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Buckley Sandler Insights: OMB releases updated and possibly outdated CFPB rulemaking agenda
OMB has released the CFPB’s Fall 2017 rulemaking agenda. Although this is the first update to the agenda since Richard Cordray left the agency in November 2017, delays in the publication of rulemaking agendas are common so the updated agenda may not reflect the views of new CFPB leadership. The updated agenda does not appear on the Bureau’s website. Further:
- HMDA & ECOA Amendments: The updated agenda states that the Bureau planned to determine by December 2018 whether to make permanent adjustments to the threshold for reporting open-end lines of credit. However, as discussed in greater detail here, the CFPB stated on December 21 that it intended to engage in a broader rulemaking to (i) re-examine the criteria determining whether institutions are required to report data; (ii) adjust the requirements related to reporting certain types of transactions; and (iii) re-evaluate the required reporting of additional information beyond the data points required by the Dodd-Frank Act.
- Prepaid Cards: The updated agenda states that the CFPB expected to finalize amendments to its rule on prepaid cards in November 2017, but no final amendments have been issued. Instead, on December 21, the CFPB announced its intent to adopt final amendments “soon after the new year” and stated that it expects to extend the April 1, 2018 effective date to allow more time for implementation.
- Debt Collection: The updated agenda states that the CFPB expects to issue a proposed rule in February 2018 “concerning FDCPA collectors’ communications practices and consumer disclosures.” However, on December 14, OMB announced that the CFPB had withdrawn its planned survey regarding debt collection disclosures because “Bureau leadership would like to reconsider the information collection in connection with its review of the ongoing related rulemaking.”
See previous InfoBytes coverage on the HMDA, Prepaid, and Debt Collection rulemaking updates.
Other noteworthy aspects of the updated agenda include:
- Regulation Reviews: The updated agenda reiterates the Bureau’s intent to review the regulations inherited from other agencies and “clarify ambiguities, address developments in the marketplace, and modernize or streamline regulatory provisions.” The updated agenda lists “pre-rule activities” as continuing through February 2018, rather than September 2017 under the prior agenda.
- “Larger Participants” in Installment Lending: Consistent with the prior agenda, the CFPB states that it is preparing a proposed rule to define the “larger participants” in the personal loan market (including consumer installment loans and vehicle title loans) that will be subject to Bureau examinations. The updated agenda also states that the Bureau is still considering “whether rules to require registration of these or other non-depository lenders would facilitate supervision, as has been suggested to the Bureau by both consumer advocates and industry groups.” However, while the prior agenda indicated that a proposal was expected in September 2017, the new agenda lists May 2018.
- Overdrafts: The updated agenda states only that the CFPB is “continuing to engage in additional research and consumer testing initiatives relating to the opt-in process” for overdraft protection and that “pre-rule activities” will continue through this month. Under the prior agenda, pre-rule activities were scheduled to continue through June 2017.
- Small Business Lending: The agenda indicates that the long-delayed implementation of the small business data reporting provisions of the Dodd-Frank Act will be delayed even longer. The last agenda listed “pre-rule activities” as continuing through June 2017, stating that the CFPB “is focusing on outreach and research to develop its understanding of the players, products, and practices in the small business lending market and of the potential ways to implement section 1071.” The new agenda states that these activities will continue until May 2018, after which the Bureau “expects to begin developing proposed regulations concerning the data to be collected, potential ways to minimize burdens on lenders, and appropriate procedures and privacy protections needed for information-gathering and public disclosure.”
- TRID/Know Before You Owe Amendments: The updated agenda lists April 2018 as the expected release date for finalization of the July 2017 proposed rule addressing the “black hole” issue, which is discussed in a Buckley Sandler Special Alert. The prior agenda listed March 2018.
- Mortgage Servicing Amendments: In October 2017, the CFPB issued proposed amendments to the mortgage periodic statement requirements to further address circumstances in which servicers transition between modified and unmodified statements in connection with a consumer’s bankruptcy case. The updated agenda does not provide an expected release date for final amendments.
