Consumer Compliance Outlook > 2019 > Second Issue 2019

Consumer Compliance Outlook: Second Issue 2019

News from Washington: Regulatory Updates

The Consumer Financial Protection Bureau (Bureau) issues its spring 2019 regulatory agenda. 

On May 22, 2019, the Bureau released its spring 2019 regulatory agenda, as part of the spring 2019 Unified Agenda  of Federal Regulatory and Deregulatory Actions. The Bureau’s spring 2019 agenda lists the regulatory matters that the agency reasonably anticipates having under consideration from May 1, 2019, to April 30, 2020, including initiatives to implement statutory requirements and to address the potential sunset of statutory and regulatory provisions. It includes:

• Rulemaking to implement the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, such as extending the Truth in Lending Act (TILA)/Regulation Z ability-to-repay requirements and related civil liability provisions to residential “Property Assessed Clean Energy” (PACE) loans and providing a TILA/Regulation Z exemption from higher-priced mortgage loan escrow account requirements to certain creditors with assets of $10 billion or less that meet other specific criteria.
• Rulemaking to implement the requirements of the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank Act), such as revisiting its requirement to engage in Equal Credit Opportunity Act/Regulation B rulemaking to require financial institutions to collect, report, and make public any information about credit applications from women-owned, minority-owned, and small businesses.
• Rulemaking in connection with the July 2020 expiration of an exception to Electronic Fund Transfer Act/Regulation E international remittance transfer disclosure requirements, which allows insured depository institutions and insured credit unions to estimate certain pricing information.

Certain other Bureau rulemaking activities referenced in its spring 2019 agenda relating to the Fair Debt Collection Practices Act, the Home Mortgage Disclosure Act (HMDA)/Regulation C, and payday, vehicle title, and certain high-cost installment loans, are among the items discussed next.

The Bureau issues a Notice of Proposed Rulemaking (NPR) to implement the Fair Debt Collection Practices Act (FDCPA). 

On May 21, 2019, the Bureau published an NPR in the Federal Register to implement the FDCPA. Congress enacted the FDCPA in 1977 in “response to ‘abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors.’’’ However, before Congress enacted the Dodd–Frank Act in 2010, the FDCPA prohibited the issuance of implementing regulations. The Dodd–Frank Act amended the statute to provide discretionary rulemaking authority to the Bureau (15 U.S.C. §1692l(d)). To implement the FDCPA, the proposal would, among other things:

• Provide model forms that describe how consumers can respond to debt collection notices and clarify the statute’s requirements for disputing debts;
• Clarify the statute’s requirements for debt collector communications, including limiting the number of calls that debt collectors can make to a particular person;
• Specify additional information that collectors must provide about a debt when communicating with consumers;
• Prohibit suits and threats of suit on time-barred debts; and
• Require debt collectors to communicate with a consumer about a debt before reporting it to a consumer reporting agency.

The Bureau seeks public comment under the Regulatory Flexibility Act (RFA) on the economic effect of its overdraft rule on small entities. 

On May 15, 2019, the Bureau issued a notice  under §610 of the RFA seeking comments on the Regulation E overdraft rule (12 C.F.R. §1005.17).  Section 610 of the RFA requires federal administrative agencies to publish a plan for the periodic review of the rules issued by the agency that have a significant economic impact on a substantial number of small entities. Under the plan, the Bureau intends to initiate a §610 review approximately nine years after a rule’s publication and complete each review within 10 years of a rule’s publication in the Federal Register.

In 2009, the Federal Reserve Board (Board) issued the overdraft rule to prohibit financial institutions from imposing overdraft fees for automated teller machine (ATM) and one-time debit card transactions unless their customers opted in for the service after receiving a required disclosure about the terms of the overdraft program. As part of its §610 review of the overdraft rule, the Bureau sought comment on: (1) the nature and extent of the economic effects of the overdraft rule on small entities; (2) how the Bureau could reduce the costs of the rule on small entities; and (3) any other relevant information. The comment period on the overdraft rule closed on July 1, while the comment period of the Bureau’s §610 review plan closed on July 15.

The Federal Reserve Board (Board) issues Supervision and Regulation (SR) Letter 19-6 transmitting a new Federal Financial Institutions Examination Council (FFIEC) policy statement on developing Reports of Examination (ROE). 

On March 11, 2019, the Board issued SR Letter 19-6 transmitting the FFIEC’s new Interagency Statement on the Report of Examination, which replaces the 1993 Interagency Policy Statement on the Uniform Core Report of Examination applicable to commercial bank exams. The new policy statement uses a principles-based approach to developing ROEs to better promote consistency while providing supervisors the flexibility to tailor their assessments as appropriate for financial institutions’ sizes, activities, risk profiles, and financial and managerial conditions.

