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CFPB outlines regulatory flexibility related to Covid-19
On March 26, the CFPB announced several regulatory flexibility measures to help financial companies work with consumers affected by Covid-19. Specifically, the measures postpone certain industry data collections on Bureau-related rules. These include:
- HMDA. Quarterly information reporting by certain mortgage lenders as required under HMDA and Regulation C will not be expected during this time. However, entities should continue collecting and recording HMDA data in anticipation of making annual submissions. Entities will be provided information by the Bureau on when and how to commence new quarterly HMDA data submissions. (See statement here.)
- TILA. During this time, annual submissions required under TILA, Regulation Z, and Regulation E “concerning agreements between credit card issuers and institutions of higher education; quarterly submission of consumer credit card agreements; collection of certain credit card price and availability information; and submission of prepaid account agreements and related information” will not be expected. (See statement here.)
- Section 1071. A survey seeking information from financial institutions on the cost of compliance in connection with pending rulemaking on Section 1071 of the Dodd-Frank Act has been postponed. As previously covered by InfoBytes, under the terms of a stipulated settlement resolving a 2019 lawsuit that sought an order compelling the Bureau to issue a final rule implementing Section 1071, the Bureau agreed to outline a proposal for collecting data and studying discrimination in small-business lending.
- PACE Financing. A survey of firms providing Property Assessed Clean Energy (PACE) financing to consumers for the purposes of implementing Section 307 of the Economic Growth, Regulatory Relief, and Consumer Protection Act has been postponed.
- Supervision and Enforcement. The Bureau’s policy statement provides “that it does not intend to cite in an examination or initiate an enforcement action against any entity for failure to submit to the Bureau” specified information related to credit card and prepaid accounts. However, the Bureau’s announcement advises entities to “maintain records sufficient to allow them to make delayed submissions pursuant to Bureau guidance.” With respect to operational challenges facing institutions due to Covid-19, the Bureau states that it will work with institutions when scheduling examinations and other supervisory activities to minimize disruption and burden. “[W]hen conducting examinations and other supervisory activities and in determining whether to take enforcement action, the Bureau will consider the circumstances that entities may face as a result of the [Covid-19] pandemic and will be sensitive to good-faith efforts demonstrably designed to assist consumers,” the announcement states.
CFPB releases HMDA FAQs
On March 6, the CFPB released seven updated FAQs to assist reporting institutions in complying with HMDA and Regulation C. As previously covered by InfoBytes, the Federal Financial Institutions Examinations Council’s issued the 2020 edition of the “Guide to HMDA Reporting: Getting It Right!” in February. The FAQs offer guidance for reporting the following data points: (i) universal loan identifier (ULI); (ii) legal entity identifier (LEI); (iii) ethnicity, race, and sex; (iv) discount points; and (v) construction and construction/permanent transactions. Highlights are listed below:
- Regulation C does not “require a financial institution to provide the ULI on loan documents.” It requires a financial institution to “collect, record, and report a ULI for applications for covered loans that is receives, covered loans that it originates, and covered loans that it purchases for each calendar year.”
- “For applications taken by telephone…a person collecting the race or ethnicity information [is required] to orally state the information in the collection form unless the information pertains uniquely to applications taken in writing, for example, the italicized language in the sample data collection form.”
- “[A] financial institution should not correct the race or ethnicity as reported by the applicant, even if the applicant has entered clearly incorrect or inappropriate information.”
- “Where a natural person applicant does not provide ethnicity, race, or sex information for a mail, internet, or telephone application, and a financial institution does not have an opportunity to collect this information during an in person meeting during the application process, the financial institution may report either that the information was not collected on the basis of visual observation or surname (code 2) or that the requirement to report this data field is not applicable (code 3).”
- “For construction and permanent loans where the construction loan is a separate transaction, the financial institution reports only the loan term of the permanent loan. Because the separate construction loan is designed to be replaced by permanent financing, it is excluded as temporary financing.”