- Credit Card Agreement Submission: The agenda continues to state that the Bureau is considering rules to modernize its database of credit card agreements to reduce the submission burden on issuers and to make the database more useful for consumers and the general public. The agenda lists “pre-rule activities” as continuing through February 2018. Under the prior agenda, pre-rule activities were scheduled to continue through October 2017.
Buckley Sandler Insights: CFPB Updates Rulemaking Agenda
On July 20, the CFPB released its Spring 2017 rulemaking agenda. The agenda was last updated in Fall 2016. The summer release date, and the fact that certain deadlines listed in the updated agenda have already passed, indicates that the agenda’s release may have been delayed after the CFPB drafted it. The following aspects of the updated agenda are particularly noteworthy:
- Regulation Reviews: The Bureau plans to begin “the first in a series of reviews of existing regulations that we inherited from other agencies through the transfer of authorities under the Dodd-Frank Act,” noting that “other federal financial services regulators have engaged in these types of reviews over time, and believe that such an initiative would be a natural complement to our work to facilitate implementation of new regulations.” The Bureau has formed “an internal task force to coordinate and deepen the agency’s focus on concerns about regulatory burdens and projects to identify and reduce unwarranted regulatory burdens….” The agenda lists “pre-rule activities” as continuing through September 2017. Separately, the Bureau notes its ongoing assessments of the effectiveness of the Mortgage Servicing Rules, the Ability-to-Repay/Qualified Mortgage Rule, and the Remittance Transfer Rule pursuant to the Dodd-Frank Act’s five-year lookback provision.
- Small Dollar Lending: The Bureau reports that it received more than one million comments on its June 2016 proposed rule to impose ability-to-repay requirements for payday, vehicle title, and similar installment loans. The Bureau states that it “continue[s] to believe that the concerns articulated in the [proposed rule] are substantial” but does not provide an expected release date for a final rule.
- “Larger Participants” in Installment Lending: The agenda lists September 2017 as the expected release date for “a proposed rule that would define non-bank ‘larger participants’ in the market for personal loans, including consumer installment loans and vehicle title loans.” Designation as a larger participant brings a non-bank entity within the CFPB’s supervisory jurisdiction. The agenda indicates that a companion rule requiring payday, vehicle title lenders, and other non-bank entities to register with the Bureau is also underway, as noted below.
- Debt Collection: In July 2016, the Bureau released an outline of proposals under consideration for debt collection and convened a panel under the Small Business Regulatory Enforcement Fairness Act in conjunction with the Office of Management and Budget and the Small Business Administration’s Chief Counsel for Advocacy to consult with representatives of small businesses that might be affected by the rulemaking. The Bureau notes that, “[b]uilding on feedback received through [that] panel, we have decided to issue a proposed rule later in 2017 concerning debt collectors’ communications practices and consumer disclosures.” The agenda states that a proposed rule is expected in September 2017. The Bureau also states that, in a departure from the July 2016 outline of proposals, the Bureau “intend[s] to follow up separately at a later time about concerns regarding information flows between creditors and FDCPA collectors and about potential rules to govern creditors that collect their own debts.”
- Overdrafts: The Bureau states that the current opt-in regime “produces substantially different opt-in rates across different depository institutions” and that its “supervisory and enforcement work indicates that some institutions are aggressively steering consumers to opt in.” The Bureau reports that it is “engaged in consumer testing of revised opt-in forms and considering whether other regulatory changes may be warranted to enhance consumer decision making.” The agenda lists “pre-rule activities” as continuing through June 2017.
- Small Business Lending: The agenda lists “pre-rule activities” on the implementation of the small business data reporting provisions of the Dodd-Frank Act as continuing through June 2017. Specifically, the agenda states that, at this juncture, the CFPB “is focusing on outreach and research to develop its understanding of the players, products, and practices in the small business lending market and of the potential ways to implement section 1071.”
- HMDA & ECOA Amendments: The agenda lists October 2017 as the expected release date for the April 2017 proposed ECOA amendments to clarify requirements for collecting information on ethnicity, race, and sex, but does not list an expected release date for finalization of the April 2017 proposed technical corrections to the 2015 HMDA rule, or the July 2017 proposed amendments to the 2015 HMDA rule’s requirements for reporting home equity lines of credit.
