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The Consumer Financial Protection Bureau (CFPB) has issued an updated small entity compliance guide for compliance with the Mortgage Servicing Rules after the CFPB’s recent amendments to the rules take effect, generally on October 19, 2017.

The existing guide is still relevant for compliance before the new amendments take effect.

To learn more about the amendments to the Mortgage Servicing Rules, read the Mayer Brown white paper.

Today, the Consumer Financial Protection Bureau (CFPB) announced that it is sending warning letters to 44 mortgage lenders and mortgage brokers, stating that the CFPB staff has information that the companies may not be complying with their obligations to report data under the Home Mortgage Disclosure Act (HMDA).

The CFPB states in its press release that it “identified the 44 companies by reviewing available bank and nonbank mortgage data,” but it does not provide further details about how the companies were identified.

The warning letters note that failure to comply with HMDA reporting requirements “could result in the imposition of the full range of available remedies, including injunctive relief and civil money penalties.”

The letters are a reminder to all institutions to ensure that they are compliant with HMDA.  Several years ago, the CFPB issued consent orders against two institutions for inaccurate HMDA reporting, requiring them to correct and resubmit certain data and to implement effective HMDA compliance management systems.  The letters described above may signal that the CFPB plans to step up its HMDA enforcement again.

The Consumer Financial Protection Bureau (CFPB) has offered its new mortgage servicing rule for public inspection today, meaning it is scheduled to be published in the Federal Register on October 19, 2016.  The CFPB informally released the rule on its website in August.

The effective date of the rule is tied to its publication date, so the bulk of its requirements (with some exceptions) will take effect in 12 months, on October 19, 2017.

To learn more about the rule, read our Mayer Brown white paper.

Tomorrow the CFPB will issue an interim final rule that will increase the maximum amount of civil penalties that the CFPB and certain other enforcers can obtain for various consumer protection violations.  The maximum amount for most CFPB civil penalties will increase by about 8%.

A budget bill passed last year instructed federal agencies, including the CFPB, to make a one-time “catch-up” inflation adjustment to the civil penalties that they impose, based on the Consumer Price Index (CPI) in October of the “year during which the amount of such civil monetary penalty was established or [last] adjusted….”  This will be followed by regular inflation adjustments by January 15 of every year.

Most CFPB civil penalties for violations of the various laws that the CFPB administers are assessed under Section 1055(c) of the Dodd-Frank Act.  Because the Dodd-Frank Act was enacted in 2010, the CFPB takes the position that the baseline for the “catch up” should be the CPI in October 2010.  This will result in an 8.475% increase, meaning that that maximum amount will be $5,437 for any “Tier 1” violation; $27,186 for any “Tier 2” violation, which requires recklessness; or $1,087,450 for any “Tier 3” violation, which requires knowledge.  These amounts are calculated “for each day during which such violation continues.”  The CFPB is also adjusting certain other civil penalty authorities that are less commonly used.

Notably, the interim final rule provides that the adjustments “shall apply to civil penalties assessed after [the effective date], regardless of when the violation for which the penalty is assessed occurred.”  The effective date is scheduled to be July 14, 2016.  Thus, the CFPB takes the position that the increased civil penalties will be available for violations that have already occurred, even if they occurred several years ago.

On June 2, 2016, the CFPB proposed new ability-to-repay and payment processing requirements for short-term and certain longer-term consumer loans.  Relying largely on the CFPB’s authority to prohibit unfair or abusive practices, the proposal would generally require that lenders making payday, vehicle title, and certain high-rate installment loans either originate loans satisfying strict product characteristic limitations set by the rule or make an ability-to-repay determination based on verified income and other information.

To facilitate the ability-to-repay determination, the CFPB is also proposing to establish special “registered information systems” to which lenders would have to report information about these loans.  In addition, servicers would have to obtain new payment authorizations from consumers after making two consecutive unsuccessful attempts at extracting payment from consumer accounts, and would be subject to new disclosure requirements related to payment processing. Continue Reading CFPB Proposes Underwriting and Payment Processing Requirements for Payday, Title, and High-Rate Installment Loans

Earlier this month, we wrote about how 28 U.S.C. 2642 might provide a statute of limitations in those cases where the Consumer Financial Protection Bureau (CFPB) alleges that none applies.  As we described, the CFPB has taken the position that no statute of limitations applies to administrative enforcement cases that it brings, and that there is no statute of limitations applicable to some enforcement cases it brings in federal district court, either.  A skeptical member of the D.C. Circuit questioned the agency about this issue during oral argument in PHH Corporation’s appeal of a CFPB administrative enforcement order, suggesting (although the parties had not argued the point) that 28 U.S.C. 2642 may be applicable. That statute provides that “[e]xcept as otherwise provided by Act of Congress, an action, suit or proceeding for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise” is generally subject to a five-year statute of limitations.

What qualifies as a “civil fine, penalty, or forfeiture, pecuniary or otherwise” is thus one of the determinants of whether Section 2642’s statute of limitations applies. On May 26, the Eleventh Circuit addressed this very issue in a case involving a Securities and Exchange Commission (SEC) enforcement action, SEC v. Graham, No. 14-13562, slip op. (11th Cir. May 26, 2016). Continue Reading Eleventh Circuit Statute of Limitations Opinion May Have Implications for CFPB Cases

The oral argument before the DC Circuit in the Consumer Financial Protection Bureau’s (CFPB) case against PHH Corporation has garnered a fair amount of coverage in light of the panel’s apparent interest in arguments about the constitutionality of the CFPB’s structure. One of the key issues raised in PHH that has received relatively less notice is whether a statute of limitations applies to the matter. PHH is one of a number of CFPB enforcement cases in which the CFPB has asserted that no statute of limitations applies.

The DC Circuit panel was skeptical about this contention, with one of the judges raising 28 U.S.C. 2462 as a possible statute of limitations. Ori Lev and Chris Shelton explain why 28 U.S.C. 2462 could be a significant constraint on the CFPB’s authority to punish entities for older violations of numerous statutes in a Legal Update available here.

 

The hearing before the U.S. Court of Appeals for the D.C. Circuit in PHH Corp. v. Consumer Financial Protection Bureau on April 12 was a tale of two arguments.

The presentation on behalf of PHH was relatively uneventful: its counsel (Ted Olson) was asked a limited number of questions in roughly 25 minutes at the podium, with at least five minutes passing before the first question was posed. In contrast, counsel for the CFPB (Larry Demille-Wagman) was kept at the podium for a solid 40 minutes and subjected to a steady stream of tough questions.

While it is hard to predict based on the oral argument how the Court of Appeals will rule, including whether the Court will reach the constitutional questions it previously raised, today’s argument suggests that the CFPB may well be on track for its first major litigation defeat. Continue Reading U.S. Court of Appeals for the D.C. Circuit Sharply Questions CFPB At Oral Argument In PHH Corp. v. CFPB