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CFPB Issues Final Remittance Rule

On May 11, 2020, the Consumer Financial Protection Bureau (“CFPB”) announced that it will impose stricter reporting requirements on entities that process international money and remittance transfers for consumers. This final rule will take effect on July 21, 2020, replacing a temporary rule that has been in place since 2013. The new rule requires that international money transfer and remittance providers disclose the following information to consumers: exact exchange rates; the total value of transaction fees; and the amount of money expected to be received by the transfer or remittance recipient. For banks and credit unions that process large numbers of transfers, compliance costs and associated oversight policies will remain burdensome.

The new rule, however, augments the safe harbor protections afforded to certain banks and credit unions when reporting the costs of transfers and remittances to consumers. Under the temporary version of Regulation E, which was adopted in 2013, banks and credit unions that provide fewer than 500 remittances or transfers per year were permitted to estimate the costs of remittance transfers to consumers rather than providing exact transaction fees and exchange rates. Preceding the effective date of the temporary regulation, this safe harbor provision only applied to those banks and credit unions that processed fewer than 100 transfers per year. The final rule increases the transfer threshold to 500 transfers per year, making the temporary exemption permanent. In addition, the Bureau adopted a new, permanent exemption for insured institutions to “estimate the exchange rate for a remittance transfer to a particular country if, among other things, the designated recipient will receive funds in the country’s local currency and the insured institution made 1,000 or fewer remittance transfers in the prior calendar year” and the recipients received funds in the country’s local currency.

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The Paycheck Protection Program: Managing Fair Lending Risks

The past few weeks have seen increasing scrutiny of the lenders and borrowers participating in the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”), including by the Treasury Department, SBA Inspector General, U.S. Department of Justice, and Congress with the Special Inspector General for Pandemic Recovery surely soon to follow.

Against this backdrop, the Consumer Financial Protection Bureau (“CFPB”) has recently raised concerns related to fair lending for lenders participating in the PPP. On May 6, 2020, the CFPB issued guidance related to the timing for Equal Credit Opportunity Act (“ECOA”)-mandated adverse action notices under the PPP. On April 27, 2020, the CFPB published a statement in which the Bureau emphasized that lenders must comply with ECOA when extending small business credit, outlining key bases for discrimination claims under ECOA and encouraging women and minority-owned businesses who feel they have suffered lending discrimination to submit complaints to the CFPB through its complaint portal.

The CFPB’s recent focus on institutional fair lending compliance accords with that of federal banking regulators. For example, on April 27, 2020, the Office of the Comptroller of the Currency released “OCC Bulletin 2020-45,” which, among other things, encourages institutions to “prudently document their implementation and lending decisions” under the SBA’s PPP.

Given recent regulatory focus on fair lending compliance in connection with PPP lending, banks and other lenders should consider the following proactive risk mitigation steps.

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CFPB Joint Advisory Committee Meeting – COVID-19 Impact Trends

Special populations need extra support during the COVID-19 pandemic. The CFPB is committed to providing real time, easily understood consumer education materials as well as clear guidelines for financial services companies. The Bureau stands ready to prosecute bad actors for UDAAP violations in the marketplace through enforcement and referrals of UDAAP violations. These were three themes offered by Director Kathleen Kraninger in public meeting remarks. And not to bury the lead, she noted the Bureau’s on-going monitoring of consumer impacts with the Department of Justice, Treasury, the FTC and state Attorneys’ General.

On Friday, May 1, 2020, the CFPB convened a joint session of its several Advisory Committees, including the Consumer Advisory Board, the Community Bank Advisory Council, the Credit Union Advisory Council and the Academic Research Council.  The meeting involved presentations from staff focused on (1) consumer complaint analysis and trends, (2) household and market impacts and (3) special populations concerns. Public questions and comments were entertained relating to each topic. The presentation materials contain useful initial analysis on consumer complaints trends arising during the COVID-19 pandemic. 

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COVID-19 CFPB Access to Credit Guidance

TRID Rescission Waiver Rule & ECOA Valuations FAQ

On April 29, 2020, the Consumer Financial Protection Bureau (CFPB) released additional information which Director Kathleen Kraninger said she hopes “will help consumers facing financial emergencies obtain access to mortgage credit faster.”  The new guidance impacts waiver of rights of rescission, good faith closing costs estimates, and ECOA valuations delivery timing requirements in connection with potential urgent consumer finance transactions.

“Temporary & Targeted Solutions.”

Mortgage lenders will need to be aware of this new interpretive rule and FAQ guidance and adjust their operations accordingly. Consumers who are accessing the COVID-19 resources center on the CFPB website likely will be aware of these potential ways to expedite transactions and will be expecting lenders to act accordingly.  Key bases for the new rules include COVID-19 pandemic related “bona fide personal financial emergency” or “changed circumstances.”  

