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Consumer advocacy groups claim CFPB taskforce is illegally chartered
On June 16, several consumer advocacy groups filed a lawsuit in the U.S. District Court for the District of Massachusetts against the CFPB claiming that the Bureau’s Taskforce on Federal Consumer Financial Law was “illegally chartered” and violates the Federal Advisory Committee Act (FACA). As previously covered by InfoBytes, the taskforce was established last year to examine the existing legal and regulatory environment facing consumers and financial services providers. As also covered by InfoBytes, the taskforce recently outlined its future plans, which include analyzing comments received from a March request for information, holding a public hearing, and participating in public listening sessions with the Bureau’s four advisory committees. The complaint argues, however, that the taskforce’s membership lacks balance, and that the appointed members who “uniformly represent industry views” have worked on behalf of several large financial institutions or work as industry consultants or lawyers. This composition, the consumer advocacy groups argue, undermines the purpose of the taskforce and is a violation of FACA and the Administrative Procedure Act. The complaint also states that while FACA requires advisory committee meetings to be open to the public and that records be disclosed, the taskforce has held closed-session meetings without providing public notice and has failed to make available any of the records related to these meetings or its other work.
The complaint seeks declaratory and injunctive relief and asks the court to (i) set aside the taskforce’s charter, all orders and decisions, and the appointments of the taskforce members; (ii) enjoin the taskforce from meeting, or otherwise conducting taskforce business; (iii) order the Bureau to immediately release all materials prepared for the taskforce; and (iv) enjoin the Bureau from relying upon taskforce recommendations or advice. The complaint also seeks costs and attorneys’ fees.
CFPB eases Covid-19 loss mitigation rules
On June 23, the CFPB issued an interim final rule that provides relief to mortgage servicers from certain Regulation X requirements when offering Covid-19 related loss mitigation options. Among other things, the interim final rule amends Regulation X to temporarily permit servicers to offer eligible loss mitigation options without obtaining a complete loss mitigation application from borrowers who have experienced a financial hardship due to Covid-19. In order to qualify for the exception, the loss mitigation option must satisfy certain criteria, including that (i) it must permit the borrower to delay paying certain amounts until liquidation, refinance, maturity, or, for a mortgage insured by FHA, the mortgage insurance terminates; (ii) the servicer cannot charge interest on delayed payment amounts, cannot charge fees in connection with the option, and must waive all existing penalties and fees upon acceptance; and (iii) the borrower’s acceptance must resolve any prior delinquency. The interim final rule is effective on July 1.
Special Alert: CFPB proposes changes to qualified mortgage definition; delays expiration of “GSE patch” until final rule becomes effective
On June 22, the CFPB released two Notices of Proposed Rulemaking (NPRM) to address the January 2021 expiration of the so-called GSE Patch for the Qualified Mortgage (QM) Rule. The GSE Patch provided QM status to mortgage loans eligible for purchase by either of the GSEs even if the loans did not otherwise meet the criteria for a QM under the “General QM” standard provided they comply with the same loan-feature prohibitions and points-and-fees limits as General QM loans. Notably, the GSE Patch allows loans to exceed the 43 percent debt-to-income ratio limit required under the General QM standard and also does not require creditors to use Appendix Q to Regulation Z to calculate the consumer’s income and debt.
In the first NPRM, the Bureau proposes to remove the General QM loan definition’s 43 percent DTI limit and replace it with a price-based threshold. In the second NPRM, the Bureau proposes to delay the expiration of the GSE Patch until the effective date of final amendments to the General QM definition in order to facilitate a smooth and orderly transition away from the GSE Patch definition of a Qualified Mortgage.
