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  • Democratic AGs object to CFPB sandbox

    State Issues

    On February 11, a coalition of 22 Democratic state Attorneys General responded to the CFPB’s proposed policy on No-Action Letters (NAL) and a new federal product sandbox, pushing back on the Bureau’s efforts to provide relief to financial institutions looking to implement new consumer financial products or services. (InfoBytes coverage on the proposal available here.) The Attorneys General argued that the Bureau “has no authority to issue such sweeping immunity absent formal rulemaking” and urged the Bureau to rescind the proposals, which the Bureau had stated were exempt from the notice and comment procedures of the Administrative Procedures Act.

    In addition to challenging the Bureau’s authority to establish these policies, the Attorneys General asserted specific concerns with the NAL proposal, including (i) the fact that the proposed NAL policy would make NALs binding on the CFPB indefinitely; (ii) the streamlined application process and 60-day decision window, potentially causing the Bureau to render hasty, uninformed decisions; and (iii) the proposed NAL policy’s purported deviations from the policies of other federal agencies, such as the SEC.

    As for the new product sandbox, the Attorneys General viewed the proposed policy as “even more troubling” than the NAL proposal, as it provides immunity from “enforcement actions by any Federal or State authorities, as well as from lawsuits brought by private parties.” The Attorneys General rejected the Bureau’s contention that the statutory safe harbors in TILA, ECOA, and the EFTA grant the authority to provide the broad enforcement relief and accused the Bureau of “abandoning its critical role in monitoring the risk that new and emergency technologies post to consumers in the financial marketplace.”

    State Issues State Attorney General Fintech CFPB Regulatory Sandbox Safe Harbor

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  • CFPB releases semi-annual report to Congress

    Federal Issues

    On February 12, the CFPB issued its semi-annual report to Congress covering the Bureau’s work from April 1, 2018, through September 30, 2018. The report, which is required by the Dodd-Frank Act, addresses issues including problems faced by consumers with regard to consumer financial products or services; significant rules and orders adopted by the Bureau; and various supervisory and enforcement actions taken by the Bureau when acting Director Mick Mulvaney was still in office. The report is the first to be released under Kathy Kraninger, who was confirmed as Director in December 2018. In her opening letter, Kraninger emphasized that during her tenure the Bureau will “vigorously and even-handedly enforce the law,” and will make sure the financial marketplace “is innovating in ways that enhance consumer choice.” Among other things, the report focuses on credit invisibility and mortgage shopping as two significant problems faced by consumers, noting that credit invisibility among adults tends to be concentrated in rural and highly urban areas and, based on recent studies, more than 75 percent of borrowers report applying for a mortgage with only one lender.

    The report also includes an analysis of the efforts of the Bureau to fulfill its fair lending mission. The report highlights the most frequently cited violations of Regulation B (ECOA) and Regulation C (HMDA) in fair lending exams during the reporting period and emphasizes that during the reporting period the Bureau did not initiate or complete any fair lending public enforcement actions or refer any matters to the DOJ with regard to discrimination.

    Federal Issues CFPB Supervision Enforcement Fair Lending Mortgages Regulation B Regulation C ECOA HMDA Dodd-Frank

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  • CFPB releases 2019 lists of rural or underserved counties

    Agency Rule-Making & Guidance

    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.

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

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  • Global Financial Innovation Network seeking cross-border testing applications

    Fintech

    On January 31, the United Kingdom’s Financial Conduct Authority (FCA) announced that the Global Financial Innovation Network (GFIN) officially launched and is now seeking cross-border testing applications. As previously covered by InfoBytes, in August 2018, the FCA announced the creation of the GFIN in collaboration with 11 other global financial regulators, including the CFPB. The network has now expanded to include 29 organizations, including financial regulators and other related entities, committed to supporting financial innovation. The GFIN has three primary functions: (i) to collaborate on innovation and to provide accessible regulatory contact information for firms; (ii) to provide a forum for joint regulation technology work; and (iii) to provide firms with an environment in which to trial cross-border solutions.

    The announcement states that the network has opened a one month application window for firms interested in joining a pilot cohort for cross-border testing for new technologies. Firms interested in participating are required to meet the application requirements of all the jurisdictions in which they would like to test. Each applicable regulator will decide whether the firm’s proposed test meets the screening criteria and ensure safeguards are in place in their jurisdiction for testing. The deadline for testing applications is February 28.

    Fintech Financial Conduct Authority CFPB Regulatory Sandbox International Of Interest to Non-US Persons

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  • OCC praises CFPB’s payday rule proposal

    Federal Issues

    On February 11, the OCC released a statement from Comptroller of the Currency Joseph Otting supporting the CFPB’s proposed rule rescinding certain requirements relating to underwriting standards for short-term small-dollar loans. (Covered by InfoBytes here.) Calling the proposal “important and courageous,” Otting praised the Bureau, noting that it was “[t]he shrinking supply and steady demand” that “drove up prices and promoted much less favorable terms.” He continued to state that a framework of rules that allows responsible lenders to compete in the market will make the market “work better for everyone.”

