Rulemaking

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The Consumer Financial Protection Bureau issued a proposed rule that would raise the threshold temporarily for institutions that will be required to collect and report data on home equity lines of credit (HELOCs).

Financial institutions that must collect and report data under the Home Mortgage Disclosure Act (HMDA) will start to feel the brunt of the CFPB’s HMDA overhaul relatively soon. Beginning January 1, 2018, new thresholds for determining which institutions must collect and report HMDA data (including the extensive set of new data elements) are set to become effective. As it stands, those institutions will include those that, in addition to other criteria, originated at least 25 closed-end mortgage loans or 100 open-end lines of credit in each of the two preceding calendar years. Accordingly, in connection with HELOCs, if the institution did not originate 100 open-end lines of credit in both of those past two years, the Bureau will not require the institution to collect and report data on those loans.

As indicated in the Bureau’s recent proposed rule, it has learned that the 100-HELOC threshold may be too low, and may impose significant costs on relatively small HELOC lenders. The Bureau indicated that the number of open-end loan originations is continuing to rise, so the threshold may capture more institutions than previously estimated. Further, while the Bureau previously thought that the start-up costs of implementing new technology for capturing and reporting data on HELOCs are sometimes not quite as overwhelming for small institutions (since they may not be as burdened by legacy systems), the Bureau now believes it may have underestimated those costs. HMDA reporting on HELOCs has historically been voluntary – many lenders originate those loans through separate business units using separate systems, and have not needed to consolidate those processes or otherwise collect that data until now. Accordingly, the Bureau is proposing to relieve those institutions that originate fewer than 500 open-end lines of credit in either of the preceding two years from having to collect and report data on those loans.

This higher threshold applies both to whether an institution is a reporting “financial institution,” and with regard to the types of transactions a reporting “financial institution” must report.

The proposed rule would raise the HELOC threshold to 500 open-end lines of credit just for two years, until January 1, 2020, at which time the threshold will revert back to 100 such loans. The agency will use that time to reassess whether it should adjust the threshold permanently.

Comments on the proposed rule are due in just two weeks (by July 31, 2017) – arguably indicating that the Bureau does not expect much opposition to this proposal. The Bureau reportedly hopes to finalize this rule along with the technical corrections it proposed in April 2017.

Two-for-one is harder than it sounds. President Trump’s recently-issued executive order on reducing regulations, requiring the repeal of two regulations for each new one issued, provided agencies with precious little guidance. According to the Office of Management and Budget (OMB), the executive order applies only to “significant regulatory actions” of executive agencies (not independent agencies like the CFPB, SEC, FHFA, or the federal banking agencies). It requires an analysis of cost savings, but appears to exempt regulations “required by law.” A lawsuit has already been filed, claiming that the order is unconstitutional and contrary to the will of Congress. To learn more, applicable agencies are instructed to call OMB. However, you can learn more about the two-for-one executive order in Mayer Brown’s Legal Update.

Following his campaign promise to dismantle the Dodd–Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), Donald Trump issued an Executive Order on February 3, 2017 that set out “Core Principles” for regulating the financial system.  Trump proclaimed that his administration would be “doing a big number on Dodd-Frank,” yet his recent Executive Order on Core Principles appears to be more of a tempered call for analysis and review rather than an outright demolition of existing financial regulations, especially when read in light of the administration’s more drastic requirement that Executive agencies must eliminate two existing regulations for each new one that it issues. Continue Reading Moving On: Core Principles for Dodd-Frank Reform Omit Mention of Financial Crisis

Financial services companies that hoped for immediate regulatory relief when the Trump Administration assumed control may have to wait a bit longer, because the newly announced freeze on federal regulations does not appear to apply across the board.  “Independent regulatory agencies,” such as the Consumer Financial Protection Bureau (“CFPB”), the Federal Reserve Board, the Office of the Comptroller of the Currency (“OCC”), the Federal Deposit Insurance Corporation (“FDIC”), and the Securities and Exchange Commission (“SEC”) may be excluded from that moratorium. Continue Reading How Solid is the “Freeze”? Some Agencies May Be Excluded from White House Regulatory Moratorium

Flood Insurance

Federal banking agencies issued a revised proposal on November 7th to implement requirements for regulated institutions to accept private flood insurance. The Biggert-Waters Flood Insurance Reform Act (the “Act”) required those agencies to issue a rule directing their respective regulated lending institutions to accept such insurance. The purpose of the requirement is reportedly to stimulate the private flood insurance market, which in turn supports the financial solvency of the National Flood Insurance Program (“NFIP”). Continue Reading Agencies Address Acceptance of Private Flood Insurance

A federal court in Texas put a hold on the implementation of the U.S. Department of Labor’s overtime rule.  That rule, which was scheduled to take effect on December 1, 2016, was intended to expand significantly the number of employees entitled to overtime pay under the federal Fair Labor Standards Act.  However, the court postponed that effective date until it can fully consider whether the Department is authorized to promulgate the rule’s increases in the salary-based exemptions. Continue Reading Court Blocks Expansion of Federal Overtime Requirements, at Least Temporarily

New regulations under the federal Military Lending Act (“MLA”) that become effective next week will prohibit consumer loans to covered US Service members if those loans have a “military annual percentage rate” (“MAPR”) greater than 36 percent. The Defense Department’s regulations will impose that MAPR limit on additional types of consumer credit transactions (beyond just payday, vehicle title, and tax refund anticipation loans) to active duty members of the armed forces and their spouses/dependents. The regulations will also change how a lender may determine whether applicants are “covered borrowers” and modify the disclosures required for those borrowers.

The MLA’s enforcement provisions include criminal and civil liability for noncompliance and provide for a private right of action.

Read more about the new regulations in Mayer Brown’s Legal Update.

If you think the shadow of the Consumer Financial Protection Bureau (“CFPB”) is hiding behind a tree, you may well be right. On July 7th, the CFPB posted a Request for Information (“RFI”) on the federal government contracts website, called FedBizOpps.gov, in which it “pre-solicited” vendor capabilities to develop an automated technology solution for nonbank financial institutions to register with the CFPB.  It noted that such a potential registration system “might also be used to collect financial and operational data as well as organizational structure data.”  In other words, in the name of supervision, the CFPB might condition your future ability to offer goods and services on your advance registration and satisfaction of ongoing reporting requirements. Continue Reading Papers Please: CFPB Advances Plans to Register Nonbank Financial Services Providers

The Consumer Financial Protection Bureau (CFPB) recently proposed changes to its rules governing confidential information. The proposed rules would restrict recipients of civil investigative demands (CIDs) from voluntarily disclosing the receipt of a CID, while at the same time giving the CFPB more leeway to disclose confidential supervisory information to other government agencies. The proposed simultaneous tightening and loosening of restrictions on the disclosure of confidential information can have important implications for parties subject to CFPB enforcement and supervisory jurisdiction, who should consider whether to submit comments, which are due by October 24, 2016. Read more about the decision in Mayer Brown’s Legal Update, available here.

Nearly three years after releasing its Advance Notice of Proposed Rulemaking on debt collection practices, the Consumer Financial Protection Bureau (CFPB) has finally offered some insight on its plans for issuing rules under the Fair Debt Collection Practices Act. On July 28, 2016, the CFPB released an outline of proposals that it is considering in preparation for the next step in the rulemaking process—convening a Small Business Review Panel. Read more about the proposals under consideration, particularly in light of past CFPB enforcement actions and guidance, in Mayer Brown’s Legal Update, available here.