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  • Acting director outlines future direction for CFPB

    Federal Issues

    On February 4, CFPB acting Director Dave Uejio published a blog post conveying his “broad vision” for the Division of Research, Markets, and Regulations (RMR). Uejio emphasized that in order for the Bureau to respond to his previously stated policy priorities—(i) relief for consumers facing hardship and economic crisis due to the Covid-19 pandemic, and (ii) racial equity (covered by InfoBytes here)—the agency must sharpen its focus on the consumer experience. To achieve this goal, Uejio is authorizing the Bureau’s use of its 1022(c)(4) data collection authority and has asked RMR to examine “the impact of specific industry practices on consumers’ daily budget and overall bottom line in order to target effective policy interventions.” Among other things, RMR has been asked to take the following immediate steps:

    • Prepare an analysis assessing housing insecurities such as mortgage foreclosures, mobile home repossessions, and landlord-tenant evictions.
    • Prepare an analysis to address pressing consumer financial barriers to racial equity in order to “inform research and rulemaking priorities,” and “[e]xplicity include in policy proposals the racial equity impact of the policy intervention.”
    • Resume data collections paused due to Covid-19, including HMDA quarterly reporting, CARD Act data collection, PACE data collection, and the previously completed 1071 data collection.
    • Focus mortgage servicing rulemaking on Covid-19 responses “to avert, to the extent possible, a foreclosure crisis” when pandemic forbearances end in March and April.
    • Explore options for preserving the status quo with respect to QM and debt collection rules. (QM rules covered by InfoBytes here and a Buckley Special Alert; debt collection rules covered by InfoBytes here and here.) 

    Uejio also noted that he “will be assessing regulatory actions taken by the previous leadership and adjusting as necessary and appropriate those not in line with [the Bureau's] consumer protection mission and mandate,” and that he wants to “preserve, where possible, maximum policy flexibility” for President Biden’s nominee once confirmed.

    Federal Issues CFPB Succession Fair Lending Covid-19 Mortgages Qualified Mortgage Data Collection / Aggregation CFPB

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  • CFPB outlines regulatory flexibility related to Covid-19

    Federal Issues

    On March 26, the CFPB announced several regulatory flexibility measures to help financial companies work with consumers affected by Covid-19. Specifically, the measures postpone certain industry data collections on Bureau-related rules. These include:

    • HMDA. Quarterly information reporting by certain mortgage lenders as required under HMDA and Regulation C will not be expected during this time. However, entities should continue collecting and recording HMDA data in anticipation of making annual submissions. Entities will be provided information by the Bureau on when and how to commence new quarterly HMDA data submissions. (See statement here.)
    • TILA. During this time, annual submissions required under TILA, Regulation Z, and Regulation E “concerning agreements between credit card issuers and institutions of higher education; quarterly submission of consumer credit card agreements; collection of certain credit card price and availability information; and submission of prepaid account agreements and related information” will not be expected. (See statement here.)
    • Section 1071. A survey seeking information from financial institutions on the cost of compliance in connection with pending rulemaking on Section 1071 of the Dodd-Frank Act has been postponed. As previously covered by InfoBytes, under the terms of a stipulated settlement resolving a 2019 lawsuit that sought an order compelling the Bureau to issue a final rule implementing Section 1071, the Bureau agreed to outline a proposal for collecting data and studying discrimination in small-business lending.
    • PACE Financing. A survey of firms providing Property Assessed Clean Energy (PACE) financing to consumers for the purposes of implementing Section 307 of the Economic Growth, Regulatory Relief, and Consumer Protection Act has been postponed.
    • Supervision and Enforcement. The Bureau’s policy statement provides “that it does not intend to cite in an examination or initiate an enforcement action against any entity for failure to submit to the Bureau” specified information related to credit card and prepaid accounts. However, the Bureau’s announcement advises entities to “maintain records sufficient to allow them to make delayed submissions pursuant to Bureau guidance.” With respect to operational challenges facing institutions due to Covid-19, the Bureau states that it will work with institutions when scheduling examinations and other supervisory activities to minimize disruption and burden. “[W]hen conducting examinations and other supervisory activities and in determining whether to take enforcement action, the Bureau will consider the circumstances that entities may face as a result of the [Covid-19] pandemic and will be sensitive to good-faith efforts demonstrably designed to assist consumers,” the announcement states.

    Federal Issues CFPB Agency Rule-Making & Guidance Data Collection / Aggregation Mortgages Data HMDA Credit Cards Prepaid Cards TILA Dodd-Frank PACE Programs Examination Supervision Consumer Finance Covid-19

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  • Nevada deems collection agencies “non-essential businesses”

    State Issues

    On March 20, the Nevada Financial Institutions Division issued guidance deeming a collection agency a non-essential business under the Nevada Governor’s orders to close non-essential business. The guidance mentioned in particular that courts in Las Vegas have suspended issuing defaults on civil actions, suspended issuing orders for the examination of a judgment debtor, and suspended the issuance of any writ of execution. Collection agencies licensed or certified in Nevada must cease collection efforts until April 16.

