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On October 17, the Bureau of Consumer Financial Protection (“BCFP” or “Bureau”) issued its Fall  2018 regulatory agenda.  Notable highlights include:

  • Payday Lending Rule Amendments. In January 2018, the Bureau announced that it would engage in rulemaking to reconsider its Payday Lending Rule released in October 2017.  According to the Bureau’s Fall 2018 agenda, the Bureau expects to issue a notice of proposed rulemaking by January 2019 that will address both the merits and the compliance date (currently August 2019) of the rule.
  • Debt Collection Rule Coming. The Bureau expects to issue a notice of proposed rulemaking addressing debt collection-related communication practices and consumer disclosures by March 2019.  The Bureau explained that debt collection remains a top source of the complaints it receives and both industry and consumer groups have encouraged the Bureau to modernize Fair Debt Collection Practices Act (“FDCPA”) requirements through rulemaking.  The Bureau did not specify whether its proposed rulemaking would be limited to third-party collectors subject to the FDCPA, but its reference to FDCPA-requirements suggests that is likely to be the case.
  • Small Business Lending Data Collection Rule Delayed. The Dodd-Frank Act amended the Equal Credit Opportunity Act (“ECOA”) to require financial institutions to submit certain information relating to credit applications made by women-owned, minority-owned, and small businesses to the Bureau and gave the Bureau the authority to require financial institutions to submit additional data.  In May 2017, the Bureau issued a Request for Information seeking comment on small business lending data collection.  While the BCFP’s Spring 2018 agenda listed this item as in the pre-rule stage, the Bureau has now delayed its work on the rule and reclassified it as a long-term action.  The Bureau noted that it “intends to continue certain market monitoring and research activities to facilitate resumption of the rulemaking.”
  • HMDA Data Disclosure Rule. The Bureau expects to issue guidance later this year to govern public disclosure of Home Mortgage Disclosure Act (“HMDA”) data for 2018.  The Bureau also announced that it has decided to engage in notice-and-comment rulemaking to govern public disclosure of HMDA data in future years.
  • Assessment of Prior Rules – Remittances, Mortgage Servicing, QM; TRID up next. The Dodd-Frank Act requires the Bureau to conduct an assessment of each significant rule adopted by the Bureau under Federal consumer financial law within five years after the effective date of the rule.  In accordance with this requirement, the Bureau announced that it expects to complete its assessments of the Remittance Rule, the 2013 RESPA Mortgage Servicing Rule, and the Ability-to-Repay/Qualified Mortgage Rule by January 2019.  At that time, it will begin its assessment of the TILA-RESPA Integrated Disclosure Rule (TRID).
  • Abusiveness Rule? Consistent with recent statements by Acting Director Mick Mulvaney that while unfairness and deception are well-established in the law, abusiveness is not, the Bureau stated that it is considering whether to clarify the meaning of abusiveness through rulemaking.  The Bureau under former Director Richard Cordray rejected defining abusiveness through rulemaking (although the payday rule relied, in part, on the Bureau’s abusiveness authority), preferring instead to bring abusiveness claims in enforcement proceedings to establish the contours of the prohibition.  Time will tell if the Bureau will follow through on this.

Continue Reading BCFP’s Fall 2018 Regulatory Agenda

Last week the Bureau of Consumer Financial Protection (“BCFP” or “Bureau”) issued guidance on the operations of financial institutions and other supervised entities in the wake of major disasters and emergencies. The guidance explains that supervised entities have flexibility under the existing regulatory framework to take action that could benefit affected consumers.

This is not the first time the Bureau has issued guidance on this topic. Last year, the Bureau released a statement on Hurricanes Harvey and Irma and another on Hurricane Maria. Unlike the prior guidance, the statement released last week does not address a particular emergency or disaster but applies to emergencies in general.

