Tag Archives: CFPB

Welcome to Internet and Mobile Marketing: HUD’s 1996 RESPA CLO Policy Statement Finally Refreshed

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R. Colgate Selden, R. Andrew Arculin, Scott D. Samlin, Paula M. Vigo Marques, and Daniel V. Funaro ●

A new Consumer Financial Protection Bureau (“CFPB”) advisory opinion refreshes the Department of Housing and Urban Development’s computer loan origination system policy statement for a new generation of online marketing technology, specifically targeting the policy to “operators of certain digital technology platforms” that function via website and online applications. These “Digital Mortgage Comparison-Shopping Platforms,” as described by the CFPB, “enable consumers to comparison shop for mortgages and other real estate settlement services, and include platforms that generate potential leads for platform participants through consumer interactions.”

The CFPB advisory opinion applies long standing interpretations on unlawful referrals to new online marketing technology platforms. However, even if such platforms are permissible under a referral analysis, they still could violate prohibitions on unfair, deceptive, or abusive acts or practices and other federal and state laws. The advisory also functions to put the industry on notice for future enforcement actions should operators of noncompliant marketing platforms not heed the guidance in the advisory.

Background

After nearly 30 years, the CFPB issued an advisory opinion (“CFPB Opinion”) last week picking up where the Department of Housing and Urban Development (“HUD”) left off in 1996 with its policy statement on computer loan origination systems (“CLOs”). The HUD policy statement, which addressed the applicability of the Real Estate Settlement Procedures Act’s (“RESPA”) Section 8 prohibition on kickbacks in exchange for settlement service business referrals to CLOs, was drafted at a time when CLOs often consisted of a lender’s Internet dial-up computer kiosk located in a real estate broker or other settlement service provider’s office.

Read the full client alert on our website.

CFPB Looks to Expand Its Oversight of Nonbanks through Two Controversial New Registries

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R. Andrew Arculin, R. Colgate Selden, Scott E. Wortman, Paula M. Vigo Marques, and Daniel V. Funaro

The Consumer Financial Protection Bureau (“CFPB” or “Bureau”) released two new proposals that aim to expand the Bureau’s authority over nonbank financial institutions:

  1. A “repeat offender” registry of consent orders or settlements with an array of state and federal regulators relating to compliance with consumer protection laws (“Repeat Offender Proposal”); and
  2. A public registry of the terms and conditions nonbanks use in “form contracts” that consumers typically are not able to negotiate (“Terms and Conditions Proposal”).

Assuming these registries are created as proposed and survive any ensuing legal challenges, complying with the reporting obligations should be relatively easy. The larger challenge will be managing the increased regulatory and litigation risk imposed by the registries.

Repeat Offender Proposal

On December 12, 2022, the CFPB issued a proposal to establish a “repeat offender” registry requiring certain nonbank covered entities to report all final public written orders and judgments (including any settlements, consent decrees, or stipulated orders and judgments) obtained or issued by any federal, state, or local government agency for violation of a number of enumerated consumer protection laws, including those related to unfair, deceptive, or abusive acts or practices (“UDAAPs”).

After receiving these written orders and judgments, the CFPB intends to create a database of enforcement actions that would be available online for use by the public and other regulators. The database will be limited to final settlement or consent orders, so injunctions, preliminary orders, temporary cease-and-desist, and other tentative or temporary orders would not be reportable.

In addition, the proposal would require supervised nonbanks to submit annual written statements regarding compliance with an attestation for each underlying order by an executive with “knowledge of the entity’s relevant systems and procedures for achieving compliance and control over the entity’s compliance efforts.” These entities would also be required to identify a central point of contact related to an entity’s compliance with reportable enforcement actions.

The proposed rule would only apply to certain nonbank covered entities subject to CFPB’s authority. At present, insured depository institutions and credit unions, related persons, states, natural persons, and certain other entities are excluded from registry participation requirements. However, the CFPB stated in the press release for the proposal that it “might later consider collecting or publishing the information described in the proposal from insured banks and credit unions.”