Kraninger emphasizes need for FCRA and CARES Act compliance
On June 19, CFPB Director Kathy Kraninger spoke during a Consumer Data Industry Association webinar, warning information furnishers and consumer reporting agencies (CRAs) that the Bureau has dedicated significant resources toward enforcement of certain provisions of the CARES Act and the FCRA. Specifically, Kraninger emphasized the Bureau’s reliance on consumer complaint data to inform its supervisory and enforcement activity and noted that April and May had the highest monthly complaint volumes in the Bureau’s history, with approximately 7,200 complaints mentioning Covid-19 related terms during that time. Kraninger referenced the Bureau’s April policy statement, which stated the Bureau would take a “flexible supervisory and enforcement approach during this pandemic regarding compliance with the [FCRA] and Regulation V” (covered by InfoBytes here). However, Kraninger warned that furnishers are still required to comply with the CARES Act, and that the “Bureau expects CRAs and furnishers to make good faith efforts to investigate disputes as quickly as possible.” According to Kraninger, due to the unique challenges the Covid-19 pandemic has created, the Bureau will evaluate each CRA and furnisher’s respective efforts and circumstances on an individual basis to determine whether it made the good faith effort to investigate as quickly as possible.
CFPB issues CARES Act credit reporting FAQs
On June 16, the CFPB released a set of Frequently Asked Questions (FAQs) concerning the Bureau’s previously issued policy statement addressing consumer reporting agencies’ (CRAs) and furnishers’ credit reporting responsibilities under the CARES Act amendments to the Fair Credit Reporting Act (FCRA). The policy statement also emphasized that the Bureau is taking a “flexible supervisory and enforcement approach during this pandemic regarding compliance with the [FCRA] and Regulation V,” including refraining from citing in examinations or bringing enforcement action against CRAs or furnishers acting in good faith. (Covered by InfoBytes here.)
Addressed within the FAQs are topics for furnishers to consider when complying with the CARES Act requirements. These include: (i) reporting as current certain accounts for consumers affected by the Covid-19 pandemic; (ii) citing or suing furnishers that violate the FCRA by failing to investigate disputes; (iii) defining an “accommodation” for purposes of the FCRA amendments, and clarifying whether furnishers are required to provide accommodations to impacted consumers, and if so, what their consumer reporting obligations will be; (iv) clarifying that “using a special comment code to report a natural or declared disaster or forbearance” is not a substitute for complying with the CARES Act credit reporting requirements; (v) warning that reporting forbearances on accounts that are not delinquent, or for which a consumer has not requested a forbearance, “increases the risks of inaccurate reporting and consumer confusion”; and (vi) specifying account status reporting requirements after a CARES Act accommodation ends.
CFPB releases TRID factsheet and FAQs
On June 9, the CFPB released a factsheet on TRID Title Insurance Disclosures and FAQs regarding lender credits on the total payments disclosure, the optional signature line, and separating consumer and seller information. Highlights of each document include:
- TRID Title Insurance Disclosures. The factsheet discusses the two forms of title insurance commonly purchased in residential transactions—lender’s title insurance and owner’s title insurance. The factsheet breaks down the disclosure rules for each, including, among other things, (i) when and how the costs are required to be disclosed; (ii) specifics regarding simultaneous title insurance; and (iii) differences between state disclosures and TRID disclosures for simultaneous rates. The Bureau also provides detailed disclosure examples for various title insurance scenarios.
- FAQs. The updated FAQs note, among other things, that when providing separate closing disclosures to sellers and consumers, the TRID Rule requires seller-paid loan costs and other costs to be disclosed on page 2 of the consumer’s Closing Disclosure. Additionally, the FAQs provide a breakdown of the Total of Payments disclosure on the Closing Disclosure and discuss when a creditor may require a consumer to sign a Loan Estimate or Closing Disclosure.
CFPB outlines plans for consumer financial law taskforce
On June 8, the CFPB published a blog post written by Todd Zywicki, the Chair of the Taskforce on Federal Consumer Financial Law, which discusses the future plans of the taskforce. In addition to the March request for information (RFI) seeking input on consumer protection areas for the taskforce to focus its research and analysis on (covered by InfoBytes here), the post notes that the taskforce intends to gain feedback from other public forums as well in order to produce a two-volume report. The first volume, among other things, will contain a history of consumer financial protection laws, a cost-benefit analysis of financial products and services, and an outline of the current regulatory framework. The second volume will include a set of recommendations for the Bureau “on ways to improve and strengthen the application of financial laws and regulations.” Through the fall, the taskforce will (i) analyze the comments received from the RFI; (ii) hold a public hearing; and (iii) participate in public listening sessions with the Bureau’s four advisory committees.