The new guidance echoes prior guidance by providing examples in which regulations allow flexibility. For instance:

  • Although RESPA’s Regulation X generally prohibits residential mortgage servicers from offering a loss mitigation option to borrowers based on an evaluation of an incomplete application, the guidance notes servicers may nonetheless offer short-term loss mitigation options. Because it could be difficult for consumers impacted by a disaster to obtain and submit the necessary documents to complete a timely application, this exception may allow servicers to better assist those borrowers.
  • Although ECOA’s Regulation B generally requires creditors to provide first-lien loan applicants with copies of appraisals or other written valuations promptly upon completion, or three business days prior to consummation or account opening, whichever is earlier, the guidance notes that the applicant generally may waive that timing requirement and agree to receive the copy at or before consummation or account opening (except where otherwise prohibited by law). That exception may allow supervised entities to give consumers impacted by a disaster quicker access to credit.

Unlike prior guidance that expressly “encouraged” supervised entities to take these steps, this latest guidance only states that supervised entities are permitted to use the flexibility. Continue Reading BCFP Releases New Guidance on Major Disasters and Emergencies

The Summer 2018 edition of Supervisory Highlights –the first one the BCFP has issued under Mick Mulvaney’s leadership – is much the same as previous editions. In it, the Bureau describes recent supervisory observations in various industries, and summarizes recent public enforcement actions as well as supervision program developments.

One aspect of the report that is notably different, however, is the introductory language. In prior regular editions of Supervisory Highlights, the report’s introduction would emphasize the corrective action that the Bureau had required of supervised institutions. It would highlight the amount of total restitution to consumers and the number of consumers affected by supervisory activities, and would note the millions of dollars imposed in civil money penalties.

This new version eliminates all of that discussion from the introduction. Instead, the Bureau has added language emphasizing that “institutions are subject only to the requirements of relevant laws and regulations” and that the purpose of disseminating these Supervisory Highlights is to “help institutions better understand how the Bureau examines institutions” to help industry limit risks to consumers.

The first sentence of the report, which in previous iterations used to say that the Bureau is “committed to a consumer financial marketplace that is fair, transparent, and competitive, and that works for all consumers” now says the Bureau is committed to a marketplace that is “free, innovative, competitive, and transparent, where the rights of all parties are protected by the rule of law, and where consumers are free to choose the products and services that best fit their individual needs.”

Ultimately, time will tell whether this is simply rhetoric or if the Bureau’s supervisory and enforcement posture will be dramatically different from that under Mulvaney’s predecessor. Continue Reading BCFP’s Latest Supervisory Highlights

On May 8, 2018, the House of Representatives used the Congressional Review Act (“CRA”) to vote to repeal the Consumer Financial Protection Bureau’s (CFPB’s) March 2013 bulletin addressing indirect auto lending and compliance with the Equal Credit Opportunity Act (“ECOA”). That vote follows the Senate’s April 18 CRA vote to repeal the bulletin. President Trump is expected to sign the joint resolution (S.J. Res. 57) within 10 days.

In that bulletin, the CFPB (under the leadership of former director Richard Cordray) had stated that some indirect auto lenders may be subject to ECOA and Regulation B, and advised them to “take steps to ensure that they are operating in compliance” with those antidiscrimination principles. Most significantly, the bulletin noted that indirect auto lenders may have direct liability under ECOA for allegedly discriminatory pricing disparities. In an indirect auto lending arrangement, instead of providing financing directly to the consumer, the auto dealer facilitates financing through a third party. The CFPB bulletin stated that some indirect auto lenders have policies that allow dealers to mark up lender-established rates and then compensate dealers for those markups, which may result in pricing disparities on a basis prohibited under ECOA.

As explained in a prior Mayer Brown Legal Update, the CRA allows Congress to pass a resolution of disapproval of an agency rule within 60 legislative session days of the rule’s publication. Such a resolution, if passed by both houses of Congress and signed by the President (or passed by a two-thirds majority in both houses to overcome a presidential veto), invalidates the rule. The CRA allows Congress to use expedited procedures that effectively prohibit filibusters in the Senate.

