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On October 22, the CFPB released an advanced notice of proposed rulemaking (ANPR), which seeks comments to assist the Bureau in developing regulations covering consumers’ access to financial records. The Bureau is required to promulgate regulations to implement Section 1033 of the Dodd-Frank Act, which provides, among other things, that consumer financial services providers must make certain product or service information available to consumers. The Bureau’s press release notes that access to this information would allow consumers’ enhanced control of their financial matters. Additionally, should consumers allow third parties to access the information, those parties may “deliver new or improved financial products and services,” such as personal financial management and making or receiving payments. However, the Bureau acknowledges certain risks associated with access to financial records, including risks related to the methods of authorization and risks related to an institution’s collection and use of the records. The ANPR seeks comments on questions grouped into nine categories: (i) costs and benefits of consumer data access; (ii) competitive incentives; (iii) standard-setting; (iv) access scope; (v) consumer control and privacy; (vi) legal requirements outside of Section 1033; (vii) data security; (viii) data accuracy; and (ix) other information. Comments are due 90 days after publication in the Federal Register.
On September 29, the U.S. District Court for the Eastern District of New York granted a national bank’s request for interlocutory appeal of the court’s September 2019 decision denying the dismissal of a pair of actions, which alleged that the bank violated New York law by not paying interest on escrow amounts for residential mortgages. As previously covered by InfoBytes, last September, the district court concluded that the National Bank Act (NBA) does not preempt a New York law requiring interest on mortgage escrow accounts, because there is “clear evidence that Congress intended mortgage escrow accounts, even those administered by national banks, to be subject to some measure of consumer protection regulation.” The bank moved to amend the prior order and certify the preemption question for interlocutory appeal to the U.S. Court of Appeals for the Second Circuit. The court granted the motion stating that the case “presents one of the rare instances in which there would be system-wide benefits to granting an interlocutory appeal.” The court noted that certifying the question for appeal would foster an “effective and efficient judiciary” by saving the defendants and jurists “considerable time and effort” by not having to re-litigate the issue. Moreover, certifying for appeal would “materially advance the ultimate disposition of [the] litigation.”
On October 1, the CFPB released the assessment report required by Section 1022(d) of the Dodd-Frank Act for the TILA-RESPA Integrated Disclosure Rule (TRID), concluding that the TRID Rule “made progress towards several of its goals.” The assessment report was conducted using the Bureau’s own research and external sources. In opening remarks, Director Kraninger noted that the Bureau was “unable to obtain or generate the data necessary” to include a cost-benefit analysis, but documented the benefits and costs when possible. In addition to studying the effectiveness of the TRID Rule, the report also summarized the public comments the Bureau received from its November 2019 request for information (covered by InfoBytes here).
The Bureau issued the TRID Rule in November 2013, and the Rule took effect on October 3, 2015. Among other things, the TRID Rule integrated TILA’s Good Faith Estimate (GFE) and RESPA’s settlement statement (HUD-1), as well as other Dodd-Frank required disclosures, into the “Loan Estimate” and “Closing Disclosure” forms. Key findings of the assessment include:
- The TRID disclosure forms improved borrower abilities to locate key mortgage information, and compare costs and features of different mortgage offers;
- Evidence was mixed as to whether the TRID disclosure forms improved borrower abilities to understand loan estimates and transactions, and the TRID Rule increased consumer shopping for mortgages;
- The median response for one-time costs for lenders of implementing the rule was roughly $146 per mortgage originated in 2015;
- Evidence was unclear regarding ongoing costs for lenders, noting that over the last decade, lenders’ costs have increased steadily, but the data does not show a clear increase from the time the TRID Rule took effect; and
- Purchases and refinances dropped notably (around 14 percent and eight percent, respectively) in the first two months after the effective date, and purchase closing times lengthened by about 13 percent. However, both changes returned to pre-TRID Rule amounts and durations.
Additionally, the Bureau released a Data Point report titled, “How mortgages change before origination,” which details how the terms and costs of a mortgage loan may change during the origination process. The Bureau examined about 50,000 mortgages originated between March 2016 and November 2017, and found, among other things, that (i) APR changes occurred in more than 40 percent of mortgages; (ii) loan amount and the loan to value ratio changed for nearly 25 percent of mortgages; and (iii) interest rate changed for eight percent of mortgages.
