CFPB – Page 6 – Consumer Financial Services Watch

Non-Direct Auto Lending: Is the CFPB Asserting Jurisdiction over the Capital Markets?

Nov 18 2014

The capital markets should look closely at the proposed rule of the Consumer Financial Protection Bureau (the “CFPB”) to supervise certain larger non-bank automobile finance companies because of the CFPB’s assertion of broad authority over large purchasers of auto loans and auto leases. The CFPB’s interest in indirect auto lending is not new. The proposed rule, however, purports to give the CFPB jurisdiction over any large purchaser of auto loans and auto leases, regardless of whether the purchaser had any direct involvement with the lender or reasonably could be construed to be the indirect originator. In its defense, the CFPB would stop its jurisdiction at the door of securitization, but any purchases up to that point may be fair game. The logic underlying this position could be extended by the CFPB to mortgages, credit cards, and virtually any other type of consumer product or service. Interested parties may want to comment by the December 8, 2014 due date.

To read the full alert, click here.

Another CFPB Loan Originator Compensation Enforcement Action

Nov 17 2014

By: Kris D. Kully

The Consumer Financial Protection Bureau (CFPB) has once again charged a mortgage lender with paying compensation to loan originators based on loan terms, which is prohibited under the Truth in Lending Act and its Regulation Z. This week, the CFPB asked a federal court to approve an order requiring Franklin Loan Corporation (which lends in California and Illinois) to pay $730,000 for allegedly paying loan originators quarterly bonuses based on loan terms.

A Cure for What Ails You – Or At Least One Thing That Does: CFPB’s Cure for “Points and Fees” Mistakes

Nov 17 2014

By: Kris D. Kully

In a recent amendment to Regulation Z, the CFPB offers a tonic to mortgage lenders and their assignees that have struggled with the “points and fees” calculation for Qualified Mortgages (QMs). The CFPB’s cure allows lenders or assignees of covered loans to reestablish the QM status of a loan for which the amount of points and fees inadvertently exceeds the thresholds set by the CFPB’s Ability to Repay/QM Rule. The cure is available for loans consummated on and after November 3, 2014, but it expires January 10, 2021.

To read the full alert, click here.

CFPB Finalizes Rule Permitting Financial Institutions to Post Privacy Notices Online

Oct 30 2014

By: Kristie D. Kully, David A. Tallman, Jeremy M. McLaughlin

Last week, the CFPB last week finalized its rule permitting certain financial institutions to post their annual privacy notices online, claiming it will benefit consumers and financial institutions alike. The rule became effective on October 28, 2014, and applies to banks and non-banks within the CFPB’s jurisdiction.

K&L Gates Legal Insight: Start Your Compliance Engines: CFPB Proposes Rule to Supervise Larger Nonbank Auto Finance Companies

Oct 09 2014

By: Melanie Brody, Anjali Garg, Christa Bieker

The Consumer Financial Protection Bureau (“CFPB” or “Bureau”) issued a proposed rule on September 17, 2014, that would empower the Bureau to supervise certain larger nonbank automobile finance companies. The CFPB proposed the rule pursuant to its authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) to supervise nonbank larger participants of certain financial product and service markets for compliance with federal consumer laws.

To read the full alert, click here.

Big Data takes a Big Step: CFPB Offers Insight into Its Fair Lending Proxy Methodology

Sep 18 2014

By: Melanie Brody, Anjali Garg*
*Ms. Garg is not admitted in D.C. She is supervised by Stephanie Robinson, a member of the D.C. Bar.

The Home Mortgage Disclosure Act requires residential mortgage lenders to collect race and ethnicity information about loan applicants, and lenders, regulators and others routinely use this information to statistically evaluate whether there is a risk that a lender has discriminated against borrowers on a prohibited basis. With regard to other types of credit, with respect to which federal law generally prohibits the collection of demographic information, lenders and other interested parties must impute credit applicants’ race and ethnicity using proxies. For example, a lender could use the racial composition of the census tract in which a consumer resides to assign an assumed race to the consumer. Although proxying provides a way to evaluate fair lending risk in the absence of actual demographic data, there historically has not been a generally-accepted methodology for performing the proxy process, and this has made it particularly challenging to evaluate fair lending compliance for non-mortgage credit products.

What’s the Deal With the CFPB and Bitcoin?

Aug 14 2014

By: David L. Beam

The Consumer Financial Protection Bureau just released an advisory for consumers on digital currencies (a.k.a. “virtual currencies”) like Bitcoin. But the thing that’s most extraordinary about the advisory on digital currency is what it doesn’t say. Read More

CFPB Issues Proposed Rule to Impose Additional Reporting Requirements Under Regulation C

Jul 28 2014

By: Melanie Brody, Stephanie C. Robinson, Jay M. Willis

On Friday, the CFPB released a proposed rule that would significantly expand the scope of financial institutions’ mortgage lending data reporting requirements under the Home Mortgage Disclosure Act, or HMDA.

First enacted in 1975, HMDA was originally intended to allow both regulators and the public at large to examine whether lenders were effectively serving the credit needs of the communities in which those lenders were located. To that end, the Act required covered institutions to collect and publicly disclose data regarding their mortgage lending activities, thus allowing both public officials and the mortgage lending industry the means necessary to respond to areas of need. Subsequent amendments to the Act, designed to assist regulators in monitoring compliance with fair lending laws, required that covered financial institutions also report the race, ethnicity, sex, and annual income of both applicants and borrowers for home mortgage loans (and mortgage loans purchased by the institution). Read More

Recent Force-Placed Insurance Initiatives by FHFA & CFPB Suggest Divergent Priorities

Jun 12 2014

By: Nanci L. Weissgold, *Christopher Shelton
* Mr. Shelton is not admitted in D.C. Supervised by Nanci Weissgold, member of D.C. Bar.

Force-placed insurance is under continuing scrutiny by the Federal Housing Finance Agency (FHFA) and the Consumer Financial Protection Bureau (CFPB). However, each agency’s focus is slightly different. FHFA, perhaps galvanized by a New York enforcement action, has focused on conflicts of interest between servicers and insurers. The CFPB has focused on erroneous placing of insurance and excessive charges. Read More

CFPB Widens RESPA Enforcement to Focus on Affiliated Business Arrangement Disclosures

Jun 03 2014

By: Holly Spencer Bunting, Anaxet Y. Jones

The CFPB once again has taken aim at affiliated business arrangements (“AfBAs”), only this time, it is targeting AfBA disclosures. In prior enforcement actions, the CFPB focused on the validity of the AfBA, bringing actions against alleged “sham” AfBAs. However, in its most recent enforcement action, the CFPB entered into a consent order with a real estate brokerage company, alleging that it referred consumers to its affiliate, but failed to provide an adequate AfBA disclosure. The CFPB also alleged that the brokerage company improperly required the use of its affiliate title insurance agency.

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