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CFPB publishes BNPL FAQs
On September 18, the CFPB issued Frequently Asked Questions (FAQ) guidance on Buy Now, Pay Later (BNPL) products. The FAQs are organized into three sections: (i) a general description of BNPL products and “Pay-in-Four” BNPL loans; (ii) scope and coverage of Pay-in-Four BNPL loans; and (iii) requirements for periodic statements for Pay-in-Four BNPL loans. In particular, the FAQs offer direction on how to apply Regulation Z to BNPL products, including the application of credit card periodic statement requirements to Pay-in-Four BNPL products accessed through digital user accounts. As previously covered by InfoBytes, the CFPB issued an interpretive rule in May, stating its position that certain consumer protection provisions of Regulation Z applied to BNPL accounts.
Veterans Affairs releases circular on new electronic system for lenders
On September 9, the U.S. Department of Veterans Affairs (VA) released Circular 26-24-18 announcing the launch of the new Program Participant Management (PPM) system for lenders beginning October 7. The PPM system will replace the current mail-based process and allow lenders to submit and track applications electronically. It will also manage payment accounts for lender maintenance fees and update employment information for underwriters and staff appraisal reviewers. The new system aims to centralize and simplify lender interactions with the VA and improve efficiency for lenders working with the loan guaranty program. Lenders must register for the new system and designate at least one VA relationship manager to manage their information within the system.
The VA plans to release training videos and user guides to help lenders transition to the new system. These materials will be available on the VA’s training website, and lenders are encouraged to enroll in the GovDelivery notifications for updates.
FHFA releases NPRM on housing goals for 2025-2027
On August 22, FHFA released a proposed rule on its housing goals for Fannie Mae and Freddie Mac (the GSEs) for 2025-2027 as required by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992. FHFA is requesting comments on all aspects of the proposed rule. The rule included goals and subgoals for single-family and multifamily mortgages for low-income and very low-income families, set requirements for housing plans, and made technical changes to 12 C.F.R. § 1282. FHFA also proposed new criteria that would assess if a housing plan would be required for certain single-family housing goals during the 2025-2027 housing goals period. FHFA stated that it proposed these changes “to encourage the [GSEs] to focus on meeting the market levels rather than focusing exclusively on the housing goals benchmark levels in the event of unexpected disruptions to the market[.]”
The proposed rule would amend the housing goals to update the benchmark levels for the total number of purchase money mortgages for low-income families to 25 percent, down from 28 percent; and for very low-income families from 7 percent to 6 percent. Revised subgoals include low-income census tract housing remaining at 4 percent, but the minority census tracts housing subgoal increased from 10 percent to 12 percent. The refinancing housing goal remains at 26 percent. The previous goals were for 2022-2024.
The NPRM also included a new section (Section 1282.21) to codify rules on compliance with housing goals and notice of final determination. The new enforcement factors for 2025-2027 were listed under Section 1282.22. The NPRM included multiple tables outlining FHFA’s housing goals. FHFA will accept written comments on the proposed rule on or before 60 days after publication in the Federal Register.
CFPB issues filing instructions, other resources for nonbank registration
On August 23, the CFPB issued a Filing Instructions Guide and launched the Nonbank Registry webpage to help nonbank entities understand, register and comply with the Nonbank Registration Rule (the Rule). As previously covered by InfoBytes, the Rule, which was issued on June 3 and becomes effective on September 16, will require certain nonbanks (subject to public orders resulting from regulatory actions) to register and file reports with the CFPB.
The Rule includes three separate submission periods.
- For larger participant CFPB-supervised covered nonbanks, the registration submission period is October 16 through January 14, 2025.
- For other CFPB-supervised covered nonbanks, the submission period is January 14, 2025, through April 14, 2025.
- For all other covered nonbanks, the submission period is April 14, 2025, through July 14, 2025.
The CFPB’s Nonbank Registry webpage links to various resources for filers, including the Filing Instructions Guide, an executive summary of the Rule, a sample registration form, and instructions for viewing state regulatory actions in NMLS. The CFPB notes that other resources will be added soon, including Quick Reference User Guides and additional sample forms. The Nonbank Registry Portal will likely go live on October 16 enabling nonbanks to start the registration process.
The Nonbank Registry webpage states that the CFPB plans to publish certain information from the registry online for public and regulatory use, along with summary reports and aggregations. It also provides a nonbank registry technical assistance email address (NBRHelp@cfpb.gov) for submission of requests for technical help with using the Nonbank Registry.
FDIC releases Q&As on part 328 advertising rule
On August 16, the FDIC released a series of Q&As to provide clarifying information to stakeholders’ compliance with the FDIC’s recent amendments to its rule governing FDIC official sign and advertising requirements, including false advertising or misrepresenting FDIC coverage (codified as part 328 of FDIC regulations). The FDIC created the Q&As by collecting the most frequently asked questions received from covered stakeholders including banks, trade associations, technology companies and vendors.
The final rule, which was issued in December 2023 and became effective April 1, modernizes regulations related to the use of the FDIC sign, associated advertising statements, and false advertising and misrepresentations regarding an entity’s deposit insurance coverage (NPRM covered by InfoBytes here). Although the final rule became final on April 1, the final rule provided an extended the compliance date to January 1, 2025, to provide financial institutions sufficient time to update processes to comply with the rule.
The FDIC’s Q&As cover such topics like the placement and display of official signage, requirements for advertising statements across various platforms and financial products, and the availability of technical assistance resources for regulated entities to aid compliance. The FDIC noted that additional resources like slides from banker webinars are available to assist stakeholders with implementation.
