The following articles cover recent news and updates regarding the Consumer Financial Protection Bureau (CFPB).
CUNA Presses CFPB on International Remittances Rule
Credit unions will be significantly hurt by the new Consumer Financial Protection Bureau’s (CFPB) rule on international remittance transfers set to take effect February 7, 2013 and call on the CFPB to improve the rule. That was the message that the CUNA Credit Union Remittances Working Group assembled at the request of CFPB Director Cordray re-emphasized to him October 18.
In an hour-long meeting with the Director, at CFPB headquarters across from the White House, the group raised four major concerns:
• The exemption level of 100 transfers a year does not make sense;
• The provisions that place liability for problems caused by the sender are inappropriate;
• The cost and burdens of compliance are tremendous and will affect credit unions and their members; and
• The complex disclosures, including on foreign taxes, are burdensome.
Those participating in person in the meeting were: Faith Anderson, American Airlines FCU, Jill Bennett, First Carolina FCU, Fred Fernandez, Bethex FCU, Bobi Shields-Farrelly, United Nations FCU, and Mary Dunn, Senior Vice President and Deputy General Counsel, who also organized the meeting and participated on behalf of CUNA. Additional credit union officials by phone were, Shirley Bhutto, Saint Mary’s Bank, Greg Badovinac, Western FCU, Maria Martinez, Border FCU, Francisco Nebot, SchoolsFirst FCU and Gregg Stockdale, 1st Valley CU.
At the request of Director Cordray, CUNA is providing a memo to the CFPB on how the official staff commentary to the rule could be modified to allow more credit unions, possibly, to have some relief from the rule. While the CFPB Director is disinclined to amend the rule, Director Cordray said he would consider the CUNA memo which we will provide early next week. He said they will address the liability issues and are also looking for ways to provide some relief on the foreign tax disclosure issues. He asked for any input CUNA might have on these two points. It is unclear how much or whether the impacts of the final rule will be modified to help credit unions. However, the credit union officials presented their concerns very well and the Director, engaging with all credit union officials participating, said he will review the follow-up materials from CUNA. We will keep you posted on all developments regarding the final rule.
Consumer Financial Protection Bureau Should Substantially Improve its Proposal on Mortgage Loan Originator Compensation
In a letter filed on October 15, the Missouri Credit Union Association (MCUA) is urging the CFPB to make a number of substantial changes to its mortgage loan originator compensation proposal to lessen the impact on credit unions. MCUA has a number of major concerns with the CFPB's proposal and is seeking significant changes.
As discussed in this letter, MCUA urges the CFPB to:
• Substantially alter the loan originator qualification requirements that are not specifically required by the Dodd-Frank Act;
• Eliminate the use of “proxy” factors to restrict compensation to loan originators;
• Refrain from expanding recordkeeping requirements;
• Revise the restrictions on upfront points and fees; and
• Provide some flexibility on the use of arbitration clauses.
If this proposal is adopted without significant changes, credit unions will have to shoulder greater regulatory burdens and costs. These costs far outweigh any marginal benefits that credit union members might achieve as a result of this proposal. MCUA's comment letter is available here.
CFPB Issues Guidance on Disciplinary Action Reporting for Mortgage Loan Originators (MLOs)
On October 18, the CFPB issued guidance stating that disciplinary action functionality will soon be added to the Nationwide Mortgage Licensing System and Registry (NMLSR). On October 22, 2012, the functionality of the federal registration component of the NMLSR will be updated to accommodate the collection of information about certain disciplinary, enforcement, and other actions against a mortgage loan originator. This information is required to be reported by each MLO or on behalf of the MLO by financial institutions that employ the MLO under the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act).
Under the current functionality of the Federal Registry on the NMLSR, MLOs only disclose whether they have been subject to one of the required publicly adjudicated disciplinary and enforcement actions as required under the SAFE Act. However, the new functionality will require MLOs to provide additional information regarding the disclosed actions. Additionally, state regulators will be able to link state regulator actions to an MLO’s Federal registration. For a detailed listing of the new functionality and reporting requirements, click here.
CFPB Issues Report on Student Loan Servicing for Servicemembers & Annual Student Loan Ombudsman Report
Also yesterday, the CFPB issued a report about the servicing obstacles that servicemembers face in paying off student loan debt. In the report, the CFPB notes that servicemembers are having problems getting their lenders to correctly apply their Servicemember Civil Relief Act (SCRA) rights. The report details specific examples cited by borrowers with these types of problems, and the CFPB has also developed a Guide for Servicemembers with Student Loans in connection with the issuance of this report, which details information on repayment options for borrowers. For a complete copy of the report, click here.