    State Issues Covid-19 Nevada Data Collection / Aggregation

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  • California Reinvestment Coalition sues CFPB alleging data collection failures

    Courts

    On May 14, the California Reinvestment Coalition (CRC) announced it filed a lawsuit in the U.S. District Court for the Northern District of California against the CFPB for allegedly failing to implement Section 1071 of the Dodd-Frank Act, which requires the Bureau to collect and disclose data on lending to small, women, and minority-owned businesses. In the complaint, the CRC argues that the failure to implement Section 1071 violates two provisions of the Administrative Procedures Act. Specifically, the CRC alleges the that Bureau has “unlawfully withheld and unreasonably delayed” the implementation of Section 1071 since Dodd Frank’s passage in 2011, and also, that the Bureau has acted “arbitrarily and capriciously” by informing financial institutions to “not to make [the] inquiries, nor compile, maintain, and submit [the loan application] data” required by Section 1071. The CRC claims that the failure to collect and publish the data has harmed its ability to advocate for access to credit, advise organizations working with women and minority-owned small businesses, and work with lenders to arrange investment in low-income and communities of color. The CRC is seeking the court to invalidate the Bureau’s countermanding of Section 1071’s requirements on financial institutions and an order or writ compelling the Bureau to issue a final rule implementing Section 1071.

    Courts CFPB Data Collection / Aggregation Small Business Lending Dodd-Frank Administrative Procedures Act

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  • Senate Banking Committee’s Fintech Hearing Discusses Regulatory Challenges and Innovation Risks

    Fintech

    On September 12, the full Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled “Examining the Fintech Landscape” to discuss topics concerning fintech innovation and the regulatory landscape. Committee Chairman Mike Crapo (R-Idaho) opened the hearing by asserting that while fintech firms provide “new and innovative products and services in areas such as marketplace lending, digital payments and currencies, wealth management, insurance and more . . . [u]ncertainty remains around questions like data security and the proper regulatory treatment to ensure consumers and the financial system are safeguarded.” Sen. Crapo said that he welcomes the opportunity to learn more about fintech innovations, the impact on the financial system, and the current regulatory approach to this sector.

    Sen. Sherrod Brown (D-Ohio), ranking member of the Committee, also released an opening statement in which he called for the need to “improve federal oversight of data collection and data security,” especially in light of the recent credit reporting data breach. (See previous InfoBytes summary here.) Sen. Brown noted that he is interested in understanding “how Congress can encourage fintech innovation to make it easier for community banks to serve their customers, comply with important safety and soundness and anti-money laundering rules.”

    The three witnesses offered numerous insights related to the fintech industry, including (i) the need to manage risk without stifling fintech innovation; (ii) the importance of creating consistent standards and a regulatory framework; (iii) the need to clearly outline the definition of fintech firms and digital lenders; (iv) challenges when using algorithms and alternative data to assess creditworthiness; and (v) concerns regarding state preemption in the fintech space. The witnesses also answered questions concerning the concept of utilizing a regulatory sandbox to allow fintech firms to operate on a limited basis to test new ideas, and offered support for an innovation office, which would help fintech firms and regulators understand the emerging landscape.

    • Mr. Lawrance Evans, Director, Financial Markets, U.S. Government Accountability Office (testimony);
    • Mr. Eric Turner, Research Analysis, S&P Global Market Intelligence (testimony); and
    • Mr. Frank Pasquale, Professor of Law, University of Maryland Francis King Carey School of Law (testimony).

    Fintech Federal Issues Senate Banking Committee Privacy/Cyber Risk & Data Security Data Collection / Aggregation

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  • CFPB Issues Consent Order to Online Lead Aggregator, Settles Separate 2016 Lead Aggregator Action

    Consumer Finance

    On September 6, the CFPB ordered an online loan lead aggregator to pay $100,000 for its alleged involvement in selling leads to small-dollar lenders and installment loan purchasers who then extended loans that were void in whole or in part under the borrower’s state laws. The consent order alleges that the California-based company knew the state of residence for each lead sold, yet “regularly sold [l]eads for consumers located in states where the resulting loan was void or the lender had no legal right to collect the principal, interest, or fees from the consumer based on state-licensing requirements or interest-rate limits.” The order also claims that, because the company knows the identity of each purchaser prior to the sale of the loan, it should also know (i) whether the purchaser is likely to comply with the state laws, or (ii) whether the leads it sells will result in loans exceeding state usury interest rate limits or fail to be in compliance with the consumer’s state laws. Pursuant to the consent order, in addition to the $100,000 civil money penalty, the company must (i) “undertake reasonable efforts to ensure” leads do not result in loans that are void under the laws of the consumer’s state; (ii) obtain, among other things, copies of licenses required by each state for its end users “where the absence of such a license would render a loan void in whole or in part under the laws of that state”; (iii) implement procedures for reviewing loans that result from its leads to ensure compliance with privacy and other laws; (iv) establish a policy to prohibit lenders from making loans that are likely to result in loans that are void under the consumer’s state-licensing requirements or interest-rate limits and “refrain from conveying” leads for such loans; and (v) submit registration for the Bureau’s Company Portal.

