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Agencies adjust threshold for Regulations Z and M
On October 31, the CFPB and the Federal Reserve Board finalized the annual dollar threshold adjustments that govern the application of Regulation Z (Truth in Lending Act) and Regulation M (Consumer Leasing Act) to credit transactions, as required by the Dodd-Frank Act (published in the Federal Register here and here). Each year the thresholds must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The exemption threshold for 2020, based on the annual percentage increase in the CPI-W, is now $58,300 or less, except for private student loans and loans secured by real property, which are subject to TILA regardless of the amount.
Agencies increase threshold for appraisal exemption under TILA for HPMLs
On October 30, the CFPB, OCC, and the Federal Reserve Board published a final rule in the Federal Register, which increases the smaller loan exemption threshold for the special appraisal requirements for higher-priced mortgage loans (HPMLs) under TILA. TILA requires creditors to obtain a written appraisal before making a HPML unless the loan amount is at or below the threshold exemption. 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 for 2020 is $27,200, up from $26,700 in 2019. The final rule will take effect January 1, 2020.
Agencies raise residential appraisal requirement to $400,000
On September 27, the OCC, the Federal Reserve Board, and the FDIC announced a final rule increasing the threshold for residential real estate transactions requiring an appraisal from $250,000 to $400,000. As previously covered by InfoBytes, in November 2018, the agencies proposed the threshold increase in response to feedback that the exemption threshold had not increased to keep pace with the price appreciation in the residential real estate market. The final rule also includes the rural residential appraisal exemption included in the Economic Growth, Regulatory Relief, and Consumer Protection Act (previously covered by InfoBytes here), and implements the Dodd-Frank Act mandate that institutions appropriately review appraisals for compliance with the Uniform Standards of Professional Appraisal Practice. The final rule is effective the first day after publication in the Federal Register, except for the evaluation requirement for transactions exempted by the rural residential appraisal exemption and the requirement to review appraisals for compliance with the Uniform Standards of Professional Appraisal Practice, which are effective January 1, 2020.
The FDIC press release is available here, the Federal Reserve Board press release is available here, and the concurrence letter from the CFPB is available here.
NCUA approves additional payday loan alternative
On September 19, the NCUA announced the approval of a final rule creating a new payday alternative loan product (PAL II). As previously covered by InfoBytes, in June 2018, NCUA proposed the PAL II as an additional offering to the current payday alternative loan product (PAL I), which has been available since 2010. PAL II includes most features of PAL I except that it (i) eliminates a loan minimum and sets the maximum at $2,000; (ii) requires a minimum loan term of one month and a maximum of 12 months; and (iii) does not contain a requirement for the minimum length of a membership. Moreover, federal credit unions are restricted to offering only one type of PAL loan to a member at any given time. All prior requirements of PAL I loans, such as the prohibition against rollovers, the limit on the number of loans a single borrower can take in a given period, and full amortization, remain in effect. The final rule will be effective 60 days after publication in the Federal Register.
CFPB requests comments on using Tech Sprints
On September 18, the CFPB published a notice in the Federal Register seeking comments on the use of Tech Sprints—forums which gather “regulators, technologists, financial institutions, and subject matter experts from key stakeholders for several days to work together to develop innovative solutions to clearly-identified challenges”—as a means to encourage regulatory innovation and collaborate with stakeholders on forming solutions to regulatory compliance challenges. The Bureau notes that Tech Sprints have been successfully used by the U.K.’s Financial Conduct Authority, which has organized seven Tech Sprints since 2016, resulting in a pilot project on digital regulatory reporting. The Bureau is interested in using Tech Sprints to, among other things: (i) leverage cloud solutions and other developments that may reduce or modify the need for regulated entities to transfer data to the Bureau; (ii) continue to innovate the HMDA data submission process; (iii) identify new technologies and approaches that can be used by the Bureau to provide more cost-effective oversight of supervised entities; and (iv) reduce other unwarranted regulatory compliance burdens. Comments must be received by November 8.
CFPB extends debt collection comment period
On August 2, the CFPB announced that it is extending the comment period on its Notice of Proposed Rulemaking implementing the FDCPA to “facilitate the ability of commenters to consider the issues raised in the NPRM, gather data, and prepare their responses.” The comment period now closes on September 18.
Detailed InfoBytes coverage on the CFPB’s debt collection proposal is available here.
