Compliance Center: Three Announcements From the CFPB

The Consumer Financial Protection Bureau (CFPB) recently published three press releases that may be of interest for credit unions.

The first is a press release from the CFPB that provides details into the proposed rule that the Bureau is considering for pre-dispute arbitration clauses.  The Bureau would not ban arbitration clauses in their entirety, but would provide certain restrictions.  The proposal would prohibit the use of pre-dispute arbitration agreements in class action litigation.  Companies that include any arbitration agreements in contracts for consumer financial products or services would need to explicitly state that the arbitration agreement does not apply to cases filed on behalf of a class unless and until the class certification is denied or the class claims are dismissed by the court.  In addition, the CFPB is considering imposing a condition on the use of pre-dispute arbitration agreements by requiring the submission of information about arbitration claims and awards to the Bureau.

The second is a guidance bulletin released by the Bureau that highlights the risks of Marketing Service Agreements (MSAs) when it comes to the anti-kickback provisions of RESPA.  The Bureau is seeing an increase in MSAs and several cases where the MSAs are designed to evade RESPA’s prohibition on payment and acceptance of kickbacks and referral fees.  The bulletin provides an overview of RESPA’s prohibitions, describes examples of market behavior gleaned from enforcement actions, and describes the legal and compliance risks observed from such arrangements.  The Bureau recognizes that the facts and circumstances of each MSA are unique and must be examined to determine whether or not there is a potential RESPA violation.

The third came from prepared remarks from Director Cordray when he addresses a meeting of the Credit Union Advisory Council.  The remarks talked about consumer challenges in payment systems and give insight into potential future rulemaking from the CFPB.  Key areas of focus will be:

  • Transparency and information to allow consumers to make informed decisions with regards to electronic payments;
  • Protecting the consumer from loss, theft, or mistreatment that may arise from payment security problems;
  • Access to the payment system by unbanked and underbanked

Compliance Question of the Week

Does federal law require a credit union to provide an overdraft notice whenever an NSF item is presented?

No. Truth in Savings does not require that a credit union give a member an overdraft notice when an NSF item occurs.  However, credit unions are now required to include notice on the members statement advising of any overdraft fees or returned item fees.  Credit unions do generally send a notice as a matter of industry practice and as a matter of courtesy.  This notice is also helpful as a loss control measure since it raises a red flag for errors or unauthorized items.

And while there is not a regulatory requirement to send the notice, the Joint Guidance on Overdraft Protection Programs suggests a best practice to promptly notify the member each time the overdraft protection program is used.

Related Links

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA released the October 2015 issue of its NCUA Report.

The NCUA announced that it will team up with the FTC to host a live Twitter chat on cybersecurity. The chat is scheduled for Thursday, October 22, 2015 at 11 a.m. EST.

The NCUA released “World of Cents”, an online interactive financial education tool aimed at teaching children the value of money and savings.

The NCUA released its board action bulletin which stated that it approved three items during its October 2015 board meeting.  The NCUA approved a final rule to modernize the risk-based capital requirements, a proposed rule that would provide regulatory relief to FCUs regarding investing in bank notes, and revisions that will streamline the granting or amending of community charters.

The NCUA released its latest video in its Economic Update series. The video focuses on the potential rise in interest rates and what that will mean for credit unions.

NCUA Chairman Matz delivered a speech at the National Directors Roundtable Conference. During her speech, Matz discussed the fact that younger people are becoming a larger force in the economy, interest-rate risk, and cybersecurity.

The NCUA announced that it will join other federal regulators on a webinar to cover the recent updates to the flood insurance regulations. The webinar is scheduled for Thursday, October 22nd and credit unions can register for the webinar here.

The video of the September NCUA Board Meeting is now available.

Consumer Financial Protection Bureau (CFPB)

The CFPB released Compliance Bulletin 2015-05, which focuses on the prohibition on kickbacks and referral fees under RESPA.

The CFPB announced that it is considering ban consumer financial companies from using arbitration clauses to block consumers from suing in a group to obtain relief.

The CFPB announced that it will hold its next Consumer Advisory Board Meeting in Washington, D.C. on October 22nd. The meeting will be recorded and will be made public after the event. The agenda for the meeting was also released.

CFPB Director Cordray delivered prepared remarks at the Meeting of the Credit Union Advisory Council. Cordray’s remarks mostly focused on payment systems.

The CFPB released the final rule implementing amendments to the Home Mortgage Disclosure Act.

Federal Housing Finance Agency (FHFA)

Fannie Mae and Freddie Mac have both released letters stating that the enterprises will not complete loan file reviews for TILA/RESPA Integrated Disclosure compliance at this time. The enterprises will determine when the reviews will begin after a period of time, although that time frame has not been specified. The enterprises do expect lenders to make good faith efforts to comply with the rule. 

Federal Reserve Bank (FRB)

The minutes from the September Federal Open Market Committee meeting are now available.

The FRB released the August G.19 Consumer Credit Report. The report shows that consumer credit has increased at an annual rate of just over 5 percent.

The FRB released the October 2015 issue of FedFlash.

The FRB released the minutes from its August and September discount rate meetings.

The FRB released its October update to the Beige Book.

Financial Crimes Enforcement Network (FinCEN)

FinCEN released its second edition of SAR Stats.

FinCEN Director Calvery delivered remarks to the Predictive Analytics World for Government Conference regarding the FinCEN footprint, intelligence cycle, and analytics in action.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of October 15, 2015. The last update prior to this was October 7, 2015.

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

Posted in Compliance News, NCUA.