Several of Mayer Brown’s Consumer Financial Services partners will be featured at this month’s Regulatory Compliance Conference in Washington, DC, sponsored by the Mortgage Bankers Association.

As part of MBA’s Compliance Essentials program (and in support of its Certified Mortgage Compliance Professional (CMCP) designation), Kris Kully will participate in a panel outlining how the Dodd Frank Act and its regulations continue to change the compliance framework for mortgages. That panel takes place on Sunday, September 17th.

On Monday, September 18th, Melanie Brody will address HMDA issues, including several that are still unresolved as we approach the 2018 effective date.

Also on Monday, Phillip Schulman will participate in a roundtable discussion on the always-hot RESPA Section 8 issues.

On Tuesday, September 19th, Krista Cooley will participate in a panel on mortgage loan servicing. The “Servicing Compliance Developments under the New CFPB Rule” panelists will cover topics including the CFPB’s new regulatory requirements and recent legal decisions impacting mortgage servicing. Krista’s comments will focus on developments in government loan servicing, including recent regulatory reform efforts in this area.

Also on Tuesday, Larry Platt will join a panel of other experts to discuss hot topics in mortgage compliance.

We look forward to seeing you!

The ABA Business Law Section is holding its 2017 Annual Meeting in Chicago next week and will offer over 90 CLE programs and many more committee meetings and events.

Mayer Brown’s Financial Services Regulatory & Enforcement (FSRE) partner David Beam (Washington DC) will moderate a panel on payment network rules and their impact in the marketplace. FSRE partner Melanie Brody (Washington DC) will participate on a panel on how fintech is changing the way consumer credit offerings work.

FSRE associate Matthew Bisanz (Washington DC) will co-moderate, and FSRE partner Stephanie Robinson (Washington DC) will participate on, a panel discussing innovative enforcement techniques being employed by bank regulators and how the industry can adapt to them. FSRE associate Eric Mitzenmacher (Washington DC) will participate on a panel on bank technology services and marketplace lending developments.

Mayer Brown’s Government Relations partner Mitchell Holzrichter (Chicago) will participate on a panel discussing the life-cycle of public-private partnership projects.

For more information, please visit the event webpage.

A Texas federal court has struck down the 2016 U.S. Department of Labor’s rule that would have greatly increased the number of employees eligible for overtime pay.

This may seem like old news to those who have been following the rule. In November 2016, Judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas issued a preliminary junction, preventing the rule from becoming effective (which would otherwise have occurred in December 2016). The rule would have significantly raised the salary level that qualifies an employee for an exemption from overtime eligibility under the Fair Labor Standards Act regulations. Judge Mazzant stated that, pending further review by the court, the rule’s challengers were likely to be able to show that such a significant increase would exceed the agency’s authority.  (We addressed that decision in a prior post on this blog.)

The Department (then under the Obama Administration) appealed that ruling to the Court of Appeals for the Fifth Circuit. Even after the change in administration, the Department asked the court to overturn the injunction, asserting that the Department has the authority to use a salary test for the exemption. New Labor Secretary Acosta reportedly indicated in congressional hearings that while he believes the rule set the salary test too high, the overtime exemption nonetheless needed updating. The Department requested public input on whether the exemption should have a salary level test, and if so what that level or levels should be. The request also addressed certain other topics related to the exemption, such as the extent to which commissions should count toward meeting the test, and whether the level should be automatically updated. The comment period for the Department’s request ends on September 25th.

The news is that last week, Judge Mazzant issued a final summary judgment in the original challenge to the rule. He agreed with his preliminary statements that the Department lacks the authority to establish such a high salary test, as that test then essentially supplants other criteria (such as the types of duties the employee performs) for determining who is exempt from overtime eligibility. The court’s ruling makes the pending appeal to the Fifth Circuit moot.

Questions remain, though, as to what the current administration will do regarding employees’ eligibility for overtime pay. According to estimates, the prior rulemaking would have affected 4.2 million employees, but it faced opposition from many types of employers (and consequently from many on Capitol Hill). The Department now specifies that it will not advocate for such an expansion. Accordingly, if and when Secretary Accosta resurrects the overtime exemption, odds are that number will come down.

The Consumer Financial Protection Bureau recently announced a change in the way financial institutions, service providers, and others can obtain informal guidance on regulatory issues from the CFPB’s staff. It appears that the only change is the access vehicle to use when posing questions.

In the past, the CFPB preferred that questions be posed via email to CFPB_reginquiries@cfpb.gov. Now persons wanting answers to regulatory questions can use a new online form (https://reginquiries.consumerfinance.gov/). The new form provides a dropdown menu that allows the user to choose from the proverbial alphabet soup of regulations, along with an “Other” box. Users also can specify a particular statutory code section. However, the box provided for the user to pose the question has limited formatting options. As just one example, there is apparently no way to upload an attachment, which of course was an option when questions were sent via email. It remains to be seen whether the new formatting limits will make it more difficult to seek and obtain confirmation of an interpretation.

Other elements of the prior system seem to be unchanged. Responses to questions will still take time. The CFPB estimates an average of 10 to 15 business days, but acknowledges that longer time frames might be expected, depending on the volume of questions, the amount of time needed to research the question, and staff availability. Presumably a longer response time might also be expected if the question poses policy issues that CFPB staff must discuss and resolve prior to responding. Also unchanged is the CFPB’s position that responses will not constitute official CFPB interpretations and “are not a substitute for formal legal counsel or other compliance advice.” The CFPB notes, for example, that it will not moderate disputes, provide guidance on matters under examination or investigation, answer questions about specific business plans, or provide guidance on laws that are not under the CFPB’s authority.

