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Financial Services Law Insights and Observations


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  • Kraninger: ATR/QM, Remittance Rules expected in May

    Agency Rule-Making & Guidance

    On February 25, in a speech before the Credit Union National Association Government Affairs Conference, CFPB Director Kathy Kraninger discussed the Bureau’s rulemaking approach in the consumer financial marketplace. Specifically, Kraninger reminded attendees that the Bureau’s Advance Notice of Proposed Rulemaking (ANPR) on the Ability to Repay/Qualified Mortgage Rule (ATR/QM rule) issued last July signaled its “intent to allow the patch to expire as intended in January 2021 or shortly thereafter to allow for a smooth and orderly transition.” As previously covered by a Buckley Special Alert, the ANPR solicited feedback on, among other things, whether the debt-to-income ratio should be altered and how Regulation Z and the ATR/QM Rule should be amended to minimize disruption from the so-called GSE patch expiration. Following a review of all received public comments, Kraninger stated that the Bureau has “decided to propose to amend the QM rule by moving away from the 43 percent debt-to-income ratio requirement,” and will instead “propose an alternative, such as [a] pricing threshold to better ensure that responsible, affordable mortgage credit remains available for consumers.” A proposed rule seeking comments on possible amendments will be issued no later than May, Kraninger stated.

    Kraninger also discussed possible amendments to the Remittance Rule (Rule), which implements the Electronic Fund Transfer Act and requires financial companies handling international money transfers, or remittance transfers, to disclose exact fees and exchange rates. The Bureau issued a Request for Information last April on two aspects of the Rule (covered by InfoBytes here), and a follow-up Notice of Proposed Rulemaking (NPR) in December (covered by InfoBytes here) to propose a permanent safe harbor for financial companies that provide 500 or fewer remittance transfers a year. According to Kraninger, “[t]his would reduce the burden on over 400 banks and almost 250 credit unions that send a relatively small number of remittances. Ultimately, by allowing the use of estimates in some circumstances and adjusting the threshold for coverage under the rule, . . . [the] proposal was designed to preserve consumers’ ability to send remittances from their bank accounts to certain destinations.” The Bureau plans to finalize the remittances rulemaking in May.

    Kraninger also commented on the Bureau’s regulatory review process, and reminded attendees of its “Start Small, Save Up” initiative, which encourages partnerships between financial companies/service providers and the Bureau in order to develop savings products for consumers.

    Agency Rule-Making & Guidance CFPB Ability To Repay Qualified Mortgage Regulation Z GSE Remittance Rule

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  • Republican lawmakers urge CFPB to extend Remittance Rule safe harbor

    Federal Issues

    On September 30, 16 Republican members of Congress wrote to CFPB Director Kathy Kraninger to express concern over the upcoming expiration of a safe harbor to the Remittance Rule (the Rule), which allows certain insured depository institutions to estimate exchange rates and certain fees they are required to disclose to customers about remittance transactions. As previously covered by InfoBytes, the CFPB issued a Request for Information (RFI) last April on two aspects of the Rule that require financial institutions handling international money transfers, or remittance transfers, to disclose to individuals transferring money information about the exact exchange rate, fees, and the amount expected to be delivered. The RFI also sought feedback on a possible extension of the current statutory exception, which is set to expire July 21, 2020. While lawmakers recognize the CFPB’s interest in mitigating negative effects that may result from the exception’s expiration, they urged the CFPB to “take every available step” to ensure that consumers may continue to access remittance services. The lawmakers stressed that it is often difficult, if not “virtually impossible,” for depository institutions to calculate the exact cost of certain remittance transactions. The letter further noted that “depository institutions cannot readily covert all foreign currencies at the time a transfer is conducted, and if the currency exchange takes place after the transfer is initiated, a consumer’s financial institution may only be able to estimate the applicable exchange rate.” Accordingly, if the exception expired, it could cause many depository institutions to discontinue providing remittance services due to increased compliance risk, or cease transfers to certain countries or beneficial banks due to non-compliance risks.

    The lawmakers urged the CFPB to use its statutory authority under the Electronic Fund Transfer Act or Dodd-Frank to make the exception permanent “so financial institutions are able to make long-term decisions regarding the provision of these services.”

    Federal Issues CFPB Remittance Rule Congress EFTA Dodd-Frank

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