On July 15, 2020, the Consumer Financial Protection Bureau filed a lawsuit against Townstone Financial, Inc., a Chicago-based mortgage lender and mortgage broker, alleging that Townstone “redlined” African-American neighborhoods in the Chicago Metropolitan Statistical Area and discouraged prospective applicants from applying to Townstone for mortgage loans on the basis of race. This marks the first

On May 20, 2020, the Office of the US Comptroller of the Currency announced its final rule overhauling the Community Reinvestment Act regulations. The CRA requires insured depository institutions to participate in investment, lending, and service activities that help meet the credit needs of their assessment areas, particularly low- and moderate-income  communities and small businesses

The Consumer Financial Protection Bureau (“CFPB”) has settled a lawsuit seeking to compel it to undertake the rulemaking required by Section 1071 of the Dodd-Frank Act (“Section 1071”). Section 1071, 15 U.S.C. § 1691c-2, requires financial institutions to collect and maintain information about loan applications by women-owned, minority-owned and small businesses, and requires the CFPB to collect and publish this data annually. It also requires the CFPB to issue implementing regulations. The settlement sets forth a specific date by which the CFPB must begin the rulemaking process and establishes a framework for determining, along with plaintiffs or subject to court order, a final timeline for promulgation of the required rule. The settlement should result in a final rule in 2022, a dozen years after Congress first required the CFPB to act.
Continue Reading Long-Awaited Section 1071 Small Business Rulemaking Is Finally on the Horizon

Redlining is back in the news.  Last week, the Department of Housing and Urban Development announced that it approved a settlement resolving redlining claims brought by the California Reinvestment Coalition against a California-based depository institution.

Unlike DOJ’s June redlining settlement with First Merchants Bank, which we wrote about here, this new case was not

Possibly hinting toward a revival of fair lending enforcement following a recent lull, the OCC’s Ombudsman recently declined a bank’s appeal of the OCC’s decision to refer the bank to both DOJ and HUD for potential Fair Housing Act violations.

The OCC’s Ombudsman oversees an infrequently used program for banks that desire to appeal agency

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

On July 26, 2018, the Federal Reserve Board (“FRB”) announced the launch of a new publication called the Consumer Compliance Supervision Bulletin. Similar to the Bureau of Consumer Financial Protection’s (“BCFP”) Supervisory Highlights, the new publication summarizes examiners’ observations from recent supervisory activities and offers guidance on what supervised institutions can do to address consumer compliance risks. The first bulletin focuses on three areas: fair lending, unfair or deceptive acts or practices (“UDAP”), and recent regulatory and policy developments.
Continue Reading Key Takeaways from the Fed’s July 2018 Consumer Compliance Supervision Bulletin

 

On May 8, 2018, the United States Department of Justice and KleinBank reached a settlement agreement resolving allegations that the bank engaged in mortgage lending discrimination by failing to adequately serve predominantly minority neighborhoods (so-called “redlining”) in and around the Twin Cities of Minneapolis and St. Paul, Minnesota. The settlement resolves one of the only

The Consumer Financial Protection Bureau (“CFPB”) has issued its first No-Action Letter (“No-Action Letter” or “Letter”) in response to a request from Upstart Network, Inc. (“Upstart”). The No-Action Letter means that CFPB staff currently has no intention of recommending enforcement or supervisory action against Upstart. This decision is limited to the application of the Equal Credit Opportunity Act (“ECOA”) and its implementing regulation, Regulation B, to Upstart’s automated model for underwriting applicants for unsecured, non-revolving credit (“automated model”).

Upstart is an online lending platform that, working with a bank partner, uses alternative data to facilitate credit and pricing decisions for consumers with limited credit or work history. In addition to relying on traditional credit information, Upstart uses non-traditional sources of information to evaluate a consumer’s creditworthiness. For instance, Upstart might look at an applicant’s educational information, such as school attended and degree obtained, and the applicant’s employment to determine financial capacity and ability to repay. Upstart submitted a Request for No-Action Letter (“Request”) in relation to its automated model to the CFPB pursuant to the agency’s no-action letter policy.

According to the CFPB, the no-action letter policy is intended to facilitate consumer-friendly innovations where regulatory uncertainty may exist for certain emerging products or services. In practice, however, the process has presented significant challenges for companies that might seek to benefit from it.
Continue Reading CFPB Issues No-Action Letter to Alternative Credit Lending Platform

It appears that the Consumer Financial Protection Bureau’s (CFPB) controversial indirect auto initiative may be over.  Before the holidays, the CFPB issued a blog post setting forth its fair lending priorities for 2017.  It identified those priorities as Redlining, Mortgage and Student Loan Servicing, and Small Business Lending.  Not only was indirect auto lending not listed, but the CFPB appeared to go out of its way to indicate it was moving away from this issue.  
Continue Reading Is the CFPB’s Indirect Auto Initiative Over?