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CFPB and DOJ Settle With Mortgage Lender for Alleged Discriminatory Mortgage Pricing
On May 28, the CFPB, along with the DOJ, filed a joint complaint against a California-based mortgage lender alleging that the lender violated the Equal Credit Opportunity Act by engaging in a pattern or practice of discrimination from 2006 to 2011 that increased loan prices for African-American and Hispanic borrowers. The DOJ also alleges that the lender violated the Fair Housing Act. According to the complaint, the lender’s mortgage broker compensation policy, which incented discretionary interest rate and fee increases to borrowers, resulted in approximately 14,000 African-American and Hispanic borrowers being charged higher total broker fees on wholesale mortgage loans than non-Hispanic white borrowers. The complaint alleges that the higher fees were not based on the borrowers’ credit risk profile, but rather on the basis of race or national origin. The parties separately filed a proposed consent order which would require the mortgage lender to, among other things, pay $9 million in consumer relief to affected borrowers to resolve the allegations. The proposed consent order is currently pending court approval.
CFPB Fines Worldwide Payment System $25 Million for Alleged Deceptive Practices
On May 19, the CFPB announced a stipulated final judgment against a California-based worldwide payment system company. According to the CFPB’s complaint, filed the same day, the defendant (i) failed to honor advertised promotional benefits; (ii) charged consumers deferred-interest fees; (iii) enrolled consumers in a credit product without their knowledge or consent; (iv) failed to remove late fees and interest charges that consumers accrued because of website failures; and (v) mishandled consumers’ billing disputes. Under the terms of the final judgment, the company will improve its disclosures regarding enrollment options and payment allocation, pay $15 million to reimburse consumers who were the victims of its practices, and pay $10 million to the CFPB’s Civil Penalty Fund.
CFPB Introduces Financial Coaching Initiative
On May 20, the CFPB launched its Financial Coaching Initiative, an educational program designed to help “recently-transitioned veterans and economically vulnerable consumers.” The program places 60 certified financial coaches – all of whom will be accredited by the Association for Financial Counseling and Planning Education – at diverse, non-profit partner organizations around the country. With over 49 million people living below the poverty line, and at least 68 million financially underserved, the goal of the CFPB’s new educational service is to “help these consumers make good financial decisions and reach their financial goals.” The program is being paid for by the CFPB’s Civil Penalty Fund.
CFPB Seeks Public Comments Into Student Loan Servicing Practices
On May 14, the CFPB published a Request For Information (RFI) seeking public comment on student loan servicing practices. In particular, the Bureau is requesting comments on six areas: (i) industry practices that cause repayment challenges; (ii) challenges faced by distressed borrowers; (iii) financial incentives that affect the quality of service; (iv) application of consumer protections in other markets to the loan servicing market; and (v) the availability of information about the student loan market. According to the Bureau, the comments received concerning the aforementioned areas will be used to assist student loan servicers and policymakers identify potential options to improve service, reduce defaults, develop industry best practices, examine consumer protection, and spur innovation. Comments must be received by July 13. Along with the RFI, the CFPB released a factsheet on student debt stress, highlighting statistics that could lead to significant challenges for the industry. In prepared remarks for a field hearing concerning the issue, CFPB Director Richard Cordray alluded to the growing concerns within the student loan market, mentioning that two-thirds of graduates finishing their bachelor’s degrees graduate with debt averaging almost $30,000.
CFPB and Federal Reserve Host Final Webinar on TILA-RESPA Integrated Disclosure
On May 26, The CFPB and the Federal Reserve will host a 60-minute webinar to answer questions with respect to the TILA-RESPA Integrated Disclosure rule under the TILA and RESPA, also known as TRID. “This fifth and final in the planned series of webinars will address specific questions related to rule interpretation and implementation challenges that have been raised to the Consumer Financial Protection Bureau by creditors, mortgage brokers, settlement agents, software developers, and other stakeholders,” according to the Federal Reserve. For those interested in attending, registration is required and can be accessed here.