- TRID/Know Before You Owe Amendments: The agenda lists March 2018 as the expected release date for finalization of the July 2017 proposed rule addressing the “black hole” issue, which is discussed in our special alert.
- Mortgage Servicing Amendments: The Bureau states that it expects to issue a proposal in September 2017 “to make one or more substantive changes to the rule in response to . . . concerns” raised by the industry.
- Arbitration: Interestingly, the agenda states that the Bureau’s final rule on mandatory arbitration clauses, which was released this month to significant controversy, was not expected until August.
- Non-Bank Registration: The Bureau states that it is “considering whether rules to require registration of [installment lenders] or other non-depository lenders would facilitate supervision, as has been suggested to us by both consumer advocates and industry groups.”
- Prepaid Cards: The agenda does not provide an expected release date for finalization of the June 2017 proposed amendments addressing error resolution and limitations on liability, application of the rule’s credit-related provisions to digital wallets, and other issues.
- Credit Card Agreement Submission: The Bureau is “considering rules to modernize our database of credit card agreements to reduce burden on issuers that submit credit card agreements to us and make the database more useful for consumers and the general public.” The agenda lists “pre-rule activities” as continuing through October 2017.
CFPB Extends Comment Deadline for Small Business Lending Request for Information
On July 12, the CFPB issued a notice in the Federal Register announcing that, in response to a request from 13 industry trade associations for an additional comment period extension, the Bureau has extended the comment period of the “Request for Information Regarding the Small Business Lending Market” for another 60 days. As previously covered in InfoBytes, the Bureau is seeking responses to its questions regarding the small business lending market and how the implementation of Section 1071 Dodd-Frank Act will affect small business financing. The Bureau also hopes to receive feedback on privacy concerns related to the Section 1071 disclosures. In light of the extension, comments must now be received by September 14.
CFPB Issues Request for Information on Small Business Lending; Prepares to Implement Section 1071 of Dodd Frank Act
On May 10, the CFPB announced the issuance of a Request for Information on various aspects of the market for small business loans as the Bureau prepares to implement Section 1071 of the Dodd-Frank Act, which amends the Equal Credit Opportunity Act (ECOA) to require financial institutions to compile, maintain, and report information concerning credit applications made by women-owned, minority-owned, and small businesses. The Request includes questions grouped in five categories: (i) defining what constitutes a small business; (ii) data points the Bureau will require to be submitted and collected; (iii) types of lenders involved in small business lending and the appropriate institutional coverage for the data collection requirements; (iv) types of financial products offered to small businesses generally, and those owned by women and minorities in particular; and (v) privacy concerns related to the data collection.
The CFPB also released Director Cordray’s prepared remarks in advance of a field hearing on small business lending where he introduced the Request for Information and issued a related press release. Comments are due 60 days after the Request for Information is published in the Federal Register. The Bureau also released a report, entitled “Key Dimensions of the Small Business Lending Landscape,” which presents the CFPB's perspective on the market for lending to small, minority-owned and woman-owned firms and gaps in its understanding.
A couple of industry groups have already weighed in regarding expected difficulties with the application of Section 1071. In a letter sent Tuesday in advance of the field hearing, the National Association of Federally-Insured Credit Unions (NAFCU) urged the CFPB to exempt its members from any rulemaking that compels disclosure of business loan information. NAFCU Regulatory Affairs Counsel Andrew Morris cites the unique characteristics of credit unions, and that such data collection “may yield confusing information about credit unions and further restrict lending activity as a result of increased compliance costs.” The letter notes that “[c]redit unions serve distinct fields of membership, and as a result, institution-level data related to women-owned, minority-owned and small business lending substantially differs in relation to other lenders.”
And, in a white paper provided to the Treasury Department, the American Bankers Association criticizes what amounts to Section 1071’s conflation of consumer and commercial lending, “recommend[ing] the elimination of any vestige of Bureau regulatory, supervisory, or enforcement authority over commercial credit or other commercial account and financial services.”