    As previously covered by InfoBytes, in May 2018, the OCC released a Bulletin encouraging banks to meet the credit needs of consumers by offering short-term, small-dollar installment loans subject to the OCC’s core lending principles.

    Federal Issues Consumer Finance CFPB OCC Installment Loans Payday Rule Underwriting

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  • CFPB announces settlement with payday lending operation

    Federal Issues

    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.

    The Bureau also asserts that the companies violated the GLBA by only providing initial privacy notices when consumers opened their first loan. GLBA requires financial services firms to provide borrowers a privacy policy each time a new customer relationship is established, which in this instance the CFPB claims, occurred each time a borrower paid off an outstanding loan and subsequently took out a new loan. Finally, the Bureau alleges that because the payday loans extended by the companies constitute as closed-end credit under TILA and Regulation Z, the companies were required to disclose a payday loan database fee charged to Kentucky customers in the APR but failed to do so. This resulted in, among other things, inaccurate APR disclosures in advertisements.

    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.

    Federal Issues CFPB Enforcement Settlement Payday Lending CFPA Gramm-Leach-Bliley Regulation P Privacy Notices TILA Regulation Z APR UDAAP

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  • CFPB proposes to rescind ability-to-repay standards in payday rule

    Agency Rule-Making & Guidance

    On February 6, the CFPB released two notices of proposed rulemaking (NPRM) related to certain payday lending requirements under the agency’s 2017 final rule covering “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (the Rule). As previously covered by InfoBytes, last October the Bureau announced plans to reconsider the Rule’s mandatory underwriting requirements and address the Rule’s compliance date.

    The first NPRM proposed will rescind certain provisions of the Rule related to underwriting standards for payday loans and related products scheduled to take effect later this year. Specifically, the CFPB proposes 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. The proposed changes would also rescind prescribed mandatory underwriting requirements for making the ability-to-repay determination, provisions exempting certain loans from the mandatory underwriting requirements, as well as related definitions, reporting, and recordkeeping requirements. The CFPB explains that it now initially determines that the evidence underlying the identification of the unfair and abusive practice in the Rule “is not sufficiently robust and reliable to support that determination, in light of the impact those provisions will have on the market for covered short-term and longer-term balloon-payment loans, and the ability of consumers to obtain such loans, among other things.” If finalized, the proposals represent a significant change to the Rule as finalized during the tenure of former Bureau Director Richard Cordray in October 2017. (See Buckley Special Alert for more detailed coverage on the Rule.) Comments will be accepted for 90 days following publication in the Federal Register.

    The second NPRM seeks to delay the Rule’s compliance date for mandatory underwriting provisions from August 19, 2019 to August 19, 2020. Notably, the Bureau states in a press release announcing the NPRMs that the proposal to delay the effective date does not extend to the Rule’s provisions governing payments, which “prohibit payday and certain other lenders from making a new attempt to withdraw funds from an account where two consecutive attempts have failed unless consumers consent to further withdrawals.” Lenders also will still be required to provide written notice to consumers both before the first attempt to withdraw payment from their accounts, as well as prior to subsequent attempts involving different dates, amounts, or payment channels. These provisions are not under reconsideration and will take effect August 19, 2019. Comments will be accepted for 30 days following publication in the Federal Register.

    Agency Rule-Making & Guidance CFPB Payday Lending Underwriting Federal Register Ability To Repay

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  • CFPB releases TRID FAQs

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance CFPB TRID Regulation Z Mortgages EGRRCPA Disclosures

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  • CFPB files proposed consent order banning certain Canadian and Maltese payday lenders from U.S. consumer lending

    Federal Issues

    On February 1, the CFPB and a group of payday lenders, including individuals and corporate officials based in Canada and Malta (collectively, “defendants”), filed a proposed consent order with the U.S. District Court for the Southern District of New York that would resolve allegations that the defendants violated the Consumer Financial Protection Act. According to the Bureau’s press release, the defendants allegedly (i) misrepresented to consumers an obligation to repay loan amounts that were voided because the loan violated state licensing or usury laws; (ii) misrepresented that loan agreements were not subject to federal or state laws; (iii) misrepresented that non-payment would result in lawsuits, arrests, imprisonment, or wage garnishment; and (iv) conditioned loan agreements upon irrevocable wage assignment clauses. Under the terms of the proposed order, the defendants would be, among other things, (i) permanently banned from consumer lending in the U.S.; (ii) permanently restrained from the collection or sale of existing U.S. consumer debts; and (iii) subject to certain reporting and recordkeeping requirements. The proposed order does not impose a fine on the defendants.

    Federal Issues CFPB Settlement Payday Lending Enforcement Consumer Finance CFPA Courts

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  • CFPB seeks information on debt collection disclosures

    Agency Rule-Making & Guidance

    On February 4, the CFPB released a request for public comment on a new information collection titled, “Debt Collection Quantitative Disclosure Testing.” The proposed collection—which seeks Office of Management and Budget approval to conduct a web survey as part of the Bureau's debt collection disclosure research—“will explore consumer comprehension and decision making in response to debt collection disclosure forms.” Comments must be received by March 6.

    Agency Rule-Making & Guidance CFPB Debt Collection Disclosures OMB Federal Register

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