Consumer Financial Protection Bureau Alert—Vol. 2, No. 1
By the Authors of PLI's Consumer Financial Services Answer Book 2011 and Edited by Arthur B. Axelson
Legal Alerts
1.06.12
Regulations and Guidance Update
CFPB Publishes Interim Final Rules Regarding the Real Estate Settlement Procedures Act (RESPA), Title V of the Gramm-Leach-Bliley Act (the "GLB Act”), the Truth in Savings Act (TISA), the Fair Credit Reporting Act (FCRA), the Equal Credit Opportunity Act (ECOA), the Interstate Land Sales Act (ILSA), the Truth in Lending Act (TILA), the Electronic Fund Transfer Act (EFTA), and the Disclosure Requirements for Depository Institutions Lacking Federal Deposit Insurance
Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) transferred rulemaking authority for a number of consumer financial protection laws from seven federal agencies to the Consumer Financial Protection Bureau (the “Bureau” or “CFPB”) as of July 21, 2011. The Bureau is in the process of republishing the regulations implementing those laws, with technical and conforming changes to reflect the transfer of authority and certain other changes made by the Dodd-Frank Act.
Effective July 21, 2011, section 1061 of the Dodd-Frank Act transferred to the Bureau the “consumer financial protection functions” previously vested in certain other federal agencies. Accordingly, effective July 21, 2011, except with respect to persons excluded from the Bureau’s rulemaking authority by section 1029 of the Dodd-Frank Act, the authority of the Board to issue regulations transferred to the Bureau. Under this authority, the Bureau has been busy revising the regulations it inherited from other regulators so it can reissue them under its own subtitles in the Code of Federal Regulations (“CFR”). To this end, the Bureau released newly codified regulations regarding RESPA (Regulation X), Title V of the GLB Act (Regulation P), TISA (Regulation DD), FCRA (Regulation V), ECOA (Regulation B), ILSA (Regulations J, K, and L), TILA (Regulation Z), EFTA (Regulation E), and the Disclosure Requirements for Depository Institutions Lacking Federal Deposit Insurance (Regulation I). These regulations are discussed below.
Real Estate Settlement Procedures Act (Regulation X)—12 CFR Part 1024
The Dodd-Frank Act transferred certain rulemaking authority for regulations under RESPA from the Department of Housing and Urban Development (HUD) to the CFPB. The Bureau has published in the Federal Register an interim final rule establishing a new Regulation X that implements the regulatory provisions under RESPA over which the Bureau has rulemaking authority.
The interim final rule substantially mirrors HUD’s Regulation X and imposes no new substantive obligations on covered entities. In fact, most of the changes made to the new Regulation X are largely non-substantive, formatting, and stylistic modifications. For example, references to HUD and its administrative structure, including provisions for imposing penalties for escrow violations, have been replaced with references to the Bureau. References to any “HUD Public Guidance Document” throughout HUD’s Regulation X have been replaced with references to a “Public Guidance Document” throughout the Bureau’s Regulation X.
The Bureau plans to distribute booklets that will help borrowers better understand the nature and cost of real estate settlement services. The Bureau further wishes to integrate some disclosure requirements of the Truth in Lending Act with certain disclosure requirements of RESPA. Such integration would allow the Bureau to adopt regulations pertaining to practices of mortgage servicers and issue regulations to execute the consumer purposes of RESPA. Comments to Regulation X must be made on or before February 21, 2012.
Privacy of Consumer Information (Regulation P)—12 CFR Part 1016
With the recent transfer of rulemaking authority for the privacy provisions of the GLB Act to the Bureau, the Bureau is in the process of republishing the regulations implementing those laws with technical and conforming changes to reflect the transfer of authority and certain other changes made by the Dodd-Frank Act. As such, the Bureau is publishing for public comment an interim final rule establishing a new Regulation P (Privacy of Consumer Financial Information). The interim final rule was effective December 30, 2011, and comments must be received on or before February 21, 2012.
The interim final rule combines the transferor agencies’ existing rules (with the exception of the FTC’s existing rule as it relates to entities described in section 504(a)(1)(C) of the GLB Act) as the Bureau’s new Regulation P, 12 CFR Part 1016. The Bureau’s new Regulation P makes only certain nonsubstantive, technical, formatting, and stylistic changes. Specifically, references to the transferor agencies and their administrative structure have been replaced with appropriate references to the Bureau, conforming edits have been made to internal cross-references and to reflect the scope of the Bureau’s authority pursuant to the GLB Act, and historical references that are no longer applicable (and references to effective dates that have passed) have been removed as appropriate. Notably, this interim final rule does not impose any new substantive obligations on regulated entities.
Additionally, Appendix B, which listed sample clauses for privacy notices and provided a safe harbor for privacy notices issued with those sample clauses before January 1, 2011, has been removed. Appendix B was already scheduled to be eliminated from each of the agencies’ privacy regulations on January 1, 2012, so the removal of Appendix B by this interim final rule as of December 30, 2011, does not nullify the validity of privacy notices issued before January 1, 2012.
Further, to the extent the transferor agencies’ rules substantively differed from one another, the interim final rule contains separate provisions for the financial institutions previously subject to those agencies’ rulemaking authority. For example, special rules related to joint relationships and loans applicable to credit unions under the National Credit Union Association’s privacy regulation are contained in separate sections for “joint relationships in the case of credit unions” and “special rule for loans in the case of credit unions.” Similarly, the Federal Trade Commission’s privacy regulation defined “financial institution” more narrowly than the other agencies’ privacy regulations. The interim final rule therefore contains a separate definition of “financial institution” enforcement jurisdiction.
Truth in Savings Act (Regulation DD)—12 CFR Part 1030
The Dodd-Frank Act transferred certain rulemaking authority for regulations under TISA from the Board of Governors of the Federal Reserve System (the “Board”) to the Bureau. The CFPB has published in the Federal Register an interim final rule establishing a new Regulation DD that implements the regulatory provisions under TISA over which the Bureau has rulemaking authority.
