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FDIC Releases Video To Help Banks Comply with Loan Originator Compensation Rule
On January 27, the FDIC released the second in a series of three technical assistance videos intended to assist bank employees comply with certain mortgage rules issued by the CFPB. The first video, which we wrote about here, covered the ATR/QM Rule, this video covers the Loan Originator Compensation Rule, and the third video, expected in February, will cover the Servicing Rule.
FTC Releases Report on the "Internet of Things"
On January 28, the FTC released a comprehensive report detailing what the so-called “Internet of Things” is, how it is being used, and how both consumers and businesses can protect themselves. The report defines the Internet of Things as “devices or sensors – other than computers, smartphones, or tablets – that connect, store or transmit information with or between each other via the Internet,” and that are sold to or used by consumers. The report focuses on consumer privacy and security and offers a variety of recommendations for those companies offering devices that fall within the definition, including that security be a key part of the design process and data collection be limited where possible. The report does not call for new legislation specific to the Internet of Things because the FTC believes such legislation would be premature. The FTC states that it will use existing authority under laws such as the FTC Act, the Fair Credit Reporting Act, the Hi-Tech Act, and the Children’s Online Privacy Protection Act to take actions against Internet of Things products and services as necessary to protect consumers.
OCC Appoints Comptroller of Troubled Banks
On January 26, the OCC named Michael Brickman as the Deputy Comptroller for Special Supervision. In his role, Brickman will manage the supervision of the OCC’s most problematic midsize and community banks, and will oversee the “development and implementation of rehabilitation or resolution strategies for assigned banks and savings associations.” Prior to joining the OCC in 2011 as Director for Special Supervision, Brickman held various positions at the Office of Thrift Supervision, including Conglomerate Examiner—Complex and International Organizations, Senior Advisor to the Managing Director of Supervision, and Director for Regional Activities.
SEC Schedules Proxy Voting Roundtable
On January 27, the SEC announced that it will host a roundtable to discuss ways to improve the proxy voting process, focusing most specifically on universal proxy ballots and retail participation in the proxy process. Divided into two panels, the roundtable will focus on (i) “the state of contested director elections and whether changes should be made to the federal proxy rules to facilitate the use of universal proxy ballots by management and proxy contestants;” and (ii) “strategies for advancing retail shareholder participation in the proxy process.” The roundtable is scheduled to take place on February 19 in Washington, D.C.
FHFA Director Testifies on the Hill
On January 27, FHFA Director Mel Watt testified at a House Financial Services Committee hearing. In prepared remarks, Watt mentioned the strengthened balance sheet of the GSEs since being placed into conservatorship, recent policy announcements, and future priorities for the agency.
Mortgage Servicer Settles with California Regulator
On January 23, the California Department of Business Oversight (DBO) announced a $2.5 million settlement with a national mortgage servicer for failing to provide loan information to the state regulator. According to the consent order, the company must also (i) pay an independent third-party auditor selected by the DBO to ensure the servicer provides all requested information to DBO; (ii) cover administrative costs associated with the case; and (iii) cease acquiring new mortgage servicing rights that include loans secured by California properties until the DBO is satisfied that the servicer can satisfactorily respond to certain requests for information and documentation made in the course of a regulatory exam.
Eighth Circuit Rules Disputed Debt Claim Does Not Violate FDCPA
On December 4, the U.S. Court of Appeals for the Eighth Circuit held that a debt collector did not violate the FDCPA by informing a consumer reporting agency (CRA) that a consumer owed a debt without also expressly indicating that the consumer had disputed it. McIvor v. Credit Control Services, Inc., No. 14-1164 (8th Cir. Dec. 4, 2014). According to the opinion, the plaintiff brought a claim under § 1692e(8) of the FDCPA, which prohibits debt collectors from using “any false, deceptive, or misleading representation or means in connection with the collection of any debt,” and deems as a violation the conduct of “[c]ommunicating . . . to any person credit information which is known . . . to be false, including the failure to communicate that a disputed debt is disputed.” The court reasoned that no violation occurred here because (i) the CRA already knew that the debt was disputed, and (ii) the debt collector communicated with the CRA “with the purpose of complying with the FCRA, not as an elective report of credit information.”
