Blog – Michael Christians Consulting, LLC

2026 Threshold Adjustments

Wed, 07 Jan 2026 17:11:31 GMT

Each year, the Consumer Financial Protection Bureau and other federal government agencies are required to adjust a number of regulatory thresholds to account for inflation. Most adjustments are based on the annual percentage change in the Consumer Price Index. The following thresholds were effective January 1, 2026.

Fannie Mae/Freddie Mac Conforming Loan Limits

$832,750 ($1,249,125 for high-cost areas)

Home Mortgage Disclosure Act Institutional Coverage Test

A financial institution that meets the following four-part test is subject to HMDA:

Assets in excess of $59 million as of 12/31/2025,
Home or branch office in a Metropolitan Statistical Area (MSA),
Originated at least one home purchase or refinance transaction in the preceding calendar year, and
Federally insured or regulated.

Qualified Mortgage Pricing Test

First Lien Loans

The APR charged in connection with the transaction does not exceed the current value of the APOR index by more than:

2.25% for loans greater than or equal to $137,958
3.50% for loans greater than or equal to $82,775 but less than $137,958
6.50% for loans less than $82,775

Subordinate Lien Loans

The APR charged in connection with the transaction does not exceed the current value of the APOR index by more than:

3.50% for loans greater than or equal to $82,775
6.50% for loans less than $82,775

Qualified Mortgage Points and Fees Test

Loans greater than $137,958 - 3% of the loan amount
Loans between $82,775 and $137,958 - $4,139
Loans between $27,592 and $82,775 - 5% of the loan amount
Loans between $17,245 and $27,592 - $1,380
Loans less than $17,245 - 8% of the loan amount

Small Creditor Definition

A financial institution that meets the following two-part test is considered a small creditor:

During the preceding calendar year, the financial institution and its affiliates together originated 2,000 or fewer covered transactions secured by a first lien, and
At the end of the preceding calendar year, the financial institution and its affiliates together had total assets of less than $2.785 billion.

Higher Priced Mortgage Loan Appraisal Requirement

Generally, in connection with a higher priced mortgage loan, a financial institution must obtain a written appraisal of the subject property. However, if one of the following exceptions applies, an alternative method of valuation may be used:

The higher priced mortgage loan also meets the definition of a qualified mortgage,
An extension of credit equal to or less than $34,200,
A transaction secured by a mobile home, boat, or trailer,
A construction loan,
A bridge loan with a term of 12 months or less, or
A reverse mortgage.

High-Cost Mortgage Points and Fees Test

A loan is considered high cost if the points and fees charged in connection with the transaction exceed:

5% of the loan amount for loans of $27,592 or greater
For loans of less than $27,592, the lesser of -
8% of the loan amount, or
$1,380

Credit Card Minimum Interest Charge

A card issuer is required to disclose any minimum interest charge exceeding $1.00 that could be imposed during a billing cycle.

Regulation Z Exemption

An extension of credit in excess of $73,400 is exempt from Regulation Z unless it is:

Secured by any real property or by personal property used by the consumer as his/her principal dwelling, or
A private education loan.

Regulation M Exemption

A consumer lease with a total contractual obligation in excess of $73,400 is exempt from Regulation M.

NFIP Set to Lapse on September 30th

Mon, 22 Sep 2025 20:37:07 GMT

The current funding authorization for the National Flood Insurance Program (NFIP) will expire on September 30, 2025, without Congressional action.

The last long-term reauthorization of the NFIP occurred 13 years ago under the Biggert-Waters Flood Insurance Reform Act of 2012. Since then, Congress has only been able to reauthorize the program via short-term spending measures.

If the NFIP is allowed to lapse on September 30th, borrowers will not be able to purchase new flood insurance contracts. Existing NFIP contracts will remain in effect until the end of their current one-year policy term. However, per the interagency Q&A regarding flood insurance, credit unions are permitted to close loans secured by property located in a special flood hazard area during the lapse period considering all of the following:

They obtain a Standard Flood Hazard Determination in connection with the transaction,
They provide the Notice of Special Flood Hazards within a reasonable period of time prior to closing,
At its discretion, the credit union can require that closing be postponed until the NFIP is available again,
At its discretion, the credit union can require that the borrower purchase a private flood insurance policy, and
For loans closed during the lapse period without coverage, the credit union must have policies and procedures in place to require the purchase of flood insurance as soon as the NFIP is again active.

Fannie and Freddie Adjust ROV Requirements

Fri, 19 Sep 2025 13:24:57 GMT

On September 3rd, Fannie Mae issued Selling Guide Announcement SEL-2025-07 , amending its reconsideration of value (ROV) requirements that went into effect in October 2024. Under the original rule, sellers were required to provide an ROV disclosure both at the time of application and again upon delivery of the appraisal copy to the applicant. The rule has been amended to require delivery of the ROV disclosure only at the time the appraisal copy is provided to the applicant.

Freddie Mac followed suit in Bulletin 2025-12 and also removed the dual disclosure requirement. These changes come following HUD's elimination of all borrower-initiated ROV requirements in connection with FHA-insured loans.

NCUA Removes Disparate Impact from Fair Lending Materials

Fri, 05 Sep 2025 18:41:27 GMT

Yesterday, the National Credit Union Administration (NCUA) announced that it has removed all references to disparate impact liability from its Fair Lending Guide and other materials. Furthermore, the agency contends that its examination and supervision processes will no longer review for disparate impact. This was done in response to President Trump's executive order - Restoring Equality of Opportunity and Meritocracy. That order directed the heads of all federal agencies to eliminate the use of disparate impact liability in their regulations, policies, and practices.

While the executive order and the NCUA's subsequent actions has lessened the compliance risk associated with disparate impact, credit unions must not lose sight of the other types of fair lending risk. For example, in a case from 2015, the United States Supreme Court held that disparate impact claims are cognizable under the Fair Housing Act. As a result, the legal risk associated with this theory of discrimination is very much alive and well.

CFPB Seeks Input on Personal Financial Data Rights Rule Rewrite

Fri, 22 Aug 2025 14:38:55 GMT

On July 29, 2025, the Consumer Financial Protection Bureau (CFPB) indicated in a court filing that it planned to engage in an "accelerated rulemaking process" to rewrite its personal financial data rights rule, finalized in October 2024. That process has now begun.

The agency published an advance notice of proposed rulemaking (ANPR) in the Federal Register on August 22 ^nd seeking comment on four specific issues it plans to address in the rewrite:

The Dodd-Frank Act permits a consumer and/or representative acting on behalf of the consumer to request covered data from a financial institution. The CFPB seeks comment on who should be allowed to serve as a representative acting on behalf of the consumer.
Under the final rule in its current form, a financial institution is prohibited from imposing any fee and/or charge on a consumer when fulfilling an information request. The ANPR asks whether the Dodd-Frank Act specifically requires this, and if so, what steps a financial institution should be allowed to take to defray some of its costs associated with fulfilling the information request.
The final rule requires financial institutions to have appropriate safeguards in place to protect against malicious actors in the use, retention, and transmission of consumer financial data. The CFPB seeks comment as to whether the final rule’s information security standards go far enough.
The final rule requires a financial institution to obtain express informed consent from the consumer before making his/her consumer financial data available to a third-party. The ANPR seeks comment as to whether the rule, in its current form, provides adequate consumer privacy protection.

Comments on the ANPR, available here , must be received by October 21, 2025.

