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CFPB Seeks Public Comment on its Plans for Assessing RESPA Mortgage Servicing Rule
On May 4, the CFPB issued a request for comment on its plans for assessing the 2013 Real Estate Settlement Procedures Act (RESPA) servicing rule’s effectiveness in meeting the purposes and objectives outlined in the Dodd-Frank Act, which requires the CFPB to assess each significant rule or order it adopts under Federal consumer financial laws. According to the request for comment and a May 4 blog post on the CFPB’s website, the self-assessment will focus on objectives to ensure that: (i) “[c]onsumers are provided with timely and understandable information to make responsible decisions about financial transactions”; (ii) “[c]onsumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination”; (iii) “[o]utdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens”; (iv) “[f]ederal consumer financial law is enforced consistently”; and (v) “[m]arkets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.”
In 2013, the Bureau adopted the 2013 RESPA Servicing Final Rule and further amended the rule several times to address questions raised by the industry, consumer advocacy groups, and other stakeholders. The CFPB deemed the 2013 RESPA Servicing Final Rule, effective January 10, 2014, a “significant rule” for purposes of the Dodd-Frank Act. Importantly, however, in Footnote 10 of its most-recent request for comment, the Bureau clarifies that it “is not seeking comment on the amendments to the mortgage servicing rules that became or will become effective after the January 10, 2014 effective date.” (emphasis added) Accordingly, it appears that the Bureau is not presently seeking comments on the Amendments to Regulation X and Regulation Z that the CFPB published as a Final Rule (12 CFR Parts 1024 and 1026) in the October 19, 2016 edition of the Federal Register – see earlier InfoBytes coverage here – and which are slated to take effect in part on October 19, 2017 and in full on April 19, 2018.
CFPB Releases “Core Outcomes” for Financial Empowerment Programs
On April 27, the CFPB announced in a blog post its release of a core set of financial outcomes designed to help human services organizations integrate financial empowerment and capability initiatives into their programs. Strategies include implementing financial education tools and financial counseling or coaching. In its April report, Tracking Success in Financial Capability and Empowerment Programs, the Bureau identified the following five core outcomes to help consumers improve their financial capabilities: (i) planning and goals; (ii) savings; (iii) bill payment; (iv) credit profile; and (v) financial well-being. According to the report, which assists the financial empowerment field in encouraging commonality in outcomes, core outcomes are designed to:
- “help inform and guide service delivery organizations and those who design, fund, or evaluate service programs as they assess or document the value of integrating financial capability and empowerment strategies into the delivery of human services programs”;
- “provide a suggested core set of common outcomes to measure for the financial empowerment field”;
- “augment, not displace, current programmatic outcomes and accommodate a broad range of different program types”; and
- “help provide consistency across programs by creating a common framework and language for demonstrating success for the provision of financial empowerment services as an element of other human services programs.”
According to the Bureau’s Office of Financial Empowerment, it began identifying common core outcomes with input from multiple financial empowerment practitioners and researchers to “improve the financial well-being of “lower-income and economically vulnerable consumers.”
Fannie Mae to Allow Home Owners to Swap Student Loan Debt for Mortgage Debt
On April 25, Fannie Mae issued updates to its Selling Guide allowing home owners to refinance their mortgages to pay off their student loan debt. The new policies will present opportunities for homeowners to (i) pay down student debt by refinancing their mortgage; (ii) no longer be required to include non-mortgage debt (credit cards, auto loans, and student loans) paid by others on loan applications; and (iii) increase the likelihood of qualifying for a mortgage loan while carrying student debt “by allowing lenders to accept student debt payments included on credit reports.” The updates also allow for debt to be excluded from the debt-to-income ratio if a lender can obtain documents showing that a non-mortgage debt has been paid by another party for at least 12 months. “These new policies provide . . . flexible payment solutions to future and current homeowners and, in turn, allow lenders to serve more borrowers,” stated Jonathan Lawless, Fannie Mae’s Vice President of Customer Solutions. The policy changes are effective immediately.
AG Sessions Discusses Approach to Enforcement at Annual Ethics Conference
In prepared remarks delivered April 24 at the Ethics and Compliance Initiative Annual Conference, Attorney General Jeff Sessions discussed the DOJ’s anticipated approach to prosecuting corporate fraud and misconduct under his leadership. The Attorney General announced the Department of Justice’s (DOJ) commitment to “re-double” its efforts to combat violent crime, while continuing to investigate and prosecute “corporate fraud and misconduct.” Specifically, Mr. Sessions pledged that the DOJ will “continue to emphasize the importance of holding individuals accountable for corporate misconduct” and when making charging decisions, will account for “whether companies have good compliance programs; whether they cooperate and self-disclose their wrongdoing; and whether they take suitable steps to remediate problems.”
