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On July 31, the CFPB released FAQs to assist with TILA-RESPA Integrated Disclosure Rule (TRID Rule) compliance. The five new FAQs relate to providing loan estimates to consumers. Highlights include:
- If a consumer submits the six pieces of information (name, income, social security number, property address, estimate of the value of the property, and loan amount sought) that constitute an application under the TRID Rule, the creditor must ensure that a loan estimate is delivered or placed in the mail within three business days.
- A creditor cannot require the consumer to submit anything other than the six pieces of information that constitute an application under the TRID Rule as a condition to providing a loan estimate.
- A creditor cannot require a consumer to provide verifying documents in order to receive a loan estimate.
- If a consumer submits the six pieces of information that constitute an application, in order to receive a pre-approval or a pre-qualification letter, the creditor must also provide a loan estimate within three business days of receipt.
- A creditor may collection additional information, beyond the six pieces of information that constitute an application, it deems necessary to process a request for a mortgage loan, including a request for a pre-approval or pre-qualification letter.
On July 31, the CFPB announced that it is reopening the comment period for certain aspects of its May Notice of Proposed Rulemaking (covered by InfoBytes here), which would permanently raise coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under the HMDA rules. The comment period originally closed on June 12, but to allow for the submission of comments that reflect the national loan level dataset for 2018 (which will be released “later this summer”), the Bureau is reopening the comment period for certain aspects of the May proposal. Specifically, the Bureau is reopening comments on (i) the proposed changes to the permanent coverage threshold for closed-end mortgage loans, which would permanently raise the reporting threshold from 25 loans in each of the two preceding calendar years to either 50 or 100 closed-end loans in each of the preceding two calendar years; (ii) the proposed changes to the permanent coverage threshold for open-end lines of credit, which would extend the temporary threshold of 500 loans for calendar years 2018 and 2019 to January 1, 2022, and then permanently lower the threshold to 200 open-end lines of credit after that date; and (iii) the appropriate effective date for any change to the closed-end coverage threshold. Comments are due by October 15.
On August 1, the CFPB published in the Federal Register the final rule amending Regulation Z, which implements the Truth in Lending Act (TILA), including as amended by the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), the Home Ownership and Equity Protection Act of 1994 (HOEPA), and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s ability-to-repay and qualified mortgage (ATR/QM) provisions. The CFPB is required to make annual adjustments to dollar amounts in certain provisions in Regulation Z, and has based the adjustments on the annual percentage change reflected in the Consumer Price Index in effect on June 1, 2019. The following thresholds will be effective on January 1, 2020:
- For open-end consumer credit plans under TILA, the threshold for disclosing an interest charge will remain unchanged at $1.00;
- For open-end consumer credit plans under the CARD Act amendments, the adjusted dollar amount for the safe harbor for a first violation penalty fee will increase from $28 to $29, and the adjusted dollar amount for the safe harbor for a subsequent violation penalty fee will increase from $39 to $40;
- For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages will be $21,980, and the adjusted points and fees dollar trigger for high-cost mortgages will be $1,099; and
- The maximum thresholds for total points and fees for qualified mortgages under the ATR/QM rule will be: (i) 3 percent of the total loan amount for loans greater than or equal to $109,898; (ii) $3,297 for loan amounts greater than or equal to $65,939 but less than $109,898; (iii) 5 percent of the total loan amount for loans greater than or equal to $21,980 but less than $65,939; (iv) $1,099 for loan amounts greater than or equal to $13,737 but less than $21,980; and (v) 8 percent of the total loan amount for loan amounts less than $13,737.
On July 25, the CFPB issued an Advance Notice of Proposed Rulemaking (ANPR) that is intended as a first step in an orderly expiration of the so-called GSE patch, which confers Qualified Mortgage status for loans purchased or guaranteed by Fannie Mae and Freddie Mac while those entities operate under FHFA conservatorship. The patch expires in January 2021, or when Fannie and Freddie exit their conservatorships, whichever comes first. The ANPR solicits feedback on amending Regulation Z and the Ability to Repay/Qualified Mortgage Rule (ATR/QM Rule) to minimize disruption from the patch’s expiration. Comments are due 45 days after the ANPR’s publication in the Federal Register, which has not occurred as of the publication of this Special Alert.
