Posts tagged ‘CFPB’

End Of CDC Protections Puts Focus Back On NY State

Standing on tenuous legal ground (second entry), the Biden administration announced Saturday that the CDC would no longer be extending the national eviction moratorium beyond July 31st. The announcement means that, absent highly unlikely federal legislation extending the moratorium, the action returns to the state level. Most importantly, with or without the federal moratorium, New York State’s eviction and foreclosure moratorium on most properties remains in effect until August 31st.

These FAQ’s on New York’s Department of Financial Services’ website remind New Yorkers of their rights under state law. The bottom line is, with or without the changes to federal law, August 31st remains the key date for foreclosure and eviction purposes in New York State.

September 1st also remains the key date for mortgage servicers who have to comply with the CFPB’s nuanced regulations intended to provide delinquent homeowners additional notice of forbearance options which may be available to them.

Looking at the big picture, the CFPB remains concerned that nationwide the coming weeks will witness a huge surge of evictions and foreclosure proceedings. It has put servicers on notice that it will be keeping a close eye on their conduct and you can bet that state regulators will be taking a similar approach.

August 2, 2021 at 9:31 am Leave a comment

New Requirements Finalized for Delinquent COVID-19 Homeowners

Hello Folks,

For those of you who do mortgage lending, your summer just got a little busier.  The CFPB has issued highly nuanced amendments to its existing regulations dealing with delinquent borrowers that have to be in place by August 31st.

For months the CFPB has expressed concern that as federal and state laws protecting individuals from foreclosure end, there will be a huge increase in foreclosures that will disproportionately impact minority communities. As originally proposed, the regulations put forward by the CFPB would have had the practical effect of preventing most foreclosures through the end of this year. These final regulations don’t go that far but they impose nuanced amendments for dealing with homeowners impacted by Covid-19 which your policies and procedures will have to reflect. Remember every box you don’t check off represents one more potential delay in a foreclosure.

I will be getting into the weeds in future blogs, but for now, among the most important things to keep in mind is that the regulations implement a streamline loan modification process under which mortgages that meet certain conditions can be evaluated for potential modifications by a servicer who has not received a completed application. Additionally, the regulations prescribe specific information which must be provided to delinquent borrowers. For instance, a servicer must inform a borrower that there are programs for individuals having difficulty making payments because of the Covid-19 emergency; list and describe the applicable programs and tell the borrower of at least one way they can find contact information for homeownership counseling services.

There is much more but for now, I want to make sure you start delving into this regulation if you haven’t done so already.

It’s Back!

New York Congresswoman Carolyn Maloney kicked off the holiday weekend by introducing the “Overdraft Protection Act of 2021.” If enacted, the bill would restrict overdraft fees by, among other things, requiring that such fees be “reasonable and proportional” to the cost of processing these transactions and limiting the number of overdraft fees that can be imposed on any one consumer. Expect an even bigger push to get the legislation done this year.

July 6, 2021 at 9:45 am 2 comments

Did The CFPB Just Do a Power Grab?

Today the CFPB will be publishing in the Federal Register an interpretive ruling explaining why it has the authority to examine the institutions it directly supervises for compliance with the Military Lending Act. Since most of you work for credit unions that have less than $10 billion in assets this document won’t have an impact on your operations, but here’s why you should care:

The Military Lending Act was passed in 2006 as a narrowly focused piece of legislation to protect our service men and women from some of the most egregious predatory lending in existence at the time. After all, there should be a special place in hell for people who specialize in ripping off the underpaid men and women who protect us. Unfortunately, the MLA has been transformed via the rulemaking process from a reasonable piece of legislation into a regulatory monstrosity replete with its own Military APR and its own interest rate cap. But that is water under the bridge.

Another unique aspect of the MLA is that it is not included in the expansive list of federal consumer financial protection laws which congress explicitly listed when it passed the Dodd-Frank Act. Nevertheless, this did not become an issue until 2018 when the CFPB announced that it would no longer conduct MLA examinations as part of its oversight over the institutions it directly supervised because it lacked the legislative authority to do so.

