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Financial Services Law Insights and Observations


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  • CFPB proposes final rule for registering nonbanks for supervision

    Agency Rule-Making & Guidance

    On June 3, the CFPB issued a final rule to require the registration and reporting of nonbank financial institutions that have been subject to public orders resulting from regulatory actions.  The Bureau’s stated goal in establishing the registry was to assist the public and enforcement agencies in identifying repeat offenders. The registry will compile and maintain all public orders issued by an agency or court, involving certain nonbank entities that were issued at least in part by an action or proceeding by any federal, state or local agency. The final rule mandated those nonbank covered entities—excluding depository institutions and credit unions—must register with the Bureau when they are subject to a public order. Under the CFPA, Section 1022(b)(1) authorized the Bureau to create rules “as may be necessary or appropriate to enable the Bureau to… carry out the purposes and objectives of the Federal consumer financial laws.” Section 1024(b) authorized the Bureau to exercise supervisory authority over certain nonbank entities. The final rule will also require nonbank entities to submit an annual written statement confirming compliance with each public order.

    This rule will apply to all covered entities, specifically nonbanks, which have entered into an order with an effective date on or later than January 1, 2017, and which remain in effect following the effective date of the final rule. Every nonbank that was named in an order and was covered under the rule must register, submitting all information required including the executed order. However, nonbanks that were subject to an order published on the NMLS’s Consumer Access website (other than an order in which the CFPB was involved) can elect for a simplified option.

    This action will be the latest step in the Bureau’s efforts to expand its nonbank supervision program. As previously covered by InfoBytes, the CFPB released a supervisory designation over a nonbank company in March since that company’s conduct posed an alleged risk to consumers (here), and in April the Bureau released its procedural rule to change how it will supervise nonbanks (here). In a prepared statement, the Director of the CFPB, Rohit Chopra, expressed that the final rule was designed to aid the CFPB and other law enforcement agencies to “monitor and track repeat offenders in order to better hold them accountable” regardless of companies reoffending. The director emphasized that court or enforcement orders are not a “tipsheet or set of suggestions.” This rule will go into effect on September 16. 

    Agency Rule-Making & Guidance Federal Issues CFPB Supervision Nonbank Nonbank Supervision

  • CFPB finalizes standards setting body component of open banking rule

    Agency Rule-Making & Guidance

    On June 5, the CFPB announced it finalized in part its proposed Personal Financial Data Rights rule, thus establishing the minimum qualifications necessary for the Bureau to become a recognized industry standard setting body when the full rule becomes final. Last October, the CFPB proposed the Personal Financial Data Rights rule to implement Section 1033 of the CFPA (covered by InfoBytes here) which was intended to offer consumers more control over their financial data and more consumer protections for misused data.

    After considering relevant public comments, the CFPB made several changes to the sections concerning standard setters and the standards they issue. Commenters asked for clarity regarding changes in standards, such as when a consensus standard ceases to have consensus status, and how it could potentially cause market uncertainty. In response, the Bureau replaced the term “qualified industry standard” with “consensus standard” and added a newly defined “recognized standard setter” term. The final rule defined “consensus standard” to clarify when a given standard will be a consensus standard, and also added that a “consensus standard” must be one that will be adopted and maintained by a recognized standard setter. In response to concerns about market uncertainty, the CFPB responded that they expect revocation of recognition for a standard setter to be a rare occurrence.

    Regarding periodic review, the final rule extended the maximum duration of the CFPB’s recognition of a standard-setting body from the proposed duration of three years to five years. The Bureau expects this change will incentivize standard-setting bodies to obtain recognition. The final rule included “data recipients” as an interested party in response to commenter concern that certain fintech sectors may be excluded. Additionally, meeting the criteria in the final rule is just the starting point for approval, as the CFPB may also assess whether the standard-setting body will be committed to developing and upholding open banking standards.

    The final rule also included a guide that detailed how standard setters can apply for CFPB recognition, how the Bureau will evaluate applications, and what standard setters can expect once recognized. The final rule will go into effect 30 days after publication in the Federal Register. 

    Agency Rule-Making & Guidance Federal Issues Privacy CFPB Open Banking Consumer Protection

  • CFPB releases semi-annual report on mid-year 2023

    Federal Issues

    On June 4, the CFPB released its semi-annual report to Congress, for the period beginning April 1, 2023, and ending September 30, 2023. The report highlighted rules and orders, complaints, supervisory and enforcement actions, and fair lending initiatives from the Bureau. The Bureau provided an overview of three final rules: a final rule on its authority over nonbanks in determining their risk, a final rule on small business lending under the ECOA, and an interim final rule in helping transition the LIBOR changes to reflect the LIBOR Act. Additionally, the report included a compilation of reports, guidance and spotlights on different consumer finance issues. Looking ahead, the Bureau noted its upcoming rules following September 2023 with four proposed rules. One on personal financial data rights, another on defining the participants for digital consumer payment applications, another on overdraft lending, one on fees for instantaneously declined transactions, and a final rule on credit card penalty fees.

