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FFIEC Finalizes Updated Uniform Interagency Consumer Compliance Rating System
On November 7, the Federal Financial Institutions Examination Council (FFIEC) announced the issuance of an updated Uniform Interagency Consumer Compliance Rating System, more commonly known as the “CC Rating System.” In final guidance the FFIEC explains that the new rating system has been re-designed “to better reflect current consumer compliance supervisory approaches and to more fully align the CC Rating System with the Agencies’ current risk-based, tailored examination processes.” The agency also notes that the revisions “were not developed to set new or higher supervisory expectations for financial institutions and their adoption will represent no additional regulatory burden” (emphasis added).
Under the new CC Rating System, institutions will be assessed on a 1-to-5 rating scale in three distinct categories: (i) board and management oversight; (ii) compliance program and violations of law; and (iii) consumer harm. The new rating system will be used by all FFIEC member agencies – including CFPB in its evaluation of non-depository institutions. FFIEC member agencies plan to implement the updated rating system on consumer compliance examinations that begin on or after March 31, 2017.
White to Testify Before House Financial Services
SEC Chair Mary Jo White is scheduled to testify later this month at separate House Financial Services Committee hearings, a spokesman for the panel said. White will appear before the committee on November 15 to answer questions regarding the SEC’s agenda, operations, and budget request. She will be the only witness.
CFPB and New York Attorney General File Lawsuit Against Network of Collections Companies
On November 2, the CFPB, in partnership with the New York Attorney General, filed a lawsuit in a federal district court against the leaders of a debt collection operation based out of Buffalo. The lawsuit alleges that defendants operate a network of companies that harass and/or deceive consumers into paying inflated debts or amounts they may not owe. The Bureau is seeking to shut down the operation and to obtain compensation for victims and a civil penalty against the companies and partners.
CFPB Takes Action Against B&B Pawnbrokers For Misleadingly Low Annual Percentage Rate
On November 3, the CFPB filed a lawsuit in federal district court against a Virginia pawnbroker for deceiving consumers about the actual annual cost of its loans. In its Complaint, the CFPB alleges both TILA violations and unfair, deceptive, or abusive acts or practices under Dodd-Frank and the CPA. The complaint seeks monetary relief, injunctive relief, and penalties. The CFPB coordinated its investigation with the Virginia Attorney General’s office – which filed its own lawsuit against the same pawnbrokers back in July 2015 for violations of the Virginia Consumer Protection Act.
CFPB Releases Financial Literacy Annual Report for 2016
On October 31, the CFPB released its Financial Literacy Annual Report for 2016. The report describes what the Bureau is doing to “help consumers navigate the financial marketplace and build financial well-being” per its mandate under Dodd-Frank to improve the “financial literacy” of consumers in America. The 2016 edition of the report is broken down into three sections: (i) why there is a need for financial literacy amongst consumers; (ii) the Bureau’s approach to increasing financial literacy; and (iii) research initiatives designed to “understand consumers and the financial market place,” “effective financial education practices,” and “how best to prepare youth for financial capability in adulthood.”
CFPB Releases Supervisory Highlights Report for Fall 2016
On October 31, the CFPB released the 13th Edition of its Supervisory Highlights Report, covering the period May through August of this year. The report shares recent supervisory observations in the areas of automobile loan origination, automobile loan servicing, debt collection, mortgage origination, mortgage servicing, student loan servicing, and fair lending. The report found that the CFPB’s recent supervisory actions returned more than $11 million to approximately 225,000 consumers. The Bureau also set forth new examination procedures for reverse mortgage servicing, student loan servicing, and the Military Lending Act.
CFPB Clarifies "Flexibility" in Third-Party Risk Management
On November 1, the CFPB issued an update to its previous guidance on risk management for third-party service providers. The update is substantially similar to the Bureau’s previous guidance on third-party risk management, but clarifies that the depth and formality of an entity’s risk management program for service providers may vary depending upon (i) the service being performed, and (ii) the service provider’s compliance with federal consumer financial laws and regulations. With this update, the CFPB emphasized that supervised entities have flexibility to allow appropriate risk management of these relationships.
CFPB Reissues Guidance on Service Providers
On October 26, the CFPB published Bulletin 2016-02 on service providers to amend previously issued guidance covered in Bulletin 2012-03. Bulletin 2016-02 seeks to clarify that supervised banks and nonbanks have flexibility in managing the risks of service provider relationships. Specifically, the CFPB advises that “the depth and formality of the risk management program for service providers may vary depending upon the service being performed —its size, scope, complexity, importance and potential for consumer harm—and the performance of the service provider in carrying out its activities in compliance with Federal consumer financial laws and regulations.” The CFPB plans to post Bulletin 2016-02 on its website on October 31, 2016.
CFPB Monthly Complaint Report Spotlights Prepaid Complaints
On October 25, the CFPB released its latest monthly report of consumer complaint trends. This month’s report highlights prepaid complaints, noting that since July 21, 2011, the CFPB has received approximately 6,000 prepaid complaints. According to the report, the “most common issues identified by consumers are problems with managing, opening or closing an account (32 percent) and unauthorized transactions or other transaction issues (30 percent).” Additional prepaid complaints highlighted in the report include: (i) consumers experiencing delays in receiving a replacement card after having notified a company of fraudulent or unauthorized charges to their prepaid cards; (ii) difficulty using a prepaid card after having purchased one; (iii) assessing dormancy fees that depleted the card’s balance; and (iv) balance discrepancies. Consistent with past reports, this month’s issue lists the top ten most-complained-about companies across all financial products, as well as the top seven most-complained about companies for prepaid-related issues. Finally, the report identifies North Carolina as its geographical spotlight, observing that, as of October 1, 2016, the CFPB has received about 27,600 complaints from North Carolina consumers.
CFPB Issues Warning Letters to 44 Mortgage Lenders and Brokers for Potential HMDA Reporting Failures
On October 27, the CFPB issued warning letters to 44 mortgage lenders and mortgage brokers informing them that they may not be in compliance with certain provisions of the Home Mortgage Disclosure Act (HMDA) and Regulation C. The warning letters state that the recipients may be required to collect, record, and report housing-related lending data, and that they may be violating those requirements. Under HMDA, financial institutions that meet certain criteria are required to collect and report data related to their housing-related activity, including home purchase loans, home improvement loans, and refinancings they originate or purchase, or for which the institutions receive applications. The letters recite HMDA’s coverage criteria for lenders who are not banks, credit unions, or savings associations, suggesting that the CFPB is particularly concerned about HMDA compliance for non-depository mortgage lenders. While the letters state that the CFPB has not made any determinations that the recipients are in violation of HMDA filing requirements, the letters urge recipients to review their practices to ensure compliance with the relevant laws, and encourage recipients to advise the CFPB if the institution has taken steps or will take steps to ensure compliance. The letters advise recipients of the CFPB’s authority to impose civil money penalties for noncompliance with HMDA. In October 2013, the CFPB fined a bank and a nonbank mortgage lender for filing inaccurate HMDA data. In October 2015, the CFPB finalized a rule amending the HMDA reporting requirements under Regulation C, with the majority of the provisions taking effect on January 1, 2018.