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  • CFPB solicits comments on proposed rule regarding civil penalty inflation adjustments

    Agency Rule-Making & Guidance

    On October 12, the CFPB published an amendment to its rule regarding inflation adjustments for the maximum amount of each civil penalty within its jurisdiction, pursuant to the 2015 Inflation Adjustment Act amendments. Under the Bureau’s amendment, adjusted penalty amounts would only apply to assessments with associated violations occurring on, or after, November 2, 2015. The Bureau noted that because the amendment “would limit the civil penalties covered persons may pay, the proposed rule would not impose any additional costs on them. Nor does the rule impose any new, affirmative duty on any small entity or change any existing requirements on small entities, and thus no small entity who is currently complying with the laws that the Bureau enforces will incur any expense from the amended rule.” Comments must be received by November 13.

    Agency Rule-Making & Guidance CFPB Civil Money Penalties

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  • FDIC FIL provides guidance on HMDA partial exemptions

    Agency Rule-Making & Guidance

    On October 10, the FDIC issued FIL-58-2018 which summarizes guidance provided by the CFPB on the implementation of partial exemptions from certain of HMDA’s reporting requirements for specific insured depository institutions and insured credit unions pursuant to Section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act. On August 31, as previously covered in InfoBytes here, the Bureau issued an interpretive and procedural rule to implement and clarify recent HMDA amendments and outline exemption qualification requirements. FIL-58-2018 reminds FDIC-supervised institutions subject to HMDA and Regulation C of the following clarifications made by the Bureau: (i) there are 26 data points covered by the partial exemptions and 22 other data points that all HMDA reporters must collect, record, and report”; (ii) loans counted towards partial exemption thresholds must otherwise be reportable under Regulation C; (iii) exception based on Community Reinvestment Act examination reports will be determined by the two most recent CRA ratings as of December 31 of the preceding calendar year; (iv) if an institution eligible for a partial exemption chooses not to report a universal loan identifier, it must report a non-universal loan identifier unique within the institution; and (v) institutions exempt from certain reporting requirements may still report exempt data fields so long as they “report all data fields associated with that data point.”

    Agency Rule-Making & Guidance FDIC CFPB HMDA EGRRCPA S. 2155 Mortgages CRA

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  • CFPB announces settlement with companies that allegedly delayed transfer of consumer payments to debt buyers

    Consumer Finance

    On October 4, the CFPB announced a settlement with a group of Minnesota-based companies that allegedly violated the Consumer Financial Protection Act when consumers made payments on debts that the companies had already sold to third parties, and the companies improperly delayed the forwarding of some of those payments to debt buyers. According to the consent order, the companies—whose practices include the purchasing, servicing, collection, and furnishing consumer-report information on consumer loans—partnered with third-party banks to sell merchandise on closed-end or open-end revolving credit. Within a few days, banks originated the loans and sold the receivables to the companies. The companies subsequently serviced the debts and sold the receivables to a third party. For defaulted accounts, the companies charged off the accounts and sold them to third-party debt buyers. According to the Bureau, the companies allegedly failed to notify consumers when their accounts were sold, failed to inform them who now owned the debt, and continued to accept direct pays from consumers. The Bureau contends that between 2013 and 2016, the companies delayed forwarding direct pays for more than 31 days in 18,000 instances, and in 3,500 of those instances, the companies did not forward the payments for more than a year. Moreover, the Bureau asserts that these delays led to misleading collection efforts, including collection activity on accounts consumers had completely paid off. The order requires the companies to pay a civil money penalty of $200,000, and improve their policies and procedures to prevent further violations.

