Consumer Financial Protection Bureau Law Blog

Just-Issued Final Remittance Rule Suggests CFPB is Listening… Sort Of

In January, the CFPB announced that it was delaying implementation of its controversial Remittance Rule governing foreign money transfers to revisit certain concerns raised by financial institutions. It appears that the CFPB was listening--sort of. The final Remittance Rule just released by the CFPB contains revisions lifting some of the compliance burdens on smaller community banks and credit unions, but leaving others in place that could jeopardize the ability of these small banks to offer remittance services. Read More ›

FHFA Limits Fannie and Freddie to “Qualified Loans”: Another Strike Against Non-Qualified Loans and the Consumers Who Rely on Them

In January, the CFPB issued its final Qualified Mortgage Rule (QMR) creating a safe harbor for lenders from liability for loans that meet its criteria for a “qualified mortgage.” The Federal Housing Finance Authority (FHFA) has endorsed this Rule by barring Fannie Mae and Freddie Mac from purchasing non-qualified mortgages. This means that, beginning in January 2014 when the QRM takes effect, Fannie and Freddie will no longer be permitted to purchase: (i) loans with terms over 30 years, (ii) interest-only loans; (iii) negative amortization or ballooning principal loans; or (iv) loans with points and fees exceeding the thresholds set by the CFPB. The one exception the FHFA made is for loans that meet Fannie’s and Freddie’s underwriting and delivery standards. According to the FHFA, the “[a]doption of these new limitations by Fannie Mae and Freddie Mac is in keeping with FHFA’s goal of gradually contracting their market footprint and protecting borrowers and taxpayers.” These limitations also add to the growing number of disincentives for lenders to offer non-qualifying loans, which could constrict access to credit for those who may need it the most. 

CFPB Publishes Small Entity Compliance Guides for New HOEPA, ECOA, and TILA Rules- Institutions of All Sizes Should Take Notice

As readers of this blog know, in January 2013, the CFPB adopted rules governing the Home Ownership and Equity Protection Act (HOEPA), valuations under the Equal Credit Opportunity Act (ECOA), and appraisals of Higher-Priced Mortgage Loans (HPML) under the Truth In Lending Act (TILA). While these rules do not take effect until January 2014, the CFPB is wasting no time warning financial institutions of their obligations under these rules.  On May 2, 2013, the CFPB published three compliance guides for each of these rules targeted at small entities with limited legal and compliance staff. The guides can be found here: Guide for the 2013 HOEPA Rule; Guide for the ECOA Valuations Rule; and Guide for the TILA HPML Appraisal Rule. While billed as “Small Entity Compliance Guides,” mortgage lenders and servicers of all sizes could benefit from reviewing these materials to understand better the CFPB’s recent rules. Read More ›

CFPB Probes Auto Lenders Over Extended Warranty And Other Ancillary Products

The CFPB has subpoenaed a number of auto lenders concerning the sale of financial products such as extended warranties, according to a report in the May 2, 2013 edition of the Wall Street Journal.  Consumer advocates have long criticized what they perceive to be excessive use of high-cost ancillary products to boost profits for car dealers.  Although there is nothing illegal about any of these products, and many provide significant benefits to consumers, we nonetheless expect the CFPB to use its UDAAP powers to deem certain of these practices “abusive,” and to use fair lending-based methodologies to argue that these sales have a disparate impact on certain protected classes.  When combined with the CFPB’s March 2013 guidance on indirect auto lending, which we discuss here, the CFPB is demonstrating that auto lending will be an area of significant enforcement activities in the months to come.  

Stay tuned to the CFPB-Lawblog's continuing coverage of the CFPB's activities involving auto financing.
 

CFPB Hosting Student Loan Hearing: New Rules On The Way???

On May 8, 2013, the CFPB is hosting a field hearing at Miami Dade College in Florida "on student loan borrowers." The CFPB holds field meetings on a regular basis without much fanfare, but what makes this hearing different is that the "event will feature remarks from [Director Cordray]." Cordrary's attendance at a "field hearing" is traditionally coupled with a "major announcement" from the CFPB , e.g. the release of data/information from the CFPB's compliant database, issuance of recommended procedures, or the publication of new rules. Student loans have been a special focus of attention for the CFPB, and it would suprise us in the least if Director Cordray used this forum to make a "major announcement" regarding student loans. Stay tuned to the CFPB-Lawblog, as we follow this developing story.

Legislation Seeks to Limit CFPB’s Authority Over Community Banks, Credit Unions and Small Servicers

Rep. Blaine Luetkemeyer (R-Mo.) has introduced legislation would limit the CFPB’s authority over and provide regulatory relief to community banks, credit unions, small servicers. Luetkemeyer’s legislation, H.R. 1750The Community Lending Enhancement and Regulatory Relief Act, would exempt institutions with less than $10 billion in assets from federal requirements on mortgage escrows and “qualified mortgage” standards (the latter only applies to loans keep on an institution's books for least three years),which which should benefit community banks and credit unions. The legislation would also increase the “small servicer” exemption in mortgage servicing rules from 5,000 mortgages to 20,000 mortgages annually. The Missouri Credit Union Association President/CEO Don Cohenour remarked that there “are several provisions in this bill that are valuable to credit unions and their members.” Stay tuned to the CFPB-lawblog as we follow this legislation.  

