Comptroller of the Currency Thomas J. Curry discussed bank supervision after the financial crisis during the 49th Annual Conference on Bank Structure and Competition in Chicago today. In order to detect risks across our multifaceted and far-reaching financial system, Curry said that his office is stepping up coordination with the Federal Reserve, the FDIC and the CFPB to "develop integrated strategies for joint supervision of complex institutions and new tools to aid oversight." He also described a new "heightened expectations" program, which aims to increase standards regarding audit and risk management. For more, read Curry’s remarks.

After receiving more than 28,000 comments to the February 2013 Notice and Request for Information regarding student debt issues, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray announced during a field hearing on student loan debt today that the bureau has published a new report discussing how high student debt — particularly from private student loans — is preventing many consumers from achieving "a full financial life" and could be harmful to "recovering consumer markets." Whereas traditionally, consumers with student debt "typically had higher income and were therefore more likely to buy a home," today the opposite appears to be trending: those saddled with student loan debt are refraining from purchasing homes and cars as well as starting businesses. In addition, these consumers are shying away from moving to rural communities that may necessitate home and car ownership, and are relying on their parents while being unable to begin their own retirement savings. The report features several potential policy and market-based solutions that would help borrowers who pay on time refinance their loans, and would provide a "road to recovery" for borrowers in distress and a "credit clean slate" for borrowers in default. For more, read the full press release, prepared remarks and report.

New rules from the Consumer Financial Protection Bureau (CFPB) regulating international money transfers will take effect on October 28, 2013, after being delayed and revised following complaints from the financial industry that the regulations would put them out of business, according to a press release from the bureau (see our Dec 26, 2012, blog post for more information). The revised rule requires remittance providers to disclose that fees and foreign taxes may apply to a transfer, but no longer requires them to specifically disclose each fee or foreign tax, The Wall Street Journal reports. The rule also requires that remittance providers "attempt to recover the funds" if a sender uses the wrong account number, but no longer requires them to "bear the cost of funds that cannot be recovered," the release said. For more, read the full Wall Street Journal story (subscription required) and CFPB press release.

Yesterday, the Consumer Financial Protection Bureau (CFPB) released an amendment to the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) that makes it easier for stay-at-home spouses and partners with access to a working partner's income to get a new credit card or an increased credit limit, according to a press release from the bureau. The amendment revises the CARD Act requirement that a card issuer "evaluate a consumer's ability to pay before opening a new credit card account or increasing a credit limit" to allow consideration of not only the applicant's independent income or assets, but also "third-party income if the applicant has a reasonable expectation of access to it." For more, read the full press release.

According to a report recently released by the Consumer Financial Protection Bureau (CFPB), older Americans are at risk of being deceived by the more than 50 different designations that financial advisers use "to indicate that they have advanced training or expertise in the financial needs of older consumers." The report, titled "Senior Designations for Financial Advisers: Reducing Consumer Confusion and Risks," found that the requirements, examinations and oversight can differ significantly for similar sounding designations. Lacking "comprehensive supervision and enforcement," these credentials are used to defraud older Americans, whose retirement savings, inheritance and accumulated home equity can make them "attractive targets for the marketing of various financial products," the release said. For more, read the full press release.

In Washington, D.C., today, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray announced that four mortgage insurance companies are facing enforcement actions for illegally providing inflated "reinsurance" payments to mortgage lenders "in exchange for referring business to them," according to a press release from the bureau. The CFPB’s investigation revealed that these mortgage insurance companies used subsidiaries to funnel millions of dollars to lenders as payments for reinsurance, which is additional insurance to protect lenders against the risk of default on loans made to home buyers that "cannot make a 20 percent down payment," the release said. For more, read the full press release.

In an effort to increase transparency within the consumer financial services market and to encourage civic participation in reform efforts, the Consumer Financial Protection Bureau (CFPB) announced today that its Consumer Complaint Database has been expanded "from about 19,000 credit card complaints to more than 90,000 complaints on mortgages, student loans, bank accounts and services, other consumer loans, and credit cards" — making it the largest collection of federal consumer financial complaint data in the nation, according to a press release from the bureau. The database is updated daily with complaints involving approximately 450 companies so far, and each database entry includes "the type of complaint, the date of submission, the consumer's ZIP code, and the company that the complaint concerns." Providing the hashtag #CFPBdata for sharing ideas, the bureau encourages "consumers, analysts, developers, data scientists, civic hackers, and companies that serve consumers" to analyze, augment and mash the data with other public sets so as to "highlight innovative uses" and make the data as contributive as possible toward the bureau's efforts. CFPB Director Richard Cordray announced the expansion of the database during a consumer response field hearing in Des Moines, Iowa. For more, read the full press release and Director Cordray's prepared remarks, and access the Consumer Complaint Database.

The Consumer Financial Protection Bureau (CFPB) released a bulletin yesterday that provides "guidance to indirect auto lenders within the CFPB's jurisdiction on how to address fair lending risk," according to a press release from the bureau. Unlawful, discriminatory pricing may be responsible for "tens of millions of dollars in consumer harm each year" with discretionary "dealer markups" on car loans causing African Americans and Hispanics to be "charged higher markups than other, similarly situated, white consumers." For more, including links to the bulletin, a fact sheet on the bulletin and an infographic on auto lending, read the full press release.

During a press call in Washington, D.C., last week, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray discussed the bureau's proposed rule to redefine certain student loan servicers so that they fall under the authority of the CFPB. Cordray said that because borrowers have "no control or choice over which company services a loan," complaints abound from borrowers over a lack of customer service and the availability of information from these servicers. With student loan debt totaling more than $1 trillion by the end of 2012, Cordray said that the "rapid growth of this market and the recent rise of delinquency rates" demands the bureau's attention. For more, read the full story.

Last week, the Consumer Financial Protection Bureau (CFPB) announced a proposed rule that would expand federal supervision over student loan servicers beyond larger banks to include certain nonbanks for the first time, according to a press release from the bureau. Nonbank student loan servicers that handle more than 1 million borrower accounts for either federal or private student loans would be classified as "larger participants," allowing the CFPB to monitor them for compliance with federal consumer financial laws. With this new definition, the bureau would have the authority to supervise "the seven largest student loan servicers," which manage a combined 49 million borrower accounts. The rule comes as part of the bureau's ongoing efforts to monitor and regulate the student loan industry (see our December 17, 2012, blog post for more information). For more, read the full press release.

Bricker & Eckler Partner Anthony Sharett will be among a panel of experts who will present during the Bank Safety & Soundness Advisor’s upcoming webinar on the impact of the new qualified mortgage (QM) and ability to repay (ATP) rules recently released by the Consumer Financial Protection Bureau (CFPB). The 90-minute webinar — scheduled for Tuesday, March 26, at 2 p.m. EST — will address the types of loans that fit the CFPB’s new definition for qualified mortgages, what it means to qualify for ability to repay (ATR) standards, and how these new rules will impact the profitability of mortgages. For more, including registration information, visit the webinar website.

At the Credit Union National Association’s 2013 Governmental Affairs Conference in Washington, D.C., today, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray praised credit unions for serving as “the true consumer protectors” before the bureau was established, according to his prepared remarks. He also explained that since most credit unions do not fall under the bureau’s supervision because they have $10 billion or less in assets, the CFPB created the Credit Union Advisory Council to fill in the gap of day-to-day contact between the bureau and credit unions. Director Cordray then provided in-depth explanations of the bureau’s Ability-to-Repay rule (otherwise known as the Qualified Mortgage rule) as well as its implementation of common-sense requirements for mortgage servicers, saying that small institutions like credit unions are exempt from several of these rules’ provisions due to the bureau’s “recognition and acknowledgement that the traditional credit union lending model is deserving of respect and should be treated differently under our rules.” For more, read the full transcript of Director Cordray’s remarks. 

At the 2013 winter/spring meeting of the National Association of Attorneys General in Washington, D.C., today, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray spoke about the work the bureau is doing to create "a fairer, more transparent marketplace — one where prices and risks are made clear and where consumers are protected against fraud," and how those efforts are helped through collaboration with state governments, according to his prepared remarks. Efforts include creating new rules to protect against excesses and irresponsible practices in the mortgage market; regulating and monitoring the credit card market as well as the student loan industry; developing tools to help consumers navigate the financial market; and simplifying loan forms. For more, read the full transcript of Cordray’s prepared remarks.

Yesterday, the Consumer Financial Protection Bureau (CFPB) released a Notice and Request for Information in the Federal Register as part of its ongoing effort of devising ways to give private student loan borrowers “more flexible repayment options,” according to a press release from the bureau. Such borrowers are having “trouble negotiating affordable repayment plans with their lenders and servicers” on private loans, which — unlike federal student loans — offer no income-based repayment, long-term forbearance or rehabilitation options if the borrower defaults. According to the release, the bureau is seeking input on the following issues:

• How student loan burdens might impact the broader economy and hinder access to mortgage credit and automobile loans;
• How distressed borrowers manage their student loan obligations;
• What options currently exist for borrowers to lower their monthly payments on private student loans;
• Examples of successful alternate payment programs in other markets and which features could apply to this market; and
• The most effective mechanisms for communicating with distressed borrowers.