Budget Bill Slashes CFPB Funding

michael@mchristiansconsulting.com (Michael Christians) — Wed, 09 Jul 2025 00:37:13 GMT

On July 4, 2025, President Trump signed H.R.1, The One Big Beautiful Bill Act into law. Among the many, many other things that the law does, it dramatically reduces the amount of funding available to the Consumer Financial Protection Bureau (CFPB).

Under the Dodd-Frank Act of 2010, the CFPB could request from the Federal Reserve up to 12% of its total operating expenses in 2009. Each year, the 2009 amount is adjusted for inflation to determine the new amount of the CFPB’s maximum permissible withdrawal from the Federal Reserve.

Under H.R.1, this cap has been reduced from 12% to 6.5%, a reduction of nearly half of the CFPB’s annual funding. Senate Republicans claim that the reduction in funding for the CFPB will save taxpayers around $2 billion.

Under the temporary leadership of Russ Vought, we’ve seen the CFPB withdraw nearly 70 guidance documents, de-prioritize enforcement of its payday lending rule, vacate its credit card late fee rule, stop defending a number of rules in federal court, and terminate several pending enforcement actions for alleged violations of consumer financial protection law. All this to say that a 46% reduction in its annual budget shouldn’t be too difficult for the lame duck agency to manage.

FinCEN Issues Order Related to CIP Rule

michael@mchristiansconsulting.com (Michael Christians) — Sat, 28 Jun 2025 01:20:49 GMT

Under 31 CFR 1020.220, a financial institution's Customer Identification Program (CIP) requires the collection of certain information in connection with the opening of a new account. Specifically, the rule requires the financial institution to collect the following from the customer :

Name
Date of birth (for an individual)
Residential or business street address, and
Identification number (e.g., taxpayer identification number)

Under an order issued by the Financial Crimes Enforcement Network (FinCEN) on June 27, 2025, financial institutions are now permitted to collect a customer's taxpayer identification number (TIN) from a third-party, instead of directly from the customer. To utilize this alternative collection method, the financial institution must have written procedures that: a) enable the financial institution to obtain the customer's TIN prior to account opening, b) recognize the relevant risks associated with obtaining the customer's TIN from a third-party, and c) enable the financial institution to form a reasonable belief that it knows the true identity of the customer. Nothing in the order requires the financial institution to utilize this alternative collection method.

You can access a copy of the FinCEN order here .

Small Business Lending Rule Delayed Again

michael@mchristiansconsulting.com (Michael Christians) — Wed, 18 Jun 2025 15:28:01 GMT

Today, the Consumer Financial Protection Bureau (CFPB) published an interim final rule extending the mandatory compliance dates once again for its small business lending data collection rule under Section 1071 of the Dodd-Frank Act.

The new mandatory compliance dates are as follows:

Tier One Lenders (those that originated at least 2,500 covered credit transactions in both years of their determination period)
July 1, 2026
Tier Two Lenders (those that originated between 500 and 2,499 covered credit transactions in both years of their determination period)
January 1, 2027
Tier Three Lenders (those that originated between 100 and 499 covered credit transactions in both years of their determination period)
October 1, 2027

The interim final rule also clarifies that a covered financial institution may use any of the following combinations for its determination period - 2022 and 2023, 2023 and 2024, or 2024 and 2025.

The CFPB indicates that it plans to use this additional time to initiate a new Section 1071 rulemaking. The notice of proposed rulemaking, which we anticipate will make significant changes to the current small business lending data collection framework, will be issued as expeditiously as possible according to the agency.

Section 1033 Open Banking Rule Likely to be Struck Down by Month's End

michael@mchristiansconsulting.com (Michael Christians) — Tue, 27 May 2025 14:32:11 GMT

In late 2024, the Consumer Financial Protection Bureau (CFPB) finalized its open banking rule as required by Section 1033 of the Dodd-Frank Act. The rule requires financial institutions and other data providers to make covered data regarding financial products and services available to consumers and authorized third parties in electronic form.

Almost immediately, the CFPB was sued in federal district court in Kentucky, alleging several deficiencies with the rulemaking. On May 23 ^rd , the CFPB’s general counsel indicated that the agency plans to file a motion for summary judgment by May 30 ^th asking the court to cancel the rule. In a status report filed with the court, the CFPB stated, “after reviewing the rule and considering the issues that this case presents, Bureau leadership has determined that the rule is unlawful and should be set aside.”

Notwithstanding this development, financial institutions must keep in mind that Section 1033 of the Dodd-Frank Act statutorily mandates that the CFPB prescribe rules requiring covered persons to make certain information about financial products and services available to consumers in electronic form. Absent an act of Congress striking this requirement from the Dodd-Frank Act, the CFPB will need to start anew with its open banking initiative.

CFPB Withdraws Three Proposed Rules, Search for a Permanent Director Continues

michael@mchristiansconsulting.com (Michael Christians) — Thu, 15 May 2025 19:44:47 GMT

On May 15, 2025, the Consumer Financial Protection Bureau (CFPB) published notice in the Federal Register that it is withdrawing three proposals introduced under the previous administration.

First, the CFPB is withdrawing a proposed interpretive rule regarding applicability of the Electronic Fund Transfers Act to emerging payment mechanisms. Under the January 2025 proposal, a stablecoin, bitcoin, or other cryptocurrency transaction conducted in connection with a consumer asset account would be considered an electronic fund transfer subject to Regulation E’s requirements.

Next, the CFPB is withdrawing a proposed rule that would have banned unfair provisions in credit contracts and specifically prohibited certain terms and conditions. Under the January 2025 proposal, a credit contract could not contain provisions such as a confession of judgment or waiver of exemption. In addition, a covered financial institution would not be able to enforce any term or condition that permits it to unilaterally amend a contract or restrain expression.

Finally, the CFPB is withdrawing its proposed rule concerning harmful data broker practices. The proposal, issued in December 2024, would have treated data brokers as consumer reporting agencies, required a permissible purpose to obtain credit header data (e.g., name, address, date of birth, and social security number of a consumer) from a consumer reporting agency, and emphasized that marketing is not a permissible purpose to obtain a credit report under the FCRA.

On May 9, 2025, the White House announced that President Trump is nominating Jonathan McKernan as Undersecretary of Treasury for Domestic Policy. It was later confirmed that as a result, Mr. McKernan’s previous nomination to head the CFBP is being withdrawn. Russell Vought, the Director of the White House Office of Management and Budget, is currently serving as acting director of the Bureau. He may continue to do so for an additional 210 days under the Federal Vacancies Reform Act. The White House has yet to announce a new nominee for CFPB director.

CFPB Withdraws 67 Previously Issued Guidance Documents

Mon, 12 May 2025 15:02:57 GMT

On May 12th, the Consumer Financial Protection Bureau (CFPB) published notice in the Federal Register that it is withdrawing dozens of interpretive rules, policy statements, and advisory opinions, dating as far back as 2011. The Bureau is withdrawing its guidance in light of the President’s directive to deregulate and streamline bureaucracy. In the future, the agency intends to only issue guidance when absolutely necessary, and only to reduce compliance burden.

