News from Washington: Regulatory Updates
The Consumer Financial Protection Bureau (CFPB) issues its Spring 2015 regulatory agenda. 
On May 22, 2015, the CFPB released its Spring 2015 regulatory agenda, which updates the status of the regulatory issues and rulemakings on which the CFPB is currently working:
Final Rule
- Completing a final rule under Regulation C to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank Act) amendments to the Home Mortgage Disclosure Act. The rulemaking proposal is available; the CFPB expects the final rule to be issued in August 2016.
- Completing a final rule under Regulation E to regulate prepaid financial products. The proposal is available; the CFPB expects the final rule to be issued in January 2016.
- Issuing a final rule on June 10, 2015, to supervise larger, nonbank participants in the consumer automobile financing and leasing markets, defined as nonbanks that annually originate at least 10,000 automobile loans, automobile loan refinancings, purchase of automobile loans, or leases. The rule became effective August 31, 2015.
Prerule Stage
- Considering a rulemaking proposal to regulate payday, auto title, and other loans
- Considering a rulemaking proposal for overdrafts and related services
- Considering a rulemaking proposal to regulate debt col- lection
- Determining, as required by the Dodd-Frank Act, whether to issue regulations restricting mandatory arbitration clauses for financial products and services
The CFPB delays the TILA/RESPA integrated disclosure (TRID) rule effective date until October 3, 2015.
On July 24, 2015, the CFPB issued a final rule to delay the effective date of the TRID rule from August 1, 2015, until October 3, 2015, and to make technical corrections to §1026.38(i)(8) (ii) and (iii)(A), and §1026.38(j)(1)(iv).
On a related note, the following five webinars on the TRID rule with presentations from the CFPB are available on the Outlook Live website:
- The TILA-RESPA Integrated Disclosures, Part 1 — Overview of the Rule
- FAQs on the TILA-RESPA Integrated Disclosures, Part 2 — Various Topics
- FAQs on the TILA-RESPA Integrated Disclosures Rule, Part 3 — Completing the Loan Estimate
- The TILA-RESPA Integrated Disclosures, Part 4 — Completing the Closing Disclosure
- The TILA-RESPA Integrated Disclosure, Part 5 — Implementation Challenges and Questions
The CFPB is in the early stages of a rulemaking to regulate payday loans, vehicle title loans, deposit advance products, and certain high-cost installment and open-end loans.
On March 26, 2015, the CFPB published an outline of a rulemaking proposal it is contemplating that would require lenders to consider repayment ability for these loan products. The press release stated that consumers using these products often end up in “debt traps” because the creditors offering them typically do not underwrite a consumer’s ability to repay the loan. Consequently, consumers often must choose to reborrow, default, or fall behind on other obligations. To address this issue, the CFPB is considering a proposal to regulate both short-term credit products that require full repayment within 45 days and longer-term credit products of more than 45 days in which the lender has access to repayment from the consumer’s deposit account or paycheck or holds a security interest in the consumer’s vehicle, and in which the all-in APR exceeds 36 percent. The CFPB is considering two regulatory approaches: “prevention” and “protection.” The prevention approach would incorporate an ability-to-repay element, including verification of the consumer’s income, major financial obligations, and borrowing history. Under the protection approach, lenders would have to com- ply with various restrictions designed to ensure that consumers can affordably repay their debt. Lenders would choose which approach to follow. The proposal under consideration would also restrict certain collection practices by requiring creditors to provide advance notice of at least three business days before submitting a payment request to the consumer’s financial institution or prepaid account. If the payment could not be collected after two attempts, the creditor could not initiate a third attempt unless the consumer provided a new authorization. More details on the proposals under consideration are available at http://files.consumerfinance. gov/f/201503_cfpb_outline-of-the-proposals-from-small-business-review-panel.pdf. 
The CFPB proposes to expand Regulation Z’s definitions of small creditor and rural to facilitate access to credit.
On January 29, 2015, the CFPB proposed changes to its mortgage rules to facilitate mortgage lending by small creditors, particularly in rural and underserved areas. The CFPB issued several mortgage rules that became effective in January 2014, including the ability-to-repay/qualified mortgage (QM) rule. This rule defined five categories of QMs, three of which are only available to a small creditor, defined as a creditor with less than $2 billion in assets that (with its affiliates) originates no more than 500 first-lien covered mortgages each year. Small creditor QMs offer more pricing and underwriting flexibility than the standard QM category. The proposal would expand the definition of small creditor by raising the origination threshold to 2,000 or fewer nonportfolio, first-lien covered mortgage loans in the prior calendar year (including affiliates). Under the proposal, loans held in a portfolio would not count toward the 2,000 loan threshold. The CFPB estimates that 700 additional creditors would qualify as small creditors under the proposed definition.
The proposal would also revise the definition of rural, which would impact several mortgage rules. Small creditors operating predominately in rural or underserved areas and meeting certain other requirements are not required to maintain escrows for first-lien, higher-priced mortgage loans; they can offer high-cost mortgage loans with a balloon feature (the Home Ownership Equity Protection Act generally prohibits balloon features for high-cost loans) and can permanently offer portfolio-held balloon loans that are QMs (QMs generally cannot have a balloon feature; other small creditors that do not operate predominantly in rural or underserved areas are temporarily eligible to originate balloon-loan QMs). As currently defined, a county is considered to be rural during a calendar year if it is not in a metropolitan statistical area (MSA) and it is not in a micropolitan statistical area (micro area) that is adjacent to an MSA, as defined by the Office of Management and Budget. The CFPB proposes to expand the number of areas considered rural by including areas that the U.S. Census Bureau classifies as rural on a census tract basis. Thus, the definition of rural would be expanded to include areas in census blocks that are not in an urban area, as defined by the Census Bureau. The CFPB estimates that the number of rural small creditors would increase by approximately 1,700 if the proposal were adopted. The proposal also would revise certain timing elements related to the small creditor and rural definitions. The comment period closed on March 30, 2015. The proposal indicates that when the final rule is adopted, it will become effective January 1, 2016.
The CFPB makes minor changes to “know before you owe” mortgage rules.
On January 20, 2015, the CFPB issued a final rule to make two minor modifications to the TRID rules. The changes were proposed in October 2014 to address the timing of when consumers must receive updated disclosures after locking in an interest rate and the manner in which consumers receive information regarding certain construction loans.
Under the January 2015 final rule, creditors must provide a re- vised loan estimate within three business days after a consumer locks in a floating interest rate. The original rule required creditors to provide the revised loan estimate on the date that the rate is locked in. For new construction loans, a minor addition has been made to the loan estimate form.