Comments will be accepted until April 8, 2013. For more, read the full press release.

The Consumer Financial Protection Bureau (CFPB) announced a plan today that it will implement during 2013 to help ensure that the mortgage industry is in compliance with new consumer protections that are set to go into effect in January 2014, according to a press release from the bureau. To ensure that the Ability-to-Pay rule, as well as new rules for mortgage servicing, appraisals, escrow accounts, high-cost mortgages, and compensation and qualifications for loan originators are “understood, applied, and carried out evenly and effectively,” the CFPB will take the following actions:

• Coordinate with other federal government regulators to help promote “a consistent regulatory experience for industry”
• Publish plain-language, easy-to-understand written and video guides this spring that will be especially useful for “smaller businesses with limited staff for compliance”
• Beginning in the spring, publish updates to official interpretations that will answer questions and provide guidance on how to comply with the rules with priority given to the issues that are important to the largest number of providers or consumers and those that “critically affect mortgage companies’ implementation decisions”
• Publish readiness guides in the summer that will feature checklists and suggested implementation plans, and later this year publish more in-depth implementation procedures that can be used for “self-assessments and internal reviews”
• Pursue a broad-reaching consumer education program as the implementation date approaches

For more, read the full press release.

The Office of the Comptroller of the Currency (OCC) recently released a bulletin to explain that because the Consumer Financial Protection Bureau (CFPB) “raised the asset size exemption threshold to $42 million for depository institutions” with respect to the requirements of Regulation C — which implemented the Home Mortgage Disclosure Act (HMDA) — institutions with “assets of $42 million or less as of December 31, 2012,” will not be required to collect HMDA data in 2013. The adjustment, which raises the threshold from $41 million to $42 million, is effective for data collection in 2013 and does not affect “the institution’s responsibility to report data” that it was required to collect in 2012, the bulletin said. For more, read the full bulletin.

Today — Raj Date’s last day serving as deputy director of the Consumer Financial Protection Bureau (CFPB) — the bureau announced that Steven Antonakes will temporarily serve as deputy director of the agency while still maintaining his current duties as the bureau’s associate director of supervision, enforcement, and fair lending, according to a press release from the CFPB (see our November 14, 2012, blog post for more information). For more, read the full press release.

The Consumer Financial Protection Bureau (CFPB) announced today that it is launching an inquiry into the financial products and services that are marketed to students through universities and colleges to determine “whether these arrangements are in the best interest of students,” according to a press release from the bureau. Although the Credit CARD Act of 2009 “restricted financial institutions from using certain types of marketing practices on college campuses” and made agreements between financial and academic institutions subject to public disclosure, certain campus financial products — including school-affiliated bank accounts, student ID cards that double as debit cards, and cards used to access student loans and scholarships — fall outside the scope of the CARD Act. The bureau is seeking comment from families, students, the public, the higher education community and financial institutions regarding their experiences with these products. For more, including a guide to financial services for college students and a consumer advisory for students about potential financial pitfalls, read the full press release.

Since the U.S. Court of Appeals for the D.C. Circuit ruled last week that three recess appointments made by President Obama were invalid, companies subject to oversight by the Consumer Financial Protection Bureau (CFPB) are questioning whether the fact that CFPB Director Richard Cordray’s appointment was made on the same day will be a potential game changer, The National Law Journal reports (see our January 25, 2013, blog post for more information). The Dodd-Frank Act of 2010 prohibits the CFPB from using any powers that it didn’t inherit from seven other agencies if it doesn’t have a director, which means the agency cannot supervise non-banks if it doesn’t have a director, the article said. While some of these companies may decide to balk at the bureau’s compliance demands should Cordray’s appointment be deemed invalid, some lawyers are advising against this, insisting that the bureau is not going anywhere and treating inspectors poorly while potential legal issues play out will not help these companies in the long run, the article said. For more, read the full story (subscription required).

A three-judge panel of the U.S. Court of Appeals for the District of Columbia ruled today that President Barack Obama “violated the Constitution when he used controversial recess appointments last year to fill three vacancies on the National Labor Relations Board,” The Columbus Dispatch reports. The ruling could mean that President Obama’s recess appointment of former Ohio Attorney General Richard Cordray to head the Consumer Financial Protection Bureau last year may also be found unconstitutional since it took place on the same day as the three NLRB appointments — January 12, 2012. However, because the Obama administration has vowed to appeal the ruling to the U.S. Supreme Court, Cordray — whom the president re-nominated on Thursday — will likely stay on at his post until the Court issues a decision, the article said. For more, read the full story.

The Ohio Mortgage Bankers Association (OMBA) is hosting a “QM and Truth-in-Lending Final Rules and Your Mortgage Lending Business” seminar on Friday, February 1, 2013, from 1 to 4 p.m. at Bricker & Eckler’s downtown Columbus office. Bricker & Eckler Partner Anthony Sharett will cover the two final rules and one proposed rule released by the Consumer Financial Protection Bureau (CFPB) in early January, providing a thorough discussion of what is required of a lending institution and its staff. For more information or to register to attend the event, contact OMBA Executive Director and COO Marianne Collins at omba@ohiomba.org.

The Consumer Financial Protection Bureau (CFPB) announced today that it is temporarily delaying implementation of its international remittance transfer rules that were slated to go into effect on February 7, 2013, according to a press release from the bureau. The as-yet-unannounced new implementation date will allow time for review following the January 30, 2013, closing of the comment period for substantive changes to the final rule (see our December 26, 2012, blog post for more information). For more, read the full press release.

The Consumer Financial Protection Bureau (CFPB) has been busy. In the past eight days, it has issued the much anticipated qualified mortgage standards, amended the high-cost mortgage and homeownership counsel amendments (HOEPA), and, most recently, issued a rule regarding appraisals for higher priced (subprime) mortgage loans (HPMLs) on January 18, 2013. 

This rule implements amendments to the Truth in Lending Act (TILA) enacted in Dodd-Frank. The rule permits a lender to extend an HPML only if the following conditions are met:

• The lender obtains a written appraisal;
• The appraisal is performed by a licensed or certified appraiser; and
• The appraiser physically inspects the property from the inside.

What’s more, the rule requires lenders to notify the borrower at the application stage about the appraisal, that the applicant will receive a copy of the appraisal, the applicant will pay for the appraisal, and that the applicant may have a separate appraisal conducted at her expense.

Importantly, mortgages provided under the new qualified mortgage rule are exempt from this new rule as are reverse mortgages, some construction loans, short-term bridge loans, loans for manufactured homes, and transactions secured by a mobile home, boat or trailer. The rule is effective January 18, 2014. A link to the entire appraisal rule is here. 

The Consumer Financial Protection Bureau announced mortgage servicing rules today designed to help borrowers in distress get “a fair process to avoid foreclosure,” a press release from the bureau said. A few of the new rules include: 

• Services are now restricted from “dual-tracking,” which is when a servicer is working with a borrower to avoid foreclosure while at the same time moving forward with the foreclosure.
• Following two consecutive missed payments, servicers are now required to notify borrowers of “loss mitigation options” to retain their homes.
• Servicers are now required to provide delinquent borrowers with direct and ongoing access to servicing personnel.
• Servicers must provide borrowers with a fair review process of all alternative foreclosure options to help them retain their homes and can no longer steer borrowers toward options that “are most financially favorable for the servicer.”

For the full new rules, read the full CFPB press release and summary of the rules, as well as this Mortgage Bankers Association story.

The Consumer Financial Protection Bureau (CFPB) issued final rules yesterday for high-cost mortgages that ban balloon payments, which are large, lump sum payments usually due at the end of a loan, with some exceptions. The rules also ban and limit certain fees and practices, including a ban on fees for modifying loans; capping late fees at four percent of the payment that is past due; prohibiting closing costs from being rolled into the loan amount; and restricting fees for payoff statements, according to a press release from the bureau. The rules also ban the practice of “encouraging a consumer to default on an existing loan to be refinanced by a high-cost mortgage.” The rules require consumers to receive housing counseling before taking out a high-cost mortgage and require lenders to provide a list of homeownership counseling organizations to consumers “shortly after they apply for a mortgage.” Creditors are now also required to extend the duration of an escrow account on high-cost mortgage loans from the current one year minimum to a minimum of five years. For more, read the full press release.

The Consumer Financial Protection Bureau (CFPB) adopted the ability-to-repay rule today, which requires lenders to “ensure prospective buyers have the ability to repay their mortgage” in an effort to protect consumers from what the bureau calls “irresponsible mortgage lending,” a press release from the CFPB said. The rule requires lenders to verify consumers’ financial information, including their employment status, income and assets, current debt obligations, credit history and mortgage payment information, the release said. The new rule also says that lenders must verify that a borrower has “sufficient assets or income” to repay a loan and that teaser rates can no longer be used to determine a borrower’s ability to repay “both the principal interest and the interest over the long term.”