Let’s be honest, to his critics, Mick Mulvaney’s oversight of the CFPB is remembered about as fondly as Voldemort’s rule over Hogwarts.  In our polarized political world the idea that an agency would unilaterally limit its own power was of course met with howls of outrage even though Congress could have and should have easily amended existing law to give the CFPB examination authority. Besides, the CFPB still had the authority to bring enforcement actions against lenders who violated the MLA. 

The language is pretty clear, or so I thought.  §125 provides in part (1) IN GENERAL —The Bureau shall have exclusive authority to require reports and conduct examinations on a periodic basis of persons described in subsection (a) for purposes of— (A) assessing compliance with the requirements of Federal consumer financial laws; (B) obtaining information about the activities subject to such laws and the associated compliance systems or procedures of such persons…

Congress took the time to list precisely what laws were to be considered Federal consumer financial laws and the MLA wasn’t put on the list.

It ends up that we didn’t need to change a law, we simply needed to change administrations. In its interpretive ruling the CFPB explains how, notwithstanding the fact that Congress drafted a definitive list of statutes over which the CFPB would have examination authority, the MLA is also within the CFPB’s scope of authority.

This is the latest example of the CFPB stretching its already enormous powers. The problem is that we live in a nation of laws, not regulations. The same people who complement the CFPB today will be the same people criticizing the CFPB for ignoring the role of Congress next time a Republican administration takes over the CFPB.  It’s time for everyone to remember that in a republic, the ends don’t justify the means.  We simply don’t get to ignore the laws we don’t like or the processes we have in place to change them. 

June 23, 2021 at 9:24 am Leave a comment

Juneteenth Creates Compliance Glitch For Mortgage Lenders

The passage of legislation making Juneteenth a national holiday resulted in a compliance glitch which the CFPB could, and hopefully will, fix as early as today.

This issue sent me back to the preamble to the 2013 final TRID regulations. As the CFPB explained, neither RESPA nor TILA defines the term “business day.” As a result, for reasons that have never been clear to me, Regulation X which implements RESPA and Regulation Z which implements TILA contain separate definitions of a business day.

Most importantly, Regulation Z applies a definition of business days which includes calendar days except Sunday and legal public holidays specified in § 5 USC 6103. This is the section of law amended by Congress last week. As a result, from a strict compliance standpoint, June 19th was a national holiday and not a business day for disclosure purposes. This means that your credit union runs the risk of making loans that are out of compliance with federal regulations.

Yours truly is hopeful that common sense will prevail. Hopefully the CFPB will issue guidance clarifying that for purposes of complying with federal regulations. Lenders will not be deemed to be out of compliance for counting Juneteenth as a business day in 2021.

NY to Release Diversity and Inclusion Document to State Regulated Institutions

The Department of Financial Services will shortly release a memorandum to state chartered institutions explaining the department’s expectations as it relates to diversity and inclusion in the workplace. This publication is similar to one issued last October related to climate change initiatives. Its purpose is not to impose specific mandates at this time but to begin a discussion about the requirements that should be imposed on banks, credit unions, and mortgage lenders. When it comes to the efforts they are making to bring more diversity to middle and upper management. Stay tuned.

June 21, 2021 at 9:33 am Leave a comment

Are Overdrafts Fees An Endangered Species?

Overdraft fees have recently been put under the microscope once again and it does feel like the pieces are falling into place to see new restrictions placed on this product.

First, there is the news that overdraft fees dropped dramatically during the pandemic. The Wall Street Journal reported yesterday that overdraft revenue fell in 2020 for the first time in six years. The paper reports that banks and credit unions brought in $31.3B in overdraft revenue in 2020, a drop of almost 10 percent from the previous year. This is hardly surprising since the huge influx of savings has given many consumers a bigger financial cushion.

An even more intriguing development is highlighted in today’s American Banker which notes the growing numbers of banks that are offering overdraft fee alternatives. On Wednesday, Ally Financial announced that it will permanently stop charging overdraft fees. According to the AB “these firms are reducing or eliminating their reliance on overdraft fees at a time when regulatory scrutiny seems likely to increase, and as competition from lower-cost alternatives is on the rise.”