CFPB Director Provides Update on TRID and U.S. Housing Market
On May 12, CFPB Director Richard Cordray addressed the National Association of Realtors regarding the 2008-2009 economic crash and the gradual recovery of the American housing market. In an effort to restore consumers’ confidence in the mortgage market, the Bureau implemented rules, such as the Ability-to-Repay rule and the Qualified Mortgage rule, to ensure that lenders were offering consumers mortgages they could afford. Effective August 1, the Bureau’s “Know Before You Owe” rule will replace the current separate disclosures required by TILA and RESPA with combined TILA-RESPA disclosures (“TRID”); the new forms are “consumer-tested to be more user-friendly, which will ease the process and improve the consumer experience.”. In his remarks, Cordray did not signal that the TRID effective date or enforcement of the same would by delayed by the Bureau.
CFPB Reminds Mortgage Lenders to Include Section 8 Income
On May 11, the CFPB issued Bulletin 2015-02, reminding creditors to include income from the Section 8 Housing Choice Voucher (HCV) Homeownership Program when underwriting mortgage loans. Within the Bulletin, the Bureau noted that it “has become aware of one or more institutions excluding or refusing to consider income derived from the Section 8 HCV Homeownership Program during mortgage loan application and underwriting processes,” further mentioning that “some institutions have restricted the use of Section 8 HCV Homeownership Program vouchers to only certain home mortgage loan products or delivery channels.” The Bulletin warns that disparate treatment prohibited under ECOA and Reg. B may exist when a creditor does not consider Section 8 as a source of income and provides guidance on how lenders can mitigate their fair lending risk. In conjunction with the guidance, the CFPB also published a blog post, providing an overview of the Section 8 HCV Program and detailed how consumers can submit complaints if they believe they have been discriminated against.
FDIC Hosts Teleconference on CFPB Mortgage Rules
On May 21, the FDIC’s Division of Depositor and Consumer Protection is scheduled to host a teleconference that will focus on the implementation of the new mortgage rules issued by the CFPB in 2013. According to the FDIC, officials from the banking regulator will discuss findings and highlight best practices that its examiners have noted during initial examinations in the first year since the rules became effective in 2014. Registration is required, and will begin at 2:00 p.m. EST.
CFPB Updates Mortgage Origination Examination Procedures to Include Requirements of TILA-RESPA Integrated Disclosure Rule
On May 4, the CFPB updated its Supervision and Examination Manual’s Mortgage Origination examination procedures to include guidance on how its compliance examiners will examine loan disclosures and terms of closed-end residential mortgage loans that are subject to the TILA-RESPA Integrated Disclosure (TRID) rule. The TRID examination procedures updates are reflected in module 4 of the Manual’s 8 modules, and instruct compliance examiners to review a sample of complete loan files to determine a company’s compliance. Further, if consumer complaints exist concerning the mortgage origination and closing disclosure requirements, then compliance examiners are permitted to interview the consumers included in the sample and inquire about each subject area listed in the module. The TRID rule is scheduled to go into effect August 1, 2015.
CFPB Study: Over 26 Million Consumers Are Credit Invisible
On May 5, the CFPB released the results of its latest analysis of the credit reporting industry, finding that more than 26 million consumers are categorized as “credit invisible” (i.e., consumers without credit histories with a nationwide consumer reporting agency). The report also found that an additional 19 million consumers’ credit records (roughly 8 percent of the adult population) are unscored because of insufficient credit history or information not recently reported. Other notable findings of the study include: (i) almost 15 percent of Black and Hispanic consumers are more likely to be “credit invisible” compared to 9 percent of White consumers; and (ii) consumers in low-income neighborhoods are much more likely to be credit invisible or to have an unscored credit record. During a conference call to announce the results of the study, Kenneth Brevoort, Section Chief within the CFPB’s Office of Research, alluded to what the Bureau’s next steps may be in the area, stating that the Bureau wants “to have a better understanding of exactly what interventions are possible in the regulatory space or perhaps, industry initiatives that may improve the functioning of these markets for the consumers’ well-being.”