The CFPB’s Spring 2016 Agenda has been published, and it looks like we may have a busy summer. Compliance folks may want to get some sleep this weekend, because it may be your last chance. Of the rules on the list, the following may have impact on credit unions.
In the Prerule Stage:
Business Lending Data (Regulation B)
Section 1071 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amends the Equal Credit Opportunity Act (ECOA) to require financial institutions to report information concerning credit applications made by women-owned, minority-owned, and small businesses. The amendments to ECOA made by the Dodd-Frank Act require that certain data be collected and maintained, including the number of the application and date the application was received; the type and purpose of loan or credit applied for; the amount of credit applied for and approved; the type of action taken with regard to each application and the date of such action; the census tract of the principal place of business; the gross annual revenue of the business; and the race, sex, and ethnicity of the principal owners of the business. The Dodd-Frank Act also provides authority for the CFPB to require any additional data that the CFPB determines would aid in fulfilling the purposes of this section. The Bureau will focus on outreach and research to develop its understanding of the players, products, and practices in the small business lending market and of the potential ways to implement section 1071. The CFPB then expects to begin developing proposed regulations concerning the data to be collected and appropriate procedures, information safeguards, and privacy protections for information-gathering under this section.
Debt Collection Rule
The federal government for many years has received more consumer complaints about debt collectors than about any other single industry. The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from engaging in unfair, deceptive, abusive, and other unlawful collection practices, but no federal agency was vested with authority to issue general implementing regulations prior to the creation of the CFPB. In November 2013, the CFPB issued an Advance Notice of Proposed Rulemaking seeking comment, data, and information from the public about debt collection practices, and in January 2014, the CFPB extended the comment period to February 28, 2014. The Bureau is in the process of analyzing responses to a survey seeking information from consumers about their experiences with debt collectors and is engaged in qualitative testing to determine what information would be useful for consumers to have about debt collection and how that information should be provided to them.
Overdraft
In June 2013, the CFPB issued a white paper summarizing the CFPB’s initial findings from its analysis of overdraft practices. The white paper, which was based on supervisory data from several large banks, highlighted a number of possible consumer protection concerns, including how consumers opt in to overdraft coverage for ATM and one-time debit card transactions, overdraft coverage limits, transaction posting order practices, overdraft and insufficient funds fee structure, and involuntary account closures. In July 2014, the CFPB released a report, based on data from the same sources, providing additional information about the outcomes of consumers who do and do not opt in to overdraft coverage for ATM and one-time debit card transactions. The July 2014 report also explored the transactions that overdraw consumer accounts. The CFPB is continuing to engage in additional research and has begun consumer testing initiatives relating to the opt-in process.
In the Proposed Rule Stage:
Payday Loans and Deposit Advance Products
The Bureau is conducting a rulemaking to address consumer harms from practices related to payday loans and other similar credit products, including failure to determine whether consumers have the ability to repay without default or reborrowing and certain payment collection practices. Under the Small Business Regulatory Enforcement Fairness Act (SBREFA), the Bureau released in March 2015 an outline of proposals under consideration for the rulemaking. As part of the SBREFA process, in April 2015, the Bureau along with the Office of Management and Budget and the Small Business Administration’s Chief Counsel for Advocacy, met with small lenders that may be affected by the rulemaking to obtain feedback on the proposals. This rulemaking builds on Bureau research, including a white paper the Bureau published on these products in April 2013, a data point providing additional research in March 2014, and ongoing analysis.
The CFPB has scheduled a June 2 field hearing on small dollar lending in Kansas City. It is anticipated that proposed rules will be released the same day.