The bureau also defined criteria for qualified mortgages — they cannot have excessive upfront points and fees or “toxic loan features,” such as interest-only payments, terms exceeding 30 years or negative-amortization payments, the release said. Qualified mortgages will also cap the debt-to-income ratio at 43 percent or less to ensure that consumers can afford the loan.

For more, read the full press release and fact sheet, as well as prepared remarks that CFPB Director Richard Cordray presented during the ability-to-pay rule field hearing.

Last week, the Consumer Financial Protection Bureau (CFPB) issued proposed revisions to a rule designed to protect consumers who transfer money internationally by requiring remittance transfer providers to "disclose certain fees and taxes, as well as the exchange rate that will apply to the transfer," according to a press release from the bureau (see the Nov. 30, 2012, blog post — "CFPB will revise money-transfer rules amid concerns from banks"— for more information). The proposed changes would provide "increased flexibility and guidance" regarding disclosure of foreign taxes and institution fees, and would protect providers from having to bear the cost of unrecoverable funds if it can be demonstrated that "the consumer provided an incorrect account number and certain other conditions are satisfied," the release said. Additionally, the proposed rules would eliminate the requirement that taxes imposed by foreign regional, provincial, state or other local governments be disclosed, while requiring such disclosure for foreign taxes imposed by a country's central government, the release said. For more, read the full press release.

The Consumer Financial Protection Bureau (CFPB) announced this week that it is seeking public comment on how the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) has impacted consumers’ daily lives and the behavior of the credit card market, according to a press release from the CFPB. The bureau is specifically requesting comment on the following:

• How the terms and conditions of credit card agreements have changed and how the practices of credit card issuers regarding disclosures of rates and fees have changed and affected consumers
• The success of protections against unfair or deceptive acts or practices and whether issuers have circumvented or tried to circumvent these protections
• Changes in the cost and availability of credit
• The use of risk-based pricing in the credit market

For more, read the full press release.

The Consumer Financial Protection Bureau (CFPB) announced today that it has released an extension to its General Supervision and Examination Manual that will serve as a field guide for CFPB examiners to ensure large banks and nonbanks that make private student loans have the “appropriate processes in place to prevent harm to borrowers,” according to a press release from the bureau. The Student Lending Examination Procedures will verify that these institutions are doing the following with regard to student loans:

• Using accurate, non-discriminatory advertising or marketing
• Making appropriate disclosures regarding loan costs and terms
• Providing borrowers with accurate account information such as monthly payment requirements, charges, fees and interest rate changes
• Using adequate procedures to handle borrower inquiries and complaints.

The bureau also announced the availability of the following new consumer tools:

• Guides for students and families shopping for student loans and managing money while in college
• A comparison tool to help students and their families compare financial aid offers from multiple schools
• A new web tool to help student loan borrowers navigate their repayment options.

For more, read the full press release and the Student Lending Examination Procedures.

Yesterday, the Consumer Financial Protection Bureau (CFPB) announced a proposed policy that would allow “banks, credit unions, and other financial services companies to propose and conduct trial disclosure programs” on a case-by-case basis to help the bureau identify the best ways to provide the information consumers need to “make financial decisions in a marketplace of evolving programs and products,” according to a press release from the bureau. For a company to be granted a waiver from current disclosure requirements to pursue a proposed trial, the CFPB will evaluate how the trial will improve consumer understanding with regard to the costs, benefits and risks of products and services; how it will “help develop more cost-effective disclosure rules or policies”; and the extent to which the program is designed to “mitigate any risk to consumers,” the release said. For more, read the full press release and the proposed policy.

Yesterday, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray announced the release of a CFPB report on the big three credit reporting companies — Equifax, Experian and TransUnion — outlining how they manage consumer data, according to The Columbus Dispatch and prepared remarks from Cordray. Calling it “one of the most comprehensive looks at the credit reporting industry to date,” the report explores how these companies collect, organize and maintain consumer credit information, Cordray said. According to a CFPB press release, key takeaways in the report, titled “Key Dimensions and Processes in the U.S. Credit Reporting System: A review of how the nation’s largest credit bureaus manage consumer data,” are:

• More than half of the trade lines in the credit bureau databases are supplied by the credit card industry
• More than a third of disputes have to do with collections
• Less than one in five people obtain copies of their credit report each year
• Most information contained in credit reports comes from a few large companies
• Most complaints are forwarded to the furnishers that provided the original information

For more, read The Columbus Dispatch article and Director Cordray’s remarks, as well as the full CFPB press release and report.

The Consumer Financial Protection Bureau released a bulletin yesterday to nationwide specialty consumer reporting agencies reminding them of “their obligation under the law to provide a streamlined process for consumers to request a free annual consumer report,” according to a press release from the bureau. In addition, the CFPB also issued warning letters to agencies that may be violating the law by failing to provide an easy way for consumers to get free access to these annual reports, the release said. Consumers not only have a right to a free annual report from the largest three credit bureaus, but also from nationwide specialty consumer reporting agencies, which “primarily collect and provide specific types of information on a consumer’s history,” such as medical payments, employment, tenancy, check-writing or insurance claims, the release said. For more, read the press release and the bulletin.

After banks complained that rules for international money transfers established by the Consumer Financial Protection Bureau that were supposed to take effect on February 7 could push them out of business, the bureau announced this week that it will issue revised rules for comment in December, Bloomberg reports. The changes will address “what should happen if a consumer provides an incorrect account number for a transfer and how remittance providers must disclose third-party fees and foreign taxes,” the article said. For more, read the full story.

The Consumer Financial Protection Bureau and the Federal Trade Commission have teamed up to investigate mortgage fraud through deceptive ads by mortgage brokers, homebuilders and other non-bank entities, the National Law Journal reports. Looking for potential violations of the 2011 Mortgage Acts and Practices Advertising Rule, which “bars misleading claims about government affiliation, interest rates, fees, costs, payments associated with the loan, and the amount of cash or credit available to the consumer,” the agencies have opened 19 investigations of the “most egregious offenders” and have sent warning letters to “companies with lesser violations,” the article said. For more, read the full story (subscription required).

The Consumer Financial Protection Bureau (CFPB) recently announced the launch of Project Catalyst, an initiative that seeks to “encourage consumer-friendly innovation and entrepreneurship in markets for consumer financial products and services,” according to a press release from the bureau. Project Catalyst will enable the CFPB to better engage with those companies at the forefront of innovation and to better understand new and emerging products and trends in the marketplace. The bureau has already partnered with three companies — BillGuard, Plastyc and Simple — with the intention of analyzing their data to gain insight about “consumer behaviors and trends” that will ultimately shape policy decisions, the release said. For more, read the press release.

Raj Date, deputy director of the Consumer Financial Protection Bureau (CFPB), is stepping down from the agency at the end of January 2012, Bloomberg News reports. A former executive at Capital One and Deutsche Bank, Date argued for the creation of the bureau alongside Elizabeth Warren during the debate over Dodd-Frank. Following Warren’s departure from the bureau in July 2011, Date became its head and the CFPB’s special adviser to the Treasury secretary, the article said. After President Barack Obama appointed Richard Cordray to be the bureau’s director in January 2012, Date became the agency’s deputy director.

In an email announcing Date’s decision to leave the agency, bureau spokeswoman Jen Howard praised his leadership and data-driven approach. The timing of Date’s departure from the bureau will allow him to “finish work on some mortgage service regulations” and “help wrap up several mortgage rules the CFPB is due to finalize by January, notably one on so-called qualified mortgages,” the article said. For more, read the full story.

Federal rules establishing “standards for non-abusive lending” and requiring “banks to hold a slice of risky mortgages on their books” are to take effect in January, which is making lenders concerned that if additional rules in the form of “capital standards mandated in the international Basel III accords” are released around the same time, the multiple rules “might overlap or conflict” to create a “perfect storm of regulation,” Bloomberg News reports. Consumer advocates call the mortgage industry’s fears ”overblown” and insist it be “more judicious with its complaints” as the industry routinely insist that any rule will “increase the cost of credit or reduce access to credit,” the article said. For more, read the full story.

Many in the financial services industry were watching the presidential election results closely. This is particularly true of the companies within the financial services industry under the regulatory and enforcement purview of the Consumer Financial Protection Bureau (CFPB).  

Presidential candidate Mitt Romney had explained on the campaign trail that he would work diligently to repeal Dodd-Frank and disband the CFPB. He and others believe that the regulatory and enforcement powers of the CFPB are unchecked and have inundated the industry with unnecessary new rules and regulations. 

The House Committee on Financial Services recently announced that regulators have written 224 of the 400 new rules promulgated as a result of Dodd-Frank — these rules consume 7,365 pages. 

But despite the opposition to Dodd-Frank and the CFPB, President Barack Obama’s re-election means that both are here to stay. Indeed, President Obama has made consumer protection a focus in his first administration and all signs suggest that will continue. What’s more, with the election of Elizabeth Warren to the United States Senate, she will no doubt continue to champion causes aimed at consumer protection.

