Consumer Compliance Outlook
News from Washington: Regulatory Updates
On January 31, 2013, the CFPB launched an initiative to learn more about financial products designed for college students and the impact of agreements that schools often make with financial companies. The CFPB solicited information on a variety of related issues, including: 1) the information schools share with financial institutions when they establish these relationships; 2) how financial products are marketed to students; 3) the fees for the products; 4) the marketing agreements between schools and financial institutions; and 5) student experiences using campus financial products. The CFPB will use the information to determine if the arrangements are in the best interest of students. The comment period ended on March 18, 2013.
On January 22, 2013, the CFPB announced it was delaying the February 7, 2013, effective date for its foreign remittance transfer rule because of a pending rulemaking proposal the CFPB issued in December 2012 that would make three changes to the final rule. The proposal was issued in response to industry concerns about compliance challenges in implementing the final rule. The proposal addresses disclosure of foreign taxes and institution fees, disclosure of sub-national taxes in a foreign country, and liability for errors when a sender provides incorrect or incomplete account information for the recipient. The CFPB will announce the new effective date when it makes the December 2012 proposal final.
On January 22, 2013, the FFIEC issued proposed guidance on the application of consumer protection laws and regulations to the social media activities of financial institutions and nonbanks. The guidance does not impose new compliance requirements but instead is intended to help financial institutions and nonbanks recognize and manage the potential risks of using social media. The guidance focuses on three risk categories: compliance and legal risks, including a discussion of specific laws and regulations; reputational risks; and operational risks. The comment period ended on March 25, 2013.
On December 28, 2012, the CFPB issued a final rule adjusting the asset-size exemption threshold for banks, savings associations, and credit unions under Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The asset-size exemption will increase to $42 million. Institutions with assets of $42 million or less as of December 31, 2012, are exempt from collecting HMDA data in 2013. However, an exemption from collecting data in 2013 does not affect an institution’s obligation to report 2012 data if an institution was subject to HMDA in 2012.
On December 19, 2012, the CFPB announced that it is seeking public comment on how the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) has affected consumers and the credit card industry. In particular, the CFPB sought information about the terms of credit card agreements, the effectiveness of the Credit CARD Act’s protections against unfair or deceptive acts or practices, changes in the cost and availability of credit, and the use of risk-based pricing. The CFPB will use the information in a report to Congress on the state of the consumer credit card market. The comment period closed on February 19, 2013.
On December 19, 2012, the federal bank regulatory agencies announced the annual adjustment to the asset-size thresholds used to define small bank, small savings association, intermediate small bank, and intermediate small savings association under the Community Reinvestment Act (CRA) regulations as follows:
- “Small bank” or “small savings association” means an institution that, as of December 31 of either of the prior two calendar years, had assets of less than $1.186 billion.
- “Intermediate small bank” or “intermediate small savings association” means a small institution with assets of at least $296 million as of December 31 of both of the prior two calendar years, and less than $1.186 billion as of December 31 of either of the prior two calendar years. The annual adjustments are required by the CRA regulations. Based on the asset-size threshold, financial institutions are evaluated under different CRA examination procedures. Financial institutions meeting the small and intermediate small asset-size threshold are not subject to the reporting requirements applicable to large banks.
The changes were effective January 1, 2013.
On December 13, 2012, the CFPB announced its proposed policy to allow companies to test new consumer disclosures on a case-by-case basis, as provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The CFPB launched Project Catalyst in November as a part of that commitment, under which the CFPB would approve individual companies, on a case-by-case basis, for limited time exemptions from current federal disclosure laws to allow those companies to research and test informative, cost-effective disclosures and share the results with the CFPB. The information will be used to improve its disclosure rules and model forms. The comment period closed on February 15, 2013.
On November 20, 2012, the Board and the CFPB announced an increase in the dollar threshold for coverage under Regulations Z and M. Effective January 1, 2013, consumer credit and lease transactions in the amount of $53,000 or less are subject to Regulations Z and M, respectively. However, private education loans and loans secured by real property (such as mortgages) are subject to Regulation Z regardless of the loan amount.
On November 20, 2012, the CFPB announced its annual adjustment to the dollar amount of fees that trigger additional disclosure requirements and restrictions under Regulation Z and HOEPA for certain high-cost home mortgage loans. HOEPA’s requirements apply when the total points and fees payable by the consumer exceed the fee-based trigger (initially set at $400 and adjusted annually) or 8 percent of the total loan amount, whichever is larger. The dollar amount of the fee-based trigger has been adjusted to $625, effective January 1, 2013.
On November 16, 2012, the CFPB announced that it will delay the mandatory compliance deadline for certain new mortgage disclosures required under the Dodd-Frank Act until it completes a pending rulemaking proposal to integrate mortgage disclosures required under the Truth in Lending Act and the Real Estate Settlement Procedures Act into a single disclosure. The Dodd-Frank Act established certain new mortgage disclosure requirements, including disclosures about the cancellation of escrow accounts, consumers’ liability for debt payment after foreclosure, and the creditor’s policy for accepting partial payments. The CFPB is allowing creditors more time to provide these new disclosures until the new integrated mortgage disclosure rulemaking is completed.