Consumer Financial Services Watch

News and developments related to consumer financial services, litigation, and enforcement.

 

1
HUD’s Proposed Fair Lending Rule: Deadline for Comments
2
CFPB and Other Federal Banking Agencies Issue Joint Supervisory Statement Clarifying $10 Billion Asset Determination: Regulatory Uncertainty Remains
3
CFPB Proposes to Disclose Credit Card Complaint Data to the Public
4
CFPB to Provide Early Warning Notice of Potential Enforcement Actions
5
Risky Business: CFPB’s New Consumer Risk Assessment Process
6
CFPB Announces “Know Before You Owe” for Student Loans
7
The CFPB Mortgage Servicing Examination Procedures Fail to Harmonize – Isn’t it Ironic?
8
When Trying Title Becomes Trying: The Impact of Bevilacqua v. Rodriguez on Massachusetts Foreclosure Law
9
CFPB to Host Town Hall in Minneapolis on October 26
10
CSBS/AARMR Order Up State Loan Originator Compensation Examination Guidelines – But Go Easy On The Guidance!

HUD’s Proposed Fair Lending Rule: Deadline for Comments

By: Melissa S. Malpass

On November 16, 2011 the United States Department of Housing and Urban Development (“HUD”) released a proposed rule to establish that proof of intentional discrimination is not necessary to establish a violation of the Fair Housing Act, and that a violation may be established under a disparate impact approach. HUD’s proposal makes clear the intention of the agency to apply this new approach to lenders. In describing policies “that may have a disparate impact,” the proposal references: “mortgage pricing policies that give lenders or brokers discretion to impose additional charges or higher interest rates unrelated to a borrower’s creditworthiness” and “credit scoring overrides provided by a purchaser of loans.” Read More

CFPB and Other Federal Banking Agencies Issue Joint Supervisory Statement Clarifying $10 Billion Asset Determination: Regulatory Uncertainty Remains

By: Andrew Caplan* and Stephanie C. Robinson
*Mr. Caplan is not yet admitted to practice; admission to the NY Bar pending.

The Dodd-Frank Act gives the CFPB exclusive supervisory authority and primary enforcement authority of federal consumer financial protection laws over depository institutions with total assets greater than $10 billion and their affiliates (“Large Institutions”). Under Dodd-Frank, the federal banking agencies maintain supervisory and enforcement authority over other institutions with respect to federal consumer financial protection laws. On November 17, 2011, the federal banking agencies and the CFPB issued a joint supervisory statement delineating how and when these Agencies will determine the total assets of an insured depository institution or an insured credit union for purposes of their supervisory and enforcement responsibilities. This is because sections 1025 and 1026 Dodd-Frank, which establish the basic threshold regarding who will regulate whom, do not specify how and when an institution’s assets are assessed for purposes of determining “Large Institution” status. That task was left to the Agencies themselves to determine.

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CFPB Proposes to Disclose Credit Card Complaint Data to the Public

By: Stephanie C. Robinson

It is no secret that the CFPB is taking great interest in consumers’ complaints about credit cards. From day one, a “submit a credit card complaint” icon has held a prominent position on the agency’s home page, and CFPB representatives have talked about how credit card offers and terms are sometimes too complicated for consumers to understand.

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CFPB to Provide Early Warning Notice of Potential Enforcement Actions

By: Kathryn M. Baugher

On November 7, the Consumer Financial Protection Bureau unveiled a process designed to warn individuals and companies of possible enforcement actions against them. At its discretion, the Bureau may provide an Early Warning Notice and an opportunity to respond before deciding whether to pursue an enforcement action. This process is not required by law, however, and the CFPB may decide not to provide notice in certain cases, such as when the Bureau’s Office of Enforcement believes that prompt action is necessary. Read More

Risky Business: CFPB’s New Consumer Risk Assessment Process

By: David L. Beam, Rebecca Lobenherz, Stephanie C. Robinson

Those who have been concerned about the expansive powers of the new Consumer Financial Protection Bureau (“CFPB” or the “Bureau”) should ready themselves for the risk assessment reviews that the Bureau is about to initiate. The CFPB recently released the first edition of its Supervision and Examination Manual (“Examination Manual”), which provides an overview of the Bureau’s supervision planning process and details the Bureau’s examination procedures. A key component of the Examination Manual is the CFPB’s Consumer Risk Assessment process, which evaluates supervised entities based on the amount of risk their activities pose to consumers, identifies sources of risk, and assesses the quality of risk controls put in place by the supervised entities.

