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  • Buckley Sandler Insights: CFPB Updates Rulemaking Agenda

    Consumer Finance

    On July 20, the CFPB released its Spring 2017 rulemaking agenda. The agenda was last updated in Fall 2016. The summer release date, and the fact that certain deadlines listed in the updated agenda have already passed, indicates that the agenda’s release may have been delayed after the CFPB drafted it. The following aspects of the updated agenda are particularly noteworthy:

    • Regulation Reviews: The Bureau plans to begin “the first in a series of reviews of existing regulations that we inherited from other agencies through the transfer of authorities under the Dodd-Frank Act,” noting that “other federal financial services regulators have engaged in these types of reviews over time, and believe that such an initiative would be a natural complement to our work to facilitate implementation of new regulations.” The Bureau has formed “an internal task force to coordinate and deepen the agency’s focus on concerns about regulatory burdens and projects to identify and reduce unwarranted regulatory burdens….” The agenda lists “pre-rule activities” as continuing through September 2017. Separately, the Bureau notes its ongoing assessments of the effectiveness of the Mortgage Servicing Rules, the Ability-to-Repay/Qualified Mortgage Rule, and the Remittance Transfer Rule pursuant to the Dodd-Frank Act’s five-year lookback provision.
    • Small Dollar Lending: The Bureau reports that it received more than one million comments on its June 2016 proposed rule to impose ability-to-repay requirements for payday, vehicle title, and similar installment loans. The Bureau states that it “continue[s] to believe that the concerns articulated in the [proposed rule] are substantial” but does not provide an expected release date for a final rule.
    • “Larger Participants” in Installment Lending: The agenda lists September 2017 as the expected release date for “a proposed rule that would define non-bank ‘larger participants’ in the market for personal loans, including consumer installment loans and vehicle title loans.” Designation as a larger participant brings a non-bank entity within the CFPB’s supervisory jurisdiction. The agenda indicates that a companion rule requiring payday, vehicle title lenders, and other non-bank entities to register with the Bureau is also underway, as noted below.
    • Debt Collection: In July 2016, the Bureau released an outline of proposals under consideration for debt collection and convened a panel under the Small Business Regulatory Enforcement Fairness Act in conjunction with the Office of Management and Budget and the Small Business Administration’s Chief Counsel for Advocacy to consult with representatives of small businesses that might be affected by the rulemaking. The Bureau notes that, “[b]uilding on feedback received through [that] panel, we have decided to issue a proposed rule later in 2017 concerning debt collectors’ communications practices and consumer disclosures.” The agenda states that a proposed rule is expected in September 2017. The Bureau also states that, in a departure from the July 2016 outline of proposals, the Bureau “intend[s] to follow up separately at a later time about concerns regarding information flows between creditors and FDCPA collectors and about potential rules to govern creditors that collect their own debts.”
    • Overdrafts: The Bureau states that the current opt-in regime “produces substantially different opt-in rates across different depository institutions” and that its “supervisory and enforcement work indicates that some institutions are aggressively steering consumers to opt in.” The Bureau reports that it is “engaged in consumer testing of revised opt-in forms and considering whether other regulatory changes may be warranted to enhance consumer decision making.” The agenda lists “pre-rule activities” as continuing through June 2017.
    • Small Business Lending: The agenda lists “pre-rule activities” on the implementation of the small business data reporting provisions of the Dodd-Frank Act as continuing through June 2017. Specifically, the agenda states that, at this juncture, the CFPB “is focusing on outreach and research to develop its understanding of the players, products, and practices in the small business lending market and of the potential ways to implement section 1071.”
    • HMDA & ECOA Amendments: The agenda lists October 2017 as the expected release date for the April 2017 proposed ECOA amendments to clarify requirements for collecting information on ethnicity, race, and sex, but does not list an expected release date for finalization of the April 2017 proposed technical corrections to the 2015 HMDA rule, or the July 2017 proposed amendments to the 2015 HMDA rule’s requirements for reporting home equity lines of credit. 
    • TRID/Know Before You Owe Amendments: The agenda lists March 2018 as the expected release date for finalization of the July 2017 proposed rule addressing the “black hole” issue, which is discussed in our special alert.
    • Mortgage Servicing Amendments: The Bureau states that it expects to issue a proposal in September 2017 “to make one or more substantive changes to the rule in response to . . . concerns” raised by the industry. 
    • Arbitration: Interestingly, the agenda states that the Bureau’s final rule on mandatory arbitration clauses, which was released this month to significant controversy, was not expected until August.
    • Non-Bank Registration: The Bureau states that it is “considering whether rules to require registration of [installment lenders] or other non-depository lenders would facilitate supervision, as has been suggested to us by both consumer advocates and industry groups.”
    • Prepaid Cards: The agenda does not provide an expected release date for finalization of the June 2017 proposed amendments addressing error resolution and limitations on liability, application of the rule’s credit-related provisions to digital wallets, and other issues. 
    • Credit Card Agreement Submission: The Bureau is “considering rules to modernize our database of credit card agreements to reduce burden on issuers that submit credit card agreements to us and make the database more useful for consumers and the general public.” The agenda lists “pre-rule activities” as continuing through October 2017.

