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On February 22, the FDIC issued FIL-9-2019, which announces revisions to interagency examination procedures for evaluating compliance with the CFPB’s Prepaid Accounts Rule. The Rule was originally finalized in October 2016 and expands coverage under Regulation E to provide consumers, among other things, additional federal protections on prepaid financial products, person-to-person payment products, and other electronic accounts with the ability to store funds. (Covered by InfoBytes here.) In January 2018, the CFPB finalized updates to the Rule and delayed the effective date until April 1, 2019. (Covered by InfoBytes here.) The FIL contains a link to the interagency procedures listed in the FDIC Compliance Examination Manual and confirms that after April 1 the examination staff will begin supervising institutions for compliance with the rule.
On February 12, the CFPB released its annual list of rural counties and rural or underserved counties for lenders to use when determining qualified exemptions to certain TILA regulatory requirements. In connection with the release of the lists, the Bureau also directed lenders to use its web-based Rural or Underserved Areas Tool to assess whether a rural or underserved area qualifies for a safe harbor under TILA’s Regulation Z.
On February 6, the CFPB announced a settlement with an Indiana-based payday retail lender and affiliates (companies) in seven states to resolve alleged violations of the Consumer Financial Protection Act (CFPA), Truth in Lending Act (TILA), and Gramm-Leach-Bliley Act (GLBA) privacy protections. The CFPB alleges that the companies engaged in unfair acts or practices, failed to properly disclose annual percentage rates, and failed to provide consumers with required initial privacy notices.
Specifically, the Bureau alleges that the companies violated CFPA’s UDAAP provisions by, among other things, (i) failing to implement processes to prevent unauthorized charges, including those resulting from unauthorized draws on borrowers’ bank accounts; (ii) requiring loan applicants to provide contact information for their employers, supervisors, and four personal references, and then repeatedly calling employers to seek payments when borrowers became delinquent; (iii) disclosing the borrower’s financial information during those calls and, in certain instances, asking the third party to make payments on the loan; (iv) misusing personal references for marketing purposes; and (v) advertising check-cashing and telephone reconnection services they were no longer providing.
While the companies have not admitted to the allegations, they have agreed to pay a $100,000 civil money penalty and are prohibited from continuing the illegal behavior.
On January 25, the CFPB released FAQs to assist with TILA-RESPA Integrated Disclosure Rule (TRID) compliance. Three of the four FAQs relate to corrected closing disclosures and the three business-day waiting period, while the fourth FAQ relates to the use of model forms. Highlights of the FAQs include:
- Under TRID, a creditor must ensure that a consumer received a corrected Closing Disclosure at least three business days before consummation of the transaction (i) for certain APR changes; (ii) if the loan product information changes; or (iii) if a prepayment penalty has been added to the loan. Any of these changes would trigger a new three business-day waiting period.
- A corrected Closing Disclosure is required under TRID if the APR changes, including if it decreases. If the change in the APR is within applicable tolerances under Regulation Z, the creditor may provide the new Closing Disclosure without triggering a new three business-day waiting period. If the change in the APR is outside applicable tolerances, the creditor must wait three business days before consummation.
- Section 109(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act did not change the timing for consummating transactions if a creditor is required to provide a corrected Closing Disclosure under TRID.
- A creditor is deemed in compliance with the disclosure requirements of TRID if it uses the appropriate model forms provided by the Bureau and properly completes them with accurate content.
On September 26, the OCC issued Bulletin 2018-31, which updates the “Truth in Lending Act” (TILA) booklet of the Comptroller’s Handbook, which previously was issued in December 2014. The booklet provides guidance for OCC examiners to be used in connection with the examination and supervision of national banks and federal savings associations, which offer or extend consumer credit products covered by TILA. The updates reflect changes made to Regulation Z, TILA’s implementing regulations, since the booklet’s previous release, and includes procedures implementing the CFPB’s TILA-RESPA integrated disclosure rule (TRID). Additional updates include, among other things, (i) special provisions on certain construction loans; (ii) special provisions relating to small creditors and rural or underserved areas; (iii) changes regarding appraisals for higher-priced mortgage loan exemptions; (iv) updates to mortgage origination examination procedures; and (v) updates to mortgage servicing rules and the small creditor definition.
With the issuance of the new booklet, the OCC rescinds (i) OCC Bulletin 2014-61, “Truth in Lending Act: Revised Comptroller’s Handbook Booklet and Rescissions”; (ii) The TILA sections of OCC Bulletin 2015-27, “Revised Interagency Examination Procedures for Consumer Compliance”; and (iii) OCC Bulletin 2015-42, “Initial Examinations for Compliance With TILA-RESPA Integrated Disclosure Rule.”
On May 15, the CFPB released the 2018 updated versions of the “Know Before You Owe” mortgage disclosure rule Small Entity Compliance Guide (versions 4.1 and 5.2) and Guide to Forms (versions 1.5 and 2.1). Because the optional compliance period with the 2017 TILA-RESPA Integrated Disclosure Rule (TRID) extends through October 1, the CFPB updated both versions of each guide. Additionally, all four versions are updated with the 2018 TRID changes (covered by InfoBytes here), which will become effective prior to the end of the 2017 optional compliance period.