    During the period from October 2022 to September 2023, the Bureau received 1.55 million consumer complaints. Of these, around 1.2 million complaints were sent to the relevant companies for review. When broken out by category, 79 percent of all consumer complaints were related to credit or other consumer reporting, with 7 percent on debt collection, 4 percent on credit cards, 4 percent on checking or savings, and 2 percent on mortgages; the remaining 4 percent was spread among a variety of consumer finance products.

    During the semi-annual reporting period, the CFPB executed a total of 55 public supervisory and enforcement actions. On state consumer financial law, the Bureau noted its ongoing complaint against an education firm accused of engaging in deceptive marketing and unfair debt collection practices with ten state attorneys general (as covered by InfoBytes here). Additionally, there were three lawsuits submitted along with the New York State Attorney General. Finally, for fair lending, the Bureau discussed its enforcement and rulemaking, with the issuance of a proposed rule on quality for Automated Valuation Models for real estate collateral securing mortgage loans. 

    Federal Issues CFPB Fair Lending Enforcement Rulemaking Agenda

  • CFPB sues student loan servicer over discharged student loan collections

    Federal Issues

    On May 31, the CFPB announced its lawsuit against a Pennsylvania-based student loan servicer (the defendant) for allegedly collecting on discharged loans. According to the complaint, the defendant lacked policies and procedures for identifying serviced loans that were discharged by bankruptcy courts. The CFPB alleged that the defendant continued to collect on discharged non-qualified education loans by making misrepresentations to consumers through repayment schedule letters and billing statements. Furthermore, the Bureau alleged that the defendant’s failure to establish policies for private student loans that were discharged resulted in its furnishing inaccurate information to consumer reporting agencies. The Bureau added that even if consumers did not continue to pay on their discharged loans, they were not reasonably able to avoid the defendant’s collection attempts and the credit information it furnished. The CFPB also claimed that consumers were unable to protect their interests because they could not choose their loan servicer and had no control over its collection practices. The defendant’s actions were in violation of the CFPA based on several violation of Regulation V. The defendant allegedly violated the FCRA, too. The Bureau sought injunctive relief, consumer redress, a civil money penalty, and other relief. 

    Federal Issues Enforcement CFPB CFPA FCRA Student Loan Servicer Student Loans

  • CFPB cautions against unenforceable contract terms and conditions

    Federal Issues

    On June 4, the CFPB issued Circular 2024-03, which cautioned covered persons under the CFPA against contracts for consumer financial products or services, including illegal or non-binding clauses. The Bureau said that such clauses may mislead consumers into thinking they have forfeited legal rights, which would violate the CFPA. Specifically, consumer contracts that falsely claim to restrict consumer rights (including liability waivers and mandatory arbitration clauses) can violate the prohibition on deceptive acts. CFPB Director, Rohit Chopra, said in an accompanying press release that the Bureau will address companies that “deceptively slip these terms into their fine print.” The Bureau reiterated prior guidance that disclaimers in a contract such as “subject to applicable law” do not cure misrepresentations caused by an unenforceable contract term. Past CFPB actions have addressed “deceptive contract terms” in various consumer finance areas, including mortgages, bank accounts, remittance transfers, and auto loans. The CFPB said it will continue to ensure fair consumer interactions with financial institutions, including efforts to regulate nonbank companies' contract terms and uphold the right to post honest online reviews. The Bureau also said it supported servicemembers' rights to challenge unlawful contract terms through legal action. 

    Federal Issues CFPB Compliance Contracts

  • CFPB says SCRA-related complaints are increasing

    Federal Issues

    On May 23, the CFPB published a blog post reporting that complaints from servicemembers, veterans, and their families significantly increased, with the total number of complaints surpassing 400,000 since the CFPB began cataloging complaints. The Bureau noted a 27 percent rise in complaints from 2022 and a 98 percent increase compared to 2021, with servicemember complaints mostly alleging credit reporting errors, mortgage problems, and financial fraud and scams.

    The CFPB’s blog post specifically focused on the application of interest rate protections under the Servicemembers Civil Relief Act (SCRA), which among other protections permitted servicemembers to request a decrease to 6 percent in interest rates on loans they took out before active duty. However, after a review of the complaints, the Bureau found servicemembers who claimed to face challenges in obtaining interest rate reductions. The CFPB noted a significant number of otherwise eligible servicemembers did not receive SCRA benefits. The CFPB suggested possible solutions like automated interest rate reductions, which it argued have been successful for federal student loans. The CFPB also noted instances where the CFPB cannot directly resolve an issue, it would refer complaints to appropriate agencies, such as the DOJ, for potential SCRA violations. The CFPB has also coordinated with other agencies to address military community complaints, including identity theft and financial fraud.

    Federal Issues CFPB Consumer Finance Consumer Protection Servicemembers

  • CFPB releases RFI on mortgage closing costs

    Federal Issues

    On May 30, the CFPB announced a request for information (RFI) regarding mortgage “junk fees” and their impact on borrowers and lenders. The CFPB identified an increase of over 36 percent in median total loan costs for home mortgages from 2021 to 2023 in its analysis, with median mortgage closing costs of $6,000 in 2022. The Bureau argued these fees and costs, many of which are fixed, can reduce home equity and may undercut home ownership.

