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Consumer Financial Services Watch

News and developments related to consumer financial products and services

Beyond Credit Reporting: The Extension of Potential Class Action Liability to Employers under the Fair Credit Reporting Act

Posted in Litigation & Enforcement Actions

By: Brian M. Forbes, Mark D. Pomfret, Robert W. Sparkes, III

Do not be fooled by its title: the Fair Credit Reporting Act (“FCRA”) reaches far beyond the realm of credit reporting and governs a broad spectrum of industries. Indeed, the provisions of FCRA apply to any business entity that seeks to use a “consumer report” – which broadly includes anything from a credit report to a criminal or even motor vehicle background check – for any “employment purposes” (among other purposes). This includes the use of such reports to evaluate an individual for potential employment, as well as to evaluate a current employee for promotion or termination. The consequences of a FCRA violation can be substantial; the statute provides for a civil private right of action and permits recovery of actual damages, statutory damages, punitive damages, and attorneys’ fees and costs. Continue Reading

Federal Agencies Propose AMC Minimum Standards

Posted in Appraisals, Bureau of Consumer Financial Protection (CFPB), Mortgage Lending, Other Federal Agencies & GSEs

By: Nanci L. Weissgold, Morey Barnes Yost

The April 9 Federal Register contains the announcement for which the appraisal management industry has been waiting for months: the federal banking and finance regulatory agencies’ proposal of minimum standards for appraisal management companies (“AMCs”). Section 1473 of the Dodd-Frank Act requires the agencies – the OCC, FRB, FDIC, NCUA, CFPB, and FHFA (the “Agencies”) -to adopt standards for states to apply in their registration and supervision of AMCs. Continue Reading

Non QM Lending Facilitated by New Fitch Ratings Criteria

Posted in Mortgage Lending, Securitization

By: Laurence E. Platt

Non-QM lending received a big boost this week when Fitch Ratings issued its criteria for analyzing residential mortgage-backed securities (“RMBS”) under the Ability to Repay (“ATR”) and Qualified Mortgage (“QM”) rules issued by the Consumer Financial Protection Bureau. It announced that it would apply a relative “credit enhancement” adjustment (i.e., extra collateralization) to non-QM loans pooled to back RMBS, but the level of credit enhancement reflects its belief that the risk of massive losses on such loans is relatively slight. In reliance upon required third-party due-diligence reviews, Fitch said that it would assume the accuracy of an originator’s designation of loans as “safe harbor” QM loans, higher-priced QM loans or non-QM loans. Continue Reading

CFPB Criticized For Failure to Provide Information Related to Indirect Auto Lending Activities

Posted in Bureau of Consumer Financial Protection (CFPB)

By: Melanie Brody, Tori K. Shinohara

On Friday, the Chairman of the House Financial Services Committee wrote a letter to Director Cordray chastising the CFPB for its continued refusal to provide meaningful responses to Congressional requests for information about the Bureau’s supervision and enforcement activities related to indirect auto lending. In the letter, Chairman Hensarling cites five instances of Congressional requests for information related to the CFPB’s indirect auto activities over the past year that have been not been satisfied. He criticizes the Bureau’s “pattern of obfuscation” related to Congressional requests for information and contends that the CFPB has created “unnecessary uncertainty” within the auto lending market. Continue Reading

K&L Gates Legal Insight: We’ve Only Just Begun–Lessons from the CFPB’s First 35 Enforcement Cases

Posted in Bureau of Consumer Financial Protection (CFPB)

By: Jon Eisenberg

Few agencies have generated as much controversy as the Consumer Financial Protection Bureau. The brainchild of Senator Elizabeth Warren when she was still a professor and the product of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the agency is charged with being the cop on the beat for consumers much like the SEC is the cop on the beat for investors. Among its goals are preventing consumers from being subject to “deceptive,” “unfair,” and “abusive” practices and holding alleged wrongdoers accountable by bringing enforcement cases against those the CFPB believes have violated consumer financial protection laws. Consumers have flooded it with over 300,000 complaints since the agency began operations less than three years ago, and those have already proven to be a fertile source of information for its examination and enforcement programs.

To read the full alert, click here.



