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FCC approves robocall blocking
On June 6, the FCC approved a Declaratory Ruling and Notice of Proposed Rulemaking to address unwanted robocalls to consumers. The Declaratory Ruling affirms that voice service providers may block unwanted robocalls “based on reasonable call analytics, as long as their customers are informed and have the opportunity to opt out of the blocking.” Among other things, the Declaratory Ruling clarifies that voice providers (i) may offer call blocking tools to their customers as a default, as opposed to an opt-in basis; and (ii) may offer customers tools that would allow customers to block calls from any number that is not listed in the customer’s contact list or other “white lists.” The FCC notes that a “white list” could be based on a customer’s contact list and would be updated as customers add and remove contacts from their phone. According to reports, the FCC also adopted language that was added to the May proposal, which encourages voice providers to devise a system for addressing complaints made by legitimate companies whose calls to customers are being blocked. The final Declaratory Ruling is effective upon its publication on the FCC’s website.
The FCC also adopted a Notice of Proposed Rulemaking (NPRM) (available in the May proposal) requiring voice providers to implement the “STIR/SHAKEN” caller ID authentication framework—an “industry-developed system to authenticate Caller ID and address unlawful spoofing by confirming that a call actually comes from the number indicated in the Caller ID, or at least that the call entered the US network through a particular voice service provider or gateway.” The FCC asserts that once the “STIR/SHAKEN” is implemented, it would “reduce the effectiveness of illegal spoofing and allow bad actors to be identified more easily.” The deadline for comments in response to the NPRM will be established upon publication in the Federal Register.
CFPB releases TRID FAQs for construction loans
On May 31, the CFPB released FAQs to assist with TILA-RESPA Integrated Disclosure Rule (TRID) compliance. The two new FAQs relate to the application of TRID to construction loans. Highlights include:
- Most construction-only and construction-permanent loans are covered by TRID as long as such a loan: (i) is made by a creditor as defined in Regulation Z; (ii) is a closed-end, consumer credit transaction; (iii) is secured in full or in part by real property or cooperative unit; (iii) is not a reverse mortgage; and (iv) is not exempt for any reason under Regulation Z.
- There are three special disclosure provisions for construction-only or construction-permanent loans under TRID: (i) Section 1026.17(c)(6) permits a creditor to issue separate or combined disclosures for construction-permanent loans based on whether each phase is treated as a separate transaction; (ii) Appendix D provides methods that may be used for estimating construction phase financing disclosures; and (iii) Section 1026.19(e)(3)(iv)(F) permits creditors, in certain instances involving new construction, to use a revised estimate of a charge for good faith tolerance purposes when settlement will occur more than 60 days after the original Loan Estimate. The Bureau notes that these provisions apply “even if the creditor does not necessarily label the product as construction-only or construction-permanent, so long as the product meets the requirements discussed in each provision.”
U.S., UK establish “Financial Innovation Partnership”
On May 29, the Department of Treasury announced the establishment of a Financial Innovation Partnership (FIP) between the U.S. and the UK. The FIP will focus on expanding bilateral financial services collaborative efforts to study emerging fintech innovation trends and share information and expertise on regulatory practices. Specifically, the FIP will focus on (i) regulatory engagement, including building upon “existing regulatory cooperation by discussing regulatory developments and sharing experiences on technical issues related to innovation in financial services,” and (ii) commercial engagement, such as providing cross-border opportunities for private sector companies to engage with industry associations as well as market participants. The FIP was announced during a meeting of the U.S.-UK Regulatory Working Group, which, a week earlier, held discussions in Washington, D.C. on the outlook for financial regulatory reforms, future priorities, regulatory cooperation, and possible implications of the UK’s exit from the EU on financial stability and cross-border financial regulation.
Federal agencies release host state loan-to-deposit ratios
On May 28, the Federal Reserve Board, the FDIC, and the OCC released the current host state loan-to-deposit ratios for each state or U.S. territory, which the agencies use to determine compliance with Section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. Under the Act, banks are prohibited from establishing or acquiring branches outside of their home state for the primary purpose of deposit production. Branches of banks controlled by out-of-state bank holding companies are also subject to the same restriction. Determining compliance with Section 109 requires a comparison of a bank’s estimated statewide loan-to-deposit ratio to the yearly host state loan-to-deposit ratios. If a bank’s statewide ratio is less than one-half of the yearly published host state ratio, an additional review is required by the appropriate agency, which involves a determination of whether a bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches.
