News from Washington: Regulatory Updates
The Consumer Financial Protection Bureau (CFPB) amends its prepaid accounts rule. 
On January 25, 2018, the CFPB amended its prepaid accounts rule. The changes include:
- delaying the scheduled effective date from April 1, 2018, to April 1, 2019;
- providing that financial institutions are not required to resolve errors or limit consumers’ liability on unverified prepaid accounts. If a consumer’s identity is later verified, institutions are not required to limit liability and investigate errors for disputed transactions that occurred prior to verification; and
- providing more flexibility for certain credit cards linked to digital wallets by creating a limited exception to Regulation Z’s prepaid card provisions for certain business arrangements between prepaid account issuers and credit card issuers that offer traditional credit card products.
The Federal Register notice is available at https://www.govinfo.gov/content/pkg/FR-2018-02-13/pdf/2018-01305.pdf. 
The federal bank regulatory agencies announce they will give favorable Community Reinvestment Act (CRA) consideration to activities to revitalize or stabilize the U.S. Virgin Islands and Puerto Rico following Hurricane Maria.
On January 25, 2018, the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency (OCC) (the agencies) announced that they will provide favorable CRA consideration to community development activities that help to revitalize or stabilize these disaster areas by financial institutions located anywhere in the United States, provided they have been responsive to the community development needs and opportunities of their own CRA assessment area(s).
Ordinarily, community development activity receives favorable CRA consideration when it benefits a bank’s assessment area(s) or a broader statewide or regional area that includes the bank’s assessment area(s), even when the benefit to the assessment area(s) is not immediate or direct. Additionally, if an institution has been responsive to the needs of its assessment area(s), it may receive consideration for community development activity in the broader statewide or regional area that includes its assessment area(s) regardless of whether it benefits the assessment area(s).
Hurricane Maria, however, caused widespread devastation in areas not connected to the mainland but have experienced economic impact and other effects that may extend to other parts of the nation. The agencies stated that CRA consideration for related revitalization and stabilization activities will be given regardless of the median income of the census tract or the personal income of the individual, but they may give greater weight to activities that are most responsive to community needs, including the needs of low- and moderate-income areas and individuals. The interagency statement is available at https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20180125a1.pdf.
The House of Representatives and the Senate pass bills exempting certain depository institutions from the new Home Mortgage Disclosure Act (HMDA) requirements.
On January 18, 2018, the House passed H.R.2954, the Home Mortgage Disclosure Adjustment Act. The bill exempts certain depository institutions from collecting and reporting various expanded HMDA data points in the CFPB’s 2015 amendments to Regulation C that became effective on January 1, 2018. Depository institutions originating fewer than 500 closed-end mortgage loans or fewer than 500 open-end lines of credit would receive regulatory relief in connection with expanded data points required by the amended regulation for, respectively, their closed-end mortgage loans or their open-end lines of credit.
On March 14, 2018, the Senate passed S.2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act, a broader bill that contains similar provisions. If the HMDA provisions in these bills are reconciled and passed into law, depository institutions eligible for the exemptions would still need to collect and report HMDA data points required prior to the amended regulation’s January 1, 2018, effective date.
The CFPB issues its biennial report on the consumer credit card market.
On December 27, 2017, the CFPB released an updated report, The Consumer Credit Card Market, which it last issued in December 2015. The report’s major findings include that:
- the total amount of credit line, used or unused, on credit cards remains below the levels prior to the financial crisis but has steadily increased since the crisis;
- new credit card originations remain below volumes prior to the crisis but have increased by roughly 50 percent since 2010;
- average credit card debt increased 9 percent over the last two years;
- more than 60 percent of active credit card accounts are enrolled in online services to track spending, pay bills, and conduct other account activities; and
- cardholders have on average fewer credit cards than before the recession; for example, prime borrowers on average had five cards before the recession and now have an average of four cards; and more consumers are signing up for secured cards that require a cash deposit.
The complete report is available at https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2017.pdf.
The Federal Financial Institutions Examination Council (FFIEC) agencies announce supervisory expectations regarding compliance with HMDA amendments.
On December 21, 2017, the Federal Reserve Board issued Consumer Affairs (CA) Letter 17-4, which transmits its expectations regarding early examinations of supervised institutions for compliance with amended Regulation C.
Recognizing that complying with the amended regulation will involve significant system and operational challenges, the Federal Reserve will not require HMDA data collected in 2018 and submitted in 2019 to be resubmitted unless any errors are material. The Federal Reserve likewise does not intend to assess penalties regarding HMDA data collected in 2018 and submitted in 2019. Rather, examinations of such 2018 HMDA data will be diagnostic to help institutions identify compliance weaknesses and will credit good faith compliance efforts. The other FFIEC agencies issued similar statements. CA Letter 17-4 is available at https://www.federalreserve.gov/supervisionreg/caletters/caltr1704.htm.
In its statement, the CFPB also indicated that it intends to reconsider aspects of amended Regulation C to include its institutional and transactional coverage tests and discretionary data points. The discretionary data points are those that the CFPB elected to add in its October 2015 final rule amending Regulation C, apart from the compulsory additional HMDA data points specified in §1094 of the Dodd–Frank Wall Street Reform and Consumer Protection Act.
The CFPB announces that it may reconsider its recently issued Payday Rule.
On November 17, 2017, the CFPB issued its Payday Rule amending Regulation E (which implements the Electronic Fund Transfer Act) and Regulation Z (which implements the Truth in Lending Act (TILA)), in connection with payday, vehicle title, and certain high-cost installment loans. The rule has two primary components: (1) for short-term and longer-term loans with balloon payment features, it indicates that it would be an unfair and abusive practice for a lender to extend such loans without a reasonable determination that consumers have the ability to repay the loans; and (2) for those loans and for longer-term loans with annual percentage rates over 36 percent that are repaid directly from consumers’ accounts, it indicates that it would be an unfair and abusive practice to attempt to withdraw payments from a consumer’s account after two successive unsuccessful payment attempts, unless a lender receives the consumer’s authorization to make further withdrawals.
The compliance date for most of the provisions of the final rule is August 19, 2019. On January 16, 2018, however, the CFPB announced that it intends to conduct a rulemaking so that it may reconsider the final rule.
The Federal Register notice for the final rule is available at https://www.federalregister.gov/documents/2017/11/17/2017-21808/payday-vehicle-title-and-certain-high-cost-installment-loans.
The CFPB announcement is available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-statement-payday-rule/.
The Federal Reserve Board and two other agencies announce adjustments to the threshold for the smaller loan exemption from appraisal requirements for higher-priced mortgage loans.
On November 9, 2017, the Federal Reserve Board, the CFPB, and the OCC announced that the threshold exempting loans from the special appraisal requirements for higher-priced mortgage loans increased from $25,500 in 2017 to $26,000 in 2018, based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
Special appraisal requirements for higher-priced mortgage loans include a requirement that creditors obtain a written appraisal based on a physical visit to the home’s interior before making a higher-priced mortgage loan.
For loans made between January 1, 2018, and December 31, 2018, higher-priced mortgage loans of $26,000 or less are exempt from the special appraisal requirements.