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Buckley Sandler Special Alert: Cordray to resign as director of CFPB
Richard Cordray said today in an email to the staff of the Consumer Financial Protection Bureau that he will resign as director before the end of November. While it has long been expected that he would seek the Democratic nomination for the governorship of Ohio, he did not specify his plans in the email.
Richard Cordray is the first confirmed Director of the CFPB, which was created by the Dodd-Frank Act in the wake of the financial crisis. Following his recess appointment by President Obama in January 2012, Cordray oversaw an aggressive rulemaking and enforcement agenda, which accelerated following the election of President Trump in November 2016.***
Click here to read full special alert.If you have questions about the announcement or other related issues, please visit our Consumer Financial Protection Bureau practice page, or contact a Buckley Sandler attorney with whom you have worked in the past.
Acting Comptroller Argues for Removing Separation Between Banking and Commerce
On November 8, Acting Comptroller of the Currency Keith A. Noreika addressed The Clearing House Annual Conference in New York, New York and called for an end to the separation between banking and commerce. Noreika noted that the topic may be considered “taboo” to banking regulators but nonetheless offered “an alternative to the popular narrative.” In his speech, Noreika acknowledged that the premise of the separation is to avoid the risks associated with entangling federally insured deposits with unreliable commercial enterprises. However, he argued, “the recent financial crisis actually demonstrated that there is nothing inherently safer about separating banking and commerce or traditional banking and investment banking,” and further noted that allowing for commingling could generate efficiencies and improve banking economic performance.
FDIC Chairman Speaks About Financial Inclusion
On November 7, the Chairman of the FDIC, Martin J Gruenberg, addressed the Local Initiatives Support Corporation (LISC) in New York, New York regarding financial inclusion and expanding economic opportunity for the underbanked. In his speech, Gruenberg discussed the agency’s most recent report, FDIC National Survey of Unbanked and Underbanked Households, which found that nearly 27 percent of American households are unbanked or underbanked. Gruenberg also highlighted the initiatives the agency has undertaken to address the results of this report, including (i) creating access to “Safe Accounts,” which are electronic transaction accounts with low costs; (ii) conducting research on mobile financial services and how technology can lead to more sustainable banking relationships; and (iii) continuing financial education initiatives with a particular focus on youth savings.
Fannie and Freddie Introduce Extended Modifications for Disaster Relief
On November 2, at the direction of the Federal Housing and Finance Authority (FHFA), Fannie Mae introduced in Lender Letter LL-2017-09 (Letter) a temporary forbearance mortgage loan modification (Extend Mod) for servicers with mortgage loans affected by the recent disasters. The Letter covers the requirements for an Extend Mod, including outlining loan eligibility criteria. Among other requirements, the loan must (i) be located in a FEMA-Declared Disaster Area; (ii) be less than 31 days delinquent when the disaster occurred and complete the forbearance plan while between 31 days delinquent and 360 days delinquent; (iii) not be delinquent after being previously modified with an Extend Mod from the same disaster; (iv) not be insured or guaranteed by a federal government agency; and (v) not be subject to a recourse or indemnification arrangement, another workout option, or a current repayment plan that is performing. The Letter also provides information on disbursing hazard loss draft proceeds, reimbursement for property inspections, and payment records for borrower-initiated termination of mortgage insurance.
Under the same FHFA direction and in coordination with Fannie Mae, Freddie Mac issued Guide Bulletin 2017-25 announcing the servicing requirements for the Freddie Mac Extend Modification for Disaster Relief. Both Fannie and Freddie note the deadline for implementing the Extend Mod is February 1, 2018.
Find more InfoBytes disaster relief coverage here.
House Energy and Commerce Subcommittee Examines Consumer Data Security
On November 1, the House Subcommittee on Digital Commerce and Consumer Protection (Subcommittee) held a hearing entitled “Securing Consumers’ Credit Data in the Age of Digital Commerce” to examine: (i) the legal and regulatory framework for consumer reporting agencies, including the Gramm-Leach-Bliley Act and Fair Credit Reporting Act; (ii) current cybersecurity standards, best practices, threats, and vulnerabilities; and (iii) how data breaches relate to incidences of identity theft and fraud. In introductory remarks, Subcommittee Chairman, Bob Latta (R-Ohio), acknowledged the need to understand ways to protect against data breaches and secure consumer data. This sentiment was echoed by Full Committee Chairman, Greg Walden (R-Or.), who noted in his opening statement that recent data breaches “demonstrate the challenges of protecting consumer information in the digital age.” The full list of witnesses, testimony, and committee background memo is available here.
Third Treasury Report Calls on HUD to Reconsider Application of Disparate Impact Rule to the Insurance Industry
On October 26, the U.S. Treasury Department published a report outlining a number of recommendations for ways to manage systemic risk primarily within the asset management and insurance industry. A section of the report, however, also discusses HUD’s potential application of the disparate impact rule to the insurance industry—specifically related to homeowner’s insurance. The report, “A Financial System That Creates Economic Opportunities—Asset Management and Insurance,” is the third in a series of four the Treasury plans to issue in response to President Trump’s Executive Order 13772 (EO), which mandated a review of financial regulations for inconsistencies with promoted “Core Principles.” (See Buckley Sandler Special Alert on the EO here and InfoBytes coverage on the first two reports here.)