The Bureau proposes to exempt more lenders from HMDA’s data collection and reporting requirements and separately issues an advanced notice of proposed rulemaking (ANPR) seeking feedback on the costs and benefits of reporting the expanded data set required by the Bureau’s rulemaking in 2015 (2015 HMDA Rule). 

On May 13, 2019, the Bureau issued a notice of proposal  NPR to increase the loan thresholds used to determine when lenders are covered by HMDA and must report data on closed-end loans or open-end lines of credit. The proposal seeks to increase the loan threshold used to determine when a lender must collect and report data on closed-end mortgage loans (in addition to the asset size and geographic criteria) from the current 25 to either 50 or 100 closed-end mortgage loans in each of the two prior years. The Bureau proposes the 50 or 100 loan threshold in the alternative and seeks comment on which threshold, or any higher threshold, would be optimal.

The Bureau finds that increasing the closed-end mortgage threshold to 50 loans would relieve approximately 745 depository institutions from HMDA’s collection and reporting requirements, and increasing it to 100 loans would relieve approximately 1,682 depository institutions of the 4,263 reporters currently covered by HMDA. The proposal would also extend the current reporting threshold for open-end lines of credit, which is currently set at 500 and scheduled to expire on January 1, 2020, until January 1, 2022, and then permanently set the threshold at 200 open-end lines of credit after that date. The Bureau proposes an effective date of January 1, 2020.

The ANPR solicits information on whether to make changes to data points added or revised by the Bureau’s 2015 HMDA Rule. The Bureau seeks this feedback to confirm, in part, that the data requirements established by the 2015 HMDA rule “appropriately balance the benefits and burdens associated with data reporting.” This information will help the Bureau determine whether the burden associated with the collection and reporting of certain data is justified by the benefit of having such data. The ANPR also seeks comment on whether to continue coverage and reporting of business or commercial-purpose loans made to a nonnatural person (for example, a corporation, partnership, or trust) and secured by a multifamily dwelling.

The Bureau seeks comment on the following new data points added by the Dodd–Frank Act:

• Property address
• Universal loan identifier
• Age
• Rate spread for all loans
• Credit score
• Total loan cost or total points and fees
• Prepayment penalty term
• Loan term
• Introductory rate period
• Nonamortizing features
• Property value
• Application channel
• Mortgage loan originator identifier.

The Bureau also seeks comment on data points added pursuant to its discretional authority:

• Reasons for denial
• Origination charges
• Discount points
• Lender credits
• Interest rate
• Debt-to-income and combined loan-to-value ratio
• Manufactured home
• Secured property type
• Land property
• Multifamily affordable units
• Automated underwriting system
• Reverse mortgage, open-end line of credit, or business or commercial purpose flags.

Last, the Bureau sought comment on the revised data points requiring additional information:

• Loan purpose
• Occupancy type
• Ethnicity
• Race
• Legal entity identifier.

The comment period for the NPR closed on June 12, 2019, while the comment period for the ANPR closed on July 8, 2019.

The Bureau issued a rulemaking proposal to eliminate the mandatory underwriting provisions of its final rule regulating payday and other certain loans (payday loan rule) and a final rule to delay the compliance date of certain provisions of the payday rule. 

On February 14, 2019, the Bureau issued a rulemaking proposal  to rescind the mandatory underwriting provisions of its November 2017 final rule governing payday, vehicle title, and certain high-cost installment loans (payday loan rule). Under the mandatory underwriting provisions, making a covered short-term or longer-term balloon payment loan, including a payday or vehicle title loan, without reasonably determining that a consumer has the ability to repay the loan would be considered an unfair and abusive practice. The comment period closed on May 15, 2019.

Because the Bureau is reconsidering the payday loan rule, it also issued a final rule to delay the compliance date for the mandatory underwriting provisions from August 19, 2019, to November 19, 2020. The Bureau clarified that the delay would not affect the payment provisions of the payday loan rule, which are still subject to the August 19, 2019, compliance date. Under these provisions, after a lender makes two consecutive withdrawal attempts from the consumer’s financial account to repay the loan, and those attempts fail, the lender cannot attempt another withdrawal from the same account unless the lender obtains the consumer’s new and specific authorization to make further withdrawals. However, the payday loan rule is the subject of ongoing litigation, and a district court has stayed the compliance date for the entire rule until further action by the court.