    The RFI requested public input on whether the fees are subject to competition, how fees are set, who profits from them, and how fee changes, if any, impact consumers and the mortgage market. The CFPB was particularly interested in the factors driving fee increases, such as hard-pull tri-merge credit report costs, and how such fees are affecting housing affordability and access to homeownership. The CFPB also highlighted the potential impact of title insurance and mortgage origination fees.

    The RFI included nine specific questions related to

    (i) whether there are fees that are particularly problematic or burdensome for consumers;

    (ii) whether there are unnecessary fees charged for loan closure;

    (iii) whether and to what extent consumers compare closing costs across lenders;

    (iv) whether and to what extent consumers shop for closing costs across settlement providers;

    (v) the determination of fees, the beneficiaries, and lenders’ influence over third-party costs;

    (vi) which fees have increased, and what are their causes;

    (vii) factors contributing to rising closing, credit report, and credit score costs, the roles of various entities in the credit report chain, competitive pressures on these costs, and their consumer impact;

    (viii) lenders’ ability to negotiate closing costs more effectively than consumers; and

    (ix) the potential impact of closing costs on housing affordability, homeownership access, or home equity.

    Comments in response to the RFI must be received by August 2.

    Federal Issues CFPB Agency Rule-Making & Guidance Mortgages Fees RFI

  • FTC outlines TILA and EFTA efforts in letter to CFPB

    Federal Issues

    On May 20, the FTC released a letter to the CFPB detailing its enforcement activities related to Regulation Z (TILA), Regulation M (the Consumer Leasing Act or CLA), and Regulation E (the EFTA) during 2023.

    The FTC noted its TILA enforcement efforts related to automobile financing; specifically, the Commission detailed two actions involving deceptive car dealer practices. The Commission reported its finalization of the CARS Rule to address the sale, financing and leasing of motor vehicles. The Commission highlighted its “junk fees” rulemaking and stated that such fees cost consumers tens of billions of dollars each year and undercut honest businesses. The Commission noted its military credit and leasing initiatives as well as its report to Congress on consumer issues affecting American Indian and Alaska Native populations, such as impersonation scams and predatory lending.

    The Commission also discussed its work pertaining to the EFTA and Regulation E. The Commission referenced its 2023 enforcement actions, including a case involving negative options. The Commission described its proposed amendments to its 1973 Negative Option Rule which included the addition of a “click to cancel” provision requiring sellers to make cancellation as easy for consumers as it was to sign up. Finally, the Commission confirmed that it released guidance cautioning consumers about money transmission payment apps and their potential for exploitation by scammers.

    Federal Issues FTC CFPB TILA EFTA

  • CFPB holds its Consumer Advisory Board Meeting

    Federal Issues

    On May 15, the CFPB held its Spring 2024 Consumer Advisory Board Meeting (CAB) to discuss mortgage servicing and origination, consumer data reporting accuracy, and medical debt on credit reports. The CAB met with the CFPB leadership to discuss broad policy matters related to the CFPB’s Unified Regulatory Agenda and scope of authority. The discussions on mortgage servicing and origination covered capping closing costs to make homeownership more accessible. Additional concerns related to the impact of private equity on the housing market and how it changes home affordability in certain neighborhoods. Additionally, CAB members raised yet another implication which would make home ownership difficult in the refinancing space for small-balance mortgages. Predatory practices involving solar lending were of concern due to the influx of funds related to the Inflation Reduction Act. CAB members shared the challenges faced by mortgage servicing and foreclosure prevention services leading to delays in loss mitigation processing and high-touch mortgage servicing areas. Additional talking points included topics such as tenant screening and employment background checks, purpose limitations under the FCRA, creation of a “Public Credit Registry,” reduced time limits on negative information reporting, and restricted use of credit scores in employment and rental decisions.

    Federal Issues CFPB Advisory Board

  • OIG makes recommendations for CFPB’s examiner commissioning program

    Federal Issues

    On May 15, the Office of Inspector General (OIG) for the Fed and CFPB published a report entitled “The CFPB Can Enhance Certain Aspects of Its Examiner Commissioning Program.” The report assessed the CFPB’s examiner commissioning program (ECP) and included recommendations to enhance the program. The OIG made three high-level recommendations in the report:

    1. Create clear guidelines delineating the duties and expectations for those servicing in ECP support roles, including (i) mentorship during acting EIC assignments, (ii) provide regional training leads support during rotations, and (iii) field manager assistance in selecting suitable examinations and identifying acting examiner in charge (EIC) tasks for commissioning candidates.
    2. Establish a uniform method for supervision learning and development and regional offices to jointly offer additional support to examiners during their ECP preparation.
    3. Review and improve the feedback parameters for the EIC case study assessment, ensuring examiners receive detailed, constructive feedback while maintaining the integrity of the EIC case study assessment. Update the feedback guidelines accordingly and provide training on these new standards.

    Federal Issues OIG CFPB


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