Skip to main content
Menu Icon Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • CFPB finalizes Regulation Z HPML escrow exemptions

    Agency Rule-Making & Guidance

    On January 19, the CFPB issued a final rule amending Regulation Z, as required by the Economic Growth, Regulatory Relief, and Consumer Protection Act, to exempt certain insured depository institutions and credit unions from the requirement to establish escrow accounts for certain higher-priced mortgage loans (HPMLs). Under the final rule, any loan made by an insured depository institution or credit union that is secured by a first lien on the principal dwelling of a consumer would be exempt from Regulation Z’s HPML escrow requirement if (i) the institution has assets of no more than $10 billion; (ii) “the institution and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling during the preceding calendar year”; and (iii) the institution meets certain existing HPML escrow exemption criteria. The final rule essentially adopts the proposed rule (covered by InfoBytes here) without change, except the end date for the exception to the prerequisite against maintaining escrows is finalized as 120 days after the date of publication in the Federal Register, instead of the 90 days as proposed.

    Agency Rule-Making & Guidance CFPB Regulation Z HPML Escrow Mortgages EGRRCPA

    Share page with AddThis
  • CFPB finalizes rule stating supervisory guidance lacks force of law

    Agency Rule-Making & Guidance

    On January 19, the CFPB issued a final rule codifying the Interagency Statement Clarifying the Role of Supervisory Guidance issued by the CFPB, OCC, Federal Reserve Board, FDIC, and the NCUA on September 11, 2018 (2018 Statement). As previously covered by InfoBytes, the October 2018 joint proposal amended the 2018 Statement by (i) clarifying that references in the Statement limiting agency “criticisms” includes criticizing institutions “through the issuance of [matters requiring attention] MRAs and other supervisory criticisms, including those communicated through matters requiring board attention, documents of resolution, and supervisory recommendations”; and (ii) adding that supervisory criticisms should be “specific as to practices, operations, financial conditions, or other matters that could have a negative effect on the safety and soundness of the financial institution, could cause consumer harm, or could cause violations of laws, regulations, final agency orders, or other legally enforceable conditions.”

    The Bureau notes that it chose to issue a final rule that is specific to the Bureau and Bureau-supervised institutions, rather than a joint version including the five agencies as it did with the proposal. However, the final rule adopts the proposed rule without substantive change. The final rule is effective 30 days after publication in the Federal Register.

    Similar announcements were issued by the OCC, FDIC, and NCUA.

    Agency Rule-Making & Guidance CFPB Supervision Examination Enforcement

    Share page with AddThis
  • Online lender settles MLA violations for $1.25 million

    Federal Issues

    On January 19, the CFPB announced a settlement with a California-based online lender resolving allegations that the company violated the Military Lending Act (MLA) when making installment loans. This settlement is part of “the Bureau’s broader sweep of investigations of multiple lenders that may be violating the MLA,” which provides protections connected to extensions of consumer credit for active-duty servicemembers and their dependents. As previously covered by InfoBytes, last month the Bureau filed a complaint in the U.S. District Court for the Northern District of California alleging that since October 2016 the lender, among other things, made more than 4,000 single-payment or installment loans to over 1,200 covered borrowers in violation of the MLA. These violations included (i) extending loans with Military Annual Percentage Rates (MAPR) exceeding the MLA’s 36 percent cap; (ii) requiring borrowers to submit to arbitration in loan agreements; and (iii) failing to make certain required loan disclosures, including a statement of the applicable MAPR, before or at the time of the transaction.

    Under the terms of the settlement, the company is required to pay $300,000 in consumer redress and pay a $950,000 civil money penalty. The company is also be prohibited from committing future MLA violations and from “collecting on, selling, or assigning any debts arising from Void Loans.” Furthermore, the company is required to submit a compliance plan to ensure its extension of consumer credit complies with the MLA. This plan must include, among other things, a process for correcting information furnished to credit reporting agencies about affected consumers.

