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CFPB plans to reconsider payday rule
On January 16, the CFPB announced plans to reconsider its final rule addressing payday loans, vehicle titles loans, and certain other extensions of credit (previously covered in a Buckley Sandler Special Alert) by engaging in a rulemaking process. While the announcement was made on the effective date of the final rule, most provisions do not require compliance until August 19, 2019. However, the deadline for submitting a preliminary approval to become a registered information system is April 16, 2018. The Bureau noted that it will consider waiver requests from potential applicants.
Notably, this marks the second recent announcement in which the agency refers to itself as “the Bureau of Consumer Financial Protection,” instead of the more-commonly used “Consumer Financial Protection Bureau.” Both titles are used in the text of the Dodd-Frank Act, though the sections of the Dodd-Frank Act authorizing creation of the CFPB used the “Bureau of Consumer Financial Protection” naming convention. The agency also previously updated its mission statement located at the bottom of each release.
For more InfoBytes coverage on the latest CFPB changes, click here.
Agencies adjust civil penalties for inflation
On January 12, the CFPB published a final rule adjusting upward the maximum amount of each civil penalty within their jurisdictions, as required by the Inflation Adjustment Act. As explained in the rule, the new maximum penalty amounts for 2018 are calculated by multiplying the corresponding 2017 penalty by a “cost-of-living adjustment” multiplier—which for 2018 has been set by the OMB at 1.02041—and then rounding to the nearest dollar. The new penalty amounts apply to civil penalties assessed after January 15, 2018.
In addition, the FDIC, the OCC, and the Federal Reserve recently issued similar Civil Penalty Inflation Adjustment notices.
Buckley Sandler Insights: OMB releases updated and possibly outdated CFPB rulemaking agenda
OMB has released the CFPB’s Fall 2017 rulemaking agenda. Although this is the first update to the agenda since Richard Cordray left the agency in November 2017, delays in the publication of rulemaking agendas are common so the updated agenda may not reflect the views of new CFPB leadership. The updated agenda does not appear on the Bureau’s website. Further:
- HMDA & ECOA Amendments: The updated agenda states that the Bureau planned to determine by December 2018 whether to make permanent adjustments to the threshold for reporting open-end lines of credit. However, as discussed in greater detail here, the CFPB stated on December 21 that it intended to engage in a broader rulemaking to (i) re-examine the criteria determining whether institutions are required to report data; (ii) adjust the requirements related to reporting certain types of transactions; and (iii) re-evaluate the required reporting of additional information beyond the data points required by the Dodd-Frank Act.
- Prepaid Cards: The updated agenda states that the CFPB expected to finalize amendments to its rule on prepaid cards in November 2017, but no final amendments have been issued. Instead, on December 21, the CFPB announced its intent to adopt final amendments “soon after the new year” and stated that it expects to extend the April 1, 2018 effective date to allow more time for implementation.
- Debt Collection: The updated agenda states that the CFPB expects to issue a proposed rule in February 2018 “concerning FDCPA collectors’ communications practices and consumer disclosures.” However, on December 14, OMB announced that the CFPB had withdrawn its planned survey regarding debt collection disclosures because “Bureau leadership would like to reconsider the information collection in connection with its review of the ongoing related rulemaking.”
See previous InfoBytes coverage on the HMDA, Prepaid, and Debt Collection rulemaking updates.
Other noteworthy aspects of the updated agenda include:
- Regulation Reviews: The updated agenda reiterates the Bureau’s intent to review the regulations inherited from other agencies and “clarify ambiguities, address developments in the marketplace, and modernize or streamline regulatory provisions.” The updated agenda lists “pre-rule activities” as continuing through February 2018, rather than September 2017 under the prior agenda.
