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  • Senate passes bipartisan financial regulatory reform bill

    Federal Issues

    On March 14, by a vote of 67-31, the Senate passed the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) (the bill)—a bipartisan regulatory reform bill crafted by Senate Banking, Housing, and Urban Affairs Committee Chairman Mike Crapo, R-Idaho—that would repeal or modify provisions of Dodd-Frank and ease regulations on all but the biggest banks. (See previous InfoBytes coverage here.) The bill’s highlights include:

    • Improving consumer access to mortgage credit. The bill’s provisions state, among other things, that: (i) banks with less than $10 billion in assets are exempt from ability-to-repay requirements for certain qualified residential mortgage loans; (ii) appraisals will not be required for certain transactions valued at less than $400,000 in rural areas; (iii) banks and credit unions that originate fewer than 500 open-end and 500 closed-end mortgages are exempt from HMDA’s expanded data disclosures (the provision would not apply to nonbanks and would not exempt institutions from HMDA reporting altogether); (iv) amendments to the S.A.F.E. Mortgage Licensing Act will provide registered mortgage loan originators in good standing with 120 days of transitional authority to originate loans when moving from a federal depository institution to a non-depository institution or across state lines; and (v) the CFPB must clarify how TRID applies to mortgage assumption transactions and construction-to-permanent home loans, as well as outline certain liabilities related to model disclosure use.
    • Regulatory relief for certain institutions. Among other things, the bill simplifies capital calculations and exempts community banks from Section 13 of the Bank Holding Company Act if they have less than $10 billion in total consolidated assets. The bill also states that banks with less than $10 billion in assets, and total trading assets and liabilities not exceeding more than five percent of their total assets, are exempt from Volcker Rule restrictions on trading with their own capital.
    • Protections for consumers. Included in the bill are protections for veterans and active-duty military personnel such as: (i) permanently extending the protection that shields military personnel from foreclosure proceedings after they leave active military service from nine months to one year; and (ii) adding a requirement that credit reporting agencies provide free credit monitoring services and credit freezes to active-duty military personnel. The bill also addresses general consumer protection options such as expanded credit freezes and the creation of an identity theft protection database. Additionally, the bill instructs the CFPB to draft federal rules for the underwriting of Property Assessed Clean Energy loans (PACE loans), which would be subject to TILA consumer protections.
    • Changes for bank holding companies. Among other things, the bill raises the threshold for automatic designation as a systemically important financial institution from $50 billion in assets to $250 billion. The bill also subjects banks with $100 billion to $250 billion in total consolidated assets to periodic stress tests and exempts from stress test requirements entirely banks with under $100 billion in assets. Additionally, certain banks would be allowed to exclude assets they hold in custody for others—provided the assets are held at a central bank—when computing the amount such banks must hold in reserves.
    • Protections for student borrowers. The bill’s provisions include measures to prevent creditors from declaring an automatic default or accelerating the debt against a borrower on the sole basis of bankruptcy or cosigner death, and would require the removal of private student loans on credit reports after a default if the borrower completes a loan rehabilitation program and brings payments current.

    The bill now advances to the House where both Democrats and Republicans think it is unlikely to pass in its current form.

    Federal Issues Federal Legislation Bank Regulatory Dodd-Frank S. 2155 CFPB HMDA Mortgages Licensing TILA TRID Servicemembers Volcker Rule Student Lending Consumer Finance Bank Holding Companies Community Banks Privacy/Cyber Risk & Data Security

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  • District Court denies payment company’s request to set aside judgment


    On March 12, the U.S. District Court for the Northern District of California denied a company’s post-trial motions to set aside September 2017 judgments in a lawsuit brought by the CFPB for alleged violations of the Consumer Financial Protection Act (CFPA). Specifically, the bi-weekly payments company requested that the court set aside its injunction and reconsider a $7.93 million penalty in light of “new evidence” that demonstrated the company’s inability to pay the penalty. As previously covered by Infobytes, the CFPB filed the lawsuit in 2015, alleging, among other things, that the company made misrepresentations to consumers about its bi-weekly payment program by overstating the savings provided by the program and creating the impression the company was affiliated with the consumers’ lender. In denying the company’s motion, the court held that the company failed to present new evidence that would justify the relief. Additionally, the court rejected the argument that the permanent injunction placed on the company was overly burdensome, stating “in light of the evidence of defendants[’] prior practices…the limitations of the injunction reflect appropriate safeguards ‘to avoid deception of the consumer.’”