The 60-day clock for introduction of a disapproval resolution in Congress begins on the “submission or publication” date of the rule, which the CRA defines as the later of the date on which Congress receives the agency’s report related to the rule or the date the rule is published in the Federal Register, if it is published. Although the CFPB issued its indirect auto lending bulletin more than 60 days ago, the CFPB did not submit to Congress a report on the bulletin or publish it in the Federal Register, so arguably the 60-day clock did not begin in 2013.

Upon signing this resolution, President Trump will have used the CRA to invalidate 16 agency rules. Prior to the Trump administration, the CRA had been used only once to invalidate a rule. However, this resolution marks the first time Congress has used the CRA to invalidate agency guidance. Previously, Congress had used the CRA only to repeal rules that the respective agencies viewed as legislative rules or regulations subject to the Administrative Procedure Act’s notice-and-comment requirements. Unlike those legislative rules, the CFPB’s indirect auto lending bulletin is informal guidance that, as the Government Accountability Office (“GAO”) concluded, “offers clarity and guidance on the Bureau’s discretionary enforcement approach.” Nonetheless, the GAO found that the CFPB bulletin qualifies as a “rule” subject to the CRA. The GAO has responded to requests from members of Congress to opine on the status of agency issuances by consistently noting that the scope of the definition of a rule under the CRA is broad. In a 2012 letter, the GAO explained that the “definition of a rule has been said to include ‘nearly every statement an agency may make.’”

If the CRA is available to Congress to invalidate agencies’ non-rule guidance that was not reported to Congress or published in the Federal Register, it is unclear what, if any, timing boundaries apply. This novel approach could implicate a large swath of informal agency guidance issued since the CRA’s passage. Further, a CRA disapproval extends beyond the rule (or non-rule guidance) itself, and prohibits the agency from issuing any rule that is “substantially the same” as the invalidated rule, absent subsequent statutory authorization.

It is unclear, however, what this means in the context of agency guidance. If agency guidance is an interpretation of existing statutes and regulations, and Congress repeals only the guidance/interpretation, but not the existing statutes (or regulations, if applicable), it is possible that an agency could simply attempt to return to its initial stance (for instance, a CFPB director could possibly refocus on indirect auto lenders, using an approach similar to that announced in the CFPB’s 2013 bulletin). Certainly, the actions of Congress under the CRA do not protect entities from scrutiny by the Department of Justice, the Federal Trade Commission, or the states, which also have enforcement authority under ECOA, or from private plaintiffs, who have a cause of action.

In any event, Congress definitely has clarified that it is willing to use the CRA to invalidate both agency regulations and informal guidance, and it remains to be seen which additional Obama-era regulations or guidance documents may be the CRA’s next victim.

On January 24, 2018, the Consumer Financial Protection Bureau (“CFPB” or “Bureau”) announced that it is seeking public comment on all aspects of its civil investigative demand (“CID”) process. This Request for Information (“RFI”) is the first in a series of RFIs in which the Bureau plans to seek comment on its enforcement, supervision, rulemaking, market monitoring, and education activities.

The RFI comes on the heels of Acting Director Mick Mulvaney’s announcement that the CFPB will no longer “push the envelope” when it comes to enforcement.  Consistent with that sentiment, the RFI explains that the CFPB is “especially interested in better understanding how its processes related to CIDs may be updated, streamlined, or revised to better achieve the Bureau’s statutory and regulatory objectives, while minimizing burdens.” Because responding to the CFPB’s CIDs has often proved to be an arduous and costly endeavor, this RFI is likely to be a welcome opportunity for many regulated entities. Continue Reading CFPB Requests Comments on Civil Investigative Demand Process

For those who thought that the Consumer Financial Protection Bureau (CFPB) may be getting bored with US mortgage loan servicing as it turns its attention to arbitration clauses, payday lending and other non-mortgage consumer credit issues, no such luck. Last week, the CFPB released a “special edition” of its Supervisory Highlights focused on examinations of mortgage servicers and an update to the mortgage servicing chapter of the CFPB Supervision and Examination Manual—releases that the CFPB said are intended to “spur industry in its general compliance with CFPB rules.”  Read more about the CFPB’s spur in Mayer Brown’s Legal Update, available here.