Compliance Center: Regulators Release Updates to Unified Agendas

The Consumer Financial Protection Bureau (CFPB), the National Credit Union Administration (NCUA), and other Federal Regulatory Agencies recently released the Fall Updates to the Unified Agenda.

Per the Regulatory Flexibility Act, federal agencies are required to publish their rulemaking agenda twice a year. Most federal agencies use the Unified Agenda to post information about the rulemaking they are working on.

The NCUA’s Fall 2015 Unified Agenda items contain a number of initiatives that should come as no surprise for credit unions. Some of the items we expect to see future rulemaking on include:

Share Insurance and Appendix

Updating the share insurance rules to enhance share insurance coverage for Interest On Lawyers’ Trust Accounts and other similar escrow accounts as a result of the enactment of the Credit Union Share Insurance Fund Parity Act.

Member Business Loans

Planned release of the final rule to update the NCUA’s member business loans. The final rule is expected to remove certain waiver requirements, clarify what constitutes a MBL, define commercial loans, exempts certain credit unions from the commercial loan policy requirements, and broaden government business lending programs. In addition, the final rule should include clarifying definitions, provide flexibility regarding collateral and security requirements, and hopefully allow flexibility with regards to state MBL regulations.

Asset Securitization

This final rule would allow federal credit unions, within limits, to securitize its own loans and the work with an outside party to then sell those securities.

Federal Credit Union Occupancy, Planning and Disposal of Acquired and Abandoned Premises

When the NCUA issued the final rule updating the Federal Credit Union fixed asset rule, they also put in a comment call regarding FCU occupancy rules for properties the FCU owns. The NCUA may issue a proposed rule at the beginning of 2016 to amend the existing rule.

Supplemental Capital

Also in the proposed rule stage, the NCUA is looking to modernize its regulations to incorporate supplemental capital provisions in the risk-based capital context.

Not to be outdone, the CFPB release their Fall 2015 Unified Agenda items. A number of the items on the CFPB’s rulemaking agenda also should be no surprise for credit unions. The Bureau also provide an overview of their initiatives:

Current Initiatives

Arbitration

Arbitration clauses in many contracts for consumer financial products and services require consumers and financial institutions to resolve any disputes that may arise between them through a private arbitration process, instead of going to court. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) banned such arbitration clauses in contracts for mortgage loans and directed the Bureau to study the use of agreements providing for arbitration in connection with consumer financial products or services. This past March, the Bureau sent Congress the report summarizing their three-year study, which was the most comprehensive analysis of consumer finance arbitration ever performed and expanded on preliminary results that they had released in December 2013.

They now beginning a rulemaking process to address concerns related to the use of arbitration agreements in connection with credit cards, deposit accounts, payday loans and various other consumer financial products or services. In particular, they are considering whether to propose rules that would prevent companies from using these agreements to foreclose consumers’ ability to bring class action lawsuits, which can provide consumers with substantial relief and create the leverage to bring about changes in business practices. To help monitor the fairness of arbitration proceedings, they are also considering whether to propose requiring that arbitration filings and awards be submitted to the Bureau. These ideas are summarized in an outline that they recently released for purposes of consulting with representatives of small businesses that might be affected by the rulemaking, using a process outlined in the Small Business Regulatory Enforcement Fairness Act.

Payday, auto title, and similar lending products

The Bureau is in the process of developing a Notice of Proposed Rulemaking to address concerns in markets for payday, auto title, and similar lending products. The Bureau is particularly concerned that lenders are offering these products without assessing the consumer’s ability to repay, thereby forcing consumers to choose between reborrowing, defaulting, or falling behind on other obligations. They are also concerned about certain payment collection practices that can subject consumers to substantial fees and increase risk of account closure. 

The Notice of Proposed Rulemaking will build on feedback they have received from small businesses and other stakeholders after releasing an outline of proposals under consideration last spring for purposes of the Small Business Regulatory Enforcement Fairness Act process. The Bureau will also publish results of further research it has been conducting into these markets in connection with the rulemaking proposal. The Bureau previously released a white paper and a report summarizing some of its research on some of these products. They expect to release the rulemaking proposal in first quarter 2016.

