March 12, 2013
Bipartisan Legislation to Amend Dodd-Frank Introduced in the House
On March 12, 2013, Rep. Bill Huizenga (R-MI) introduced bipartisan legislation in the House of Representatives to amend the definition of “points and fees” in the Ability to Repay/Qualified Mortgage provisions of Dodd-Frank. Under Dodd-Frank, mortgage loans that have points and fees exceeding 3% of the loan amount cannot constitute “qualified mortgages.” The Consumer Mortgage Choice Act — H.R. 1077 — would alter the points and fees that count towards that 3% amount. Specifically, the bill would exclude (1) fees paid to creditor-affiliated title entities, (2) amounts held in escrow for payment of homeowner’s insurance which are not retained by creditor or its affiliates, (3) fees to cover loan level price adjustments assessed by Fannie Mae and Freddie Mac and (4) compensation to mortgage banker or correspondent lender in a wholesale transaction.
March 14, 2013
The CFPB Issues Larger Participant Rule for Student Loan Servicers
On March 14, 2013, the CFPB issued its proposed larger participant rule to supervise certain non-bank student loan servicers. Dodd-Frank explicitly authorizes the CFPB to supervise, without regard to their size, all non-depositary institutions -- as well as their service providers -- engaged in private student lending. That authority does not include non-bank student loan servicers that do not fund student loans. Dodd-Frank, however, did authorize the CFPB to supervise entities in certain consumer financial product markets that it classified as larger participants.
The proposed rule would cover servicing of both private and federal student loan debt. The CFPB purports to define larger participants as those student loan servicing firms that handle more than 1 million borrower accounts. The CFPB estimates that the proposed larger participant rule would cover the seven largest servicers of private and federal student loan debt, which service a total of 49,000,000 borrower accounts. The public will now have 60 days to comment on the proposed rule after its publication in the Federal Register. This proposed rule marks the third “larger participant” rule promulgated by the CFPB. In 2012, the CFPB issued larger participant rules for firms in the debt collection and credit reporting markets.
March 19, 2013
Senate Banking Committee Approves Director Cordray’s Nomination
On March 19, 2013, the Senate Banking Committee — in a 12-10 party line vote — approved Richard Cordray’s nomination as CFPB director. Cordray’s nomination now heads to the floor of the Senate, where Senate Republicans are expected to filibuster Cordray’s nomination in an attempt to compel certain structural changes to the CFPB. Senate Republicans are concerned that a director led agency with direct funding from the Federal Reserve is insulated from Congressional oversight. They are calling for the CFPB to be subject to annual appropriations and led by a five member bi-partisan commission. The White House and Senate Democrats oppose the changes to the CFPB. They maintain the structure of the bureau is not significantly different than other banking regulators. A floor vote has not been scheduled for the nomination.
March 20, 2013
CFPB Releases Annual FDCPA Report
On March 20, 2013, the CFPB released its second Annual Report to Congress summarizing the actions of the FTC and CFPB to administer the Fair Debt Collection Practices Act. Among other things, the CFPB reported that the volume of complaints filed with the FTC Consumer Response Center related to the debt collection industry declined by 13.4% from 2011. Harassing the debtor, which was the most reported consumer violation in 2011, was the second most common complaint in 2012. For the first time in five years, demanding an amount other than that permitted by law or contract was the most reported consumer grievance. The annual report also noted that CFPB issued its larger participant rule for the debt collection market in 2012, which granted the Bureau supervisory authority over those firms in the debt collection industry with annual receipts exceeding $10 million. The report also recapped major FDCPA enforcement actions and court cases over the past year, including the October 2012 settlement with American Express to refund approximately $85 million to 250,000 customers for alleged deceptive debt collection practices.
March 21, 2013
CFPB Issues Rule Amending Disclosures at ATMs
On March 21, 2013, the CFPB issued a final rule streamlining fee disclosures at ATM machines. The new rule conforms Regulation E to the December 20, 2012 law passed by Congress amending the Electronic Fund Transfer Act. The new CFPB rule eliminates the prior requirement that ATM operators must post a fee notice "on or at" an ATM. The ATM operator is still obligated to disclose the amount of the fee charged for use of the ATM on the computer screen or in paper form, before the consumer proceeds with the transaction. The CFPB reasoned that disclosures “on or at” the ATM were no longer necessary because “when the requirement was enacted in 1999, ATMs did not always disclose fees on-screen.”