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255 members of Congress seek TILA/RESPA integrated disclosure rule grace period

Posted in Mortgages

A bipartisan group of 255 members of Congress have sent a letter to the CFPB seeking a grace period for enforcement of  the TILA-RESPA Integrated Disclosure (TRID) rule which becomes effective on August 1, 2015.  They ask for the grace period to apply to “those seeking to comply in good faith from August 1st through the end of 2015.”

In March 2015, the CFPB received a similar request from  a group of 17 trade associations and organizations.  Last month, a bipartisan bill was introduced in the House to provide a temporary safe harbor from enforcement of the TRID rule.

In their letter, the 255 members of Congress note that the TRID rule does not provide lenders an opportunity to start using the new disclosures before the August 1 effective date, and that the inability of lenders to test their systems and procedures ahead of time increases the risk of unanticipated disruptions on August 1.  They also observe that during the grace period, industry can provide data to the CFPB on issues that arise to allow the CFPB and industry to work together to improve the TRID rule’s effectiveness.

Trade groups urge CFPB to solicit public comments on arbitration study

Posted in Arbitration

Five leading financial services industry trade groups have sent a letter to the CFPB urging it to solicit public comments on the final results of its arbitration study before deciding whether to initiate a rulemaking proceeding pursuant to Section 1028(b) of the Dodd-Frank Act.  The groups are the American Bankers Association, American Financial Services Association, Consumer Data Industry Association, Financial Services Roundtable, and U.S. Chamber of Commerce.

The letter formalizes a request made by several of these groups’ representatives to CFPB staff during meetings initiated by the CFPB seeking reaction to the study.  The reasons the groups give in support of a public comment period are:

  • The study’s 739-page length prevents anyone from providing other than generalized reactions during the one to two hour roundtable sessions the CFPB has convened to obtain comment.
  • The CFPB has only engaged in limited outreach regarding the study, inviting selected entities and individuals to its meetings soliciting reactions to the study.  A public comment period would provide an opportunity for the CFPB to receive comments from all interested persons, including academics who have studied the relevant issues but who have not been asked to comment by the CFPB.
  • Soliciting public comment “would at least start the process of compensating for the extreme lack of transparency and refusal to solicit public participation that characterized the Bureau’s study process.”  The trade groups note that the CFPB issued only one Request for Information in April 2012 which sought public comment on the topics that it should address in the arbitration study.  They state that the CFPB “never informed the public of the topics it had decided to study and sought public comment on them—even though a number of commenters suggested that the Bureau utilize that procedure.  The Bureau never convened public roundtable discussions on key issues, as many other agencies routinely do.  And the Bureau never sought public input on its tentative findings.”  The trade groups assert that a public comment period would provide “a valuable opportunity for the Bureau to receive additional analysis and empirical information that it refused to solicit during the study process.”
  • Soliciting public comments would allow the CFPB “to inform itself of the significant defects in the study’s analysis—defects that otherwise will fatally taint any proposed rule that the Bureau might propose based on the study.”  The letter provides examples of various shortcomings found by the groups.
  • Soliciting public input would be consistent with the CFPB’s rulemaking approach in other contexts, such as debt collection and prepaid cards, where the CFPB has issued advance notices of proposed rulemaking.

The trade groups also state that a public comment period would not delay rulemaking because the CFPB must convene a SBREFA panel before initiating a rulemaking.  They assert that the CFPB’s compliance with SBREFA could occur in parallel with a 60-day comment period.

CFPB Spring 2015 agenda: significant rulemaking actions on the horizon

Posted in CFPB Rulemaking

Just in time for the holiday weekend, the CFPB released its Spring 2015 rulemaking agenda last Friday.  The agenda sets the following timetables:

Prepaid financial products.  In November 2014, the CFPB issued a proposed rule for prepaid financial products, including general-purpose reloadable prepaid cards and certain digital and mobile wallets.  The agenda indicates that the CFPB expects to issue a final rule in January 2016.

Payday and deposit advance loans. In March 2015, the CFPB issued proposals it is considering for payday (and other small-dollar, high-rate) loans in preparation for convening a small business review panel required by the Small Business Regulatory Enforcement Fairness Act (SBREFA) and Dodd-Frank.  The agenda states that the CFPB plans to issue a Notice of Proposed Rulemaking “later in 2015 after additional outreach and analysis.”

