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CFPB Posts Strategic Plan for Fiscal Years 2018-2022
On October 18, the CFPB released and requested feedback on its draft strategic plan for fiscal years 2018-2022. This strategic plan identifies the Bureau’s long-term goals and objectives.
The proposed strategic plan outlines four broad goals for the next five years with multiple objectives and various strategies defined for each goal. Consistent with previous CFPB releases, these objectives reflect the Bureau’s continued use of data and technology to advance its mission. The four goals are:
- “Prevent financial harm to consumers while promoting good practices that work for consumers, responsible providers, and the economy as a whole.” Objectives include creating and modifying regulations; supervising institutions; and enforcing consumer financial laws.
- “Empower consumers to make informed financial choices to reach their own life goals and enhance their own financial well-being.” Objectives include handling complaints and sharing data; and creating and offering educational resources.
- “Inform the public, policy makers, and the CFPB’s own policy-making with market intelligence and data-driven analysis of consumer financial markets and consumer behavior.” Objectives include monitoring markets and producing research reports.
- “Advance the CFPB’s performance by maximizing resource productivity.” Objectives include hiring a diverse work force; using technology for public engagement; ensuring effective and efficient management; and maintaining meaningful channels for feedback.
The CFPB is requesting comments by November 18.
CFPB Consumer Advisory Board Public Meeting Notice
The CFPB Consumer Advisory Board will host a public meeting on Thursday, November 2, at 10:00am EST in Tampa, Florida. According to the notice, published in the Federal Register on October 17, the board will discuss Know Before You Owe: Reverse Mortgages; financial well-being; trends and themes; and payday, vehicle title, and certain high-cost installment loans.
Attendees must RSVP by noon, November 1, to CFPB_CABandCouncilsEvents@cfpb.gov.
OCC to Host Workshop for Bank Directors in December; FDIC, CFPB Announce Webinar to Discuss Financial Education Resources
On October 23, the OCC announced it will host a workshop December 4-6 in Albuquerque, New Mexico, for directors, senior management team members, and other key executives of OCC-supervised national community banks and federal savings associations. The “Building Blocks for Directors” workshop will (i) focus on the duties and cores responsibilities of directors and management; (ii) discuss major laws and regulations; and (iii) provide insight on the examination process.
Also on October 23, the FDIC and CFPB announced they will co-host a webinar on November 15 to discuss financial education resources designed to help people with disabilities make informed financial decisions. Topics of discussion will include recent enhancements to the FDIC’s Money Smart curriculum and the CFPB’s Your Money, Your Goals toolkit.
Senate Nullifies CFPB Arbitration Rule
On October 24, the Senate cleared a resolution under the Congressional Review Act to nullify the CFPB’s recently adopted final arbitration rule, with Vice President Mike Pence casting the deciding vote to break the 50-50 tie. As previously covered in InfoBytes, the House passed H.J. Res. 111 earlier in July to invalidate the rule, which prohibits the use of mandatory pre-dispute arbitration clauses in certain contracts for consumer financial products and services. The resolution now heads to President Trump.
Both CFPB Director Richard Cordray and Acting Comptroller of the Currency Keith A. Noreika issued statements following the vote. Noreika stated: “The elected representatives acted to stop a rule from going into effect that would have likely increased the cost of credit for hardworking Americans and made it more difficult for small community banks to resolve differences with their customers without achieving the rule’s goal of deterring future financial abuse.” Noreika labeled the action by Congress as a “victory for consumers and small banks across the country.”
However, according to many media outlets, Director Cordray condemned the Senate’s action. Cordray explained: “Tonight's vote is a giant setback for every consumer in this country. Wall Street won and ordinary people lost. This vote means the courtroom doors will remain closed for groups of people seeking justice and relief when they are wronged by a company.”