Prepaid accounts

General purpose reloadable cards and other similar prepaid products are increasingly being used by consumers in place of traditional checking accounts or credit cards, but they do not always carry important consumer protections. To address this issue, the Bureau is finalizing a proposed rule that they published in the Federal Register in December 2014.  They proposed that prepaid accounts receive certain protections that are similar to those that exist for debit and payroll cards.  They also proposed general credit card protections to prepaid accounts that access overdraft services or offer certain credit features.  They expect to issue the final rule in spring 2016.

Overdraft

The Bureau is preparing for a rulemaking concerning overdraft programs on checking accounts. A prior white paper and report by the Bureau highlighted a number of possible consumer protection concerns, including how consumers consent (or “opt in”) to overdraft coverage for certain electronic transactions, overdraft coverage limits, transaction posting order practices, overdraft and insufficient funds fee structures, and involuntary account closures. Regulations that took effect in 2010 require that consumers opt in before banks can charge overdraft fees for ATM and one-time debit card transactions, but opt in rates vary widely. In preparation for the rulemaking, the Bureau is conducting additional research and has begun consumer testing initiatives related to the opt in process.

Debt collection

The Bureau is also conducting research for a rulemaking on debt collection activities, which are the single largest source of complaints to the federal government of any industry. Building on a previous Advance Notice of Proposed Rulemaking, the Bureau is now analyzing the results of a groundbreaking nationwide survey related to consumers’ experiences with debt collection. They are also engaged in consumer testing initiatives to determine what information would be useful for consumers to have about debt collection and their debts and how that information should be provided to them.

Larger participants and non-depository lender registration

The Dodd-Frank Act allows the Bureau to supervise nonbank financial services providers that are designated as “larger participants” in their particular markets for consumer financial products and services. They have already defined larger participants in several markets, including most recently the market for auto lending and leasing.  The Bureau expects next to develop rules to define larger participants in markets for consumer installment loans and vehicle title loans.  They also expect to consider whether rules to require registration of lenders in these markets or other non-depository lenders would facilitate the Bureau’s supervision of such entities.

Women-owned, minority-owned, and small businesses data collection

The Dodd-Frank Act requires the Bureau to develop rules to implement a requirement that financial institutions report information about lending to women-owned, minority-owned, and small businesses. The Bureau is beginning work on this project, building off a rulethat it released this fall to revise a similar regime for reporting data about home mortgage lending. The first stage of our work will focus on outreach and research. They then plan to begin developing proposed rules concerning the data to be collected and appropriate procedures, information safeguards, and privacy protections for information-gathering.

Mortgage servicing

The Bureau is working to finalize a proposal they published in December 2014 to amend certain aspects of the Bureau’s 2013 mortgage servicing rules. The proposal addressed, among other things, enhanced loss mitigation requirements and compliance with certain rules when the borrower is a potential or confirmed successor in interest or is in bankruptcy.  They have been conducting testing of periodic statements for consumers in bankruptcy and are working to develop the final rule for issuance in mid-2016.

Implementation of the Home Mortgage Disclosure Act, Know Before You Owe disclosures, and other mortgage rules

The Bureau is working to support implementation of multiple mortgage rules required by the Dodd-Frank Act. Most recently, in October 2015, they issued a final rule amending Regulation C to implement amendments to the Home Mortgage Disclosure Act made by the Dodd-Frank Act, among other things. The final rule adds new reporting requirements, clarifies several existing requirements, modifies the institutional and transactional coverage of Regulation C and the processes for reporting and disclosing data, and provides extensive compliance guidance. The Bureau is preparing a compliance guide and other support materials and programs to prepare for implementation of various parts of the rule starting in 2017 and 2018.

They are also continuing to support implementation of new rules that took effect in October 2015 requiring provision of Know Before You Owe disclosures to applicants for mortgage loans. The disclosure forms streamline and integrate information that lenders are required to provide consumers under the Truth in Lending Act and Real Estate Settlement Procedures Act. They are provided guides and materials to help industry and consumers prepare for the changes. 

The Bureau is also continuing to support the implementation of various other mortgage-related final rules they issued in January 2013 to implement Dodd-Frank Act reforms and strengthen consumer protections involving mortgage origination and servicing. Among other efforts, they are monitoring the market and continuing to issue clarifications and amendments as warranted. Most recently, they issued a final rule in September 2015 modifying certain requirements for small creditors that operate predominantly in “rural or underserved” areas.