The interim final rule does not implement any substantive changes to the existing regulations. The rule makes only nonsubstantive, technical, formatting, and stylistic changes. For example, the rule makes certain nomenclature changes required by the Dodd-Frank Act, edits subheadings and numbering, moves footnotes to the main text of the regulation, and updates internal cross-references and addresses for filing applications and notices. The interim final rule became effective December 30, 2011, and written comments are due on or before February 21, 2012.
Fair Credit Reporting Act (Regulation V)—12 CFR Part 1022
The Dodd-Frank Act transferred most rulemaking authority under FCRA to the Bureau. The Dodd-Frank Act did not, however, transfer to the CFPB rulemaking authority regarding disposal of consumer information, identity theft, red flags, duties of credit card issuers regarding changes of address, or authority over certain motor vehicle dealers. Pursuant to the transfer of authority, the CFPB has published in the Federal Register an interim final rule establishing a new Regulation V.
The rule does not implement any substantive changes to the existing regulations. The text of the interim final rule duplicates the existing interagency FCRA regulations and model forms but implements non-substantive, technical, formatting, and stylistic changes. The interim final rule also includes appendices with model forms, clauses, and supplements. To reduce confusion regarding the new model forms, the CFPB added section 1022.1(c), which addresses the use of model forms and disclosures. Section 1022.1(c) provides that the use of similar forms to those in the appendices to the Bureau’s rule shall constitute compliance with FCRA provisions requiring those forms or disclosures. Specifically, the corresponding Federal Trade Commission model forms in Appendices B, E, F, G, and H to 16 CFR Part 698 are deemed substantially similar until January 1, 2013.
The interim final rule also includes edits to internal cross-references and addresses for filing applications and notices. The rule also includes information reflecting the scope of the Bureau’s rulemaking authority under FCRA, as amended by the Dodd-Frank Act. Further, the interim final rule deletes inapplicable historical references and effective dates. The interim final rule became effective December 30, 2011, and written comments are due on or before February 21, 2012.
Equal Credit Opportunity (Regulation B)—12 CFR Part 1002
Due to the transfer of the Federal Reserve System’s rulemaking authority for the Equal Credit Opportunity Act (ECOA) to the Bureau, the Bureau is publishing an interim final rule establishing a new Regulation B (Equal Credit Opportunity) and asking for public comments. The interim final rule became effective December 30, 2011, and comments must be received on or before February 21, 2012.
While this interim Regulation B incorporates the existing regulatory text, appendices (including model forms and clauses), and supplements, the rule has been edited as necessary to reflect terminology and other technical amendments established by the Dodd-Frank Act. The Bureau expects to amend Regulation B through future rulemakings to implement other changes to ECOA made by the Dodd-Frank Act, including the addition of small business loan data collection and increasing the duration of Regulation B’s record keeping requirement based on the changes of the statute of limitations under the Dodd-Frank Act from two to five years.
Further, with regard to nonbank creditors (other than affiliates of large depository institutions and credit unions), the interim final rule has left the language of Appendix A to the Board’s Regulation B, 12 CFR Part 202, unchanged for the time being. The Dodd-Frank Act assigned the Bureau enforcement authority with respect to such nonbank entities generally and created an Office of Fair Lending and Equal Opportunity within the Bureau to focus on fair, equitable, and nondiscriminatory access to credit. However, Appendix A has been revised in this interim final rule to update the federal agencies that should be listed by particular categories of creditors in adverse action notices pursuant to § 1002.9(b)(1). Thus, the list has been revised to reflect the elimination of the Office of Thrift Supervision and the grant of enforcement authority under ECOA to the Bureau for depository institutions and credit unions with total assets of more than $10 billion and their affiliates. As revised, Appendix A is not intended to describe the enforcement authority for ECOA and Regulation B, but rather to specify the proper points of contact. The Bureau expects that agencies that receive ECOA complaints or inquiries will share that information with other agencies as appropriate. The Bureau intends to work closely with other relevant federal agencies regarding the optimal intake and routing of fair lending complaints and inquiries for nonbank entities. Thus, the Bureau has delayed making additional updates to Appendix A pending this interagency coordination.
Interstate Land Sales Registration Program—Land Registration (Regulation J), Purchasers’ Revocation Rights, Sales Practices and Standards (Regulation K), Special Rules of Practice (Regulation L)—12 CFR Parts 1010, 1011, and 1012.
In light of the transfer of HUD’s rulemaking authority for ILSA to the Bureau, the Bureau published for public comment an interim final rule establishing a new Regulation J (Land Registration), Regulation K (Purchasers’ Revocation Rights, Sales Practices and Standards), and Regulation L (Special Rules of Practice). This interim final rule does not impose any new substantive obligations on entities currently regulated by the existing Regulations J, K, and L previously published by HUD. The new interim final rule became effective on December 30, 2011. Comments are requested and must be received by February 21, 2012.
ILSA protects consumers by requiring certain land developers to register their plans and to provide prescribed disclosures to prospective purchasers. Though rulemaking authority for ILSA was transferred to the Bureau by the Dodd-Frank Act, the interim final rule substantially duplicates HUD’s Interstate Land Sales Registration Program regulations. The interim final rule generally incorporates HUD’s existing regulatory text, including model forms and clauses, and makes only certain cosmetic, technical, formatting, and stylistic changes. The rule has been edited as necessary to reflect nomenclature and other technical amendments required by the Dodd-Frank Act. The interim final rule makes numerous amendments throughout the existing regulatory text to reflect ILSA’s transfer to the Bureau. For example, “Secretary” is replaced with “Director,” “Department of Housing and Urban Development” is replaced with “Bureau of Consumer Financial Protection,” and “Department” is replaced with “Bureau.” Additionally, model language for disclosure and other purposes that appeared in the text of HUD’s ILSA regulations has been removed to a new appendix.
