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Consumer Financial Protection Bureau Alert—Vol. 1, No. 5

By the Authors of PLI's Consumer Financial Services Answer Book 2011

November 3, 2011

Regulations and Guidance Update

Bureau Focuses on Transparency in Student Loan Market and Joins the Department of Education in Issuing Model Disclosure Form

College tuition has risen by an average of 5.6 percent  per year in the past decade, higher than the rate of general inflation, and the average graduate has between $22,000 and $28,000 in student loan debt. Parents are often confused about student loans, so they turn to credit cards to pay for their children’s college. Students themselves do not realize the importance of student loans and how their terms can affect them down the road.  There is a growing trend in the use of nontraditional, high-priced private loans offered by, or in partnership with, for-profit colleges prior to a student exhausting all federal options available.  These private loans are made with little to no evaluation of the students’ ability to repay the obligation. Colleges themselves have admitted that these loans will likely end up in default.  Private loans generally come with variable interest rates and stricter repayment terms upon graduation.

In response, the Consumer Financial Protection Bureau (CFPB) is calling for greater transparency in the student lending market. The CFPB indicated that it hopes this scrutiny will spur competition among schools and lenders to create a fair marketplace. On October 25, 2011, the CFPB and the U.S. Department of Education unveiled a model disclosure form for presenting financial aid offers to students. These plans coincide with the recent White House announcement of plans, using an executive order, to cap monthly student loan payments at 10 percent  of a student’s discretionary income and offer a .5 percent interest rate reduction for consolidating federal loans.

The model disclosure form for student loans is a one-page form, similar to the model disclosure forms previously unveiled as part of the Know Before You Owe project, that would clarify the costs and risks of student loans. The model form includes information about the cost of attending college, including tuition, fees and other expenses. It also makes clear distinctions between scholarships and loans, lists all federal loans available to students, and estimates student loan debt at graduation and what the student’s monthly debt payments will be after graduation.  Future versions of the form may even include the school’s graduation and loan default rates. The CFPB hopes the disclosure form will help students compare aid packages between institutions. The adoption of the simplified form is voluntary at the moment, but Congress could vote to make use of this form mandatory for any school that receives federal financial aid. The Bureau intends to post the model disclosures online to allow the public to rank items in terms of usefulness, which it will use to update the form.

The CFPB has also released a student debt repayment assistance tool that provides information on income-based repayment, deferments and alternative payment programs. The tool does not actually accept applications for loan modification, but it does ask a few basic questions to understand the user’s economic situation.  The tool then uses this information to provide advice and guide borrowers through their various options.

Another Round: CFPB Posts Model Disclosure Forms for Fixed Rate and Adjustable Rate Loans for Comment

Continuing with its work on a combined TILA/RESPA application disclosure, the Bureau has posted yet another round of model disclosure forms for comment by consumers and the industry, this time focusing on the differences between fixed and adjustable rate loans. The fixed rate form (Pinyon Bank) is fairly straightforward.  The adjustable rate form (Yucca Bank) includes additional information, including projected payment calculations in subsequent years of the loan, as well as an Adjustable Interest Rate (AIR) table that highlights the terms of the adjustable rate feature. The Bureau has also indicated that it is currently testing a new disclosure prototype design in New Mexico.

The Bureau has indicated that it has turned its attention to disclosures to be provided at loan closing and has begun working on a disclosure form that informs borrowers of final loan terms and costs. It intends to post a prototype loan closing disclosure for comment in the near future, noting that the application and closing disclosures must be both clear and effective and must work together to further borrowers’ understanding of their loans.

News from the Bureau

Bureau Names Head of Office of Older Americans; New Office to Educate and Protect Seniors

Former Minnesota Attorney General Hubert H. (“Skip”) Humphrey III has been named to lead the Bureau’s Office of Older Americans. In addition to serving four terms as the Minnesota AG, Humphrey, the son of the former U.S. Vice President, has previously served as Minnesota state senator, president of AARP Minnesota and a member of the AARP national board.

The Office of Older Americans is charged with helping seniors aged 62 or older improve their financial decision making, and with preventing unfair, deceptive and abusive practices targeted at that group.  This office is yet another team at the Bureau aimed at protecting vulnerable segments of the population such as students and service members. The new office will begin operation at a time when seniors are experiencing deepening financial problems, being hurt badly in the recent recession and experiencing a depreciation in their savings, possible foreclosure and financial abuse (seniors are losing an estimated three billion dollars annually to such abuse).