OCC issues final rule allowing certain federal savings associations to operate with national bank powers
On May 24, the OCC issued a final rule, which establishes standards permitting federal savings associations with total consolidated assets of $20 billion or less as of December 31, 2017, to elect to operate as “covered savings associations,” with the rights and privileges of national banks. The final rule—issued pursuant to section 206 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which amended the Home Owners’ Loan Act (HOLA)—provides that associations who choose this election will retain their federal savings association charters and existing governance frameworks, and will generally be subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations that apply to national banks. Among other things, the final rule also states that “a covered savings association may continue to operate as a covered savings association if, after the effective date of the election, it has total consolidated assets greater than $20 billion.” The final rule takes effect July 1.
FTC rescinds FCRA model forms and disclosures
On May 22, the FTC published a final rule in the Federal Register rescinding model forms and disclosures promulgated pursuant to the FCRA. The FTC has determined the model forms and disclosures are no longer necessary and the rescission would reduce confusion as the CFPB’s FCRA model forms and disclosures were updated in 2018. Specifically, the final rule rescinds: (i) Appendix A—Model Prescreen Opt-Out Notices; (ii) Appendix D—Standardized Form for Requesting Annual File Disclosures; (iii) Appendix E—Summary of Identity Theft Rights; (iv) Appendix F—General Summary of Consumer Rights; (v) Appendix G—Notice of Furnisher Responsibilities; and (vi) Appendix H—Notice of User Responsibilities. The final rule also makes conforming amendments to FTC rules that reference the applicable forms issued under the FCRA. The rule is effective May 22.
CFPB announces regulatory review plan; seeks comment on Overdraft Rule impact on small businesses
On May 13, the CFPB announced a plan to review its regulations under Section 610 of the Regulatory Flexibility Act (RFA), which specifies that agencies should review certain rules within 10 years of their publication, consider the rules’ effect on small businesses, and invite public comment on each rule undergoing the review. The announcement notes that RFA requires an agency to consider multiple factors when reviewing a rule, including (i) whether there is a continued need for the rule; (ii) the complexity of the rule; (iii) whether the rule overlaps, duplicates, or conflicts with federal, state, or other rules; and (iv) the degree to which factors, such as technology and economic conditions, have changed the relevant market since the rule was evaluated. Comments will be due within 60 days of the plan’s publication in the Federal Register.
The CFPB also announced that its first RFA review will be of the 2009 Overdraft Rule (Rule), which was originally issued by the Federal Reserve Board and limits the ability of financial institutions to assess overdraft fees for ATM and one-time debit card transactions that overdraw consumers’ accounts. The Bureau is seeking public comment on the economic impact of the Rule on small entities, including requesting feedback on topics such as (i) the impacts of the reporting, recordkeeping, and other compliance requirements of the Rule; and (ii) how the Bureau could reduce the costs associated with the Rule for small entities. Comments on the economic impact of the Rule will be due within 45 days of publication in the Federal Register.
OCC updates RESPA booklet in Comptroller’s Handbook
On May 7, the OCC announced an update to the RESPA booklet of the Comptroller’s Handbook. Among other things, the revisions to the booklet reflect updates to Regulation X made by the CFPB in recent years, including (i) the establishment and implementation of a definition of “successor in interest;” (ii) compliance with certain servicing requirements when a person is a debtor in bankruptcy; and (iii) clarifications and revisions to the provisions regarding force-placed insurance notices, policy and procedure requirements, and early intervention and loss mitigation requirements.
CFPB proposes debt collection rules
On May 7, the CFPB issued its Notice of Proposed Rulemaking (NPRM) amending Regulation F, to implement the Fair Debt Collection Practices Act (FDCPA) (the “Proposed Rule”). The Bureau also released a Fact Sheet on the Proposed Rule. The proposed effective date is one year after the final rule is published in the Federal Register, with comments on the Proposed Rule due 90 days after publication. Generally, the Proposed Rule covers debt collection communications and disclosures and addresses related practices by debt collectors. Highlights of the Proposed Rule include:
- Coverage. The Proposed Rule incorporates many existing provisions of the FDCPA into Regulation F including existing definitions of “debt collector” and “debt,” with only minor wording and organizational changes. The Proposed Rule would generally only cover third-party debt collectors, not the first-party efforts of the original creditor or its servicer, and specifically excludes in-house collectors of creditors (“[a]ny officer or employee of a creditor while the officer or employee is collecting debts for the creditor in the creditor’s name.”). The Proposed Rule restates the FDCPA’s definition of “consumer” but interprets the term to include “a deceased natural person who is obligated or allegedly obligated to pay a debt.” Additionally, with respect to the special definition of “consumer” for the section on communications in connection with debt collection, the Proposed Rule interprets that to include a confirmed successor in interest as well as the personal representative of a deceased consumer’s estate.
- Disclosures.