Conforming edits have also been made to internal cross references and addresses for filing applications and notices. Historical references that are no longer applicable, such as the Department of Housing and Urban Development Act and references to effective dates that have passed, have been removed as appropriate. The Bureau retained the numbering of the regulations to minimize any potential confusion.
Many procedural rules previously contained in ILSA have been eliminated as duplicative of the procedural rules that the Bureau promulgated last year in 12 CFR Part 1081. Thus, to the extent that ILSA and the procedural rules contained in Regulation L do not address specific procedures, parties proceeding under ILSA should generally be guided by 12 CFR 1081.
Truth in Lending Act (Regulation Z)—12 CFR Part 1026
The Bureau published for public comment an interim final rule establishing a new Regulation Z (Truth in Lending). This interim final rule does not impose any new substantive obligations on persons subject to the existing Regulation Z, previously published by the Board. The interim final rule became effective on December 30, 2011, with comments due on or before February 21, 2012.
The interim final rule substantially duplicates the Board's Regulation Z as the Bureau's new Regulation Z, 12 CFR part 1026, making only certain non-substantive, technical, formatting, and stylistic changes. To minimize any potential confusion, the Bureau, for the most part, preserved the numbering system of the Board's Regulation Z, other than the new part number. While this interim final rule generally incorporates the Board's existing regulatory text, appendices (including model forms and clauses), and supplements, the rule has been edited as necessary to reflect nomenclature and other technical amendments required by the Dodd-Frank Act. Notably, this interim final rule does not impose any new substantive obligations on regulated entities.
References to the Board and its administrative structure have been replaced with references to the Bureau. In particular, certain model and sample forms in Appendix G (Open-End Model Forms and Clauses) have been revised to change references to the Board (and its Web site) to the Bureau (and its Web site). The revised forms are the Applications and Solicitations model and samples for credit cards, G-10(A) through G-10(C), and the Account-Opening model and samples for credit cards, G-17(A) through G-17(C). Similarly, references to other agencies that no longer exist (e.g., the Office of Thrift Supervision and the Federal Home Loan Bank Board) have been updated as appropriate.
Conforming edits have been made to internal cross-references and addresses for filing applications and notices. Certain comments reflecting the Board's past state law preemption and exemption determinations have been amended to clarify that these determinations continue in effect pending Bureau action to the contrary. Appendix I, entitled “Federal Enforcement Agencies,” is being removed and reserved because it was designed to be informational only and is unnecessary for purposes of implementing the TILA, as amended. Conforming edits have also been made to reflect the scope of the Bureau's authority pursuant to TILA, as amended by the Dodd-Frank Act. Historical references that are no longer applicable, and references to effective dates that have passed, have been removed as appropriate.
In addition, certain changes have been made to the text of the Board's Regulation Z to conform to current codification standards of the Code of Federal Regulations. For example, previously undesignated paragraphs in the regulation and the official commentary have been enumerated, and footnotes have been eliminated and their substance moved to the body of the regulation as appropriate. Other provisions have been redesignated as necessary to accommodate these changes.
Most significantly, the Board's §§226.5a and 226.5b have been renumbered as §§1026.60 and 1026.40, respectively. These two sections, as numbered in the Board's existing Regulation Z, do not meet the current requirements for section numbering for publication in the Code of Federal Regulations. Because existing §226.5a relates to credit card disclosures, the Bureau is codifying it as §1026.60 so that it will appear in subpart G, Special Rules Applicable to Credit Card Accounts and Open-End Credit Offered to College Students. Because existing §226.5b relates to home-equity plans, the Bureau is codifying it as §1026.40 so that it will appear in subpart E, Special Rules for Certain Home Mortgage Transactions. All existing cross-references to these two sections are changed accordingly throughout the Bureau's new Regulation Z.
In addition, existing §§226.5a(b)(15) and 226.6(b)(2)(xiv) require card issuers to include in their applications and solicitations disclosures and their account opening disclosures, respectively, a reference to the Web site established by the Board and a statement that consumers may obtain on the Web site information about shopping for and using credit cards. This interim final rule revises those provisions to require a reference to the Bureau in §§1026.60(b)(15) and 1026.6(b)(2)(xiv). As noted above, the affected model forms in Appendix G are revised accordingly. The Bureau recognized that this change to the disclosure requirements will require card issuers that maintain standardized disclosure forms in their systems to make modifications to those systems. To afford adequate time to make such modifications, the Bureau added to §§ 1026.60(b)(15) and 1026.6(b)(2)(xiv) a provision that, until January 1, 2013, issuers may substitute for the required reference a reference to the Web site established by the Board. Similarly, the Bureau added to comment app. G-5 a new paragraph viii to clarify that, until January 1, 2013, issuers using model forms G-10(A) and G-17(A) may substitute references to the Board and its Web site for the references to the Bureau and its Web site contained in those models. This provision preserves the safe harbor for card issuers using the old version of these models until they have modified their systems as necessary, provided they do so by January 1, 2013.
Electronic Fund Transfer Act (Regulation E)—12 CFR Part 1020
The Dodd-Frank Act transferred certain rulemaking authority under the EFTA from the Board to the Bureau. Pursuant to the transfer of authority, the CFPB has published in the Federal Register an interim final rule establishing a new Regulation E. The interim final rule became effective December 30, 2011, and comments are due on or before February 27, 2012. The interim final rule does not impose any new substantive obligations on regulated entities. While the rule incorporates the Board’s regulatory text and supplementary materials, it has amended those items to make nomenclature changes, replace references to the Board with references to the Bureau, and revise internal cross-references, addresses, and contact information. The rule further removes inapplicable historical references and outdated informational provisions.
Disclosure Requirements for Depository Institutions Lacking Federal Deposit Insurance (Regulation I)—12 CFR Part 1009
The Bureau published an interim final rule in the Federal Register pursuant to its new rulemaking power under the Federal Deposit Insurance Act (“FDIA”). The rule establishes Regulation I, which addresses disclosure requirements for depository institutions lacking federal deposit insurance. The interim final rule became effective on December 30, 2011, and comments are requested and must be received by February 14,
2012.
