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CFPB’s Language Access Plan breakdown for consumers with limited English proficiency
On November 15, the CFPB issued a report, titled “The CFPB Language Access Plan for consumers with limited English proficiency,” on expanding consumer needs in the financial marketplace for individuals with limited English proficiency. The CFPB released this report consistent with the mandates under E.O. 13166 to “educate and empower all consumers, provide information and assistance to traditionally underserved consumer and communities, enforce fair lending laws, and promote an equitable workforce for all consumers.”
The CFPB cites that 22 percent of the U.S. population over the age of five speak a language other than English at home. The CFPB commits itself to ensuring that tools, programs, and services are available to those who need language assistance by (i) understanding the needs of the population; (ii) conducting outreach and engagement; (iii) providing products and services in eight different languages other than English; and (iv) promoting fair and equitable access to the financial marketplace.
The CFPB’s report also lists several public enforcement actions involving communicating with consumer with limited English proficiency. The report mainly outlines how well the agency does in addressing the diverse language needs of the U.S. population, including translated disclosures, websites, and outreach and engagement sessions.
HUD increases inspection fee limits for single-family homes
On November 15, HUD increased its fee limits for property inspections for single-family homes. HUD requires federal mortgage holders to perform property inspections to determine “occupancy status, ascertain property condition and to maintain property preservation.” For example, according to the Mortgage Letter, the cost for an initial occupancy inspection increased from $20 to $30, with the cost per additional unit increased from $15 to $20, to “align with industry standards,” as found in the FHA Single Family Housing Policy Handbook 4000.1. Deputy Assistant Secretary for Single Family Housing Sarah Edelman called this the “first step in updating our policies governing property and preservation fees,” and will help prevent blight from poorly maintained homes.
Regulators address concerns at Senate Banking Committee hearing, receive written concerns regarding Basel III
On November 14, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing where regulators, Fed Vice Chair for Supervision Michael Barr, FDIC Chair Martin Gruenberg, NCUA Chair Todd Harper, and acting Comptroller of Currency Michael Hsu, testified regarding the Basel III Endgame proposal. Gruenberg’s prepared remarks noted that Basel III reforms are a “continuation of the federal banking agencies’ efforts to revise the regulatory capital framework for our nation’s largest financial institutions, which were found to be undercapitalized and over-leveraged during the Global Financial Crisis of 2008.” The proposal would raise capital requirements for large banks (covered by InfoBytes here).
Concerning Basel III, Senator Tester (D-MO) mentioned he has “some concerns about the proposed changes and how its impact will be on workers’ and households’ and small businesses’ access to credit and overall vibrancy of our capital markets.” “These rules don’t affect any banks in Montana, but they do affect the big guys that affect Montana,” he noted.
Among other testimonies, Senator Warner (D-VA) expressed concerns regarding the timeline of the comment period and potential changes to the proposal. Specifically, Sen. Warner mentioned that comments may not be received until after the rule is close to finalization. Fed Vice Chair Barr noted that the regulators have yet to evaluate comments on the proposal, as most are expected to come through mid-January, and that depending on the substance of some comments, they are open to making appropriate changes to the proposal. Acting Comptroller of the Currency Hsu’s written testimony echoed Barr’s remarks, stating “[w]e will consider all comments, including alternative approaches.”
Moreover, on November 12, a group of Republican lawmakers of the committee also sent a letter to the OCC, FDIC, and the Fed. In the letter, the senators argued that the proposal would restrict billions of dollars in capital, resulting in costlier and more limited access to credit for millions of consumers, impacting affordable housing, mortgage lending, small business lending, and consumer access to credit cards and home equity lines. The proposal was also criticized for its potential to disadvantage U.S. companies globally and harm middle-market private entities and small businesses. Moreover, the letter suggested that the proposal could negatively impact pension funds, increase fees for risk hedging, and decrease returns for retirees.
Also on November 12, several banking industry groups sent a letter to the Fed, FDIC, and the OCC requesting them to issue a revised proposal. The letter alleges violations of the Administrative Procedures Act because the data used to inform the interagency proposal is not publicly available. The groups also argued that the proposed rule repeatedly utilizes non-public analyses based on the agencies’ “supervisory experience” to support different aspects of the rule. Regarding sensitive data, the groups say, “Nothing prevents the agencies from releasing such data and analyses in a manner that is anonymized or aggregated to the extent necessary to protect bank or other party confidentiality.” The senators also believe the proposal would impose “significant harm” throughout the economy “particularly in the face of current economic headwinds and tightening credit conditions.”
CFPB imposes $15 million penalty on lender for violating 2019 order
On November 15, the CFPB announced a consent order against a Chicago-based small-dollar lender for allegedly violating a 2019 order and by independently violating the CFPA. According to the 2019 consent order, the respondent allegedly withdrew funds from consumers’ bank accounts without permission and failed to honor loan extensions. Specifically, the respondent replaced consumers’ bank account information used to pay for existing loans with separate account information supplied by a “lead generator.” Respondent allegedly debited consumers’ payments through the accounts provided by the lead generator, instead of the consumers’ originally saved payment method. The 2019 order, among other things, (i) barred the respondent from making or initiating electronic fund transfers without valid authorization; (ii) barred the respondent from failing to honor loan extensions; (iii) required the respondent to pay a $3.8 million civil money penalty. In its most recent order, the CFPB alleged that through an investigation of the respondent’s compliance with the 2019 order, the respondent continued the same unauthorized withdrawals and canceled loan extensions. The Bureau also alleged that the respondent failed to disclose that making a partial payment could cancel a loan extension and misrepresent associated fees, and they failed to provide consumers copies of signed authorizations. The respondent also allegedly provided inaccurate due dates, misrepresented skipping payments, and misrepresented loan amounts. The respondent released a statement on the enforcement action, highlighting its cooperation with the CFPB, and internal technical issues.