Read the full client alert on our website.

CFPB Issues Debt Collection Interim Final Rule Due to the Ongoing COVID-19 Pandemic

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Wayne Streibich, Diana M. Eng, and Chenxi Jiao

The CFPB’s interim final rule amends Regulation F to, among other things, (i) require debt collectors to provide written notice to certain consumers about the CDC’s temporary eviction protections; and (ii) prohibit debt collectors from misrepresenting that a consumer is ineligible for eviction protection under the CDC’s moratorium. Debt collectors should take the necessary steps to ensure compliance with the amendment.

On April 19, 2021, the Consumer Financial Protection Bureau (“CFPB”) issued an interim final rule to amend Regulation F at 12 C.F.R. § 1006 (the “IFR”) to require debt collectors to provide consumers with disclosures relating to the Centers for Disease Control and Prevention (“CDC”) order, titled “Temporary Halt in Residential Evictions to Prevent the Further Spread of COVID-19” (86 FR 16731 (Mar. 31, 2021)) (the “CDC Order”). The CDC Order “generally prohibits a landlord, owner of a residential property, or other person with a legal right to pursue eviction or possessory action from evicting for non-payment of rent any person protected by the CDC Order from any residential property in any jurisdiction in which the CDC Order applies.” This prohibition applies to any agent or attorney acting on behalf of a landlord or owner of a residential property. Notably, however, the CDC Order does not cover foreclosure on a home mortgage.

The CFPB issued the IFR due to its concerns that consumers are unaware of their protections under the CDC Order and that debt collectors may be engaging in eviction-related conduct that violates the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (the “FDCPA”). The IFR applies to “debt collectors,” “consumers,” and “debt,” as defined in the FDCPA.

To read the full client alert, please click here.

CFPB Proposes COVID-19 Rule to Amend Its Mortgage Servicing Rule and Provide Additional Guidance Related to the Pandemic

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Jonathan K. Moore, Scott D. Samlin, Chenxi Jiao, and Louise Bowes Marencik

On April 5, 2021, the Consumer Financial Protection Bureau (“CFPB”) issued a notice of proposed rulemaking that proposes amendments to its Mortgage Servicing Rule (the “Proposed Rule”) to provide additional assistance for borrowers impacted by the COVID-19 emergency. The pandemic has resulted in nearly three million borrowers with delinquent mortgages, which is more homeowners in default than any time since the peak of the Great Recession in 2010. Nearly 1.7 million borrowers will exit forbearance programs in September and the following months upon expiration of the maximum term of 18 months in forbearance for federally backed mortgage loans. The Proposed Rule is intended to ensure that these homeowners have the opportunity to be evaluated for loss mitigation options prior to their loans being referred to foreclosure.

If finalized, the Proposed Rule would apply to all mortgages on a principal residence and amend Regulation X (12 CFR 1024).

To read the full client alert, please click here.

CFPB Proposes Delay of Effective Date for Debt Collection Rules

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Jonathan K. Moore and Louise Bowes Marencik

On April 7, 2021, the Consumer Financial Protection Bureau (“CFPB”) issued a Notice of Proposed Rulemaking delaying the effective date of its recent debt collection final rules. The final rules, which were issued on October 30, 2020 and December 18, 2020, were scheduled to become effective on November 30, 2021. However, in light of the ongoing COVID-19 pandemic, the CFPB has proposed delaying the effective date until January 29, 2022, in order to give the affected parties additional time to review and comply with the new rules.

To read the full client alert, please click here.

CFPB Issues Second Final Rule Clarifying Regulation of Fair Debt Collection Practices

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Wayne Streibich, Jonathan K. Moore, and Louise Bowes Marencik

On December 18, 2020, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule concerning debt collection disclosures, which follows its October 30, 2020 final rule regarding debt collection communications. The two final rules implement and interpret the consumer protections set forth in the Fair Debt Collection Practices Act (“FDCPA”) of 1977. The final rules will both become effective on November 30, 2021.