    Courts CFPB Payment Processors UDAAP CFPA

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  • CFPB updates prepaid rule Small Entity Compliance Guide

    Agency Rule-Making & Guidance

    On March 13, the CFPB released version 3.0 of its prepaid rule Small Entity Compliance Guide and the guide to Preparing Short Form Disclosure for Prepaid Accounts. The updated guides reflect the 2018 final rule governing prepaid accounts (Rule). As previously covered by Infobytes, in December 2017, the Bureau announced its plan to delay the effective date and adopt the final amendments to the Rule. In January, the Bureau finalized the Rule and moved the effective date to April 1, 2019.

    Agency Rule-Making & Guidance CFPB Prepaid Rule

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  • Judge orders student loan servicer to comply with CFPB CID


    On February 28, the U.S. District Court for the Western District of Pennsylvania granted the CFPB’s petition to enforce a Civil Investigative Demand (CID) issued against a student loan servicer. According to the opinion, the student loan servicer filed a petition with the CFPB to set aside a June 2017 CID because the statutorily-mandated Notification of Purpose did not comply with the Bureau’s notice requirements under 12 U.S.C. § 5562(c)(2). The loan servicer argued that the CID’s list of activities under investigation—i.e., processing payments, charging fees, transferring loans, maintaining accounts, and credit reporting—failed to provide the servicer with fair notice as to the nature of the investigation because it “merely categorize[s] all aspects of a student loan servicing operation.” The CFPB denied the petition, and in November 2017, filed a petition in court to enforce the CID. In granting the Bureau’s petition, the court found that the Notification of Purpose met the statutory notice requirements because nothing in the law bars the CFPB “from investigating the totality of a company’s business operations.” Moreover, the court also found that the CID’s Notification of Purpose met the necessary requirements regarding administrative subpoenas set forth by the U.S. Court of Appeals for the 3rd Circuit, concluding that the investigation is for a “legitimate purpose,” the information requested is relevant and not already known by the Bureau, and the request is not unreasonably broad or burdensome.

    Courts CFPB Student Lending CIDs Appellate Third Circuit

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  • CFPB releases 2018 lists of rural, underserved counties

    Agency Rule-Making & Guidance

    On March 6, the CFPB released its annual list of rural counties and rural or underserved counties for lenders to use when determining qualified exemptions under certain TILA regulatory requirements. In addition to these lists, the Bureau also directed lenders to use its web-based Rural or Underserved Areas Tool to assess whether a rural or underserved property qualifies for safe harbor for purposes of Regulation Z.

    Agency Rule-Making & Guidance CFPB TILA Regulation Z Consumer Finance Lending

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  • CFPB issues final rule on periodic statements during bankruptcy

    Agency Rule-Making & Guidance

    On March 8, the CFPB issued a final rule updating technical aspects of the upcoming periodic statement requirements for borrowers in bankruptcy under Regulation Z. The Bureau adopted the proposed rule, released in October 2017, without revision (previously covered by InfoBytes here). Specifically, the final rule changes the transition rules for borrowers who enter or leave bankruptcy by replacing the previous single-billing-cycle exemption with a single-statement exemption for the next periodic statement or coupon book that a servicer would otherwise have to provide, regardless of when in the billing cycle the triggering event occurs. The Bureau also added new commentary to clarify the operation of the single-statement exemption. The rule is effective April 19. 

    Agency Rule-Making & Guidance CFPB Mortgage Servicing Bankruptcy Consumer Finance Regulation Z

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  • GAO recommends the CFPB review the effectiveness of TRID guidance for small institutions

    Federal Issues

    On February 27, the U.S. Government Accountability Office (GAO) released a report of recommendations to financial regulators on actions to take related to the compliance burdens faced by certain small financial institutions. The report is the result of a study the GAO initiated with over 60 community banks and credit unions (collectively, “institutions”) regarding which financial regulations were viewed as the most burdensome. Among others, the report includes a recommendation to the CFPB that it should assess the effectiveness of its TILA/RESPA Integrated Disclosure Rule (TRID) guidance and take affirmative steps to address any issues that are necessary. In a response to the GAO that is included in the report, the CFPB Associate Director David Silberman said, “the Bureau agrees with this recommendation and commits to evaluating the effectiveness of its guidance and updating it as appropriate.” Among other recommendations, the GAO highlights the need for the CFPB to coordinate with the other financial regulators on their periodic Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) reviews.

    In addition to the compliance concerns with TRID disclosures, the GAO reports that the institutions also consider the data reporting requirements under HMDA, and the transaction reporting and customer due diligence requirements of the Bank Secrecy Act and related anti-money laundering laws the most burdensome. The GAO includes specific recommendations to the other financial regulators to strengthen and streamline regulations through the EGRPRA process.