The Bureau has previously solicited comments on the ATR/QM Rule, including the GSE Patch — first through a request for information relating to its adopted regulations in March 2018, and then in its ATR/QM Rule Assessment Report in January 2019.
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Click here to read the full special alert.
If you have questions about the GSE Patch and potential changes to the Ability to Repay/Qualified Mortgage Rule, please visit our Consumer Financial Protection Bureau practice page or contact a Buckley attorney with whom you have worked in the past.
On July 25, the CFPB issued an Advance Notice of Proposed Rulemaking (ANPR) seeking feedback on potential revisions to the Ability to Repay/Qualified Mortgage (ATR/QM) Rule related to the expiration in 2021 of the “GSE patch,” a temporary provision granting Qualified Mortgage status to mortgages that are eligible for purchase or guarantee by Fannie Mae and Freddie Mac, including loans with higher debt-to-income (DTI) ratios than are allowed under the general QM requirements. The GSE patch (also referred to as the “QM patch”) is set to expire no later than January 10, 2021, or when Fannie and Freddie exit their government conservatorship, whichever comes first, with the Bureau stating that it currently plans to allow the GSE patch to expire as scheduled or “after a short extension” to facilitate a smooth transition. As previously covered by InfoBytes, the Bureau issued an assessment report on the ATR/QM Rule, in which it reported, among other things, that the GSEs have persistently maintained a high share of the market.
The ANPR requests comments on several potential amendments, including (i) whether the “qualified mortgage” definition should be revised in light of the upcoming expiration (currently, loans under the GSE patch generally qualify for safe harbor from legal liability under the ATR/QM Rule even if their DTI ratio exceeds 43 percent); (ii) whether the DTI ratio limit should remain at 43 percent or be increased or decreased, along with whether loans above the DTI ratio should be granted QM status if they have “certain compensating factors,” (iii) whether the QM definition should take into account possible alternatives to the DTI ratio for assessing a borrower’s ability-to-repay; and (iv) whether Appendix Q—which sets standards for calculating and verifying debt and income to determine the borrower’s DTI ratio—should be replaced, changed, or supplemented. Comments on the ANPR are due 45 days after publication in the Federal Register.
On July 25, the CFPB and New York attorney general announced (see here and here) proposed settlements with a network of New York-based debt collectors (defendants) to resolve allegations that the defendants engaged in improper debt collection tactics in violation of the Consumer Financial Protection Act, the FDCPA, and various New York laws. As previously covered by InfoBytes, the CFPB and the New York AG filed a lawsuit in 2016, alleging the defendants established and operated a network of companies that harassed and/or deceived consumers into paying inflated debts or amounts they may not have owed. Among other things, the defendants allegedly (i) “misrepresented to consumers that they owed sums they did not owe, were not obligated to pay, or that the companies did not have a legal right to collect”; (ii) deceptively threatened consumers with lawsuits that the defendants did not plan on initiating; and (iii) impersonated law enforcement officials, government agencies, and court officers. Additionally, the New York AG claimed the defendants violated state laws related to the collection of consumer debt and the placement of consumer debt for collection.
The proposed settlements permanently ban the defendants from acting as debt collectors and enjoin all defendants from engaging in the alleged unlawful conduct in the future and from making any misrepresentation or omission connected with any consumer financial product or service. The first proposed stipulated final judgment and order for a group of the defendants imposes a $10 million civil money penalty (CMP) to both the CFPB and the New York AG, as well as $40 million in redress to harmed consumers. Under the terms of the second proposed stipulated final judgment and order, the other group of defendants must pay CMPs of $1 million to both the CFPB and the New York AG and $4 million in consumer redress. However, based on the second group of defendants’ inability to pay, full payment is suspended subject to the defendants paying $10,000 in consumer redress and a $1 CMP to the Bureau.