CFPB Eases Limits On Credit Card Fees to Avoid Court Battle: Afraid of the Fight or Evidence that It Is Listening Industry Stakeholders?

The 2011 suit by First Premier Bank challenging certain credit card fee rules issued by the Federal Reserve under TILA and the Credit Card Act has been dismissed upon agreement by First Premier and the CFPB. In its complaint, First Premier argued that the rules, which attempted to regulate fees paid prior to the opening of a credit card account, exceeded the Federal Reserve’s statutory authority to regulate fees paid “in the first year during which the account is opened.” 15 U.S.C. § 1637(n); 5 U.S.C. § 706(2)(A) & (C). In July 2011, the CFPB assumed the rule making authority under TILA from the Federal Reserve and became the plaintiff in the matter. The Court enjoined the rules from taking effect and, inFebruary 2012, the CFPB advised the court that it was preparing to amended the rules so that they did not apply to fees paid prior to an “account opening.” In the amendment, which became effective on March 28, 2013, the CFPB acknowledges that the change was “necessary to resolve the uncertainty created by the South Dakota litigation.”   

Obama Administration Appeals Recess Appointment Decision: Cordray’s Fate In The Hands of the Supreme Court (Sort Of)

As expected, the Obama administration filed a petition for certiorari asking the Supreme Court to review and overturn the decision by the U.S. District Court for the D.C. declaring President Obama’s recess appointments to the National Labor Relations Board (“NLRB”), which took place the same day as Richard Cordray’s recess appointment as Director of the CFPB, unconstitutional. In Canning v. NLRB, No. 12-1115 (D.C. Cir. Jan 25, 2013), the court invalidated President Obama’s recess appointments because the Senate was not technically in recess. The court held that (1) the President may exercise recess power only in recesses between Senate sessions (“inter-session”), instead of those falling within Senate sessions (“intra-session”); and (2) that the vacancies to be filled must also first arise during that recess. As readers of this blog know, Senate Republicans have seized on the Canning decision in challenging Director Cordray’s appointment, as well as the entire structure of the CFPB.    Read More ›

Payday Lending in the Crosshairs? CFPB Issues Opening Salvo In Efforts to Restrict Payday Lending Market

Yesterday (4/24/2013), the CFPB issued a 43-page white paper—in advance of a full report due later this spring—on payday and deposit advance loans, concluding these loans “raise substantial consumer protection concerns.” During its year-long investigation, the CFPB reviewed approximately 15 million loans from lenders in 33 states.  While Director Cordray acknowledged that the study found that payday loans “can be helpful” and “may work for some consumers for whom an expense needs to be deferred for a short period of time,” the study concluded that these loans and advances “may become harmful for consumers when they are used to make up for chronic cash flow shortages” and that “the high cost of the loan or advance may itself contribute to the chronic difficulty such consumers face in retiring the debt.” What is most remarkable about the report is not what says, but what it does not say: The report is devoid of any findings, much less a suggestion, that any payday lenders actually engaged in any improper practices. Read More ›

CFPB Creates New Liaison Office For Financial Institutions and Trade Groups: Window Dressing or Earnest Attempt to Improve Communication?

This week the CFPB announced the creation of the Office of Financial Institutions and Business Liaison to “connect the CFPB with bank and nonbank trade associations, financial institutions, and businesses to enhance collaboration and communication as the Bureau continues in its work to make markets more accessible and efficient for consumers.” In the CFPB’s announcement, Director Cordray remarked that, “[a]s the Bureau moves forward with its important work, we continue to build a strong, talented team and to enhance our outreach to all stakeholders involved in improving markets for consumers and responsible businesses.” Patty Briotta, spokesperson for the National Association of Federal Credit Unions (NAFCU), told the Credit Union Times that the NAFCU appreciates open line of communication the CFPB has provided thus far, and will utilize the newly created office to continue advocating for credit unions. This new office will be headed up by Dan Smith. Mr. Smith comes to the CFPB from Freddie Mac where he served as the Director for Industry and State Relations at Freddie Mac. Prior to working at Freddie Mac, Mr. Smith represented Fortune 500 companies as Vice President at Dehart and Darr Associates.

Whether creation of this office is just “window dressing” to placate critics of the CFPB or an earnest attempt by the CFPB to open the lines of communication between financial institutions and trade groups further remains to be seen. Stay tuned to the CFPB-Lawblog as we follow the activities for this new liaison office.