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Financial Services Law Insights and Observations

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  • CFPB issues ANPR on consumer access to financial records

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance CFPB Dodd-Frank Section 1033 Consumer Finance

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  • Senator Brown objects to Bureau’s proposal to reorganize SEFL

    Federal Issues

    On October 21, Senator Sherrod Brown (D-OH) asked CFPB Director Kathy Kraninger to delay the implementation of a proposed reorganization of the Bureau’s Division of Supervision, Enforcement, and Fair Lending (SEFL) until after the election and a determination is made as to whether Kraninger will continue as Director. According to Brown, the proposed SEFL reorganization would remove the Office of Enforcement’s (Enforcement) “voice and role in critical SEFL decisionmaking processes,” and “introduces inefficiency and confusion.” Brown addressed several concerns, including that the proposed reorganization would (i) disband Enforcement’s Policy and Strategy Team, whose duties include determining overall priorities and strategies; (ii) strip “Enforcement of its seat at the table and vote to determine whether potential violations of federal consumer financial law should be resolved through supervisory examinations or through an enforcement action”; (iii) strip “Enforcement of its authority to open new research matters (precursors to investigations) or new investigations of potential violations of federal consumer financial laws”; (iv) strip “Enforcement of its E-Litigation Team, which provides specialized technology expertise and manages electronic data discovery from initial Enforcement investigations through trial”; and (v) strip “Enforcement of its representation in the ‘Clearance’ process, which will exclude Enforcement from sharing its views and potential concerns with other Bureau offices regarding proposed rules, regulations, guidance, advisory opinions, or other public Bureau statements.” Brown cautioned that while establishing a “consistent and unified SEFL approach to policy and strategic planning” may have merit, the manner in which this objective is achieved must be addressed.

    Federal Issues CFPB Supervision Enforcement

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  • CFPB releases HMDA 2021 reference chart

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance CFPB HMDA FFIEC

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  • CFPB extends GSE Patch

    Agency Rule-Making & Guidance

    On October 20, the CFPB issued a final rule extending the expiration of the GSE Patch until the mandatory compliance date of final amendments to the General Qualified Mortgage (QM) loan definition in order to facilitate a smooth and orderly transition away from the GSE Patch. As previously covered by a Buckley Special Alert, in June, the Bureau released two Notices of Proposed Rulemaking (NPRM) to address the January 2021 expiration of the GSE Patch for the QM Rule. The first NPRM proposed to remove the General QM loan definition’s 43 percent debt-to-income ratio (DTI) limit and replace it with a price-based threshold and the second proposed to extend the expiration of the GSE Patch.

    The final rule replaces the original expiration of the GSE Patch (January 1, 2021) until the mandatory compliance date of the final amendments to the QM loan definition. The final rule also provides that the current QM definition “will be available only for covered transactions for which the creditor receives the consumer’s application before the mandatory compliance date of final amendments to the General QM loan definition in Regulation Z.” Notably, the NPRM for the new QM loan definition proposes an effective date of six months after the final rule is published in the Federal Register and the rule has not yet been published; it does not discuss a mandatory compliance date.

     

    Agency Rule-Making & Guidance CFPB GSE Patch Qualified Mortgage Mortgages

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  • Agencies propose codifying that supervisory guidance lacks force of law

    Agency Rule-Making & Guidance

    On October 20, the Federal Reserve Board, CFPB, FDIC, NCUA, and OCC released a notice of proposed rulemaking (NPRM), which seeks to codify the “Interagency Statement Clarifying the Role of Supervisory Guidance issued by the agencies on September 11, 2018 (2018 Statement).” As previously covered by InfoBytes, the 2018 Statement confirmed that supervisory guidance “does not have the force and effect of law, and [that] the agencies do not take enforcement actions based on supervisory guidance.” The Statement emphasized that the intention of supervisory guidance is to outline agencies’ expectations or priorities and highlighted specific policies and practices the agencies intend to take relating to supervisory guidance to further clarify the proper role of guidance, including: (i) not citing to “violations” of supervisory guidance; (ii) limiting the use of numerical thresholds or other “bright-line” requirements; (iii) limiting multiple issuances of guidance on the same topic; (iv) continuing to emphasize the role of supervisory guidance to examiners and to supervised institutions; and (v) encouraging supervised institutions to discuss supervisory guidance questions with their appropriate agency contact.