Overdrafts.  The CFPB issued a June 2013 white paper and a July 2014 report on checking account overdraft services.  In the agenda, the CFPB states that it “plans to release the results of further studies on overdraft programs and their effects on consumers.  The CFPB is also considering whether rules governing overdraft and related services are warranted, and, if so, what types of rules would be appropriate.”  Although the CFPB’s last agenda set a July 2015 date for further action, the new agenda gives an October 2015 date for further prerule activities.

Larger participants.

  • Auto finance.  In September 2014, the CFPB issued a proposed “larger participant” rule for the auto finance market.  The agenda gives a June 2015 date for issuance of a final rule.
  • Installment and auto title loans.  The agenda confirms that the CFPB is considering one or more new “larger participant” rules for “consumer installment loans and vehicle title loans.”  It sets a January 2016 date for prerule activities.  (The confirmation follows reports at the 2015 PLI Annual Consumer Financial Services Institute held in April 2015 that installment lending was the next non-bank industry that might be subject to a larger participant rule.)

Debt collection.  In November 2013, the CFPB issued an Advance Notice of Proposed Rulemaking concerning debt collection.  The agenda indicates that further prerule activities, which are expected to involve the convening of a SBREFA panel, will occur in December 2015.  The CFPB had indicated in its prior agenda that further prerule activities would occur in April 2015.

Arbitration.  In December 2013, the CFPB issued preliminary results of its study of consumer arbitration as mandated by Section 1028 of the Dodd-Frank Act, and in March 2015, it issued final study results.  The agenda states only that the CFPB “is considering whether rules governing pre-dispute arbitration agreements are warranted, and, if so, what types of rules would be appropriate” and gives a September 2015 for further prerule activities.

Home Mortgage Disclosure Act.  In July 2014, the CFPB issued a proposed rule to implement Dodd-Frank Act amendments to HMDA.  The agenda indicates that the CFPB expects to issue a final rule in August 2015.

Mortgage rules.  In February 2015, the CFPB issued a proposal to modify certain mortgage loan requirements for small creditors, including those that operate predominantly in “rural or underserved” areas.  The agenda sets a September 2015 date for a final rule.

In November 2014, the CFPB issued a proposal to amend various provisions of its mortgage servicing rules.  The agenda has a March 2016 date for issuance of a final rule.



Ballard attorneys author article on auto finance and disparate impact

Posted in Auto Finance, Fair Credit

In several blog posts and legal alerts, we have previously written about disparate impact and auto finance.  Together with our colleague, Jonathan Selkowitz, we have recently written an article on “Auto Finance and Disparate Impact: Substantive Lessons Learned from Class Certification Decisions.”

The article, which was published in the May 1, 2015 edition of the Consumer Financial Services Law Report, discusses the substantive implications that class certification appellate decisions may have for disparate impact pricing claims alleged against assignees of motor vehicle retail installment sale contracts.


58 members of Congress urge CFPB to ban consumer arbitration

Posted in Arbitration

Senator Al Franken and 57 other members of Congress signed a letter sent to Director Cordray last week urging the CFPB “to move forward quickly to use its authority under the Dodd-Frank Act to issue strong rules to prohibit the use of forced arbitration clauses in financial contracts and give consumers a meaningful choice after disputes arise.”

In March 2015, the CFPB delivered to Congress the final results of its empirical study of consumer arbitration as mandated by Section 1028 of the Dodd-Frank Act.  The letter relies on what it calls a “substantial bedrock of evidence” in the study showing “the devastating effects of forced arbitration on tens of millions of consumers.”

The letter’s characterization of the study is not surprising since it is consistent with the CFPB’s negative characterization of arbitration in announcing the study’s results as well as the similar characterization in numerous media reports about the study.  However, as we have previously commented, the data in the CFPB’s study conclusively demonstrates that arbitration is faster, cheaper and more beneficial for consumers than litigation, including class action litigation.  This leads us to question how carefully Senator Franken and his colleagues read the study before sending their letter.

Senator Perdue renews attempt to change CFPB funding

Posted in CFPB General

Republican Senator David Perdue has introduced a bill, S.1383 entitled the ‘‘Consumer Financial Protection Bureau Accountability Act of 2015,” that would make the CFPB subject to the congressional appropriations process.  Currently, pursuant to Dodd-Frank, the CFPB is entitled to receive automatic annual funding through transfers from the Fed that are capped at a fixed percentage of the Fed’s total 2009 operating expenses.

The introduction of the bill follows Senator Perdue’s attempt in March 2015 to make the CFPB subject to the congressional appropriations process through an amendment to the Senate’s 2015 Budget Resolution.