- “Larger Participants” in Installment Lending: Consistent with the prior agenda, the CFPB states that it is preparing a proposed rule to define the “larger participants” in the personal loan market (including consumer installment loans and vehicle title loans) that will be subject to Bureau examinations. The updated agenda also states that the Bureau is still considering “whether rules to require registration of these or other non-depository lenders would facilitate supervision, as has been suggested to the Bureau by both consumer advocates and industry groups.” However, while the prior agenda indicated that a proposal was expected in September 2017, the new agenda lists May 2018.
- Overdrafts: The updated agenda states only that the CFPB is “continuing to engage in additional research and consumer testing initiatives relating to the opt-in process” for overdraft protection and that “pre-rule activities” will continue through this month. Under the prior agenda, pre-rule activities were scheduled to continue through June 2017.
- Small Business Lending: The agenda indicates that the long-delayed implementation of the small business data reporting provisions of the Dodd-Frank Act will be delayed even longer. The last agenda listed “pre-rule activities” as continuing through June 2017, stating that the CFPB “is focusing on outreach and research to develop its understanding of the players, products, and practices in the small business lending market and of the potential ways to implement section 1071.” The new agenda states that these activities will continue until May 2018, after which the Bureau “expects to begin developing proposed regulations concerning the data to be collected, potential ways to minimize burdens on lenders, and appropriate procedures and privacy protections needed for information-gathering and public disclosure.”
- TRID/Know Before You Owe Amendments: The updated agenda lists April 2018 as the expected release date for finalization of the July 2017 proposed rule addressing the “black hole” issue, which is discussed in a Buckley Sandler Special Alert. The prior agenda listed March 2018.
- Mortgage Servicing Amendments: In October 2017, the CFPB issued proposed amendments to the mortgage periodic statement requirements to further address circumstances in which servicers transition between modified and unmodified statements in connection with a consumer’s bankruptcy case. The updated agenda does not provide an expected release date for final amendments.
- Credit Card Agreement Submission: The agenda continues to state that the Bureau is considering rules to modernize its database of credit card agreements to reduce the submission burden on issuers and to make the database more useful for consumers and the general public. The agenda lists “pre-rule activities” as continuing through February 2018. Under the prior agenda, pre-rule activities were scheduled to continue through October 2017.
CFPB Releases Biennial Credit Card Report
On December 27, the CFPB released its biennial report on the state of the U.S. credit card market, finding that the total amount of credit lines, the total number of credit accounts, the total number of enrollments in online services, and the total amount of debt have increased since 2015. The report also found that the overall credit card cost to consumers has “proved largely stable” since 2015. Among other things, the report concludes:
- The total amount of credit lines has increased steadily since the recession but still remains below the mid-2008 high of $4.4 trillion.
- Over the last two years, credit card debt averages have increased by more than nine percent.
- Credit card originations have increased by roughly 50 percent since 2010 but still remain below pre-recession volumes.
- More than 60 percent of active credit card accounts enroll in online services.
Consumers average fewer credit cards than before the recession, and more consumers are signing up for secured credit cards.
CFPB Releases HMDA Tools; Updates HMDA Asset Threshold
On December 27, the CFPB announced the launch of a HMDA Check Digit Tool and a Rate Spread Calculator to assist financial institutions in the calculation of data field values required for reporting HMDA data. According to the CFPB, the HMDA Check Digit Tool and the Rate Spread Calculator will remain available to financial institutions throughout the 2018 collection period and beyond. As previously covered by InfoBytes, new HMDA data collection and reporting requirements under the amendments to Regulation C became effective January 1, 2018.
Also on December 27, the CFPB published a final rule increasing the asset-size exemption threshold under HMDA for financial institutions. As of January 1, 2018, banks, savings associations, and credit unions with assets of $45 million or less as of December 31, 2017 are exempt from collecting data in 2018. Regulation C requires the CFPB to adjust the asset threshold based on the year-to-year change in the average of the CPI–W (not seasonally adjusted) for each 12-month period ending in November, rounded to the nearest million. During the 12-month period ending in November 2017, the CPI–W increased by 2.1 percent, resulting in an increase in the threshold from $44 million to $45 million.