In the most recent order, the respondent, without admitting nor denying the CFPB’s allegations, agreed to pay a $15 million civil money penalty and refund affected consumers. The respondent also agreed to stop providing certain types of consumer loans for seven years (beginning in 2022) and to reform its executive compensation agreements and policies to ensure that compensation accounts for executives’ compliance with consumer financial protection laws, including the Consent Order. The respondent must conduct an annual compensation review and provide a report of the review to the CFPB.
Agencies finalize 2024 HPML smaller loan exemption threshold
On November 13, the CFPB, OCC, and the Fed published final amendments to the official interpretations for regulations implementing Section 129H of TILA, which establishes special appraisal requirements for “higher-risk mortgages,” otherwise termed as “higher-priced mortgage loans” (HPMLs). The final rule increases TILA’s loan exemption threshold for the special appraisal requirements for HPMLs. Each year, the threshold must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. The exemption threshold will increase from $31,000 to $32,400 effective January 1, 2024.
Fed releases report on banking supervision and regulation
On November 10, the Fed released its biannual Supervision and Regulation Report ahead of congressional oversight hearings next week. The report covers banking system conditions, regulatory developments, and supervisory developments. The report stated that “[t]he banking sector remains sound overall.” After learning from the recent bank failures last spring, the Fed’s report aims to improve its supervision of “liquidity and interest rate risks by conducting targeted reviews… as well as conducting focused training and outreach… for banks and examiners.” Proposed regulatory developments include the Basel III endgame, long-term debt, and discount window preparedness. For supervisory developments, the Fed created the Novel Activities Supervision Program (previously covered by InfoBytes here) in August to supervise novel banking activities such as “crypto-assets, distributed ledger technology, and complex, technology-driven partnerships with nonbanks.”
HUD seeks comments on update to HECM policy
On November 9, FHA posted a proposed update to its Home Equity Conversion Mortgage (HECM) policy. According to FHA, the proposal “enables certain categories of… HECMs that were previously ineligible for assignment to be assigned to HUD… This change will support servicer liquidity and strengthen the HECM market for senior homeowners.” Under current HECM policy, mortgage servicers can assign a HECM to HUD “when the mortgage reaches 98 percent of the Maximum Claim Amount and… an eligible borrower or non-borrowing spouse is residing in the property.”
The draft mortgage letter “proposes to expand the assignment eligibility criteria to include HECMs that are due and payable resulting from the death of all borrowers and non-borrowing spouses.” A redline of the proposed language of the updated HECM Assignment Eligibility can be found here. FHA seeks comments on its proposal through December 11, 2023, using the Feedback Response Worksheet download here, and can be sent to sffeedback@hud.gov.
FHFA releases advisory bulletin for pilot and voluntary programs
On November 13, FHFA released an advisory bulletin on the FHLBank Framework for Pilot and Voluntary Programs. The desire for FHFA to develop innovative pilot programs is to support “affordable housing, equity advancement, and community development for underserved and financially vulnerable populations.” The pilot programs would be implemented and then analyzed to determine if they should continue, be expanded, or stop altogether. Some pilot programs may be to “test and learn” while some end because they do not meet FHLBank objectives. What the FHFA disallows from its pilot programs are “[p]roducts, programs, and services implemented under established FHFA statutory and regulatory authorities.” However, voluntary programs have included “grants, down payment assistance programs, and special purpose credit programs.”
The FHFA guidance recommends that FHLBank’s board of directors establish specific parameters for pilot and voluntary programs by March 29, 2024. This bulletin was a result of public input phases of the “FHLBank System at 100: Focusing on the Future” initiative, as previously covered by InfoBytes here. Stakeholder feedback claimed that “FHLBanks should do more to support the affordable housing and community development components of their mission, especially in addressing the needs of underserved or financially vulnerable populations.”
CFPB and Fed release updated thresholds for Regulations Z and M
On November 13, the CFPB and the Fed released updated dollar thresholds for whether certain credit and lease transactions are subject to Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) requirements for 2024. The thresholds for both regulations were increased from $66,400 to $69,500, an increase of 4.6 percent. Transactions at or below the 2024 threshold of $69,500 will be “subject to the protections of the regulations.” The CFPB derives its thresholds from the June 1, 2023, report on the Consumer Price Index for Urban Wage Earnings and Clerical Workers (CPI-W). The thresholds for 2023 were previously increased at a rate of 8.8 percent, a larger increase given the rate of inflation during the previous year.
SEC and DOJ charge two co-CEOs operating a $100 million fraud scheme
On November 9, the SEC and DOJ charged two co-CEOs of a tech investment firm for allegedly directing a $100 million fraud scheme. The two individuals were the founders of a failed Fresno-based technology company and were charged with “conspiring to commit wire fraud and taking more than $100,000,000 from various businesses and individuals” under U.S.C. § 1349. The two founders allegedly misled investors through falsified documents, bank records, auditing reports, and accounting statements.
The DOJ alleges that, as recently as January 2022, “[the two individuals lied] to board members, investors, lenders, and others about [the company’s] finances to obtain investments, loans, and other funding… Much of the money went towards paying payroll, including the [co-CEOs’] $600,000 per year salaries.” Authorities discovered the alleged fraud scheme back in May 2023 when the company failed to make payroll and then terminated all its 900 employees. If convicted, the two founders face a maximum statutory penalty of 20 years in prison each and a $250,000 fine.