CFPB Proposes Minor Changes to the Ability-to-Repay Rule

The Consumer Financial Protection Bureau (CFPB) released proposed amendments to the ability-to-repay rule. Most of the proposed changes focus on alternative definitions to the small servicer provisions for nonprofit (501(c)(3)) entities.

But one change is of interest for credit unions. The change allows for a limited cure mechanism for exceeding the points and fees limit that applies to qualified mortgages.

If a credit union determines after consummation that the total points and fees payable exceeds the applicable limit, the loan is not precluded from being a qualified mortgage. There are some stipulations, however:

  • The loan was originated in good faith as a qualified mortgage, and meets all other QM requirements;
  • Within 120 days of consummation, the creditor refunds the consumer the dollar amount that was over the transaction’s point and fees limit; and
  • The creditor maintains and follows policies and procedures for a post-consummation review of loans and refunding to consumers the amounts that exceed the applicable limit.

Question of the Week

When advertising a loan product, if I want to disclose the APR, what else am I required to disclose?      

If your loan product is open end, when you disclose the APR you must also disclose any minimum, fixed, transaction, activity, or similar charge that could be imposed. If the rate is variable you must disclose that fact and you must also disclose any membership or participation fee that could be imposed.

If your loan product is closed end, disclosing the APR is not a trigger term so you do not have to disclose anything else, but you do have to use the term “APR” or “annual percentage rate.”

Related Links:

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA released part II of its video series on the risk-based capital proposal.   

The NCUA is offering a free webinar to credit unions titled, “How to be in Compliance with OFAC and FinCEN.” (Part 1).  The webinar will be held on May 21, 2014 and credit unions should register to attend.

Consumer Financial Protection Bureau (CFPB)

The CFPB announced proposed changes to the Mortgage Rules to ensure access to credit.

The CFPB posted information on its blog detailing its work on fair lending, including enforcement actions.

Financial Crimes Enforcement Network (FinCEN)

FinCEN has released five administrative rulings that focus on the definition of a money transmitter: FIN-2014-R004, FIN-2014-R005, FIN-2014-R006, FIN-2014-R007, FIN-2014-R008.

Federal Reserve Board (FRB)

FRB Chair Yellen delivered a speech on supervision of community banks to the Independent Community Bankers of America Policy Summit.

Internal Revenue Service (IRS)

The IRS released Notice 2014-33 on the implementation of FATCA, explaining that 2014 and 2015 will be considered a transition period for enforcement and administration of the rule.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of Amy 1, 2014. The last update prior to this was April 29, 2014.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance.