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Financial Services Law Insights and Observations

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  • CFPB marks 10th anniversary

    Federal Issues

    On July 21, the CFPB marked its 10 year anniversary. Prepared remarks published by acting Director Dave Uejio highlighted Bureau activities taken over the past decade in consumer empowerment and racial equity, as well as recent actions in response to the Covid-19 pandemic. With respect to enforcement, Uejio noted that since 2011, the Bureau’s work has led to approximately $14.4 billion in consumer relief and $1.7 billion in civil penalties. According to a Bureau blog post, during this time period more than 183 million consumers and consumer accounts have received economic redress and consumers have filed more than 3 million complaints. Additionally, over 7 million consumers have accessed the Bureau’s Covid-19 educational materials. “In the decade to come, we will continue to use all the tools at our disposal to empower American consumers and work to ensure the financial markets they interact with are fair, transparent, and competitive,” Uejio wrote.

    Federal Issues CFPB Consumer Finance Covid-19 Enforcement

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  • Fed, OCC report on health of MDIs

    Federal Issues

    Recently, the Federal Reserve Board and the OCC issued reports pursuant to Section 367 of the Dodd-Frank Act generally detailing the health of Minority Depository Institutions (MDIs) and the agencies’ efforts taken to assist MDIs as the Covid-19 pandemic disproportionately affected low- and moderate-income communities and racial and ethnic minorities. The Fed’s report, “Promoting Minority Depository Institutions,” discussed, among other things, extra steps taken by the agency to support and assist MDIs over the past year, which included conducting individualized outreach on several topics like how to access the discount window and the Paycheck Protection Program Liquidity Facility (covered by InfoBytes here and here). The report also examined efforts taken by the Fed to preserve and promote MDIs through its Partnership for Progress program—“a national outreach effort to help MDIs confront unique business-model challenges, cultivate safe banking practices, and compete more effectively in the marketplace”—and covered the Fed’s unanimous approval last September to approve an Advance Notice of Proposed Rulemaking on modernizing the Community Reinvestment Act (covered by InfoBytes here).

    The OCC outlined actions taken to preserve and promote MDIs in its “2020 Annual Report,” including the launch of the Roundtable for Economic Access and Change known as Project REACh (covered by InfoBytes here). OCC subject matter experts also provided regulatory technical assistance to MDIs on topics including safety and soundness, cybersecurity, compliance with Bank Secrecy Act/anti-money laundering requirements, and current expected credit loss accounting methodology, among others. The OCC also noted that despite a seven-basis-points drop on the average return on assets for MDIs through the pandemic, the health of those institutions “remained satisfactory.”

    Federal Issues Minority Depository Institution Federal Reserve OCC Covid-19 CRA Dodd-Frank Compliance Bank Secrecy Act Anti-Money Laundering

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  • SBA outlines guaranty purchase, charge-off process for PPP loans

    Federal Issues

    On July 15, the SBA issued Procedural Notice 5000-812316 to remind lenders of their servicing responsibilities and provide guidance on the agency’s guaranty purchase process for Paycheck Protection Program (PPP) first-draw and second-draw loans. Lenders may submit requests for SBA to purchase and charge off PPP loans in instances where a borrower (i) is past due 60 days or more on scheduled loan payments where the default has not been cured; (ii) has permanently closed and does not intend to submit a forgiveness application; (iii); has filed for bankruptcy; or (iv) is deceased in the case of self-employed individuals, sole proprietors, single-member LLCs, or independent contractors. In circumstances where a borrower or any owner of 20 percent or more of the borrower has been indicted for, or convicted of, a felony related to a PPP loan, or in a case where a borrower has appealed an SBA loan review decision, the lender may request guaranty purchase without charge-off from SBA. Additionally, SBA outlines procedures for lenders when a borrower submits a forgiveness application after the lender has submitted a request to SBA for guaranty purchase. Guidelines for submitting guaranty purchase and charge-off requests are provided in the procedural notice.

