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Oklahoma Governor Vetoes Legislation Expanding High-Cost Payday Lending
On May 5, Oklahoma Governor Mary Fallin vetoed legislation that would have expanded consumer payday lending in the state. Oklahoma House Bill 1913—known as the “Oklahoma Small Loan Act”—would have allowed lenders to offer installment loans with terms no longer than 12 months and interest rates up to 17 percent per month. Fallin’s veto message to the House expressed concerns about adding another high interest loan product without eliminating or restricting existing payday loan products: “House Bill 1913 adds yet another level of high interest borrowing (over 200% APR) without terminating or restricting access to existing payday loan products.” Fallin further asserted that “some of the loans created by this bill would be more expensive than the current loan options.” Four years prior, Fallin vetoed Senate Bill 817 “due to [her] concerns with the frequency [with which] low-income families in Oklahoma were using these lending options, and the resulting high cost of repayment to those families.” In the veto message, Fallin requested that the state legislature seek advice from her office as well as consumer advocates and mainstream financial institutions if it decides to revisit these issues. Under Section 11 of Article 6 of the Oklahoma Constitution, the legislation can still be enacted if two-thirds of the members of both legislative chambers vote to override the veto. In earlier votes, the legislation fell short of the two-thirds threshold, passing the Oklahoma House 59-31 and the Senate by a 28-16 margin.
Notably, last year, the CFPB published proposed rules in the Federal Register affecting payday, title, and certain other high-cost installment loans (see previously posted Special Alert).
Massachusetts AG Announces Settlement with Student Loan Debt Relief Company
On April 28, Massachusetts Attorney General Maura Healey announced a settlement with a student loan debt relief company to resolve allegations that the company charged consumers illegal upfront fees to receive debt relief assistance and falsely led customers to believe it was affiliated with the federal government. According to the Attorney General’s office, this is the fourth in a series of enforcement actions brought against student loan debt relief companies in the state. Under the terms of the April settlement, the company is required to refund $6,500 to 18 affected borrowers, must agree to discontinue providing student loan services, and is prohibited from selling or disseminating Massachusetts customer information collected. Previously in 2015 and 2016, Healey announced settlements with three debt relief companies, bringing the overall recovery total to-date to more than $260,000. In November 2015, the state launched the Student Loan Assistance Unit to assist borrowers unable to repay their loans (see previous InfoBytes summary).
American Bankers Association White Paper Addresses Concerns Over HMDA Expansion
On May 2, the American Bankers Association (ABA) issued a white paper to the Treasury Department on the implementation of the 2015 Home Mortgage Disclosure Act (HMDA) rule as part of its continuing response to President Trump’s executive order outlining “core principles” for financial regulation (see previously issued Special Alert here). The white paper, HMDA – More Really is Less: The Data Fog Frustrates HMDA, presents several views held by the ABA including that the CFPB should (i) rescind requirements to collect any data fields not expressly required by HMDA; (ii) suspend the effective date of the 2015 HMDA rule until privacy and security concerns are addressed (see previously issued Special Alert here); (iii) exclude commercial loans from HMDA coverage; and (iv) revoke the new HMDA data elements added by the Dodd-Frank Act. The ABA noted that the Dodd-Frank Act added more than 13 new categories to the statutory HMDA data fields lenders are required to collect, and in the implementing regulation, Regulation C, the CFPB added 25 new data fields to the existing 23 fields. The ABA noted that the CFPB estimates that, in addition to existing costs of HMDA compliance, the additional annual costs of operations will be approximately $120.6 million conservatively (more if reporting quarterly) and lenders will incur a one-time additional cost of between $177 million and $326.6 million. Furthermore, the ABA states there still remains a need to address the “significant” privacy issues presented by the “vast trove of data points added by Dodd-Frank,” and that “the collection and transfer and warehousing of greatly increased and more sensitive data will necessitate even more robust and costlier private sector and government systems.” However, the ABA noted the Bureau has not initiated rulemaking to address the privacy issues presented.
Notably, last month, the CFPB issued a proposal in the Federal Register to amend the 2015 HMDA rule (see previously issued Special Alert here). The changes are primarily for the purpose of clarifying data collection and reporting requirements, and most of the clarifications and revisions would take effect in January 2018. The deadline to submit comments on the CFPB’s proposal is May 25, 2017.
