CFPB to Begin Collecting Complaints Regarding Prepaid Cards
The CFPB recently announced that it will begin collecting complaints related to prepaid cards. Complaints may include problems related to opening or closing an account, overdrafts, fraud, scams, marketing, and rewards features.
CFPB Proposes Letting Consumers Make Complaints Public
On July 16, 2014, the CFPB proposed a new policy that would allow consumers to make their complaints about consumer financial products and services public. According to the CFPB, making complaints public would help the public to detect specific trends in the market and help to improve customer service.
To read the proposed policy, visit: http://files. consumerfinance.gov/f/201407_cfpb_proposed- policy_consumer-complaint-database.pdf
CFPB Issues Final Interpretive Rule on Definition of “Assumption” Under Reg Z
On July 11, 2014, the CFPB issued a final interpretive rule regarding the meaning of “assumption” and the application of the ability-to-repay rule to successors in interest. The ability-to-repay rule applies to any “covered transaction,” including certain “new transactions” that occur after consummation of a loan. One such “new transaction” is an “assumption.”
Under the final interpretive rule, the CFPB clarified that a successor-in-interest’s agreement to be added or substituted as obligor on a consumer credit transaction securing the dwelling is not an “assumption” as defined by Regulation Z, and therefore, not subject to its disclosure requirements. Although a successor-in-interest’s agreement to take on a loan obligation is sometimes commonly referred to as an assumption, it is not an “assumption” for purposes of the ability-to-repay rule because it is not done in order to finance the acquisition or initial construction of a dwelling.
One effect of this guidance is to enable a borrower’s heir to be added to the mortgage without triggering the ability-to-repay rule.
CFPB Issues Policy Guidance Regarding “Mini-Correspondent Lenders”
On July 11, 2014, the CFPB issued policy guidance regarding supervisory and enforcement considerations regarding “mini-correspondent lenders.” According to the CFPB, many mortgage brokers have considered restructuring their business to become mini-correspondents that may not be subject to the Dodd-Frank Act.
The CFPB stated that it intends to closely monitor mini-correspondents to ensure that they are not evading the CFPB’s regulations. In so doing, the CFPB will consider the following: whether the mini- correspondent still acts as a mortgage broker in some transactions; how many investors the mini- correspondent has; whether the mini-correspondent uses a bona fide warehouse line of credit; what changes the former broker made in staff and structure in order to become a mini-correspondent; and what entity is performing the majority of the mini-correspondent’s origination activities.
To read the policy guidance, visit: http://files. consumerfinance.gov/f/201407_cfpb_guidance_ mini-correspondent-lenders.pdf
Agencies Issue Guidance on HELOCs Nearing End-of-Draw Periods
On July 1, 2014, several federal financial institution regulatory agencies issued guidance regarding HELOCs nearing their end-of-draw periods. A HELOC is a line of credit secured by a dwelling that generally provides for a draw period, during which a borrower has revolving access to unused funds, and a repayment period.
Specifically, the guidance addresses principles that should govern management oversight of HELOCs ending their end-of-draw period. These principles include: prudent underwriting; compliance with existing pertinent guidance; sustainable modification terms; appropriate accounting of troubled debt restructurings; and appropriate segmentation and analysis of end-of-draw exposure.
To read more, visit: http://www.federalreserve.gov/ newsevents/press/bcreg/bcreg20140701a1.pdf
FFIEC Launches Cybersecurity Website
On June 24, 2014, the Federal Financial Institutions Examination Council (“FFIEC”) launched a website on cybersecurity. Part of an effort to raise awareness of cybersecurity risks at financial institutions, the website provides resources, such as webinars, that may help financial institutions address cybersecurity risks.
OCC Issues Semiannual Risk Report
The OCC recently issued the Spring 2014 edition of its semiannual risk report. In the report, the OCC noted that performance of federally chartered financial institutions improved in 2013 overall, with small banks lagging behind larger banks. Moreover, the OCC noted, consumer confidence improved, resulting in an increase in spending.
Traditional risk metrics improved in 2013, with charge-offs and nonperforming assets dropping close to pre-recession levels. However, the OCC sees signs that credit risk is increasing, such as a decline in underwriting standards and increased layering of risk in the indirect auto loan market.
For banks many banks, strategic risk is high for reasons such as expansion into new, less familiar products and reduction of overhead by outsourcing to third parties. Operational risk is also high for many banks due to changing business models and the proliferation of cybersecurity threats.
The OCC’s key priorities for the next 12 months include oversight of the 19 largest banks, operational risk
FHFA to Consider Litigation Over Forced- Placed Insurance
On June 25, 2014, the Federal Housing Finance Agency (“FHFA”) issued a report entitled FHFA’s Oversight of the Enterprises’ Lender-Placed Insurance Costs.