Recently, Director Cordray presented the five-year strategic plan for the CFPB. Now, it appears that the plan is even more relevant than it was just a few weeks ago.

The Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB) are partnering to create a National Mortgage Database, which will be “the first comprehensive repository of detailed mortgage information” but will not include personally identifiable information, according to a press release from the CFPB. The database, which will be used to support the agencies’ policymaking and research efforts, will include “loan-level data about the mortgage including: the borrower’s financial and credit profile; the mortgage product and terms; the property purchased or refinanced; and the ongoing payment history of the loan,” the release said. The database is also intended to help regulators “better understand emerging mortgage and housing market trends” so that they may develop appropriate consumer protections. For more, including examples of how the database can support the agencies’ work, read the press release.

The Consumer Financial Protection Bureau (CFPB) released its first Supervisory Highlights report outlining “problems CFPB examiners discovered through the agency’s supervision process,” according to a press release from the bureau. The report, which details supervision work from July 21, 2011, to September 30, 2012, uncovered issues pertaining to credit line increase processes, compliance with fair credit reporting requirements and mortgage disclosure procedures.

The CFPB also published an appeals process for supervised institutions and an updated version of the CFPB Supervision and Examination Manual, a field guide used by examiners, the release said. For more, read the press release.

Consumer Financial Protection Bureau (CFPB) Director Richard Cordray delivered prepared remarks during the National Consumer Law Center Conference in Seattle yesterday. Cordray discussed several of the CFPB’s efforts to “improve the daily lives and financial opportunities for consumers,” including its supervision of consumer debt collectors and its new mortgage servicing standards. Cordray highlighted the bureau’s efforts to increase the transparency of the private student loan industry and also described how it is beginning to penalize those who “violate the law and cause meaningful consumer harm.” For more, read Director Cordray’s prepared remarks.

As part of the Consumer Financial Protection Bureau’s new rule establishing for the first time federal supervision authority over debt collectors, debt collection lawyers in firms with “more than $10 million in annual receipts from consumer debt collection activities” will be subject to the bureau’s field examiners who will review these firms' procedures, “evaluate the quality of their compliance and identify risks to consumers,” the National Law Journal reports. Opponents call federal regulation of the practice of law inappropriate and a potential interference with the attorney-client privilege. The bureau did limit its jurisdiction to lawyers whose “principal business activity is debt collection,” but justified keeping the overall provision by arguing that “consumer debt collection is a consumer financial service” and that debt collection attorneys do not provide “legal advice or services to those consumers,” the article said. For more, read the full story.

The Consumer Financial Protection Bureau (CFPB) announced Monday that it will begin accepting consumer complaints about credit reporting, according to a press release from the bureau. Consumer credit reporting agencies include the “three largest credit reporting companies that sell comprehensive consumer reports; consumer report resellers that repackage information they buy from the largest companies; and specialty consumer reporting companies that primarily collect and provide specific types of information like on payday loans or checking accounts,” the release said.

This marks the first time that consumers have been able to access individual-level complaint assistance about credit reporting at the federal level. Consumers must first file a dispute and get a response from the credit reporting agency; if the agency does not respond or the consumer is dissatisfied with the resolution, the consumer may contact the CFPB for assistance with the following issues:

• Incorrect information on a credit report;
• A consumer reporting agency’s investigation;
• The improper use of a credit report;
• Being unable to get a copy of a credit score or file; and
• Problems with credit monitoring or identify protection services.

For more, read the press release.

A rule published today by the Consumer Financial Protection Bureau (CFPB) established that beginning on January 2, 2013, the CFPB will be the first federal institution ever to supervise the larger consumer debt collectors, according to a press release from the bureau. Any firms engaging in three main types of debt collection with more than $10 million in “annual receipts from consumer debt collection activities” — which is approximately 175 debt collectors and 60 percent of the industry’s annual receipts — will be under the jurisdiction of the bureau, the release said.

In addition to creating a debt collection question and answer section for its Ask CFPB database, the bureau also released a field guide to help examiners “ensure that companies and banks engaging in debt collection are following the law,” the release said. This field guide will help examiners evaluate, among other things, whether debt collectors provide required disclosures and accurate information; have a complaint and dispute resolution process; and communicate civilly and honestly with consumers, the release said.

For more, read the press release. Check back for a more comprehensive analysis of the bureau’s procedures regarding the supervision of debt collectors.

The Consumer Financial Protection Bureau (CFPB) released its draft strategic plan for 2013-2018 on October 10, 2012. The document outlines the bureau’s mission, vision and values and describes four strategic goals that it aims to achieve over the next five years, including preventing financial harm to consumers while promoting practices that benefit them; empowering consumers to live better financial lives; informing the public, policy makers and the bureau’s own policy-making with data-driven analysis of consumer finance markets and consumer behavior; and advancing the bureau’s performance by maximizing resource productivity and enhancing impact. The bureau is inviting public comment on the draft plan through October 25, 2012. For more, read the draft strategic plan.

Consumer Financial Protection Bureau (CFPB) Director Richard Cordray held the bureau’s first board meeting on September 27, 2012 in St. Louis. The public meeting had approximately 200 in attendance and provided Cordray an opportunity to summarize the bureau’s accomplishments during its first year in existence and a snapshot of its future priorities.  In addition, 25 members of the Consumer Advisory Board were sworn in.

During the meeting, Director Cordray applauded the “Know Before You Owe” program and explained that providing an opportunity for consumers to tell their stories has given the CFPB a roadmap toward consumer protection.  He also emphasized that the bureau’s future success depends upon accessibility to the American public. 

For more information on the meeting, read this Bricker & Eckler Bulletin.

The Office of the Comptroller of the Currency (OCC), in coordination with the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau (CFPB) and the Federal Deposit Insurance Corporation (FDIC), announced yesterday that American Express Bank was assessed a $500,000 civil money penalty for “violations of section 5 of the Federal Trade Commission Act,” according to a press release from the OCC. The penalty is based on “the bank’s failure to properly manage vendors who engaged in deceptive debt collection practices,” the release said. American Express Bank was also ordered to provide an estimated 17,000 affected customers with approximately $6 million in restitution, and to “establish an effective vendor management program to oversee the provision of products to the bank’s customers,” the release said. For more, read the press release.

A new study released Tuesday by the Consumer Financial Protection Bureau (CFPB) found that one out of five consumers who purchase a credit score will likely receive a “meaningfully different” score than what a lender would see, according to a press release from the bureau. The study analyzed “credit scores from 200,000 credit files from each of the following credit bureaus: TransUnion, Equifax, and Experian,” and found that the different scoring models were responsible for displacing consumers’ credit-quality categories by one category 19 to 24 percent of the time and by more than two categories 1 to 3 percent of the time, the study said. For more, read the press release or the full study.

The Consumer Financial Protection Bureau’s new remittance rule, which creates consumer protections for certain electronic transfers to other countries, will go into effect on February 7, 2013. The bureau is hosting a webinar on Tuesday, October 16, 2012, to help the financial industry understand and comply with the rule. In addition, they are releasing a small business guide and a list of “countries and other areas to which a particular exception to the rule’s disclosure requirements applies,” according to a press release from the bureau. For more, read the press release.

The Consumer Financial Protection Bureau (CFPB) and the Federal Deposit Insurance Corporation (FDIC) issued a joint press release today announcing that Discover Bank has been ordered to “refund approximately $200 million to more than 3.5 million consumers and pay a $14 million civil money penalty,” according to a release from the bureau. The $14 million civil money penalty will be split evenly between the U.S. Treasury and the CFPB’s Civil Penalty Fund. An investigation initially undertaken by the FDIC and joined by the CFPB last year found that Discover used “deceptive telemarketing and sales tactics” to mislead customers into paying for various add-on credit card services, such as payment protection, credit score tracking, identity theft protection and wallet protection, the release said. For more, read the press release.

The prepared remarks that Consumer Financial Protection Bureau (CFPB) Director Richard Cordray recently gave during the Corporation for Enterprise Development (CFED) 2012 Assets Learning Conference in Washington, D.C., are now available on the bureau’s website. According to the CFED website, the organization’s goal is to empower “low- and moderate-income households to build and preserve assets by advancing policies and programs that help them achieve the American Dream.” During his remarks, Cordray reiterated the bureau’s commitment to “addressing the concerns of the financially disempowered” through regulation of financial practices that are “unfair, deceptive, abusive, or discriminatory toward customers.” For more, read the full transcript of Richard Cordray’s remarks.

The Consumer Financial Protection Bureau (CFPB) announced yesterday that the inaugural meeting of its new Consumer Advisory Board will take place on Thursday, September 27, 2012, in St. Louis, Missouri, according to a press release from the bureau. The meeting, which is open to the public, will feature remarks from CFPB Director Richard Cordray as well as the chair and vice chair of the Consumer Advisory Board. For more, read the press release.