FTC shares 2019 enforcement report with CFPB
On June 4, the FTC announced that it submitted its 2019 Annual Financial Acts Enforcement Report to the CFPB. The report covers the FTC’s enforcement activities regarding the Truth in Lending Act (TILA), the Consumer Leasing Act (CLA), and the Electronic Fund Transfer Act (EFTA). Highlights of the enforcement matters covered in the report include:
- TILA and CLA. FTC enforcement actions concerning TILA/Regulation Z and CLA/Regulation M include: (i) efforts to combat deceptive automobile dealer practices; (ii) a payday lending action involving undisclosed, inflated fees; (iii) credit repair and debt relief schemes, including the failure to make clear, conspicuous written disclosures for closed-end financing; and (iv) consumer electronics financing.
- EFTA. The FTC reported 12 new or ongoing cases related to EFTA/Regulation E. These include: (i) negative option plans involving, among other things, companies applying recurring charges to consumers’ debit or credit card numbers for goods or services without obtaining proper written authorization; and (ii) unfair loan servicing practices.
Additionally, the report addresses the FTC’s research and policy efforts related to truth in lending and leasing, and electronic fund transfer issues, including (i) a study of consumers’ experiences in buying and financing automobiles at dealerships; (ii) a small business financing forum to examine “trends and consumer protection issues in the small business marketplace, including. . .online loans and alternative financing products”; and (iii) the FTC’s Military Task Force’s work on military consumer protection issues. The report also outlines the FTC’s consumer and business education efforts, which include several blog posts warning of new scams and practices.
CFPB issues LIBOR transition materials
On June 4, the CFPB released three documents to assist in the LIBOR transition before its anticipated cessation at the end of 2021. Highlights of the documents include:
- Notice of Proposed Rulemaking. The Bureau issued a proposed rule to amend Regulation Z to address the sunset of LIBOR, and to facilitate creditors’ transition away from using LIBOR as an index for variable-rate consumer products. For open-end products, among other things, the proposal would (i) require creditors to include in the change-in-terms notice the replacement index and any adjusted margin; (ii) add a LIBOR-specific provision allowing the LIBOR transition to occur on or after March 15, 2021, as opposed to the current rule’s “no longer available” standard; and (iii) allow creditors to elect a replacement index that is newly established and has no history, or is not newly established and has a history, if certain conditions are met. For closed-end credit, among other things, the proposal provides the Secured Overnight Financing Rate (SOFR) recommended by the Alternative Reference Rates Committee (ARRC) as a “comparable index” to LIBOR. In conjunction with the proposal, the Bureau released a “Fast Facts” high-level summary and an unofficial redline.
- FAQ Guidance. The Bureau released FAQ guidance to address other LIBOR transition topics and regulatory questions that do not require amendments to Regulation Z. Among other things, the FAQs cover general regulatory implementation considerations and specific requirements related to adjustable rate mortgage and HELOC disclosures.
- CHARM Booklet. The Bureau released revisions to their Consumer Handbook on Adjustable Rate Mortgages (CHARM) booklet, which aims to help consumers better understand adjustable rate mortgage loan products. The revisions provide updates based on consumer testing and remove LIBOR-based rate examples.
CFPB updates reverse mortgage servicing examination procedures
On June 1, the CFPB updated its reverse mortgage servicing examination procedures to incorporate current HUD regulations that provide the structure for Home Equity Conversion Mortgage (HECM) products. The updated procedures also add new exam questions to include issues raised in complaints submitted by older consumers. According to the Bureau’s summary, additions to the procedures include: (i) information regarding situations where a “servicer advances funds to pay for property taxes in any situation where the borrower was not behind on these payments”; (ii) guidance concerning a servicer’s timeliness in providing accurate payoff statements; (iii) new language under “Causes of Default” summarizing the circumstances under which an eligible non-borrowing spouse on an HECM loan may stay in the home after the borrower dies, for loans originated on or after August 4, 2014; and (iv) new language in the background section, which “incorporates HUD’s August 2017 regulatory changes that affected the ways in which lenders and servicers calculate the initial and annual mortgage insurance premiums,” as well as additional language “to provide a fuller description of reverse mortgages.”