On July 19, the CFPB released a report titled, “Building a Bridge to Credit Invisibility,” which covers the Bureau’s September 2018 fair lending symposium of the same name. The symposium was a day-long event that explored the challenges consumers face in accessing credit. The Bureau uses the term “credit invisible” to describe consumers who do not have a credit record maintained by a national credit reporting agency, or who have a credit record that is deemed to have too little or too old information to be treated as “scorable” by widely used credit scoring models. (Coverage of a previous Bureau report on credit invisibility available here.) The symposium report includes summaries of each of the panel discussions: (i) several short talks on issues such as credit invisibility, lending deserts, and innovation to expand access to credit; (ii) Bridging to Credit Visibility Using Innovative Products; (iii) Credit Products and Services for Microenterprise; and (iv) Alternative Data: Innovative Products and Solutions. The report also highlights key themes from the symposium, noting that many panelists believe work needs to be done to make products for the credit invisible more profitable and sustainable for large financial service providers. Additionally, panelists noted the need for responsible innovation while ensuring that access to credit is facilitated in a way that is “safe, affordable, and non-discriminatory.”
On July 18, Senators Patty Murray (D-WA) and Sherrod Brown (D-Ohio) sent a letter to CFPB Director Kathy Kraninger and U.S. Department of Education (Department) Secretary Betsy DeVos requesting an explanation as to why a statutorily required Memorandum of Understanding (MOU) terminated by the Department in 2017 has not been reestablished. As previously covered by InfoBytes, the terminated MOU allowed the sharing of information connected with the oversight of federal student loans. The Senators’ letter raises questions concerning the disagreement between the agencies over why the MOU was terminated, as well as “conflicting explanations” provided to Congress regarding the delay in reestablishing the MOU. According to the Senators, Kraninger previously commented in April that creating a new MOU with the Department was a priority for the Bureau (see InfoBytes coverage here). However, the Senators note that this statement conflicts with formal responses from the Department for a hearing record received three weeks after Kraninger’s comments, in which the Department claimed the Bureau “has not formally attempted to reestablish an MOU.” The Senators asked the agencies to provide a written explanation addressing (i) the basis for terminating the MOU; (ii) whether an attempt to reestablish the MOU has been made; (iii) any outstanding unresolved issues preventing reestablishment of the MOU; and (iv) an expected timeline for reestablishing the MOU. The Senators strongly encouraged the agencies “to reestablish the MOU immediately.”
On July 22, the CFPB, FTC, and 48 states, the District of Columbia and Puerto Rico announced a settlement of up to $700 million with a major credit reporting agency to resolve federal and state investigations into a 2017 data breach that reportedly compromised sensitive information for approximately 147 million consumers. According to the complaints (see here and here) filed in the U.S. District Court for the Northern District of Georgia, the company allegedly engaged in unfair and deceptive practices by, among other things, (i) failing to provide reasonable security for the sensitive personal information stored within its network; (ii) deceiving consumers about its data security program capabilities; and (iii) failing to patch its network after being alerted in 2017 to a critical security vulnerability.
Under the terms of the proposed settlements (see here and here), pending final court approval, the company will pay up to $425 million in monetary relief to consumers and provide credit monitoring to affected individuals, as well as six free credit reports each year for seven years to all U.S. consumers. The company must also pay $175 million to 48 states, the District of Columbia and Puerto Rico, and a $100 million civil money penalty to the Bureau. The $425 million fund will also compensate consumers who bought credit- or identity-monitoring services from the company and paid other expenses as a result of the breach. The company must also, among other things, implement a comprehensive information security program that will require annual assessments of security risks and safeguard measures, obtain third-party information security assessments, and acquire annual certifications from the board of directors that the company has complied with the settlements.
On July 18, Kathy Kraninger, Director of the CFPB, spoke before the Exchequer Club where she discussed the Bureau’s strategy for preventing consumer harm. Kraninger discussed her ongoing “listening tour”—in which she has met with and received feedback from “more than 600 consumer groups, consumers, state and local government officials, military personnel, academics, non-profits, faith leaders, financial institutions, and former and current Bureau officials and staff”—and commented on ways in which feedback received from these stakeholders has helped shape her approach. Kraininger highlighted four “tools” that the Bureau has at its disposal to execute its mission: education, rulemaking, supervision, and enforcement.
- Education. According to Kraninger, the Bureau’s focus reflects a “consumer-centric definition of financial well-being” designed to empower consumers when protecting their own interests and choosing the appropriate financial products and services. Specifically, Kraninger referred to the Bureau’s “Misadventures in Money Management” financial education tool for active-duty servicemembers, as well as its “Start Small, Save Up” initiative, which is designed to increase consumers’ ability to handle urgent expenses.
