On Tuesday, a federal district court in the Southern District of New York issued an order dismissing a lawsuit brought by the New York Department of Financial Services (NYDFS) regarding a proposal of the Office of the Comptroller of the Currency (OCC) to issue federal charters to certain fintech firms. In dismissing the case, U.S. District Court Judge Naomi Reice Buchwald held the NYDFS did not have standing to sue because the OCC had not yet officially decided to issue charters to fintech companies. Judge Buchwald explained that because the OCC had not made “a final determination” that it will issue such charters, the injuries alleged by the NYDFS are “too future-oriented and speculative” to support the lawsuit.

By way of background, in December 2016, the OCC announced plans to study whether it could issue special purpose charters to fintech firms. In March 2017, OCC Comptroller Thomas J. Curry announced the OCC would be issuing charters to fintech companies. In the same month, the OCC released a document describing how fintech companies could apply for a charter. In May 2017, Mr. Curry stepped down from his position, and President Trump named Keith Noreika Acting OCC Comptroller.

The NYDFS then sued the OCC regarding the proposal to grant charters to fintech companies. According to the NYDFS, the OCC did not have authority to issue a charter to fintech companies and should not allow such companies to operate in New York without complying with the state’s usury law and other consumer financial regulations. In the following months, Acting Comptroller Noreika stated several times that the OCC had not reached a final decision about whether to issue charters to fintech companies. Joseph Otting was then nominated by President Trump as permanent Comptroller of the Currency and was confirmed in November 2017. In Judge Buchwald’s decision, she noted that she was not aware of any statement by Mr. Otting indicating his position on fintech charters.

The Conference of State Bank Supervisors filed a similar lawsuit against the OCC in the U.S. District Court for the District of Columbia. The OCC filed a motion to dismiss that lawsuit as premature, which motion is currently pending before the court.

Once again, the Consumer Financial Protection Bureau (“CFPB”) is providing compliance tips through its Supervisory Highlights for lenders making non-Qualified Mortgages (“non-QMs”). In its latest set of Highlights, the CFPB addresses how a lender must consider a borrower’s assets in underwriting those loans, and clarifies that a borrower’s down payment cannot be treated as an asset for that purpose, apparently even if that policy has been shown to be predictive of strong loan performance.

The Dodd-Frank Act and the CFPB’s Ability to Repay Rule generally require a lender making a closed-end residential mortgage loan to determine that the borrower will be able to repay the loan according to its terms. A lender may choose to follow the Rule’s safe harbor by making loans within the QM parameters. Alternatively, a lender may opt for more underwriting flexibility (and somewhat less compliance certainty). When making a non-QM, a lender must consider eight mandated underwriting factors and verify the borrower’s income or assets on which it relies using reasonably reliable third-party records. As one of those eight factors, the lender must base its determination on current or reasonably expected income from employment or other sources, assets other than the dwelling that secures the covered transaction, or both. Continue Reading CFPB Prohibits Considering Down Payments for Non-QMs

In March 2017, the CFPB issued a special edition of its Supervisory Highlights addressing consumer reporting from the perspective of consumer reporting companies (“CRCs”) (commonly referred to as credit bureaus or consumer reporting agencies) and furnishers. This follows the CFPB’s February 2017 Monthly Complaint Report, which focused on complaints related to credit reporting. These publications, along with recent statements by Director Robert Cordray, suggest that the CFPB will be placing additional supervisory focus on credit reporting for both CRCs and furnishers of consumer information. Continue Reading Time for Some Spring (Credit Reporting) Cleaning

The Consumer Financial Protection Bureau (“CFPB”), in its most recent set of Supervisory Highlights, provides a bit of insight into how it interprets its Ability to Repay Rule for loans that are not Qualified Mortgages (“QMs”).  However, it fails to reconcile the Rule’s contradiction that while a lender making a non-QM is not required to consider or verify the borrower’s income if it reasonably finds the borrower’s assets to be sufficient, it is nonetheless required to consider and verify a borrower’s income!  Make sense?

By way of background, the Dodd-Frank Act and CFPB’s regulations generally require lenders making a closed-end residential mortgage loan to reasonably determine that the consumer will be able to repay the loan according to its terms.  If the lender wants to take advantage of a safe harbor of compliance with that requirement, it may choose to make a QM in accordance with the Rule’s strict criteria for those loans.  However, a lender may decide to make non-QMs, for which the Rule offers more underwriting flexibility.  Still, the lender must consider eight specified factors, and verify the amounts of income or assets on which it relies using reasonably reliable third-party records.  Continue Reading CFPB Addresses Non-QMs Under Ability-To-Repay Rule

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