    In addition to codifying the above elements of the 2018 Statement, the proposal would amend the 2018 Statement by (i) clarifying that references in the Statement limiting agency “criticisms” includes criticizing institutions “through the issuance of [matters requiring attention] MRAs and other supervisory criticisms, including those communicated through matters requiring board attention, documents of resolution, and supervisory recommendations”; and (ii) adding that supervisory criticisms should be “specific as to practices, operations, financial conditions, or other matters that could have a negative effect on the safety and soundness of the financial institution, could cause consumer harm, or could cause violations of laws, regulations, final agency orders, or other legally enforceable conditions.”

    Comments are due 60 days after publication in the Federal Register, which has not yet occurred.

     

    Agency Rule-Making & Guidance Federal Reserve CFPB FDIC NCUA OCC Supervision Examination Enforcement

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  • CFPB settles with auto servicer over deceptive practices

    Federal Issues

    On October 13, the CFPB announced a settlement with the Texas-based auto-financing subsidiary of a Japanese automobile manufacturer to resolve allegations that the servicer violated the Consumer Financial Protection Act by engaging in illegal repossession and collection practices. The CFPB alleged that the servicer engaged in unfair and deceptive practices by (i) wrongfully repossessing vehicles even though customers made payments to decrease their delinquency to less than 60 days past due or kept a promise to pay; (ii) limiting the ability of borrowers who pay over the phone to select payment options with significantly lower fees; (iii) making false statements in loan extension agreements, which “created the net impression that consumers could not file for bankruptcy”; and (iv) knowing its repossession agents were charging customers upfront storage fees before returning personal property left inside repossessed cars.

    Under the terms of the consent order, the servicer must pay a $4 million civil money penalty, as well as up to $1 million in consumer redress. The servicer must also credit any outstanding fees stemming from the repossession and pay consumers redress for each day it wrongfully held their vehicles. The servicer is also ordered to, among other things, (i) cease using language that creates the impression that customers may not file for bankruptcy; (ii) conduct a quarterly review to identify and remediate any future wrongful repossessions; (iii) adopt policies and procedures to correct its repossession practices; (iv) prohibit its repossession agents from charging fees to get personal property returned; and (v) clearly disclose phone payment fees to consumers.

    Federal Issues CFPB Enforcement CFPA UDAAP Deceptive Unfair

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  • Debt collector settles with CFPB for $15 million

    Federal Issues

    On October 15, the CFPB announced a proposed settlement with the largest U.S. debt collector and debt buyer and its subsidiaries (collectively, “defendants”), resolving allegations that the defendants violated the terms of a 2015 consent order related to their debt collection practices. As previously covered by InfoBytes, the Bureau filed an action against the defendants in September alleging that they collected more than $300 million from consumers by violating the terms of the 2015 consent order—and again violating the FDCPA and CFPA—by, among other things, (i) filing lawsuits without possessing certain original account-level documentation (OALD) or first providing the required disclosures; (ii) failing to provide debtors with OALD within 30 days of the debtor’s request; (iii) filing lawsuits to collect on time-barred debt; and (iv) failing to disclose that debtors may incur international-transaction fees when making payments to foreign countries, which “effectively den[ied] consumers the opportunity to make informed choices of their preferred payment methods.” 

    The stipulated final judgment, if entered by the court, would require the defendants to pay nearly $80,000 in consumer redress and a $15 million civil money penalty. Moreover, among other things, the defendants are subject to a five-year extension of certain conduct provisions of the 2015 consent order and must disclose to consumers the potential for international-transaction fees and that the fees can be avoided by using alternative payment methods.   

