Consumer Compliance Outlook: Third Quarter 2013

News from Washington: Regulatory Updates

Consumer Financial Protection Bureau (CFPB) issues final rule to clarify TILA and RESPA mortgage rules. External Link

On July 10, 2013, the CFPB issued a final rule clarifying the mortgage regulations it issued in January 2013 under the Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA). Among the changes and revisions, the CFPB:

Agencies propose three exemptions to appraisal requirements for higher-risk mortgages. External Link

In January 2013, six federal regulatory agencies (Agencies) jointly issued a final rule to implement the appraisal requirements for higher-risk mortgages in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The Agencies are now proposing three exemptions to the appraisal requirements of the January 2013 final rule. The Dodd-Frank Act defines a “higher-risk mortgage” as a higher-priced mortgage loan, namely, a consumer credit transaction secured by a consumer’s dwelling whose annual percentage rate exceeds the Freddie Mac average prime offer rate by 150 basis points for first-lien loans, 250 basis points for jumbo loans, and 350 basis points for subordinate-lien loans. Under the proposed exemptions, the appraisal requirements would not apply to loans of $25,000 or less, certain “streamlined” refinancings, and certain loans secured by manufactured housing. The comment period closed on September 9, 2013.

CFPB issues procedural rule for supervision of nonbanks. External Link

On June 26, 2013, the CFPB issued a final rule that establishes procedures to bring under its supervisory authority certain nonbanks whose activities it has reasonable cause to determine pose risks to consumers. Nonbanks subject to the rule are companies that offer or provide consumer financial products or services but do not have a bank, thrift, or credit union charter. The rule details the procedures the CFPB will follow to provide the nonbank with an opportunity to respond to a supervisory notification and creates a method for nonbanks to petition to terminate CFPB supervision after two years.

CFPB proposes amendments to mortgage rules. External Link

On June 24, 2013, the CFPB announced a proposal to amend certain aspects of some of the final mortgage rules issued in January 2013. The proposed changes would:

The comment period closed July 22, 2013.

Agencies release list of distressed or underserved nonmetropolitan middle-income geographies. External Link

On June 18, 2013, the Federal Reserve Board and the other federal bank and thrift regulatory agencies announced the release of the 2013 list of distressed or underserved communities PDF External Link where revitalization or stabilization activities will receive consideration as “community development” under the Community Reinvestment Act.

Federal Deposit Insurance Corporation (FDIC) and the CFPB develop a resource tool for older adults. External Link

On June 12, 2013, the FDIC and the CFPB launched a new financial resource tool, Money Smart for Older Adults, External Link to help older adults and their caregivers prevent, identify, and respond to elder financial exploitation; plan for a secure financial future; and make informed financial decisions. The instructor-led module offers practical information and is designed to be delivered to older adults and their caregivers by representatives of financial institutions, adult protective service agencies, senior advocacy organizations, law enforcement, and others that serve this population.

CFPB issues final rule amending its ability-to-repay rule.External Link

On May 29, 2013, the CFPB finalized amendments to the Ability-to-Repay (ATR) rule that it issued in January 2013. That rule will become effective on January 10, 2014. Among other things, the amendments create exemptions and modifications to the rule for small creditors, community development lenders, and housing stabilization programs. The amendments also revise the rule on how to calculate loan originator compensation for certain purposes. Specifically, the final rule:

CFPB revises rule protecting consumers sending money internationally. External Link

On April 30, 2013, the CFPB issued the final rule amending its foreign remittance transfer rule. The remittance rule applies to transfers sent by consumers in the United States to individuals and businesses in foreign countries. This rule will take effect on October 28, 2013. The CFPB made three changes to the final rule:

CFPB issues amendments to CARD Act rule. External Link

On April 29, 2013, the CFPB amended the rules that implement the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act). The CARD Act requires card issuers to evaluate a consumer’s ability to repay before opening a new credit card account or increasing the credit limit of an existing account. The rules that were previously issued to implement that requirement required creditors to determine whether the applicant has an independent source of income or assets from which they can make the required payments on the account. For applicants who are at least 21 years old, the CFPB’s revision to the rule allows card issuers to consider third-party income if the applicant has a reasonable expectation of access to it. For example, a card issuer evaluating the ability to repay of a stay-at-home husband or wife applying for a credit card could consider the income of the working spouse even if the spouse is not a joint applicant.