    Federal Issues GAO CFPB Mortgages TRID HMDA Bank Secrecy Act Anti-Money Laundering EGRPRA

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  • CFPB reviews removal of public records from credit reports

    Consumer Finance

    On February 22, the CFPB released a report finding that the removal of public records from consumer credit reports may have had an effect on consumers’ credit scores. The report reviewed the impact of the civil public records minimum information standards established pursuant to the National Consumer Assistance Plan (NCAP) – an initiative launched by the top three U.S. credit reporting agencies (CRAs) as a result of settlement agreements between the CRAs and over 30 state attorneys general. Starting in July 2017, the NCAP required public records furnished to the CRAs to include a name, address, and social security number and/or date of birth and required the records be refreshed every 90 days. According to the report, prior to the NCAP, six percent of consumers had a civil judgment or tax lien on their credit report; and after the NCAP implementation, the CFPB found that only 1.4 percent of consumers had a tax lien on their credit report and zero consumers had civil judgments. However, the report notes that while there was a significant drop in the overall reporting of public records, only six percent of those affected by the NCAP new reporting requirements, experienced an increase from “deep subprime or subprime credit scores in June before the standards took effect and rose to near prime or above in September.” The CFPB noted in a blog release that the Bureau cannot assess scoring-model accuracy because it requires two years of data following the implementation of new standards to perform the analysis.

    Consumer Finance CFPB Credit Reporting Agency

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  • CFPB releases RFI on external engagements

    Federal Issues

    On February 21, the CFPB released its fifth Request for Information (RFI) in a series seeking feedback on the bureau’s operations. This RFI solicits public comment on how the Bureau can best “conduct future external engagements while continuing to achieve the Bureau’s statutory objectives.” According to the RFI, the Bureau’s “external engagements” are public and non-public meetings, including: field hearings, town halls, roundtables, and meetings of its advisory board and councils. The Bureau is required by the Dodd-Frank Act to have a Consumer Advisory Board.  The Bureau has also chosen to form three advisory councils: the Community Bank Advisory Council, the Credit Union Advisory Council, and the Academic Research Council. 

    The RFI broadly requests feedback on all aspects of these external engagements but also highlights specific topics on which comment is requested, including (i) strategies for seeing feedback from diverse external stakeholders; (ii) information related to the methods, such as town halls and field hearings, the Bureau uses to receive feedback; (iii) the current process for transparency in the details of the events; (iv) strategies for promoting transparency while protecting confidential business information; and (v) other approaches not currently utilized by the Bureau. The RFI is expected to be published in the Federal Register on February 26. Comments will be due 90 days from publication.

    Federal Issues RFI CFPB Succession CFPB

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  • CFPB Succession: CFPB releases five-year strategic plan; Trump’s budget proposal suggests cuts

    Federal Issues

    On February 12, the CFPB released its five-year strategic plan, which establishes the agency’s long-term strategic goals with corresponding objectives and achievement strategies. The strategic plan also introduces a new stated mission for the CFPB, which is based on Sections 1011(a) and 1013(d) of the Dodd-Frank Act:

    “To regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws and to educate and empower consumers to make better informed financial decisions.”

    The new mission focuses on regulation and education but is silent on enforcement, as compared to the Bureau’s previous mission:

    “The CFPB helps consumer financial markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.”

    In addition to the mission, with the exception of the achievement strategies, the plan’s goals and corresponding objectives are all also restatements of various sections of title X of the Dodd-Frank Act. According to the plan, the Bureau will act with “humility and moderation” in achieving the three stated goals, which are:

    • “Ensure that all consumers have access to markets for consumer financial products and services.”
    • “Implement and enforce the law consistently to ensure that markets for consumer financial products and services are fair, transparent, and competitive.”
    • “Foster operational excellence through efficient and effective processes, governance and security of resources and information.”

    Notable, are the strategies the Bureau has outlined to achieve its goals and objectives. Among others, these strategies include, (i) reviewing individual regulations for clarification opportunities and considering alternative approaches to regulation; (ii) enhancing institutional regulatory compliance to protect consumers from discrimination and UDAAP violations; (iii) focusing enforcement resources on institutions and product lines that pose the greatest risk to consumers; (iv) promoting the development of compliance technology solutions. The strategic plan also focuses on internal strategies to achieve the Bureau’s mission, such as, maintaining a responsive cybersecurity program and promoting budget discipline.

    The final strategic plan is a significant rewrite of the draft strategic plan published in October 2017 under the Bureau’s previous leadership (covered by InfoBytes here). The final plan represents a “more coherent strategic direction” compared to the draft version, according to a letter written by acting Director Mick Mulvaney, which accompanies the final plan.

    On the same day as the strategic plan was released, President Trump issued his 2019 budget proposal which outlines a plan to place the CFPB under the congressional appropriations process, cut the Bureau’s budget by more than $6 billion over 10 years, and restrict the Bureau’s enforcement authority of federal consumer financial laws. More InfoBytes details about the budget proposal are available here.

    Federal Issues CFPB Succession Bank Supervision Enforcement Consumer Education CFPB

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