    Federal Issues SBA PPP Covid-19 CARES Act Small Business Lending

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  • CFPB and FDIC release enhancements to financial education program for seniors

    Agency Rule-Making & Guidance

    On July 14, the CFPB and FDIC announced enhancements to Money Smart for Older Adults, the agencies’ financial education program geared toward preventing elder financial exploitation. The enhanced version includes sections to help people avoid romance scams, which, according to data from the FTC, led to $304 million in losses in 2020. In addition, the agencies are also releasing an informational brochure on Covid-19 related scams. FDIC training materials and other resources for older adults are available from the CFPB here.

    Agency Rule-Making & Guidance FDIC CFPB Consumer Finance Elder Financial Exploitation Covid-19

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  • CFPB examines reported assistance trends on consumers’ credit records

    Federal Issues

    On July 13, the CFPB released findings regarding trends in reported assistance on consumers’ credit records. The post—the second in a series documenting trends in consumer credit outcomes during the Covid-19 pandemic (the first covered by InfoBytes here)—examines consumer month-to-month transitions into and out of assistance from January 2020 to April 2021. As previously covered by InfoBytes, last August, the Bureau issued a report examining trends through June 2020 in delinquency rates, payment assistance, credit access, and account balance measures, which showed that generally there was an overall decrease in delinquency rates since the start of the pandemic for auto loans, first-lien mortgages, student loans, and credit cards. According to the Bureau’s recent findings, as of March 2021, auto loans and credit card accounts with assistance were slightly above pre-pandemic levels, and the share of mortgages and student loans on assistance continued to be significantly higher than pre-pandemic levels. Researchers also found that some communities have been disproportionately affected by the health and economic shocks of the pandemic: “majority Black census tracts, majority Hispanic census tracts, older borrowers and borrowers in counties hit hardest by COVID cases and layoffs were most likely to receive assistance in the early months of the pandemic.” Additionally, consumers in majority Hispanic census tracts were “more likely to exit assistance, but consumers in majority Black census tracts were somewhat less likely to exit assistance than their counterparts in majority white census tracts.”

    Federal Issues CFPB Covid-19 Consumer Finance Credit Cards Auto Finance Mortgages Student Lending

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  • Massachusetts regulator allows work from home for some entities

    State Issues

    On July 12, the Division of Banks of the Massachusetts Office of Consumer Affairs and Business Regulations (Division) issued guidance that authorizes its licensees and registrants to continue permitting their personnel to operate remotely from non-licensed locations subject to certain conditions and restrictions. Among other things, the licensee or registrant: (i) cannot hold the unlicensed location out to the public as a place of business; (ii) must ensure that the individual working remotely only engages in activities that can be completed safely and in compliance with all applicable laws, regulations, and Division guidance; (iii) must ensure that the individual working remotely is strictly prohibited from engaging in any in-person customer interactions at the remote location; (vi) must have established security protocols to securely access systems through a virtual privacy network or other secure system; (v) must have policies and procedures to protect data; (vi) must protect sensitive customer information; and (vii) must ensure adequate supervision of remote personnel. The guidance also notes that the work location for mortgage loan originators (MLOs) has been the subject of various inquiries over the years and clarifies that MLOs are not required to live within a certain distance of a branch office and that “the Division will look to determine that the [branch] manager is able to provide adequate supervision for the given number and location of MLOs under his/her supervision.” The guidance replaces any previous guidance issued by the Division regarding telework and will continue, unless modified or withdrawn.

    State Issues Massachusetts Covid-19 Licensing Mortgages Mortgage Origination

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  • FHA extends Covid-19 flexibilities

    Federal Issues

    Recently, FHA announced the extension of several Covid-19-related flexibilities for single-family lenders and servicers. Specifically, Mortgagee Letter 2021-16 will “allow industry partners additional opportunity to utilize flexible guidance related to” self-employment and rental income verification for case numbers assigned on or before September 30. Both extensions are applicable to Single Family Title II forward and Home Equity Conversion Mortgages. FHA is also extending temporary flexibilities for “the administration of 203(k) Rehabilitation Escrow guidance for borrowers in forbearance” for open escrow accounts through September 30. Additionally, Mortgagee Letter 2021-17 updates Single Family Quality Control (QC) requirements for appraisal field reviews and evaluation of property and appraisal documentation. FHA notes that the updated guidance applies to mortgages selected for Property and Appraisal QC review on or after July 1.