    On the same day, the CFPB also entered into a $250,000 settlement with the company’s president and primary owner for his alleged actions cited in a 2016 complaint involving his role as the operator of a different online lead aggregator. (See previous InfoBytes summary here.) In addition to the civil money penalty, the president has agreed to (i) make efforts to guarantee that all loans offered to consumers are valid in the states where they live; (ii) ensure that there is no misleading, inaccurate, or false information contained in the consumer-facing content of all lead generators from which leads are accepted; and (iii) require all lead generators to “prominently disclose to consumers an accurate description” of how leads will be received, conveyed, and processed. The president has neither admitted nor denied the CFPB’s allegations.

    Consumer Finance CFPB Payday Lending Data Collection / Aggregation Enforcement Settlement

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  • Legislation Proposed to Create Consistent Financial Data Reporting Standards Across Federal Agencies

    Federal Issues

    On March 16, Congressmen Darrell Issa (R-Calif.) and Jared Polis (D-Colo.) introduced the Financial Transparency Act of 2017 (H.R. 1530), a bipartisan bill intended “to amend securities, commodities, and banking laws to make the information reported to financial regulatory agencies electronically searchable.”  Specifically, H.R. 1530 would require the Treasury Department to disseminate data standards for all financial regulatory agencies, while directing each agency to transform its regulatory reporting regime from disconnected documents into standardized, searchable data. The bill further provides that any information required by other laws to be public must be published as open data, and includes specific directives for the SEC to improve that agency’s existing data reporting regime.

    Additional details concerning the proposed measure are explained in a summary prepared by www.datacoalition.org. U.S. Representative Randy Hultgren (R-IL)—one of the bill’s co-sponsors and current Vice Chairman of the House Subcommittee on Capital Markets, Securities and Investment—has also promoted the legislation in an op-ed for The Guardian, entitled How to stop the next Bernie Madoff.

    Federal Issues Congress Department of Treasury Data Collection / Aggregation

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  • OFR Director Delivers “Reducing the Regulatory Reporting Burden” Remarks at the Financial Data Summit

    Privacy, Cyber Risk & Data Security

    On March 16, the Office of Financial Research (OFR) posted remarks made by Director Richard Berner at the third annual Financial Data Summit hosted by the Data Transparency Coalition. "Reducing the Regulatory Reporting Burden" outlines OFR’s mission to identify areas of “duplication, overlap, and inefficiency in regulatory reporting,” presents steps to be undertaken in partnership with the Financial Stability Oversight Council (and its member agencies) to “improve data quality and reduce the reporting burden [by] requiring standards, including precise and agreed-on definitions, identifiers, and formats; industry-regulator agreement on essential data elements; adherence to best practices in data collection; and more data sharing among regulators,” and seeks participation and input from the private sector.

    Privacy/Cyber Risk & Data Security OFR Data Collection / Aggregation

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  • CFPB Issues Largest HMDA Fine in Bureau History Against Nonbank Mortgage Lender

    Lending

    On March 15, the CFPB announced a consent order assessing a $1.75 million civil money penalty against a national mortgage lender for failing to accurately report mortgage data in violation of the Home Mortgage Disclosure Act (“HMDA”). The Bureau alleged that, during the supervision process, it found the lender’s HMDA compliance systems to be flawed, and that the flaws led to the generation of “significant, preventable” errors in its mortgage lending data. The following violations were also alleged: (i) a failure to “maintain detailed HMDA data collection and validation procedures”; (ii) a failure to “implement adequate compliance procedures”; and (iii) a failure to “consistently define data among its various lines of business,” which resulted in data discrepancies.  As reported by the Bureau, the size of the penalty reflects the lender’s market size, the magnitude of the errors, and its history of violations. The terms of the consent order require the lender to pay a $1.75 million penalty, develop an effective compliance management system to prevent future violations, and review and correct HMDA reporting inaccuracies for the defined time period. Notably, the consent order does not provide for consumer redress.

    Later that day, the mortgage lender issued a statement announcing the resolution of the Bureau’s examination and highlighting the company’s efforts “over the past two years” to “proactively ma[ke] substantial investments in new staff, training and technology to enhance all of [their] HMDA-related processes and controls.”

    Lending CFPB Mortgage Lenders HMDA Data Collection / Aggregation

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  • Fed Report Provides Information on Debit Card Transactions in 2015

    Federal Issues

    On November 30, the Fed announced the release of its annual report on debit card transactions in 2015. The report is the fourth in a series to be published every two years pursuant to Section 920 of the Electronic Fund Transfer Act (EFTA). As in prior years, the 2015 report reflected that issuers’ costs of authorizing, clearing, and settling debit card transactions (excluding issuer fraud losses) varied greatly across respondents. Data compiled in the report estimates that debit-card fraud losses to all parties (merchants, cardholders, and issuers) increased by 44 percent from 2013 to an estimated total of $2.41 billion in 2015. The median covered issuer had average fraud prevention and data security costs of 1.9 cents per transaction.

    Federal Issues Federal Reserve Debit Cards EFTA Payments Data Collection / Aggregation

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