Arguments Heard in English Litigation; CFPB Announces Relaxed Compliance Requirements for HMDA; Other Proposed Rulemakings
On December 22, Judge Timothy Kelley heard arguments from both parties related to Leandra English’s litigation against President Trump and Mick Mulvaney. Judge Kelley did not rule on the matter at the close of the hearing. As previously covered by InfoBytes, English filed an amended complaint for declaratory and injunctive relief and a motion for preliminary injunction on December 6.
In response to English’s new arguments, the defendants filed an opposition motion on December 18. Among other things, the response counters an argument—raised by English for the first time in her amended complaint—that the Federal Vacancies Reform Act (FVRA) cannot be used to appoint an acting CFPB Director because the Director is also a member of the FDIC. Defendants responded that the FVRA provision excluding appointments to independent multi-member boards or commissions only applies to direct appointments and not to positions that serve as “ex officio” members, as the CFPB Director does on the FDIC. The defendants go on to explain that English’s interpretation would prevent the use of FVRA to fill multiple Cabinet and other high-ranking Executive Branch positions that serve as ex officio members of independent agencies. The defendants also alleged that English failed to satisfy the requirements of the federal quo warranto statute – the exclusive means, according to the defendants, for directly challenging Mulvaney’s authority to perform as Acting Director of the CFPB. English replied to the defendant’s opposition motion on December 21.
Throughout the week, the CFPB took action regarding current and future rulemakings:
HMDA. On December 21, the CFPB issued a statement regarding compliance with the Home Mortgage Disclosure Act (HMDA) final rule and amendments to the HMDA final rule. Although the Bureau did not delay the January 1, 2018 effective date as some had hoped, it acknowledged the difficulties of coming into compliance with the new requirements, stating that the Bureau “does not intend to require data resubmission unless data errors are material or assess penalties with respect to errors for data collected in 2018 and reported in 2019.” According to the CFPB, compliance with the HMDA requirements pose “significant system and operational challenges” and therefore, institutions should focus the 2018 data collection on identifying areas for improvement in their HMDA compliance management systems for future years. The Bureau further advised that it expects that supervisory examinations of 2018 HMDA data will be “diagnostic” to help “identify compliance weaknesses, and will credit good-faith compliance efforts.” However, institutions will still use the CFPB’s new HMDA Platform for data collected in 2017. The FDIC and the OCC issued similar announcements, Financial Institution Letter FIL-63-2017 and OCC Bulletin 2017-62 respectively, and other regulators are expected to do the same.
The Bureau’s stated intent to focus on “good-faith compliance efforts” and “material” errors in the early days of the new HMDA requirements is similar to the approach taken for implementation of the Ability-to-Repay/Qualified Mortgage Rule and the TILA-RESPA Integrated Disclosure Rule. While this flexible approach is generally beneficial for lenders and consumers, it does produce some uncertainty over what will be considered “good faith” or “material.”
The Bureau also announced its intent to engage in additional HMDA rulemaking that may (i) re-examine the criteria determining whether institutions are required to report data; (ii) adjust the requirements related to reporting certain types of transactions; and (iii) re-evaluate the required reporting of additional information beyond the data points required in HMDA, as amended by the Dodd-Frank Act.
Prepaid Accounts. On December 21, the CFPB also issued a statement on the final rule covering prepaid accounts and the proposed amendments to that rule. In the statement, the CFPB announced that it intends to adopt final amendments “soon after the new year” and that it expects to further extend the April 1, 2018 effective date to allow more time for implementation. The Bureau did not give details on the nature of the amendments or the length of the expected extension.
Debt Collection. On December 14, OMB released a Notice of Action, which reflected that the CFPB withdrew its plan to conduct a survey related to debt collection disclosures of 8,000 individuals. According to OMB’s notice, the CFPB withdrew the plan because “Bureau leadership would like to reconsider the information collection in connection with its review of the ongoing related rulemaking.”