Arbitration
The Bureau is preparing to issue a Notice of Proposed Rulemaking this spring concerning the use of agreements providing for arbitration of any future dispute between covered persons and consumers in connection with the offering or providing of certain consumer financial products or services. The rulemaking follows on a report that the Bureau issued to Congress in March 2015 as required by the Dodd-Frank Act, as well as on preliminary results of arbitration research that were released by the Bureau in December 2013. In fall 2015, the Bureau began the rulemaking process by releasing an outline explaining that it was considering whether to ban arbitration agreements from being used to compel arbitration of consumer class actions and whether to require the reporting of certain information concerning consumer arbitrations to the Bureau to facilitate monitoring. The Bureau convened a panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA) in conjunction with the Office of Management and Budget and the Small Business Administration’s Chief Counsel for Advocacy to consult with small businesses that may be affected by the policy proposals under consideration. The Bureau has also gathered extensive feedback from other stakeholders in preparation for the rulemaking.
Amendments to FIRREA Concerning Appraisals (Automated Valuation Models)
The CFPB is participating in interagency rulemaking processes with the Board of Governors of the Federal Reserve System (Board), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration Board (NCUA), and the Federal Housing Finance Agency (FHFA) (collectively, the Agencies) to develop regulations to implement the amendments made by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) concerning appraisals. The FIRREA amendments require implementing regulations for quality control standards for automated valuation models (AVMs) designed to ensure a high level of confidence in the estimates produced by the valuation models, protect against the manipulation of data, seek to avoid conflicts of interest, require random sample testing and reviews, and account for any other such factor that the Agencies determine to be appropriate. The Agencies’ work to develop a proposed rule to implement the Dodd-Frank Act’s AVM amendments to FIRREA will continue.
Gramm-Leach-Bliley Act (GLBA / Regulation P)
Title LXXV of the Fixing America’s Transportation Act, entitled the Eliminate Privacy Notices Confusion Act, amended the Gramm-Leach-Bliley Act (GLBA) to add new section 503(f). Section 503(f) provides that financial institutions are no longer required to provide annual privacy notices as long as: (1) they have not changed their privacy policies since the last time their customers received a privacy notice, and (2) they only share customers’ financial information with others in a manner that is exempt from notice and opt-out requirements. Section 503(f) was effective upon enactment. In consultation and cooperation with other agencies with GLBA rule writing authority, the Bureau is expecting to issue a proposal to make minor technical modifications and clarifications to Regulation P to incorporate section 503(f).
Amendments to Federal Mortgage Disclosure Requirements Under the Truth in Lending Act (Regulation Z)
Since the effective date of the TILA-RESPA Integrated Disclosure rule and the TILA-RESPA Integrated Disclosure rule amendments on October 3, 2015, the Bureau has received information concerning the provisions of applicable Federal mortgage disclosure requirements and how these requirements are being implemented by creditors. The information received has indicated that some disclosures required for closed-end consumer credit secured by real property under the Truth in Lending Act and Regulation Z are generating confusion and uncertainty for some creditors. The Bureau will be seeking comment on a proposal to add new provisions and amend certain other provisions of Regulation Z in order to provide additional clarity to creditors in order to promote consistency in the provision of information for Federal mortgage transactions that will enable consumers to more readily understand their mortgage transactions.
In the Final Rule Stage:
Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z)
Prepaid financial products are among the fastest growing types of payment instruments in the United States. The CFPB issued a proposed rule in November 2014 (published in the Federal Register on December 23, 2014) that would create comprehensive consumer protections for prepaid financial products under Regulation E, which implements the Electronic Fund Transfer Act, and Regulation Z, which implements the Truth in Lending Act. The proposal would expressly bring prepaid products within the ambit of Regulation E as prepaid accounts and create new provisions specific to such accounts. The proposal would modify Regulation E to establish disclosure requirements specific to prepaid accounts, would include an option for an alternative to Regulation E’s periodic statement requirement and would apply Regulation E’s limited liability and error resolution provisions to prepaid accounts, with certain modifications. The proposal would also generally require prepaid account issuers to post account agreements for prepaid accounts on their websites and require issuers to provide those agreements to the CFPB, which the CFPB would post on a Web site it maintains. Finally, the proposal would also contain amendments to Regulations Z and E to regulate prepaid accounts with overdraft services or credit features. Among other things, prepaid accounts that access overdraft services or credit features for a fee would generally be credit cards subject to Regulation Z’s credit card rules. Moreover, the proposal would require that issuers obtain consumers consent before adding overdraft services or credit features to their prepaid accounts and give them at least 21 days to repay the debt incurred in connection with using such services or features. Further, the compulsory use provision under Regulation E would also be amended so that prepaid account issuers would be prohibited from requiring consumers to set up preauthorized electronic fund transfers to repay credit extended through an overdraft service or credit feature. The Bureau’s proposed rule on prepaid accounts was issued in November 2014, and the Bureau anticipates issuing a final rule in early summer 2016.
