News from Washington: Regulatory Updates
The Board of Governors of the Federal Reserve System (Board) issues revised interagency examination procedures for the Military Lending Act (MLA). 
On September 29, the Board issued Consumer Affairs (CA) Letter 16-6 transmitting revised interagency examination procedures for the MLA. In a July 2015 final rule, the Department of Defense (DOD) amended its MLA implementing regulation, codified at 32 C.F.R. Part 232, to extend the protections of the MLA to a wider range of closed-end and open-end credit products, including credit cards. Consequently, the amended MLA regulation generally applies to all consumer credit other than home-secured credit and loans to finance the purchase of motor vehicles and other consumer goods that are secured by the purchased item. For extensions of credit covered by the rule, the Military Annual Percentage Rate (MAPR) applicable to the loan may not exceed 36 percent. Among a range of other amendments, DOD’s final rule modifies: the fees that must be included when calculating the MAPR; the optional safe-harbor provisions for creditors to determine whether consumers are entitled to MLA protections; and MLA disclosure requirements. The compliance date for the final rule was October 3, 2016, but for credit card accounts, the compliance date is October 3, 2017 (which may, at DOD’s option, be extended by one year). The interagency MLA examination procedures have been amended to reflect the changes made by the DOD to its regulation in the July 2015 final rule.
The DOD publishes MLA interpretive rule.
On August 26, 2016, the DOD published in the Federal Register an interpretive rule, in a Q&A format, providing guidance regarding certain questions it received on compliance with its July 2015 MLA final rule amending the MLA implementing regulation. The full guidance is available at www.gpo.gov/fdsys/pkg/FR-2016-08-26/pdf/2016-20486.pdf. 
The Consumer Financial Protection Bureau (CFPB) proposes updates to the TILA-RESPA Integrated Disclosure (TRID) rule and issues an updated version of its small entity compliance guide.
On August 15, 2016, the CFPB published a proposal in the Federal Register to amend Regulations Z and X to implement changes to TRID. The changes are intended to codify some of the informal guidance the CFPB has provided in webinars, compliance guides, and other media to provide clarity concerning issues entities have encountered in implementing TRID. Among other proposed revisions, the proposal would:
- permit a creditor, in instances where changed circumstances (as defined by the rule) occur after provision of a Closing Disclosure, to reset applicable good faith tolerances by providing a revised Closing Disclosure within three business days of the discovery of the changed circumstance;
- provide accuracy tolerances for the Total of Payments disclosure that parallel existing finance charge tolerances;
- apply a zero tolerance category to fees where the creditor fails to provide a written list of settlement providers;
- clarify when disclosures can be shared with various parties involved in the mortgage origination process;
- provide further guidance on construction loan disclosures;
- clarify that closed-end consumer credit transactions secured by a cooperative, which are considered to be personal property in some states, are subject to TRID regardless of how state law classifies them; and
- adjust a partial disclosure exemption that mainly affects housing finance agencies and nonprofits.
The comment period closed on October 18, 2016. The CFPB also released a revised version of its TRID small entity compliance in October 2016, including updates incorporating guidance from its webinars.
Agencies issue revised interagency examination procedures for Regulation P.
On June 8, 2016, the Board issued CA Letter 16-3 regarding revised interagency examination procedures for Regulation P (privacy of consumer financial information). The procedures were revised to reflect Section 75001 of the Fixing America’s Surface Transportation (FAST) Act, which amended Section 503 of the Gramm-Leach-Bliley Act (GLBA). GLBA Section 503, as implemented by Regulation P, generally requires a financial institution to provide an annual notice to its customers of its policies for disclosing and protecting nonpublic personal information. To reduce the compliance burden, the amendment provides that a financial institution is not required to provide an annual notice if: 1) it shares nonpublic personal information solely in accordance with certain exceptions to GLBA requirements under §§502(b)(2) (corresponding to §1016.13 of Regulation P) or 502(e) (corresponding to §§1016.14 and .15 of Regulation P); and 2) it has not changed its policies for disclosing nonpublic personal information since its most recent disclosure to its customers. This change became effective December 4, 2015, when the FAST Act was signed into law. On a related note, on July 11, 2016, the CFPB published a notice of proposed rulemaking in the Federal Register to amend Regulation P to implement Section 75001.