    Federal Issues CFPB Enforcement Military Lending Act Online Lending Courts Military Lending

    Share page with AddThis
  • CFPB issue semi-annual report to Congress

    Federal Issues

    On January 21, the CFPB issued its semi-annual report to Congress covering the Bureau’s work from April 1 to September 30, 2020. The report, which is required by Dodd-Frank, addresses, among other things, the effects of the Covid-19 pandemic on consumer credit, significant rules and orders adopted by the Bureau, consumer complaints, and various supervisory and enforcement actions taken by the Bureau. In her opening letter, former Director Kathy Kraninger discusses the Bureau’s response to the Covid-19 pandemic, including measures taken to educate consumers on how to navigate relief options offered through the CARES Act and related pandemic-relief laws, as well as Paycheck Protection Program (PPP) guidance provided to small businesses. Kraninger also notes that in 2020, “the Bureau filed the second-highest number of actions in the Bureau’s history, secured approximately $875 million dollars in customer relief and penalties, and opened investigations of banks and nonbanks in all of the Bureau’s markets.”

    Among other topics, the report highlights two reports published by the Bureau on the effects of Covid-19: one focusing on credit applications and credit inquires (covered by InfoBytes here), and another focusing on consumer credit outcomes (covered by InfoBytes here). Results from the Bureau’s Making Ends Meet Survey (conducted prior to the pandemic) are also discussed, as are the Bureau’s efforts to understand financial challenges facing older adults. In addition to these areas of focus, the report notes the issuance of several significant notices of proposed rulemaking related to remittance transfers, debt collection practices, the transition from LIBOR, and qualified mortgage definitions under TILA. Multiple final rules were also issued concerning HMDA reporting thresholds (of which there were two final rules); remittance transfers; and payday, vehicle, title, and certain high-cost installment loans. Several other rules and initiatives undertaken during the reporting period are also discussed.

    Federal Issues CFPB Covid-19 Agency Rule-Making & Guidance CARES Act SBA Consumer Finance

    Share page with AddThis
  • CFPB files action against mortgage lender for unlawful practices

    Federal Issues

    On January 15, the CFPB announced a complaint filed in the U.S. District Court for the District of Connecticut against a mortgage lender and four executives (collectively, “defendants”) alleging the defendants engaged in unlawful mortgage lending practices in violation of TILA, FCRA, ECOA, the Mortgage Acts and Practices—Advertising Rule (MAP Rule), and the CFPA. According to the complaint, from as early as 2015 until August 2019 (i) unlicensed sales people would take mortgage applications and offer and negotiate mortgage terms, in violation of TILA and Regulation Z; (ii) company policy regularly required consumers to submit documents for verification before receiving a Loan Estimate, in violation of TILA and Regulation Z; (iii) employees would deny consumers credit without issuing an adverse action notice, as required by the FCRA or ECOA; and (iv) defendants regularly made misrepresentations about, among other things, the availability and cost savings of a FHA streamlined refinance loan, in violation of the MAP Rule. The Bureau is seeking an injunction, as well as, damages, redress, disgorgement, and civil money penalties.

    Federal Issues CFPB Enforcement Courts ECOA FCRA CFPA TILA Regulation Z MAP Rule Mortgages

    Share page with AddThis
  • CFPB issues debt collection small entity compliance guide

    Agency Rule-Making & Guidance

    On January 15, the CFPB issued a small entity compliance guide summarizing the Bureau’s debt collection rule. As previously covered by InfoBytes, the Bureau issued a final rule last October amending Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA), to address debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. The guide provides a detailed summary of the October final rule’s substantive prohibitions and requirements, as well as a summary of key interpretations and clarifications of the FDCPA. The Bureau noted, however, that the current small entity compliance guide does not discuss (unless specifically noted otherwise) the CFPB’s final rule issued in December (covered by InfoBytes here), which clarified consumer disclosure requirements, provided a model validation notice, and addressed required actions prior to furnishing and prohibitions concerning the collection of time-barred debt. Updates will be made to the small entity compliance guide at a later date to include provisions related to the December final rule.