Federal Reserve developing real-time payment system
On August 5, the Federal Reserve Board (Board) announced that Federal Reserve Banks will develop a “round-the-clock real-time payment and settlement service” called the “FedNow℠ Service.” According to a notice and request for comment, “the service would support depository institutions’ provision of end-to-end faster payment services and would provide infrastructure to promote, ubiquitous, safe, and efficient faster payments in the United States.” The Board is requesting comments on how the service might be designed in order to support payment system stakeholders and the general functioning of the U.S. payment system. FedNow is anticipated to be available in 2023 or 2024. Comments on the notice will be due 90 days after publication in the Federal Register. The Board also released FAQs associated with faster payments.
In a speech announcing the service, Governor Brainard noted that FedNow will be accessible to all banks and “will permit banks of every size in every community across the country to provide real-time payments to their customers.” Brainard noted that the Board is “uniquely placed to deliver this outcome” given its “long-standing service connections with more than 10,000 banks across the country.”
As previously covered by InfoBytes, the Board issued a request for comments in October 2018 regarding potential actions the Board could take to facilitate real-time interbank settlement of faster payments. The Board reports that it received over 350 comments and over 90 percent supported the Board operating its own, round-the-clock payment service alongside services provided by the private sector.
FTC finalizes rule providing free credit monitoring for servicemembers
On June 24, the FTC finalized the “Free Electronic Credit Monitoring for Active Duty Military Rule,” which implements the Economic Growth, Regulatory Relief, and Consumer Protection Act requirement for nationwide consumer reporting agencies (CRAs) to provide free electronic credit monitoring services for active duty military consumers. The proposed rule, issued in November 2018 (covered by InfoBytes here), defined the term “electronic credit monitoring service” as a service through which the CRAs provide, at a minimum, electronic notification of material additions or modifications to a consumer’s file and requires CRAs to notify active duty military consumers within 24 hours of any material change. The proposal noted that CRAs may require that active duty military provide contact information, proof of identity, and proof of active duty status in order to use the free service and outlines how a servicemember may prove active duty status, such as with a copy of active duty orders. Additionally, the proposal prohibited CRAs from requiring active duty military consumers to purchase a product in order to obtain the free service.
In response to comments on the proposal, the final rule refers to the definition of “active duty military consumer” in the FCRA, which requires that the servicemember be assigned to service away from their usual duty station, or be a member of the National Guard, regardless of whether the National Guard member is stationed away from their normal duty station. The FTC noted that commenters requested the requirement that the servicemember be stationed away from their normal duty station be eliminated but “the statutory language limit[ed] the Commission’s discretion on [the] topic.” However, the FCRA does not apply the same duty station requirement to the National Guard. Additionally, the final rule, among other things (i) requires CRAs to provide free access to a credit file when it notifies an active duty military consumer about a material change to the file; (ii) extends the amount of time the CRAs have to notify an active duty military consumer of a material change from 24 hours to 48 hours; and (iii) prohibits CRAs from requiring that active duty military consumers agree to terms or conditions as a requirement to obtain their free credit file, unless the terms or conditions are necessary to comply with certain legal requirements.
While the final rule goes into effect three months after publication in the Federal Register, CRAs will be allowed to comply with certain portions of the final rule by offering existing credit monitoring services to active duty military consumers for free, for a period of up to one year from the effective date.
Agencies finalize streamlined small-institution reporting
On June 17, the FDIC, the OCC, and Federal Reserve issued the final rule to streamline regulatory reporting for qualifying small institutions to implement Section 205 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The agencies adopted the final rule as proposed in November 2018 (covered by InfoBytes here). The final rule permits depository institutions with less than $5 billion in assets—previously set at $1 billion—that do not engage in certain complex or international activities to file the FFIEC 051 Call Report, the most streamlined version of the Call Reports. Additionally, the rule reduces the existing reportable data items in the FFIEC 051 Call Report by approximately 37 percent for the first and third calendar quarters. The rule also includes similar provisions for uninsured institutions with less than $5 billion in total consolidated assets that are supervised by the Federal Reserve and the OCC. The rule notes that the agencies are also committed to “exploring further burden reduction and are actively evaluating further revisions to the FFIEC 051 Call Report, consistent with guiding principles developed by the FFIEC.” The rule will take effect 30 days after it is published in the Federal Register.
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.