While the amount of guidance being withdrawn by the Bureau is too voluminous to fully detail here, below is a flavor of the agency's previous interpretations that no longer carry any precedential value:

Policy Statements (8 withdrawn in total)
Statement of Policy Regarding Prohibition on Abusive Acts or Practices – issued in April 2023, this statement provided an analytical framework of what constitutes an abusive act and/or practice
Interpretive Rules (7 withdrawn in total)
ECOA (Regulation B); Discrimination on the Bases of Sexual Orientation and Gender Identity – issued in March 2021, this interpretive rule expanded Regulation B’s prohibition against sex discrimination to include both sexual orientation and gender identity
Advisory Opinions (13 withdrawn in total)
Circulars (16 withdrawn in total)
Reopening Deposit Accounts that Consumers Previously Closed – issued in May 20243, this circular indicated that it is likely an unfair act and/or practice to unilaterally reopen a deposit account that was previously closed by the consumer
Bulletins (23 withdrawn in total)
Prohibition of Unfair, Deceptive, or Abusive Acts or Practices in the Collection of Consumer Debts – issued in July 2013, this bulletin outlined several debt collection practices that the agency would consider to be unfair, deceptive, and/or abusive

CFPB's Medical Debt Rule on Life Support

michael@mchristiansconsulting.com (Michael Christians) — Wed, 07 May 2025 23:34:44 GMT

In January, the Consumer Financial Protection Bureau (CFPB) issued a final rule to amend Regulation V concerning the use of medical information in connection with a determination of eligibility for credit. Under the rule, the instances in which a creditor can use medical information about a consumer are significantly limited. In addition, the rule generally prohibits consumer reporting agencies from providing a creditor with a report that contains medical debt information.

The rule was originally scheduled to take effect on March 17th. However, due to litigation filed in the US District Court for the Eastern District of Texas, the rule was stayed for 90 days until June 15th.

The CFPB now agrees that it exceeded its statutory authority when promulgating the rule. The parties have filed a joint motion asking the court to find that the rule is contrary to federal law. In light of this development, Judge Jordan has cancelled a scheduled hearing regarding the preliminary injunction and has asked all parties involved to fully brief the case for final resolution.

If this case follows in the footsteps of the credit card late fee rule, the CFPB's decision to not defend the rule in federal court is likely a death knell. Final resolution of the litigation is anticipated in advance of the June 15th expiration of the preliminary injunction.

Parties Reach Deal to Vacate Credit Card Late Fee Rule

michael@mchristiansconsulting.com (Michael Christians) — Tue, 15 Apr 2025 15:25:56 GMT

On April 14 ^th , the Chamber of Commerce of the United States and the Consumer Financial Protection Bureau (CFPB) filed a joint motion for entry of consent judgment to resolve litigation in the US District Court for the Northern District of Texas regarding the CFPB’s credit card late fee rule.

In March 2024, the CFPB issued a final rule that would have limited large card issuers (those with more than 1 million open and active credit card accounts) from charging a late fee that exceeds $8. Almost immediately, a lawsuit was brought by the US Chamber of Commerce in federal district court asserting that the rule violated the CARD Act. To resolve this litigation, the parties have jointly asked the court to vacate the rule.

Once the terms of the settlement have been approved by the court, card issuers will return to the safe harbor fee amounts outlined in 12 CFR 1026.52.

CFPB to Reopen Small Business Lending Data Collection Rule

michael@mchristiansconsulting.com (Michael Christians) — Sat, 05 Apr 2025 17:13:15 GMT

In a filing submitted in connection with a lawsuit in the US District Court for the Southern District of Florida challenging the small business lending data collection rule, the Consumer Financial Protection Bureau (CFPB) has indicated its intent to reopen the rule to make changes. According to the filing, the agency intends to issue a notice of proposed rulemaking as expeditiously as reasonably possible.

By way of reminder, the rule is currently stayed by the 5th Circuit in companion litigation, but only for members of the American Bankers Association, America’s Credit Unions and other plaintiffs/intervenors. All other covered financial institutions are required to begin complying with the rule as soon as July 18, 2025 (depending on loan volume).

However, the CFPB’s filing in the Florida case also agreed that “subjecting similarly situated entities to different compliance dates for Section 1071’s data collection requirements would not serve the public interest.” As a result, it is anticipated that the agency will announce that it does not intend to enforce the rule, in its current form, against any institution. Stay tuned for further developments.

CFPB Will Not Prioritize Enforcement of Payday Lending Rule

michael@mchristiansconsulting.com (Michael Christians) — Thu, 03 Apr 2025 00:59:35 GMT

On March 28, 2025, the Consumer Financial Protection Bureau (CFPB) announced that it will not prioritize enforcement or supervision actions with regard to the payday lending rule. In its press release , the CFPB said that it is contemplating issuing a notice of proposed rulemaking that would further narrow the scope of the rule.

As a reminder, the payday lending rule, which took effect on March 30th, requires covered financial institutions to:

Obtain new and specific automatic payment authorization for a covered loan after two consecutive automatic payment attempts have failed, and
Provide specific disclosures and notices in connection with a covered loan.

Only lenders that originate 2,500 or more covered loans in a calendar year are covered by the requirements of the rule.

FinCEN Guts Beneficial Ownership Reporting Requirements under the CTA

michael@mchristiansconsulting.com (Michael Christians) — Mon, 24 Mar 2025 22:52:56 GMT

The Financial Crimes Enforcement Network (FinCEN) has issued an interim final rule removing the requirement for domestic reporting companies to file their beneficial ownership information directly with the agency.

The Corporate Transparency Act (CTA), passed by Congress in 2020, required reporting companies to submit information about their beneficial owners directly to FinCEN. The interim final rule now exempts domestic reporting companies from this registration requirement. A domestic reporting company is defined as any corporation, limited liability company, or other entity that is created by a filing with the secretary of state (or similar office) under the laws of any state or Indian tribe.

Foreign reporting companies will continue to be subject to the reporting requirement; however, will not have to report information about any of its beneficial owners that are US persons. Existing foreign reporting companies will have 30 days from the rule's publication in the Federal Register to submit their information to FinCEN. New foreign reporting companies will have 30 days from formation to submit their information.

FinCEN's interim final rule does not change the 2018 customer due diligence requirements, which charge financial institutions with collecting beneficial ownership information about legal entity customers at the time of account opening.

HUD Rescinds FHA Reconsideration of Value Requirements

michael@mchristiansconsulting.com (Michael Christians) — Sat, 22 Mar 2025 16:19:01 GMT

On March 19th, the US Department of Housing and Urban Development (HUD) issued Mortgagee Letter 2025-08 . The letter rescinds, among other things, ML 2024-07, which imposed several borrower-initiated reconsideration of value (ROV) requirements in connection with FHA-insured residential mortgage loans with a case number assigned on or after October 31, 2024.

The borrower-initiated ROV requirements rescinded by HUD's most recent mortgagee letter include, but are not limited to:

Disclosure at application and again upon delivery of the appraisal copy information about the borrower's ability to initiate an ROV request,
Policies and procedures that outline the steps a borrower must take to initiate an ROV request, along with milestones for communication with the borrower as to the status of his/her request, and
The actions a creditor may take in response to an ROV request.

While underwriter-initiated ROV requirements remain in effect for FHA loans, HUD states that the borrower-initiated requirements are being rescinded in response to President Trump's executive order dated January 20, 2025. That executive order was aimed at reversing policies that the administration feels have adversely affected key sectors, including the housing market. It remains to be seen whether the Federal Housing Finance Agency will follow suit and rescind their borrower-initiated ROV requirements in connection with Fannie Mae and Freddie Mac loans.