The Bureau has indicated that the various tasks of the Office of Older Americans will include educating seniors about financial choices in the areas of long-term savings, retirement planning and long-term care.  It will also provide coordination between senior groups, law enforcement, financial institutions, and federal and state agencies to identify and prevent scams. Mr. Humphrey stated that “A well-informed consumer is the best protection against fraud and deceptive practicesespecially if that knowledge is backed up by tough regulatory enforcement.”

Noting that the lack of a confirmed Bureau director may initially hinder certain of his office’s activities, Mr. Humphrey believes there is much work his office can begin right now. Chief among these is listening to and learning from seniors, in order to learn and understand the problems they are facing. Mr. Humphrey stated that “We’re going to bring their concerns back to the consumer bureau to inform our work and develop effective programs to serve these problems.”

The Bureau has introduced the Office of Older Americans on its website and has listed the problems seniors may be facing and what the Office is planning to do to help them with these issues. In addition, the Bureau website offers assistance to seniors on avoiding scams, elder financial abuse, housing, long-term care, protecting investments, retirement, support on financial decision-making and legal issues, end-of-life issues, and taking care of loved ones.  The Bureau refers seniors to its hotline and to additional resources for assistance with these matters.

Bipartisan Group of State Attorneys General Back Cordray for CFPB Chief

A group of 37 Democratic and Republican state attorneys general has endorsed Richard Cordray for the CFPB’s chief, stating that he “has the knowledge, experience and leadership skills to serve in this important position.” The attorneys general, all members of the National Association of Attorneys General, recently sent a letter to the leaders of the United States Senate praising Cordray’s “good judgment and inherent sense of fairness.” The letter called Cordray “both brilliant and balanced,” and assured Senate leaders that, “[a]s head of the CFPB, Mr. Cordray will be an honest broker and strong advocate for both business and consumers that are committed to follow the rules.”

Absent from the list of signatories to the letter was Mike DeWine, who defeated Cordray for the position of Ohio Attorney General in 2010.  DeWine has since commented that Cordray is “highly qualified” and will “do an excellent job.” DeWine stated that he did not sign the letter because he prefers not to tell his former colleagues in the Senate what to do.

The Senate Banking Committee approved Cordray’s nomination along party lines in early October. Cordray’s confirmation is in question, however, because a bloc of 44 Republicans has threatened to prevent consideration of any nominee to the CFPB until Democrats agree to make changes to the Dodd-Frank Act, including (1) replacing the CFPB director with a board of directors, (2) subjecting the CFPB to the appropriations process and (3) establishing tools for bank regulators to use to prevent unnecessary bank failure.

Republican Senator Richard Shelby has complained that President Barack Obama has been “ignoring Republicans’ calls to make [the CFPB] accountable to their elected representatives.”  Senate Majority Leader Harry Reid, on the other hand, has labeled the Republicans’ actions as “obstructionism.” President Obama also has lamented that the Republicans “have threatened not to confirm [Cordray] not because of anything he’s done, but because they want to roll back the whole notion of having a consumer watchdog.” The White House stressed its continued commitment to getting Cordray confirmed. In their letter, the attorneys general maintained that disagreements about the Bureau should not be confused with Cordray’s suitability for the job.

Miscellany

Bureau Issues Notice and Request for Comment Regarding Generic Information Collection in Connection With Monitoring of, and Responses to, Consumer Complaints on Financial Products and Services

On October 31, the CFPB invited the general public and other federal agencies to comment on proposed generic information collection procedures that will enable the CFPB to satisfy responsibilities under the Dodd-Frank Act. Written comments must be received on or before December 31, 2011. Written comments submitted in response to the CFPB Notice will be summarized and/or included in a request for Office of Management and Budget approval.

The proposed generic information collection will help facilitate the collection and monitoring of, and response to, consumer complaints about certain financial products and services. There is general concern in the financial industry, however, that the CFPB has been lax on its information collection controls, which could result in potential harm to the industry. Specifically, many claim the current procedures do not address the accuracy of complaints or adequately protect industry participants from unfair reputational harm due to frivolous or illegitimate consumer complaints. From a consumer standpoint there are also privacy concerns relating to the CFPB’s control of personal information contained in consumer complaints, which could ultimately lead to identity theft.