House Democrat Wants CFPB to Probe Discrimination in Small Business Loans
In a March 15 letter to CFPB Director Richard Cordray, Rep. Emanuel Cleaver (D-Mo.) called upon the Bureau to address potential abuses by FinTech companies that may be engaged in predatory small-business lending. In so doing, he asked that the Bureau “investigate whether FinTech companies engaged in small business lending are complying with all anti-discrimination laws, including the Equal Credit Opportunity Act.” The letter also seeks responses to three questions:
- When does the CFPB anticipate finalizing regulation and guidance to fully implement Section 1071 of the ECOA (requiring financial institutions to collect and maintain loan data for women-owned, minority-owned and small business credit applicants)?
- Has the CFPB engaged in any supervisory activities over FinTech small business lenders and, if so, did the CFPB identify any ECOA-related compliance issues?
- Will the CFPB solicit complaints through its consumer complaint portal from consumers, particularly those from communities of color, who feel they have been discriminated against by a FinTech lender offering small business loans (and, if not, how can consumers formally submit a complaint)?
CFPB Issues Spring 2016 Rulemaking Agenda
On May 18, the CFPB released an overview of its Spring 2016 Rulemaking Agenda, which outlines the CFPB’s current initiatives. In addition to summarizing the CFPB’s recently released proposed rule to ban pre-dispute arbitration clauses in future consumer agreements, the agenda states that the CFPB expects to release this Summer (i) a Notice of Proposed Rulemaking regarding small dollar loan products, including payday loans and auto title loan; (ii) a rule to finalize its November 2014 proposed rule on prepaid products; (iii) a Notice of Proposed Rulemaking to provide clarity concerning its TRID Know Before You Owe mortgage rule; and (iv) a final rule to amend its 2014 proposed rule revising certain provisions of mortgage servicing requirements under RESPA and TILA. The agenda further comments on the CFPB’s oversight of (i) overdraft services on checking accounts, noting that the agency “is engaged in pre-rule making activities to consider potential regulation” of such services; (ii) debt collection practices, observing that the agency is in the process of developing proposed rules to further regulate the industry; (iii) nonbank institutions, emphasizing the CFPB’s rulemaking efforts to further define larger participants of certain markets for consumer financial products and services; and (iv) mortgage markets, highlighting CFPB efforts to implement “critical consumer protections under the Dodd-Frank Act.” Finally, the agenda comments that the CFPB is in the “very early stages starting work to implement section 1071 of the Dodd-Frank Act, which amends the Equal Credit Opportunity Act to require financial institutions to report information concerning credit applications made by women-owned, minority-owned, and small businesses.”
CFPB Director Defends Mortgage Rules, Discusses Plans In Other Markets
On January 28, the House Financial Services Committee held a lengthy hearing with CFPB Director Richard Cordray in connection with the CFPB’s November 2013 Semi-Annual Report to Congress, which covers the period April 1, 2013 through September 30, 2013. The hearing came a day after the Committee launched a CFPB-like “Tell Your Story” feature through which it is seeking information from consumers and business owners about how the CFPB has impacted them or their customers. The Committee has provided an online submission form and also will take stories by telephone. Mr. Cordray’s prepared statement provided a general recap of the CFPB’s recent activities and focused on the mortgage rules and their implementation. It also specifically highlighted the CFPB’s concerns with the student loan servicing market.
The question and answer session centered on the implementation and impact of the CFPB’s mortgage rules, as well as the CFPB’s activities with regard to auto finance, HMDA, credit reporting, student lending, and other topics. Committee members also questioned Mr. Cordray on the CFPB’s collection and use of consumer data, particularly credit card account data, and the costs of the CFPB’s building construction/rehabilitation.
Mortgage Rule Implementation / Impact
Generally, Director Cordray pushed back against charges that the mortgage rules, in particular the ATR/QM rule, are inflexible and will limit credit availability. He urged members to wait for data before judging the impacts, and he suggested that much of the concerns being raised are “unreasoned and irrational,” resulting from smaller institutions that are unaware of the CFPB’s adjustments to the QM rule. He stated that he has personally called many small banks and has learned they are just not aware of the rule’s flexibility. He repeatedly stated that the rules can be amended, and that the CFPB will be closely monitoring market data.
