, the CFPB issued a request for comment on its plans for assessing the 2013 Real Estate Settlement Procedures Act (RESPA) servicing rule’s effectiveness in meeting the purposes and objectives outlined in the Dodd-Frank Act, which requires the CFPB to assess each significant rule or order it adopts under Federal consumer financial laws. According to the request for comment and a May 4 blog post on the CFPB’s website, the self-assessment will focus on objectives to ensure that: (i) “[c]onsumers are provided with timely and understandable information to make responsible decisions about financial transactions”;  (ii) “[c]onsumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination”;  (iii) “[o]utdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens”;  (iv) “[f]ederal consumer financial law is enforced consistently”; and (v) “[m]arkets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.”

    In 2013, the Bureau adopted the 2013 RESPA Servicing Final Rule and further amended the rule several times to address questions raised by the industry, consumer advocacy groups, and other stakeholders. The CFPB deemed the 2013 RESPA Servicing Final Rule, effective January 10, 2014, a “significant rule” for purposes of the Dodd-Frank Act. Importantly, however, in Footnote 10 of its most-recent request for comment, the Bureau clarifies that it “is not seeking comment on the amendments to the mortgage servicing rules that became or will become effective after the January 10, 2014 effective date.” (emphasis added) Accordingly, it appears that the Bureau is not presently seeking comments on the Amendments to Regulation X and Regulation Z that the CFPB published as a Final Rule (12 CFR Parts 1024 and 1026) in the October 19, 2016 edition of the Federal Register – see earlier InfoBytes coverage here – and which are slated to take effect in part on October 19, 2017 and in full on April 19, 2018.

    Agency Rule-Making & Guidance CFPB RESPA Regulation X Regulation Z Mortgages Dodd-Frank UDAAP

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  • Financial CHOICE Act of 2017 Approved by House Financial Services Committee

    Federal Issues

    On May 4, GOP efforts to overhaul existing financial regulations took a step forward as the House Financial Services Committee approved H.R. 10, a revised version of the “Financial CHOICE Act of 2017” in a party-line vote, 34-26. The vote concluded a two week period that included both a three-day markup, of the GOP-backed legislation—during which several Democrat committee members sought, unsuccessfully, to remove various provisions of the bill—and, a two-day hearing that included testimony from 18 different witnesses.

    • An Executive Summary of the proposed legislation is available here.
    • A Comprehensive Summary of the proposed legislation is available here.
    • A copy of the Legislative Text of the proposed legislation is available here.

    Originally introduced by Committee Chairman Jeb Hensarling (R-TX) in September 2016, the main focus of the CHOICE Act was to give financial institutions the option of avoiding many of the rules set up by the 2010 Dodd-Frank law if they maintain a high level of capital and are “well-managed” as defined in the bill. The legislation, if enacted, would also end the Dodd-Frank Act’s taxpayer-funded bailouts of large financial institutions and would impose greater penalties on those who commit fraud and insider trading, while also demanding greater accountability from banking regulators. A summary of changes incorporated in the latest iteration of the proposed legislation—recently referred to as “CHOICE Act 2.0”—was released by the Committee last week and included, among other things:

    • the elimination of the CFPB supervisory and examination authority;
    • a restructuring of the CFPB, FHFA, OCC, and FDIC into bipartisan commissions appointed by the President;
    • an opt-out of many regulatory requirements for banks and other financial institutions if they maintain a 10% leverage ratio (among other conditions);
    • subjecting the federal banking regulators to greater congressional oversight and tighter budgetary control;
    • reforms in bank stress tests;
    • materially reducing the authority of the Financial Stability Oversight Council (FSOC) and the establishment of a new process of identifying financial institutions as "systemically important";
    • a repeal of the Orderly Liquidation Authority and the creation of a new bankruptcy process for banks;
    • a repeal of the Volcker Rule; and
    • facilitated capital raising by small companies, including through crowd-funding.

    Looking ahead, the House could vote to pass the bill later this month. While a party-line vote would pass the House, the bill will likely need to pick up a minimum of 60 votes—including support from several Democrats—in order for it to pass in the Senate.

    Federal Issues House Financial Services Committee Financial CHOICE Act Congress Dodd-Frank CFPB FHFA OCC FDIC

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