The interim final rule makes no substantive changes to the Federal Trade Commission’s (FTC) former rule in 16 CFR Part 320. Regulation I makes only certain non-substantive, technical, formatting, and stylistic changes. Within Regulation I, the Bureau is preserving, where possible, the numbering the FTC used in its former rule. However, Regulation I has been edited as necessary to reflect nomenclature and other technical amendments required by the Dodd-Frank Act.
Specifically, references to the FTC and its administrative structure have been replaced with references to the Bureau, and conforming edits have been made to internal cross-references. Edits have also been made to reflect the scope of the Bureau’s authority to issue implementing regulations for disclosures required of depository institutions lacking federal deposit insurance. Further, the interim final rule reflects changes Dodd-Frank made regarding the Bureau’s enforcement authority over FDIA.
News from the Bureau
Obama’s Recess Appointment of Cordray Substantially Increases CFPB Powers
President Obama, under pressure from consumer groups and Democrats, has taken advantage of a disputed congressional recess to appoint Richard Cordray as Director of the Bureau of Consumer Financial Protection. With a Director in place, the CFPB will be able to exercise certain additional powers granted to it under the Dodd-Frank Act. These powers were only valid and actionable once a Director was in place.
With a Director in place, the CFPB may exercise its supervisory powers over non-bank financial institutions, such as payday lenders, non-depository mortgage lenders and servicers, debt collectors, debt settlement companies, private student lenders, and consumer reporting agencies. The CFPB also will be able to promulgate new rules to prevent unfair, deceptive, or abusive acts or practices with respect to consumer financial products and services, as well as to enforce existing consumer protection laws that it lacked authority to enforce prior to Cordray’s appointment. (See the article below regarding the Bureau’s new powers and expectations for Bureau activity in 2012.)
President Obama’s recess appointment defies strident Republican opposition to the appointment based on the current structure of the CFPB set out in the Dodd-Frank Act, and Republican congressional leaders have already indicated
they would fight the legality of this appointment. Republicans now must decide whether they will challenge the appointment in court. A press release from Speaker John Boehner implies as much, concluding that he “expect[s] the courts will find the appointment to be illegitimate.” Despite this proclamation, Republicans may determine that litigation on the matter is not politically viable in this election year.
Moreover, Republican opposition to recess appointments may be subject to criticism, in that President Obama has used recess appointments much more sparingly than his Republican predecessors. In fact, a legal advisor to President George W. Bush advised the former president that the Senate “cannot use sham ‘pro forma’ sessions to prevent the President from exercising a constitutional power.”
The Office of Servicemember Affairs Continues Its Outreach and Education Efforts
The CFPB’s Office of Servicemember Affairs (“OSA”) recently held a Financial Fitness Forum that included members of all military branches, top military officials, and financial service providers to discuss the financial challenges faced by servicemembers. Holly Petraeus, the assistant director overseeing the OSA (and wife of CIA Director David Petraeus), emphasized that there is a huge financial education gap despite the education efforts of the Defense Department. The OSA’s mission is to educate and empower servicemembers and their families to make better-informed decisions regarding consumer financial products and services.
The OSA plans to unveil its first financial education program early this year with delivery to servicemembers via computer or smart phone. The OSA’s programs are meant to enhance the financial aid course the military offers during basic training. However, the OSA plans to offer its educational programs earlier in training when service members are more likely to retain the information. As part of the training, the OSA will highlight products that banks and credit unions already offer to servicemembers (e.g., short-term credit, matching savings programs, and guaranteed deposit in the event of a government shutdown); however, a particular focus will be directed to housing issues. According to Petraeus, servicemembers have been especially impacted by the housing downturn, with many being underwater on their mortgages. As a result, they face severe financial difficulties when they receive military permanent change-of-station orders, which typically occur every three years. If a member of the military defaults on a loan, the individual will lose his or her security clearance—an essential requirement for many military jobs.
There have been recent policy changes to federal programs that make it easier for servicemembers to qualify for financial assistance. However, at the recent forum some mortgage industry representatives said they have no way of tracking borrowers who are members of the military, and thus there is no way to inform them about special benefits. Although the Federal Housing Finance Agency is in the process of building a database that includes a field to denote whether a borrower is dealing with a permanent change of station, the OSA’s mission is to educate servicemembers early so they know how to help themselves until such alert measures are in place.
Military officials at the forum encouraged the OSA to reach out to soldiers of all ages through various platforms and at different stages of their careers. Thomas Gill, the sergeant major to the Army deputy chief of staff, emphasized the importance of continued education by stating, “You can’t just teach it one time at one location and expect soldiers to get it...I think that’s where this body [the OSA] could really give us some help, because I’m not qualified to educate the masses.”
The OSA also is planning similar education products for military spouses, who are often responsible for household finances, especially during deployments.
CFPB Continues Its Coordination with State Regulators and Targets Consumer Fraud against Seniors in Maine
As part of its effort to coordinate consumer protection efforts for seniors with state regulators and senior advocacy organizations, the CFPB recently sent officials from its Office of Older Americans to Maine, one of the states fighting the highest levels of elder abuse. Skip Humphrey, the head of the CFPB Office of Older Americans, wrote about his trip to Maine and larger goals for the department on his December 22 blog post.
The Maine Attorney General’s Office reports that there are an estimated 14,000 incidents of elder abuse, including financial exploitation, in Maine annually. Of those, the Attorney General’s Office estimates that at least 84 percent of cases go unreported. On his December 12 visit to Portland, Humphrey met with local seniors, advocacy groups, governmental leaders, and financial association groups to address ways to combat financial scams aimed at seniors in Maine. Humphrey focused on community coordination and education. In his meeting with Maine Attorney General Bill Schneider, he additionally addressed ways in which the states Attorneys General could work with the CFPB to better identify and confront elder financial abuse.