DOL Seeks Supreme Court Review of the Invalidation of its Mortgage Loan Officer Overtime Ruling

Posted in Litigation & Enforcement Actions, Mortgage Lending, Other Federal Agencies & GSEs

By: Thomas H. Petrides, John L. Longstreth

On February 28, 2014 the Department of Labor, represented by the Solicitor General, petitioned for Supreme Court review of an appellate decision invalidating a 2010 DOL administrative ruling that determined mortgage loan officers generally do not qualify for the administrative exemption from overtime under the Fair Labor Standards Act. The U.S. Court of Appeals for the D.C. Circuit held last July that a prior administrative ruling issued in a 2006 DOL Opinion Letter was established law and that DOL was therefore required to use notice and comment rulemaking to change it. The 2006 Opinion Letter had previously determined that loan officers could qualify for the administrative exemption and therefore would be ineligible for overtime pay based on that exemption. The Solicitor General argues that requiring notice and comment for an interpretive rule in any circumstances is inconsistent with the Administrative Procedure Act, which exempts interpretive rules from notice and comment requirements, and therefore the 2010 interpretation should be reinstated. The petition also argues that the D.C. Circuit decision is inconsistent with the rulings of at least two other federal appeals courts. Continue Reading

CFPB Continues to Target Mortgage Servicing

Posted in Bureau of Consumer Financial Protection (CFPB), Mortgage Servicing, UDAAP

By: Soyong Cho, Kerri M. Smith

At the Mortgage Bankers Association’s National Mortgage Servicing Conference & Expo last week, CFPB Deputy Director Steven Antonakes issued a strongly-worded warning that the CFPB will continue to vigorously monitor and investigate the mortgage servicing industry. Deputy Director Antonakes stated that the CFPB will rely on its newly adopted Mortgage Servicing Rules (the “Rules”) and Sections 1031 and 1036(a) of the Consumer Financial Protection Act (“CFPA”), which prohibit unfair, deceptive or abusive acts or practices (“UDAAP”). In his speech, Deputy Director Antonakes recounted problems that had been observed in mortgage servicing and admonished that “the fundamental rules have changed forever” and that “business as usual has changed in mortgage servicing.” Specifically, the Deputy Director explained the CFPB’s expectations of servicers: Continue Reading

Global Government Solutions® 2014 Annual Outlook

Posted in Bureau of Consumer Financial Protection (CFPB)

K&L Gates is pleased to announce the publication of its Global Government Solutions® 2014 Annual Outlook.

Our seventh edition of the Global Government Solutions® series highlights increased government involvement in global commerce and provides the latest regulatory information corporate leaders need to navigate the intersection of business and government. The K&L Gates Global Government Solutions® 2014 Annual Outlook is a collection of 50 insightful articles to help you do just that, including:

  • Former U.S. Congressmen Bart Gordon and James T. Walsh on congressional deadlock
  • The European Union as a business partner
  • A more aggressive Securities and Exchange Commission
  • New hedge fund regulations
  • International trade negotiations
  • Resources nationalism in emerging nations
  • Tax reform
  • Competition and compliance risks for government contractors

To view the report, click here. For more information on our Global Government Solutions® practice, please visit our website.



The CFPB Defines Foreign Remittance Transfer “Larger Participants”

Posted in Bureau of Consumer Financial Protection (CFPB), Payment Systems

By: David L. Beam, Christopher G. Smith

The Dodd-Frank Act provided the CFPB with examination authority over, among others, “larger participants” of consumer financial product and service markets. Almost three years ago, the CFPB issued an Advance Notice of Proposed Rulemaking targeting various industries whose larger participants it was eyeing for regular examination, including money transmission. In January 2014, the CFPB issued a proposed larger participants rule for a subset of money transmitters – those engaged in foreign remittances. Continue Reading

CFPB Publishes New Mortgage Servicing Exam Procedures

Posted in Mortgage Servicing, Servicemember Protections

By: Nanci L. Weissgold, Kerri M. Smith, Christopher Shelton*

*Mr. Shelton is not admitted to the practice of law in the District of Columbia.

The CFPB has released updated exam procedures for reviewing mortgage servicers, incorporating the Mortgage Servicing Rules (“the Rules”) that became effective on January 10, 2014. These updated exam procedures still focus on nine major modules covering routine servicing, default servicing, and foreclosure. However, they frequently cross-reference the TILA and RESPA exam procedures that were updated in November 2013 to reflect the Rules. Because of the overlap in coverage and the reliance on cross-referencing, the updated servicing exam procedures are shorter than the prior version of the CFPB’s Examination Manual, although there are some notable additions. Continue Reading