NCUA Outlines Changes to Exam Scheduling Policy

michael@mchristiansconsulting.com (Michael Christians) — Wed, 12 Feb 2025 23:41:53 GMT

In Letter to Credit Unions 25-CU-03 , the National Credit Union Administration (NCUA) announced its new exam scheduling policy. Effective January 1, 2025, federally insured credit unions (FICUs) will be examined according to the following schedule:

8 to 12 months following its last examination date
FICUs with ANY of the following characteristics -
A CAMELS rating of 3, 4, or 5,
Considered less than well capitalized,
An outstanding enforcement action, or
Assets greater than or equal to $10 billion.
FICUs with assets between $1 billion and $10 billion, and
A CAMELS rating of 3, 4, or 5, or
A change in CEO since its last examination.
12 to 16 months following its last examination date
FICUs with assets between $1 billion and $10 billion, and
A CAMELS rating of 1 or 2, and
No change in CEO since its last examination.
14 to 18 months following its last examination date
Federal credit unions (FCUs) not included above
Once every 5 years
Federally insured state-chartered credit unions (FISCUs) not included above

The NCUA believes this revised schedule will allow it to better respond to emerging risks and priorities using available resources. It is important to note that nothing in the new schedule limits the NCUA's authority to examine any FICU as frequently as the agency deems necessary.

Eleventh Circuit Vacates New TCPA Prior Express Written Consent Requirements

michael@mchristiansconsulting.com (Michael Christians) — Wed, 29 Jan 2025 20:05:28 GMT

Back in December 2023, the Federal Communications Commission (FCC) adopted a new rule amending the prior express written consent requirements under the Telephone Consumer Protection Act (TCPA).

That rulemaking would have done a couple of things. First, it would have clarified that a consumer’s prior express written consent can apply to not more than one seller. In other words, the rule would have prevented a company from obtaining a consumer’s consent to the receipt of advertising and telemarketing messages both for itself as well as its affiliates. Second, the rule would have required that a consumer’s consent be logically and topically associated with the interaction that prompted the consent.

That second requirement was particularly concerning for financial institutions. The language of the rulemaking seemed to suggest that an institution that captured prior express written consent at the time of account opening could not later rely on that same consent for purposes of sending advertising or telemarketing messages related to loans, credit cards, or other non-deposit products.

The Insurance Marketing Coalition asked for a judicial review of the rulemaking at the Eleventh Circuit Court of Appeals. On January 24, 2025, that court vacated the new requirements. In its order, the court found that the FCC exceeded its statutory authority because the amendments to the definition of prior express written consent impermissibly conflicted with the statutory definition of the same term under the TCPA.

CFPB Reminds Institutions Payday Lending Rule Takes Effect March 30th

michael@mchristiansconsulting.com (Michael Christians) — Sat, 25 Jan 2025 21:03:38 GMT

Following years of litigation, the Consumer Financial Protection Bureau’s 2017 payday lending rule will take effect on March 30, 2025.

Three types of consumer loans are covered by the payday lending rule:

Short-term loans that require repayment within 45 days,
Longer term loans with a balloon payment, and
Longer term loans for which the APR exceeds 36% and automatic payment is required from the consumer's account.

Under the rule, covered lenders will have to adhere to both payment restrictions and notice requirements. First, when two consecutive automatic payment attempts have failed in connection with a covered loan, the lender is prohibited from attempting another withdrawal until it has obtained a new and specific authorization from the consumer. Second, the rule imposes the following notice requirements in connection with a covered loan:

Written notice before the lender attempts to withdraw the first automatic payment from the consumer's account,
Written notice before a subsequent automatic payment attempt that will differ in amount or effective date, and
Written notice when two consecutive payment attempts have failed.

Lenders that do not originate more than 2,500 covered loans in a calendar year are exempt from the rule’s requirements. Additional implementation resources regarding the payday lending rule are available from the CFPB here .

CFPB Issues Winter 2025 Supervisory Highlights

Sat, 25 Jan 2025 20:54:47 GMT

The Consumer Financial Protection Bureau (CFPB) has issued an advanced technologies special edition of its supervisory highlights’ publication, available here .

First, the CFPB found evidence of disparate treatment in the underwriting and pricing of credit cards. Certain complex credit scoring models used by some card issuers resulted in disproportionately negative outcomes for Black/African American and Hispanic applicants. In response, the CFPB is encouraging card issuers to test their scoring models for potential bias and look for less discriminatory alternatives.

Second, the CFPB found that some auto lenders are using credit scoring models that rely heavily on alternative data. As explained in an Interagency Statement on the Use of Alternative Data in Credit Underwriting, data not directly related to a consumer’s finances may present greater consumer protection risks. These auto lenders are encouraged to look for less discriminatory alternatives when considering the input variables that make up their scoring models.

Finally, auto lenders are reminded of the requirement under Regulation B to provide a statement of specific reasons for adverse action. When an application is denied by a credit scoring model, it is not sufficient to state on the adverse action notice that the applicant did not meet the required minimum credit score. Specific factors that contributed to the applicant’s credit score (e.g., delinquent past or present obligations) must be identified.

CFPB Proposes Interpretive Rule to Expand Scope of Transactions Subject to Regulation E

Sat, 18 Jan 2025 22:53:08 GMT

On January 10th, the Consumer Financial Protection Bureau (CFPB) issued a proposed interpretive rule that would make stablecoin transactions and other non-bank consumer asset accounts subject to Regulation E.

The Electronic Fund Transfers Act and Regulation E apply to electronic fund transfers that authorize a financial institution to debit or credit funds from/to a consumer’s account. The proposed interpretive rule broadly defines the terms financial institution, funds, and account to make stablecoin, video game accounts, and virtual currency wallets subject to Regulation E.

First, the proposed interpretive rule relies on the well-established definition of financial institution under 12 CFR 1005.2 to affirm that nonbank entities that directly or indirectly hold consumer accounts fall within the scope of Regulation E.

Next, the proposed interpretive rule looks to previous judicial decisions and modern definitions to reason that the term funds encompasses much more than just US currency. It includes stablecoins and other similarly situated fungible assets that operate as a medium of exchange for paying for goods or services.

Finally, the proposed interpretive rule confirms through legislative history that Congress intended that the term account extend to more than just checking and savings accounts. It covers any asset account established primarily for a personal, family, or household purpose that allows a consumer to pay for goods or services, withdraw funds, or conduct person-to-person transfers.

Comments on the proposed interpretive rule must be received by March 31, 2025. It remains to be seen whether the new CFPB director under the Trump administration will pause this rulemaking or allow it to move forward.

CFPB Withdraws Proposed Rule on Fees for Instantaneously Declined Transactions

michael@mchristiansconsulting.com (Michael Christians) — Wed, 15 Jan 2025 21:26:21 GMT

On January 14th, the Consumer Financial Protection Bureau (CFPB) published in the Federal Register notice that it was withdrawing its proposed rule prohibiting financial institutions from charging NSF fees in connection with instantaneously declined transactions.

By way of reminder, the CFPB had issued a proposed rule in January 2024 designating fees charged in connection with instantaneously declined transactions an abusive act or practice. For example, if a customer attempts a transaction using his/her debit card and that transaction is instantaneously declined due to non-sufficient funds, the proposed rule would have prohibited the assessment of a fee in connection with the attempt.

In its notice of withdrawal, the Bureau indicated that it would take additional time to determine whether a more comprehensive approach to the prohibition of NSF fees will better protect consumers.