The latest final rule outlines various requirements regarding debt collection disclosures. Specifically, a debt collector must send a written disclosure to a consumer containing information concerning the debt and actions the consumer may take in response, within five days of its initial communication with the consumer. This disclosure must be sent unless such validation information was provided in the initial communication or the consumer has paid the debt. The final rule includes a model validation notice, which, if used, provides a safe harbor for compliance with the disclosure requirements. The final rule also requires debt collectors to disclose the existence of a debt to the customer, orally, in writing, or electronically, before it can report information concerning the debt to a consumer reporting agency.

Please click here to read the full client alert.

CFPB Proposes Regulations to Clarify, Modernize, and Implement the Fair Debt Collection Practices Act

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Wayne Streibich, Diana M. Eng, Jonathan M. Robbin, Nicole R. Topper, Scott E. Wortman, and Paul Messina Jr.

Financial institutions and debt collectors should take note of, and provide comments on, the CFPB’s recent Notice of Proposed Rulemaking, which attempts to provide consumers with “clear protections against harassment by debt collectors and straightforward options to address or dispute debts.”      

On May 7, 2019, the Consumer Financial Protection Bureau (“CFPB”) released its long-awaited Notice of Proposed Rulemaking (“NPRM”), aiming to clarify and modernize the Fair Debt Collections Practices Act (“FDCPA”). The over 500-page NPRM marks the CFPB’s latest half-decade long effort to issue the first set of substantive rules interpreting the FDCPA since its passage in 1977.

Background

Seeking to curb abuses in the debt collection industry, Congress enacted the FDCPA in 1977. However, with the passage of time and the creation of new technologies, ambiguities and uncertainties in the industry developed. Without any federal agency delegated authority to write substantive rules interpreting the FDCPA, the courts were left with the sole burden of doing so. That changed in 2010, when Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) delegating authority to the CFPB.

Citing the ongoing and abundance of consumer complaints, as well as the need to adapt the FDCPA for modern technologies, the CFPB called for public input on potential new regulations in 2013, and again in 2016, releasing an outline of proposals under consideration. This week’s NPRM incorporates many of those ideas with some adjustments. The NPRM will be open for 90 days for public comment following its publication in the Federal Register.

Please click here for the full client alert. 

Southern District of New York Holds the CFPB Is Unconstitutionally Structured

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By: Louise Bowes Marencik, Diana M. Eng, and Jonathan K. Moore

On June 21, 2018, the United States District Court for the Southern District of New York (“Southern District”) held that Title X of the Dodd Frank Act, which established the Consumer Financial Protection Bureau (“CFPB”) as an “independent bureau” within the Federal Reserve System, is unconstitutional.

In Consumer Financial Protection Bureau v. RD Legal Funding, LLC, et al., the CFPB and The People of the State of New York, by Eric T. Schneiderman, Attorney General for the State of New York (collectively, “Plaintiffs”) alleged that the defendant entities violated the Consumer Financial Protection Act (“CFPA”) by offering cash advances to consumers awaiting payouts on settlement agreements or judgments entered in their favor, which Plaintiffs argued were actually usurious loans prohibited by state law. 2018 U.S. Dist. LEXIS 104132 (S.D.N.Y. June 21, 2018). The consumers at issue were class members in the National Football League Concussion Litigation class action, and individuals eligible for compensation from the September 11th Victim Compensation Fund of 2001. Continue reading →

CFPB Eliminates Class Action Waivers with New Arbitration Rule

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By: Jonathan K. Moore, Edward W. Chang, Diana M. Eng, and Andrew Williamson

On July 10, 2017, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule (“Arbitration Rule”) prohibiting banks, debt servicers, credit card companies, and a wide range of other businesses from using arbitration clauses to bar a consumer from filing a class action lawsuit to resolve any future dispute between the consumer and the consumer financial service provider. The full version of the final rule is available on the CFPB’s website:  CFPB Arbitration Agreements Final Rule.

