Consumer Financial Protection Bureau Law Blog

CFPB Proposes Delay in Implementing Rule Against Financing of Certain Credit Insurance on Mortgage Loans

As our readers will recall, the CFPB proposed back in January 2013 to limit the ability of mortgage lenders to finance credit insurance premiums. These prohibitions were to go into effect on June 1, 2013, several months before the required implementation date of most regulations issued at that time. On May 8, 2013, however, the CFPB switched course, proposing to delay implementation of the rule while the CFPB decides whether to make the rule applicable to transactions other than those in which a lump-sum premium is added to the loan amount at closing. Back in January, the CFPB issued a number of final rules concerning mortgage lending, in accordance with requirements of the Dodd-Frank Act, including Loan Originator Compensation Requirements under the Truth in Lending Act (Regulation Z) (the "LO Compensation Rule"). The LO Compensation Rule deals not only with compensation, but also with loan originator qualifications and registration, as well as compliance procedures for banks, prohibitions on mandatory arbitration, and (relevant here), prohibitions on the financing of single-premium credit insurance.  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 Issues Guidance to Small Businesses on Ability-to-Repay and QM: A Primer Not Just for Small Business Consumption

As our readers well know, the CFPB adopted rules in 2013 implementing the Ability to Repay/Qualified Mortgage (ATR/QM) provisions of the Dodd-Frank Act. By January 2014, these rules will apply to everyone.  However, on April 10, the CFPB published a small entity guide to ATR/QM that contains useful information for any entity that may be required to comply.  Written in a plain English FAQ format, the guide is packed with detailed information about the rules and is a worthwhile desk reference for those looking for the requisite detail, without the bulk associated with both the rule and the official staff interpretations.  For those more comfortable with charts, the CFPB has likewise published a summary comparison of the ability-to-repay, qualified mortgage, GSE qualified mortgage and balloon-payments QM’s.  Stay tuned.

Private Mortgage Insurance: Does the CFPB’s Latest Enforcement Action Effectively Regulate Captive Reinsurance Out of Existence?

Today (4/4/13), the CFPB announced enforcement actions against, and settlements with, four mortgage insurers involving what “the Bureau believes to be improper kickbacks paid by mortgage insurers to mortgage lenders in exchange for business.” The CFPB alleges that, in exchange for business referrals, the four insurers—Genworth U.S. Mortgage Insurance Corporation, United Guaranty Corporation, Radian Guaranty Inc., and Mortgage Guaranty Insurance Corporation—violated RESPA by providing kickbacks to lenders in connection with the purchase of captive reinsurance, which the CFPB claims were designed to help lenders obtain greater profits. The CFPB contends these captive reinsurance deals violated RESPA because the projected value of the reinsurance was less than the reinsurance premiums paid by mortgage insurers to the reinsurer. Under the terms of the proposed consent orders filed with the United States District Court for the Southern District of Florida, the mortgage insurers will: (i) pay a collective $15 million in penalties to the CFPB; (ii) cease the paying “illegal kickbacks”; (iii)  not enter into new captive mortgage reinsurance arrangements with affiliates of mortgage lenders; and (iv) submit to compliance monitoring and reporting.  Read item (iii) carefully:  All four companies agreed that they would NEVER AGAIN enter into captive mortgage reinsurance arrangements with mortgage lenders.   Read More ›

ATM Fee Disclosures: Bureau Amends Regulation E Removing ATM Sticker Requirement

Readers will remember that, before December 2012, the Electronic Fund Transfer Act required ATM’s to include fee notices on the machines themselves.  Congress eliminated that requirement after banks faced repeated nuisance litigation arising out of the physical removal of these notices.  In many cases, the notices were likely removed by the very people who filed suit.  With the signage requirement gone, the CFPB has amended Regulation E to reflect the change while reiterating that ATM customers still receive either an on-screen or paper fee disclosure.  The revised provision, at 12 C.F.R. 1005.16, requires: (1) that the ATM operator “provide a notice that a fee will be imposed for providing electronic fund transfer services or a balance inquiry that discloses the amount of the fee”;  (2) that the notice either be shown “on the screen of the [ATM] or by providing it on paper, before the consumer is committed to paying a fee”; and (3) that the fee be imposed only if the “consumer elects to continue the transaction or inquiry after receiving such notice.”

ECOA Redux: CFPB Targeting Indirect Auto Lenders For Alleged Discriminatory Practices By Dealers

Today (March 21, 2013), the CFPB released a bulletin warning indirect auto lenders that the Bureau intends to “pursue” -- under the federal Equal Credit Opportunity Act (ECOA) -- those that fail to impose proper “controls” on dealer markups and allow dealer pricing discretion that the CFPB deems discriminatory to protected classes. Read More ›

BREAKING: Senate Committee: Thumbs Up On Cordray But Deadlock Looms On Senate Floor

Without the support of a single Republican, the Senate Banking Committee approved the nomination of Richard Cordray as director of the CFPB.  No surprises here.  The 12-10 vote signals the inevitable difficulties Cordray will face when his nomination hits the Senate floor. 

Stay tuned to the CFPB-Lawblog as we follow Cordray's nomination.

Senator Coburn to Director Cordray: "I Think You've Done A Wonderful Job" But...

If Republicans hate the current makeup of the CFPB, they don’t appear to share a hatred for Director Rich Cordray. Press reports suggest that there is little or no personal animus against the current Director, but those warm and fuzzy feelings do not equate to a thumbs up vote on the Senate floor.  "I will compliment you," said Oklahoma Republican Tom Coburn  to Rich Cordray.  "I think you've done a wonderful job so far."  The issue is , of course, the CFPB's autonomy.  Republicans intend to block a confirmation vote unless changes are made to the CFPB's structure and the bureau is subject to the Congressional appropriations process.  Adding fuel to the fire, Senator Elizabeth Warren, who told the press that any move against Cordray and the CFPB was bad for consumers. "The American people,” she said, “deserve a Congress that worries less about helping big banks, and more about helping regular people who have been cheated on mortgages, on credit cards, on student loans and on credit reports."

Chamber of Commerce Calls (Yet Again) for Improvements in the CFPB’s Supervision and Authority Processes

For the second time in eight months, the U.S. Chamber of Commerce has called for the CFPB to take action to “eliminate the uncertainty and lack of clarity that continues to cloud the Bureau’s activity and therefore imposes significant costs on the huge number of businesses subject to the Bureau’s jurisdiction.” In a February 14, 2013 letter, David Hirschmann, the Chamber’s senior vice president, addressed the Bureau’s supervision and regulatory processes. Hirschmann warned that “continued uncertainty and inefficiency [in those processes] is not simply to impose excessive, unjustified costs on legitimate businesses seeking to comply with the law—it directly constrains the lending, especially lending to small businesses that our economy desperately needs in order to grow and create jobs for the millions of Americans who remain unemployed.” Read More ›

Will the QM rules Harm the Mortgage Market?

In a January 14, 2013 "issue brief" published by The Heritage Foundation, research fellows Diane Katz and David John argue that the CFPB's new qualified mortgage (QM) rules will frustrate the market, thereby adversely impacting traditional supply and demand principles.  Read More ›