CFPB Proposes to Resurrect Credit Practices Rule...And Then Some

michael@mchristiansconsulting.com (Michael Christians) — Tue, 14 Jan 2025 01:24:56 GMT

On January 13th, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule that would resurrect the Federal Trade Commission’s Credit Practices Rule for financial institutions. The proposal would add a new subpart 1027 to Title 12 of the Code of Federal Regulations that would stand in place of the old Regulation AA, repealed by the Federal Reserve in 2016.

First, the proposed Part 1027 speaks to unfair credit contract provisions. A credit contract that contains any of the following would generally be unenforceable against the consumer:

Confession of judgment - a waiver of the right of notice and the opportunity to be heard in the event of suit or process
Waiver of exemption - a waiver of the exemption from attachment, execution or other process applicable to certain real or personal property owned by the consumer
Assignment of wages - unless specifically authorized by and revocable at any time by the consumer
A nonpossessory security interest in household goods other than a purchase money security interest

Next, the proposed Part 1027 discusses unfair or deceptive cosigner practices. A covered financial institution is prohibited from misrepresenting the nature or extent of a cosigner’s liability. To prevent this, the proposed rule requires a separate Notice to Cosigner that must be provided before the cosigner becomes obligated on the credit transaction.

Third, proposed Part 1027 prohibits the pyramiding of late fees. Pyramiding is the practice of charging a borrower a subsequent late fee based solely on his/her failure to pay a previously outstanding late fee.

Finally, proposed Part 1027 adds to the old Credit Practices Rule by prohibiting a covered financial institution from including any of the following terms and conditions in a contract for a consumer financial product or service:

Waivers of law - a waiver of any remedy or cause of action available to a consumer under federal or state law
Unilateral amendments - any language that allows the covered financial institution to unilaterally change, modify or revise a material term of the contract
Restraint on expression - any language that purports to limit or restrain the free and lawful expression of a consumer

Comments on the proposed rule, available here , are due by April 1, 2025.

CFPB Finalizes Medical Debt Information Rule

michael@mchristiansconsulting.com (Michael Christians) — Thu, 09 Jan 2025 19:04:51 GMT

On January 7th, the Consumer Financial Protection Bureau (CFPB) issued its final rule to amend Regulation V concerning the use of medical information in connection with a determination of eligibility for credit. The final rule, available here , will be effective 60 days following its publication in the Federal Register.

Under the rule, creditors may only obtain and use medical information about a consumer in the following situations:

To determine the validity of a power of attorney designation due to the occurrence of a medical condition or event
To comply with local, state, or federal law
To determine whether a consumer qualifies for a special credit program designed to meet the needs of consumers with certain medical conditions
To prevent or detect fraud
In the case of credit for the purpose of financing a medical product or service, to verify the medical purpose of the loan and use of the loan proceeds
When the consumer specifically asks the creditor to consider his/her medical information to accommodate his/her particular circumstances
To determine whether the consumer qualifies for a forbearance triggered by a medical condition or event
To determine the consumer's eligibility for credit insurance or debt cancellation benefits as a result of a specified medical condition or event
The medical information relates to income payable to the consumer (e.g., disability benefits)

In addition, the rule prohibits consumer reporting agencies from providing a consumer report to a creditor that contains medical debt information about the consumer unless the agency has reason to believe the information will be used in a manner consistent with Regulation V. For this purpose, medical debt information includes information about a debt owed directly to the provider of a medical product, service, or device. It does not include debt payable to a third-party creditor, such as a credit card company.

NOTE: Based on when this rule was issued, it is subject to oversight under the Congressional Review Act (CRA). Under the CRA, both houses of Congress can pass a joint resolution that, if signed by the President, would repeal the rule and prohibit the CFPB from issuing a new rule in substantially the same form.

NCUA Announces 2025 Supervisory Priorities

michael@mchristiansconsulting.com (Michael Christians) — Thu, 09 Jan 2025 18:58:52 GMT

The National Credit Union Administration (NCUA) has issued a letter to credit unions ( 25-CU-01 ) announcing its 2025 supervisory priorities.

The agency's priorities focus on the following areas posing the highest risk to credit union members, the credit union industry, and the National Credit Union Share Insurance Fund:

Credit Risk
Balance Sheet Management and Risk to Earnings and Net Worth
Cybersecurity
Consumer Financial Protection
Overdraft Programs
Fair Lending
Home Mortgage Disclosure Act / Regulation C
Military Lending Act
Electronic Fund Transfer Act / Regulation E

Credit unions with questions about these supervisory priorities are encouraged to contact their NCUA examiner or regional office.

Agencies Finalize Threshold Adjustments for 2025

michael@mchristiansconsulting.com (Michael Christians) — Sat, 28 Dec 2024 18:04:37 GMT

Each year, the federal banking agencies are required to update several thresholds throughout federal law to account for inflation. The Federal Housing Finance Agency (FHFA) and Consumer Financial Protection Bureau (CFPB) have announced the following thresholds effective January 1, 2025.

Fannie Mae and Freddie Mac Jumbo Loan Limit

$806,500 ($1,209,750 for high-cost areas)

Home Mortgage Disclosure Act Institutional Coverage Test

An institution that meets the following four-part test is subject to HMDA:

Assests in excess of $58 million as of 12/31/2024
Home or branch office in a Metropolitan Statistical Area (MSA)
Originated at least one home purchase or refinance transaction in the preceding calendar year
Federally insured or regulated

Qualified Mortgage Pricing Test

First Lien Loans

The APR charged in connection with the transaction does not exceed the current value of the APOR index by more than:

2.25% for loans greater than or equal to $134,841
3.50% for loans greater than or equal to $80,905 but less than $134,841
6.50% for loans less than $80,905

Subordinate Lien Loans

The APR charged in connection with the transaction does not exceed the current value of the APOR index by more than:

3.50% for loans greater than or equal to $80,905
6.50% for loans less than $80,905

Qualified Mortgage Points and Fees Test

Loans greater than $134,841 - 3% of the loan amount
Loans between $80,905 and $134,841 - $4,045
Loans between $26,968 and $80,905 - 5% of the loan amount
Loans between $16,855 and $26,968 - $1,348
Loans less than $16,855 - 8% of the loan amount

Small Creditor Definition

An institution that meets the following two-part test is considered a small creditor:

During the preceding calendar year, the institution and its affiliates together originated 2,000 or fewer covered transactions secured by a first lien
Excludes loans retained in the institution's portfolio
At the end of the preceding calendar year, the institution together with its affiliates had total assets of less than $2.717 billion

Higher Priced Mortgage Loan Appraisal Requirement

Generally, in connection with a higher priced mortgage loan, an institution must obtain a written appraisal of the subject property. However, if one of the following exceptions applies, an alternative method of valuation may be used:

The higher priced mortgage loan also meets the definition of a qualified mortgage
An extension of credit equal to or less than $33,500
A transaction secured by a mobile home, boat, or trailer
A construction loan
A bridge loan with a term of 12 months or less
A reverse mortgage

High-Cost Mortgage Points and Fees Test

A loan is considered high cost if the points and fees charged in connection with the transaction exceed:

5% of the loan amount for loans of $26,968 or greater
For loans of less than $26,968, the lesser of -
8% of the loan amount, or
$1,348

NCUA Finalizes Succession Planning Rule for Federally Insured Credit Unions

michael@mchristiansconsulting.com (Michael Christians) — Sat, 21 Dec 2024 16:28:32 GMT

At its final board meeting of 2024 on December 17th, the National Credit Union Administration (NCUA) issued a succession planning rule for all federally insured credit unions (FICUs).