FFIEC releases 2020 HMDA reporting guide
On February 13, the FDIC issued FIL-9-2020 announcing the Federal Financial Institutions Examinations Council’s issuance of the 2020 edition of the “Guide to HMDA Reporting: Getting It Right!” The guide applies to HMDA data collected in 2020 that will be reported to supervisory agencies by March 1, 2021, and includes, (i) a summary of responsibilities and requirements; (ii) directions for assembling the necessary tools; and (iii) instructions for reporting HMDA data. According to the announcement, the 2020 edition provides information to assist HMDA compliance in the event of a merger or acquisition, as well as updates to the appendices to reflect amendments to Regulation C made by the CFPB that took effect January 1. As previously covered by InfoBytes, the amendments extend the current temporary threshold of 500 open-end lines of credit under HMDA rules for reporting data to January 1, 2022.
CFPB updates HMDA Small Entity Compliance Guide
On January 24, the CFPB published the HMDA Small Entity Compliance Guide with updates to integrate the HMDA final rule issued in October. According to the guide, HMDA rule changes include (i) the types of institutions and transactions that are subject to Regulation C; (ii) the information that institutions must collect and report; and (iii) the process for reporting the information. As previously covered in InfoBytes, some institutions are exempt from the information collection and reporting requirements. Additionally, the guide notes that effective January 1, 2022, the rule “reduces the loan-volume threshold for covered open-end lines of credit to 100 covered open-end lines of credit in each of the two preceding calendar years” from the temporary threshold of 500 lines, previously covered here. It also clarifies and expands the categories of excluded transactions.
CFPB releases annual HMDA and TILA adjustments
On December 18, the CFPB announced final rules adjusting the asset-size thresholds under HMDA (Regulation C) and TILA (Regulation Z). Both rules take effect on January 1, 2020.
Under HMDA, institutions with assets below certain dollar thresholds are exempt from the collection and reporting requirements. The final rule increases the asset-size exemption threshold for banks, savings associations, and credit unions from $46 million to $47 million, thereby exempting institutions with assets of $47 million or less as of December 31, from collecting and reporting HMDA data in 2020.
TILA exempts certain entities from the requirement to establish escrow accounts when originating higher-priced mortgage loans (HPMLs), including entities with assets below the asset-size threshold established by the CFPB. The final rule increases this asset-size exemption threshold from $2.167 billion to $2.202 billion, thereby exempting creditors with assets of $2.202 billion or less as of December 31, from the requirement to establish escrow accounts for HPMLs in 2020.
CFPB publishes fall 2019 rulemaking agenda
On November 20, the Office of Information and Regulatory Affairs released the CFPB’s fall 2019 rulemaking agenda. According to a Bureau announcement, the information released represents regulatory matters it “reasonably anticipates having under consideration during the period from October 1, 2019, to September 30, 2020.”
Key rulemaking initiatives include:
- Property Assessed Clean Energy (PACE) Financing: As previously covered by InfoBytes, the Bureau published an Advanced Notice of Proposed Rulemaking (ANPR) in March 2019 seeking feedback on the unique features of PACE financing and the general implications of regulating PACE financing under TILA. The Bureau notes it is currently reviewing comments as it considers next steps.
- Small Business Rulemaking: On November 6, the Bureau held a symposium on small business lending to gather information for upcoming rulemaking (previously covered by InfoBytes here). The Bureau emphasized it will focus on rulemaking that would not impede small business access to credit by imposing unnecessary costs on financial institutions. According to the Bureau, materials will be released prior to convening a panel under the Small Business Regulatory Enforcement Fairness Act to consult with businesses that may be affected by future rulemaking.
- HMDA/Regulation C: The Bureau plans to finalize the permanent thresholds for reporting data on open-end lines of credit and closed-end mortgage loans in March 2020, and expects to issue a Notice of Proposed Rulemaking (NPRM) to govern the collection of HMDA data points and the disclosure of this data in July 2020. Both initiatives follow an NPRM and an ANPR issued by the Bureau in May (previously covered by InfoBytes here).