    Consumer Finance CFPB Enforcement Third-Party Debt Buying CFPA Settlement

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  • CFPB bulletin announces changes to supervisory communications

    Agency Rule-Making & Guidance

    On September 25, the CFPB issued Bulletin 2018-01, which announces changes to how it communicates supervisory expectations to institutions. According to the bulletin, effective immediately, examination reports and supervisory letters will include two categories of findings that convey supervisory expectations: (i) Matters Requiring Attention (MRAs); and (ii) Supervisory Recommendations (SRs). MRAs will continue to be used to outline specific goals for institutions to accomplish in order to correct violations of law, remediate harmed consumers, and address compliance management system (CMS) weaknesses, and will include timeframes for companies to report on its efforts to address MRAs and timeframes for implementation. SRs will be used when the Bureau has not identified violations of law but noted weaknesses in CMS and will contain recommended actions to address weaknesses. The bulletin notes that neither MRAs nor SRs are legally enforceable, but emphasizes the Bureau will consider an institution’s response in addressing the noted concerns when assessing a compliance rating, prioritizing future supervisory work, or assessing the need for an enforcement action.

    Agency Rule-Making & Guidance CFPB Supervision Examination

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  • Court dismisses action by a tribal nation against a national bank for claims relating to the bank’s incentive compensation sales program

    Courts

    On September 25, the U.S. District Court for the District of New Mexico dismissed an action brought by a tribal nation against a national bank alleging, among other things, that the bank’s incentive compensation sales program resulted in the bank’s employees opening deposit and credit card accounts for consumers without obtaining their consent to do so. In December 2017, the tribal nation brought 17 claims against the national bank, including alleged violations of the Consumer Financial Protection Act (CFPA) and a variety of federal, state, tribal, and common law violations. The court rejected the tribal nation’s claims under the CFPA, holding they are barred by res judicata, as the claims previously had been litigated under the CFPB’s 2016 consent order (previously covered by InfoBytes here) and that the tribal nation was in privity with the CFPB. The court also rejected the tribal nation’s argument that it was entitled to civil penalties, injunctive and declaratory relief under the doctrine parens patriae, finding the tribal nation failed to allege facts sufficient to demonstrate standing for each claim and each form of relief. As for the state and tribal law claims, the court held that it lacked an independent basis for jurisdiction due to the court’s dismissal of all of the federal law claims.

    Courts Incentive Compensation CFPA CFPB

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  • CFPB issues report and RFI on data sources and use

    Federal Issues

    On September 25, the CFPB released a report on the Bureau’s data governance program, including what data the Bureau collects, from where the data is sourced, and how the data is used and reused within the Bureau. The report emphasizes that data informs a large portion of the Bureau’s work, including rule writing, supervision, enforcement, consumer education, and market monitoring. The report details the more than 188 data collections from public sources, government agencies, commercial vendors, financial institutions, and consumers that the Bureau has undertaken to date. In connection with the report, the Bureau issued a request for information (RFI) seeking feedback on the Bureau’s data governance program and data use. Specifically, the RFI requests comments on, among other things, (i) the overall effectiveness and efficiency of the Bureau’s data collections; (ii) privacy issues related to the Bureau’s data collection practices; (iii) ways the Bureau should or should not reuse data collected for one purpose to inform other work; and (iv) ways the Bureau could make data reporting less burdensome. Comments must be received by December 27.

    Federal Issues CFPB Data RFI

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  • Federal Reserve seeks to repeal SAFE Act regulations to reflect CFPB authority

    Agency Rule-Making & Guidance

    On September 21, the Federal Reserve Board (Board) issued a notice of proposed rulemaking seeking comment on the repeal of certain provisions of regulations that incorporate the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), which the Board states are intended to reflect the transfer of rulemaking authority to the CFPB by the Dodd-Frank Act. Specifically, the Board proposes amending Regulation H (Membership of State Banking Institutions in the Federal Reserve System) and Regulation K (International Banking Operations) to repeal the provisions that incorporate the SAFE Act because of the change in rulemaking authority and because the CFPB finalized a rule that is substantially identical to the Board's regulations. Comments on the proposal are due within 60 days after publication in the Federal Register.