According to the FHFA’s inspector general, lender- placed insurance (“LPI”) rates in several jurisdictions were excessive due to profit-sharing arrangements between servicers and insurers. As a result, Fannie and Freddie were overcharged $158 million in LPI premiums. Accordingly, the FHFA is considering litigation over these excessive LPI premiums.
To read the report, visit: http://fhfaoig.gov/ Content/Files/EVL-2014-009.pdf
CFPB Issues Final Rule Regarding Procedures for TROs
On June 18, 2014, the CFPB issued a final rule adopting its September 2013 interim final rule regarding procedures for issuance of temporary cease-and-desist orders in adjudication proceedings brought under the Dodd-Frank Act. The final rule became effective July 18, 2014.
To read the final rule, visit: http://www.gpo.gov/ fdsys/pkg/FR-2014-06-18/pdf/2014-14228.pdf
Agencies Held Webinar on Community Reinvestment
On July 17, 2014, several financial institution regulatory agencies held a webinar entitled “Interagency Questions and Answers Regarding Community Reinvestment.” The first in a series related to the new TILA-RESPA Integrated Disclosure rule, this webinar is now available online for public viewing.
To watch the webinar, visit: http://www. philadelphiafed.org/bank-resources/publications/ consumer-compliance-outlook/outlook-live/
CFPB Issues Manual for Assisted Living Facilities
The CFPB recently issued a manual entitled “Protecting residents from financial exploitation: A manual for assisted living and nursing facilities.” Designed to help managers and staff at assisted living and nursing facilities prevent financial exploitation of the elderly, the manual explains relevant laws, summarizes warning signs of exploitation, identifies common scams that target the elderly, and provides recommendations on facility policies to help prevent exploitation.
To read the manual, visit: http://files. consumerfinance.gov/f/201406_cfpb_guide_ protecting-residents-from-financial-exploitation.pdf
CFPB to Host Roundtable Discussion on Debt Collection
On October 23, 2014, the CFPB will host a roundtable discussion entitled “Debt Collection & the Latino Community” to examine how debt collection issues affect Latino consumers, particularly those with limited proficiency in English. The roundtable is free and open to the public.
OCC Increases Assessments on Large Banks
The OCC is adopting a final rule increasing assessments for national banks and federal savings associations with assets in excess of $40 billion. Increases depend on an institution’s assets, but will range between 0.32 percent and 14 percent.
To read more, visit: https://www.federalregister. gov/articles/2014/07/09/2014-16017/assessment- of-fees
House Appropriations Committee Releases 2015 Financial Services Bill
On June 17, 2014, the House Appropriations Committee released the Financial Services and General Government Appropriations bill for fiscal year 2015. Among other things, the bill contains a provision that would change the CFPB’s funding source to the congressional appropriations process in fiscal year 2016 and require extensive reporting on the agency’s activities. These changes would increase transparency of the CFPB’s activities.
To learn more, visit: http://appropriations. house.gov/news/documentsingle. aspx?DocumentID=384676
CFPB Delays Prepaid Card Rulemaking
CFPB Director Richard Cordray recently announced that the CFPB will not release its new prepaid card regulations until the end of this summer. This is in keeping with several other rulemaking delays recently announced.
To read the agency’s rulemaking agenda, visit: http://www.reginfo.gov/public/do/ eAgendaMain?operation=OPERATION_GET_AGENCY_RULE_LIST¤tPub=true&agenc yCode=&showStage=active&agencyCd=3170&Im age58.x=58&Image58.y=5&Image58=Submit
Agencies to Review Outdated Regulations
Several financial institution regulatory agencies have requested public comment on bank regulations that are no longer necessary. Conducted under the Paperwork Reduction Act, the review will include rules on applications and reporting, powers and activities, and international operations. Comments are due September 2, 2014, and may address topics such as the purpose, effects, and burdens of the regulations.
To read more, visit: https://s3.amazonaws.com/ public-inspection.federalregister.gov/2014-12741. pdf
Agencies Clarify Flood Insurance Coverage Requirements for Multi-Family Residences
Several financial institution regulatory agencies recently released guidance regarding flood insurance coverage requirements for multi-family units classified as “other residential buildings” under the National Flood Insurance Program (“NFIP”). The maximum limit of coverage has been increased from $250,000 per building to $500,000 per building.
The increase in the maximum amount of available insurance coverage may affect the minimum amount required for existing and future loans secured by “other residential buildings,” as the amount of insurance required, pursuant to the Biggert-Waters Act, is the lesser of the outstanding principal balance of the loan or the maximum amount available under the NFIP.