    Consumer Finance Agency Rule-Making & Guidance CFPB Regulator Enforcement Lending Installment Loans Debt Collection Overdraft Small Business Lending HMDA ECOA TRID Mortgages Arbitration Prepaid Cards Credit Cards

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  • Senate and House Committees File Separate Resolutions Disapproving of CFPB Arbitration Rule

    Federal Issues

    On July 20, the Senate Committee on Banking, Housing and Urban Affairs and the House Financial Services Committee each announced Congressional Review Act Joint Resolutions of Disapproval against the CFPB’s Arbitration Agreements final rule issued July 10. In a press release issued by the Senate Committee, 24 Republican senators—including Chairman Mike Crapo (R-Idaho)—expressed concern that the anti-arbitration measure will discourage cost-effective dispute resolution and push consumers into class action lawsuits causing more harm than good. House Republicans outlined similar concerns in a press release issued the same day. H.J. Res. 111, co-sponsored by all 34 Republican members of the House Financial Services Committee, will seek to nullify the rule, which they believe “punish[es] consumers with decreased access to financial products, increased costs for such products, or both.”

    The Congressional Review Act allows Congress to overturn agency rules by a simple majority if moved within 60 days from the rule’s publication.

    Federal Issues Agency Rule-Making & Guidance Arbitration CFPB Senate Banking Committee CRA House Financial Services Committee Congress Class Action

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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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  • ABA, CFPB to Host Webinar for Financial Institutions on New HMDA Submission Platform

    Agency Rule-Making & Guidance

    On July 17, the ABA and CFPB announced a joint webinar on August 8 at 2:00 pm EDT, which will instruct compliance, operations, and loan processing professionals on how to use the new platform for submitting HMDA data. The webinar will provide an overview of the new tool and data collection process that all financial institutions must use to submit HMDA data beginning January 1, 2018 for data collected during 2017 and going forward.

    Notably, however, on July 14, the CFPB issued a request for comments on proposed amendments to its HMDA reporting threshold for calendar years 2018 and 2019 to ease the burden on small-volume lenders. The comment period ends July 31, 2017. (See previous InfoBytes summary here.)

    Agency Rule-Making & Guidance CFPB ABA HMDA Mortgages Bank Compliance

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  • Judge Issues Ruling that Federal Safe Harbor Provision Applies in RESPA Case

    Courts

    On July 13, a federal judge in the U.S. District Court for the Western District of Kentucky issued an opinion holding that a safe harbor provision for affiliated business arrangements under Section 8(c)(4) of RESPA protects a Louisville law firm's relationship with a string of now-closed title insurance agencies. (See CFPB v. Borders and Borders, Plc, No. 3:13-cv-01047-CRS-DW (W.D. Ky. July 13, 2017)). In 2013, the CFPB alleged the firm violated RESPA by paying kickbacks for real estate settlement referrals through a network of joint ventures with the principals of nine title insurance companies. (See previous InfoBytes summary here.) The judge granted the firm’s motion for summary judgment on only one safe harbor question, stating that the firm’s agreements with the title insurance agencies qualified as “affiliated business arrangements” because it “disclosed the relationship…, the customers could reject the referral, and the Bureau failed to show that the [title insurance companies] received anything of value beyond their ownership interests.”

