Consumer Compliance Outlook: First Issue 2016

News from Washington: Regulatory Updates

The Board of Governors of the Federal Reserve (Board) repeals Regulation AA. External Link

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) repealed the Board’s rulemaking authority to write rules that address unfair or deceptive acts or practices, which were contained in the Board’s Regulation AA. The Dodd-Frank Act provides the Consumer Financial Protection Bureau (CFPB) separate authority to promulgate rules to identify and prohibit unfair, deceptive, or abusive acts or practices. The legislative repeal of the Board’s rulemaking authority nullified the provisions in Regulation AA, including the Board’s “credit practices rule.” Regulation AA prohibited banks from using certain practices to enforce consumer credit obligations and from including these practices in their consumer credit contracts. In 2014, the Board joined the CFPB, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) in issuing interagency guidance, stating that, depending on the facts and circumstances, a depository institution might violate the prohibition against unfair or deceptive practices in the Federal Trade Commission (FTC) Act and the Dodd-Frank Act if it engages in the practices prohibited by the former credit practices rule.

The Board proposes to repeal Regulation C. External Link

The Dodd-Frank Act transferred rulemaking authority for several federal consumer protection statutes, including the Home Mortgage Disclosure Act (HMDA), from the Board to the CFPB. The Board implemented the HMDA through Regulation C, 12 C.F.R. Part 203. Following the enactment of the Dodd-Frank Act, the CFPB issued an interim final rule creating its own Regulation C; see 12 C.F.R. Part 1003. Because the Board no longer has legal authority to issue implementing regulations for the HMDA, it is proposing to repeal its Regulation C, 12 C.F.R. Part 203. The comment period closed April 22, 2016.

The CFPB seeks comment on changing the threshold for requiring resubmission of mortgage data under the HMDA. External Link

On January 12, 2016, the CFPB published a notice in the Federal Register seeking public comment on whether to change its HMDA Resubmission Guidelines for data that will be submitted under the CFPB’s recent amendments to Regulation C. Under current guidelines, institutions reporting fewer than 100,000 loans or applications on the HMDA loan application register (LAR) should be required to correct and resubmit HMDA data when errors are found in (1) 10 percent or more of the HMDA LAR sample entries or (2) 5 percent or more of the sample entries within an individual data field. Institutions reporting 100,000 or more entries on the HMDA LAR should be required to correct and resubmit HMDA data when errors are found in (1) 4 percent or more of the HMDA LAR sample entries or (2) between 2 percent and 4 percent of the sample entries within an individual data field. The request for comment lists 20 questions on which the CFPB is seeking comment, such as whether it should continue to use error percentage thresholds to determine the need for data resubmission or whether, if the thresholds are retained, they should be calculated differently than they are currently. The deadline for submitting comments was March 16, 2016.

Federal banking agencies release annual Community Reinvestment Act (CRA) asset-size threshold adjustments for small and intermediate small institutions. External Link

On December 22, 2015, the federal banking agencies announced the annual adjustment under the CRA to the asset-size thresholds used to define small bank, small savings association, intermediate small bank, and intermediate small savings association regulations. Financial institutions are evaluated under different CRA examination procedures based upon their asset-size classification. Institutions meeting the small and intermediate small institution asset-size thresholds are not subject to the reporting requirements that apply to large banks and savings associations. The annual adjustment to asset-size thresholds is based on the change in the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Based on the .42 percent decline in the average of the CPI-W for 2015, the 2016 thresholds for small and intermediate small institutions are as follows:

The adjustments were effective January 1, 2016.

Federal banking agencies seek comment on interagency effort to reduce regulatory burden under the Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) of 1996. External Link

On December 23, 2015, the Board, the FDIC, and the OCC published their fourth and final notice in the Federal Register under the EGRPRA seeking comment on reducing regulatory burden through potential amendments to regulations pertaining to rules of procedure, safety and soundness, and securities. The regulations on which the agencies were seeking comment include interagency standards for appraisal management companies. They also invited the public to comment on any other agency final rule not included in a previous EGRPRA Federal Register notice. The comment period closed March 22, 2016. Additional information on the EGRPRA is available on the agencies’ EGRPRA website. External Link

Agencies announce dollar thresholds in Regulations Z and M for exempt consumer credit and lease transactions. External Link

On November 25, 2015, the Board and the CFPB announced the dollar thresholds that will apply under Regulation Z (Truth in Lending Act (TILA)) and Regulation M (Consumer Leasing Act) for determining exempt consumer credit and lease transactions in 2016. The annual adjustment is based on the annual percentage increase in the CPI-W. If the CPI-W average has not increased, the Board and the CFPB maintain the exemption threshold from the prior year. Transactions at or below the thresholds are subject to the protections of the regulations. Because the CPI-W average declined, the agencies are maintaining the 2015 threshold of $54,600 effective January 1, 2016. Accordingly, the protections of the TILA and the Consumer Leasing Act generally will apply to consumer credit transactions and consumer leases of $54,600 or less in 2016. Note, however, that private education loans and loans secured by real property (such as mortgages) are subject to the TILA regardless of the loan amount.

Agencies announce the threshold for smaller loan exemption from appraisal requirements for higher priced mortgage loans. External Link

On November 25, 2015, the Board, the CFPB, and the OCC announced that the threshold exempting loans from special appraisal requirements for higher priced mortgage loans during 2016 will remain at $25,500. As with the Regulation Z and Regulation M thresholds mentioned in the previous item, adjustments are made annually to the threshold based on the change in the average of the CPI-W. Because the CPI-W average declined, the threshold will remain the same effective January 1, 2016. Special appraisal requirements for higher priced mortgage loans include a requirement that creditors obtain a written appraisal based on a physical visit to the home’s interior before making a higher priced mortgage loan. The rules contain an exemption for loans of $25,000 or less, with that threshold also adjusted annually to reflect increases in the CPI-W average.

The Department of Defense (DoD) expands coverage of the Military Lending Act (MLA). PDF External Link

On July 22, 2015, the DoD issued a final rule amending its regulation implementing the MLA. The DoD amended the regulation to extend the protections of the MLA to a wider range of closed-end and open-end credit products, including credit cards. The amended MLA regulation generally applies to all consumer credit, other than home-secured credit and loans, to finance the purchase of motor vehicles and other consumer goods that are secured by the purchased item. Extensions of credit covered by the rule would be subject to a 36 percent rate cap, based on the military annual percentage rate (MAPR). Among a range of other amendments, DoD’s final rule modifies the following: The fees that must be included when calculating the MAPR, the optional safe harbor provisions for creditors to determine whether consumers are entitled to MLA protections, and MLA disclosure requirements. The compliance date for the amended rule is October 3, 2016, but for credit card accounts, the compliance date is October 3, 2017 (which may be extended by one year at the DoD’s option). DoD’s final rule was issued following required consultation with the Board, the CFPB, the FDIC, the FTC, the National Credit Union Administration, the OCC, and the Department of the Treasury. The Federal Register notice is available online. PDF External Link