U.S. Dept. of Education proposes new restrictions on campus financial products

Posted in Campus Financial Products

The U.S. Department of Education has issued proposed revisions to its Title IV Higher Education Act (HEA) cash management rules that include significant new restrictions on financial products used to disburse credit balance funds to students.  Credit balances result when the amount of Title IV HEA program funds credited to a student’s account exceeds the amount of tuition and fees, room and board, and other allowed charges.  The proposal is the result of a negotiated rulemaking process, which was actively supported by the CFPB.  The CFPB made a presentation to the negotiated rulemaking committee in which it provided its views on financial products marketed to students.

Among the key restrictions in the proposal are a prohibition against a college requiring students or parents to open or obtain an account or access device offered by or through a specific financial institution; a requirement for colleges to provide a list of account options that students and parents can choose from to receive program funds in which options are presented in a neutral manner and the student’s or parent’s preexisting account is shown prominently as the first and default option; and a prohibition on overdraft and point-of-sale fees in arrangements between colleges and third-party servicers.  Comments on the proposal are due on or
before July 2, 2015.  For more information on the proposal, see our legal alert.



FDIC to hold teleconference on CFPB mortgage rules

Posted in Mortgages

The FDIC’s Division of Depositor and Consumer Protection will hold a teleconference on
May 21, 2015 on implementation of the CFPB’s mortgage rules.  FDIC staff will share observations made by FDIC examiners during initial examinations since the rules became effective in January 2014.  In addition, FDIC staff will highlight a number of practices currently used by some institutions to ensure compliance with the mortgage rules.

Democrats release alternative regulatory relief bill

Posted in Mortgages, Privacy

Democrats on the Senate Banking Committee have released a regulatory relief bill intended to be an alternative to the bill released by Senator Richard Shelby.  While Senator Shelby’s bill is entitled the “Financial Regulatory Improvement Act of 2015,” the alternative bill is entitled the “Community Financial Institution Regulatory Relief and Consumer Protection Act of 2015.”

The bill released by Democrats includes the same provision as Senator Shelby’s bill directed at the annual financial privacy notice required by the Gramm-Leach-Bliley Act (GLBA).  Like Senator Shelby’s bill, the alternative bill would amend the GLBA to create an exception under which a financial institution would not have to deliver an annual financial privacy notice if it satisfied certain conditions. Key among such conditions is that the institution has not changed its policies and practices with respect to sharing nonpublic personal information from those disclosed in its most recent annual financial privacy notice.

The alternative version would also amend the Consumer Financial Protection Act to add various provisions of the Servicemembers Civil Relief Act to the “enumerated consumer laws” that can be enforced by the CFPB.  In addition, it would amend the TILA ability to repay provision by creating a safe harbor for mortgage loans that meet certain conditions and are held in portfolio by banks and credit unions with less than $10 billion in assets.  This safe harbor is substantially narrower than the safe harbor that Senator Shelby’s bill would create.

Senator Shelby’s bill is scheduled for markup on May 21, 2015.

CFPB launches financial coaching initiative

Posted in Financial Literacy

The CFPB has announced the launch of its Financial Coaching Initiative which targets
recently-transitioned veterans and economically vulnerable consumers. (The CFPB first announced its plans for launching the program in 2013, at which time it was expecting a 2014 launch date.)

The CFPB is calling the Financial Coaching Initiative its first program paid for by the CFPB’s Civil Penalty Fund (CPF).  When the CFPB collects civil penalties in an enforcement action, it is required to deposit them in the CPF.  The funds are first to be used to compensate consumers who were harmed by the activities for which civil penalties were imposed.  If funds remain after the CFPB has provided full compensation to all eligible victims or if payments to victims are impracticable because victims cannot be located or it is otherwise impracticable to pay victims, the CFPB can use the funds for consumer education and financial literacy programs.

In its announcement, the CFPB states that the coaches hired for the program have experience working with the populations they will serve, are trained in financial coaching techniques, and will be accredited by the Association for Financial Counseling and Planning Education.  In partnership with the Department of Labor, and after a nationwide search, the CFPB selected 60 partner organizations from around the country to host the professional financial coaches.  The organizations include various nonprofits, as well as Department of Labor American Job Centers, that provide resources to help people find jobs, identify training programs, and gain job skills.  According to the CFPB, all of the nonprofits it selected to host financial coaches for economically vulnerable consumers also provide services that complement financial coaching, such as job training and education, social, and housing services.