TRID/ Reg Z Interpretive Rule – Modification or Waiver of Right of Rescission Timing

TILA RESPA Integrated Disclosure (TRID) rules protect borrowers by allowing them to receive information so they can “know before they owe.” Borrower exercise of three day rescission rights has been an issue of confusion and substantial litigation over the years. The new Rule may yield similar disputes in the future because of the evolving nature of the pandemic related financial hardship and the timing pressures involved. It also will be interesting to see how this temporary rule may influence either extension or sunset of current CARES Act foreclosure prohibitions.

The new Rule provides that “(1) if a consumer determines that the extension of credit is needed to meet a bona fide personal financial emergency, (2) the consumer’s brief statement describing the emergency identifies a financial need that is due to the COVID-19 pandemic, and (3) the emergency necessitates consummating the credit transaction before the end of an applicable TRID Rule waiting period or must be met before the end of the Regulation Z Rescission Rules waiting period, then the consumer has a bona fide personal financial emergency that would permit the consumer to utilize the modification and waiver provisions…”

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COVID-19 Borrower Protection Program Launched by FHFA & CFPB

Today, the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB) announced a joint program to assist borrowers experiencing financial hardship in connection with the COVID-19 pandemic. The Borrower Protection Program (BPP) augments a number of prior actions taken by the regulators in connection with and relating to the CARES Act. 

According to the announcement, the BPP “enables CFPB and FHFA to share servicing information to protect borrowers during the coronavirus national emergency.” FHFA Director Mark Calabria added “Borrowers are entitled to accurate information about their forbearance options. This partnership with CFPB ensures FHFA can address misconceptions stemming from consumer complaints by working with Fannie and Freddie servicers.” This may be an early attempt to avoid confusion, consternation and often delay which impacted consumers as well as servicers seeking to understand what specific relief was available to which borrowers. Consumers and servicers alike will recall these challenges plagued the roll out of the TARP HAMP processes following the 2008 Financial Crisis, often exacerbated by media soundbites that did not communicate detail regarding program relief requirements. Even today’s press release reflects additional detail from FHFA: “The missed payments will have to be paid back by the borrower. The missed payments can be added to the normal monthly payments, paid back all at once, tacked on to the end of the loan, or the borrower can have the term of the loan extended.”

Analytical Tools and Complaint Information: The program itself will involve sharing of data between the two agencies: “CFPB will make complaint information and analytical tools available to FHFA via a secure electronic interface; and FHFA will make available to the Bureau information about forbearances, modifications and other loss mitigation initiatives undertaken by Fannie Mae and Freddie Mac (the Enterprises).” CFPB Director Kraninger has noted previously that she sees data analysis as a key focus of the Bureau.

In her testimony before the House Financial Services Committee in February 2020, Kraninger stated: “Complaints, along with other inputs, give us insight into people’s experiences in the marketplace that we analyze and use to improve our mission execution. The analysis helps us regulate consumer financial products and services under existing Federal consumer financial laws, enforce those laws judiciously, and educate and empower consumers to make informed financial decisions. The Bureau also publishes complaint data and reports on complaint trends annually in Consumer Response’s Annual Report to Congress.”

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Credit Reporting & Collections Forbearance per the CFPB

The CFPB issued guidance and consumer information tools last week covering components of the Coronavirus Aid, Relief and Economic Security (CARES) Act. In this rapidly environment, financial services companies might do well to check the CFPB blog frequently to keep abreast of new developments and to be aware of specific information and tools consumers may reference in difficult hardship conversations. 

Credit Reporting Policy Statement: On April 1, the CFPB issued a Policy Statement regarding the CARES Act credit reporting requirements lenders and credit furnishers and reporting agencies must follow under the fair Credit Reporting Act and Regulation V.

The Statement recognizes the importance of accurate credit reporting and information to the consumer financial services market system. In a press release Director Kraninger said: “During this time of uncertainty, we are providing clarity to ensure the consumer reporting industry can continue to function. Consumers rely on their credit report to purchase a new car, their new home, or to finance their college education. An effective consumer reporting system is critical in promoting fair and efficient access to credit in the consumer financial services market.”

While highlighting the adverse impact of the COVID-19 pandemic on consumers, the Policy Statement recognizes the operations and staffing challenges lenders, servicers and reporting agencies are having as well. “The Bureau intends to consider the circumstances that entities face as a result of the COVID-19 pandemic and entities’ good faith efforts to comply with their statutory and regulatory obligations as soon as possible. The Bureau believes that this flexibility will help furnishers and consumer reporting agencies to manage the challenges the current crisis poses.”

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2019 Year in Review for Financial Services Class Actions

This Roundup provides a recap of a variety of key developments and summarizes a number of interesting federal case rulings. It is not an exhaustive survey of rulings in state and federal courts nationwide, but should help provide flavor for the current environment as we look forward to 2020. Highlighted in this issue:

  • CFPB Director Kraninger’s 2019 Priorities and 2020 Constitutionality Developments
  • Federal Case Developments of Note
  • 2020 Issues to Watch
  • FTC 2019 Class Notice Study

Access the full 2019 Year in Review here.

