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On October 27, the CFPB announced a settlement with a national bank, resolving allegations that the bank reported inaccurate HMDA data for 2016 and 2017 mortgage transactions. According to the consent order, the bank allegedly violated HMDA, Regulation C, and the Consumer Financial Protection Act by failing to report accurate data among the 7,000 mortgage applications reported in 2016 and 2017. Specifically, the Bureau alleged that the submissions contained “significant errors,” with an internal audit of the 2016 filing identifying a 40 percent error rate and the Bureau’s review of the 2017 filing identifying a 16 percent error rate. The Bureau asserted that the 2016 errors were caused by “a lack of appropriate staff, insufficient staff training, and ineffective quality control,” while the 2017 errors were “directly related to weaknesses in [the bank]’s compliance-management system (CMS).” In 2013, the bank entered into a consent order with the Bureau for similar issues; thus, the Bureau concluded the 2016 and 2017 errors were “intentional and not bona fide” as the bank allegedly failed to maintain a “CMS with procedures reasonably adapted to avoid” the errors since the previous order.
The consent order requires the bank to, among other things, pay a $200,000 civil money penalty and develop a HMDA compliance-management system that includes policies, procedures, and an internal audit program that regularly tests the HMDA data integrity.
On October 16, the CFPB published a new reference chart titled “Reportable HMDA Data: A Regulatory and Reporting Overview Reference Chart for Data Collected in 2021.” The chart is designed to be used as a reference tool for required data points to be collected, recorded, and reported under Regulation C, as amended by HMDA rules issued October 15, 2015, August 24, 2017, October 10, 2019, and April 16, 2020 (most recently covered by InfoBytes here). The Bureau noted that this chart does not provide HMDA loan/application register data fields or enumerations.
On August 27, the CFPB issued a new analysis of the 2019 Home Mortgage Disclosure Act (HMDA) data on mortgage lending transactions, which follows an initial release from the CFPB and the Federal Financial Institutions Examinations Council (FFIEC) earlier in June (covered by InfoBytes here). The newly released report groups the new and revised HMDA data points into seven major categories: (i) open-end and reverse mortgage flags; (ii) expanded or revised demographic information; (iii) property type; (iv) loan purpose and characteristics; (v) applicant/borrower characteristics and property characteristics; (vi) pricing outcomes and components; and (vii) miscellaneous data points. The report breaks down the data points in each category by providing a definition and basic reporting requirements, as well as a statistical overview of the reported information.
On August 21, the CFPB released the Filing Instructions Guide for HMDA data collected in 2021 that must be reported in 2022. The guide states that there are no significant changes to the submission process and that the required data fields to be collected and reported have not changed. Instructions for quarterly reporting can be found in the Supplemental Quarterly Reporting Guide, which was issued the same day. As outlined in a statement issued in March (covered by InfoBytes here), institutions are reminded that as of March 26, 2020, and until further notice, the Bureau does not intend to cite in an examination or initiate an enforcement action against any institution for failure to report its HMDA data quarterly. However, entities should continue collecting and recording HMDA data in anticipation of making annual submissions.
On July 30, a group of consumer fair housing associations (collectively, “plaintiffs”) filed suit against the CFPB, challenging the Bureau’s final rule permanently raising coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under HMDA. As previously covered by InfoBytes, the final rule, which amends Regulation C, permanently increases the reporting threshold from the origination of at least 25 closed-end mortgage loans in each of the two preceding calendar years to 100, and permanently increases the threshold for collecting and reporting data about open-end lines of credit from the origination of 100 lines of credit in each of the two preceding calendar years to 200. In the complaint, the plaintiffs argue that the Bureau, among other things, (i) failed to provide a “reasoned explanation” for the changes to the original threshold requirements; (ii) conducted a “flawed analysis of the costs and benefits” of the final rule; and (iii) failed to “adequately consider comments” that were submitted in response to the rule’s proposal. According to the complaint, the final rule “exempts about 40 percent of depository institutions that were previously required to report.” The plaintiffs assert this result “undermines the purpose” of HMDA by allowing potential violations of fair lending laws to go undetected. The plaintiffs argue that because the CFPB allegedly violated to the Administrative Procedures Act, the final rule should be vacated and set aside.