These changes are taking place in a political environment focused on issues of economic equality like never before. In 2017 the CFPB issued a report concluding that overdraft services are disproportionately used by individuals with lower credit scores who have less access to credit. The report didn’t have much of an impact but in 2021 this is precisely the type of factoid that is galvanizing individuals to push for changes to the banking system.

Finally, there is the ubiquitous class action litigation involving the accuracy of overdraft disclosures. While I think much of this litigation can be preempted with appropriate changes to account agreement language, judges are scrutinizing overdraft practices like never before. 

What does all this mean? It means that your credit union should begin preparing for the day when the revenue it receives from overdraft fees is dramatically reduced. Unfortunately, this is easier said than done. A report released in May by the Brookings Institution highlighted anecdotal evidence that small lenders and credit unions have grown increasingly dependent on overdraft fee income.

On that happy note, enjoy your day.

June 3, 2021 at 9:06 am Leave a comment

Three Things to Ponder As You Start Your Credit Union Day

It’s been another busy week in credit union land.  Here are some of the key things to ponder as you finish your second or third cup of coffee.

Municipal Deposits Bills Advance

Legislation that would finally permit municipalities to deposit their funds in credit unions, if that is where they think they can get the greatest benefit for their taxpayers, jumped a major legislative hurdle yesterday when A7334 sponsored by Assemblyman Pichardo was passed out of the Assembly Banks Committee. Companion legislation- S670 by Senator Sanders– was passed out of the Senate’s Bank Committee earlier this week. Now both bills are in the Finance Committees of their respective chambers with plenty of time left to get this done before the end of the session.

To Mask or Not To Mask, That is the Question

Now that the CDC has modified its mask guidance and Governor Cuomo has followed suit, credit unions in New York State are considering what changes, if any, they are going to make to mask wearing policies for both members and staff. Here are some things to consider as you implement your changes.

First, take the time to read both the entire CDC guidance and the Governor’s announcement. For instance, did you know that even as he announced that New York would defer to the CDC guidance, the Governor stressed that the state’s Department of Health continues to “strongly recommend” that masks continue to be worn in indoor settings where vaccination status of individuals is unknown. In addition, the CDC is continuing to take a more conservative approach when it comes to hopping on the plane for the long awaited return to an in-person conference.

In many ways the HR issues that your credit unions have to navigate are even trickier. For instance, to the extent you give employees more flexibility based on proof of vaccination, remember the need to provide reasonable accommodations under the ADA to disabled persons who can’t get the vaccine for health reasons.

Given these complexities, your changes should, of course, be in writing but stay flexible. With variants raging around the world and this country still nowhere near approaching herd immunity, you can bet you’re going to have to modify your procedures in the coming months.

CFPB Updates Mortgage Lending Guidance

CFPB’s Q&As on TRID compliance are in many ways the Rosetta Stone of mortgage lending. So when I heard that the CFPB had updated its guidance in response to the federal BUILD Act yours truly was a little nervous. Full Disclosure: I had not heard of the BUILD Act. 

The BUILD Act is legislation signed into law by President Trump in early January. It authorizes not-for-profits offering low-interest mortgage loans that meet certain criteria to provide modified loan estimates and closing disclosures. It is a common complaint among not-for-profits that the regulatory burdens imposed on them by TRID make it difficult to provide loans to the people who need them most. I couldn’t agree more. It’s a shame that Congress takes such a narrow view of which institutions could benefit from greater lending flexibility.

May 20, 2021 at 10:03 am Leave a comment

Get Ready For A Bigger Tax Collection Role

The White House is planning on financial institutions to play an important role in helping to pay for the $1.9 trillion spending plan the President will unveil tonight. 

As explained by the Wall Street Journal, the Biden Administration is proposing increasing the IRS’s budget with the hope of taking in more tax revenue.  An important part of the plan is to expand the reporting obligations of financial institutions.  As explained in this fact sheet released by the White House.  “It would require financial institutions to report information on account flows so that earnings from investments and business activity are subject to reporting more like wages already are.”