FBI Issues PSA on Social Engineering Scams
On May 4, the FBI’s Internet Crime Complaint Center released a public service announcement (I-050417-PSA) citing losses to U.S. businesses of nearly $1.6 billion due to social engineering wire transfer and other payment scams between October 2013 and December 2016, with approximately one fifth of the losses coming in the last seven months of 2016. The FBI defines the crime as Business E-mail Compromise (BEC), a sophisticated scam targeting businesses that regularly perform wire transfer payments and/or work with foreign suppliers, and often specifically involves E-mail Account Compromise (EAC) of individuals that perform wire transfer payments. Victims range from small businesses to large corporations and deal in a wide variety of goods and services. According to the FBI, the five main BEC/EAC scam scenarios are: (i) a business working with a longstanding or trusted foreign supplier, where a perpetrator may impersonate the supplier and seek a change in payment instructions by e-mail, phone or fax; (ii) a high-level business executive whose e-mail account is compromised receiving or initiating a request for a wire transfer; (iii) a third party business contact receiving fraudulent correspondence, such as requests for invoice payment, through a compromised email account; (iv) impersonation of a business executive or attorney; and (v) data theft. The FBI also cites 2016 trends including a 480 percent increase in complaints filed by title companies targeted by scammers as part of a real estate transaction, a 50 percent increase in complaints filed by businesses working with dedicated foreign suppliers, and a large increase in W-2 and PII phishing occurring during the 2016 tax season.
Treasury Department Releases Report on Troubled Asset Relief Program (TARP)
On April 10, the Treasury Department released the March 2017 Monthly Report to Congress on the status of its Troubled Asset Relief Program (TARP). Among other things, the report provides updates on TARP programs such as the Capital Purchase Program, the Community Development Capital Initiative, and the Making Home Affordable Program, among others. Additionally, the report highlights, among other things, administration obligations and expenditures, insurance contracts, transaction reports, and projected costs and liabilities. On May 1, the Treasury issued a monthly TARP update noting principal, investment, income, and revenue totals affecting certain TARP programs.
American Bankers Association Argues for “Strong, Consistent” National Data Protection Standard
In a May 8 letter to Congress, the American Bankers Association (ABA) called on Congress to pursue national data protection standards for companies that handle consumers’ sensitive financial data. The letter notes that the financial sector has an excellent track record in protecting consumer data, citing data from the Identity Theft Resource Center indicating that only 0.2% of records exposed in data breaches were attributable to the financial sector, as opposed to the 81.3% of records exposed at businesses included retail, adding that the industry is highly motivated and under constant oversight to ensure that Federal privacy and data protection laws such as the Gramm-Leach-Bliley Act are followed. On the other hand, the ABA notes, other industries are not required to protect consumer data under Federal law and have strongly opposed legislation that would add such requirements. The association concludes that a “strong, consistent national standard for fighting data breaches” is necessary to create a “security infrastructure that brings banks, payment networks and retailers together to safeguard sensitive financial data.”
CFPB Seeks Public Comment on its Plans for Assessing RESPA Mortgage Servicing Rule
On May 4, the CFPB issued a request for comment on its plans for assessing the 2013 Real Estate Settlement Procedures Act (RESPA) servicing rule’s effectiveness in meeting the purposes and objectives outlined in the Dodd-Frank Act, which requires the CFPB to assess each significant rule or order it adopts under Federal consumer financial laws. According to the request for comment and a May 4 blog post on the CFPB’s website, the self-assessment will focus on objectives to ensure that: (i) “[c]onsumers are provided with timely and understandable information to make responsible decisions about financial transactions”; (ii) “[c]onsumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination”; (iii) “[o]utdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens”; (iv) “[f]ederal consumer financial law is enforced consistently”; and (v) “[m]arkets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.”
In 2013, the Bureau adopted the 2013 RESPA Servicing Final Rule and further amended the rule several times to address questions raised by the industry, consumer advocacy groups, and other stakeholders. The CFPB deemed the 2013 RESPA Servicing Final Rule, effective January 10, 2014, a “significant rule” for purposes of the Dodd-Frank Act. Importantly, however, in Footnote 10 of its most-recent request for comment, the Bureau clarifies that it “is not seeking comment on the amendments to the mortgage servicing rules that became or will become effective after the January 10, 2014 effective date.” (emphasis added) Accordingly, it appears that the Bureau is not presently seeking comments on the Amendments to Regulation X and Regulation Z that the CFPB published as a Final Rule (12 CFR Parts 1024 and 1026) in the October 19, 2016 edition of the Federal Register – see earlier InfoBytes coverage here – and which are slated to take effect in part on October 19, 2017 and in full on April 19, 2018.
FHFA Director Appeared Before the Senate Banking Committee on May 11; Discussed Fannie/Freddie, Proposed "Underserved Markets Plans"
On May 11, the Senate Committee on Banking, Housing, and Urban Affairs met in open session at 10:00 a.m. to discuss “The Status of the Housing Finance System After Nine Years of Conservatorship.” Federal Housing Finance Agency (FHFA) Director Mel Watt was the only witness scheduled to testify.