To address these issues and streamline methods for information collection, the CFPB has invited comments on the following topics:

  • Whether the proposed collection of information is necessary for the proper performance of the functions of the CFPB, including whether the information will have practical utility;
  • Whether the CFPB’s estimate of the total annual burden hours on the proposed information collection (418,300 hours) is accurate;
  • Ways to enhance the quality, utility and clarity of the information to be collected; and
  • Ways to minimize the burden of the collection of information on respondents, including the use of automated collection techniques or other forms of information technology, such as permitting electronic submission of responses.

Industry leaders should take a close look at the CFPB’s proposal to determine whether to submit comments, recognizing that all comments will become a matter of public record.

Bureau Issues Notice and Request for Comment Regarding Generic Information Collection in Connection With the Development and Testing of Its Model Forms

On November 2, 2011, the Bureau published a Notice and Request for Public Comment in the Federal Register regarding its collection of generic information in connection with the development and testing of its model forms and related material. This notice, required by the Paperwork Reduction Act, invites the general public and other federal agencies to comment on the proposed information collection. Comments must be received on or before January 3, 2012.

The CFPB expects to collect qualitative data through a variety of collection methods, including interviews and research, to assist in the design, development and implementation of the model form(s), disclosures, tools and other similar related materials. The information collected through qualitative evaluation methods will inform the design and content of the model form(s), using an iterative process to improve the draft disclosures. For example, information collected from consumers will help the CFPB design model forms, disclosures, tools and similar related materials that are responsive to consumer needs and present complex information in an understandable form.

The CFPB will only submit a collection for approval under this generic clearance if it meets the following conditions:

  • The collection is voluntary;
  • The collection is low-burden for respondents (based on considerations of total burden hours, total number of respondents or burden-hours per respondent) and are low-cost for both the respondents and the federal government;
  • Personally identifiable information is collected only to the extent necessary, subject to privacy protections, and is not retained;
  • Information gathered and released beyond the CFPB will indicate the qualitative nature of the information; and
  • Information gathered will yield qualitative information; the collections will not be designed or expected to yield statistically reliable results or used as though the results are generalizable to the population of study.

The core objective of the data collection is to help identify, evaluate and refine specific features of the content or design of the model forms, disclosures, tools and other similar related materials to maximize communication effectiveness while minimizing the compliance burden.

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 November 3, 2011

**NOTE: Click here to access a printable version of the Scorecard.

Description   

Date of Proposal/
Final or Interim Rule 

Summary of Contents 

Key Dates 

Proposed Federal Reserve Board Comprehensive Regulation Z Proposals  

August 26, 2009
(74 FR 43428)

August 26, 2009
(74 FR 43232)

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
(75 FR 58539)

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
(76 FR 1507)

June 15, 2011
(76 FR 35071)

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

Effective Date: July 15, 2011

Proposed Federal Reserve Board Regulation Z: Escrow Requirements

March 2, 2011
(76 FR 11598)

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

CFPB and JAGs Partnership

July 6, 2011

The CFPB and JAGS: partnering to protect servicemembers

CFPB and Judge Advocate Generals will work together to identify potential violations of consumer law involving service members and their families.


OCC, FED, FDIC, SEC, FHFA, and HUD Risk Retention/Qualified Residential Mortgage (QRM)

April 29, 2011
(76 FR 24090)

June 10, 2011
(76 FR 34010)

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

Federal Reserve Board Increase in Regulations Z & M Coverage Thresholds

April 4, 2011
(76 FR 11598)

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

CFPB Data Collection under ECOA

April 11, 2011

Section 1701 of the Dodd-Frank Act

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.


Federal Reserve Board Ability to Repay/Qualified Mortgage (QM)

April 19, 2011
(76 FR 27390)

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

Federal Reserve Board Foreign Remittance Transfers under Regulation. E

May 23, 2011
(76 FR 29902)

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

Federal Reserve Board Collection Data at Motor Vehicle Dealers under Regulation. B

June 20, 2011
(76 FR 36885)

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

CFPB “Single Integrated Disclosure” Proposal (in advance of proposed rule) under DFA §1032

May – June, 2011
(
www.consumerfinance.gov)

J
uly 20, 2011
(76 FR 43374)

September 12, 2011

CFPB posted “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).