Treasury Releases Report Criticizing CFPB Arbitration Rule
On October 23, the Treasury Department released a report criticizing the CFPB’s arbitration rule (Rule)—finding the Rule did not satisfy the statutory prerequisites under the Dodd-Frank Act for banning arbitration agreements. Specifically, the report concludes that “the Bureau has not made a reasoned showing that increased consumer class action litigation will result in a net benefit to consumers or the public as a whole.” Like the OCC’s findings (as covered by InfoBytes previously), the Treasury Department found that the Rule will result in increased costs to consumers as affected businesses are unlikely to absorb the new financial costs associated with increased class action litigation. Moreover, the report notes that (i) the CFPB’s data shows that the majority of class action lawsuits deliver no relief to consumers; (ii) that despite the rule’s high costs, the CFPB did not demonstrate the Rule would help increase compliance with federal consumer laws; and (iii) the CFPB failed to consider less burdensome alternatives to the rule.
In addition to the Treasury Department, the Rule is also under scrutiny by Congress and the subject of a lawsuit filed by the U.S. Chamber of Commerce and other financial industry groups (previously discussed in InfoBytes here and here, respectively).
CFPB Publishes Mortgage Servicing Small Entity Compliance Guide and Executive Summary
On October 19, the CFPB released version 3.0 of its mortgage servicing Small Entity Compliance Guide. The updated guide supports implementation of amendments to the Bureau’s mortgage servicing interim final rule issued October 4, which provides servicers, who are subject to a cease in communication request, a 10-day window to provide modified early intervention notices at the end of the 180-day period. The interim final rule takes effect October 19, at the same time the broader amendments to the early intervention requirements take effect. (See previous InfoBytes coverage here.) An updated Executive Summary, which highlights key changes to provisions of the 2016 Mortgage Servicing Rule, the 2016 FDCPA Interpretive Rule, and the October 2017 interim final rule has also been released.
CFPB Updates HMDA Implementation Materials; Federal Regulatory Agencies Release Key Data Fields
On October 17, the CFPB published a new reference chart titled “Reportable HMDA Data: A Regulatory and Reporting Overview Reference” designed to be used as a reference tool for required data points to be collected, recorded, and reported under Regulation C. The chart takes into account HMDA rules issued on August 24, which generally take effect January 1, 2018. (See previous InfoBytes coverage here.) The CFPB noted that the reporting reference chart “does not itself establish any binding obligations” and is not intended to be viewed as a “substitute for the regulation or its official commentary.”
Separately that same day, in a measure to promote efficiency and consistency, the Board of Governors of the Federal Reserve, FDIC, and OCC identified 37 key data fields that examiners will typically use to test and validate the accuracy and reliability of data collected under the new HMDA requirements beginning in 2018. In certain circumstances, however, examiners may find it necessary to review additional HMDA data fields as appropriate. OCC Acting Comptroller of the Currency Keith Noreika noted in a statement that these actions should help ensure the accurate collection of HMDA data without creating “needless burden” on community banks surrounding the full resubmission of data “simply because of a few minor errors.”
CFPB Issues Principles Concerning Security and Transparency for Financial Data Sharing and Third-Party Aggregation
On October 18, the CFPB published guidelines entitled “Consumer Protection Principles” (Principles), which are “intended to reiterate the importance of protecting consumers” when companies, including “fintech” firms, banks, and other financial institutions, get authorization from consumers to access their account data that reside in separate organizations to provide products and services. Earlier this year, industry groups responded to a CFPB request for information and weighed in on the benefits and risks associated with consumers authorizing third parties to access their financial and account information held by financial service providers. (See previous InfoBytes summary here.) Along with the Principles, the CFPB published a summary of stakeholder insights, which highlights the feedback received by the Bureau. Separately, on October 16, Senator Edward J. Markey (D-Mass.) sent a letter to Director Richard Cordray raising concerns about data security during the transfer of consumer data to third-party aggregators and highlighting the need for transparency concerning the use of the data.
The Principles address the following areas: (i) data access; (ii) data scope and usability; (iii) control of data and informed consent; (iv) payment authorizations; (v) data security; (vi) transparency on data access rights; (vii) data inaccuracies; (viii) dispute rights and unauthorized access resolution; and (ix) mechanisms for efficient and effective accountability.