District Court Rules CFPB Violates FOIA in Withholding Documents Produced in Response to CID; Upholds Other CFPB Interpretations of FOIA
On December 14, the U.S. District Court for the District of Columbia ruled that any CFPB policy considering information provided to the CFPB in response to CID requests to have been submitted “voluntarily” and therefore exempt from public disclosure violates the Freedom of Information Act (FOIA). In response to a lawsuit filed by a consumer class action law firm, the court reviewed numerous claims related to the CFPB’s use of FOIA Exemptions. As explained in the opinion, the D.C. Circuit views information provided voluntarily to government entities as “more stringently protected” than compulsory submissions in determining whether materials qualify as “confidential” under FOIA Exemption 4. The court, in granting summary judgment, agreed with the plaintiff in holding that the CFPB had “actual legal authority” to issue the CID and obtain the related materials, and therefore the CFPB cannot treat information produced in response as having been disclosed voluntarily. In addressing other claims, however, the court agreed with the CFPB that documents it relied upon to identify wrongful collection lawsuits were exempt from public disclosure under FOIA Exemption 7(E), which protects “records or information compiled for law enforcement purposes,” and that CFPB attorney notes from a settlement conversation were exempt under FOIA Exemption 5, which protects intra-agency memoranda and has been interpreted to protect attorney work product. The court also supported the CFPB’s policy treating debt collectors and debt buyers as financial institutions as consistent with FOIA Exemption 8 related to financial institution information, finding that debt collectors “as a link in the credit-management chain” fit comfortably within the “inherently broad” term financial institutions.
Supreme Court Rejects Tribal Lenders’ Petition to Avoid CFPB CID
On December 11, the U.S. Supreme Court rejected without comment a petition from online tribal lending entities to appeal a Ninth Circuit Court of Appeals decision that ordered the entities to comply with a CFPB investigation related to small-dollar loan products. As previously covered by InfoBytes, the entities argued that due to tribal sovereignty, the CFPB does not have jurisdiction over the small-dollar lending services. The CFPB urged the Supreme Court to deny the petition, arguing that the Court’s review is unnecessary because “[t]he question at this juncture is solely whether the Bureau may obtain information from petitioners pursuant to a CID,” not “whether petitioners are subject to the Bureau’s regulatory authority.”
CFPB Ombudsman’s Office Publishes Fiscal Year 2017 Annual Report
The CFPB’s Ombudsman’s Office published its annual report to the Director for fiscal year 2017, entitled Advocating for Fair Process in Consumer Financial Protection. The December 6 report details Ombudsman initiatives undertaken in 2017 and highlights the Bureau’s selection as one of four case studies in a December 2016 study by the Administrative Conference of the United States (ACUS) on the use of ombudsmen in federal agencies. Specifically, the Bureau’s report focuses on systemic reviews concerning the following: (i) the accessibility of CFPB print materials for different groups of people; (ii) the telephone entry point for non-consumers; (iii) the documenting and standardizing of ex parte communications regarding proposed rules; and (iv) the implementing of improvements to the way consumers select categories when identifying issues with companies in the consumer complaint database.
The Ombudsman’s report also outlines strategic goals for the next two years, including, among other things, (i) addressing CFPB process issues facing consumers, financial entities, and trade groups; (ii) optimizing resources for effective assistance; and (iii) expanding educational efforts and engagement with stakeholders, in addition to implementing best practices to convey feedback.
CFPB Updates Guide to TRID Forms
On December 6, the CFPB published an updated version of the TILA-RESPA Integrated Disclosure Guide to the Loan Estimate and Closing Disclosure Forms. The updated guide reflects the amendments issued by the CFPB on July 7 of this year (previously covered by a Buckley Sandler Special Alert). These include changes resolving a number of significant ambiguities that generated concerns about the liability of lenders and purchasers of mortgage loans.