    Federal Issues CFPB Settlement Debt Collection Debt Buyer CFPA FDCPA Enforcement

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  • CFPB releases annual college credit card report

    Federal Issues

    On October 8, the CFPB released its annual report to Congress on college credit card agreements. The report was prepared pursuant to the CARD Act, which requires credit card issuers to submit to the Bureau the terms and conditions of any agreements they make with colleges, as well as certain organizations affiliated with colleges. The Bureau cited data from 2019 showing that (i) the number of college credit card agreements, as well as the number of open accounts under these agreements, “continues a general trajectory of decline,” which is anticipated to continue into 2020; (ii) payments by issuers to the educational or affiliated entities remain stable overall; and (iii) agreements with alumni associations continue to dominate the market based on most metrics. The report also highlighted a statement issued by the Bureau in March, which was intended to temporarily provide more flexibility and reduce administrative burdens on credit card issuers (covered by InfoBytes here). The complete set of credit card agreement data collected by the Bureau can be accessed here.

    Federal Issues CFPB Credit Cards

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  • CFPB offers RESPA guidance on MSAs

    Federal Issues

    On October 7, the CFPB issued FAQs covering RESPA Section 8 and corresponding Regulation X sections. The FAQs provide a general overview of Section 8 and its prohibited activities. The FAQs also address the application of Section 8 to common scenarios involving gifts and promotional activities and marketing services agreements (MSAs). Highlights of the examples include:

    • Gifts. The FAQs note that if a gift ( “thing of value”) is given or accepted as part of an agreement or understanding for referral of business related to a real estate settlement service involving a federally related mortgage loan then it is prohibited under Section 8. The FAQs emphasize that the agreement or understanding need not be in writing or oral and can be established by a practice, pattern, or course of conduct.
    • Promotional activities. The FAQs state that promotional or educational activities connected to a referral source would be allowed under Regulation X if the activities (i) are not conditioned on referral of business; and (ii) do not involve defraying expenses that otherwise would be incurred by the referral source. The FAQs describe these conditions in more detail and provide example of activities that meet and do not meet Regulation X’s conditions.
    • Marketing Services Agreements. The FAQs emphasize that MSAs that involve payments for referrals are prohibited under RESPA Section 8(a), whereas MSAs that involve payments for marketing services may be permitted under RESPA Section 8(c)(2), depending on certain facts and circumstances. MSAs are lawful under RESPA when structured and implemented as an agreement for the performance of actual marketing services and the payment reasonably reflects the value of the services performed. The FAQs provide examples of prohibited MSAs under Section 8(a) and Section 8(b), including (i) agreements structured to provide payments based on the number of referrals received; or (ii) the use of split charges, either being paid to a person that does not actually perform the services or the amount paid exceeds the value of the services performed by the person receiving the split.

    Notably, with the release of the FAQs, the Bureau is rescinding its Compliance Bulletin 2015-05, entitled RESPA Compliance and Marketing Services Agreements, noting that the Bulletin “does not provide the regulatory clarity needed on how to comply with RESPA and Regulation X.” The Bureau emphasizes that with the rescission, MSAs will still “remain subject to scrutiny, and [the Bureau] remain[s] committed to vigorous enforcement of RESPA Section 8.”  

    Federal Issues CFPB RESPA Marketing Services Agreements Section 8 Referrals Regulation X

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  • Senate Democrats question CFPB’s lack of restitution in VA ad settlements

    Federal Issues

    On October 1, sixteen Democratic Senators sent a letter to CFPB Director Kathy Kraninger, expressing concern over the Bureau’s failure to obtain restitution in eight recent settlements with mortgage lenders for allegedly mailing consumers advertisements for Department of Veterans Affairs (VA) mortgages that contained misleading statements or lacked required disclosures (covered by InfoBytes here). The letter states that while the Bureau collected approximately $2.8 million in civil penalties over the eight settlements, it did not require any company to pay restitution to harmed consumers. The letter argues that the failure to obtain restitution in these matters was a departure from the Bureau’s practice in previous cases where it obtained restitution for consumers who enrolled in a service connected to allegedly deceptive advertising. The letter notes that, if the Bureau was not able to determine a restitution amount based on the “millions of advertisements” that were sent, it had the authority to seek disgorgement as a remedy. The letter requests the Bureau elaborate on, among other things, its decision not to seek restitution for consumers in the cited actions and to provide information about the standard the Bureau uses to determine when to provide restitution.

    Federal Issues U.S. Senate Mortgages CFPB Department of Veterans Affairs UDAAP

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