The hearing comes after Fannie Mae (Fannie) and Freddie Mac (Freddie) published their first quarter financial reports. On May 2, Freddie announced $2.2 billion in net income in the first quarter—all of which Freddie expects to distribute to the Treasury, bringing the total to $108.2 billion in dividends. Notably, the $2.2 billion figure was down from its fourth quarter net income of $4.8 billion. Similarly, on May 5, Fannie reported net income of $2.8 billion in the first three months of 2017, money that will be sent to Treasury, which brings its total payments to $162.7 billion. The net income was a significant decline from the $5 billion it reported for the fourth quarter of 2016.
Fannie and Freddie also recently released their respective “Underserved Markets Plans” for public comment. As previously covered by InfoBytes, FHFA published a final rule in the December 18 Federal Register implementing certain Duty to Serve provisions of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008. Among other things, these provisions require Fannie and Freddie to each adopt a formal “Underserved Markets Plan” to improve the availability of mortgage financing for residential properties that serve “very low-, low-, and moderate-income families” in three specified underserved markets: manufactured housing, affordable housing preservation, and rural markets. The Plans can be accessed through the following links:
As explained on the FHFA’s DTS Underserved Markets Plan page, the activities and objectives in each of these Plans may be subject to change based on factors including public input, FHFA comments, compliance with the Enterprises' Charter Acts, safety and soundness considerations, and market or economic conditions. To this end, “views of interested stakeholders are sought on whether the proposed Plans would effectively serve the underserved markets if carried out as proposed, or if there are modifications that each Enterprise should consider making to its proposed Plan to better serve these underserved markets.” The period during which the Enterprises are receiving public input on the proposed Plans will end on July 10.
Pursuant to the same new rule, FHFA has also published a Proposed Evaluation Guidance to provide: (i) FHFA's expectations regarding the development of the Underserved Markets Plans, and (ii) the process by which FHFA will evaluate Fannie’s and Freddie’s achievements under their Plans each year. The deadline for public input on FHFA’s Proposed Evaluation Guidance is June 7.
Rep. Cummings Calls for House Oversight Committee to Assert Jurisdiction Over Financial CHOICE Act
As covered in last week’s InfoBytes, on May 4 the House Financial Services Committee approved the revised Financial CHOICE Act of 2017, H.R. 10, in a party-line vote, 34-26. In a May 3 letter to House Oversight and Government Reform Committee Chairman Jason Chaffetz, Rep. Elijah Cummings (D-Md.), the Ranking Minority Member on that Committee, urged the Committee “not to waive its jurisdiction over the Financial CHOICE Act, H.R. 10”—which he argues includes “numerous provisions that clearly fall within the legislative jurisdiction of the Committee.” Rep. Cummings also states in his letter that the proposed legislation would “destroy key financial regulations and consumer protections” and “place our economy at greater risk of another crisis.” Accordingly, he argues that “[i]t is imperative that the Committee review and vote on [H.R. 10’s] dangerous proposals.”
OCC Appoints Six New Members to Mutual Savings Association Advisory Committee
On May 4, the OCC announced the appointment of six new members to its Mutual Savings Association Advisory Committee (MSAAC). The committee—which is presided over by Michael R. Brickman, the Deputy Comptroller for Thrift and Special Supervision—is tasked with assessing the condition of mutual savings associations, regulatory changes and other actions the OCC may take to ensure the health and vitality of mutual savings associations, and other issues of concern to such institutions.
The six new members appointed to the committee are:
- J.R. Buckner, President and CEO, First Federal Bank of Kansas City, Kansas City, MO;
- Thomas Fraser, President and CEO, First Federal Lakewood, Lakewood, OH;
- Shirley Hughes, President and CEO, Elizabethton Federal Savings Bank, Elizabethton, TN;
- James McQuade, President and CEO, Dollar Bank, Pittsburgh, PA;
- James Wainwright, CEO, Freehold Savings Bank, Freehold, N.J.; and
- William White, President and CEO, Dearborn Federal Savings Bank, Dearborn, MI.
They join the following current MSAAC members:
- Jeffrey Hyde, President and CEO, Evergreen Federal Savings and Loan Association, Grants Pass, OR;
- Dan Moore, President and CEO, Home Bank, Martinsville, IN.; and
- Charles Timpa, President and CEO, First Federal Bank of Louisiana, Lake Charles, LA.
Additional information concerning the MSAAC, including committee meeting documents, can be accessed through the OCC’s website.