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  • CFPB To Hold Forum On Mortgage Closing Process

    Lending

    The CFPB announced today that it will hold a forum on the mortgage closing process. The event will take place at the CFPB’s headquarters in Washington, DC at 1:30 p.m. on April 23, 2014. It will be open to members of the public who RSVP and also will be available through a live stream on the CFPB’s website. Consistent with its past practice, the CFPB has not provided advance details about the specific topics to be addressed or the participants. The event is likely to review the feedback the CFPB received in response to a January 2014 request for information about consumer “pain points” associated with the mortgage closing process, an initiative the CFPB first revealed in November 2013 in conjunction with the release of the final rule combining mortgage disclosures under TILA and RESPA. We plan to attend the event and will provide an update later this month.

    CFPB Mortgage Origination

  • CFPB Issues Annual Consumer Complaint Report

    Consumer Finance

    On March 31 the CFPB published its Consumer Response Annual Report, providing a review of the CFPB’s complaint process and a description of complaints received during January 1 through December 31, 2013. According to the report the Bureau received approximately 163,700 complaints in 2013. Mortgage complaints outpaced all others (37%), followed by complaints regarding debt collection (19%), bank accounts (12%), and credit cards (10%). Complaints related to consumer loans, student loans, payday loans, money transfers, and “other” each comprised 3% or less of the total. The report also breaks down the types of complaints for each category and summarizes companies’ responses. The majority of closed complaints for all categories were resolved with an explanation by the company, i.e. without monetary or other relief, and companies responded to complaints in a timely fashion 99% of the time, or better. The report also stated that the CFPB “continues to evaluate, among other things, the release of consumer narratives, the potential for normalization of the data to make comparisons easier, and the expansion of functionality to improve user experience.”

    CFPB Consumer Complaints

  • Comptroller Curry Calls On Banks To Offer Payday Loan Alternatives

    Consumer Finance

    On April 1, Comptroller Thomas Curry delivered remarks in which he urged banks to offer alternatives to “high cost payday loans.” The Comptroller defended his agency’s guidance on deposit advance products and stated that “properly managed small-dollar loan programs do not exhibit the same level of risks [the OCC] identified with deposit advance products, and that such loans can be made available to consumers.” He added that many of the risks identified with regard to deposit advance guidance, including the product’s short-term balloon payment feature, were specific to that product. He encouraged banks to offer “responsible” small-dollar loan programs comprised of products with reasonable terms, and to report payment information for such products to credit bureaus. In addition to helping consumers, the comptroller believes such programs (i) can be offered at an incremental cost to banks; (ii) can help build banks’ reputations and expand existing customer relationships; and (iii) can potentially be eligible for positive CRA consideration. The remarks did not provide specific guidance on the pricing and other small dollar loan terms that the OCC would consider appropriate.

    Payday Lending OCC Installment Loans

  • Texas Issues Licensing Guidance For Virtual Currency Firms

    Fintech

    On April 3, the Texas Department of Banking issued a supervisory memorandum on the regulatory treatment of virtual currencies under the Texas Money Services Act. The memorandum states that money transmission licensing determinations regarding transactions with decentralized virtual currencies such as Bitcoin, referred to by the Banking Department as cryptocurrencies, turn on whether cryptocurrencies should be considered "money or monetary value" under the Money Services Act. The memorandum concludes that cryptocurrencies currently cannot be considered “money or monetary value” because they are not currencies as that word is defined in the Money Services Act, and a unit of cryptocurrency is not a claim under the Act. However, when a cryptocurrency transaction includes sovereign currency, it may constitute money transmission depending on how the sovereign currency is handled. The memorandum provides examples of common types of transactions involving cryptocurrencies and whether they would constitute money transmission subject to state licensing requirements. For example, the Department states that exchanging cryptocurrency for sovereign currency through a third party exchanger is generally money transmission, and that exchange of cryptocurrency for sovereign currency through an automated machine is usually but not always money transmission. The Department advises that cryptocurrency businesses conducting money transmission must comply with state licensing requirements. The Department further advises that (i) a money transmitter that conducts virtual currency transactions is subject to a $500,000 minimum net worth requirement; (ii) a license holder may not include virtual currency assets in calculations for its permissible investments; and (iii) license applicants who handle virtual currencies in the course of their money transmission activities must submit a current third party security audit of their relevant computer systems.

    Digital Assets Money Service / Money Transmitters Virtual Currency Insurance Licensing Cryptocurrency

  • FFIEC Advises Banks On Website, ATM Cyber Attacks

    Privacy, Cyber Risk & Data Security

    On April 2, the FFIEC advised financial institutions that distributed denial-of-service (DDoS) attacks on a financial institution’s public websites present operational and reputation risks. If coupled with attempted fraud, a financial institution may also experience fraud losses and face liquidity and capital risks. The FFIEC members expect financial institutions to address DDoS readiness as part of ongoing information security and incident response plans and to, among other things, (i) maintain an ongoing program to assess information security risk; (ii) monitor Internet traffic to the institution’s website to detect attacks; (iii) activate incident response plans and notify service providers, including Internet service providers, as appropriate, if the institution suspects that a DDoS attack is occurring; (iv) ensure sufficient staffing for the duration of the DDoS attack and consider hiring pre-contracted third-party servicers, as appropriate, that can assist in managing the Internet-based traffic flow; and (v) evaluate any gaps in the institution’s response following attacks and in its ongoing risk assessments, and adjust risk management controls accordingly.