    The judge rejected the firm's claim that the CFPB cannot seek disgorgement as a remedy and further declined to address the firm’s ultra vires argument that the CFPB is an unconstitutional agency and therefore lacks legal authority to bring suit, stating that the en banc decision in PHH Corp. v. CFPB has not yet been issued.

    Notably, however, the judge appeared to suggest that case could be appealed because the firm’s other arguments fail to qualify for RESPA safe harbors under Sections 8(c)(1) and 8(c)(2).

    Courts CFPB RESPA Mortgages Litigation Disgorgement Safe Harbor

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  • ABA, State Banking Associations Request HMDA Implementation Delay

    Lending

    Following up on comments submitted to the CFPB on its proposal to amend the 2015 HMDA rule (see previous InfoBytes coverage here), the American Bankers Association (ABA)—along with state banking associations representing all 50 states and Puerto Rico—sent a letter on July 12 to the Bureau requesting that the new “complex” and “substantive” requirements scheduled to take effect January 1, 2018 be delayed to allow banks time to comply. The associations claim the Bureau (i) failed to sufficiently conduct industry research to identify and address questions and proposed solutions concerning the proposed changes, and (ii) inadequately addressed issues related to the protection of borrower data. The ABA also stresses that the software systems banks need to incorporate into their platforms to ensure compliant data collection will not be available in time “because the industry and systems vendors are still awaiting rule changes that will necessitate system adaptations.” The Bureau has been asked to announce its intention for a delay within the next month.

    Lending HMDA ABA CFPB Bank Compliance Mortgages Agency Rule-Making & Guidance

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  • CFPB Seeks Comments on Proposed Amendments to HMDA Reporting Threshold

    Agency Rule-Making & Guidance

    On July 14, the CFPB announced and requested comments on proposed amendments to Regulation C, which concerns reporting requirements for banks and credit unions issuing home-equity lines of credit under HMDA. The amendments would raise the threshold from 100 loans to 500 for calendar years 2018 and 2019 to ease the burden on small-volume lenders. During this time, the Bureau will determine based on feedback whether the threshold should be permanently changed. The comment period ends July 31, 2017.

    As previously reported in InfoBytes, earlier this year the Bureau solicited and received comments on its proposal to clarify data collection and reporting requirements under the 2015 HMDA rule. The amendments are scheduled to take effect January 1, 2018.

    Agency Rule-Making & Guidance CFPB HMDA Lending Mortgage Origination

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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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  • CFPB Monthly Complaint Snapshot Focuses on State-Level Consumer Complaints

    Consumer Finance

    On June 27, the CFPB released its monthly complaint report, highlighting complaints from around the country. According to the Bureau, it has handled over 1.2 million complaints from 2011 through June 1 of this year. The report shows nationwide complaint statistics and statistics for service members and older consumers. In addition, the report breaks down statistics on the state level covering financial products and services, company responses to complaints, as well as number of complaints. The vast majority of consumers report high company response rates to complaints averaging in the high 90 percent range, although the volume of complaints is trending upward. The top five products receiving complaints across the country in descending order are: (i) debt collection; (ii) mortgages; (iii) credit reporting; (iv) credit cards; and (v) bank accounts or services.

    Consumer Finance Lending Consumer Complaints Internet Lending CFPB Debt Collection Credit Cards Mortgage Servicing

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  • North Carolina Changes Retail Installment Sales Act Default Fee

    State Issues

    On June 12, the General Assembly of North Carolina ratified Senate Bill 577, which amends the North Carolina Retail Installment Sales Act. Specifically, Senate Bill 577 modifies the late charge on an installment sale contract to be a flat fee of fifteen dollars, which is an increase from the prior limit of the lesser of five percent of the installment payment amount or six dollars. The amendment became effective on June 26 and applies to defaults from that day forward.

    State Issues CFPB State Legislation Consumer Finance Lending Consumer Lending

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