On September 15, the CFPB released its “Outline of Proposals Under Consideration and Alternatives Considered” (Outline) for implementing the requirements of Section 1071 of the Dodd-Frank Act, which instructs the Bureau to collect and disclose data on lending to women and minority-owned small businesses. The detailed Outline describes the proposals under consideration and discusses other relevant laws, the regulatory process, and potential economic impacts. The Bureau also released a high-level summary of the Outline. Highlights of the proposals include:
- Scope. The Bureau is considering proposing that the data collection and reporting requirements would apply only to applications for credit by a small business. Financial institutions would not be required to collect and report data for women- and minority-owned businesses that are not considered “small,” as defined by the Small Business Act and the Small Business Administration’s (SBA) implementing regulations.
- Covered Lenders. The Bureau is considering proposing a broad definition of “financial institution” that would apply to a variety of entities engaged in small business lending, but is also considering proposing exemptions based on either a size-based (examples include $100 million or $200 million in assets), or activity-based threshold (examples range from 25 loans or $2.5 million to 100 loans or $10 million), or both.
- Covered Products. The Bureau is considering proposing exemptions from the definition of “credit” to include consumer-designated credit, leases, factoring, trade credit, and merchant cash advances.
- Application. Because an “application” would trigger requirements under Section 1071, the Bureau is considering proposing a definition that is largely consistent with Regulation B; however, the Bureau is also considering “clarifying circumstances,” such as inquiries/prequalifications, that would not be reportable.
- Data Points. The Bureau is considering a range of data points for collection, including, in addition to the mandatory data points required by Section 1071, “discretionary data points” to aid in fulfilling the purposes of Section 1071: “pricing, time in business, North American Industry Classification System (NAICS) code, and number of employees.”
- Privacy. The Bureau is considering using a “balancing test” for public disclosure of the data. Specifically, data “would be modified or deleted if its disclosure in unmodified form would pose risks to privacy interests that are not justified by the benefits of public disclosure.”
Additionally, the Bureau will convene a panel, as required by the Small Business Regulatory Enforcement Fairness Act (SBREFA), in October 2020 to “consult small entities regarding the potential impact of the proposals under consideration.” Feedback on the proposals is due no later than December 14.
On August 24, the FTC announced several Notices of Proposed Rulemaking (NPRM) intended to clarify that five Fair Credit Reporting Act (FCRA) rules promulgated by the FTC will now apply only to motor vehicle dealers. The NPRMs also propose non-substantive amendments to correspond to changes made to the FCRA by the Dodd-Frank Act, and will apply to the following rules:
- Address Discrepancy Rule. This rule requires users of consumer reports to implement policies and procedures for, among other things, handling notices of address discrepancy received from a nationwide consumer reporting agency (CRA) and furnishing an address for a consumer that a “user has reasonably confirmed as accurate to the CRA from whom it received the notice.” The proposed amendments narrow the scope of the rule to motor vehicle dealers excluded from CFPB jurisdiction.
- Affiliate Marketing Rule. This rule provides consumers the right to restrict a person from using certain information obtained from an affiliate to make solicitations to the consumer. While the proposed amendments narrow the scope of the rule to “motor vehicle dealers” excluded from CFPB jurisdiction, they retain the substantive provisions of the rule because they “addresses the relationship between covered motor vehicle dealers and their affiliates, which may not be motor vehicle dealers.”
- Furnisher Rule. Under this rule, furnishers are required to implement policies and procedures regarding the accuracy and integrity of the consumer information they provide to a CRA. The amendments propose changes including narrowing the rule’s scope to entities set forth in Dodd-Frank “that are predominantly engaged in the sale and servicing of motor vehicles, excluding those dealers that directly extend credit to consumers and do not routinely assign the extensions of credit to an unaffiliated third party.”
