Home Mortgage Disclosure Act: On October 9th, the CFPB announced enforcement actions against Mortgage Master, Inc. (nonbank) and Washington Federal (bank) for violating the Home Mortgage Disclosure Act (HMDA) by making significant errors in the reported data about mortgage applications that each company received in 2011. The CFPB enforcement action requires that:
- Mortgage Master pay $425,000 and Washington Federal pay $34,000 in civil penalties;
- Each company correct and resubmit its mortgage application data for 2011; and
- Each company develop and implement an effective HMDA compliance management system to prevent future violations.
In conjunction with the enforcement actions, on October 9th , the CFPB published a bulletin that, according to the CFPB press release, “puts the industry on notice about the importance of accurate HMDA data and effective HMDA compliance management systems.” The bulletin discusses components of an effective HMDA compliance management system and details factors that the CFPB may consider in evaluating whether to pursue enforcement action. The bulletin includes the CFPB’s new HMDA Resubmission Schedule and Guidelines, which will apply to HMDA reviews on or after January 18, 2014.
- Examinations: On October 9th , CFPB Deputy Director Steve Antonakes delivered remarks at the Federal Deposit Insurance Corporation (FDIC) Advisory Committee on Economic Inclusion. Antonakes stated, “charter or license type is becoming less relevant in determining how we will prioritize and schedule our examinations and investigations. Accordingly, we have begun to implement a prioritization framework that allocates our examination, investigation, and fair lending resources across product types. This strategy intentionally moves us away from static examination cycles.”
- Examinations & Enforcement Lawyers: On October 8th, the CFPB announced that CFPB enforcement attorneys will no longer accompany CFPB supervision staff during examinations. A CFPB spokeswoman explained that the change results from an internal review to make the examination process less time consuming and less costly, and that the CFPB’s approximately 100 enforcement lawyers will continue to work closely with CFPB examiners to determine if an enforcement action is appropriate.
- Fair Credit Reporting Act: On October 4th, the CFPB and the Federal Trade Commission jointly filed an amicus brief in a case (Moran v. The Screening Pros, LLC) involving the Fair Credit Reporting Act’s (FCRA) obsolescence rules regarding criminal history. The CFPB argues that the 1998 FCRA amendments indicate that the reporting of negative criminal history charges for up to seven years should begin on the date of the charge and not, as a lower court held, from the date of the charge’s dismissal.
CFPB & Congress
- Qualified Mortgage Rule: On October 10th, Sen. Johnny Isakson (R-GA) delivered remarks on the Senate floor offering his support to CFPB Director Richard Cordray and the CFPB “for a job well done” in writing the Qualified Mortgage (QM) rule. Isakson stated, “Mr. Cordray did an outstanding job of seeking input from people in the industry and the trades affected by the housing industry and wrote a rule that made sense.”
Director Cordray: On October 4th, the Plain Dealer (OH) published an interview with Cordray in which he addressed a number of matters, including payday lending, consumer education, and his confirmation process.
- Payday lending: Asked about industry criticism of the CFPB’s whitepaper on payday lending released in April 2013 (previously reported), Cordray stated, “I think our analysis stands. … The payday lenders themselves are quite welcome to put out their own analysis and work through that number of transactions, and they haven’t really done that.”
- Consumer education: Cordray highlighted several financial literacy tools on the CFPB website, including the consumer complaint function and “Ask CFPB.” Cordray also cited efforts to develop “better and comprehensive guidance” and “a whole suite of tools” on major financial decisions such as “Paying for College.“
- Confirmation: “As for the minor controversy over my appointment, we worked through that. I think we showed people that we were going to continue to do our work, and I think that work has value.”
- Financial Literacy: On October 10th, the CFPB published a blog post on its website about its “Ask CFPB” tool, a database of CFPB answers to consumers’ financial questions. The CFPB announced that last week it published its 1,000th answer and that 987,000 people have visited “Ask CFPB” to find answers to financial questions. The blog post stated, “We learn about what you need in many ways. We listen to the questions you ask at the events we hold throughout the country and the ones you pose through social media. We review the questions you submit to Ask CFPB. We also see what’s working for you by checking which answers are viewed the most and how they are rated.”
- Financial Literacy: On October 4th, the CFPB announced that it is seeking private sector partnerships to “research approaches for helping consumers overcome common decision- making challenges around their finances.” Potential partners may include educational organizations, businesses, and other innovators. Those organizations interested in partnering with the CFPB should notify the CFPB by November 8th.
- Shutdown: On October 9th, the CFPB and four other federal regulators issued a press release encouraging financial institutions to develop “prudent workout arrangements” for borrowers who “may face a temporary hardship in making payments on debts” due to the current shutdown of the federal government. The press release advises that, “prudent efforts to modify terms on existing loans should not be subject to examiner criticism.”
Consumer Complaints: On October 8th, the National Community Reinvestment Coalition (NCRC) published a report entitled, “NCRC Analysis of Bank Account Complaints by ZIP Code,” which analyzes the CFPB’s consumer complaint data. The NCRC recommends that:
- “The CFPB, the [FDIC], the Office of the Comptroller of the Currency, the Federal Reserve Board, and the National Credit Union Administration should develop a joint database covering all banks and credit unions so that the public has a more comprehensive view of the number of complaints issued from customers of large and small institutions.”
- Given the NCRC’s findings that predominantly minority communities account for a disproportionately large share of complaints, “Federal regulatory agencies should further investigate complaint data for individual institutions to determine instances in which violations of consumer protection or anti-discrimination law occur.”
Consumer Complaints: Deloitte LLP has published a report entitled, “CFPB Consumer Complaint Database: Analysis Reveals Valuable Insights.” Deloitte concluded that:
- Complaints about troubled mortgages account for 56% of the approximately 94,000 complaints submitted from March 2012 through April 2013.
- Customer misunderstanding may be the cause of more complaints than financial institution error.
- Financial institutions are responding to complaints submitted to the CFPB more quickly as well as more effectively. The untimely response rate decreased from 10% in December 2011 to 1% in April 2013, while the rate at which consumers disputed resolutions fell from 28% in January 2012 to 23% in April 2013.
- Overdraft Protection: On October 7th, American Bankers Association (ABA) Senior Vice President Richard Riese sent a letter to CFPB Associate Director for Research, Markets, and Regulations David Silberman encouraging the CFPB not to adopt further limits on overdraft protection and to instead directly survey customers who use overdraft protection in order to better understand users’ demographics and preferences. The ABA sent the letter in response to the CFPB’s June 2013 whitepaper entitled, “CFPB Study of Overdraft Programs: A Whitepaper of Initial Data Findings” (previously reported). The ABA has also published its own whitepaper explaining how overdraft protection programs help to protect consumer choice.
- Remittance Transfers: On October 8th, the Boston University Pardee Center for the Study of the Longer-Range Future published a report entitled, “Remittance Flows to Post-Conflict States: Perspectives on Human Security and Development.” In the report, the Pardee Center argues that CFPB regulations and disclosure requirements that implement section 1073 of the Dodd-Frank Act, “create a number of practical compliance problems for remittance transfer providers that could well result in increasing the cost of, or reducing the availability of, remittance services,” especially for remittances directed to post-conflict countries. The Task Force concludes that the CFPB designed the regulations, “for a model in which…remittance transfers are subject to known rules and regulations, where all fees can be determined before, and where exchange rates and timing can be predicted with near certainty,” but these assumptions are unsupported in reviewing the actual transfers to many post-conflict countries.