On Tuesday, the CFPB also issued the annual report of the CFPB Student Loan Ombudsman. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is required to publish an annual report and make appropriate recommendations to the Secretary of the Treasury, the Director of the CFPB, the Secretary of Education, and Congress. This is the first annual report issued by the CFPB in this area. For a complete copy of the report, click here.
CFPB’s Proposal to Amend Regulation B’s Appraisal Requirements
On October 19, the Missouri Credit Union Association (MCUA) filed a comment letter with the CFPB and NCUA in response to an interagency appraisal for proposed rule to amend Regulation B, Equal Credit Opportunity Act (ECOA), to require creditors to provide certain loan applicants with a copy of the appraisal and valuation. Currently, Regulation B requires a creditor to provide the applicant with a copy of the appraisal report only upon request.
As stated in the letter, we have concerns with certain aspects of the proposal, including the commentary’s “examples of valuations” that appear to include items that are beyond the statutory definition of “valuation.” The CFPB should limit the scope of required information to the appraisal and valuation, and not the supplemental information, as proposed. Not only is such supplemental information beyond the directives of the statute, but also we believe it will be of little, to no, use to the applicant and is likely to cause consumer confusion.
The proposal would remove the current exemption for federal credit unions from the appraisal delivery requirements of Regulation B, which was permitted because NCUA has a similar rule in place that requires federal credit unions to provide applicants with a copy of the appraisal report upon request. We understand that with the amendment to ECOA requiring the compulsory provision of a copy of the appraisal and valuation, the NCUA’s current rule no longer satisfies the requirements of amended ECOA. Therefore, we urge the CFPB to work with NCUA before finalizing this rule in order to assess how the final rule may be able to retain some of the flexibility for federal credit unions that is provided currently by the exemption.
CUNA Comments on Interagency Proposal on Appraisals for Higher-Risk Mortgage Loans
Also on Friday of last week, CUNA filed a letter with the CFPB and NCUA in response to an interagency proposal on appraisals for “higher-risk mortgage loans,” that would amend Regulation Z to implement provisions of the Truth in Lending Act (TILA), as amended by the Dodd-Frank Act. In general, the proposal would prohibit a creditor from making a “higher-risk mortgage loan” unless the consumer obtained a written appraisal from a certified or licensed appraiser who conducted an interior inspection.
The proposal provides that a “higher-risk mortgage loan” is a closed-end consumer credit transaction secured by the consumer’s principal dwelling with an annual percentage rate (APR) that exceeds the average prime offer rate (APOR) for a comparable transaction. The CFPB’s 2012 TILA-RESPA Proposal contains a simpler and more inclusive finance charge calculation for closed-end credit. In light of the uncertainty regarding whether the CFPB will adopt such a finance charge and the potential impact of that change, the CFPB has proposed two alternative versions of what constitutes a “higher-risk mortgage loan,” one that would use APR and the other a less-inclusive TCR (transaction coverage rate).
We continue to analyze the consequences of the 2012 TILA-RESPA Proposal and the positive and negative effects of using the TCR or APR as a baseline for determining a “higher-risk mortgage loan.” However, we do not support the proposal’s use of the TCR for determining whether a loan is a “higher-risk mortgage loan,” as we believe use of a separate rate and calculation solely for making such a determination is likely to lead to confusion among consumers and within the industry.
We strongly oppose the proposed requirement to obtain a second, additional appraisal in instances where the property is being resold at a higher price within a 180-day period. This requirement will have unintended consequences. For example, some creditors may stop offering “higher-risk mortgage loans” due to the cost and burden associated with the additional appraisal requirement. Unfortunately, such a result would reduce the availability of credit to riskier borrowers.
CFPB Proposes to Amend Regulation Z to Remove Independent Ability-To-Pay Requirement for Consumers Who Are at Least 21
On Wednesday, the CFPB proposed a rule to amend Regulation Z to make it easier for spouses or partners who do not work outside of the home to qualify for credit cards. The proposal would allow a stay-at-home spouse or partner to rely on shared income from his or her spouse or partner when applying for a credit card account.
Regulation Z currently requires that issuers consider the consumer’s independent ability to pay, regardless of the consumer’s age. The CFPB’s proposal would allow credit card applicants who are 21 or older to rely on third-party income to which they have a reasonable expectation of access. Although the proposal applies to all applicants regardless of marital status, the CFPB expects that it will ease access to credit particularly for stay-at-home spouses or partners who have access to a working spouse or partner’s income.
The CFPB will accept comments on the proposal for 60 days following publication in the Federal Register.