What We’ll See from the CFPB

by: Chris Collver, Senior Regulatory and Legislative Analyst, California and Nevada Credit Union Leagues

Some credit unions are wondering: What regulations does the Consumer Financial Protection Bureau intend to issue, and when will they be issued? While we have a fairly good idea what areas the CFPB intends to regulate, the timing of final regulations to be issued by the agency is still up in the air.

So far, the CFPB has issued only one substantive final regulation (which was required by the Dodd-Frank Wall Street Reform and Consumer Protection Act) pertaining to disclosures and protections for international remittances. It is effective Feb. 7, 2013.

However, there are a lot of pending regulations “in the pipeline.” We’ll take a look at proposed rules the CFPB has inherited from other agencies, and has yet to finalize, as well as some initiatives the agency has taken up as part of its purpose and focus.

Mortgage Lending
•Dodd-Frank Escrow Account Rules—This proposal,
www.gpo.gov/fdsys/pkg/FR-2011-03-02/pdf/2011-4385.pdf, would amend Regulation Z to expand the minimum period for mandatory escrow accounts, including higher cost mortgages, and implement new disclosure requirements. Comments were due May 2, 2011.
•Dodd-Frank Ability to Repay Rule—This proposal,
www.gpo.gov/fdsys/pkg/FR-2011-05-11/pdf/2011-9766.pdf, contains four possible compliance options that would meet the requirement for lenders to do at least a minimum level of mortgage underwriting, including the creation of a “qualified mortgage.” Comments were due July 22, 2011.
•Combined RESPA/TILA Disclosures—Under Dodd-Frank, the CFPB has until July 21, 2012 to issue an official proposal to consolidate the disclosures required under the Truth in Lending Act and the Real Estate Settlement Procedures Act. The CFPB has released several draft forms under its “Know Before You Owe” project,
www.consumerfinance.gov/knowbeforeyouowe, but these actions were not official proposed rules, nor were they part of the Administrative Procedures Act.
•Home Mortgage Disclosure Act—Dodd-Frank requires the CFPB to amend HMDA to require lenders to collect and report additional information from borrowers, to include total points and fees, the borrower’s credit score, and Mortgage Loan Originator information. To date, the CFPB has not issued a proposal on this provision.
•Mortgage Servicing Rules—In April, the CFPB announced it intends to propose eight new mortgage servicing rules this summer, including earlier disclosures before interest rate changes on adjustable-rate mortgages, contact and disclosure requirements to help borrowers avoid foreclosure, and force-placed insurance provisions.

Consumer Lending
The CFPB has initiated two other “Know Before You Owe” projects for credit cards and student loans, which include sample agreements and disclosures. Although these projects are not official proposals (the forms are not mandatory), it indicates the agency’s interest in addressing what it perceives to be shortcomings in current agreements and disclosures—and the CFPB has the authority to issue regulations in this area.

Operations
•Amendments to Regulation CC—This proposal would make extensive changes to the regulation, including a shortening of the extended hold period from five to two days, and revisions to the model disclosure forms. Comments were due by June 3, 2011. The CFPB will likely finalize this rule together with the Federal Reserve.
•Overdrafts—The agency has requested public input,
www.federalregister.gov/articles/2012/02/28/2012-4576/impacts-of-overdraft-programs-on-consumers, regarding the impact of overdraft programs on consumers. The CFPB’s inquiry is focused on four main areas: transaction re-ordering that increases consumer costs; missing or confusing information; misleading marketing materials; and disproportionate impact on low-income and young consumers. Although this is only an information-gathering action, the CFPB has embarked on it by citing their authority under Dodd-Frank to regulate “the offering and provision of consumer financial products or services under the Federal consumer financial laws.”

The CFPB is also in the process of evaluating comments it recently received regarding its initiative to streamline the regulations it inherited from other federal agencies. While the goal of the initiative is to eliminate outdated, burdensome, or unnecessary provisions of the regulations, doing so would require amendments to the regulations. So, even an amendment that may be beneficial in the long term would require extra short-term work in the form of revised policies and procedures, amended disclosures, and other areas.

And, of course, keep in mind that the CFPB has as its overarching mission to regulate and enforce any acts or practices that it considers “unfair, deceptive, or abusive.”

Chris Collver is the Senior Regulatory and Legislative Analyst for the California and Nevada Credit Union Leagues. His responsibilities include tracking and analyzing federal and state legislation and regulations of importance to credit unions. He works extensively with the Leagues’ advocacy teams to provide data, analysis, and recommendations on new and proposed legislation and regulations, including drafting legislative language and preparing comments to regulators.

Chris joined the Leagues in 2000 after working for 15 years at a credit union in Omaha, NE. While there, he worked in a variety of operational roles, including 10 years managing the credit union’s call center, data processing, ACH, and ATM and debit card processing departments.

Chris holds a degree in business administration from California Baptist University.  www.ccul.org