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CFPB Issues Interpretative Rule on Screening and Training Requirements for Mortgage Loan Originators

 

On November 15, the Consumer Financial Protection Bureau (CFPB) implemented an interpretive rule that clarifies that financial institutions that employ loan originators are not obligated to screen and train loan originators with temporary authority. Instead, the state is responsible for any necessary screening or training of these originators. The rule will be effective on November 24. CFPB Release.

CFPB Issues Final HMDA Rule to Provide Relief to Smaller Institutions

 

On October 10, the Consumer Financial Protection Bureau (CFPB) issued a rule which finalizes certain aspects of its May 2019 Notice of Proposed Rulemaking under the Home Mortgage Disclosure Act (HDMA). It extends for two years the current temporary threshold for collecting and reporting data about open-end lines of credit under the HDMA. The rule also clarifies partial exemptions from certain HMDA requirements which Congress added in the EGRRCPA. Release.

Federal Reserve Approves Final Rule to Repeal Regulations that Incorporated the S.A.F.E. Act

 

On May 9, the Federal Reserve Board approved final amendments to its regulations to reflect the transfer of the Board’s rulemaking authority for the Secure and Fair Enforcement for Mortgage Licensing Act (S.A.F.E. Act) to the Consumer Financial Protection Bureau (CFPB). Entities that were subject to the Board’s rules are now subject to the CFPB’s rules. Press Release.

CFPB Changes Policy Regarding Civil Investigative Demands

 

On April 23, the Consumer Financial Protection Bureau (CFPB) announced changes to its current policies regarding Civil Investigative Demands (CIDs). These changes will require CIDs to provide more information about the alleged wrongful conduct under investigation. The new policy aligns with recent court decisions about notifications of purpose and is consistent with prior reports from the CFPB.

CFPB Structure Ruled Unconstitutional

On October 11, 2016, the U.S. Court of Appeals for the District of Columbia Circuit ruled in PHH Corporation v. Consumer Financial Protection Bureau that the CFPB’s structure is unconstitutional.

In reaching this conclusion, the appellate court found that “No head of either an executive agency [established by the President] or an independent agency [established by Congress] operates unilaterally without any check on his or her authority” and, therefore, the Director of the CFPB “enjoys more unilateral authority than any other officer in any of the three branches of the U.S. Government, other than the President.” The court concluded that the CFPB “lacks that critical check and structural constitutional protection, yet wields vast power over the U.S. economy.” In order to remedy the constitutional flaw, the appellate court ruled that the CFPB can continue to operate but “will do so as an executive agency akin to other executive agencies headed by a single person, such as the Department of Justice and the Department of the Treasury,” and will be removable by the President. Report.

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 Considers Proposal to Overhaul Debt Collection Market

On July 28, 2016, the Consumer Financial Protection Bureau (“CFPB”) announced that it is considering a proposal that would significantly alter the debt collection industry “by capping collector contact attempts and by helping to ensure that companies collect the correct debt.”  Press Release.

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.