Notable among the many points made by Mr. Sessions during his speech, was his emphasis on the Foreign Corrupt Practices Act (“FCPA”). As explained by Mr. Sessions, “corruption harms free competition, distorts prices, and often leads to substandard products and services coming into this country” and, ultimately, “increases the cost of doing business, and hurts honest companies that don’t pay these bribes.” To this end, the Attorney General promised to “strongly enforce the FCPA and other anti-corruption laws.” As he put it, “[c]ompanies should succeed because they provide superior products and services, not because they have paid off the right people.” In closing, the Attorney General took a moment to remind the audience that “[o]ur economy, and indeed, our whole system of self-government, depends on people believing that those who choose to disregard the law will be caught and punished. This is ultimately the responsibility of the Justice Department.”
OFAC Updates: New Sanction Designations and Additions to Specially Designated Nationals List
In April, OFAC announced implementation of three new sanctions against several entities and individuals designated for, among others, materially assisting, sponsoring, or providing financial support to certain foreign entities. In addition, OFAC updated its list of Specially Designated Nationals (SDN) and Blocked Persons.
Libya-Based ISIS Financial Facilitators / Algerian ISIS Supporter and Arms Trafficker. On April 13, OFAC imposed sanctions against certain Libyan and Algerian financial facilitators for their roles in assisting ISIS’s financial operations in Libya. The designations block the individuals, one of whom was designated as engaging in actions through weapon trafficking, from the global financial system, and further state that “all property and interests in property . . . subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with” the identified individuals.
Syrian “Research Center” Accused of Developing Weapons. On April 24, OFAC announced it was taking action against 271 employees of a Syrian research center for “developing and producing non-conventional weapons and the means to deliver them.” The sanctions came as a reaction to the widely- reported April 4 sarin gas attack against civilians, and followed sanctions announced January 12 against 18 officials, five branches of the Syrian military, and associated entities for their participation in a chemical weapons program responsible for attacks in 2014 and 2015. The 271 named individuals are “designated for materially assisting, sponsoring, or providing financial, material, or technological support for, or goods or services in support of, and having acted or purported to act for or on behalf of, directly or indirectly, the Government of Syria.” The new sanctions block U.S. persons from dealing with these employees.
Foreign Narcotics Kingpin Sanctions. OFAC made additions to the Specially Designated Nationals (SDN) list, which designates individuals and companies who are prohibited from dealing with the U.S. and whose assets are blocked. Transactions are prohibited if they involve transferring, paying, exporting, or otherwise deal in the property or interest in property of an entity or individual on the SDN list. Additions to the list include Foreign Narcotics Kingpin Sanctions Regulations against two Mexican entities, and Global Terrorism Sanctions Regulations against a Saudi individual.
CFPB to Discuss Small Business Lending at May 10 Field Hearing
On May 10, the CFPB will hold a field hearing on small business lending in Los Angeles, CA. The announcement, which is posted on the Events page of the CFPB’s website, indicates that the hearing will feature “remarks from Director Cordray, as well as testimony from community groups, industry representatives, and members of the public.” Notably, “small business data collection” was among the topics covered by the Bureau in its latest fair lending report (See previous InfoBytes coverage here). Specifically, the CFPB noted in its report that Congress “expressed concern that women-owned and minority-owned businesses may experience discrimination when they apply for credit, and has required the CFPB to take steps to ensure their fair access to credit.” In response to this observation, the Bureau indicated in its report that its “[s]mall business lending supervisory activity will also help expand and enhance the Bureau’s knowledge in this area, including the credit process; existing data collection process; and the nature, extent, and management of fair lending risk.”
CFPB Draws Mixed Reactions in Response to Request for Comments on Proposed Student Lending Information Collection
Back in February, the CFPB proposed information collection on the student loan servicing market, since then two trade associations have submitted comment letters, one in support of the information collection and one believing that the information collection would be unduly burdensome. According to the Bureau, the proposed information collection was intended to provide the Bureau “with a broader and deeper look into the student loan market.” The comment period for its request closed earlier this month.
Americans for Financial Reform (AFR). On April 24, the AFR and 31 other organizations sent a sign-on letter to the CFPB expressing support for the CFPB’s proposed student loan servicing data collection initiative. The letter argues, among other things, that “compiling such metrics and borrower outcomes would benefit market participants, federal and state agencies, policymakers, and borrowers,” by allowing each to “[o]btain[] a clearer view of the student loan market overall” while also “inform[ing] all market participants on how best to serve student loan borrowers.” The AFR letter also offers several suggests as to how the Bureau can best ensure the “quality and transparency of the data.” The letter emphasized, among other things, that “transparency is critical to having a servicing system that works for borrowers,” especially given the large number of student loan defaults.