On September 30, 2012, the Consumer Financial Protection Bureau (CFPB) will begin supervising credit bureaus and other consumer reporting companies to ensure that they are complying with requirements of federal consumer financial law, according to a press release from the bureau (see our September 6 blog post for more information). The Columbus Dispatch expounded on what this means for the three largest credit reporting companies — Experian, Equifax and TransUnion — as part of its ongoing coverage of consumer credit issues. In addition to making sure the companies “have employees who are trained to answer consumers’ questions about their credit reports,” examiners will be evaluating whether the agencies are providing accurate information about consumers, handling consumer disputes, and preventing fraud and identity theft, the article said. For more, read the full story.

The Consumer Financial Protection Bureau (CFPB) recently announced exam procedures that will be used to ensure that credit bureaus and other consumer reporting companies are “complying with requirements of consumer financial law,” according to a press release from the bureau. Examiners will be assessing whether companies are using and providing accurate information, handling consumer disputes, making disclosures available, and preventing fraud and identity theft. For more, read the press release.

Using financial records from the Consumer Financial Protection Bureau (CFPB) obtained under the Freedom of Information Act, Judicial Watch — a “conservative foundation aimed at fighting government corruption” — rebuked the bureau’s allocation of $465,000 for sign language translation services, its use of $4,500 to enroll six employees in a banking law fundamentals class, and the salaries of several of its employees, CNNMoney reports. The CFPB contends that the sign language services are required for ADA compliance and that any unused funds will be returned at the end of the year; that the banking law fundamentals class is considered a qualifying program for the continuing education requirements of the bureau’s enforcement attorneys; and that the Dodd-Frank Act sets the director’s salary and requires the salaries and benefits for employees of the bureau to be “comparable to the Federal Reserve Board and other federal financial regulators,” the article said. For more, read the full story.

Six federal financial regulatory agencies — the Board of Governors of the Federal Reserve System, the Consumer Financial Protection Bureau, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the National Credit Union Administration and the Office of the Comptroller of the Currency — issued a proposed rule yesterday that would establish new appraisal requirements for “higher-risk mortgage loans,” according to a joint press release from the agencies.

Under the Dodd-Frank Act, mortgage loans are deemed higher-risk if “they are secured by a consumer's home and have interest rates above a certain threshold.” The proposed rule would require creditors to “use a licensed or certified appraiser” to prepare “a written report based on a physical inspection” of the property and to “disclose to applicants information about the purpose of the appraisal,” the release said. Additionally, to address fraudulent property flipping, creditors would be required to “obtain an additional appraisal at no cost to the consumer for a home-purchase higher-risk mortgage loan if the seller acquired the property for a lower price during the past six months,” the release said.

For more information, including the Federal Register notice as well as information on submitting comments about the proposal, read the press release.

The Consumer Financial Protection Bureau (CFPB) announced today two sets of proposed rules intended to enhance consumer protections with regard to the process for “evaluating consumers for alternatives to foreclosure” and to “lessen potential burdens on small servicers,” according to a press release from the bureau. The proposed rules are in response to complaints of mortgage servicers losing applications and paperwork, and making it exceptionally difficult to correct errors when they do arise, the release said.

The first set of proposed rules aims to help consumers avoid costly surprises by providing them with “clear and timely information about their mortgages,” the release said. Those rules include: clear monthly mortgage statements; warnings before interest rates adjust; options for avoiding costly “force-placed” insurance; and early information and options for avoiding foreclosure. The second set of rules would dictate “requirements for handling consumer accounts, correcting errors, and evaluating borrowers for options to avoid foreclosure,” the release said. Those rules include: payments promptly credited; maintenance of accurate and accessible documents and information; errors corrected quickly; direct and ongoing access to servicer personnel to assist delinquent borrowers; and evaluation of borrowers for options to avoid foreclosure.

For more information on the proposed rules, read the press release.

In its semi-annual report released this week, the Consumer Financial Protection Bureau (CFPB) showcased several of the activities in which it has been engaged since the start of 2012. According to a press release from the bureau, highlighted activities, accomplishments and achievements include:

• Consumer Engagement: The CFPB regularly requests input from consumers to help guide its policies for regulation and enforcement. The bureau also “helps resolve consumer disputes with lenders by taking complaints through its website and by telephone, mail, fax, and by referral from other agencies.”
• Financial Education: The CFPB has designed a number of tools and resources, including a public database of complaints the bureau has received about financial products, to help consumers “make responsible financial decisions.”
• Regulation: The bureau has taken a number of steps to reform the mortgage market, including writing rules that help consumers make informed decisions, simplifying mortgage disclosure forms, and bringing “greater transparency and accountability to mortgage servicing.”
• Research: The CFPB has been conducting “in-depth studies on consumer financial products, such as reverse mortgages and private student loans,” and has issued numerous Requests for Information to gather input from consumers and industry participants on a range of pertinent issues.
• Supervision: The bureau has been expanding its supervisory authority beyond larger banks and credit unions to include certain nonbank entities that have “never before been federally supervised.” This includes residential mortgage companies, payday lenders and private education lenders.
• Enforcement: A recent CFPB investigation led to enforcement action against Capital One, including $140 million that will be returned to customers who were “wronged by the company.”

For more, read our review of the semi-annual report.

This month, the Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Education released a report detailing the risky practices and loose underwriting in the private student loan market that has resulted in more borrowers and more debt, according to a press release from the bureau. Between 2001 and 2008, the private student loan market grew from less than $5 billion to over $20 billion as many lenders bypassed school financial aid offices and marketed loans directly to students, making money by “originating and then selling private student loans with less regard for borrowers’ creditworthiness,” the release said. The report features a list of recommendations for reforming the private student loan market. For more information, read the press release.

This week, the Consumer Financial Protection Bureau (CFPB) announced its first public enforcement action, charging Capital One Bank with employing deceptive marketing tactics to promote add-on credit card services such as payment protection and credit monitoring, according to a press release from the bureau. The action requires Capital One to “refund approximately $140 million to two million customers and pay an additional $25 million penalty,” the release said. For more information, read the press release.

The Consumer Financial Protection Bureau (CFPB) is preparing to revamp the home mortgage market over the next six months, according to the New York Times. The CFPB plans to change the way in which borrowers get mortgages and making it easier for them to understand the type of loan they are getting as well as the true costs. 

The specific goals of the CFPB are to protect consumers by giving more good faith estimates of costs; disclosure statements that more clearly show the interest rate being paid and how much cash will be needed at closing; and better options for consumers facing foreclosure. Read more here.

On June 28, the Consumer Financial Protection Bureau (CFPB) implemented a new rule to classify protections for privileged information submitted to the Bureau by the regulated financial institutions it oversees.

According to a press release on the CFPB’s website, the new rule “provides supervised entities further assurances that providing privileged information to the Bureau will not adversely affect the confidentiality of such information.” The rule also clarifies that the CFPB’s “transfer of privileged information to another Federal or State agency does not result in a waiver of any applicable privilege.”

For more, read here:

In a report released today, the Consumer Financial Protection Bureau (CFPB) found that few American consumers completely understand the reverse mortgage market, including the fact that property taxes and insurance must still be paid even with a reverse mortgage, according to a press release from the bureau. Additionally, the study found that consumers are getting reverse mortgages at younger ages and that 70 percent of borrowers take the proceeds as a lump sum payment, the release said. The bureau is seeking public input regarding reverse mortgages. For more, read the press release and the full report.

The State National Bank of Big Spring, a community bank in Texas, filed a lawsuit alleging that certain provisions of the Dodd-Frank Act are unconstitutional, particularly the creation of the Consumer Financial Protection Bureau (CFPB), American Banker reports. As the first known community bank to file a lawsuit against the CFPB, State National executives say that the bureau can “essentially determine who gets a home loan…credit card…and a loan for college” with a board that has “unlimited regulatory power” and a director who is “not accountable to Congress, the President or the Courts,” the article said. For more, read the full story.

In an effort to increase the efficiency and transparency of the credit card market, the Consumer Financial Protection Bureau (CFPB) will make available to the public the “individual-level consumer complaint data” it receives, according to a press release from the bureau. Although no personally-identifiable information will be available on the database, the bureau hopes to add similar data on other products, including “mortgages, student and other consumer loans, and other bank products (such as checking and savings accounts),” once the database progresses from its beta stage, the release said. 

Consumer Financial Protection Bureau (CFPB) Director Richard Cordray spoke at the American Constitution Society Conference in Washington, D.C., last week about the function and goals of the CFPB. For more, read the full transcript of his prepared remarks.

The Consumer Protection Financial Bureau (CFPB) issued a notice and request for information on the use of pre-dispute arbitration agreements for any future dispute between covered persons and consumers in connection with the offering or providing of consumer financial products or services. Comments regarding the scope, methods and data sources for conducting the study must be submitted on or before June 23, 2012. 

The Consumer Financial Protection Bureau (CFPB) recently announced a public inquiry to learn more about the financial exploitation of older Americans and best practices for financial management, according to a press release from the bureau. A recent industry study indicates a 12 percent increase in the amount of money scammed from elders from 2008 to 2010, the release said. 

The Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Consumer Financial Protection Bureau recently signed an agreement to coordinate supervision of banks and credit unions with more than $10 billion in assets, American Banker reports. The agreement is intended to “minimize unnecessary regulatory burden, avoid duplicative efforts and reduce the risk of conflicting directives among supervisors,” the article said. For more, read the full story.

The Consumer Financial Protection Bureau (CFPB) proposed a rule yesterday that would "set up procedures to supervise nonbanks that may have engaged in activities that pose risks to consumers," according to a press release from the bureau. The proposed rule would establish procedures for the bureau to notify the nonbank that it is being considered for supervision as well as procedures for the bank to respond and even file a petition to "terminate supervision authority after two years," the release said.

The Consumer Financial Protection Bureau (CFPB) is requesting public comment on how it should study mandatory arbitration clauses, according to a press release from the bureau. As part of the Dodd-Frank Act, the CFPB is required to study and regulate pre-dispute arbitration clauses in consumer financial markets, the release said. The bureau is requesting public comment regarding the following:

• The prevalence of arbitration clauses in consumer financial products and services;
• What claims consumers bring in arbitration against financial services companies;
• If claims are brought by financial services companies against consumers in arbitration;
• How consumers and companies are affected by actual arbitrations; and
• How consumers and companies are affected by arbitration clauses outside of actual arbitrations.

Registration is now open for the 2012 Ohio Mortgage Bankers Association Convention, which takes place at the Crowne Plaza in Dublin, Ohio, from Monday, May 14th through Wednesday, May 16th. The convention, "Navigating Our Road to Recovery," features an eight-hour continuing education course on FHA insured loans that will be presented by Diehl and Associates. Consumer Financial Protection Bureau Director Richard Cordray is also scheduled to address attendees. For more information, visit the OMBA website.

The Consumer Financial Protection Bureau (CFPB) released a bulletin indicating that in keeping with the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the SAFE Act), a “state may grant a transitional loan originator license to an individual who holds a valid loan originator license from another state,” a press release from the Bureau said. The CFPB offered clarification that states are not permitted to grant transitional licensing to individuals who are registered by unlicensed originators, the press release said. Check back with OhioFinancialServicesBlog.com as we will be commenting further on the impact of this guidance. 

The Consumer Financial Protection Bureau (CFPB) recently released a bulletin outlining the responsibility of supervised financial institutions to effectively manage risks associated with third-party service provider relationships. The Bureau will closely monitor “service providers’ interactions with consumers,” and will “hold all appropriate companies accountable when legal violations occur,” a press release from the Bureau said. Banks and nonbanks supervised by the CFPB are advised to conduct thorough due diligence “to ensure that business arrangements with service providers do not present unwarranted risks to consumers,” the press release said.

The CFPB will hold an industry discussion in Cleveland, Ohio on April 27 featuring Director Richard Cordray and Deputy Director Raj Date as speakers.  Other key speakers will be Peggy Twohig, Assistant Director of Nonbank Supervision and Steve Antonakes, Assistant Director of Large Bank Supervision.  This event will be closed to the press.

The Consumer Financial Protection Bureau recently announced proposed rules that would help homeowners manage issues with mortgage servicers, which collect payments on behalf of loan holders, a press release from the Bureau said. Such rules would require "principal, interest, fees, escrow and due dates" to be clearly explained on monthly mortgage statements and would also require warnings and explanations regarding certain adjustable rate mortgages before they change. Information on options for struggling borrowers will be offered more rapidly, as will options for avoiding "forced-placed" insurance, the release said. Additional proposals would require payments to be credited to consumer accounts "the day payment is received"; errors to be more quickly addressed and corrected; and ongoing direct access to service staff members available to homeowners.

The Consumer Financial Protection Bureau (CFPB) announced a proposed rule last week that would "codify protections for privileged information submitted to the Bureau by the financial institutions it regulates," according to a press release from the CFPB. A copy of the proposed rule has been submitted to the Office of the Federal Register and is open for comment for 30 days after it is published in the Federal Register. A more comprehensive review of this rule will be available on this blog in the future. In the meantime, read the text of the rule here or read the CFPB press release here.

Both Federal Reserve Chairman Ben Bernanke and Consumer Financial Protection Bureau Director Richard Cordray reassured members of the Independent Community Bankers of America during their national convention yesterday that the regulations intended for the "too big to fail" financial institutions will not be "evenly applied to community banks," HousingWire reports. The Fed "recently established a Community Depository Institutions Advisory Council, which draws its membership from smaller banks, credit unions, and savings associations" in an effort to better understand their needs and more clearly communicate which regulations apply to them, the article said. For more, read the full story here.

Consumer Financial Protection Bureau (CFPB) Director Richard Cordray announced yesterday that his agency is working to "establish a general framework to share data" among state and federal authorities regarding consumer financial protection issues such as payday loans, foreclosure scams, auto loans, and debt collection, Bloomberg reports. The central point of the information-sharing deal will be the Federal Trade Commission's Consumer Sentinel network, which is a database where attorneys general can submit complaints about financial services that the CFPB can then use to detect trends in scams and unfair lending, the article said. For more, read the full story here.

The Consumer Financial Protection Bureau (CFPB) issued a consumer advisory yesterday on overdraft coverage for checking accounts. Although banks can automatically charge overdraft fees for checks and online bill payments, they cannot charge overdraft fees for ATM or point-of-sale debit card transactions unless the cardholder has opted in. The CFPB offered the following tips to help consumers avoid overdraft charges: 

• Opt out of ATM overdraft coverage so that your card is simply declined if there are insufficient funds for a purchase.
• Link your checking account to a savings account or credit card. Although a fee may be incurred, it will likely be less than an overdraft charge and will prevent checking account transactions from ever being declined.
• Track your balance and sign up for low balance alerts, if applicable.

For more, read the full consumer advisory here.

Small financial services providers will be greatly impacted by new CFPB rules, particularly rules concerning lending to borrowers.  The CFPB recently announced that it will use the Small Business Review Panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA). In certain cases, this Act requires the bureau to form and chair a panel alongside representatives of the Small Business Administration (SBA) and the Office of Management and Budget. That panel will meet with a group of representatives of the small providers directly affected by the new CFPB guidelines.

The 15 to 20 representatives will provide feedback on the rules the bureau is considering and on alternatives to minimize negative impacts on small businesses. Within 60 days of convening, the panel will complete a report on the issues, including input they receive, their findings on the economic impacts of the proposal, and any alternatives that achieve the proposal’s objectives while minimizing unnecessary burdens.

A “small entity” may be a small business, a small organization, or a small government, as defined by the Act.  Here are some of the rules the bureau is considering:

• whether to require that these preliminary estimates carry a disclaimer that tells the consumer that the document is not the integrated Loan Estimate required by TILA and RESPA.
• current rules provide that when a lender provides a consumer with an estimate of the cost of its own services under RESPA, the actual cost cannot be higher than the estimate unless there is a valid change of circumstances. The bureau may seek to apply the same limitation to estimates of services provided by the lender’s affiliates or by companies the lender requires the consumer to use.
• consideration requiring delivery of the integrated Settlement Disclosure stating the consumer’s final loan terms and costs at least three business days before closing, although some flexibility may be provided.

The Consumer Financial Protection Bureau (CFPB) requested Monday that consumers, industry stakeholders, and other interested parties provide feedback on the draft prototype of the new monthly mortgage statement that it has developed as required in The Dodd-Frank Wall Street Reform and Consumer Protection Act.
 
The statement, which is designed to "make it easier for homeowners to understand their loans and avoid unnecessary costs and fees," will include the following information:

• The principal loan amount
• The current interest rate
• The date on which the interest rate may next reset
• A description of any late payment penalty fees
• Information about housing counselors
• A telephone number and email address that may be used to contact the mortgage servicer

For more, read the full CFPB press release here or view the draft mortgage statement here.

The Consumer Financial Protection Bureau (CFPB) has announced that it is holding a second field meeting in a town hall format in New York City on February 22, 2011.  This time, the bureau will discuss customers’ experiences with checking account products and services.

In January, the bureau held its first field hearing in Birmingham, Alabama to discuss payday loan products.  

In the next six months, the Consumer Financial Protection Bureau (CFPB) plans to issue a series of rules, orders, and other initiatives that are expected to broadly impact financial institutions and lenders. Among other lender related actions, the Bureau expects to issue final rules that will assist lenders in determining which borrowers have the ability to repay loans. The CFPB also plans to announce initial rules related to supervision and the definition of “larger participants," which is critical in determining which nonbanks outside of the residential mortgage, private education lending, and payday lending markets will fall under the scope of the CFPB supervision program. The Bureau will also announce final regulations establishing procedures for investigations, which may signal the start of enforcement actions in 2012. Read the full article here. 

Today, the CFPB released its semi-annual report highlighting the bureau's accomplishments in its first six months.  This report coincides with Director Cordray's testimony before the Senate Committee on Banking, Housing, and Urban Affairs scheduled for January 31, 2012.   We will provide our commentary on the report in days to come.

