Consumer Financial Services Law Blog

Lessons from CFPB’s First “Abusive Practices” Enforcement Action: Few Lessons for the Consumer Financial Services Industry

In settling its first “abusive practices” enforcement action, the CFPB has forced American Debt Settlement Solutions Inc. (ADSS) and its president to agree to pay over one-half million dollars in damages and fines (most of which will be waived due to inability to pay). The settlement also prohibits ADSS from further selling any debt-relief products or services. The CFPB’s complaint against ADSS is remarkable in that it is the first to address “abusive acts or practices” under Sections 1031 and 1036 of Dodd-Frank, but the lessons here are few. Read More ›

CFPB Validates Uniform State Test for Mortgage Loan Originators For SAFE Act

On May 20, 2013, the CFPB validated the use of a Uniform State Test (UST) for mortgage origination licensing under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act). Under the SAFE Act, Mortgage Loan Originators (MLO) must pass a “qualified written test” that examines an applicant on ethics and federal and state laws regarding mortgage origination, fraud, consumer protection and fair lending issues. By validating the use of a UST, as opposed to requiring MLOs to pass a separate examination for each state that they wished to be licensed in, the CFPB removed any doubt that the UST is a good mechanism for leveling the playing field between licensed and registered mortgage loan originators. Read More ›

CFPB Releases First Round of Updates to Exam Procedures Covering New Mortgage Regulations

On June 4, 2013, in what it deemed a “first round” of “what will likely be multiple updates” to its Supervision and Examination Manual, the CFPB published forward-looking examination procedures related to new mortgage rules under the Truth in Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA) on June 4, 2013. This update identifies what CFPB examiners will be considering in evaluating compliance with the new rules when they become effective next January. Director Cordray explained that the "CFPB recognizes that the easier we make it for financial institutions and mortgage companies to follow the new regulations, the better off consumers will be." Cordray hopes that "[b]y releasing details of what our examiners will be looking for well in advance of the effective date of most of the rules, we are giving industry more time to adjust." Read More ›

CFPB and State Regulators Announce Non-Binding Framework for Supervision and Enforcement Coordination-- Can CFPB Deliver On Promise To Reduce Regulatory Burdens?

Over two years ago, the CFPB and the Conference of State Bank Supervisors (CSBS) signed a memorandum of understanding to “establish a foundation of state and federal coordination and cooperation for supervision of providers of consumer financial products and services.” Now, the parties have an official “framework” for coordinating their supervisory and enforcement efforts “in situations where the CFPB and state regulators share concurrent supervisory jurisdiction.” CFPB Director Cordray announced that “[b]y working together, we are streamlining our processes, making the most of our joint resources, and ensuring evenhanded oversight of federal consumer financial laws.” This coordination of supervisory activities was mandated by the Dodd-Frank Act and, according to the CFPB, the announced framework “facilitates the implementation of this statutory requirement by providing a guide for flexible and dynamic regulatory coordination that both protects consumers and reduces regulatory burden on industry.” Read More ›

Reid Puts Off Cordray Nomination Vote Until Late Summer--Is He Arming The Nuclear Option?

As the CFPB-Lawblog predicted, the vote on Richard Cordray’s nomination as director of the Consumer Financial Protection Bureau has been delayed. Senate Majority Leader Harry Reid had announced that the vote would take place during the week of May 20, 2013, but is now delaying the vote until after immigration reform legislation passes the Senate. This delay could actually improve the chances of Cordray’s nomination being approved by the Senate. According to some reports, Reid is planning on launching a larger fight over all of Obama's stalled nominees and filibuster reform. The Washington Post is reporting that Reid is considering changing the Senate rules to do away with the 60-vote threshold to close debate on all judicial and executive branch nominations—the so-called nuclear option. An aide of Reid’s told the Washington Post, that Reid is planning on lumping the vote on Cordray’s nomination with the votes on Thomas Perez as Secretary of Labor, and Gina McCarthy to head the Environmental Protection Agency to highlight the need for filibuster reform. This arguably would shift the focus of the debate on Cordray’s nomination from the Republican’s demands for structural changes to the CFPB, to the appropriateness of filibustering executive nominations.  

Stay tuned as we follow Cordray’s nomination.

Senate Vote on Cordray Nomination Expected Next Week: Anyone Holding Their Breath?