To view the complete alert online, click here.

CFPB Announces “Know Before You Owe” for Student Loans

By: Kathryn Baugher

The CFPB is expanding its “Know Before You Owe” initiative to cover student loans. Since “Know Before You Owe” began last May, the CFPB has asked the public for input on a variety of draft mortgage disclosure forms. Now the CFPB is working with the Department of Education to gather feedback on a sample financial aid offer form. The Department of Education, as required by the Higher Education Opportunity Act, plans to publish a model form that schools can use to communicate financial aid offers to students. Read More

The CFPB Mortgage Servicing Examination Procedures Fail to Harmonize – Isn’t it Ironic?

By: Jonathan D. Jaffe, Steven M. Kaplan, David I. Monteiro, David A. Tallman

The Bureau of Consumer Financial Protection (the “Bureau” or the “CFPB”) was designed to provide a single, integrated federal approach to consumer financial protection. But with the October 13, 2011, release of its new Mortgage Servicing Examination Procedures (the “Procedures”), the CFPB appears to leave it up to scores of individual examiners to decide in their subjective judgment whether a company’s loan servicing practices raise “unfair, deceptive, or abusive acts or practices” (“UDAAP”) concerns. A federal government that is supposed to sing in one voice has not yet harmonized its employees.

To view the complete alert online, click here.

When Trying Title Becomes Trying: The Impact of Bevilacqua v. Rodriguez on Massachusetts Foreclosure Law

By: R. Bruce Allensworth, Andrew C. Glass, Roger L. Smerage

The Massachusetts Supreme Judicial Court (“SJC”) has ruled that Massachusetts property owners may lack standing to establish title to their property where there is a void foreclosure sale in the chain of title. The Massachusetts “try title” statute permits a holder of “record title” in possession of property to file a petition to force adverse claimants to defend their purported interest in the property. In Bevilacqua v. Rodriguez, the SJC held that a third-party purchaser of foreclosed property did not hold record title where no assignment of mortgage to the foreclosing entity had occurred at the time of foreclosure. Absent such an assignment, the foreclosure sale was invalid, and the foreclosing entity had nothing to convey to the third-party purchaser. Taking nothing from the foreclosing entity, the third-party purchaser lacked standing to maintain a try title action against the original mortgagor. Nonetheless, the scope of the ruling is likely limited to Massachusetts and jurisdictions where a mortgagee or its assigns must initiate foreclosure and where the party bringing the foreclosure action did not obtain an assignment of the mortgage until after the commencement of the foreclosure process. Moreover, because the Bevilacqua decision simply applies the law as already articulated by the SJC in its January 2011 U.S. Bank, N.A. v. Ibanez  opinion, its impact on current and ongoing foreclosure practices appears limited. Massachusetts foreclosure attorneys are likely to have already altered their assignment practices in light of Ibanez.

To view the complete alert online, click here.

CFPB to Host Town Hall in Minneapolis on October 26

By: Rebecca Lobenherz

The CFPB, which has regularly reached out to consumers online through its blog posts and its consumer complaint portal, is also seeking consumer input the old-fashioned way – in person. On October 26, Raj Date, Special Advisor to the Secretary of the Treasury for the CFPB, who previously spoke with consumers in Philadelphia, will be headed to Minneapolis, Minnesota to discuss the Bureau’s upcoming initiatives directly with consumers. The Bureau has plans on holding more events aimed at consumers throughout the country in the upcoming months.

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CSBS/AARMR Order Up State Loan Originator Compensation Examination Guidelines – But Go Easy On The Guidance!

By: Kris D. Kully

The CSBS/AARMR Multistate Mortgage Committee (MMC) released a set of examiner guidelines to assist state regulators in implementing the Federal Reserve Boards loan originator compensation restrictions. Unfortunately, those guidelines provide very little guidance for examiners in determining whether state-regulated mortgage lenders or brokers have complied with those restrictions, or for the lenders or brokers seeking to comply. Like the children’s game of Hot Potato, the Federal Reserve Board issued the rulemaking, and then handed it over to the Consumer Financial Protection Bureau, but so far has left interpretation and/or enforcement of the rule to other federal and state agencies. While there are many significant questions that remain in understanding and implementing the loan originator compensation restrictions, the new state CSBS/AARMR examination guidelines do not (and cannot really be expected to) provide those answers. This client alert highlights certain aspects of the guidelines and describes the limited take-aways provided for state-regulated mortgage lenders, brokers, and loan originators.

To view the complete alert online, click here.

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