The Expedited Funds Availability Act (Regulation CC)
The Expedited Funds Availability Act (EFA Act), implemented by Regulation CC, governs availability of funds after a check deposit and check collection and return processes. Section 1086 of the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the EFA Act to provide the CFPB with joint rulemaking authority with the Board of Governors of the Federal Reserve System (Board) over certain consumer-related EFA Act provisions. The Board proposed amendments to Regulation CC in March 2011, to facilitate the banking industry’s ongoing transition to fully-electronic interbank check collection and return. The Board’s proposal includes some provisions that are subject to the CFPB’s joint rulemaking authority, including the period for funds availability and revising model form disclosures. In addition, in December 2013, the Board proposed revised amendments to certain Regulation CC provisions that are not subject to the CFPB’s authority and extended the comment period to May 2014. The CFPB will work with the Board to issue jointly a final rule that includes provisions within the CFPB’s authority.
Amendments to the 2013 Mortgage Rules Under the Real Estate Settlement Procedures Act (Regulation X) and the Truth in Lending Act (Regulation Z)
In January 2013, the CFPB issued final rules implementing numerous provisions of the Real Estate Settlement Procedures Act and the Truth in Lending Act, as amended by title XIV of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The CFPB has since made various corrections, clarifications, and other amendments to the January 2013 final rules. The mortgage servicing rules took effect in January 2014. The CFPB published a proposal in the Federal Register in December 2014 to amend various provisions of its mortgage servicing rules, in both Regulation X (which implements RESPA) and Regulation Z. The Bureau proposed clarifications concerning the applicability of certain provisions when the borrower is in bankruptcy, additional enhancements to loss mitigation requirements, provisions to address the applicability of certain rules to successors in interest, and other amendments. The Bureau has been conducting consumer testing of certain disclosures as it prepares the final rule. The Bureau anticipates issuing a final rule in early summer.
Consumer Financial Civil Penalty Fund
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) establishes a “Consumer Financial Civil Penalty Fund” (Civil Penalty Fund) into which the CFPB must deposit any civil penalty it obtains against any person in any judicial or administrative action under federal consumer financial laws. Under the Dodd-Frank Act, funds in the Civil Penalty Fund may be used for payments to the victims of activities for which civil penalties have been imposed under federal consumer financial laws. In addition, to the extent that such victims cannot be located or such payments are otherwise not practicable, the CFPB may use funds in the Civil Penalty Fund for the purpose of consumer education and financial literacy programs. This rule implements the relevant statutory provisions by articulating the CFPB’s interpretation of what kinds of payments to victims are appropriate and by establishing procedures for allocating funds for such payments to victims and for consumer education and financial literacy programs.
Civil Penalty Inflation Adjustment Rule
On November 2, 2015, the President signed into law the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which further amended the Federal Civil Penalties Inflation Adjustment Act of 1990, to improve the effectiveness of civil monetary penalties and to maintain their deterrent effect. Each Federal agency is now required to publish by interim final rule, a catch-up adjustment, which shall be effective by August 1, 2016. This rule will adjust the civil penalty amounts within the CFPB’s jurisdiction in accordance with that statutory requirement.
