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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.
CFPB issues fact sheet on TRID disclosures with assumption transactions
On May 1, the CFPB released a factsheet addressing when loan estimates and closing disclosures are required for assumption transactions under the TILA-RESPA Integrated Disclosure Rule (TRID Rule). The factsheet includes a flowchart and a narrative summary to demonstrate when the disclosures would be required. According to the factsheet, as a threshold matter, the new transaction must be within the TRID Rule’s scope of coverage (e.g., the transaction is a closed-end consumer credit transaction secured by real property or a cooperative unit and is not a reverse mortgage subject to § 1026.33). The creditor must then determine if the transaction is an “assumption” as defined in Regulation Z (under § 1026.20(b) an assumption “occurs when a creditor expressly agrees in writing to accept a new consumer as a primary obligor on an existing residential mortgage transaction.”) The factsheet includes three elements the transaction must meet in order to qualify as an assumption under Regulation Z: (i) the creditor must expressly accept the new consumer as a primary obligor; (ii) a written agreement must be executed, which includes the creditor’s express acceptance of the new customer; and (iii) it must be a “residential mortgage transaction” as to the new customer—specifically, the new customer must be financing the acquisition or initial construction of his or her principal dwelling. If the creditor determines the transaction is an assumption, based on the outlined factors, it must provide a loan estimate and closing disclosure required by the TRID Rule, unless the transaction is otherwise exempt from the requirements.
CFPB proposes permanent HMDA thresholds
On May 2, the CFPB issued a Notice of Proposed Rulemaking (NPRM), which would permanently raise coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under the HMDA rules. Specifically, the proposal would permanently raise the reporting threshold for closed-end mortgage loans from 25 loans in each of the two preceding calendar years to either 50 or 100 closed-end loans in each of the preceding two calendar years. As previously covered by InfoBytes, the CFPB temporarily increased the threshold for open-end lines of credit from 100 loans to 500 loans for calendar years 2018 and 2019. The current proposal would extend that temporary threshold to January 1, 2022, and then permanently lower the threshold to 200 open-end lines of credit after that date. Lastly, the proposal incorporates, with minor adjustments, the interpretive and procedural rule issued in August 2018 (2018 Rule), which implemented and clarified the HMDA amendments included in Section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (previously covered by InfoBytes here). The proposal includes additional interpretive information related to the partial exemptions in the 2018 Rule, including how the partial exemption rules apply after a merger or acquisition. The Bureau is proposing that these changes take effect January 1, 2020. Comments on the NPRM must be received within 30 days of publication in the Federal Register.
The Bureau also issued an Advance Notice of Proposed Rulemaking (ANPR) seeking information on the costs and benefits of reporting certain data points under HMDA. Additionally, the ANPR also seeks information about the requirement that institutions report certain commercial-purpose loans made to a non-natural person and secured by a multifamily dwelling. Comments on the ANPR must be received within 60 days of publication in the Federal Register.
CFPB updates Prepaid Small Entity Compliance Guide
On April 26, the CFPB released version 3.1 of its Prepaid Small Entity Compliance Guide to incorporate previously issued submission instructions for issuers submitting account agreements pursuant to the prepaid account rule through the electronic submission system “Collect.” (See previous InfoBytes coverage here.)
CFPB issues RFI on Remittance Rule
On April 25, the CFPB issued a Request for Information (RFI) on two aspects of the Remittance Rule, which took effect in 2013, and requires financial companies handling international money transfers, or remittance transfers, to disclose to individuals transferring money information about the exact exchange rate, fees, and the amount expected to be delivered. The RFI seeks feedback on (i) whether to propose changing the number of remittance transfers a provider must make to be governed by the rule, as well as the possible introduction of a small financial institution exception; and (ii) a possible extension of a temporary exemption to the Rule set to expire July 21, 2020, that allows certain insured institutions to estimate exchange rates and certain fees they are required to disclose (the RFI states that the EFTA section 919 expressly limits the length of the temporary exemption and does not authorize the CFPB to extend the term beyond the July 21 expiration date unless Congress changes the law). The RFI also seeks feedback on the Rule’s scope of coverage, including whether the Bureau should change a safe harbor threshold that allows persons providing 100 or fewer remittance transfers in the previous and current calendar year to be outside of the Rule’s coverage. Additionally, the RFI includes a consideration of issues discussed in the Bureau’s assessment of the Rule, which examined if the Rule had been effective in achieving its goals. Comments on the RFI are due 60 days after publication in the Federal Register.
Separately, on April 24, the CFPB released a revised assessment report of its Remittance Rule to “correct an understatement of the dollar volume of remittance transfers by banks in the original report,” which increases the share of the remittance dollars transferred by banks. The Bureau notes that the correction does not affect the report’s conclusions. (See previous InfoBytes coverage of the October 2018 assessment report here.)
OCC to clarify OREO regulations
On April 24, the OCC published a notice of proposed rulemaking (NPRM) and request for comment on a proposal to clarify and to streamline its other real estate owned (OREO) regulations for supervised national banks and to apply the same regulatory framework to federal savings associations. Specifically, the OCC seeks public comment on questions relating to its proposals regarding OREO holding periods, OREO disposition, and permissible OREO expenditures. The NPRM also addresses OREO appraisal requirements. Finally, the NPRM proposes technical amendments to remove certain outdated capital rules for national banks and federal savings associations, including provisions relating to treatment of OREO held by Federal savings associations that are no longer in effect. According to the OCC, this proposal would be the first significant revision to OREO regulations in more than 20 years. Comments on the NPRM are due by June 24.