3rd Circuit reverses district court’s decision, rules TILA provisions misapplied to unauthorized-charge suit
On May 16, the U.S. Court of Appeals for the 3rd Circuit reversed a district court’s decision, holding that the lower court, among other things, misapplied a TILA provision under Regulation Z that requires cardholders to dispute charges within 60 days of the “first periodic statement that reflects the alleged billing error.” According to the opinion, the plaintiff-appellant filed a suit against the bank after he was allegedly rebilled for a $657 fraudulent money transfer charge that originally appeared on his statement in July 2015. The charge was originally removed from his account but reappeared in mid-September of that year after the bank claimed the charge was valid after verifying transaction details. The plaintiff-appellant challenged the decision in writing, and later filed a complaint against the bank, alleging he had “timely submitted a written notice of billing error,” and that the bank “had neither credited the charge nor conducted a reasonable investigation” and imposed liability of more than $50. The district court dismissed the complaint with prejudice for failure to state a claim, which the plaintiff appealed.
At issue, the three-judge panel determined, were two provisions under TILA: (i) the “Fair Credit Billing Act” (FCBA), which stipulates that creditors must “comply with particular obligations when a consumer has asserted that his billing statement contains an error,” and (ii) the “unauthorized-use provision,” which requires certain conditions to be met before a credit card issuer can hold the cardholder liable, up to a limit of $50, for any unauthorized use. The panel first addressed the district court’s finding that the bank’s obligations under FCBA were “never triggered” because his written notice came 63 days after the July statement first included the charge. The panel held that, because the plaintiff-appellant’s August billing statement showed a credit to his account for the charge and that “there was no longer anything to dispute” and no reason to believe his statement contained a billing error, the 60-day time limit should have started when the bank rebilled him in September. In addressing the second issue, the district court held that plaintiff-appellant was not entitled to “reimbursement” under the unauthorized-use claim. However, the panel opined that he was not seeking reimbursement but rather “actual damages,” for which the statute does provide relief. “We conclude that a cardholder incurs ‘liability’ for an allegedly unauthorized charge when the issuer, having reason to know the charge may be unauthorized, bills or rebills the cardholder for that charge,” the panel wrote.
On April 19, the Federal Reserve Board (Fed) issued a consumer affairs letter (CA 18-3) announcing revised interagency examination procedures for Regulation X (RESPA) and Regulation Z (TILA) that supersede procedures previously issued in September 2015. The updated procedures account for amendments to mortgage servicing rules under Regulations X and Z that took effect October 19, 2017 (see previous InfoBytes coverage here), as well as amendments to Regulation Z published by the CFPB through April 2016, including rules concerning small creditors’ mortgage lending to rural and underserved areas. However, the Fed stated in its letter that, at this time, the updated procedures do not incorporate Regulation Z amendments concerning the CFPB’s TILA-RESPA integrated disclosure rule or those regarding prepaid accounts. These amendments will be addressed in a future update.
CFPB updates mortgage servicing Small Entity Compliance Guide, releases mortgage servicing coverage chart
On March 29, the CFPB released version 3.1 of its mortgage servicing Small Entity Compliance Guide. The updated guide supports the implementation of the 2016 Mortgage Servicing Final Rule, including the amendment to the Rule released earlier this month. The Rule replaces the previous single-billing-cycle exemption with a single-statement exemption when servicers transition to providing modified or unmodified periodic statements and coupon books to consumers entering or exiting bankruptcy. See previous InfoBytes coverage here. The Bureau also released a mortgage servicing coverage chart, which summarizes the mortgage servicing rules that will be in effect as of April 19.
On March 20, the CFPB released updated FAQs to support the implementation of the 2016 Mortgage Servicing Final Rule. Specifically, the updated FAQs pertain to the mortgage-servicing provisions regarding bankruptcy, which are effective April 19. The CFPB released ten bankruptcy-related question and answers. The bankruptcy topics include periodic statements, coupon books, reaffirmation, successors in interest, and timing of compliance.
- Buckley Webcast: Maintaining privilege in cross-border internal investigations
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Daniel P. Stipano to discuss "The state of the BSA 2019: What’s working, what’s not, and how to improve it" at the West Coast Anti Money-Laundering Forum
- Buckley Webcast: The future of the Community Reinvestment Act
- Hank Asbill to discuss "Creative character evidence in criminal and civil trials" at the Litigation Counsel of America Spring Conference & Celebration of Fellows
- Buckley Webcast: Amendments to the CFPB's proposed debt collection
- Brandy A. Hood to discuss "Flood NFIP in the age of extreme weather events" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "UDAAP compliance" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Major state law developments" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Leveraging big data responsibly" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "State examination/enforcement trends" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Benjamin K. Olson to discuss "LO compensation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- APPROVED Webcast: State and SAFE Act licensing requirements for banks
- John C. Redding to discuss "TCPA compliance in the era of mobile" at the Auto Finance Risk Summit
- Buckley Webcast: The next consumer litigation frontier? Assessing the consumer privacy litigation and enforcement landscape in 2019 and beyond
- Buckley Webcast: Data breach litigation and biometric legislation
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- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program