On August 8, 2016, the U.S. Commodity Futures Trading Commission (CFTC) announced three separate enhancements relating to the protection of customer funds. The new protections address the exemption of certain Federal Reserve Banks from liability under the Commodity Exchange Act, as well as the use of money market funds by derivatives clearing organizations and futures commission merchants. Press Release.
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.
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.