- Rulemaking. Kraninger commented that the Bureau will continue to comply with Congressional mandates to promulgate rules or address specific issues through rulemaking. However, where the Bureau has discretion, it “will focus on preventing consumer harm by maximizing informed consumer choice, and prohibiting acts or practices that undermine the ability of consumers to choose the products and services that are best for them.” Kraninger spoke of the need for increased transparency and deregulatory efforts and highlighted a recent change to the comment period for the Bureau’s Payday and Debt Collection rulemakings, as well as the consideration of potential changes to the existing Remittances Rule based on responses to a call for evidence.
- Supervision. Kraninger stressed that “[s]upervision is the heart of the agency,” as it helps to prevent violations of laws and regulations from happening in the first place. The Bureau’s approach will focus on ensuring supervision is effective, efficient, and consistent, and will explore ways to incentivize institutions to have in place good compliance management systems. Kraninger noted that, as chair of the Federal Financial Institutions Examination Council, she will focus on coordinating and collaborating with the other agencies to advance consumer protections.
- Enforcement. Kraninger noted that the Bureau will continue to enforce against bad actors that do not comply with the law, as “[a] purposeful enforcement regime can foster compliance, deter unlawful conduct, help prevent consumer harm, and right wrongs.” She referenced the Bureau’s history of collaborating with state and federal partners on enforcement actions, and stressed her commitment to ensuring enforcement matters are handled as expeditiously as possible. Kraninger also specifically drew attention to the Bureau’s collaborative approach in its recent advisory on elder financial exploitation (previously covered by InfoBytes here).
- Amanda R. Lawrence to discuss "Data privacy litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Brandy A. Hood to discuss "How to ace your TRID exam" at the Mortgage Bankers Association Regulatory Compliance Conference
- Katherine L. Halliday to discuss "UDAP, UDAAP & the Map rule compliance basics" at the Mortgage Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Jonice Gray Tucker to discuss "HMDA data is out, now what?" at the Mortgage Bankers Association Regulatory Compliance Conference
- Melissa Klimkiewicz to discuss "Navigating FHA rules and regs" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jeffrey P. Naimon to discuss "Washington regulatory overview" at the Mortgage Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Consenting views: Achieving positive outcomes from consent order recovery" at the ACAMS AML & Financial Crime Conference
- APPROVED Webcast: Preparing for 2020 license renewals
- Kathryn L. Ryan to discuss "The state’s role in fintech: Providing an industry framework for innovation" at Lend360
- Daniel P. Stipano to discuss "AML developments: The latest trends, challenges and opportunities" at the American Conference Institute Financial Crime Executive Roundtable
- Marshall T. Bell and Jeffrey P. Naimon to discuss "Truth in lending" at the American Bar Association National Institute on Consumer Financial Services Basics
- Amanda R. Lawrence and Michael A. Rome to discuss "California Consumer Privacy Act compliance" at the Capital Area Compliance Roundtable
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions" at the Institute of International Bankers Risk Management and Regulatory Examination/Compliance Seminar
- Daniel P. Stipano to discuss "Customer identification program/customer due diligence/enhanced due diligence" at a National Association of Federal Credit Unions webinar
- Jonice Gray Tucker to discuss "MCCA's blueprint for selling & buying - A pitch workshop for outside counsel" at the Minority Corporate Counsel Association Creating Pathways to Diversity Conference
- Kathryn L. Ryan and Moorari K. Shah to discuss "Today's regulatory environment - Are you in the know?" at the Equipment Leasing and Finance Association Annual Convention
- Kathryn L. Ryan and Tim Lange to discuss "Temporary authority to operate - Are you prepared? Hear what the states are doing" at the RegList Annual Workshop
- Jonice Gray Tucker to discuss "Fintech regulatory developments, crypto-assets, blockchain and digital banking, and consumer issues" at the Practising Law Institute Banking Law Institute
- Amanda R. Lawrence to discuss "How to balance a successful (and stressful) career with greater personal well-being" at the American Bar Association Women in Litigation Joint CLE Conference