While it appears the CFPB is attempting to improve its process for fielding questions concerning regulatory issues, it remains to be seen if this is truly an improvement for the public, or merely a way to simplify the process for the CFPB.

On August 2nd, Oregon Governor Katherine Brown signed legislation that provides for the licensing of residential mortgage loan servicers, Senate Bill 98 (“S 98”), the Oregon Mortgage Loan Servicer Practices Act (the “Servicer Act”).  S 98 provides for a dedicated mortgage loan servicer license, separate from the license as a mortgage banker or mortgage broker obtained under the Oregon Mortgage Lender Law.  With the enactment of the Servicer Act, Oregon joins the majority of states that license residential  mortgage loan servicers.  (A number of states still do not license residential mortgage loan servicers, including New Jersey, and Pennsylvania which is considering a mortgage loan servicer licensing law.) Although the Oregon Servicer Act was effective upon the Governor’s signature, the legislation expressly provides that the Servicer Act will become operative on January 1, 2018, and that it will apply “to service transactions for residential mortgage loans that occur on or after [the] operative date.” Continue Reading Oregon Licenses Residential Mortgage Loan Servicers

Pay-by-phone fees continue to attract the Consumer Financial Protection Bureau’s attention. Compliance Bulletin 2017-01, issued on July 27, 2017, indicates that the following acts or practices may constitute unfair, deceptive, or abusive acts or practices (“UDAAP”) or contribute to the risk of committing UDAAPs:

  1. Failing to disclose the prices of all available phone pay fees when different payment options carry materially different fees;
  2. Misrepresenting the available options or that a fee is required to pay by phone;
  3. Failing to disclose that a phone pay fee would be added to a consumer’s payment, which could create the misimpression that there is no service fee; and
  4. Lack of employee monitoring or service provider oversight, which may lead to misrepresentations or failure to disclose available options and fees.

The Bureau has previously raised concerns about phone pay fees. In a 2014 enforcement action, the Bureau and the Federal Trade Commission alleged that a mortgage servicer engaged in deceptive acts or practices by misrepresenting that the only payment method consumers could use to make timely payments was a particular method that required a convenience fee. In 2015, the Bureau took action against a bank for allegedly misrepresenting that a phone pay fee was a processing fee rather than a fee to enable the payment to post on the same day. The bank also allegedly failed to disclose other no-cost payment options. This week’s Bulletin 2017-01 suggests that companies should disclose such fees in writing to consumers, as opposed to relying solely on phone representatives to  explain the fees to consumers.

Bulletin 2017-01 also reiterates that certain practices in connection with phone pay fees may conflict with the Fair Debt Collection Practices Act (“FDCPA”). For example, Bureau examiners have found alleged violations of the FDCPA where the underlying consumer debt contract did not expressly permit the charging of phone pay fees and where the applicable state law was silent on the fees’ permissibility. The Bureau indicated last year that it may propose rules under the FDCPA to clarify that debt collectors may charge convenience fees only where state law expressly permits them or the consumer expressly agreed to them in the contract that created the underlying debt.

The Bulletin recommends that companies review their phone pay fee practices, including reviewing applicable state and federal laws, underlying debt contracts, service provider procedures, other consumer-facing materials, consumer complaints, and employee incentive plans for potential risks.

The Consumer Financial Protection Bureau announced a final rule to clarify the TILA/RESPA Integrated Disclosure requirements. The rule finalizes many of the CFPB’s earlier proposals, some with modifications. However, the agency still has not formally addressed important issues (like a lender’s ability to cure errors and the disclosure of title insurance premiums where a simultaneous discount applies), and it offers a new proposal to address the “black hole” on resetting fee tolerances. The final regulations will take effect 60 days after publication in the Federal Register.

Mayer Brown’s Legal Update discusses the CFPB’s latest attempt to strike a balance between the disclosure burdens on lenders or closing agents and ensuring consumers receive clear and useful information.

When, if at all, should a mortgage lender or servicer be required to conduct business in a language other than English when the consumer has expressed a preference that language? The Federal Housing Finance Agency (FHFA) is seeking input on actions Fannie Mae and Freddie Mac could take to promote access to mortgage credit for qualified borrowers with limited English proficiency, and to ensure those borrowers have access to information to understand the mortgage process.  This newest effort by the FHFA follows earlier efforts by that agency and others in the industry, but concerns about increased costs, legal risk, regulatory consequences continue to arise.

Mayer Brown’s latest Legal Update discusses the FHFA’s request and many of the complexities that quickly arise when considering how to access LEP borrowers.

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.

On June 22, 2017, the CFPB’s Student Loan Ombudsman put out its annual report on student loans, as required by the Dodd-Frank Act. The report analyzes complaints submitted by consumers about student loan servicers between March 2016 and February 2017. Many of the complaints relate to practices, such as payment processing, customer service and borrower communication, and income-based repayment plan enrollment, that the CFPB has frequently scrutinized in the past through supervision and enforcement activities.

However, the majority of the report focuses on complaints from consumers related to the Public Service Loan Forgiveness (PSLF) program, which allows those who enter careers in public service to have their student loans forgiven after a decade. The CFPB’s report criticizes servicers’ alleged failures to actively advise borrowers on how to qualify for PSLF, track their progress toward PSLF completion, and inform them about the requirements of the PSLF program. In conjunction with the report, the CFPB updated its education loan examination procedures to include additional questions about the PSLF program. Continue Reading CFPB Issues Report on Student Loan Servicing and Updated Examination Procedures