Compliance Blog

Written by Eliott C. Ponte, Law Clerk

I believe the job of a compliance officer is a difficult job: compliance officers must have a working understanding of the vast regulatory landscape, and in addition, be aware of how the various regulators plan to shape the regulatory landscape in the near future.  To make your difficult jobs easier, I have blogged about five areas that the CFPB is planning to change in the near future after reading the CFPB’s recent blog post that highlights its new regulatory agenda.  To save you time, I have copied the relevant portion of the CFPB’s blog in the post below, and put my comments following their post. 

 

Payday Loans and Overdrafts

The CFPB stated the following on its blog:

“We’re researching and considering whether rulemaking is warranted in the areas of payday and deposit advance products, as well as consumer overdraft products. We held a field hearing in March 2014 in Nashville, Tennessee, and  also released a report that analyzed payday lending and found that four out of five payday loans are rolled over or renewed within 14 days. We’re also expecting to build on an Advance Notice of Proposed Rulemaking that we published in 2012 concerning prepaid cards by issuing a proposed rule to strengthen federal consumer protections for these products. We’ve been testing potential disclosures that we may propose to be used on the packaging of prepaid cards.

Payday regulations is not surprising because Director Cordray foreshadowed regulations during his remarks that accompanied a report on payday loans on March 25^th of this year.  The only notable difference is that the CFPB is now “officially” considering whether regulations governing payday loans are possible under its legal authority.  Unfortunately, it is not clear what the CFPB will do at the moment, but Payday regulations might include disclosures to payday borrowers, and/or lending practices in connection with payday loans.

In regards to overdrafts, the CFPB is also considering regulating (1) how consumers opt in to overdraft coverage for ATM and one-time debit card transactions, (2) overdraft coverage limits, (3) transaction posting order, (4) overdraft and insufficient funds fee structure, and (5) involuntary account closures.  This comes after a June 2013 CFPB whitepaper that summarized initial findings form an analysis of overdraft policies from supervisory data from nine large banks.  Unfortunately, it is not clear if the CFPB is interested in prohibiting specific acts or practices, or will be issuing sweeping regulation that affects everyone in the industry.

 

Mortgages

The CFPB stated the following on its blog:

“Our agenda includes a number of rulemakings mandated by the Dodd-Frank Act.  For example, we recently convened a small business review (SBREFA) panel to discuss potential amendments to the Home Mortgage Disclosure Act, some of which were mandated by Section 1094 of the Dodd-Frank Act.  We’re also focusing intensely on supporting the implementation process for our recent rulemaking to implement a Dodd-Frank Act directive to consolidate and streamline federal mortgage disclosures required under the Truth in Lending Act and Real Estate Settlement Procedures Act.  We’re also continuing work with stakeholders to address questions that have arisen with regard to the 2013 mortgage rules, including issuing additional clarifications and amendments as warranted.”

In its blog, the CFPB forgot to include the specific information required by Section 1094 of Dodd-Frank, which expands the scope of information required to be complied by the Home Mortgage Disclosure Act (HMDA).  The CFPB claims Dodd-Frank act requires the following additional information be collected:

1. the ages of loan applicants and mortgagors,
2. information relating to the points and fees payable at origination,
3. the difference between the annual percentage rate associated with the loan and benchmark rates for all loans,
4. the term of any prepayment penalty,
5. the value of the property to be pledged as collateral,
6. the term of the loan and of any introductory interest rate for the loan,
7. the presence of contract terms allowing non-amortizing payments,
8. the application channel, and
9. the credit scores of applicants and mortgagors.

In addition to these additional HMDA requirements, the CFPB is considering adding three additional information categories: (1) identifiers for loans, (2) parcels, and (3) loan originators.  As of now, it is not certain the CFPB will include these three additional reporting requirements in its notice of proposed rulemaking, but it seems more than likely it will.

 

Defining Larger Participants

The CFPB stated the following on its blog:

“We’re also continuing rulemakings to implement our supervisory program for certain nonbank entities by defining “larger participants” in various markets for consumer financial products and services. For example, we’re developing a proposal to identify “larger participants” in the market for auto lending. We’ve previously defined larger participants in the consumer debt collection, credit reporting, and student loan servicing markets and are now in the process of finalizing a rule defining larger participants in the international money transfer market.”

The CFPB is developing a proposal that would identify a market for auto lending and define "larger participants" of that market that would be subject to the CFPB's supervisory authority.  In doing so, the CFPB will seek to amend the regulation defining larger participants of certain consumer financial product and service markets by adding a new section to define larger participants of a market for auto lending.

 

Debt Collection

The CFPB stated the following on its blog:

“We’ve been doing research and outreach to assess issues in various other markets for consumer financial products and services over many months. In November 2013, we issued an advance notice of proposed rulemaking seeking comment, data, and information from the public about debt collection, which is the single biggest source of complaints to the federal government. We received more than 23,000 comments in response to the notice, and in our 2014 annual report on Fair Debt Collection Practices Act, reported that we received more than 30,000 consumer complaints in this area.”

According to the CFPB, the Federal government has received more consumer complaints about debt collectors than about any other industry.  The CFPB has already issued an advance notice of public rule making last year on this topic, and is now considering whether rules governing the collection of debts are warranted under the Fair Debt Collection Practices Act or other CFPB authorities.