The CFPB proposes to prohibit pre-dispute arbitration agreements that waive a consumer’s right to participate in a class-action lawsuit.
On May 24, 2016, the CFPB published a notice in the Federal Register seeking comment on a rulemaking proposal for consumer arbitration agreements. Section 1028 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) directed the CFPB to study the effect of mandatory arbitration clauses in agreements for consumer financial services and products and authorized the CFPB to issue any regulations it believes are necessary to protect consumers, consistent with its findings. In 2015, the CFPB published the required arbitration study, which reviewed arbitration clauses in six consumer financial markets: credit cards, checking accounts, prepaid cards, payday loans, private student loans, and mobile wireless contracts. The proposal has two main requirements: 1) it would prohibit covered providers of consumer financial services and products from using pre-dispute arbitration agreements to prevent a consumer from participating in a class-action lawsuit and would require providers to insert language into their arbitration agreements reflecting this limitation; and 2) it would require providers using pre-dispute arbitration agreements to send records related to their arbitration proceedings, such as claims and awards, to the CFPB for its monitoring purposes. For transparency, the CFPB would plan to publish redacted records in some form. The comment period closed on August 22, 2016.
Federal banking agencies issue a policy statement concerning the standards to assess the diversity policies and practices of regulated entities.
The Dodd-Frank Act directed the Board, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) to each establish an Office of Minority and Women Inclusion and to develop standards to assess the diversity policies and practices of supervised institutions. In response, the agencies published a Final Interagency Policy Statement Establishing Joint Standards for Assessing the Diversity Policies and Practices of Entities Regulated by the Agencies on June 10, 2015. To provide further guidance, the agencies published a related FAQ on August 6, 2016, available at www.federalreserve.gov/newsevents/press/bcreg/bcreg20160802b1.pdf.
Agencies issue interagency guidance regarding deposit account reconciliation practices.
On May 18, 2016, the Board, the CFPB, the FDIC, the National Credit Union Administration, and the OCC issued interagency guidance regarding financial institutions’ deposit account reconciliation practices. The guidance highlights the requirement in the Expedited Funds Availability Act, as implemented by Regulation CC, 12 C.F.R. Part 229, that financial institutions make funds that have been deposited in a transaction account available for withdrawal within prescribed time limits as well as the Federal Trade Commission Act’s prohibition against unfair or deceptive acts or practices. The guidance also explains the agencies’ supervisory expectations regarding institutions’ account deposit reconciliation practices.
Congress temporarily extends the period of protection for servicemembers against foreclosure and evictions after service to one year and changes the location of the Servicemembers Civil Relief Act (SCRA) in the U.S. Code.
The SCRA provides certain protections to servicemembers after they complete service, including a time period during which: 1) a court may stay proceedings on real property owned before military service began; and 2) any sale, foreclosure, or seizure of the property (based on breach of the mortgage or other security) is invalid unless issued with a court order or waiver agreement. Congress extended the post-service protection period from three to nine months in 2008 and subsequently to one year; the latter extension expired on January 1, 2016. On March 31, 2016, President Barack Obama signed into law the Foreclosure Relief and Extension for Servicemembers Act of 2015, Pub. L. 114-142, which again extends the protection period to one year after service. The law became effective the day it was signed and will sunset on January 1, 2018, unless extended again. If Congress fails to act again before the sunset date, the protection period will revert to three months. The SCRA is also affected by a change to its codification in the U.S. Code. The Office of the Law Revision Counsel of the U.S. House of Representatives in late 2015 changed the codification of the SCRA from 50 U.S.C. App. 501 et seq. to 50 U.S.C. 3901 et seq. All citations to the SCRA should reflect this change. The latest version of the SCRA, including the revised citations, is available at http://uscode.house.gov/browse/prelim@title50/chapter50&edition=prelim.