Consumer Financial Protection Bureau Law Blog

Senate Vote on Cordray Nomination Expected Next Week: Anyone Holding Their Breath?

Senate Majority Leader Harry Reid (D-NV) has promised a vote on Richard Cordray’s nomination next week. Based on the chest pounding, it seems like a foregone conclusion that the Republicans will block this nomination unless the Democrats agree to change the CFPB’s structure and weaken its power. Cordray’s nomination was approved by the Senate Banking Committee along party lines (12-10). In February, 43 Senators, a group large enough to block Cordray’s nomination, sent President Obama a letter stating that they will continue to oppose confirmation of any nominee to lead the U.S. Consumer Financial Protection Bureau until “key changes are made to ensure accountability and transparency at the bureau.” When asked whether he would use the “nuclear option” and change the Senate rules to override the 60 votes necessary to stop a filibuster, Reid explained that he is “not going to do anything now, precipitously. But I’m looking at this very closely…. We’re going to fill that job. Cordray is there now. He’s going to get a vote.”

Stay tuned to the CFPB-Lawblog as we track the progress of Director Cordray’s nomination. 

Get Out the Popcorn (and an Energy Drink): The CFPB Releases Videos On New Mortgage Rules

 The CFPB has just released a series of video presentations on the new mortgage rules issued by CFPB earlier this year. In his opening remarks, Director Cordray explains that these videos are part of “a broader effort on [the CFPB’s] part  to help you comply with the Dodd-Frank Act’s mortgage reforms and [the CFPB] rules.” These videos, cover:

• Ability-to-Repay and Qualified Mortgage Rule
• 2013 HOEPA Rule
• ECOA Valuations and TILA Higher-Priced Mortgage Loans Appraisal Rules
• Loan Originator Compensation Rule
• Mortgage Servicing Rules
• TILA Escrow Rule

The CFPB issued these videos “to provide an overview of the rules in a plain language format that makes the content more accessible and consumable for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.” Those of you hoping for action sequences involving Director Cordray will be disappointed. The videos are a series PowerPoint presentations by members of the CFPB staff. Each of the videos warns that these are just “staff guidance and not any official interpretation of the Bureau or legal advice.” This guidance is important because the videos are just overviews of the requirements and do not cover all aspects of the rules or the obligations that financial institutions face under these rules.

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 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 ›