Since taking the assistant directorship at the CFPB in October, Humphrey has traveled extensively to states across the country in an effort to coordinate state and federal efforts to combat financial fraud against those over age 62. The CFPB has tasked the Office of Older Americans with increasing education (including financial literacy and counseling programs for seniors), monitoring certifications for financial advisors who advise older Americans, and increasing coordination between federal and state regulators as well as organizations that assist or educate seniors. The Office of Older Americans is a subsection of the Consumer Education and Engagement Division of the CFPB.
Miscellany
What Can We Expect from the CFPB in 2012
Now that it can exercise its full arsenal of powers? Much of 2011 was spent in building mode at the CFPB—amassing employees, transitioning regulations, and beginning consumer outreach. Despite Republican attempts to keep Congress in session and avoid a recess appointment, President Obama appointed Richard Cordray to lead the CFPB on January 4, 2012 (see article above). Barring a successful court challenge to Cordray’s appointment, the CFPB leadership now is in place (at least for the next year), and the Bureau is poised to carry out its mission in 2012.
Powers of the Bureau—Then and Now
Section 1066(c) of the Dodd-Frank Act authorized the Department of the Treasury to perform certain CFPB functions until a director was in place. Certain new powers given to the Bureau could not be exercised without a Bureau director. The authorization given to Treasury permitted it to perform the following functions through the Bureau:
- Prescribe rules, issue orders, and produce guidance relating to the federal consumer financial laws that were within the authority of the Board of Governors of the Federal Reserve System, the Office of Comptroller of the Currency, the Office of Thrift Supervision, the FDIC, and the National Credit Union Administration prior to the Transfer Date.
- Conduct examinations of large depositories.
- Prescribe rules, issue guidelines, and conduct a study or issue a report under the enumerated consumer laws that were previously within the authority of the FTC prior to the Transfer Date.
- Conduct all consumer protection functions relating to RESPA, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, and the Interstate Land Sales Full Disclosure Act, which were within the authority of the Department of Housing and Urban Development prior to the Transfer Date.
- Enforce all orders and agreements that are issued or made prior to the Transfer Date by any transferor agency or by a court of competent jurisdiction in performance of consumer financial protection functions with respect to large depositories that were transferred to the CFPB on the Transfer Date.
- Replace the Board of Governors of the Federal Reserve System, the Office of Comptroller of the Currency, the Office of Thrift Supervision, the FDIC, and the National Credit Union Administration in any lawsuit or proceeding commenced prior to the Transfer Date, with respect to a consumer financial protection function transferred to the CFPB.
The Bureau has already acted under this authority by issuing certain regulations (including Regulation D); implementing the Alternative Mortgage Transaction Parity Act; and reissuing existing regulations of the other federal banking regulators, the FTC, and HUD as its own regulations (see article above regarding the Bureau’s new regulations, as well as Volume 1, Issue 8 of our CFPB Alerts). It also started examining large depository institutions.
Once a director was appointed, the Dodd-Frank Act empowered the Bureau to:
- Prohibit unfair, deceptive, or abusive acts or practices in connection with consumer financial products and services under §1031.
- Prescribe disclosure rules and require model disclosure forms under §1032 to ensure that the features of a consumer financial product or service are fairly, accurately, and effectively disclosed.
- Prescribe rules under §1022 relating to, among other things, the filing of reports with the CFPB for the purpose of determining whether a nondepository institution should be supervised by the CFPB.
- Supervise nondepository institutions under §1024, including (a) prescribing rules defining the scope of nondepository institutions subject to the CFPB’s supervision, (b) prescribing rules establishing record-keeping requirements that the CFPB determines are needed to facilitate nondepository supervision, or (c) conducting examinations of nondepository institutions.
The Bureau now has authority to supervise covered persons, regardless of size, that offer or provide to consumers certain enumerated financial products and services, including (1) the origination, brokering, and servicing of residential mortgages and related mortgage loan modification or foreclosure relief services, (2) private education loans, and (3) payday loans. For all other financial product markets, however, the CFPB’s nondepository supervisory authority generally applies only to covered persons who are deemed a “larger participant.” The CFPB has already issued a notice and request for comment regarding the definition of a larger participant (see 76 FR 38059,Wednesday, June 29, 2011) and will use the comments to help draft a proposed rule for public comment. This rule is of enormous significance since it can potentially expand the scope of the Bureau’s supervision and regulatory authority. A final rule on larger participants must be issued by July 21, 2012.
Supervision
As noted above, the Bureau now has the power to supervise mortgage companies, payday lenders, and private education lenders, regardless of size. The Bureau wasted no time in publishing a statement on its website on January 5, 2012 yesterday explaining what examination of these nonbank entities will entail. Mirroring the examination approach used with respect to large banks (which began as of the Transfer Date), the Bureau may request reports from the nonbanks and review advertising materials, compliance systems, and procedures. The Bureau indicates that “[i]n general” it will give nonbanks advance notice of upcoming examinations.
The nonbank examination program will be risk-based, taking into consideration factors such as volume of business, products and services offered, and the extent of state oversight when determining which companies the Bureau will supervise. The Bureau plans to coordinate with other federal and state regulators to determine where supervision is not needed.
Even without a director, the CFPB was empowered to commence supervision of banks with assets in excess of $10 billion beginning on July 21, 2011. In response to concerns regarding the treatment of information provided to the Bureau as part of the examination process, the Bureau’s general counsel issued a bulletin on January 4, 2012 (CFPB Bulletin 12-01), advising that provision of privileged information (such as information protected by the attorney-client privilege) to the Bureau pursuant to a supervisory request would not constitute a waiver of the privilege. Furthermore, the Bureau would take “all reasonable and appropriate action” to rebut any claim of privilege waiver a supervised institution may face as a result of providing the information to the Bureau.