In a speech to Congress on January 24, CFPB Director Richard Cordray explained that “gross imbalances in consumer financial markets, most notably in the mortgage market, were a significant cause of the recent financial crisis.” As we announced in our January 13 blog post, the bureau released its Mortgage Origination Examination Procedures (Procedures). These Procedures act as a field guide for examiners tasked with assessing mortgage brokers and bankers’ compliance with the new CFPB procedures and federal consumer laws.

The bureau explains that examination objectives are to assess the entities’ compliance systems in place, identify acts that increase risk of violations of federal consumer laws, fact-find, and determine if lenders have violated federal consumer laws or are guilty of an unfair, deceptive, or abuse act or practice (UDAAP) as outlined in the Dodd-Frank Act.

While the bureau will examine lenders providing traditional and conventional loans, there is no doubt that CFPB lenders have been tasked to pay heavy attention to lenders’ policies and procedures that provide “subprime” and “non-traditional loans.” The bureau defines subprime loans as those with higher interest rates and charge fees to compensate the lender for lending to borrowers with impaired credit. Non-traditional loans tend to be interest-only loans and pay option ARMs.

Once examiners determine that a lender offers subprime and non-traditional loans, the Procedures provide that examiners will determine if advertising and promotional materials provide clear and understandable information about the risks associated with those products. Likewise, examiners will want to see that lenders provide information enabling borrows to determine if the product meets the borrowers’ needs.

What’s more, if the lender originates high-cost mortgages whereby the APR will exceed 8 percentage points for first mortgages or 10 percent for second mortgages and/or high mortgage points are applied, examiners will determine whether the lender routinely provides certain TILA disclosures to borrowers.

Another area of focus for CFPB examiners will be underwriting guidelines of mortgage bankers. If the mortgage banker originates non-traditional high-cost loans, examiners will assess if the lender has complied with Regulation Z requirements, including obtaining required documentation of income and assets from the borrower. Also, examiners will determine if underwriting standards take adjusted payments into account in considering the borrower’s ability to repay the loan when the payment amount is expected to change. Mortgage bankers that obtain little documentation in conjunction with originating a non-traditional or subprime loan can expect extreme scrutiny.

Finally, examiners will have unfettered access to lenders’ internal and external documents and policies including, organizational charts, loan applications, internal notes, disclosures, underwriting guidelines, computer programs, compensation policies, audit and compliance reports, and advertisements. Hence, mortgage brokers and bankers should understand the potential examination risk involved when originating subprime and non-traditional mortgages.

In late 2011, the CFPB rolled out its “Know Before You Owe” concept that provides the public with an opportunity to review and comment on real estate closing disclosure forms.  Real estate closing disclosure forms comprise of the Truth in Lending Act form and the RESPA HUD-1 Settlement Statement.  These forms are intended to help a homebuyer understand the key terms, conditions, and costs of the loan.

The bureau explains that consumers find real estate closing disclosure forms to be too complicated and cumbersome to understand.  After testing two template disclosure forms titled “Mimosa” and “Sassafras,” the bureau received comments about those forms.  With “Sassafras” winning out as being more consumer friendly, pleasing to the eye and better organized, the bureau recently posted two new template disclosure forms titled “ Butternut” and “Hemlock.”

Final template disclosure forms are due out in February 2012. 

On January 23, the Consumer Federal Protection Bureau (CFPB) and the Federal Trade Commission (FTC) signed a Memorandum of Understanding (MOU) to coordinate their consumer protection activities and to avoid duplicating law enforcement and regulatory actions at the federal level.

The Dodd-Frank Act requires the CFPB and the FTC to collaborate to ensure consistent regulatory treatment of consumer financial products and services. Jon Leibowitz, Chairman of the FTC, believes that “this agreement ensures that businesses will not be double-teamed by the two agencies.” Some of the coordinating efforts by the CFPB and the FTC outlined in the MOU include the following:

• Regular meetings to coordinate upcoming law enforcement, rulemaking, and other activities;
• Informing the other agency, absent exigent circumstances, prior to initiating an investigation or bringing an enforcement action. This notice will prevent duplicative or conflicting enforcement efforts and undue burdens on industry;
• Consulting on rulemaking and guidance initiatives to promote consistency and reflect the experience and expertise of both agencies;
• Cooperation on consumer education efforts to promote consistency of messages and maximum use of resources; and
• Sharing consumer complaints among the agencies.

The MOU lasts for three years.

For those who send money internationally, the CFPB issued new rules governing remittance transfers.   Among other requirements, the new disclosures will require companies providing international transfers to disclose the exchange rate, fees, and the amount of money to be delivered to the recipient in the foreign country.  Transmitting companies must also provide a receipt or proof of payment and tell the customer the date that the money will arrive to the recipient.

Companies now must investigate any reported problem with a transfer, and at times, a customer can be refunded or transfer without charge if money fails to arrive when promised.   These rules are effective January 2013.  These new rules will impact companies such as Western Union and MoneyGram who will now have to comply with the new requirements.  But the new rules likewise apply to banks, savings and loans companies and credit unions. 

Quoting Dr. Martin Luther King, Jr., in prepared remarks, CFPB Director Richard Cordray explained his vision for payday lending reform while at the same time telling the audience that he understands the need for payday loan products.  This field hearing occurred in Birmingham, Alabama on January 19th. 

Director Cordray provided a definition for payday loans and explained that lenders collect at least $7 billion annually in fees.  He said that now that the CFPB has the authority to examine non-bank lenders, “the Bureau will be giving payday lenders much more attention.”  He also mentioned that the CFPB will scrutinize bank products that provide short-term "advance" loans to customers.

Importantly, Director Cordray announced the unveiling of the Short-Term, Small Dollar Examination Procedures, a field guide for payday lending examiners to use nationwide.  We will be providing an analysis of the field guide in days to come.   

As was reported earlier, Richard Cordray's first hearing as director of the new Consumer Financial Protection Bureau convenes today in Birmingham, Ala., to hear testimony on the payday-loan industry, which has a reputation for "enticing low-income customers into a cycle of repeat borrowing at high interest rates," an article in The Columbus Dispatch reports. For more read the full story here.
 

In what promises to be a watershed moment in the first days of Director Cordray’s leadership of the CFPB, the debate over the regulation of the payday loan industry will begin in Birmingham, Alabama on January 19th.   The CFPB will hold its first “field meeting” at Birmingham Convention Center.  The event was first scheduled to be held at the Birmingham Civil Rights Institute.  But due to the overwhelming response, it was moved to the larger location.

In addition to Director Cordray’s comments, the field hearing will include testimony from consumer groups, civil rights groups, industry representatives and members of the public.  It was no accident that the CFPB chose Alabama for its first hearing as it explains that Alabama is “a state with one of the highest number of payday lenders per capita in the country.”  Alabama does regulate payday loans and caps the loan amount to $500 and caps the interest rate that can be charged on the loan.  Check back soon as we will provide a recap of the field meeting discussion.

The CFPB will launch its new initiative titled the Office of Minority and Women Inclusion (OMWI) on January 20, 2012.  It is no mistake that the CFPB announced this new office the same week that the nation celebrates the life and work of Dr. Martin Luther King, Jr.

According to the CFPB blog post, the OMWI and its working group will develop standards for:

• equal employment opportunity, workforce diversity, and inclusion at all levels of the agency;

• increased participation of minority-owned and women-owned businesses as vendors for the CFPB; and

• assessing the diversity policies and practices of the CFPB's regulated entities. 

Significantly, it appears that the OMWI is not only an internally focused working group, but this new office will also be outwardly focused, as for the first time, diversity programs of banks and nonbank lenders will be scrutinized by a regulatory agency. 

The CFPB is accepting comments from the public regarding the produces and services currently offered by to or used by students and their families for financing post-secondary education.  The deadline for submitting comments to the CFPB is January 17, 2012.  Comments can be provided here. 

Under the Dodd-Frank Act, the CFPB will regulate companies that offer “private education loans” offered by schools or financial institutions to finance higher education.  This new regulatory authority does not, however, apply to Title IV federal loans.

Certainly, the CFPB is looking to tighten the existing disclosures provided by private education lenders regarding the terms of these loans.  Likewise, the CFPB is seeking comment regarding whether students are adequately informed of their rights as borrowers on private education loans and it is interested in alternative repayment plans that have proven to be effective in preventing loan default.

The CFPB has announced the publication of the mortgage origination examination procedures.  These guidelines are a "field guide" for examiners reviewing mortgage originators in both the bank and nonbank industries. 

These examination guidelines will apply to both lenders and brokers and nonbank entities such as payday lenders. In sum, the supervision activities will include document gathering, data analysis, onsite examination and ongoing monitoring.

The Consumer Financial Protection Bureau (CFPB) announced this week that its director, Richard Cordray, promoted Kent Markus within the Office of Enforcement from deputy assistant director to assistant director, according to a press release from the bureau. Markus previously served as chief legal counsel to former Ohio Gov. Ted Strickland during his administration. Markus has also served as the first assistant attorney general of Ohio, the deputy chief of staff at the Department of Justice and counselor to the United States Attorney General, the release said. Read the full announcement here.