- Payday, Vehicle Title, and Certain High-Cost Installment Loans: As previously covered by InfoBytes, the Bureau published two NPRMs related to certain payday lending requirements under the final rule titled “Payday, Vehicle Title, and Certain High-Cost Installment Loans.” Specifically, the Bureau proposed to rescind the portion of the rule that would make it an unfair and abusive practice for a lender to make covered high-interest rate, short-term loans or covered longer-term balloon payment loans without reasonably determining that the consumer has the ability to repay, and to delay the rule’s compliance date for mandatory underwriting provisions. The Bureau notes it is currently reviewing comments and expects to issue a final rule in April 2020.
- Debt Collection: Following an NPRM issued in May concerning debt collection communications, disclosures, and related practices (previously covered by InfoBytes here), the Bureau states it is currently “engaged in testing of consumer disclosures related to time-barred debt disclosure issues that were not addressed in the May 2019 proposal.” Once testing has concluded, the Bureau will assess the need for publishing a supplemental NPRM related to time-barred debt disclosures.
- Remittance Transfers: The Bureau expects in December to issue a proposed rule to address the July 2020 expiration of the Remittance Rule’s temporary exception for certain insured depository institutions from the rule’s disclosure requirements related to the estimation of fees and exchange rates. (Previously covered by InfoBytes here.)
- GSE Patch: The Bureau plans to address in December the so-called GSE patch, which confers Qualified Mortgage status for loans purchased or guaranteed by Fannie Mae and Freddie Mac while those entities operate under FHFA conservatorship. The patch is set to expire in January 2021, or when Fannie and Freddie exit their conservatorships, whichever comes first. (See Buckley Special Alert here.)
The Bureau further notes in its announcement the addition of entries to its long-term regulatory agenda “to address issues of concern in connection with loan originator compensation and to facilitate the use of electronic channels of communication in the origination and servicing of credit card accounts.”
Senate Banking Committee members urge CFPB to continue collecting all HMDA data
On October 16, eight members of the Senate Banking Committee submitted a comment letter in response to the CFPB’s Advance Notice of Proposed Rulemaking (ANPR) issued last May seeking information on the costs and benefits of reporting certain data points under HMDA. (Previous InfoBytes coverage here.) In the comment letter, committee members urged the Bureau to continue collecting all HMDA data points added in the Bureau’s 2015 final rule rather than considering limitations on the information that must be collected. The committee members asserted that they are “deeply troubled” by the CFPB’s announcement that it would “reopen the 2015 HMDA rule before the new data points had even been collected,” and urged the Bureau to “follow the intent of Congress and maintain collection of all data points added by the 2015 final rule,” stressing the data’s importance when monitoring market trends, credit access, and mortgage lending discrimination.
As previously covered by InfoBytes, on October 15, a coalition of state attorneys general also submitted a comment letter asserting, among other things, that the ANPR will open the door for financial institutions to engage in discriminatory lending.
State AGs urge CFPB to reconsider proposed changes to HMDA
On October 15, a coalition of 13 state attorneys general submitted a comment letter in response to the CFPB’s Advance Notice of Proposed Rulemaking issued last May seeking information on the costs and benefits of reporting certain data points under HMDA. (Previously covered by InfoBytes here.) In the comment letter, the AGs argue, among other things, that the proposed rule would reduce transparency and “undermine the ability of local public officials to investigate unfair and discriminatory mortgage lending practices.” The AGs assert that the Bureau’s proposal to limit the data financial institutions are required to report to the CFPB under HMDA will open the door for financial institutions to engage in discriminatory lending, pointing to the 2018 national HMDA loan-level data released on August 30 (InfoBytes coverage here), which, according to the AGs, show “disturbing trends” that demonstrate the additional data fields are helping to achieve HMDA’s objectives. Specifically, the AGs cite to (i) disparities in manufactured home lending; (ii) racial and ethnic data that points to potential disparities in lending; (iii) the importance of collecting all data on denial reasons; (iv) loan pricing data as an indicator of fair lending; and (v) the importance of collecting debt-to-income and combined loan-to-value ratios.