Senate Majority Leader Harry Reid (D-NV) has promised a vote on Richard Cordray’s nomination next week. Based on the chest pounding, it seems like a foregone conclusion that the Republicans will block this nomination unless the Democrats agree to change the CFPB’s structure and weaken its power. Cordray’s nomination was approved by the Senate Banking Committee along party lines (12-10). In February, 43 Senators, a group large enough to block Cordray’s nomination, sent President Obama a letter stating that they will continue to oppose confirmation of any nominee to lead the U.S. Consumer Financial Protection Bureau until “key changes are made to ensure accountability and transparency at the bureau.” When asked whether he would use the “nuclear option” and change the Senate rules to override the 60 votes necessary to stop a filibuster, Reid explained that he is “not going to do anything now, precipitously. But I’m looking at this very closely…. We’re going to fill that job. Cordray is there now. He’s going to get a vote.”

Stay tuned to the CFPB-Lawblog as we track the progress of Director Cordray’s nomination. 

Get Out the Popcorn (and an Energy Drink): The CFPB Releases Videos On New Mortgage Rules

 The CFPB has just released a series of video presentations on the new mortgage rules issued by CFPB earlier this year. In his opening remarks, Director Cordray explains that these videos are part of “a broader effort on [the CFPB’s] part  to help you comply with the Dodd-Frank Act’s mortgage reforms and [the CFPB] rules.” These videos, cover:

• Ability-to-Repay and Qualified Mortgage Rule
• 2013 HOEPA Rule
• ECOA Valuations and TILA Higher-Priced Mortgage Loans Appraisal Rules
• Loan Originator Compensation Rule
• Mortgage Servicing Rules
• TILA Escrow Rule

The CFPB issued these videos “to provide an overview of the rules in a plain language format that makes the content more accessible and consumable for a broad array of industry constituents, especially smaller businesses with limited legal and compliance staff.” Those of you hoping for action sequences involving Director Cordray will be disappointed. The videos are a series PowerPoint presentations by members of the CFPB staff. Each of the videos warns that these are just “staff guidance and not any official interpretation of the Bureau or legal advice.” This guidance is important because the videos are just overviews of the requirements and do not cover all aspects of the rules or the obligations that financial institutions face under these rules.

Just-Issued Final Remittance Rule Suggests CFPB is Listening… Sort Of

In January, the CFPB announced that it was delaying implementation of its controversial Remittance Rule governing foreign money transfers to revisit certain concerns raised by financial institutions. It appears that the CFPB was listening--sort of. The final Remittance Rule just released by the CFPB contains revisions lifting some of the compliance burdens on smaller community banks and credit unions, but leaving others in place that could jeopardize the ability of these small banks to offer remittance services. Read More ›

FHFA Limits Fannie and Freddie to “Qualified Loans”: Another Strike Against Non-Qualified Loans and the Consumers Who Rely on Them

In January, the CFPB issued its final Qualified Mortgage Rule (QMR) creating a safe harbor for lenders from liability for loans that meet its criteria for a “qualified mortgage.” The Federal Housing Finance Authority (FHFA) has endorsed this Rule by barring Fannie Mae and Freddie Mac from purchasing non-qualified mortgages. This means that, beginning in January 2014 when the QRM takes effect, Fannie and Freddie will no longer be permitted to purchase: (i) loans with terms over 30 years, (ii) interest-only loans; (iii) negative amortization or ballooning principal loans; or (iv) loans with points and fees exceeding the thresholds set by the CFPB. The one exception the FHFA made is for loans that meet Fannie’s and Freddie’s underwriting and delivery standards. According to the FHFA, the “[a]doption of these new limitations by Fannie Mae and Freddie Mac is in keeping with FHFA’s goal of gradually contracting their market footprint and protecting borrowers and taxpayers.” These limitations also add to the growing number of disincentives for lenders to offer non-qualifying loans, which could constrict access to credit for those who may need it the most. 

CFPB Publishes Small Entity Compliance Guides for New HOEPA, ECOA, and TILA Rules- Institutions of All Sizes Should Take Notice

As readers of this blog know, in January 2013, the CFPB adopted rules governing the Home Ownership and Equity Protection Act (HOEPA), valuations under the Equal Credit Opportunity Act (ECOA), and appraisals of Higher-Priced Mortgage Loans (HPML) under the Truth In Lending Act (TILA). While these rules do not take effect until January 2014, the CFPB is wasting no time warning financial institutions of their obligations under these rules.  On May 2, 2013, the CFPB published three compliance guides for each of these rules targeted at small entities with limited legal and compliance staff. The guides can be found here: Guide for the 2013 HOEPA Rule; Guide for the ECOA Valuations Rule; and Guide for the TILA HPML Appraisal Rule. While billed as “Small Entity Compliance Guides,” mortgage lenders and servicers of all sizes could benefit from reviewing these materials to understand better the CFPB’s recent rules.   Read More ›