On July 28, the CFPB updated its HMDA FAQs to include new guidance covering the reporting of certain data points related to the credit decision. Specifically, the FAQs state that credit underwriting data such as credit score, debt-to-income ratio, and combined loan-to-value ratio must be reported if it was “relied on in making the credit decision—even if the data was not the dispositive factor.” Similarly, the FAQs emphasize that income and property value should also be reported if they were relied on in making the credit decision.
On July 29, CFPB Director Kathy Kraninger testified at a hearing held by the Senate Banking Committee on the CFPB’s Semi-Annual Report to Congress, which covers the Bureau’s work from October 1, 2019, through March 31, 2020. (Covered by InfoBytes here.) Kraninger’s testimony identified four key areas of focus for the Bureau: (i) providing financial education resources to prevent consumer harm; (ii) implementing “clear rules of the road” to encourage “competition, increase transparency, and preserve fair markets for financial products and services”; (iii) ensuring a “culture of compliance” through supervision; and (iv) following a consistent, purposeful enforcement regime. Kraninger also highlighted Bureau efforts to address discrimination, consumer confusion regarding forbearance options under the CARES Act, and a legislative proposal that would authorize the Bureau to award whistleblowers who report federal consumer financial law violations.
During the hearing, committee members focused on, among other things, the Bureau’s response to the Covid-19 pandemic and the agency’s recent repeal of certain underwriting provisions of its 2017 final rule covering “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (covered by InfoBytes here). In response to Democratic criticism regarding the repeal of the underwriting provisions, Kraninger reiterated that a Bureau analysis of the provisions in the 2017 final rule revealed it would reduce the availability of small-dollar credit “by at least 70 percent,” and denied claims that the rulemaking process had been impacted by political appointees at the agency. Additionally, Kraninger said she intends to move ahead with putting the payment provisions of the payday rule into effect and is currently “working through” a pending legal challenge to the provisions.
Democratic committee members also questioned Kraninger regarding temporary regulatory relief to mortgage servicers and other financial services companies (covered by InfoBytes here) and the Bureau’s policy statement providing Fair Credit Reporting Act and Regulation V compliance flexibility for consumer reporting agencies and furnishers during the pandemic (covered by InfoBytes here). With regard to the U.S. Supreme Court’s June ruling in Seila Law v. CFPB (covered by a Buckley Special Alert), Committee Chairman Mike Crapo (R-ID) noted he is still advocating for “a bipartisan board of directors to oversee the CFPB” and for subjecting the Bureau to the annual appropriations process.
The next day, Kraninger appeared before the House Financial Services Committee’s hearing to discuss the semi-annual report. Similar to the Senate hearing, committee members questioned Kraninger on the payday rule, the revision to the HMDA rule, the Bureau’s pandemic-related initiatives for consumers, and on ways the Bureau is protecting struggling consumers during the pandemic, particularly with respect to the agency’s supervisory and enforcement work.
On July 6, the CFPB announced the launch of Consumer Financial Protection Week from July 14 through July 17. Over the course of four days, the Bureau is hosting or participating in multiple virtual events, including (i) a tutorial and overview of the HMDA data browser; (ii) a discussion on the Bureau’s supervisory and enforcement prioritized assessment approach; and (iii) a discussion on the Bureau’s Taskforce on Federal Consumer Financial Law.
On June 29, the CFPB announced two Tech Sprints that will “bring together regulators, technologists, software providers, consumer groups, and financial institutions to develop technological solutions to shared compliance challenges.” As previously covered by InfoBytes, the CFPB announced, in September 2019, its intention to use Tech Sprints—which had been used by the U.K.’s Financial Conduct Authority seven times since 2016 and resulted in a pilot project on digital regulatory reporting—to encourage regulatory innovation and requested comments from stakeholders on the plan.