- Validation Notice. The Proposed Rule requires a debt collector to provide a consumer with a validation notice that includes certain information about the debt and the consumer’s rights with respect to the debt including: (i) the debt collector’s name and mailing address; (ii) the name of the creditor to whom the debt is currently owed and, for consumer financial product or service debt as defined in the Proposed Rule, the name of the creditor to whom the debt was owed on the itemization date; (iii) the itemization date and the amount of debt owed on that date; (iv) itemization of the current amount of the debt in a tabular format reflecting interest, fees, payments, and credits since the itemization date; (v) the current amount of the debt; (vi) if the debt is a credit card debt, the merchant brand, if any, associated with the debt, to the extent available to the debt collector; (vii) information about consumer protections; and (viii) consumer response information, including dispute prompts. The validation notice must also include the “debt collector communication disclosure” indicating the communication is for the purposes of collecting a debt.
- Disclosure Safe Harbor. Under the Proposed Rule, if a debt collector delivers in writing the Bureau’s Model Form B-3 validation notice, provided in appendix B to the Proposed Rule (available on pg. 491), it is considered to be in compliance with the validation notice requirements, though use of the model form is not required.
- Electronic Disclosures. The Proposed Rule would require debt collectors who provide required disclosures electronically to obtain the consumer’s affirmative consent directly to comply with Section 101(c) of the Electronic Signatures in Global and National Commerce Act (E-SIGN Act). In the alternative, debt collectors can send the electronic disclosures to a particular email address or phone number (in the case of text messages), that the creditor or prior debt collector could have with regard to that debt in accordance with the E-SIGN Act. Additionally, the Bureau released a flow chart to clarify how a debt collector would provide certain required disclosures electronically.
- Conduct Provisions.
- Time and Place Restrictions. The Proposed Rule clarifies that calls to mobile telephones and electronic communications, such as emails and text messages, are subject to the FDCPA’s prohibition on communicating at times or places that the debt collector knows or should know are inconvenient to the consumer, subject to certain exceptions.
- Restriction on Number of Telephone Calls. With exceptions for certain types of calls (such as those responding to a consumer request for information or made with prior consent by the consumer given directly to the debt collector), the Proposed Rule prohibits a debt collector from calling a consumer about a particular debt more than seven times within a seven-day-period. The Proposed Rule also prohibits a debt collector from calling a consumer for seven consecutive days after having had a telephone conversation with the consumer regarding the debt, beginning with the date of the conversation. A debt collector who does not exceed the frequency limits is deemed in compliance with the FDCPA’s prohibition on harassment and the Dodd-Frank Act’s prohibition on unfair acts or practices as it relates to telephone calls.
- Text and Email Communications. The Proposed Rule does not contain a restriction on the frequency or number of communications a debt collector can make via email or text message. However, the Proposed Rule requires a debt collector to include—in emails, text messages and other electronic communications—an option for the consumer to unsubscribe from future such communications and would prohibit a debt collector from attempting to communication through a medium the consumer has requested the collector not use, including a particular phone number or email address. The Proposed Rule would prohibit a debt collector from contacting a consumer through a workplace email address (absent prior consent by the consumer or receipt by the debt collector of an email sent from the consumer’s work email account) or through a public-facing social media platform, except through the platform’s private message function.
- Limited-Content Messages. The Proposed Rule specifies certain content parameters for a “Limited-Content Message” that a debt collector could send by voicemail or text that would not be considered a “communication” and therefore, would not need to include the required disclosures. Additionally, if the limited-content message was heard or observed by a third party, it would not constitute a prohibited third-party disclosure.
- Other prohibitions. The Proposed Rule prohibits a debt collector from, among other things, (i) suing or threatening to sue on a time-barred debt; (ii) reporting debts to credit reporting agencies prior to initiating communications with the consumer; and (iii) selling, transferring or placing for collection a debt to another debt collector that the collector knows or should know has been paid or settled, discharged in bankruptcy, or relates to a filed identity theft report.
FTC confirms continuing need for Holder Rule
On May 2, the FTC announced it completed its review of the Holder Rule (the Rule)—formally called the “Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses”—which is applicable when consumers purchase personal goods or services with money loaned by a merchant or a lender that works with a merchant. The Rule, aimed at preventing businesses from using financing mechanisms to collect debts from consumers in situations where the merchant failed to deliver the goods or services or engaged in fraud or other misconduct, preserves consumers’ right to assert the same legal claims and defenses against anyone who purchases the credit contract as they would have against the seller who originally provided the credit. In 2015, as part of a systematic review of all its rules and guides, the FTC sought public comment on the Rule and received 19 comments in response. All comments urged retaining the Rule, and after review, the Commission determined there was a continuing need for the Rule and the record did not warrant a rulemaking to modify the Rule. As reflected in the notice published in the Federal Register, the FTC’s action confirming the Rule took effect May 2 and is applicable as of April 23.