Indiana Court of Appeals Reverses "E-Mortgage" Decision
The Indiana Court of Appeals reversed and remanded for further proceedings a trial court’s grant of partial summary judgment and held that because the plaintiff did not show that it controlled the electronic mortgage note (“Note”) for purposes of 15 U.S.C. § 7021(b) as of the date the foreclosure was filed, it had not established that it was the party entitled to enforce the Note as of that date. The plaintiff was not the original lender, and instead, received the mortgage by assignment. The plaintiff filed a complaint to foreclose the mortgage shortly after taking assignment. The Note stated that the only authoritative copy was the copy within the Note Holder’s control. 15 U.S.C. § 7021 provides conditions under which a party can have control and the court found that the evidence put forward by the plaintiff in support of the motion for summary judgment did not properly address satisfaction of those conditions. Specifically, the court stated that the plaintiff did not present evidence demonstrating that control over the Note had been transferred to the plaintiff in accordance with the requirements of 15 U.S.C. 7021. The court specifically noted in the decision that the plaintiff, upon demonstrating it had received a transfer of control, would be entitled to the same rights as the holder of a written promissory note under UCC Article 3, and that delivery, endorsement and possession of a physical note were not required. Good v. Wells Fargo Bank, N.A., No. 20A03-1401-MF-14 (Ct. App. Ind. 2014).
Special Alert: CFPB States Supervisory Obligations Trump Nondisclosure Agreements
On January 27, the CFPB issued Compliance Bulletin 2015-01 to remind supervised financial institutions of their obligations concerning the disclosure of confidential supervisory information (CSI) to the CFPB and to third parties. Specifically, the bulletin addresses the interaction between a financial institution’s obligations with respect to the CFPB and its contractual obligations under nondisclosure agreements (NDAs) with a third party that restrict the sharing of information. Such NDAs typically (i) restrict sharing protected information with any third party (which would include a supervisory agency) other than in connection with a subpoena or similar legal requirement and (ii) require the institution to advise the third party before it shares information as required by law (which again would include sharing protected information with a supervisory agency).
Supervised financial institutions and other persons, with limited exceptions outlined in the bulletin, are generally prohibited from disclosing CSI to third parties. According to the bulletin, a supervised financial institution should not rely on the provisions of an NDA to justify disclosing CSI in a manner not otherwise permitted, either through a valid exception or prior written approval from the CFPB. The bulletin appears to take the position that the fact that information has been shared with the CFPB is itself CSI.
The bulletin also warns supervised financial institutions that an NDA between an institution and a third party does not alter or limit the CFPB’s supervisory authority, and that the failure based on an NDA to provide CSI or other information required by the CFPB to conduct its supervisory activities is a violation of law for which the CFPB will pursue all available remedies.
In that supervised institutions such as banks and bank holding companies have been subject to the same issue for many years, this bulletin may be aimed at non-banks that are new to being subject to federal financial supervision. Questions regarding the matters discussed in this Alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.
- Jeffrey P. Naimon, (202) 349-8030
- John P. Kromer, (202) 349-8040
- Joseph M. Kolar, (202) 349-8020
- Jeremiah S. Buckley, (202) 349-8010
CFPB Finalizes TILA-RESPA Integrated Mortgage Disclosure (TRID) Amendments
As previously reported in our Special Alert on January 20, the CFPB finalized certain amendments to its TRID rule, which combines the mortgage disclosures consumers receive under the Truth in Lending Act and the Real Estate Settlement Procedures Act. Significant amendments include: (i) allowing three business days for providing a revised Loan Estimate after an interest rate is locked (instead of the current same day requirement and the original proposal’s one business day requirement); and (ii) permitting the inclusion of certain information about construction loans on the Loan Estimate. The final rule, as amended, takes effect August 1. For more information, please visit our TRID Resource Center.