Consumer Compliance Outlook
News from Washington: Regulatory Updates
On June 29, 2012, the federal bank and thrift regulatory agencies announced the availability of the 2012 list of distressed or underserved nonmetropolitan middle-income geographies where revitalization or stabilization activities will receive Community Reinvestment Act (CRA) consideration as community development. These geographies are designated by the agencies in accordance with CRA regulations and reflect local economic conditions, including triggers such as unemployment, poverty, and population changes. The initial release of the 2012 list does not contain any tract information for certain areas. The 2011 lists should be used for those areas until the updated lists are released. The 2012 list will be updated when information becomes available sometime in late 2012. As with past releases, the agencies incorporate a one-year lag period for geographies that are no longer designated as distressed or underserved in the current release. Geographies subject to a one-year lag period are eligible to receive consideration for community development activities for 12 months after publication of the current list. The criteria for designating these areas are available on the Federal Financial Institutions Examination Council website.
On June 29, 2012, the Federal Reserve Board (Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issued the host state loan-to-deposit ratios that the banking agencies will use in determining compliance with section 109 of the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. These ratios update data released on June 30, 2011. Section 109 prohibits a bank from establishing or acquiring a branch or branches outside its home state primarily for the purpose of deposit production and prohibits branches of banks controlled by out-of-state bank holding companies from operating primarily for the purpose of deposit production. Section 109 also provides a process to test compliance with the statutory requirements. The first step in the process involves a loan-to-deposit ratio screen that compares a bank’s statewide loan-to-deposit ratio with the host state loan-to-deposit ratio for banks in a particular state. The second step requires a banking agency to determine whether the bank is reasonably helping to meet the credit needs of the communities served by the bank’s interstate branches. The second step is conducted if a bank’s statewide loan-to-deposit ratio is less than one-half of the published ratio for that state or if data are not available at the bank to conduct the first step. A bank that fails both steps is in violation of section 109 and is subject to sanctions by the appropriate banking agency.
On June 19, 2012, the CFPB launched a public consumer complaint database for complaints about credit cards. It also released a snapshot of the complaints it has received about credit cards, mortgages, private student loans, and bank products through June 1, including six stories of consumers who filed complaints with the CFPB and successfully resolved their issues. The CFPB had asked the public to comment on a proposed policy of making some credit card complaint data publicly available, and after considering those comments, the CFPB has finalized its policy for disclosing some of the data through its consumer complaint database. The database allows the public to know the nature of the complaint and contains certain individual-level field data, including type of complaint, date of submission, consumer’s zip code, and the company that the complaint concerns. The database also includes information about the actions taken on a complaint, whether the company’s response was timely, how the company responded, and whether the consumer disputed the company’s response. The database does not include confidential information about a consumer’s identity. The database will be populated by credit card complaints received by the CFPB on and after June 1, 2012.
The CFPB will continue to publish reports containing aggregate data and analysis of all the complaints it receives. The CFPB published a notice in the Federal Register requesting comments on extending the database to financial products other than credit cards. The comment period closed on July 19, 2012.
On June 4, 2012, the Board, the CFPB, the FDIC, the National Credit Union Administration, and the OCC released an MOU that clarifies how the agencies will coordinate their supervisory activities, consistent with the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Section 1025 of the Dodd-Frank Act requires the agencies to coordinate important aspects of their supervision of insured depository institutions with more than $10 billion in assets and their affiliates. The agencies will coordinate the scheduling of examinations, conduct simultaneous examinations of covered depository institutions (unless an institution requests separate examinations), and share draft reports of examinations for comment. The MOU establishes coordination and cooperation between the CFPB and the other agencies, minimizes unnecessary regulatory burden, avoids duplication of effort, and decreases the risk of conflicting supervisory directives.
On May 31, 2012, the CFPB announced that it would reopen the comment period on the ability to repay and qualified mortgage proposal, which the Board proposed in May 2011. The proposal’s comment period originally closed in July 2011, but the CFPB reopened it to seek comment on new data obtained after the comment period closed. The new comment period closed on July 9, 2012. The ability to repay and qualified mortgage proposal implements provisions of the Dodd-Frank Act that require lenders to determine a consumer’s repayment ability before making a loan. The proposal also addresses the definition
of qualified mortgages, which are loans deemed to satisfy the ability to repay requirement. The CFPB reopened the rulemaking for comment because it obtained data from the Federal Housing Finance Agency (FHFA) that tracked the performance of loans purchased or guaranteed by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation from 1997 to 2011. The CFPB also obtained data on other privately securitized mortgage loans. The notice explained that the CFPB could use this newly obtained data when defining a qualified mortgage. The notice specifically requested comment on the FHFA data and requested similar data regarding other types of mortgage loans and on the relationship between the ability-to-repay and other potentially relevant factors, such as borrowers’ cash reserves. The notice did not reopen the comment period on other aspects of the ability-to-repay rulemaking. The CFPB expects to issue the final rule by January 21, 2013.
23, 2012, the CFPB issued an advance notice of proposed rulemaking seeking comment, data, and information about general-purpose reloadable prepaid cards (GPR cards) that allow consumers to load the cards with money upfront and use them as if they were checking account debit cards. The CFPB is interested in learning more about the costs, benefits, and risks to consumers and intends to issue a proposal to extend the protections of the Electronic Fund Transfer Act (EFTA) and Regulation E to GPR cards. Growth in the prepaid market has stemmed from consumers who are using a prepaid card as an alternative to a checking account. Despite the growth of prepaid cards, GPR cards have still not been subject to the EFTA. With the advance notice of proposed rulemaking, the CFPB plans to evaluate fees and terms of disclosure, unauthorized transactions, and product features. The comment period closed on July 22, 2012.