- Prescreen Opt-Out Notice Rule. This rule outlines requirements for those who use consumer reports to make unsolicited credit or insurance offers to consumers. The proposed amendments will narrow the scope of the rule to cover only motor vehicle dealers. The model form is unchanged from the previous model notice and is identical to the model notice used by the CFPB.
- Risk-Based Pricing Rule. Under this rule persons that use information from a consumer report to offer less favorable terms are required to provide a risk-based pricing notice to consumers about the use of such data. Under the proposed amendments, only motor vehicle dealers will be required to comply.
The FTC seeks feedback on the effectiveness of the five rules, including (i) whether there exists a continuing need for each rule’s specific provisions; (ii) what benefits have been provided to consumers under each rule; and (iii) should modifications be made to each rule in order to benefit consumers and businesses or to account for changes in relevant technology or economic conditions.
Comments are due 75 days after the NPRMs are published in the Federal Register.
On August 24, the CFPB filed another status report in the U.S. District Court for the Northern District of California as required under a stipulated settlement reached in February with a group of plaintiffs, including the California Reinvestment Coalition. The settlement (covered by InfoBytes here) resolved a 2019 lawsuit that sought an order compelling the Bureau to issue a final rule implementing Section 1071 of the Dodd-Frank Act, which requires the Bureau to collect and disclose data on lending to women and minority-owned small businesses. Details on the Bureau’s first status update can be found here.
Among other things, the Bureau noted in the status report that (i) on July 22, it released a “survey of lenders to obtain estimates of the onetime costs that lenders would incur to prepare to collect data required by Section 1071”; and (ii) on August 11, it provided the SBA and the Office of Management and Budget’s Office of Information and Regulatory Affairs a draft Small Business Regulatory Enforcement Fairness Act (SBREFA) outline regarding proposals under consideration and alternatives considered. The status report emphasizes that the Bureau is “on track” to release a SBREFA outline by September 15 and convene a SBREFA panel by October 15, as required by the settlement.
On July 24, the CFPB announced plans to issue an Advanced Notice of Proposed Rulemaking (ANPR) on consumer-authorized access to financial records later this year. The future ANPR relates to the February Symposium held by the Bureau covering this subject and Section 1033 of the Dodd-Frank Act, which deals with consumers’ rights to access information about their financial accounts. As previously covered by InfoBytes, the purpose of this symposium was “to elicit a variety of perspectives on the current and future state of the market for services based on consumer-authorized use of financial data.” The symposium consisted of three panels: (i) the current landscape and benefits and risks of consumer-authorized data access; (ii) market developments; and (iii) considerations for policymakers. Along with the ANPR announcement, the Bureau released a report summarizing the February symposium.
According to the Bureau, the future ANPR will solicit feedback on (i) how the Bureau can effectively and efficiently implement the financial access rights described in Section 1033 of Dodd-Frank; (ii) the possible scope of data that might be subject to protected access; and (iii) how the Bureau may be able to solve the regulatory uncertainty of Section 1033’s interaction with other statutes, such as the FCRA.
On July 17, the CFPB released the final rule revising the dollar amounts for provisions implementing the Truth in Lending Act (TILA) and amendments to TILA, including the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), the Home Ownership and Equity Protection Act of 1994 (HOEPA), and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s ability-to-repay and qualified mortgage (ATR/QM) provisions. The CFPB is required to make annual adjustments to dollar amounts in certain provisions in Regulation Z, and has based the adjustments on the annual percentage change reflected in the Consumer Price Index in effect on June 1, 2020. The following thresholds will be effective on January 1, 2021:
- For open-end consumer credit plans under TILA, the threshold for disclosing an interest charge will remain unchanged at $1.00;
- For open-end consumer credit plans under the CARD Act, the adjusted dollar amount for the safe harbor for a first violation penalty fee will remain unchanged at $29, and the adjusted dollar amount for the safe harbor for a subsequent violation penalty fee will also remain unchanged at $40;
- For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages will be $22,052, and the adjusted points and fees dollar trigger for high-cost mortgages will be $1,103; and
- The maximum thresholds for total points and fees for qualified mortgages under the ATR/QM rule will be: (i) three percent of the total loan amount for loans greater than or equal to $110,260; (ii) $3,308 for loan amounts greater than or equal to $66,156 but less than $110,260; (iii) five percent of the total loan amount for loans greater than or equal to $22,052 but less than $66,156; (iv) $1,103 for loan amounts greater than or equal to $13,783 but less than $22,052; and (v) eight percent of the total loan amount for loan amounts less than $13,783.