    Agency Rule-Making & Guidance CFPB Compliance Debt Collection FDCPA Regulation F

    Share page with AddThis
  • CFPB and NCUA announce supervision MOU

    Federal Issues

    On January 14, the CFPB announced a Memorandum of Understanding (MOU) with the NCUA, which is intended to improve supervision coordination of credit unions with over $10 billion in assets. According to the Bureau’s press release, the MOU covers (i) the sharing of the Covered Reports of Examination and final Reports of Examination for covered institutions, using secure, two-way electronic means; (ii) collaboration in semi-annual strategy planning sessions for examination coordination; (iii) information sharing on training activities and content; and (iv) information sharing related to potential enforcement actions.

    Federal Issues CFPB NCUA MOUs Supervision Credit Union

    Share page with AddThis
  • Court says CFPB unconstitutionality argument strays from Supreme Court ruling in Seila

    Courts

    On January 13, the U.S. District Court for the Middle District of Pennsylvania denied a student loan servicer’s motion for judgment on the pleadings, ruling that the servicer’s argument that the CFPB is unconstitutional “strays afar” from the U.S. Supreme Court’s finding in Seila Law LLC v. CFPB. The servicer previously argued that the Supreme Court’s finding in Seila (covered by a Buckley Special Alert)—which held that that the director’s for-cause removal provision was unconstitutional but was severable from the statute establishing the CFPB—meant that the Bureau “never had constitutional authority to bring this action and that the filing of [the] lawsuit was unauthorized and unlawful.” The servicer also claimed that the statute of limitations governing the CFPB’s claims prior to the decision in Seila had expired, arguing that Director Kathy Kraninger’s July 2020 ratification came too late. However, the court determined, among other things, that “[n]othing in Seila indicates that the Supreme Court intended that its holding should result in a finding that this lawsuit is void ab initio.” The court further noted that the servicer’s assertion that the Bureau “‘never had constitutional authority to bring this action’ is belied by Seila’s implicit finding that the CFPB always had the authority to act, despite the Supreme Court’s finding that the removal protection was unconstitutional.”

    Courts CFPB Seila Law Single-Director Structure U.S. Supreme Court

    Share page with AddThis
  • CFPB releases LEP statement

    Agency Rule-Making & Guidance

    On January 13, the CFPB released fair-lending guidance for financial institutions that provide services to borrowers with limited English proficiency (LEP). As previously covered by InfoBytes, last July the Bureau issued a request for information that sought, among other things, information on ways to provide clarity under the Equal Credit Opportunity Act (ECOA) and/or Regulation B related to meeting the credit needs of LEP borrowers. During a 2020 roundtable focusing on LEP issues, the Bureau was also urged to publish additional guidance to assist financial institutions in expanding products and services to LEP consumers while also maintaining compliance with statutes and regulations. The Statement Regarding the Provision of Financial Products and Services to Consumers with Limited English Proficiency (Statement) incorporates feedback received from stakeholder groups, advocacy organizations, financial institutions, financial regulators, and trade associations. The Statement addresses, among other challenges, issues “related to balancing legal requirements and practical considerations” and potential UDAAP risks associated with offering support in certain non-English languages but not in others. The Statement further provides principles and guidance to assist financial institutions when making decisions related to assisting LEP consumers. Additionally, the Statement also includes key considerations and guidelines for institutions to use when developing compliance solutions for providing products and services in non-English languages to LEP consumers, while at the same time complying with Dodd-Frank, ECOA, and other applicable laws and regulations.

    Agency Rule-Making & Guidance CFPB Limited English Proficiency Fair Lending ECOA Regulation B Dodd-Frank

    Share page with AddThis
  • CFPB lets QM cure provision expire

    Federal Issues

    January 10 was the sunset date for the QM Rule’s provision allowing creditors to cure loans that exceed the rule’s limitation on points and fees. For transactions consummated prior to January 10, a creditor could cure any loan exceeding the (generally 3 percent) points and fees limit by refunding to the consumer the excess amount plus interest within 210 days of consummation (assuming the borrower had not notified the creditor of the error or become 60 days past due). The cure provision was originally added by the amendments to the ATR/QM Rule published in November 2014 and was always set to expire on January 10, 2021. The new QM rulemakings issued by the CFPB in December 2020 (covered by a Buckley Special Alert) do not extend it or replace the cure provision.

    Federal Issues CFPB Ability To Repay Qualified Mortgage

    Share page with AddThis

Pages