Because I’m such a helpful fella, I provided this link to the IRS website just in case you are a little rusty about how backup withholding works.  Call me wacky, but if this plan goes through, it’s going to increase the incentives some people have to be less than truthful about their income. 

Of course this is just a proposal, but if history is any guide, a President’s initial budget proposals are among the most impactful and Congress will have to come up with ways of paying for all of this increased spending. 

Assembly To Hold Hearing On Remote Notarization

One of the initiatives being advocated for by the Association is to make remote notarization – the ability of notaries to certify documents in a virtual environment – a permanent part of New York State law.  An important step towards that goal will take place a week from Friday with the announcement that the Assembly Government Operations, Banks, Consumer Affairs and Protections and the Judiciary Committees will be holding a joint virtual hearing on the subject.  We will be following up with additional information in the coming days.

This Can’t Be Good…

According to a statement released by the CFPB yesterday, mortgage servicer Mr. Cooper made unauthorized withdrawals resulting in hundreds of thousands of consumer bank accounts being debited for multiples of their mortgage payments.  In a terse statement, the CFPB said it is taking immediate action to “understand and resolve the situation”.  This sounds like it is going to get worse before it gets better.  Brace yourself for the reactionary guidance that will undoubtedly be issued by financial regulators in the coming days.

On that note, enjoy your day.

April 28, 2021 at 9:35 am Leave a comment

Three Things You Need To Know To Start Your Credit Union Day

Good news!  I just heard that Ted Lasso is coming back for another season starting July 23rd.  Nothing at all to do with your credit union day but I’m passing this on as a public service to those of you with Apple+ who want to watch an above average show that’s almost family friendly. 

House Passes SAFE Act, Again.

Yesterday the House Of Representatives passed legislation, supported by CUNA and NYCUA, permitting financial institutions to legally provide banking services to cannabis businesses as a matter of federal law in states such as New York where the sale and possession of marijuana is legal.  Similar legislation was passed last year only to die in the Senate.  It would appear that with 50 Democrats in the senate odds for Senate passage this time around have improved but this is by no means a sure thing.  The legislation may get caught up in a larger debate about criminal justice reform… stay tuned.

It’s a Watershed Moment For CDFIs

 That is the gist of this American Banker article which points out that recent months have seen a dramatic increase in funding for CDFIs.  Once again your credit union should at least take a look at whether or not it qualifies for a CDFI designation and if it does it should consider the costs and benefits of getting and maintaining this designation.

CFPB Issues Emergency Rule To Block COVID Related Evictions

Yesterday the CFPB issued an interim regulation mandating that debt collectors provide tenants information about the CDC’s eviction moratorium which bans tenants from being evicted while COVID emergency orders remain in effect.  The CFPB is taking this step out of concern that “…consumers are not aware of their protections under the CDC Order’s eviction moratorium and that FDCPA-covered debt collectors may be engaging in eviction-related conduct that violates the FDCPA.” 

I’m sure a few of my Compliance hotshots are squirming right now because they know that the Fair Debt Collection Practices Act and its accompanying Regulation F does not apply to employees of creditors provided that they are collecting on a loan they originated or that was not delinquent at the time it was purchased (15 USCA § 1692a).  But I think you are well advised to track developments in this area particularly if your credit union provides credit to commercial landlords. 

Enjoy your day folks.

April 21, 2021 at 9:47 am Leave a comment

CFPB Proposes Nationwide Foreclosure Moratorium

In one of the most aggressive claims of regulatory authority in decades, the CFPB proposed regulations yesterday that would sharply limit the ability to begin foreclosure actions until the end of the year. 

To make sure borrowers aren’t rushed into foreclosure when a potentially unprecedented number of borrowers exit forbearance at around the same time this fall, the proposed rule would provide a special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after December 31, 2021.”