Long-term actions

The Bureau has also updated a portion of the Unified Agenda focusing on long-term actions to reflect potential initiatives beyond November 2016. These include potential rulemakings to address important issues related to credit reporting and student loan servicing. 

Credit reporting

Information in credit reports can be critical to determine a consumer’s eligibility for credit, access to checking accounts, employment, rental housing, and more. The Bureau is monitoring the market through its supervisory, enforcement, and research efforts, including a white paper they published in December 2012 and other agency reports on credit report accuracy. As this work continues, the Bureau will evaluate possible policy responses to issues identified, including potential additional rules or amendments to existing rules governing consumer reporting. Potential topics for consideration might include the accuracy of credit reports, including the processes for resolving consumer disputes, or other issues.

Student loan servicing

Student loan servicers are a critical link between borrowers and lenders, yet there are no consistent, market-wide federal standards for student loan servicing. In September 2015, they released a report that identifies issues and suggests a framework to improve student loan servicing. The Bureau has made it a priority to take action against companies that are engaging in illegal servicing practices, and that ongoing work includes addressing many of the problems outlined in this report. Also in September, the Bureau, the Department of Education, and the Department of the Treasury issued a Joint Statement of Principles on Student Loan Servicing, proposing a framework similar to the recommendations included in the report.  They will continue to monitor the market for trends and developments and evaluate possible policy responses, including potentially proposing rules.  Possible topics for consideration might include specific acts or practices and consumer disclosures.

Compliance Question of the Week

If a member claims there has been an EFT error and the credit union properly investigates the claim, what does the credit union do if it determines that there was no EFT error?

Under Regulation E, if after an investigation the credit union determines that the member’s claim was invalid, the credit union must do the following:

The credit union must mail or deliver a written explanation of its findings to the member within three days of completing its investigation. The initial investigation must be completed within 10 business days (20 business days for new accounts) unless the credit union is using the 45 day investigation period (90 day for POS or foreign initiated transactions/new accounts). If the credit union is using the 45 day investigation period, it has three days beyond that to provide the explanation. The explanation must inform the member that he has the right to request the documents used by the credit union in the investigation.

If the credit union must debit an amount it had provisionally re-credited during the error resolution procedure, it must report to the member, either orally or in writing, the date and amount of the debit. The credit union must also inform the member that it will honor drafts, checks or preauthorized transfers drawn on the provisionally credited funds for 5 business days after the notice was provided to the member. The credit union may not charge for overdrafts. The credit union need only honor items it would have paid if the provisionally re-credited funds had not been debited.

Related Links:

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA announced that it will hold a panel discussion aimed at helping credit unions reach Hispanic members. Credit unions can register for the discussion here.

The NCUA released a Risk-Based Capital Rule Report which includes legislative recommendations.

The NCUA announced that it will host a mortgage lending webinar. Credit unions can register for the webinar here.

The NCUA will be hosting a live Twitter chat on Wednesday, December 2nd to discuss findings from the National Disability Institute’s 2015 report regarding banking status and financial behaviors of adults with disabilities.

Consumer Financial Protection Bureau (CFPB)

The CFPB released its monthly consumer complaint snapshot which highlights bank account and service complaints.

The CFPB announced that the threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans will remain at $25,500 for 2016.

The CFPB announced the dollar thresholds for Reg Z and Reg M that will apply for determine exempt consumer credit/lease transactions for 2016. The exemption limit will remain at $54,600 for the new year, with the exception of private education loans and real property-secured loans, which are subject to Regulation Z regardless of their dollar amount.

Federal Reserve Board (FRB)

Federal Deposit Insurance Corporation (FDIC)

The FDIC released FIL-55-2015, detailing the agency’s cybersecurity tools available to banks.

Federal Housing Finance Agency (FHFA)

The FHFA announced that the loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2016 will remain at their existing limits.

Federal Trade Commission (FTC)

The FTC is seeking comments on its review of the Holder Rule. The Holder Rule protects consumers who make a purchase using credit obtained through a merchant.  Comments must be received by February 12, 2016.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of November 25, 2015. The last update prior to this was November 24, 2015.

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

Posted in Compliance News, Federal.