Consumer Bankers Association (CBA). In an April 24 comment letter, the CBA expressed agreement with the CFPB’s ultimate goal of creating a private student loan market that is both transparent and fair, but argues that its consumer bank members already “effectively tailor[]” their loan products “to meet their customer’s needs” and strive to make loans only “to customers who are judged highly likely to repay them.” Specifically, the CBA believes, among other things, that the CFPB information collection would require unnecessarily duplication of existing publicly reported private loan data. CBA also raised additional concerns, including: (i) whether the CFPB could collect the same data effectively, and with greater protection afforded to loan holders and servicers, through the supervisory process; (ii) whether the CFPB has “grossly underestimate[d]” the burden on servicers to collect the requested data, and (iii) whether the CFPB’s stated market monitoring objectives could be met through less burdensome methods.
CFPB Deputy Director Addresses Community Bank Advisory Council on Financial Data Usage
On April 25, CFPB Deputy Director David Silberman addressed the Community Bank Advisory Council (CBAC) in Washington, D.C. on the Bureau’s work involving the use of data in the financial marketplace. CBAC was established almost five years ago to ensure that the Bureau had a direct line of communication with community banks. The Bureau is focused on understanding “how consumers are exercising control over their personal financial data, including the data that is maintained by their financial institutions.” In November of last year, the CFPB issued a Request for Information (RFI) regarding ways to “address the risks and technological challenges posed when consumers seek ready access to this data and seek to share it electronically with third parties.” The Bureau’s goal is to evaluate how to balance consumer needs without exposing the providers that maintain this data to undue costs and risks, while also making sure consumer data is not misused.
Silberman discussed the use of new types of data to assess the creditworthiness of consumers when applying for credit. The Bureau is exploring the possibility that “thoughtful and responsible use of alternative data—that is, data that is not part of the traditional credit reporting system—could expand the credit available to underserved consumers.” (See previous InfoBytes summary.) In February 2017, the CFPB issued another RFI to seek feedback about the “potential benefits and risks of using, applying, and analyzing unconventional sources” such as rent or utility payments to “assess people’s creditworthiness.” Silberman acknowledged community banks’ skill and “willingness to go beyond the numbers” in order to make lending decisions based on the totality of information they have available about their customers. The Bureau is exploring ways to combine the objectivity and rigor of automated underwriting with the community banks approach.
NY AG Schneiderman Releases Guidance on Student Loan Cancellation
On April 21, New York Attorney General Eric T. Schneiderman released guidance for eligible individuals who attended certain programs operated by a group of for-profit post-secondary education California-based colleges. The colleges—which ceased operations in 2015—allegedly made misrepresentations about the employment success of graduates of certain programs and used “false promises of career success to lure students, leaving many with enormous debt and few job prospects.” As a result, students who enrolled in those programs during specified time periods are eligible for the discharge of their federal student loans. It is estimated that up to 3,000 students in New York are eligible for federal loan cancellations based on the findings of an investigation conducted by the U.S. Department of Education (DOE). New York joins 43 other states and the District of Columbia in an outreach effort to assist students in submitting loan cancellation applications. If a student’s application is approved by the DOE, the loan(s) will be cancelled and payments previously made will be refunded.
CFPB Orders Law Firm to Comply with CID
On April 10, the CFPB issued a Decision and Order denying a law firm’s petition to set aside a civil investigative demand (CID) asking for information about the firm’s business practices to determine whether debt relief providers or lead generators engaged in “unlawful acts or practices in the advertising, marketing, or sale of debt relief services or products, including but not limited to debt negotiation, debit elimination, debt settlement, and credit counseling.” Specifically, the Bureau determined that none of the objections raised by the law firm warrant setting aside or modifying the CID.
On March 19, the firm filed a petition to set aside the CID (issued on February 27, 2017), offering four key reasons why the CID should not be enforced:
- the CFPB’s structure is unconstitutional and the CID should be stayed pending the PHH Corp. v. CFPB case;
- the CFPB lacks supervisory and enforcement authority with respect to the law firm;
- the CID’s requests are “excessively vague and overly broad”; and
- the CID was issued after the Bureau failed to prevail on a contempt order before the district court.
In responding to these arguments, the CFPB took the following positions. First, the Bureau contended that the law firm had waived its objection to the Bureau’s authority by failing to raise it during the meet-and-confer process with Bureau enforcement counsel. Second, the CFPB noted that under the Consumer Financial Protection Act, the Bureau has the authority to issue CIDs to “any person” who may have relevant information. Third, the Bureau disagreed that the requests in the CID were “excessively vague and overly broad,” and stated that the time to have raised this challenge was during the meet-and-confer process. However, the Bureau stated it is willing to engage in further discussions to determine if modifications may be appropriate. Fourth, the Bureau determined that the mere fact that the law firm in question was never held in contempt by a court of law does not preclude the CFPB “from issuing a CID or investigating whether it violated federal consumer financial law.” Pursuant to the Decision and Order, the law firm is required to produce documents and provide answers to interrogatories within 10 calendar days.