Notably, the Bureau recognized that there already exist statutes and regulations that apply to consumer protections in this market. As such, the Principles “are not intended to alter, interpret, or otherwise provide guidance on—although they may accord with—the scope of those existing protections,” and therefore do not establish “binding requirements.”
CFPB Issues Report: Student Loan Complaints Initiated Actions Bringing Relief to Borrowers
On October 16, the CFPB published its annual report analyzing consumer complaints submitted between September 1, 2016 and August 31, 2017. The report, titled “Annual Report of the CFPB Student Loan Ombudsman,” is based on more than 22,000 complaints, which related to federal student loan servicing, debt collection, private student loans servicing, and debt relief services. The press release announcing the report noted that this represented a 120 percent increase in student loan complaints compared to last year, but also that this can partly be attributed to the fact that the Bureau updated its student loan complaint form in late February 2016 to accept complaints about federal student loan servicing issues. The report also noted that student loan complaints from July 2011 through August 2017 have led to actions resulting in more than $750 million in relief to student loan borrowers and improved the loan repayment process for millions of additional borrowers.
The CFPB estimates that federal and private student loan debt combined has reached $1.4 trillion, mostly from federal loans, with more than 8 million student loan borrowers in default due to not making a required monthly payment for at least nine months. The report makes additional observations, including the following:
- Military student loan borrowers continue to complain about difficulties in accessing protections guaranteed under federal law, such as interest rate caps under the Servicemembers Civil Relief Act, automatic recertification of income-driven repayment (IDR) plans, zero percent interest rate reductions while serving in areas of hostility, and discharging loans for veterans due to Total and Permanently Disability (TPD).
- Consumers continue to report challenges concerning repayment roadblocks, such as difficulty in applying for or recertifying IDR plans, obtaining TPD discharge, and accessing advertised loan benefits for private loans.
- Harassing and aggressive debt collection tactics, including the possibility for suspension or revocation of professional licenses in some states following a default, reportedly are creating additional challenges for consumers.
OCC Acting Comptroller Shares Thoughts on Opportunities to Reduce Regulatory Burdens
On October 5, OCC Acting Comptroller of the Currency Keith Noreika spoke before the 2017 Midsize Bank Coalition of America Chief Risk Officer Meeting to discuss opportunities for regulatory reform.
According to Noreika, one area of concern relates to the adverse effect arbitrary asset thresholds pose to the annual stress test requirements required under the Dodd-Frank Act because the burden “is not commensurate with the systemic risks presented by an institution.” Given the amount of diversity in the business models of banks who have around $10 billion in assets, “regulators need the ability and authority to tailor their supervision to the unique risks presented by individual banks.” Noreika suggested an approach that would give federal banking agencies the authority to tailor statutory stress testing requirements without an asset threshold, thus reducing the risk of banks growing beyond the threshold to offset increased costs or staying below the threshold to avoid unwelcome scrutiny.
Noreika also urged for interagency harmonization of guidance and policies to avoid conflicting regulatory guidance when addressing cybersecurity issues.
Additionally, Noreika addressed the CFPB’s arbitration rule as an example of the need to work “to ensure regulation is balanced and appropriate by speaking up when we see proposed rules that may adversely affect the business of banking, have systemic effects, or result in perverse unintended consequences.” Noreika stated that prior to the publication of the final arbitration rule, the OCC requested access to the data the CFPB used to develop and support the rule in order to conduct an independent review. However, it was not until after the rule was published that the CFPB made the data available. According to OCC findings, the rule will adversely impact consumers by increasing costs. Community banks, Noreika noted, will also bear the burden of increased legal costs from defending lawsuits.
Finally, Noreika commented that banks continue to face challenges when trying to implement Bank Secrecy Act compliance programs and adapt to new requirements under TRID, HMDA, and the Military Lending Act.