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CFPB Provides Guidance on UDAAP Abusive Standard

On January 24, 2020, the Consumer Financial Protection Bureau (CFPB) announced a new policy regarding the prohibition on abusive acts or practices. The CFPB has clarified how it will define, supervise and enforce “abusive” standards under Dodd Frank § 1031(a) and (d).  The Bureau’s announcement acknowledges that there has been uncertainty in this area. The Director intends the Policy Statement to help avoid adverse consequences which may “chill or overly deter covered persons from engaging in conduct that may be beneficial to consumers.” The Policy Statement is effective January 24, 2020 and will govern supervisory and enforcement conduct going forward. The full Policy Statement is available here.

Dodd Frank Abusiveness Standard

Section 1031(d) of Dodd Frank defines broad parameters for abusiveness. The practice may be determined to be abusive if it:

(1) materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service; or

(2) takes unreasonable advantage of—

(A) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service;

(B) the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service; or (C) the reasonable reliance by the consumer on a covered person to act in the interests of the consumer.

See 12 U.S.C. 5531(d).

Bureau’s Historical Prosecution of Abusiveness

The Policy Statement provides background on the Bureau’s enforcement activities specific to abusiveness. Since 2011, the Bureau “has brought 32 enforcement actions that included an abusiveness claim, including as recently as fall 2019.” However, more than 90% of the actions included both abusiveness and unfairness or deception claims. According to the Bureau, “only two enforcement actions contained just an abusiveness claim.” Demonstrating the challenge of amorphousness, the Bureau acknowledges “in many of those 30 actions, the abusiveness claim arose from the same course of conduct as the unfairness or deception claim.”

2019 Symposium – Differing Perspectives

Director Kraninger has been active in seeking input from various constituents since taking the helm. In  June 2019, the Bureau held its Symposium on Abusive Acts or Practices. “Eight academics and practitioners with expertise in UDAAP issues engaged in dialogue…” According to the Statement topics included the following:

  • “the necessity of clarifying the abusiveness standard (and if so, whether rulemaking or another tool should be used),
  • the degree of uncertainty posed by the statutory language, the particular aspects of the standard most in need of clarification,
  • the practical consequences of this uncertainty on consumer financial markets, and how the Bureau should enforce the abusiveness standard.”
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CFPB September 2019 Roundup

September 30, 2019

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CFPB September 2019 Roundup

September 30, 2019

Authored by: Douglas Thompson

Enforcement, Innovation, Consumer Data and Unconstitutionality

Director Kraninger and the Consumer Financial Protection Bureau have been busy this month. Summer is over, and back to school it is.

In addition to convening a symposium and two Director speeches, the Bureau released ten plus statements this month spanning enforcement activity, no action letter policy, innovation, and consumer data enhancements. Not to be overlooked, the Director also announced her position that the Bureau’s structure is unconstitutional. In this relatively short article, we cannot dive deeply into the specifics of each new development, but we can offer some highlights to help keep you abreast of Bureau changes. Definitely, more to come.

Enforcement: Two actions. One stipulated judgment. The Bureau’s actions assert (a) violations of Consumer Financial Protection Act of 2010 and Reg O in connection with allegedly deceptive and abusive mortgage assistance services and (b) violations of the Fair Credit Reporting Act, Regulation V and the CFPA in connection with allegedly improper debt collection practices. The former included a proposed stipulated judgment, which if entered, would resolve the matter by imposing civil money penalty and other relief. See September 6 and September 25 case announcements here.

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CFPB Director Kraninger – 2019 Listening Tour and Bureau Priorities

On December 11, 2018 Kathleen Kraninger, the new Director of the Bureau of Consumer Financial Protection, held a media conference. She introduced herself and answered media questions. Subsequent headlines have focused on among other things: (a) whether she would simply follow the recent course set by her predecessor Acting Director Mick Mulvaney, and (b) whether the Bureau’s recent name change would stick. Director Kraninger’s comments appeared to signal accountability, independence and curiosity. The impact on regulated institutions in 2019 and beyond remains to unfold. Here are some developments to watch in 2019.

Listening Tour 2019. Kraninger will be engaging in a listening tour to get to know the 1500 employees in the Bureau. For example, she plans to visit to San Francisco, Chicago, New York regional offices. She also indicated that she intends to connect with other regulators and constituencies including, state regulators, other related federal agencies, consumer advocates and regulated institutions.   She also indicated she will work to have a productive relationship with House Financial Services Committee and its incoming chair Maxine Waters. Earlier this month, Waters released a statement requesting Kraninger undertake specific initiatives “to put consumers first by rolling back the anti-consumer actions taken by her predecessor and allowing the Consumer Bureau to resume its work of protecting hardworking Americans from unfair, deceptive or abusive practices.”   New staffing alignments and other strategic changes may be borne form this listening tour.

Believes Regulated Industry Wants to Comply. In a nod to industry, Kraninger noted that institutions want to comply with consumer protection laws. The Bureau needs to give institutions clear rules in her view. However, she also signaled strong action for outliers, indicating that enforcement is a critical function and tool of the Bureau “fundamental to the agency’s mission.”  She also noted that “bad actors” should expect repercussions under her watch.

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