Summary of the New Arbitration Rule

The Arbitration Rule is extremely broad and encompasses virtually any type of consumer financial services provider, including entities that do not lend money or service consumer debt. Notably, in addition to creditors, debt buyers, and other entities that directly lend, purchase, or service debt, the new rule applies to entities “participating in consumer credit decisions,” entities “providing services to assist with debt management or debt settlement . . . and [entities] providing products or services represented to remove derogatory information from, or to improve, a person’s credit history, credit record, or credit rating . . . .”

The Arbitration Rule will take effect 60 days after it is published in the Federal Register (“Effective Date”). In addition, the Arbitration Rule will only apply to agreements entered into more than 180 days after the Effective Date, which provides a short grace period for impacted businesses to comply.

Further, Congress may use the Congressional Review Act to invalidate the Arbitration Rule by voting to disapprove the regulation within “60 legislative days” of the Effective Date. Nonetheless, there is no guarantee that Congress will act.

Conclusion

Because the Arbitration Rule will apply prospectively to agreements entered into more than 180 days after the Effective Date, it would be prudent for consumer financial services providers to take steps to comply with the new rule and explore other ways to reduce litigation risks and costs. If the Arbitration Rule goes unchallenged by Congress, it will begin to apply to consumer financial service providers in early 2018.

CFPB Issues Proposed Amendment to Home Mortgage Disclosure Act

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By: Jessica McElroy

On April 13, 2017, the Consumer Financial Protection Bureau (“CFPB”) issued a Notice of Proposed Rule Making[1] targeted at amending Regulation C to make technical corrections to and clarify certain requirements adopted by the CFPB’s Home Mortgage Disclosure final rule (“2015 HMDA Final Rule”), which was published on October 28, 2015.[2]

Regulation C implements the Home Mortgage Disclosure Act (“HMDA”).[3] HMDA has historically provided the public and public officials with information about mortgage lending activity by requiring financial institutions to collect, report and disclose certain data pertaining to mortgage activities. The Dodd-Frank Act amended HMDA and transferred rule-making authority to the CFPB.[4] The Dodd-Frank Act additionally expanded the scope of information that institutions must collect and disclose under HMDA.[5]

The 2015 HMDA Final Rule modified the types of institutions and transactions subject to Regulation C, the types of data that institutions are required to collect and the processes for reporting and disclosing the required data.[6] Most of the modifications take effect in January 2018.

The CFPB now proposes establishing transition rules for two data points: loan purpose and the unique identifier for the loan originator. According to the CFPB, the rules would allow financial institutions to report “not applicable” for these data points when reporting certain purchased loans that were originated before the regulatory requirements took effect. Additionally, the proposal would facilitate reporting the census tract of the property securing the covered loan required by Regulation C via a geocoding tool that the CFPB intends to make available on its web site. This tool would allow financial institutions to identify the census tract in which a property is located. The proposal also includes a safe harbor provision for institutions that obtain the incorrect census tract number from the CFPB’s geocoding tool, provided that an accurate property address is entered and the tool returned a census tract for the address entered.

Comments on the proposal are due 30 days after the Notice of Proposed Rulemaking is published in the Federal Register.

Click below for the proposal: https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201704_cfpb_NPRM_HMDA.pdf.

 

[1] See https://www.consumerfinance.gov/policy-compliance/rulemaking/rules-under-development/technical-corrections-and-clarifying-amendments-home-mortgage-disclosure-october-2015-final-rule/ (last accessed April 17, 2017).

[2] See https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201704_cfpb_NPRM_HMDA.pdf.

[3] 12 U.S.C. § 2801 et seq.

[4] Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376, section 2097- 101 (2010).

[5] Id.

[6] October 2015 HMDA Final Rule, 80 FR 66128, 29.