The New York AG’s office also sent a second letter the same day in response to a Notice of Proposed Rulemaking (NPRM) issued last May by the Bureau that would permanently raise coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under the HMDA rules. (Previously covered by InfoBytes here.) The AG’s office argues that increasing the reporting threshold “would exempt thousands of lenders from reporting data” and would “inhibit the ability of communities and state and local law enforcement to ensure fair mortgage lending in New York and elsewhere, and violate the Administrative Procedure Act” since it fails to consider the full cost of the proposed rule on the states. Specifically, the AG’s office contends that the NPRM will (i) exempt a large number of depository institutions leading to significance loss of data on a local level; (ii) leave discriminatory lending in the rural and multifamily lending markets unchecked; and (iii) guarantee predatory lending if the threshold for open-end reporting is permanently set at 200 loans.
CFPB temporarily extends threshold for open-end HMDA reporting
On October 10, the CFPB issued a final rule extending the current temporary threshold of 500 open-end lines of credit under the HMDA rules for reporting data to January 1, 2022. As previously covered by InfoBytes, the CFPB temporarily increased the threshold for open-end lines of credit from 100 loans to 500 loans for calendar years 2018 and 2019. In May 2019, the Bureau proposed to extend that temporary threshold to January 1, 2022 and then permanently lower the threshold to 200 open-end lines of credit after that date (covered by InfoBytes here). The Bureau then reopened the comment period for the May 2019 proposed rule with respect to the permanent open-end and closed-end coverage thresholds (covered by InfoBytes here) and now intends to issue a final rule addressing the permanent threshold at a later date. The Bureau also intends to address the other closed-end aspects of the May 2019 proposed rule at a later date.
The final rule adopts the temporary extension of the 500 open-end lines of credit until January 1, 2022, and incorporates, with minor adjustments, the interpretive and procedural rule issued in August 2018 (2018 Rule), which implemented and clarified that the HMDA amendments included in Section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (previously covered by InfoBytes here). The final rule is effective January 1, 2022.
CFPB releases semi-annual report to Congress
On October 8, the CFPB issued its Dodd-Frank mandated semi-annual report to Congress covering the Bureau’s work from October 1, 2018 to March 31, 2019. In presenting the report, Director Kathy Kraninger stressed that the Bureau will continue to use the tools provided by Congress to protect consumers, including “vigorous and even-handed enforcement” with a focus on prevention of harm. Kraninger also reiterated her commitment “to strengthening the consumer financial marketplace by providing financial institutions clear ‘rules of the road’ that allow them to offer consumers a range of high-quality, innovative financial services and products.” Among other things, the report analyzed significant problems consumers face when obtaining consumer financial products and services, assessed actions taken by state attorneys general or state regulators relating to federal consumer financial law, and provided a recap of supervisory and enforcement activities.
While the Bureau did not adopt any significant final rules or orders during the preceding year, it did issue two significant notices of proposed rulemaking relating to certain payday lending requirements under the agency’s 2017 final rule covering “Payday, Vehicle Title, and Certain High-Cost Installment Loans.” (See previous InfoBytes coverage here.) The Bureau also adopted several “less significant rules,” and engaged in significant initiatives concerning, among other things, (i) the disclosure of loan-level HMDA data; (ii) Residential Property Assessed Clean Energy proposed rulemaking; (iii) an assessment of significant rules, including the Remittance Rule, the Ability to Repay/Qualified Mortgage Rule, and the RESPA Mortgage Servicing Rule; (iv) trial disclosure programs; (v) innovation policies related to no-action letters and product sandbox and trial disclosure programs; and (vi) suspicious activity reports on elder financial exploitation.