Consumer Compliance Outlook
News from Washington: Regulatory Update
On May 8, 2009, the Board approved final rules that revise the disclosure requirements for mortgage loans under Regulation Z. These revisions implement the Mortgage Disclosure Improvement Act (MDIA), which was enacted in July 2008. The MDIA, an amendment to the Truth in Lending Act (TILA), seeks to ensure that consumers receive cost disclosures earlier in the mortgage process. The MDIA broadens and adds to the requirements of the Board's final Regulation Z rules issued in July 2008. Among other things, the MDIA requires early, transaction-specific disclosures for mortgage loans secured by dwellings other than the consumer's principal dwelling and requires waiting periods between the time disclosures are given and consummation of the mortgage transaction. Moreover, these requirements of the MDIA will become effective on July 30, 2009, about two months earlier than the Board's regulatory amendment adopted in the July 2008 final rule.
On April 21, 2009, the Agencies proposed clarifications to certain aspects of their December 2008 final rules under the Federal Trade Commission Act prohibiting unfair credit card practices. In addition, the Board also proposed clarifications to its December 2008 final rule under TILA amending Regulation Z to improve the disclosures consumers receive in connection with credit card accounts and other revolving credit plans. The proposals are intended to improve compliance with the rules by clarifying areas of uncertainty and making technical corrections to ensure that institutions are able to come into compliance with the rules on or before the July 1, 2010, effective date without reducing protections for consumers. The closing date for comments was June 4, 2009.
On March 24, 2009, the Board released interagency examination procedures that will be used when determining a financial institution's compliance with the Servicemembers Civil Relief Act (SCRA). The procedures were recently approved by the Federal Financial Institutions Examination Council Task Force on Consumer Compliance. The SCRA was signed into law on December 19, 2003, and seeks to strengthen the national defense by providing a number of protections to servicemembers, including the temporary suspension of judicial and administrative proceedings and certain financial obligations that may adversely affect servicemembers during their military service. The SCRA is available at http://www.law.cornell.edu/uscode/html/uscode50a/usc_sup_05_50_10_sq9_20_sq1.html .
On March 11, 2009, the Board proposed amendments to Regulation Z (Truth in Lending) that would revise the disclosure requirements for private education loans. Under the amendments, creditors that extend private education loans would provide disclosures about loan terms and features on or with the loan application and would also have to disclose information about federal student loan programs that may offer less costly alternatives. In addition,
disclosures would also have to be provided when the loan is approved and when the loan is consummated. The amendments would implement provisions of the Higher Education Opportunity Act, which was signed into law on August 14, 2008. The comment period for the proposed amendments ended on May 26, 2009.
On March 6, 2009, HUD announced that it is soliciting further public comment on how it should define the scope of a prohibited practice under RESPA called "required use," which was revised in a final rule issued by HUD in November 2008. HUD will delay implementing this final rule until July 16, 2009, as it solicits public comment on whether to withdraw its new definition, which would have taken effect on January 16, 2009. The new rule established a definition of required use that would have effectively prohibited nonsettlement service providers from providing discounts to consumers for using affiliates of settlement service providers. The comment period ended on April 9, 2009.
In a press release issued on March 4, 2009, the FTC warned consumers of the threat of economic stimulus scams. The scams have taken many forms, including e-mail and fraudulent websites. These solicitations often request consumers to provide personal information and pay for fictitious services that purport to help individuals qualify for a payment from President Obama's economic stimulus package. The FTC advises consumers who may have already fallen victim to these attempts to check their credit reports and credit card bills carefully and report the scam to the FTC.
On March 4, 2009, the Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision released a joint statement encouraging all federally regulated financial institutions that service or hold residential mortgage loans to participate in the "Making Home Affordable" loan modification program. The Treasury Department announced guidelines for the program on March 4, 2009. The Treasury announced that institutions receiving financial assistance in the future under the Financial Stability Plan established under the Troubled Asset Relief Program will be required to implement loan modification programs in accordance with the Treasury Department's guidelines. By providing servicers and holders of eligible residential mortgages with incentives to modify loans at risk of foreclosure, the program seeks to promote sustainable alternatives to foreclosures on owner-occupied residential properties. The program also provides incentives for homeowners whose mortgages are modified to remain current on their mortgages after modification. Taken together, these incentives should help responsible homeowners remain in their homes and avoid foreclosure, thereby easing downward pressure on house prices in many parts of the country and averting the costs to families, communities, and the economy from avoidable foreclosures.