The bulletin also states the Bureau will treat information provided as part of the supervisory process as confidential and privileged but acknowledges that sharing such information with other government agencies may be appropriate or required in some circumstances. The Bureau does not intend to routinely share supervisory information with agencies that are not engaged in supervision. The Bureau will not, for example, share such information with law enforcement agencies—including state Attorneys General—on a regular basis unless required to do so by law. If not required by law to share the information, the Bureau will review all relevant facts and considerations and determine whether the scenario presents one of the “very limited circumstances” under which it will share such information.
The CFPB has been filling its ranks with regulatory and enforcement attorneys, investigators, and personnel and, in late 2011, began accepting consumer complaints related to credit cards and mortgage products via its website. Furthermore, open investigations under the Real Estate Settlement Procedures Act have been transferred from HUD to the CFPB. Combined with the onset of nonbank examinations, all of these factors suggest that CFPB enforcement actions will be on the horizon in 2012.
Rulemaking
Raj Date, special advisor to the Secretary of the Treasury for the CFPB, has been quoted in industry press indicating that the CFPB will be focused on mortgage-specific policy changes in 2012. The CFPB continues to work with other federal regulators to develop national servicing standards, which Date has indicated is a priority. Comments Date made last fall at the American Banker’s Regulatory Symposium suggest we can expect a final “ability to repay” rule in the near future.
Efforts to develop simplified, combined RESPA/TILA disclosures continue into the new year. Dodd-Frank requires the CFPB to propose rules and model forms by July 21, 2012, and the Bureau has indicated it will do so. As indicated above, the Bureau must also issue its regulation on “larger participants” by July 21, 2012.
Regulatory Scorecard
Below is Dykema's up-to-date chart of pending and final regulatory activities and proceedings at the CFPB.
Consumer Financial Protection Bureau Pending Rulemakings, Final Rulemakings and Other Initiatives under Dodd-Frank Act (DFA) as of January 6, 2012
**NOTE: Click here to access a printable version of the Scorecard.
Description |
Date of Proposal/ |
Summary of Contents |
Key Dates |
|
Proposed Federal Reserve Board Comprehensive Regulation Z Proposals |
August 26, 2009 |
Two proposals issued in August of 2009 contained revisions to disclosures for closed-end mortgage loans and HELOCs. |
On February 1, 2011, Fed elected not to finalize proposals, recognizing CFPB’s impending authority |
|
Proposed Federal Reserve Board Comprehensive Regulation Z Proposal |
September 24, 2010 |
Proposed rule to: (1) expand the right to rescind to additional loan types, (2) amend disclosures to explain the right to rescind, (3) clarify lender’s responsibilities upon rescission, (4) mandate disclosures for loan modifications, (5) change reserve mortgage disclosures, and (6) place restrictions on certain advertising and sales practices for reverse mortgages. |
On February 1, 2011, Fed elected not to finalize proposals, recognizing CFPB’s impending authority |
|
Department of Treasury Privacy Act System of Records |
January 10, 2011 |
In accordance with the Privacy Act of 1974, as amended, Department of Treasury provided notice of the establishment of a Privacy Act System of Records. |
Written comments due on or before February 9, 2011 |
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Proposed Federal Reserve Board Regulation Z: Escrow Requirements |
March 2, 2011 |
Proposed rule to: (1) extend the minimum period an escrow account must be maintained for first lien, higherpriced mortgage loans from one to five years, (2) provide an exemption from the mandatory escrow for certain loans, (3) exempt from the mandatory escrow requirement creditors that operate primarily in “rural or "undeserved” counties, and (4) require new disclosure explaining how the escrow account works or what the effects would be of not having an escrow account at all. |
Written comments due on or before May 2, 2011 |
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CFPB and JAGs Partnership |
July 6, 2011 |
CFPB and Judge Advocate Generals will work together to identify potential violations of consumer law involving service members and their families. |
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OCC, FED, FDIC, SEC, FHFA, and HUD Risk Retention/Qualified Residential Mortgage (QRM) |
April 29, 2011 |
DFA §941 requires sponsors of assetbacked securities (ABSs) to retain at least 5% of the credit risk of assets underlying the securities; proposal includes loan-level requirements such as minimum down payment. |
Written comments due on or before August 1, 2011 |
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Federal Reserve Board Increase in Regulations Z & M Coverage Thresholds |
April 4, 2011 |
Consumer credit transactions and consumer leases with transaction amounts up to $50,000 will be covered by Regulation Z and Regulation M. Beginning the end of this year (December 31, 2011), the threshold will be adjusted annually based upon the Consumer Price Index (CPI) for Urban Wage Earners and Clerical Workers. |
Effective July 21, 2011 |
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CFPB Data Collection under ECOA |
April 11, 2011 |
DFA §1071 amended ECOA to require financial institutions to collect and report credit application information for women- or minority-owned businesses and small businesses. CFPB issued guidance to financial institutions clarifying that DFA §1071 does not take effect until the CFPB issues necessary implementing regulations. |
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Federal Reserve Board Ability to Repay/Qualified Mortgage (QM) |
April 19, 2011 |
DFA §1411 requires creditors, when making loans covered by TILA, to determine the consumer’s ability to repay before making a loan and also to establish minimum mortgage underwriting standards; proposal includes alternatives for final regulation. |
Written comments due on or before July 22, 2011 |
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Federal Reserve Board Foreign Remittance Transfers under Regulation. E |
May 23, 2011 |
DFA §1073 amended the EFT Act, adding a new section to require providers of “remittance transfers” to provide disclosures about such transfers, including exchange rate, applicable fees and taxes, and the amount to be received by the “designated recipient.” |
Written comments due on or before July 22, 2011 |
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Federal Reserve Board Collection Data at Motor Vehicle Dealers under Regulation. B |
June 20, 2011 |
Proposed rule to clarify that motor vehicle dealers temporarily are not required to comply with certain data collection requirements in the DFA until the board issues final regulations to implement the statutory requirements. |
Written comments due on or before July 29, 2011 |
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CFPB “Single Integrated Disclosure” Proposal (in advance of proposed rule) under DFA §1032 |
May – June, 2011 |
CFPB has posted several rounds of “sample” forms on its website and sought public feedback; U.S. Treasury has solicited comments “concerning a proposed generic information collection for development and evaluation of integrated loan disclosures” (combining Regulation. Z mortgage disclosure and the RESPA Good Faith Estimate (GFE) into a single, integrated disclosure form). |