To accomplish this goal regulations would create a new temporary COVID-19 pre-foreclosure emergency review period that wouldn’t expire until the end of the year.  The regulation would be coupled with enhanced loss mitigation options.  For example, current regulation already requires servicers to attempt to make live contact with delinquent borrowers.  The proposed rule would amend these regulations to mandate that borrowers be told about COVID-19 loss mitigation options.  The new time period for evaluating loss mitigation options would effectively prohibit foreclosures. 

Where does the CFPB have the authority to impose this de facto moratorium? It points out in the legal authority section of the regulations preamble that § 1032 of the Dodd-Frank Act mandates that the Bureau “shall consider available evidence about consumer awareness, understanding of, and responses to disclosures or communications about the risks, costs, and benefits of consumer financial products or services.” 12 U.S.C. 5532(c).  It argues that researchers have pointed to a link between financial stress and poor decision making that a longer pre-foreclosure period would help address. 

For those of us in New York, the regulations wouldn’t be all that different than statutory requirements which our elected representatives voted on and chose to put in place.  In contrast, I have half-jokingly referred to the CFPB Director as the benign dictator of consumer protection law.  If this regulation is allowed to take effect, I won’t be joking anymore.  No elected representative voting to create the CFPB thought they were giving an unelected bureaucrat overseeing an independent agency the right to preempt state property law in the absence of explicit Congressional authority. 

To be clear, I am proud of working for an industry that by and large does everything it can to avoid foreclosures.  But, for those of you in support of the Bureau’s action remember, that there will someday be a Director in charge appointed by a president with whom you disagree.  Do you want him or her to be able to exercise this much power?

April 6, 2021 at 10:04 am Leave a comment

Are You Ready for the COVID Regulatory Wave?

Recent announcements by the CFPB underscore that the next COVID regulatory wave is coming.  In addition to familiarizing yourself with the most recent guidance, now is the time to double check all your files and make sure you can explain to your examiner why you took the steps you took during this very unique time in banking history. 

The trigger for this somewhat paranoid opening paragraph is recent announcements by the CFPB.  On March 31st the Bureau announced that it was rescinding a previous guidance which relaxed various regulatory expectations and requirements during the pandemic.  In effectively announcing that it was putting the gloves back on, the Bureau explained in the accompanying press release that “Providing regulatory flexibility to companies should not come at the expense of consumers.” 

The funny thing about this comment is that the Bureau prides itself on being a fair, objective, data driven regulator.  I’m curious what evidence it has to suggest even indirectly that this regulatory flexibility has come at the expense of consumers? I would suggest that a relaxation of regulatory mandates provides a mechanism for small to medium size financial institutions to put their resources towards helping members on a case by case basis rather than checking off regulatory boxes.  But then again, I don’t have the resources to do that kind of analysis. 

Then yesterday, the Bureau issued this strongly worded admonishment warning mortgage servicers against being unprepared for an anticipated wave of troubled mortgages as forbearances come to an end.    In states like New York which already have imposed rigorous forbearance requirements, this warning comes across as somewhat duplicative, but you should still take the time to read it.  Again, I can’t help escape the feeling that financial institutions are being assumed guilty until proven innocent. 

Is there any way to prepare for the regulatory wave?  Document-document-document what you have done and why you have done it.  In addition, double check to make sure your policies and procedures are up to date; after all, between the GSEs, federal legislation, state legislation, the CFPB and state level regulators, there has been no shortage of regulatory mandates with which you must demonstrate familiarity even as you try to help out your member.      

While the vast majority of credit unions aren’t large enough to be directly subject to its supervisory oversight, as the ultimate interpreter of virtually every significant federal consumer protection law, the Bureau sets the tone for examiners throughout the country, particularly in states like New York which have developed state level consumer bureaus. 

What has me ticked-off this morning is that the Bureau has proclaimed that this avalanche of regulations is more important to enforce than allowing institutions to continue to work through the pandemic in good faith. 

Maybe the Bureau hasn’t read the news in the last couple of days, but the virus is still spreading.    

April 2, 2021 at 9:40 am Leave a comment

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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