    In a second statement, the FFIEC advised financial institutions of a type of large dollar value ATM cash-out fraud by which cyber attackers gain access to, and alter the settings on, ATM web-based control panels used by small- to medium-sized financial institutions. The FFIEC states that institutions that issue debit, prepaid, or ATM cards may face operational risks, fraud losses, liquidity and capital risks, and reputation risks, and that institutions that outsource their card issuing function to a card processor may initially be liable for losses even if the compromise occurs at the processor. To mitigate these risks, the FFIEC expects member financial institutions to, among other things, (i) conduct ongoing information security risk assessments; (ii) perform security monitoring, prevention, and risk mitigation; (iii) take specific steps to protect against unauthorized access; (iv) implement and test controls around critical systems regularly; and (v) conduct information security awareness and training programs.

    FFIEC ATM Privacy/Cyber Risk & Data Security

  • House Republicans Urge FHFA Not To Direct GSEs To Start Contributing To Affordable Housing Funds Established By HERA

    Lending

    On April 2, House Financial Services Committee Chairman Jeb Hensarling (R-TX), joined by Congressmen Scott Garrett (R-NJ) and Ed Royce (R-CA), urged FHFA Director Mel Watt to continue the FHFA’s five-year-old policy of suspending contributions to the Affordable Housing Trust Fund and the Capital Magnet Fund. These two funds were established in the Housing and Economic Recovery Act (HERA)  to direct a percentage of GSE profits into affordable housing using a mechanism that would be off-budget and thus not subject to the Congressional appropriations process. In January, more than 30 Democratic Senators pressed Mr. Watt to change course and lift the suspension. Given that the federal government owns $189 billion in outstanding senior preferred shares, the Republican House members believe that lifting the suspension would divert money from Fannie Mae and Freddie Mac that could be used to compensate taxpayers. They added that funding the affordable housing programs would violate the “letter and spirit of the Housing and Economic Recovery Act,” and would be premature given ongoing congressional deliberations over broader housing finance reform.

    FHFA Housing Finance Reform Affordable Housing

  • Eleventh Circuit Holds TCPA Consent To Receive Autodialed Calls Must Come From Current Cell Phone Subscriber

    Consumer Finance

    On March 28, the U.S. Court of Appeals for the Eleventh Circuit held that, under the Telephone Consumer Protection Act (TCPA), consent to receive autodialed calls on a cell phone number must be provided by the number’s current subscriber and not the intended recipient of the call. Osorio v. State Farm Bank, F.S.B., No. 13-10951, 2014 WL 1258023 (11th Cir. Mar. 28, 2014). The case arose when a credit card applicant (and eventual cardholder) provided her housemate’s cell phone number on the issuing bank’s credit card application. After the cardholder became delinquent on her credit card payments, and a collection agency hired by the bank made over 300 autodialed calls to the housemate’s cell phone, the housemate filed suit against the bank under the TCPA, arguing that he did not consent to receive autodialed calls from the bank. The Eleventh Circuit held that the cardholder had no authority to consent to the collection calls because only the subscriber—the housemate—could have given such consent, either directly or through an authorized agent. The court further held that the cardholder and the housemate, in the absence of any contractual restriction to the contrary, were free to orally revoke any consent previously given to call the number in connection with the credit card debt. Finally, the court rejected the bank’s argument that the TCPA prohibits autodialed calls only when the called party is charged for each specific call. The court reversed a district court ruling in favor of the bank and remanded for further proceedings.

    TCPA

  • NY AG Announces Agreement To Limit Online Title Lending

    Consumer Finance

    On April 1, New York Attorney General (AG) Schneiderman announced that 10 repossession companies agreed to discontinue repossessing vehicles at the request of title loan companies. The AG states that out-of-state or online lenders offer title loans, which he characterizes as a type of payday loan with high interest rates, to New Yorkers without obtaining a New York license, and offer loans in excess of the 16% interest rate cap applicable to unlicensed lenders. In September 2013, the AG settled with five companies that collected debts on allegedly illegal payday loans, part of a broader effort by New York authorities to address alleged usurious online lending.

    State Attorney General Title Loans

  • OCC Issues Booklet On Wage Garnishment

    Consumer Finance

    On April 1, the OCC issued a booklet titled “Garnishment of Accounts Containing Federal Benefit Payments.” The booklet, a new addition to the Comptroller’s Handbook, includes interagency guidance and examination procedures and reflects a June 2013 interim rule that amended federal regulations governing the garnishment of certain federal benefit payments that are directly deposited to accounts at financial institutions. The booklet (i) establishes procedures that financial institutions must follow when they receive a garnishment order against an account holder who receives certain types of federal benefit payments by direct deposit; and (ii) requires financial institutions that receive such a garnishment order to determine the sum of such federal benefit payments deposited to the account during a two-month period and ensure that the account holder has access to an amount equal to that sum or to the current balance of the account, whichever is lower.

    OCC

  • Utah Establishes Payday Loan Ability To Repay Requirements

    Consumer Finance

    On March 29, Utah Governor Gary Herbert signed HB 127, which amends state law to require deferred deposit lenders, i.e. payday lenders, to assess a borrower’s ability to repay the loan “in the ordinary course, which may include rollovers or extended payment plans” and to obtain a signed acknowledgment from a borrower that the person has the ability to repay the loan. The legislation states that a lender is in compliance with the ability to repay requirement if, at the time of the initial period of the deferred deposit loan transaction, the lender obtains (i) a consumer report; (ii) written proof or verification of income from the person seeking the deferred deposit loan; or (iii) prior repayment history with the deferred deposit loan from the records of the deferred deposit lender. In addition, if a borrower is charged 10 continuous weeks of interest or fees on a payday loan, including rollovers, then at the end of the 10-week period, the lender must allow the borrower, upon the borrower’s request, to repay the loan and rollovers under an extended payment plan that meets certain requirements. The legislation also requires a lender to provide notice of default at least 10 days before filing a civil action to collect on a deferred deposit loan.

    Payday Lending

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