FTC announces final rule prohibiting fake reviews and testimonials
On August 14, the FTC announced a final rule addressing fake reviews and testimonials, prohibiting businesses from generating misleading reviews of their products or services. The final rule addresses concerns raised by the Commission of unfair or deceptive practices involving consumer reviews and testimonials, which the Commission asserts wastes consumers’ time and drives business from honest competitors.
The rule prohibits several specific practices, including: (i) the creation, sale, or purchase of fake reviews; (ii) reviews written by company insiders without proper disclosure of insider status; (iii) misleading representations that a website or entity controlled by a company provides independent reviews of products or services offered by the same company; and (iv) the use of fake indicators of social media influence, such as inflated views generated by fake social media accounts. The final rule also prohibits business from using threats to suppress negative reviews from consumers, and the final rule bars a business from misrepresenting either negative or all reviews on its website.
The FTC noted that the final rule will be necessary to allow it to obtain consumer redress for violations of the rule, following the Supreme Court’s decision in AMG Capital Management, LLC v. FTC, limiting the commission’s ability to obtain monetary relief (covered by InfoBytes here).
The rule will take effect 60 days after its publication in the Federal Register.
CFPB offers additional guidance for BNPL lenders during compliance transition
On August 16, the CFPB published a blog post on the CFPB’s approach to working collaboratively with the buy now pay later (BNPL) industry to develop an effective regulatory approach to BNPL loans. The blog post stated the CFPB was seeking to provide guidance to BNPL lenders to ensure that rules applied to BNPL lenders protected consumers while encouraging innovative technological or business practices by new market entrants. To this end, the CFPB issued an interpretive rule in May clarifying how federal laws like TILA and Regulation Z apply to BNPL loans (covered by InfoBytes here).
Following issuance of the interpretive rule, including the receipt of comments submitted in response to the interpretive rule, the CFPB reported that the BNPL industry has responded positively with many lenders working to comply with the clarified regulations. To provide additional guidance to lenders who are transitioning their systems to comply with the interpretive rule, the CFPB plans to release a set of FAQs next month, responding to questions received in comments and issued raised during the CFPB’s meetings with BNPL providers. Additionally, the CFPB stated that it will not seek penalties for rule violations during a BNPL’s lender compliance transition if lenders act “in good faith and expeditious manner” through the transition.
CFTC amends regulations to allow direct access for U.S. introducing brokers
On July 29, the CFTC approved its final rule allowing U.S. introducing brokers (IBs) direct access to registered foreign boards of trade (FBOTs) for the submission of customer orders. Specifically, the CFTC will amend its regulations to allow FBOTs registered with the commission to provide direct access to their electronic trading systems to U.S.-based IBs for customer order submissions. The amendments will also establish a procedure for FBOTs to request revocation of their registration and remove outdated references to “existing no-action relief.” These changes will be intended to improve competition, risk management, and liquidity in the market while maintaining protections for U.S. customers trading foreign futures and options. The amendments respond to market developments since the original regulations were established in 2011.
CFPB opinion finds TILA applies to certain contracts for deed
On August 13, the CFPB released an advisory opinion regarding home purchases under a “contract for deed” and how the purchases must comply with federal mortgage protections. The advisory opinion stated the contract for deed transactions, secured by the buyer’s dwelling, were subject to specific TILA and Regulation Z protections. The CFPB issued this opinion to reinforce its previous classification of certain contracts for deed as consumer credit under the CFPA. In some cases, investigational targets were challenging other expansive CFPB interpretations of what constituted consumer credit (covered by InfoBytes here).
The Bureau explained that a contract for deed, also known as a land contract or agreement for deed, is a type of home loan in which the buyer makes periodic payments to the seller who retains the deed until the loan is repaid. According to the CFPB, TILA’s definition of “credit” includes contracts for deed as they allow buyers to acquire property and defer payment, creating a debt obligation. Additionally, in contract for deed transactions the buyer’s obligation to repay the property’s value over time constitutes a debt under TILA. The Bureau also highlighted that such transactions are considered “residential mortgage loans” under TILA when secured by the buyer’s dwelling thereby entitling buyers to residential mortgage loan protections. The opinion underscored the importance of compliance with TILA’s disclosure requirements and other protections, such as good-faith assessments of consumers’ ability to repay loans.
The CFPB also relied on TILA’s legislative history to support its determination that sellers using contracts for deed must comply with applicable TILA and Regulation Z requirements, depending on the nature of the contract and whether the seller is considered a creditor under TILA.
The CFPB also released a supplementary report that provides further context and elaborates on its interpretation of the law regarding contracts for deed.
FDIC clarifies Interactive Teller Machine classification
On August 9, the FDIC published a financial institution letter titled “Classification of Interactive Teller Machines as Domestic Branches or Remote Service Units,” applicable to all FDIC-supervised state nonmember banks. FDI Act Section 18(d) requires state nonmember banks to obtain the FDIC’s consent before establishing a domestic branch, while Section 3(o) specifically excluded ATMs and remote service units from this definition. The FDIC stated that ITMs, which resemble ATMs but allow customers to interact with live tellers for various banking transactions, have raised questions about their classification. The FDIC noted that recently, Interactive Teller Machine (ITM) technology has become increasingly sophisticated, and state nonmember banks have sought guidance from the FDIC on whether using ITMs at locations other than established branch facilities would demand a domestic branch application or qualifies for the RSU exclusion.
The FDIC clarified that ITMs established by state nonmember banks will not be considered “domestic branches” requiring FDIC approval under specific conditions. These conditions include the ITM as an automated, unstaffed facility owned or operated by the bank, equipped to enable existing customers to initiate interactive sessions with remotely located bank personnel. Additionally, while bank personnel can assist customers remotely, customers must also be able to perform transactions independently and have the discretion to start and end interactive sessions with bank personnel. ITMs that do not meet these criteria may require a branch application.