    Federal Issues FHA Covid-19 Mortgages Servicing Mortgages

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  • CFPB enforcement bulletin emphasizes accuracy in rental data

    Federal Issues

    On July 1, the CFPB released an enforcement compliance bulletin to reiterate to landlords, consumer reporting agencies (CRAs), and others of their obligation to correctly report rental and eviction information. The CFPB noted that it is “concerned that the end of the CDC eviction moratorium could mean both an increase in negative rental information in the consumer reporting system and an increase in consumers seeking rental housing.” According to the bulletin, the CFPB intends to examine if landlords, property management companies, and debt collectors are reporting accurate information to CRAs and complying with their dispute-handling obligations under the FCRA. Specifically, the Bureau will “pay particular attention to whether furnishers are reporting arrearages” regarding amounts paid on behalf of a tenant through a government grant or relief program and fees or penalties prohibited by CARES Act or other laws. In addition, the Bureau noted that it intends to look at whether CRAs are, among other things: (i) following procedures to only include accurate rental information in individuals’ consumer reports; (ii) reporting rental information for the consumer who is the subject of the report; (iii) reporting accurate and complete eviction information; and (iv) properly investigating when inaccuracies are reported by the consumer.

    Federal Issues CFPB Consumer Reporting Agency FCRA CARES Act Covid-19

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  • CFPB highlights consumer complaints related to pandemic response

    Federal Issues

    On July 1, the CFPB released a new bulletin analyzing consumer complaints and responses related to actions taken by Congress or the Bureau to provide relief for consumers impacted by the Covid-19 pandemic. The bulletin expands upon the Bureau’s 2020 Consumer Response Annual report (covered by InfoBytes here) and specifically focuses on consumer complaints related to: (i) suspended monthly federal student loan payments; (ii) Economic Impact Payments (EIPs); and (iii) the Bureau’s interim final rule supporting the CDC’s eviction moratorium. With respect to student loans, the bulletin noted a significant decrease in federal student loan complaints following the suspension of payments, but identified complaints related to potential customer service issues concerning repayment options or available relief and discussed servicers’ ability to respond timely to complaints. With respect to EIPs, the bulletin discussed complaints about overdraft fees charged to consumers after advances made by financial institutions to allow consumers access to all of their EIP funds were reversed, and highlighted steps taken by institutions to refund these fees. According to the bulletin, consumers who received EIPs via prepaid debit cards also reported issues accessing funds, while some consumers claimed their accounts were locked following the second and third disbursements. The bulletin also described the various types of consumer complaints related to the eviction moratorium, including complaints related to collection activities and credit reporting.

    Federal Issues CFPB Consumer Complaints Covid-19 Overdraft Student Lending Evictions Consumer Finance

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  • FHFA expands use of interest rate reduction

    Federal Issues

    On June 30, FHFA announced changes to loan modification terms for borrowers impacted by the Covid-19 pandemic with mortgages backed by Fannie Mae or Freddie Mac who need payment reduction. According to FHFA, ​flex modification terms will be adjusted for Covid-19 hardships, which will make “interest rate reduction possible for eligible borrowers, regardless of the borrower’s loan-to-value ratio.” Previously, only borrowers with mark-to-market loan-to-value ratios (which compare the balance remaining on a mortgage to the current market value of a home) greater than or equal to 80 percent were eligible for an interest rate reduction. FHFA acting Director Sandra L. Thompson noted that more families qualifying for interest rate reduction will “prevent unnecessary foreclosures, help strengthen the Enterprises’ books of business, and make sustainable homeownership a reality for more families currently living with the uncertainty of forbearance.”

    Federal Issues FHFA Interest Rate Covid-19 Fannie Mae Freddie Mac GSEs Mortgages

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