DFA requires final rule no later than July 21, 2012; CFPB has stated that it will conduct four rounds of consumer testing through February, 2012, and will issue notice and comment rulemaking in July, 2012 |
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CFPB “Larger Participant” Definition |
June 29, 2011 |
DFA §1024 provides that CFPB may supervise covered persons in the residential mortgage, private education lending and payday lending markets. For other markets for consumer financial products or services, CFPB’s supervision program will apply only to a “larger participant” of these markets, as defined by rule. |
Written comments due on or before August 15, 2011 |
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CFPB Identification of Enforceable Rules and Orders |
July 21, 2011 |
CFPB published consumer financial protection authorities that would be transferred from seven federal agencies and that it would enforce after the Transfer Date. |
Effective Date: July 21, 2011 |
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CFPB Alternative Mortgage Transaction Parity (Regulation D) |
July 22, 2011 |
CFPB published interim final rule establishing Regulation D pursuant to the Alternative Mortgage Transaction Parity Act and the Truth in Lending Act. |
Effective for state housing creditors July 22, 2011 |
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FTC Statement of General Policy or Interpretation; Commentary on the Fair |
Credit Reporting Act |
FTC is rescinding its Statements of General Policy or Interpretations under the FCRA. |
Effective Date: July 26, 2011 |
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Disclosure of Records and Information |
July 28, 2011 |
Interim Final Rule establishes procedures for the public to obtain information from the CFPB under the Freedom of Information Act (FOIA). CFPB also established its rules regarding the confidential treatment of information it obtains in connection with the exercise of its authority. |
Effective Date: July 28, 2011 |
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Rules of Practice of Adjudication Proceedings |
July 28, 2011 |
Interim Final Rule establishes procedures regarding the conduct of adjudication proceedings under §1053 of the Dodd-Frank Act, used to enforce compliance with the Dodd-Frank Act or any laws for which it has enforcement authority. |
Effective Date: July 28, 2011 |
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State Official Notification Rules |
July 28, 2011 |
Interim Final Rule establishes procedures to be used by state officials to notify the CFPB of their actions or proceedings in enforcing the Dodd-Frank Act or its regulations. |
Effective Date: July 28, 2011 |
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Rules Relating to Investigations |
July 28, 2011 |
Interim Final Rule describing the CFPB’s procedures for investigations regarding compliance with the federal consumer financial laws. |
Effective Date: July 28, 2011 |
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Notice of Proposed Privacy Act System of Records |
August 1, 2011 |
Notice of new records system to collect process, log, track and respond to all FOIA- and Privacy Act-related requests. |
Written comments due on or before August 31, 2011 |
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Policy on Ex Parte Presentations in Rulemaking Proceedings
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August 16, 2011 |
Policy requiring public disclosure of ex parte presentations made to the CFPB staff concerning a pending rulemaking.
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August 16, 2011
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Notice and Request for Information on Consumer Financial Products and Services for Servicemembers
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September 6, 2011
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Request for input regarding consumer financial products and services tailored to servicemembers and their families.
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Written comments due on or before September 20, 2011
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Proposed Information Collection; Comment Requests; Generic Clearance for Research in Development of Disclosure Forms |
September 26, 2011 |
Generic Clearance Request regarding information collection to OMB in connection with research in the development of disclosure forms and request for comments on the collection of information and the estimated burden on respondents. |
Written comments due to OMB reviewer and to Treasury Department Clearance Officer on or before October 26, 2011. |
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FRB Final Rule Amending Regulation B to Postpone Auto Dealer Collection of Information on Minority and Women Owned Businesses and Small Businesses
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September 26, 2011
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Provides that motor vehicle dealers are not required to comply with Dodd-Frank’s data collection requirements on credit applications by women- and minority-owned businesses until the FRB issues final regulations to implement the statutory requirement. |
Effective September 26, 2011
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| Proposed Collection; Comment Request |
October 31, 2011 (76 FR 67128) |
CFPB is soliciting comment for a proposed generic information collection that will help the CFPB satisfy responsibilities under the Dodd-Frank Act—the collection and monitoring of and response to consumer complaints about certain financial products and services. |
Written comments due on or before December 30, 2011. |
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Proposed Collection; |
November 2, 2011 |
CFPB is soliciting comment for a proposed generic information collection for development and/or testing of model forms, tools, and similar related materials. |
Written comments due on or before January 3, 2012. |
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CFPB Early Notice of Enforcement Actions |
CFPB Bulletin 2011-04 |
CFPB announced it may provide lenders with notice of the nature of the subject's potential violations before proceeding with enforcement actions. |
Effective November 7, 2011 |
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Notice of Proposed Privacy Act System of Records |
November 4, 2011 |
CFPB is soliciting comments on its new system of records regarding its employees' Transit Subsidy Program. |
Written comments due on or before December 5, 2011. |
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Request for Information Regarding Private Education Loans and Private Education Lenders |
November 17, 2011 |
CFPB is requesting information on private education loans and related consumer financial products and services to help prepare a report on private education loans and private education lenders required under section 1077 of the Dodd-Frank Act. |
Written comments due on or before January 17, 2012 |
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Notice of Proposed Privacy Act System of Records |
November 17, 2011 |
CFPB is soliciting comments on its new system of records regarding its employees' benefits, retirement, human resources and payroll programs. |
Written comments due on or before December 19, 2011 |
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Proposed Collection; |
November 21, 2011 |