The impact of the mortgage rules on the availability of credit for manufactured homes was a major topic throughout the hearing, On the substance of the issue, which was raised by Reps. Pearce (R-NM), Fincher (R-TN), Clay (D-MO), Sewell (D-AL), and others, Director Cordray explained that in his understanding, the concerns from the manufactured housing industry began with earlier changes in the HOEPA rule that resulted in a retreat from manufacture home lending. He stated that industry overreacted and now lenders are coming back into the market. Mr. Cordray has met personally with many lenders on this issue and will continue to do so while monitoring the market for actual impacts, as opposed to the “doomsday scenarios that are easy to speculate on in a room like this.” Still, he committed to work on this issue with manufacturers and lenders, as well as committee members.
Several committee members, including Reps. Sherman (D-CA), and Huizenga (R-MI) raised the issue of the requirement that title insurance from affiliated companies must be counted in the QM three percent cap. Mr. Cordray repeated that the CFPB believes Congress made a determination to include affiliate title protections in numerous places in the Dodd-Frank Act. That said, the CFPB is looking at the data on the impacts and meeting with stakeholders. Rep. Huizenga was most forceful, stating that while the CFPB has sought to limit the impact of the three percent cap, it is not enough. He raised again his bill, HR 1077, Rep. Meeks’ HR 3211, and ongoing work with Senators Vitter (R-LA) and Manchin (D-WV). He cited a survey conducted by the Real Estate Settlement Providers Council that found the inclusion of title charges causes 60 percent of loans under $60,000 to fail as qualified mortgages, and such loans actually become high-cost HOEPA loans. The survey also found that 45 percent of affiliated loans between $60,000 and $125,000 failed to qualify as qualified mortgages, and that 97 percent of the loans that failed as QMs were under $200,000 simply due to the inclusion of title insurance. Director Cordray did not have time to respond in full, but indicated the CFPB is waiting to see data on the actual impact.
Rep. Capito focused on the QM rule impact on Habitat for Humanity and other 501(c)(3) entities. Director Cordray stated that he spoke with the Habitat CEO prior to the hearing and believes the CFPB can address all of that organization’s concerns through rule amendments. He added that the CFPB already amended the rule to address Habitat’s first set of concerns, and that its latest concerns are new.
HMDA Rule Amendments & Small Business Fair Lending Rule
As she has done several times in the past, Rep. Velazquez (D-NY) raised the status of rulemaking required by Dodd-Frank Act section 1071 regarding small and minority/women-owned business lending. As he has in the past, Director Cordray explained that the CFPB is having difficulty addressing this rule given it is the only area in which the CFPB is required to address business lending. He added that the CFPB has determined that as it moves forward with the rule to amend HMDA data collection, which is underway now, the Bureau will attempt to fold the small business lending element into that process. He stated that the CFPB is working with the Federal Reserve Board on “overhauling that whole [HMDA] database” and “it feels to me that the right spot for this, and we've talked to a number of folks both from industry and consumer side on this, is to make [the small business lending requirements] part of the later stages of that, so it's coming, but not immediate.”
Auto Finance
Rep. Bachus (R-AL) asked Director Cordray to specify appropriate dealer compensation alternatives. Mr. Cordray responded that the CFPB does not know all the mechanisms yet that would be satisfactory. It is “open to auto lenders and others bringing those to [the CFPB’s] attention, but [the CFPB] did say flat fees are one possibility. A flat percentage of the loan might be a possibility. Some combination of that with different durations of the loan, different levels, and potentially other things that [the CFPB has not] thought of but others in the industry may think of and bring to [its] attention. So [the CFPB is] open-minded on that.”
Reps. Scott (D-GA) and Barr (R-KY) also were critical of the CFPB’s auto finance guidance and suggested the CFPB should have met with industry stakeholders in advance or should have conducted a rulemaking. Mr. Scott asserted that auto credit is tighter and more expensive now. Mr. Cordray defended the guidance, as he has in the past, as a restatement of existing law. He does not believe the guidance has impacted or will impact the health of the auto market.
