Consumer Financial Protection Bureau

Nationstar Mortgage to Pay $1.75 Million Penalty for HMDA Violations

 

On March 15, 2017, the Consumer Financial Protection Bureau (“CFPB“) ordered Nationstar Mortgage LLC (“Nationstar“) to pay a $1.75 million civil penalty for violating the Home Mortgage Disclosure Act (“HMDA“) by consistently failing to accurately report data about mortgage transactions between 2012 through 2014. The $1.75 million civil penalty is the largest HMDA penalty imposed by the CFPB to date. The CFPB found that (1) Nationstar’s HMDA compliance systems were flawed and generated mortgage lending data with significant, preventable errors; (2) Nationstar failed to maintain detailed HMDA data collection and validation procedures and failed to implement adequate compliance procedures; and (3) Nationstar failed to consistently define data among its various lines of business. In addition to the civil penalty, the CFPB ordered Nationstar to develop and implement an effective compliance management system and to review, correct and make available its corrected HMDA data from 2012-2014. Release. Full Order.

The CFPB Publishes Final Rule for Prepaid Accounts

 

On October 5, 2016, the Consumer Financial Protection Bureau (the “CFPB”) finalized comprehensive consumer protections for prepaid account users that require, among other things, financial institutions to limit consumer losses when funds are stolen or cards are lost. The new rule also requires financial institutions to allow consumers free, easy access to account information and finalizes new “Know Before You Owe” disclosures to give consumers clear information about fees and other key details regarding prepaid accounts. Press Release. Final Rule.

CFPB Finalizes New Foreclosure Protections

 

On August 4, 2016, the Consumer Financial Protection Bureau (CFPB) issued updated servicing rules to expand foreclosure protections for homeowners and struggling borrowers. The new measures include expanding consumer protections to surviving family members, clarifying borrower protections in servicing transfers, providing periodic statements to borrowers in bankruptcy, and requiring servicers to provide certain foreclosure protections more than once over the life of the loan, among other protections. The majority of the provisions of the final rule will become effective 12 months after publication in the Federal Register. Press Release. Final Rule.

Consumer Financial Protection Bureau Proposes Rule to End Payday Debt Traps

On June 2, 2016, the Consumer Financial Protection Board (the “CFPB”) announced a proposed rule that would substantially change the rules governing “payday loans, auto title loans, deposit advance products, and certain high-cost installment and open-end loans.”  The CFPB also indicated it would investigate whether additional products and protections should be covered. Press Release.

The stated purpose of the rulemaking is to protect consumers living paycheck to paycheck from the so-called “debt spiral” of serial borrowing and multiple loan origination and overdraft fees occasioned by chronic liquidity needs.  Given that the proposed rule spans 1,334 densely filled pages, it will take some time to digest the broad requirements and potential impact.  Thus far, however, opinions on whether the proposed rulemaking is likely to achieve its stated goals and the impact it may have on particular businesses or borrowers seem to depend on perspective.  For some, the proposed rule is an example of overreaching by the CFPB that threatens their business and really “miss[es] the mark,” as Richard Hunt, President and CEO of the Consumer Bankers Association, noted last week.  For others, the rulemaking would appear to have a marginal impact, if any.  And some FinTech companies view the proposed rule as an opportunity for market disruption and new entrants.

For a summary of the proposed rules and their potential impact on Current Providers of Short-Term Consumer Loans, Established Banking Institutions and New Market Entrants, and Consumers, please take a look at our analysis, The New CFPB Payday Lending Rules:  An Early Analysis.

U.S. Treasury Department Issues White Paper on Online Marketplace Lending Industry

On May 10, 2016, the Department of the Treasury issued a white paper on online marketplace lending that maps the current market landscape, reviews industry insights and offers policy proposals for the road ahead.  Based on approximately 100 responses from online marketplace lenders, financial institutions, investors and other key industry figures, the Treasury, in consultation with the CFPB, FDIC, Federal Reserve Board, FTC, OCC, SBA and SEC, made several notable recommendations and observations.

The white paper explores policies that would expand regulatory oversight, including standardized representations and warranties in securitizations, pricing methodology standards, the implementation of a registry for tracking data on transactions and the reporting of loan-level performance, among others.  In addition, the Treasury mentions potential cybersecurity threats, anti-money laundering, the uneven protections and regulations in place for small business borrowers and the growth of the mortgage and auto loan markets as some of the emerging trends to monitor.  The Treasury is also considering the role of federal agencies in regulating these areas, including the formation of an interagency working group for online market place lending.  Press ReleaseWhite Paper.

CFPB Proposes Prohibition on Mandatory Consumer Arbitration Clauses

On May 5, 2016, the Consumer Financial Protection Bureau (CFPB) issued and sought comment on proposed rules prohibiting mandatory arbitration clauses that deny groups of consumers their day in court.  Under the proposed rules, companies would be prohibited from putting mandatory arbitration clauses in new consumer contracts that would prevent consumers from bringing class actions.  Comments must be received on or before 90 days after publication in the Federal Register.  Press ReleaseProposed Rule.

The CFPB Releases Consumer Bulletin on Marketplace Lending and Announces It Is Accepting Consumer Complaints

On March 7, 2016, the Consumer Financial Protection Bureau (the “CFPB”) released a consumer bulletin with information and tips for consumers of marketplace lending. The bulletin provides consumers with an overview of the peer-to-peer lending platform, as well as tips and general steps that should be taken when shopping for a loan. In conjunction with the release, the CFPB also announced that it is accepting complaints from consumers taking out loans from online marketplace lenders. Complaints are anticipated to be addressed within 60 days. CFPB Guide. Press Release.

Bureau of Consumer Financial Protection Issues Policy on No-Action Letters

On February 18, the Consumer Financial Protection Bureau issued a new policy statement on No-Action Letters.

Under the Policy, Bureau staff, in its discretion, would issue no-action letters (NALs) to specific applicants in instances involving “innovative financial products or services that promise substantial consumer benefit where there is substantial uncertainty whether or how specific provisions of statutes implemented or regulations issued by the Bureau would be applied.”

A NAL would advise the recipient that, subject to its stated limitations, the staff has no present intention to recommend initiation of an enforcement or supervisory action against the requester with respect to a specified matter. However, NALs would be subject to modification or revocation at any time at the discretion of the staff, and may be conditioned on particular undertakings by the applicant with respect to product or service usage and data-sharing with the Bureau. Also, NALs would be nonbinding on the Bureau, and would not bind courts or other actors who might challenge a NAL recipient’s product or service, such as other regulators or parties in litigation.

CFPB Launches Public Inquiry to Inform Agency Review of the Credit Card Market

On March 17, the Consumer Financial Protection Bureau (CFPB) announced it is seeking public comment on how the credit card market is functioning and the impact of credit card protections on consumers and issuers. This public inquiry will focus on issues including credit card terms, the use of consumer disclosures, credit card debt collection practices, and rewards programs, among others.  Release.