CFPB Recaps Efforts Directed Toward Assisting Older Americans

Gail Hillebrand, the CFPB’s Associate Director of its Consumer Education and Engagement Division, testified before the House Committee on Energy and Commerce, Subcommittee on Commerce, Manufacturing, and Trade. Ms. Hillebrand’s testimony consisted of a review of the recent efforts of the division’s Office of Financial Protection for Older Americans.

Noting that those Americans age 65 and older have an approximate collective net worth of $18 trillion and are therefore attractive targets of fraudulent scams, Ms. Hillebrand testified that the CFPB has “placed a priority on preventing, detecting and redressing elder financial exploitation.” She identified five problems that the CFPB is working to combat:

  1. Americans do not know who they can trust to provide financial advice. Ms. Hillebrand explained that the CFPB has previously provided a report and recommended actions for federal and state policymakers to consider with respect to promulgating standards for financial advisers to acquire senior designations and, thus, create a uniform and trusted designation for seniors to rely upon when seeking advice.
  2. Older Americans, and often their caregivers, do not know how to spot and avoid the numerous fraudulent schemes that target seniors. The CFPB is currently developing a community education program called “Money Smart for Older Americans” that will focus on preventing, reporting and recognizing such scams. The program is being developed in collaboration with the FDIC and will be released later this year.
  3. Older Americans rely on “lay fiduciaries” to handle their finances. Recognizing that many of these “lay fiduciaries” (i.e., friends or family members) often have no training; the CFPB is currently developing a set of guidelines for such fiduciaries. Specifically, the CFPB anticipates producing multiple guides that will explain fiduciary fundamentals, such as what a fiduciary does, record keeping requirements, prohibitions on commingling and other basic advice relating to money management for seniors. The guides are due to be published later this year.
  4. Those in nursing homes and assisted‐living facilities are often targeted. The CFPB seeks to aide those living in nursing homes and assisted‐living facilities by producing a national guide to assist facility owners and operators with identifying cases of financial exploitation directed toward their residents. The guide is expected to be released later this year.
  5. Financial institution personnel observe that older account holders may be the victim of fraudulent schemes, but are often unsure as to whether the personnel are legally permitted to report such suspicions without violating privacy laws. The CFPB seeks to develop a strategy to communicate to financial institutions that the Gramm‐Leach‐Bliley Act generally does not prohibit personnel from reporting suspected scams and exploitation.

CFPB Clarifies Escrows Final Rule

The CFPB issued a final rule amending the 2013 Escrows Final Rule that was previously issued in January 2013.

The 2013 Escrows Final Rule, effective on June 1, 2013, in part removes certain regulatory text regarding requirements concerning the assessment of a consumer’s ability to repay an HPML and associated prepayment penalty limits. Such requirements and limitations, however, are being expanded through the 2013 Title XIV Final Rules which are not to take effect until January 10, 2014. Thus, the CFPB’s most recent amendment to the 2013 Escrow Final Rule extends the referenced requirements and limitations until January 10, 2014 ‐‐ when the Title XIV Final Rule becomes effective ‐‐ in order to avoid a potential six‐month regulatory gap in providing those protections.

The amended final rule also serves to clarify how creditors are to make a determination with respect to whether a county qualifies as “rural” or “underserved” since certain exemptions in the 2013 Escrows Final Rule are contingent upon this determination. Accordingly, the CFPB has provided illustrations to assist in making such determination and has also published a final “2013 rural or undeserved counties list” that creditors may rely on when making such determinations for loans made from June 1, 2013 through December 31, 2013.

CFPB Settles Enforcement Regarding Real Estate Kickbacks

The CFPB recently settled an enforcement action against a homebuilder who had allegedly received illegal referral fees through affiliated business arrangements in violation of the Real Estate Settlement Procedures Act.

The builder and a local bank jointly created and owned another entity that they claimed to be a mortgage originator. That same builder, along with a mortgage company, also jointly created and owned another mortgage company. The CFPB alleged, however, that both entities were mere shams designed to allow the builder to receive certain kickbacks. Specifically, the homebuilder would refer mortgage origination business to such entities, but the actual work relating to such mortgages was performed by the pre‐existing bank and mortgage company that the homebuilder had partnered with. Kickbacks would then be distributed back to the homebuilder from the sham entities in the form of profit distributions or a service agreement.

Alleging that the affiliated business arrangements violated RESPA’s prohibition on giving and receiving kickbacks for services involving federally related mortgages, the CFPB ordered the homebuilder to surrender to the U.S. Treasury approximately $118,000 – the amount the homebuilder had received through the arrangement since early 2010.

Noting that “[k]ickbacks harm consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage,” the CFPB’s Director Richard Cordray stated in connection with the settlement that “[t]he CFPB will continue to take action against schemes designed to let service providers profit through unscrupulous and illegal business practices.” The consent order is available here.

CFPB Launches Spanish Language Website

The CFPB launched its Spanish‐version website, “CFPB en Español.” This new outreach is recognition of the fact that approximately 37 million people in the United States primarily speak Spanish at home. The new website, which is located here, is optimized for both desktop and mobile device computing. The site currently contains a database of 250 “Ask CFPB” questions, which is the CFPB’s interactive database of frequently asked questions and answers, although the CFPB is working to expand this database in an effort to provide an easy‐to‐read objective resource for consumers.