Under the rule, an FICU must establish a written succession plan that must be approved by the credit union's board of directors. The succession plan must cover, at a minimum, the following positions:

Members of the board of directors
Management and assistant management officials
Senior executive officers, and
Other credit union personnel deemed critical by the credit union's board of directors.

Each FICU's succession plan must address the following:

The title of each position covered by the succession plan, and if the position is term-limited (e.g., board member), the expiration date of the incumbent's term
The credit union's plan for permanently filling vacancies in any covered position, and
The credit union's strategy for recruiting qualified candidates for covered positions.

Each FICU must review, and update as necessary, its succession plan in accordance with a schedule established by the board of directors, but not less than every 24 months.

The final rule, available here , is effective January 1, 2026.

Fall 2024 Unified Agenda Released

Sat, 21 Dec 2024 16:20:53 GMT

The White House Office of Management and Budget has released the fall 2024 iteration of the Unified Agenda of Regulatory and Deregulatory Actions. The latest version of the semi-annual report, available here , outlines the following planned final rules from both the CFPB and NCUA.

Consumer Financial Protection Bureau

December 2024 - implementing data standards for information reported by financial institutions to regulatory agencies as required by the Financial Data Transparency Act
December 2024 - a rule prohibiting financial institutions from charging NSF fees in connection with instantaneously declined transactions
December 2024 - a rule prohibiting financial institutions from considering certain medical debts on a consumer's credit report
March 2025 - a rule making minor updates to the model remittance transfer forms under Regulation E
July 2025 - a rule that would make changes to the early intervention requirements and loss mitigation procedures under Regulation X

National Credit Union Administration

December 2024 - implementing data standards for information reported by financial institutions to regulatory agencies as required by the Financial Data Transparency Act
April 2025 - a final rule implementing several changes to a credit union's Bank Secrecy Act monitoring program as required by the Anti-Money Laundering Act of 2020

CFPB Issues Final Overdraft Rule for Very Large Financial Institutions

michael@mchristiansconsulting.com (Michael Christians) — Sat, 21 Dec 2024 16:12:48 GMT

On December 12, 2024, the Consumer Financial Protection Bureau (CFPB) issued its long-awaited overdraft rule applicable to very large financial institutions (those with at least $10 billion in assets). It is surprising, yet not shocking, to see the CFPB issue such a controversial rule in the 11th hour of its current leadership.

Under the rule, covered financial institutions will have three options to administer their overdraft programs:

Cap their overdraft fee at $5, a fee estimated by the CFPB to be sufficient for the institution to recoup the costs associated with administering its courtesy overdraft program
Set their overdraft fee based on a calculation performed by the institution that covers the costs and losses associated with operating its overdraft service
Offer an overdraft line of credit subject to the various requirements of Regulation Z, including but not limited to disclosures, an ability to repay determination, and periodic statements.

The rule, available here , is set to take effect October 1, 2025.

Almost immediately, the rule was challenged in federal court. A group of trade associations led by the Mississippi Bankers Association filed a complaint in the Southern District of Mississippi. In their complaint, the plaintiffs allege that the rule was issued in violation of the Administrative Procedures Act, the CFPB exceeded its statutory authority, and the final rule is arbitrary and capricious.

It appears this rule is far from seeing the light of day. Aside from the legal challenge, the rule was issued during a period that allows the incoming 119th Congress to overturn it using the Congressional Review Act. It is also possible that the yet to be named incoming CFPB director under President Trump could withdrawal the final rule.

NCUA Warns of Consumer Harm from Overdraft and NSF Fee Practices

michael@mchristiansconsulting.com (Michael Christians) — Thu, 12 Dec 2024 22:59:48 GMT

On December 10th, the National Credit Union Administration issued Letter to Credit Unions 24-CU-03, available here . In it, the agency warns of overdraft and NSF fee practices that are generally considered to be unfair or deceptive.

Authorize Positive, Settle Negative Overdraft Fees

Credit unions with a policy of charging overdraft fees in connection with debit card transactions that are authorized when the member has a sufficient available balance, but because of one or more intervening transactions, has an insufficient available balance when the transaction settles, are at increased UDAP risk. Charging such a fee when the member would not reasonably anticipate it (e.g., he/she had sufficient available funds at the time of the purchase) is likely to be considered an unfair act or practice.

Multiple NSF Representment Fees

Charging an NSF fee each time an item is presented and returned unpaid likely constitutes both a deceptive act or practice as well as an unfair act or practice. The practice would be considered deceptive if the credit union’s disclosures were not clear that a fee could be charged in connection with each presentment. The practice is likely unfair because the member has no control over if/when a previously returned item will be presented for payment again.

Returned Deposit Item Fees

Charging a fee for a returned deposit item irrespective of the circumstances or patterns of behavior on the member’s account likely constitutes an unfair act or practice. The depositor has no control over whether the issuer of the check will have sufficient funds at the time it is presented for payment.

The NCUA's letter goes on to discuss other overdraft and NSF fee assessment practices that present a heightened risk:

High (or no) daily limits on the number of fees assessed, and
Ordering transactions to maximize fees.

The agency provides several risk management principles that a credit union should employ in connection with its overdraft program and NSF fees:

Ensure disclosures and advertising about these products and services are clear,
Be mindful of regulatory developments around overdraft programs and NSF fees,
Track and monitor complaint activity to consider member impact, and
Take appropriate action to mitigate reputation, compliance, third-party, and legal risk associated with these types of products.

CFPB Issues Final 1033 Personal Financial Data Rights Rule

Sun, 27 Oct 2024 21:15:21 GMT

On October 22 ^nd , the Consumer Financial Protection Bureau (CFPB) finalized its personal financial data rights rule, as required by Section 1033 of the Dodd-Frank Act. The rule requires financial institutions and other data providers to make covered data regarding financial products and services available to consumers and authorized third parties in electronic form.

For purposes of the rule, a financial product or service is defined as a checking, savings, or other asset account held primarily for a personal, family, or household purpose, and credit cards. Covered data includes, but is not limited to:

Transaction history,
Balance information, and
The name, address, e-mail address, and telephone number associated with the financial product or service.

Covered data must be made available in a standardized format upon request. Data may be released to third parties with the consent of the consumer. A third-party may only use the covered data to the extent necessary to provide the consumer with the requested product or service and may not be used to advertise or cross-sell other products and services to the consumer.

The final rule provides for tiered compliance dates as follows:

April 1, 2026 - FI's with $250 billion or more in assets
April 1, 2027 - FI's with between $10 billion and $250 billion in assets
April 1, 2028 - FI's with between $3 billion and $10 billion in assets
April 1, 2029 - FI's with between $1.5 billion and $3 billion in assets
April 1, 2030 - FI's with between $850 million and $1.5 billion in assets

Financial institutions with less than $850 million in assets are not subject to the final rule.

You can access the final rule and the CFPB’s executive summary here .

NOTE: Immediately following its release, the Bank Policy Institute and the Kentucky Bankers Association filed a lawsuit in federal court challenging the rule. Among other things, the lawsuit alleges that the CFPB overstepped its authority in promulgating the rule.

FHA Issues FAQs Regarding Reconsideration of Value Requirements

michael@mchristiansconsulting.com (Michael Christians) — Sun, 27 Oct 2024 21:08:02 GMT

The Federal Housing Administration (FHA) has issued a frequently asked questions document concerning its new reconsideration of value (ROV) requirements announced in Mortgagee Letter 2024-07.