On July 9, the U.S. District Court for the District of Maryland denied a national bank’s request for interlocutory appeal of the court’s February decision denying the bank’s motion to dismiss an action, which alleged that the bank violated Maryland law by not paying interest on escrow sums for residential mortgages. As previously covered by InfoBytes, after the bank allegedly failed to pay interest on a consumer’s mortgage escrow account, the consumer filed suit against the bank alleging, among other things, a violation of Section 12-109 of the Maryland Consumer Protection Act (MCPA), which “requires lenders to pay interest on funds maintained in escrow on behalf of borrowers.” The court rejected the bank’s assertion that the state law is preempted by the National Bank Act (NBA) and by the OCC’s 2004 preemption regulations. The court concluded that under the Dodd-Frank Act, national banks are required to pay interest on escrow accounts when mandated by applicable state or federal law.
The bank subsequently moved for an interlocutory appeal. In denying the bank’s request, the court explained that there was not a difference of opinion among courts as to whether the NBA preempts Maryland’s interest on escrow law. Specifically, the court noted that its “conclusion aligns with the only other two courts that have examined [the] particular question,” citing to the U.S. Court of Appeals for the Ninth Circuit’s decision in Lusnak v Bank of America and the Eastern District of New York’s decision in Hymes v. Bank of America (covered by InfoBytes here and here, respectively). After finding there is no “difference of opinion as to any ‘controlling legal issue,’” the court concluded the motion failed to satisfy the requisite elements for an interlocutory appeal.
On July 7, the CFPB issued its semi-annual report to Congress covering the Bureau’s work from October 1, 2019, through March 31, 2020. The report, which is required by the Dodd-Frank Act, addresses, among other things, problems faced by consumers with regard to consumer financial products or services; significant rules and orders adopted by the Bureau; and various supervisory and enforcement actions taken by the Bureau. In her opening letter, Director Kathy Kraninger discusses the Bureau’s response to the Covid-19 pandemic, stating that the Bureau has participated in “countless joint statements, virtual co-appearances, and shared broadcasts to stakeholders with [their] prudential partners” and has “directly engage[d] consumers with the right information, at the right time.”
Among other things, the report highlights first time homebuyers and credit scores as areas in which consumers face significant problems, citing to the Bureau’s Market Snapshot on First-time Homebuyers and the quarterly consumer credit trends report on public records. In addition to highlighting the Bureau’s previous efforts during the reporting period, the report notes upcoming initiatives and plans, including (i) the Taskforce on Federal Consumer Financial Law’s public listening sessions in the fall; (ii) the cost-benefit analysis symposium in July; and (iii) further work on their Covid-19 pandemic responses.
- Thomas A. Sporkin to discuss "Managing internal investigations and advanced government defense" at the Securities Enforcement Forum
- Jeffrey P. Naimon to discuss "2021 - A new beginning/what's to come" at the QuestSoft Lending Compliance & Risk Management Virtual Conference
- H Joshua Kotin to discuss "Mortgage servicing in a recession: Early intervention, loss mitigation and more" at the NAFCU Virtual Regulatory Compliance Seminar
- Daniel R. Alonso to discuss "Independent monitoring in the United States" at the World Compliance Association Peru Chapter IV International Conference on Compliance and the Fight Against Corruption
- Jonice Gray Tucker to discuss "Cyber security, incident response, crisis management" at the Legal & Diversity Summit
- Jonice Gray Tucker to discuss "The future of fair lending" at the Mortgage Bankers Association Regulatory Compliance Conference
- Michelle L. Rogers to discuss "Major litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Pandemic fallout – Navigating practical operational challenges" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Consumer financial services" at the Practising Law Institute Banking Law Institute
- Daniel P. Stipano to discuss "BSA/AML - Covid impact and regulatory/guidance roundup" at an NAFCU webinar