After Director Cordray’s appointment, the CFPB reminded the public what its approach will be for nonbank examination.  For certain nonbanks including mortgage companies, payday lenders, and private education lenders, CFPB supervision is effective immediately. 

The CFPB is careful to note that its goal is to “prevent harm to consumers and promote the development of markets for consumer financial products and services that are fair, transparent, and competitive.”

To accomplish these goals, the CFPB will employ a combination of any of the following tools as outlined in the recent CFPB Blog post: requiring nonbanks to file certain reports, reviewing the documents that nonbanks utilize to offer products and services to customers, reviewing nonbank compliance systems and policies, and reviewing the correspondence between nonbanks and customers. 

The CFPB explained that “in general,” it will notify a nonbank in advance of an examination.  Thus, that leaves the door open to “surprise” CFPB examinations.  That should sufficiently concern nonbanks that will be examined by the CFPB.

Expect the CFPB to coordinate with the Ohio Department of Commerce for nonbank examinations. 

Just one day after being appointed as the new director of the Consumer Financial Protection Bureau by President Obama, Director Richard Cordray plainly stated that prior to his appointment, the CFPB lacked the "ability to supervise financial institutions other than big banks-like non-bank mortgage lenders and services, and payday lenders." Likewise, Director Cordray said that he will make "Sure that financial institutions are playing by the rules" explaining that there will be "real consequences to violating the law." 

The Dodd-Frank Act gives the CFPB the authority to promulgate rules and examine non-bank companies irrespective of their size.  According to Director Cordray partly due to his appointment delay, the CFPB will promptly begin exercise its now broadened authority.

During Director Cordray's speech at the Brookings Institution, he said non-bank companies "often compete with banks but have largely escaped any meaningful federal oversight" and that the CFPB new supervision program "may be a challenge" for non-bank lenders. 

Finally, Director Cordray made was careful to note that his job is to protect consumers by explaining that Americans like the idea of having a consumer watchdog to protect them.  See Director Cordray's blog post here regarding his appointment. 

While many consumer advocacy groups have enthusiastically applauded President Obama’s recess appointment of Richard Cordray to the CFPB, many Republican lawmakers and financial trade associations have called into question the legality of the recess appointment. Director Cordray has already explained that he has been given broad authority under the Dodd-Frank Act and intends to exercise the authority to regulate large banks and virtually all non-bank lenders immediately. But Republicans argue that the chamber was not in recess, because it had been using “sessions,” which lasted a few minutes in order to stay open during the holidays.  To read the full article and learn more about the Jones-Turner decision and the lessons learned from it for those defending against class certification motions, click here.  

UPDATE- The United States Justice Department issued an opinion recently, approving President Obama's appointment.

President Barack Obama has appointed former Ohio Attorney General Richard Cordray as the first director of the Consumer Financial Protection Bureau, according to an article posted on Bloomberg Businessweek.  An official announcement was made as Cordray and Obama visited a school in Shaker Heights this afternoon.  Cordray is scheduled to begin his new duties this week.

Bypassing the Senate Republicans' December 8 vote to block Cordray's nomination, much controversy remains regarding the process Obama used to install Cordray.  Read the full story here.  
 

Before the second session of the 112th Congress begins on January 3, a progressive advocacy group is hoping for a last-minute gift — the recess appointment of former Ohio Attorney General Richard Cordray to the Consumer Financial Protection Bureau (CFPB).  According to an article in The Columbus Dispatch, People for the American Way Executive Vice President Marge Baker said the new CFPB will not be "able to do significant portions of its work" if President Barack Obama does not override the Senate Republicans' December 8 filibuster that blocked Cordray's nomination. 

Created to protect consumers from lending and mortgage practices related to the financial crisis, several of the monitoring duties and newly created powers established under Dodd-Frank Act cannot be enforced without a director, as reported in our Dec 9 post. 

Read the full article. 

Raj Date, special advisor to President Obama, is effectively running the Consumer Financial Protection Bureau (CFPB) while it awaits a director, an article in ABA Banking Journal reports. The article offers tips for working with the CFPB, and discusses how the bureau's data-driven philosophy of regulation and collegial atmosphere make it a very different government regulatory body. For more, read the full story here.  

ALI-ABA is offering an a comprehensive one-day course on the Consumer Financial Protection Bureau (CFPB) and Dodd-Frank titled "The Consumer Financial Protection Bureau: A New Regulatory Word for Banks, Thrifts, Mortgage Lenders, Credit Card Companies, and Consumer Financial Service Companies."  The course will be offered in New York City on January 20, 2012 and will examine the regulatory powers of the CFPB, review the structuring of the bureau's operating divisions, and discuss CFPB interaction with other federal and state agencies charged with regulating the consumer financial marketplace. Representatives of the CFPB, other government agencies and private practitioners will be panelists and presenters. Click here for the online brochure. 

The Consumer Financial Protection Bureau (CFPB) recently launched the CFPB Ombudsman's Office in an effort to provide some comfort to the financial services companies that it now regulates.  Much like how most reputable large metropolitan newspapers provide their readers with an independent, impartial and confidential resource to voice concerns, the CFPB Ombudsman's Office will assist in the "resolution of individual and systematic issues" that financial services companies may have with the CFPB.  The current ombudsman is Wendy Kamenshine, formally an ombudsman and chief of programs, policy, strategy and research with the U.S. Department of Homeland Security. The Ombudsman's Office was established by the Dodd-Frank Act.

The holiday shopping season is in full gear and the lending industry is as well. The Columbus Dispatch reports that online payday lenders have increased their loans to consumers by nearly $3 billion last year. During the same period, storefront payday lenders in Ohio have decreased by about half.

Consumers who get payday loans, online or otherwise, are encouraged by all in the industry to look at their alternatives including short-term bank loans before selecting deciding on a payday loan to avoid late fees, eviction or other financial ramifications they might otherwise incur. 
 

Hence, it's a good time to review the CFPB's authority without a director. The Dodd-Frank Act provides that the Federal Reserve and the Treasury may perform certain functions in the absence of a director. Among other powers, the CFPB can:

• Write rules, orders and guidance regarding any of the consumer laws that transfer to the CFPB including proposing and finalizing certain rules;
• Conduct examinations and issue enforcement orders against banks, savings associations or credit unions with assets greater than $10 billion; 
• Replace the Federal Reserve, OCC, OTS, FDIC, NCUA, and HUD in any lawsuit or proceeding that was commenced by or against one of these agencies prior to July 21, 2011; and 
• Assume RESPA related authority and assume enforcement duties under the Federal Trade Commission.

But without a director, the CFPB cannot enforce "newly-created" powers established under Dodd-Frank. These newly-created powers derive from Sections 1022, 1024 and Title X, Subtitle C of Dodd-Frank and include:

• Prohibiting unfair, deceptive, or abuse actions or practices;
• Preparing and finalizing disclosure requirements and forms aimed at ensuring clear disclosures in the lending context; and
• Determining which non-depository institutions should be under the CFBP's authority and supervising these institutions. 

Notably, the CFPB is also receiving complaints about mortgage loans on its website and this practices will continue. But again, without a director, the CFPB can only bring enforcement actions against banks with more than $10 billion in assets for violations of the federal consumer financial laws for which Dodd-Frank transferred enforcement authority to the CFBP from other agencies. 

Richard Cordray's nomination for director of the Consumer Financial Protection Bureau was blocked earlier today by Senate Republicans with a final vote of 53-45. According to The Associated Press, President Obama spoke shortly after the vote stating that he does not see any reason why Cordray should not be confirmed by the Senate and that he will not let politics get in the way of allowing Cordray to begin working to protect consumers.
 
During a speech in Kansas yesterday, USA Today quoted the President as saying:  
 
"Every day we go without a consumer watchdog is another day when a student, or a senior citizen, or a member of our Armed Forces – because they are very vulnerable to some of this stuff – could be tricked into a loan that they can't afford – something that happens all the time. And the fact is that financial institutions have plenty of lobbyists looking out for their interests. Consumers deserve to have someone whose job it is to look out for them. And I intend to make sure they do. And I want you to hear me, Kansas: I will veto any effort to delay or defund or dismantle the new rules that we put in place."
 
The Consumer Financial Protection Bureau was created to protect consumers from many of the lending and mortgage practices that brought about the financial crisis. According to republicans, the agency has too much power and too little accountability.

According to a Market Watch press release, the Consumers Union called on the Senate today to confirm former Ohio Attorney General Richard Cordray as the director of the new Consumer Financial Protection Bureau (CFPB). The Senate is expected to vote on the Cordray nomination as early as this Thursday, December 8.

The effort to confirm Cordray has been held up in Congress by a group of Senators who have pledged to oppose any nominee to head the new consumer watchdog. The Senators opposing the Cordray nomination are seeking changes to the CFPB that would weaken its ability to protect consumers. Opposition to the nomination is preventing the CFPB from exercising its full powers to protect consumers, according to Consumers Union.