Treasury requests comments on or before September 19, 2011; DFA requires final rule no later than July 21, 2012

CFPB “Larger Participant” Definition

June 29, 2011
(76 FR 38059)

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

CFPB Identification of Enforceable Rules and Orders

July 21, 2011
(76 FR 43569)

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

CFPB Alternative Mortgage Transaction Parity (Regulation D)

July 22, 2011
(76 FR 44226)

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

Written comments due on or before September 22, 2011

FTC Statement of General Policy or Interpretation; Commentary on the Fair

Credit Reporting Act

July 26, 2011
(76 FR 44462)

FTC is rescinding its Statements of General Policy or Interpretations under the FCRA.

Effective Date: July 26, 2011

Disclosure of Records and Information

July 28, 2011
(76 FR 45372)

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

Written comments due on or before September 26, 2011

Rules of Practice of Adjudication Proceedings

July 28, 2011
(76 FR 45338)

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

Written comments due on or before September 26, 2011

State Official Notification Rules

July 28, 2011
(76 FR 45174)

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

Written comments due on or before September 26, 2011

Rules Relating to Investigations

July 28, 2011
(76 FR 45168)

Interim Final Rule describing the CFPB’s procedures for investigations regarding compliance with the federal consumer financial laws.

Effective Date: July 28, 2011

Written comments due on or before September 26, 2011

Notice of Proposed Privacy Act System of Records 

August 1, 2011
(76 FR 45767)




(76 FR 45765)









(76 FR 45761)







(76 FR 45757)





(76 FR 45759)




(76 FR 45763)

Notice of new records system to collect process, log, track and respond to all FOIA- and Privacy Act-related requests.


Notice of new records system used to enable the CFPB to carry out its responsibilities with respect to certain banks, savings associations, credit unions, and their affiliates and service providers, including coordination and conduct of examinations, supervisory evaluations and enforcement actions.

Notice of a new records system used to enable the CFPB to carry out its  responsibilities with respect to individuals related to non-depository covered persons, including the coordination of examinations, supervision evaluations and enforcement actions.

Notice of a new records system used to enable the CFPB to carry out its responsibilities with respect to the enforcement of federal consumer financial protection laws.

Notice of a new records system used to assist the CFPB by providing effective, social media-based ways to share information and interact with the public.

Notice of a new records system that will provide the CFPB with a single, agency-wide repository of identifying and registration information concerning entities offering or providing, or materially assisting in the offering or provision of, consumer financial products or services.

Effective Date: September 12, 2011

Written comments due on or before August 31, 2011

Policy on Ex Parte Presentations in Rulemaking Proceedings

 

August 16, 2011

Policy on Ex Parte Presentations in Rulemaking Proceedings

Policy requiring public disclosure of ex parte presentations made to the CFPB staff concerning a pending rulemaking.

 

August 16, 2011

 

Notice and Request for Information on Consumer Financial Products and Services for Servicemembers

 

September 6, 2011
(76 FR 54998)

 

Request for input regarding consumer financial products and services tailored to servicemembers and their families.

 

Written comments due on or before September 20, 2011

 

Proposed Information Collection; Comment Requests; Generic Clearance for Research in Development of Disclosure Forms

September 26, 2011
(76 FR 59379)
 

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. 

FRB Final Rule Amending Regulation B to Postpone Auto Dealer Collection of Information on Minority and Women Owned Businesses and Small Businesses

 

September 20, 2011

 

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. 

ective upon publication in the Federal Register

 

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. 


Proposed Collection;
Comment Request 

November 2, 2011
(76 FR 67668) 

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.

Contacts and Caveats  

For more information about Dykema’s Financial Services Regulatory and Compliance team, please contact the group's Leader, Don Lampe, at 704-335-2736, or any of the listed lawyers. 


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. ©2011 Dykema Gossett PLLC.

As part of our service to you, we regularly compile short reports on new and interesting developments and the issues the developments raise. Please recognize that these reports do not constitute legal advice and that we do not attempt to cover all such developments. Rules of certain state supreme courts may consider this advertising and require us to advise you of such designation. Your comments are always welcome. © 2018 Dykema Gossett PLLC.