CFPB is soliciting comment on the collection of information from state officials regarding the filing of state actions to enforce the Dodd-Frank Act and regulations prescribed thereunder. |
Written comments due on or before January 20, 2010 |
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Notice; Request for Information |
December 5, 2011 |
CFPB is requesting specific suggestions for streamlining regulations in inherited from other agencies. |
Written comments due on or before March 5, 2012 |
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Notice of Proposed Policy Statement |
December 8, 2011 |
CFPB is requesting comment on a proposed policy statement that addresses the CFPB's proactive disclosure of credit card complaint data. The policy statement sets forth the CFPB's proposed initial disclosure of credit card complaint data and identifies additional ways that CFPB may disclose credit card complaint data. |
Written comments due on or before January 30, 2012 |
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Notice of Proposed Privacy Act System of Records |
December 13, 2011 |
CFPB is soliciting comments on its new system of records regarding Interstate Land Sales Registration Files. |
Written comments due on or before January 12, 2012. |
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Notice of Proposed Privacy Act System of Records |
December 13, 2011 |
CFPB is soliciting comments on its new system of records regarding its Ombudsman Office's tracking of inquiries submitted to it while the inquiries are being adjudicated. |
Written comments due on or before January 12, 2012 |
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Notice and Request for Public Comment |
December 14, 2011 |
CFPB is requesting comment on a proposed information collection in connection with certain mortgage servicing rules and related disclosures. |
Written comments due on or before January 13, 2012 |
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Bureau Invites Whistleblower Information and Law Enforcement Tips, and Highlights Anti-Retaliation Protections |
December 15, 2011 |
Bureau is soliciting information form whistleblowers regarding potential violations of Federal consumer financial laws. |
December 15, 2011 |
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Interim Final Rule With Request for Public Comment |
December 16, 2011 |
Interim final rule that recodifies FDCPA rules as Regulation F under the Bureau's regulation. |
Effective Date: December 30, 2011; Written comments due on or before February 14, 2012 |
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Interim Final Rule With Request For Public Comment |
December 16, 2011 |
Interim final rule establishing a new Regulation N (Mortgage Acts and Practices—Advertising Rule) and a new Regulation O (Mortgage Assistance Relief Services Rule) under the Bureau's regulations. |
Effective Date: December 30, 2011; Written comments due on or before February 14, 2012 |
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Interim Final Rule With Request For Public Comment |
December 19, 2011 |
Interim final rule that recodifies Regulation C, implementing HMDA, under the Bureau's regulations. |
Effective Date: December 30, 2011; Written comments due on or before February 17, 2012 |
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Interim Final Rule With Request For Public Comment |
December 19, 2011 |
Interim final rule that codifies Regulation G and H, implementing the S.A.F.E. Act, under the Bureau's regulations. |
Effective Date: December 30, 2011; Written comments due on or before February 17, 2012 |
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Interim Final Rule With Request For Public Comment |
December 19, 2011 |
Interim final rule that recodifies Regulation M, implementing the Consumer Leasing Act, under the Bureau's regulations. |
Effective Date: December 30, 2011; Written comments due on or before February 17, 2012 |
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Interim Final Rule With Request for Public Comment |
December 20, 2011 |
Interim rule that recodifies RegulationX, implementing the Real Estate Settlement Procedures Act (RESPA). |
Interim final rule effective December 30, 2011; Written comments due on or before February 21, 2012 |
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Interim Final Rule With Request for Public Comment |
December 21, 2011 |
Interim rule that recodifies Regulation P, implementing the provisions of Title V and the Gramm-Leach-Bliley Act (privacy). |
Interim final rule effective December 30, 2011; Written comments due on or before February 21, 2012 |
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Interim Final Rule With Request for Public Comment |
December 21, 2011 |
Interim rule that recodifies Regulation DD, implementing the Truth in Savings Act (TISA). |
Interim final rule effective December 30, 2011; Written comments due on or before February 21, 2012 |
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Interim Final Rule With Request for Public Comment |
December 21, 2011 |
Interim rule that recodifies Regulation V, implementing the Fair Credit Reporting Act (FCRA) |
Interim final rule effective December 30, 2011; Written comments due on or before February 21, 2012 |
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Interim Final Rule With Request for Public Comment |
December 21, 2011 |
Interim rule that recodifies Regulation B,implementing the Equal Credit Opportunity Act (ECOA) |
Interim final rule effective December 30, 2011; Written comments due on or before February 21, 2012 |
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Interim Final Rule With Request for Public Comment |
December 21, 2011 |
Interim rule that recodifies Regulations J, K and L, implementing the Interstate Sales Full Disclosure Act (ISLA) |
Interim final rules effective December 30, 2011; Written comments due on or before February 21, 2012 |
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Interim Final Rule With Request for Public Comment |
December 22, 2011 |
Interim rule that recodifies Regulation Z, implementing the Truth in Lending Act (TILA) |
Interim final rule effective December 30, 2011; Written comments due on or before February 21, 2012 |
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Interim Final Rule With Request for Public Comment |
December 27, 2011 |
Interim rule that recodifies Regulation E, implementing the Electronic Fund Transfers Act (EFTA) |
Interim final rule effective December 30, 2011; Written comments due on or before February 27, 201 |
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Bureau Issues and CFPB Bulletin 12-01 regarding its supervision authority and treatment of confidential supervisory information |
January 4, 2012 |
Bureau is providing guidance regarding the collection of information through the supervisory process and the confidentiality protections that this process provides to supervised institutions. |
January 4, 2012 |
Contacts and Caveats
For more information about Dykema’s Financial Services Regulatory and Compliance Team, please contact group leader, Don Lampe at 704-335-2736, or any of the listed attorneys.
As part of our service to you, we regularly compile short reports on new and interesting developments regarding the Consumer Financial Protection Bureau. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Readers should seek specific legal advice before acting with regard to the subjects mentioned here. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments on this Alert, or any Dykema publication, are always welcome. ©2012 Dykema Gossett PLLC.
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