Rep. Beatty (D-OH) raised a recent proposal from the National Association of Auto Dealers on alternative dealer compensation models. Mr. Cordray acknowledged having seen it, and said that as long as all parties agree that the CFPB is respecting its jurisdictional lines in the auto context, the Bureau is willing to sit down with dealers and others to work on a “broader solution.”
Credit Reporting
Rep. Velazquez (D-NY) asked for an update on the CFPB’s efforts to regulate consumer credit reporting agencies. Director Cordray described the CFPB’s efforts to, for the first time, provide federal supervision of the major credit reporting agencies. He stated that those agencies are not used to such supervision and that, in his view, it has been an adjustment for them. The CFPB has had examination teams into each of the three largest credit reporting agencies and is discussing “various issues” with them and areas of concern. He informed the committee that as a result of the CFPB’s efforts the credit reporting agencies, for the first time, are forwarding the documentation that consumers send them about problems and potential errors in their credit reports to the furnishers to be evaluated. The CFPB still is concerned about errors and error resolution.
Prepaid & Overdraft
In response to an inquiry from Rep. Maloney (D-NY), Mr. Cordray stated that the CFPB is continuing to work on the prepaid card proposed rule to address “a hole in the fabric” of consumer protection. He said the rule likely will address disclosures and add new protections. On overdraft, he acknowledged the CFPB is not as far along—the agency is still studying the market.
Payday & Internet Lending
Rep. Luetkemeyer (R-MO) stated the FDIC and DOJ have admitted to working to shut down online lending. He confirmed that the Oversight Committee is considering investigating DOJ on Operation Choke Point (its payment processor investigations). He asked Director Cordray to support, perhaps with a letter of some sort, legitimate online lending businesses and processors. Mr. Cordray agreed that there is plenty of appropriate online lending, but declined to offer specific help absent further context.
Rep. Murphy (D-FL) later suggested that the CFPB look at the “good regulation and great enforcement” in Florida. Director Cordray responded that the CFPB is looking at “a number of states that have developed different provisions on short-term, small-dollar payday lending” including Florida, Colorado, and Washington.
Rep. Heck (D-WA) inquired as to the status of proposed Military Lending Act regulations. Director Cordray explained that the CFPB has been “actively engaged” on writing new rules with the Department of Defense, the Federal Reserve, the FDIC, the OCC, Treasury Department, and the FTC. It stated that it has been difficult to get multiple agencies to work together, and asked Congress to “keep our feet to the fire and make it clear that you want to see that quickly.”
Mobile Payments & Emerging Products/Providers
Rep. Ellison (D-MN) asked about the CFPB’s views on emerging financial service providers, citing recent reports about T-Mobile’s efforts. Mr. Cordray stated that the CFPB is watching very closely and trying to keep up with the rapidly changing products and markets. He stated that it will present challenges to the current regulatory structure, particularly when phone companies are involved, and that the CFPB will need to coordinate with other regulators and probably will need legislation from Congress. Rep. Heck asked the CFPB to conduct a front-end in-depth analysis of consumer protection issues across various emerging mobile payments platforms. Mr. Cordray did not commit.
Student Lending
Rep. Peters (D-MI) raised his FAIR Student Credit Act bill, HR 2561. The bill, which is co-sponsored by Reps. Bachus (R-AL), Capito (R-WV), and seven other Republicans and 11 Democrats, would amend FCRA with respect to the responsibilities of furnishers of information to consumer reporting agencies. It would provide for the removal of a previously reported default regarding a qualified education loan from a consumer report if the consumer of the loan meets the requirements of a loan rehabilitation program, where the number of consecutive on-time monthly payments are equal to the number of payments specified in a default reduction program under the Higher Education Act of 1965. The bill would limit such rehabilitation benefits to once per loan. Rep. Peters indicated the Committee will consider the legislation, and that he has met with lenders who stated they could start offering rehabilitation immediately after the bill is enacted. Director Cordray stated that without having read the bill, it sounded promising, and that he would ask Rohit Chopra to work with the Congressman.