The FAQ document, available here , covers the required disclosure, communications with an appraiser regarding an ROV request, the ROV process, required documentation, and more. FHA’s ROV requirements apply to transactions that have a case number assigned on or after October 31, 2024.

CFPB’s Latest Supervisory Highlights Points to Compliance Deficiencies in Auto Lending

michael@mchristiansconsulting.com (Michael Christians) — Wed, 23 Oct 2024 23:09:38 GMT

On October 7th, the Consumer Financial Protection Bureau (CFPB) issued the fall 2024 edition of its supervisory highlights publication. The report covers several compliance deficiencies uncovered by the Bureau in connection with auto loan financing. Pay close attention to the following list to ensure that your financial institution does not have any of the same weaknesses in your auto lending program:

Misleading advertising - mailing prescreened advertisements promoting rates "as low as" a specified APR that the intended consumers had no reasonable chance of qualifying for
Failing to accurately disclose an applicable prepayment penalty in the loan agreement
Wrongful repossession activities - failing to cancel repossession orders when consumers had brought their loan current and repossessing automobiles for which the financial institution had not perfected its lien
Allocating payments in a different order than that outlined in the borrower's loan agreement, resulting in unfair late fees
Failing to timely deliver the title to a borrower who had recently paid off their loan with the financial institution
Collecting a fee for an add-on product (such as GAP coverage) that the borrower did not agree to purchase
Imposing onerous requirements on a borrower to cancel a previously purchased add-on product
Inaccurately calculating refund amounts in connection with add-on products, or failing to issue a refund altogether
Reporting inaccurate information about a borrower's loan to a consumer reporting agency and failing to timely update the reported information once the inaccuracy was discovered

You can access the supervisory highlights here .

NCUA Encourages Board Member Engagement in Cybersecurity Oversight

michael@mchristiansconsulting.com (Michael Christians) — Wed, 23 Oct 2024 22:57:46 GMT

In its letter to credit unions ( 24-CU-02 ), the National Credit Union Administration (NCUA) is encouraging greater board member engagement in a credit union's efforts to combat cybersecurity threats. The letter provides four key areas that board members should focus on:

Ongoing education - board members should stay up to date on the most recent cybersecurity threats, trends, and best practices
Information security program - board members are charged with approving a comprehensive information security program for the credit union that meets the requirements outlined in Part 748. This program must include risk assessments, security controls, and incident response plans. It should be reviewed at least annually
Oversight - the board is responsible for overseeing the credit union's management of cybersecurity, including but not limited to third-party due diligence, vulnerability management, ongoing audit of the effectiveness of the credit union's cybersecurity program, monitoring the number of cybersecurity incidents that occur, and protecting member data
Incident response - the board must ensure that the credit union has an effective incident response plan. This includes establishing a crisis management team, conducting tabletop exercises to test the resiliency of its incident response plan, and ensuring effective communication about cybersecurity incidents to both the credit union's membership and the NCUA

Of note in the letter, since the NCUA finalized its cybersecurity incident notification rule, the agency has received 1,072 reports. The rule, effective on September 1, 2023, requires federally insured credit unions to report cyber incidents to the NCUA within 72 hours of their occurrence.

CFPB Issues Circular Regarding Regulation E Overdraft Opt-In Practices

Wed, 02 Oct 2024 11:33:15 GMT

On September 17th, the Consumer Financial Protection Bureau (CFPB) issued Circular 2024-05 . In this publication, the agency reminds financial institutions of their responsibilities under Section 1005.17 of Regulation E.

Under Regulation E, prior to assessing a fee or charge in connection with an ATM or debit card transaction that overdraws a consumer's account, the financial institution must obtain the consumer's affirmative consent.

The circular states that financial institutions must obtain and retain proof of the consumer's affirmative consent. The form of records may vary depending on how affirmative consent was obtained. For example, if a consumer opts in via postal mail, the financial institution should retain a copy of the signed consent form. For a consumer that opts in over the phone, the financial institution should retain a recording of the phone call during which consent was provided.

CFPB Issues Advisory Opinion Concerning Contracts for Deed

michael@mchristiansconsulting.com (Michael Christians) — Sat, 17 Aug 2024 19:40:39 GMT

On August 13th, the Consumer Financial Protection Bureau issued an advisory opinion affirming the applicability of certain Truth in Lending Act / Regulation Z requirements to contracts for deed. In a typical contract for deed transaction, a homebuyer makes periodic payments directly to the seller. During the repayment period, the buyer has the exclusive right to occupy the property. However, the seller retains ownership of the property until all payments are made under the contract. In some instances, financial institutions sell other real estate owned (OREO) properties obtained through foreclosure to sellers using this type of arrangement. The advisory opinion first explains that in most instances, contract for deed financing meets the definition of consumer credit if the buyer is purchasing the property for a personal, family, or household purpose. Regulation Z defines credit as the right to defer the payment of a debt, which is exactly what is contemplated by the periodic payments made by the buyer to the bank over time.

Because contract for deed financing meets the definition of consumer credit under Regulation Z, many of the regulation's requirements specific to residential mortgage loan transactions are likely applicable. These requirements include, but are not limited to:

Disclosures,
Ability to repay determination,
Rescission,
High-cost mortgage requirements (if applicable),
Higher priced mortgage loan requirements (if applicable), and
Prohibited acts and practices and certain requirements for transactions secured by a dwelling.

You can read the CFPB's advisory opinion here .

FinCEN Issues Proposed AML/CFT Rule

michael@mchristiansconsulting.com (Michael Christians) — Sun, 28 Jul 2024 22:41:56 GMT

On June 28 ^th , the Financial Crimes Enforcement Network (FinCEN) issued a proposed rule that would make several changes to its Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) implementing regulations. These changes are required under the Anti-Money Laundering Act of 2020.

First, the proposed rule specifies that a financial institution’s AML/CFT program must be effective, risk-based, and reasonably designed.

Next, the proposed rule moves on to a discussion of risk assessments. When conducting its risk assessment, a financial institution must consider:

FinCEN's most recent AML/CFT national priorities (last updated 2021),
The distribution channels the institution uses to deliver financial products and services, and
Bank Secrecy Act reports such as information obtained through Section 314(b) information sharing, suspicious activity reports filed, and currency transaction reports filed.

The proposal also seeks comment on how often an institution’s risk assessment should be updated. The options under consideration are annually, when FinCEN makes changes to its national priorities, upon material risk changes, or periodically (with no specified timeframe).

Third, the proposal specifies that a financial institution must designate a qualified BSA compliance officer, with the requisite training, skills, expertise, and experience. Fourth, the proposal seeks comment on how often an institution should conduct independent testing. The same frequency options under consideration for risk assessments are under consideration for independent testing.

There are several other changed under consideration by FinCEN. Financial institutions are encouraged to review the proposed rule, available here . Comments will be accepted until September 3rd.

Agencies Finalize Guidance on Reconsiderations of Value

michael@mchristiansconsulting.com (Michael Christians) — Sun, 21 Jul 2024 14:04:25 GMT

On July 18 ^th , the joint agencies (CFPB, FDIC, FRB, NCUA, and OCC) finalized their guidance on the development of policies, procedures, and control systems applicable to reconsiderations of value (ROVs). An ROV is a request to an appraiser or other preparer of a valuation report to reassess the report based on potential deficiencies or other information that may affect the value conclusion.