- E-Disclosures, October 5-9, 2020. This Tech Sprint will have participants “improve upon existing consumer disclosures” by “design[ing] innovative electronic methods for informing consumers about adverse credit actions, including from the use of algorithms.” The Bureau notes that many disclosure laws “were written in a paper-based age” and using digital technology for disclosures may “enable greater consumer engagement and understanding.”
- HMDA platform and submission, March 22-26, 2021. This Tech Sprint will encourage participants to “develop new tools to address compliance challenges and improve the filing process” on the HMDA platform (operated by the Bureau on behalf of the Federal Financial Institutions Examination Council). Additionally, participants “may work to further develop the HMDA Platform’s Application Programming Interfaces to increase efficiency and lower cost.”
Separately, the FDIC also announced the start of a prototyping competition intended “to help develop a new and innovative approach to financial reporting, particularly for community banks.” The competition will involve 20 technology firms from across the country that will propose solutions for the FDIC’s consideration to make financial reporting “seamless and less burdensome for banks.”
On June 30, the CFPB released its spring 2020 rulemaking agenda. According to a Bureau announcement, the information details the regulatory matters that the Bureau “expect[s] to focus on” between May 1, 2020 and April 30, 2021. The announcement notes that the agenda was set before the Covid-19 pandemic struck and while the Bureau “continues to move forward with other regulatory work,” it will prioritize work related to supporting consumers and the financial sector during and after the Covid-19 pandemic.
In addition to the rulemaking activities already completed by the Bureau in May and June of this year, the agenda highlights other regulatory activities planned, including:
- Escrow Rulemaking. The Bureau intends to issue a proposed rule to implement Section 108 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, which directs the Bureau to exempt certain loans made by creditors with assets of $10 billion or less (and that meet other criteria) from the escrow requirements applicable to higher-priced mortgage loans.
- Small Business Rulemaking. The Bureau states that in September 2020, it will publicly release materials for an October panel (convening under the Small Business Regulatory Enforcement Fairness Act) with small entities likely to be directly affected by the Bureau’s rule to implement Section 1071 of Dodd-Frank.
- HMDA. The Bureau states that two rulemakings are planned, including (i) a proposed rule that follows up on a May 2019 advanced notice of proposed rulemaking which sought information on the costs and benefits of reporting certain data points under HMDA and coverage of certain business or commercial purpose loans (covered by InfoBytes here); and (ii) a proposed rule addressing the public disclosure of HMDA data.
- Debt Collection. The Bureau intends to release the final rule amending Regulation F to implement the Fair Debt Collection Practices Act in October 2020 (InfoBytes coverage of the May 2019 proposed rule here). Additionally, “at a later date” the Bureau intends to finalize the February supplemental proposal, which covers time-barred debt disclosures (covered by a Buckley Special Alert here).
- Qualified Mortgages (QM). The Bureau states it is considering issuing a proposed rule “later this year” that would create a new “seasoning” definition of a QM under Regulation Z, allowing for QM status after the borrower has made consistent timely payments for a defined period.
Additionally, in its announcement, the Bureau notes that it is (i) participating in an interagency rulemaking process on quality control standards for automated valuation models (AVMs) with regard to appraisals; and (ii) continuing to review and conduct the five-year lookback assessments under Section 1022(d) of Dodd-Frank.
- Hank Asbill to discuss "The federal fraud sentencing guidelines: It's time to stop the madness" at a New York Criminal Bar Association webinar
- Buckley Webcast: From there to here – Anticipating comparative redlining claims
- Daniel P Stipano to moderate "Digital identity: The next gen of CIP" at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference
- Buckley Webcast: New sheriff in town – AML and sanctions under the new administration
- Tim Lange to discuss "Impact of Covid-19 on your business" at the California Mortgage Bankers Association Legal Issues & Regulatory Compliance Conference