    Agency Rule-Making & Guidance Federal Issues Federal Reserve CFPB SAFE Act Licensing Mortgages

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  • CFPB studies geographic patterns in credit invisibility

    Consumer Finance

    On September 19, the CFPB released a new Data Point report from the Office of Research titled, “The Geography of Credit Invisibility,” which examines geographic patterns in the prevalence of “credit invisible” consumers, a term for those who do not have a credit record maintained by a national credit reporting agency, or have a credit record that is deemed to have too little or too old of information to be treated as “scorable” by widely used credit scoring models. The report studies whether the geographic location of a consumer’s residence is correlated with the likelihood of remaining credit invisible and aims to “aid policymakers and advance the conversation around potential causes and solutions.” Among other things, the report found:

    • credit invisibility may be higher for geographic tracts near universities due to their concentration of adults under 25 who may not have established a credit record yet;
    • rural areas have the most credit invisibility per capita;
    • consumers are less likely to use a credit card as an entry product to establishing a credit record in rural and low-to-moderate income areas;
    • credit invisibility was more prevalent in areas with less internet access as many products are originated through online services; and
    • there is little relationship between distance to the nearest bank branch and the occurrence of credit invisibility.

    The CFPB previously published two other Data Point reports on the subject: “Credit Invisibles” in 2015 and “Becoming Credit Visible” in 2017.

    Consumer Finance CFPB Research Credit Reporting Agency

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  • California updates foreign language disclosure requirements for mortgage modifications

    State Issues

    On September 11, the California governor approved SB 1201, which amends the state civil code to, among other things, require any supervised financial institution that negotiates a mortgage loan modification with a borrower primarily in Spanish, Chinese, Tagalog, Vietnamese, or Korean and offers the borrower a final loan modification in writing, to deliver to the borrower at the same time, a specified form summarizing the modified terms in the same language as the negotiation. The amendments require the California Department of Business Oversight (CDBO) to make available—using CFPB and Fannie Mae forms as guidance—certain disclosures and forms in those specified languages.

    The amendments are generally effective on January 1, 2019, with the amendments relating to the new written disclosures to become operative 90 days following the issuance of forms by the CDBO, but not before January 1, 2019.

    State Issues State Legislation Mortgage Lenders Mortgages Loss Mitigation Mortgage Modification Language Access CFPB Fannie Mae

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  • CFPB files lawsuit against pension advance company citing alleged CFPA and TILA violations

    Courts

    On September 13, the CFPB filed a complaint against a pension advance company, its owner, and related entities (defendants) based upon alleged violations of the Consumer Financial Protection Act (CFPA) and the Truth in Lending Act (TILA). In a complaint filed with the U.S. District Court for the Central District of California, the Bureau charged that the defendants engaged in deceptive practices in violation of the CFPA when they allegedly misrepresented to customers that “lump-sum” pension advances were not loans and carried no applicable interest rate, even though customers were required to pay back advances at amounts equivalent to a 183 percent interest rate and often incurred fees such as one-time $300 set up fees, monthly management fees, and 1.5 percent late fees. According to the Bureau, the defendants allowed customers to take out advance payments ranging from $100 to $60,000. The defendants then allegedly provided the income streams as 60- or 120-month cash flow payments to third-party investors, promising between 6 and 12 percent interest rates. Moreover, the defendants allegedly failed to provide customers with TILA closed-end-credit disclosures. The complaint seeks civil penalties, monetary and injunctive relief.

    As previously covered in InfoBytes, the pension advance company initiated a suit against the CFPB in January 2017 after the Bureau declined to set aside or keep confidential a civil investigative demand served against the company. The suit challenged the Bureau’s constitutionality and argued that the company was likely to suffer irreparable harm from being identified as being under investigation. However, in a split decision, the D.C. Circuit Court ultimately denied the company’s bid for an emergency injunction, citing the now-vacated majority opinion in PHH v. CFPB.

    Courts CFPB Consumer Finance Interest Rate CFPA TILA PHH v. CFPB Single-Director Structure

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