HUD is authorized to adjudicate housing discrimination claims and issue rules relating to the Fair Housing Act. According to the report, Treasury recommends that HUD reconsider the use of the disparate impact theory to the insurance industry. The report notes a number of problems and challenges that would arise from applying disparate impact to the insurance industry. In particular, the report identifies potential challenges because (i) “state insurance regulations ordinarily prohibit the consideration of protected characteristics in the evaluation and pooling of risk” and at least one state expressly prohibits the collection of this data; (ii) the rule could impose unnecessary burdens on insurers and lead to actions that are not actuarially sound in an effort to avoid underwriting practices that may result in disparate outcomes; and (iii) it may be inconsistent with the McCarran-Ferguson Act and other existing state laws.
The report also recommends, among other things, that Congress clarify the “business of insurance” exception that generally excludes these services from the CFPB’s jurisdiction. The report recommends clarification to this exception to eliminate uncertainty about the CFPB’s jurisdiction and the potential overlap between the Bureau and state insurance regulators. A fact sheet accompanying the report further highlights Treasury’s recommendations to evaluate systemic risk, streamline regulations, rationalize international engagement, and promote economic growth.
OCC Presents First National Bank Charter Since the Financial Crisis
On October 27, Acting Comptroller of Currency, Keith A. Noreika, issued the first full-service national bank charter since the financial crisis to a banking institution in Florida. The institution is also the first de novo national bank and de novo approved for federal deposit insurance in Florida since the financial crisis. While presenting the charter, Noreika commented on the rarity of de novo banks and encouraged better efficiency in the process for their establishment in order to, “create more economic opportunity for consumers, businesses, and communities across the nation.”
As previously covered by InfoBytes, the House Financial Services Committee held a hearing in March related to the “de novo drought” and to examine the impact the Dodd-Frank Act has had on the creation of new financial institutions.
CFPB Releases Web-Based Tool to Track Trends in Mortgage Delinquency Rates
On October 30, the CFPB announced the release of a “Mortgage Performance Trends” tool that tracks delinquency rates across the nation. The tool is comprised of data from the National Mortgage Database (jointly launched by the CFPB and the FHFA in 2012) and tracks monthly changes in delinquencies in two categories – borrowers who are 30-89 days delinquent and borrowers who are 90 or more days delinquent. The tool is interactive and contains national-level data as well as data for all 50 states and the District of Columbia. According to the Bureau’s press release, the tool shows that national mortgage rates of serious delinquency rates are at their lowest level since the financial crisis.
OCC Updates Guidance on Federal Branch Supervision and Enforcement Action Policies and Procedures
On October 27, the OCC issued Bulletin 2017-46, updating guidance related to federal bank branch supervision and licensing. The OCC issued a revised version of its “Federal Branches and Agencies” booklet, which clarifies the process for reviewing and evaluating license conversion applications by a state-licensed branch or agency operated by a foreign bank to a federal branch or agency. Bulletin 2017-46 also replaced the 2014 agency paper entitled, The OCC’s Approach to Federal Branch and Agency Supervision. The paper outlines the OCC’s framework and considerations related to (i) the regulatory approach and supervision process for large and complex federal branches and agencies (not community banks), and (ii) the general overview of the filing requirements for applications, notices, and licenses, as well as the review and decision process.
On October 31, the OCC issued Bulletin 2017-48 to update its policies and procedures regarding bank enforcement actions. The updates are designed to provide more clarity and consistency in the implementation, communication and monitoring of enforcement actions. In particular, the updates are intended to, among other things, better describe the relationship between violations, concerns identified in matters requiring attention, and enforcement actions, emphasize communication with bank management and personnel and OCC supervisors, and enhance standard processes for tracking and resolving corrective actions. The updates are effective December 1, and are reflected in its “Bank Supervision Process,” “Community Bank Supervision,” “Federal Branches and Agencies Supervision,” and “Large Bank Supervision” booklets of the Comptroller’s Handbook.
Small Business Economic Hearing on Financing Through Fintech
On October 26, the House Small Business Committee Subcommittee on Economic Growth, Tax, and Capital Access (Subcommittee) held a hearing entitled, “Financing Through Fintech: Online Lending’s Role in Improving Small Business Capital Access” to understand how small businesses obtain capital, examine various industry business models, and discuss the impacts of online lending in the marketplace. In introductory remarks, Subcommittee Chairman, Dave Brat (R-VA), identified small business access to capital as a top priority for the Subcommittee and noted that small businesses are increasingly looking to online lending as a means to access credit instead of traditional sources. The full list of witnesses and testimony is available here.