Valuation deficiencies may be identified internally through the financial institution’s appraisal review process or through information later submitted by the consumer. This information may include but is not limited to consideration of comparable properties not previously identified or property information/characteristics incorrectly reported or not previously considered.

These deficiencies may be addressed in several ways. First, the institution could request a review of the valuation by an independent, qualified, and competent state-certified or state-licensed appraiser. Second, the institution could communicate relevant information to the original preparer of the valuation and ask them to reassess their report. Finally, the institution could obtain a second appraisal or valuation.

The guidance, available here , provides that institutions should consider the following when building out their ROV policies, procedures, and control systems:

Ensure lending staff are properly trained to identify deficiencies during the internal review process,
Clearly disclose to consumers how and when they must raise concerns about a valuation and detail what supporting information will be required in connection with the reconsideration request, and
Establish policies and procedures that route the request to the appropriate business unit, establish timelines for when milestones must be achieved, and set clear expectations for communicating the status of the ROV request to the consumer.

Readout on the NCUA's Fifth Board Meeting of 2024

michael@mchristiansconsulting.com (Michael Christians) — Sun, 21 Jul 2024 14:01:07 GMT

The National Credit Union Administration (NCUA), at its board meeting on July 18 ^th , took a number of actions. First, the agency approved maintaining the interest rate ceiling for federal credit unions at 18%.

Second, it approved a proposed rule that would impose restrictions on incentive-based compensation at federally insured credit unions. Those restrictions, applicable to institutions with at least $1 billion in assets, include, but are not limited to:

The credit union must not establish any incentive-based compensation plan that encourages inappropriate risk or provides a covered person with excessive compensation,
Its board of directors must approve all incentive-based compensation plans for senior executive officers and conduct ongoing oversight,
The institution must create annual reports detailing its incentive-based compensation plans and make those reports available to the NCUA upon request,
Most incentive-based compensation plans may not vest faster than on a pro rata annual basis,
Unvested incentive-based compensation shall be subject to downward adjustment or forfeiture in the event of poor financial performance or inappropriate risk taking, and
Incentive-based compensation must be subject to claw back for a period of at least seven years in the event it is determined that the covered person engaged in misconduct or fraud.

The requirements of the proposed rule would apply to any federally insured credit union the first day of the calendar quarter that begins at least 540 days from the date that it reaches at least $1 billion in assets.

Finally, the board re-proposed a rule that would implement succession planning requirements at all federally insured credit unions. Under the rule, each credit union must have a succession plan that covers its board of directors, supervisory committee, credit committee, chief executive officer, and other management officials. The plan must outline how the credit union plans to temporarily and permanently fill vacancies and outline the credit union’s strategy for recruiting qualified candidates. You can access that proposed rule here .

CFPB Proposes Changes to Regulation X's Early Intervention and Loss Mitigation Requirements

michael@mchristiansconsulting.com (Michael Christians) — Sun, 21 Jul 2024 13:54:53 GMT

On July 10 ^th , the Consumer Financial Protection Bureau (CFPB) issued a proposed rule that would make several substantive changes to the early intervention and loss mitigation requirements found in Regulation X. The changes would generally take effect 12 months following publication of the final rule in the Federal Register (18 months for language access requirements).

Early Intervention Requirements

The proposed rule would require that additional information be included in the 45-day written notice of delinquency. This additional information includes:

Identification of the secondary market investor of the borrower’s loan (if applicable) and a description of loss mitigation options available from that investor,
A website and telephone number where the borrower can access a list of all loss mitigation options available from the servicer or investor, and
Information about how the borrower can make a request for loss mitigation assistance.

In addition, for those borrowers currently in a forbearance, at least 30 days, but not more than 45 days before the scheduled end date of the forbearance, the servicer must make a good faith attempt to establish live contact and send written notice to the borrower reminding them of the scheduled end date of the forbearance.

Loss Mitigation Rules

The proposed rule eliminates the need for a written application for loss mitigation assistance. A request for assistance can be made orally, or in writing, using any usual or customary communication channel. Once a loss mitigation review cycle begins, the servicer may not charge late fees or initiate/advance the foreclosure process. A loss mitigation review cycle begins on the date the borrower makes a request for loss mitigation assistance and ends on the date the borrower becomes current or has exhausted all possible loss mitigation options.

The proposed rule also implements specific content requirements for a loss mitigation determination notice. The notice must inform the borrower about the amount of time he/she has to accept or reject the offer, detail other loss mitigation options available from the servicer, and remind them of their right to appeal the servicer’s determination. The proposed rule maintains the small servicer exemption to both the early intervention requirements and loss mitigation rules.

Language Access Requirements

Under the rule, all required written communication to the borrower must be provided in both English and Spanish. In addition, the servicer must make all required written communication available in five other languages that cover a significant majority of its non-English speaking customers. Servicers would be required, upon request, to make interpretation services available for all required oral communication. Finally, the servicer must provide all required written communication in all languages that it advertises in.

Comments on the proposed rule will be accepted until September 9th.

Spring 2024 Unified Agenda of Regulatory and Deregulatory Actions Published

Fri, 12 Jul 2024 01:07:14 GMT

On July 5th, the federal agencies released their spring 2024 unified agenda, outlining each agency's rulemaking plan in the near term. Per the agenda, the Consumer Financial Protection Bureau anticipates issuing the following final rules over the course of the next 6 months:

Personal Financial Data Rights (October 2024)
Fees for Instantaneously Declined Transactions (October 2024)
Overdraft Lending - Very Large Financial Institutions (January 2025)

The agenda also states that FinCEN will publish its proposed rule regarding revisions to the customer due diligence requirements for financial institutions in October 2024. You can access the unified agenda here .

Joint Agencies Finalize Quality Control Standards for Automated Valuation Models

michael@mchristiansconsulting.com (Michael Christians) — Mon, 24 Jun 2024 00:41:57 GMT

On June 20 ^th , the joint agencies (OCC, FRB, FDIC, NCUA, CFPB, and FHFA) finalized their proposed rule from June 2023 establishing quality control standards for the use of automated valuation models in mortgage lending.

The final rule provides that loan originators must adopt and maintain policies, practices, procedures, and control systems to ensure that automated valuation models used in mortgage lending transactions adhere to quality control standards designed to:

Ensure a high level of confidence in the estimates produced,
Protect against the manipulation of data,
Seek to avoid conflicts of interest,
Require random sample testing and reviews, and
Comply with applicable non-discrimination laws.

Control systems include things like internal and external audits, risk reviews, and other quality assurance activities.

The quality control standards will apply when extending new credit, modifying a current loan, or increasing an existing credit line. They will not apply to automated valuation models obtained for the purpose of monitoring the quality or performance of an existing loan.

The final rule, available here , is effective on the 1st day of the calendar quarter 12 months following the date the rule is published in the Federal Register.

CFPB Issues Proposed Rule to Ban Medical Bills from Credit Reports

michael@mchristiansconsulting.com (Michael Christians) — Wed, 19 Jun 2024 21:06:08 GMT

On June 12 ^th , the Consumer Financial Protection Bureau (CFPB) issued a proposed rule that would make several changes to Regulation V (the Fair Credit Reporting Act) when it comes to medical debt.

Currently, Regulation V permits a creditor to use the medical information of a consumer, under certain conditions, when determining his/her eligibility for credit. The proposed rule would amend Regulation V to only allow the use of medical information related to the consumer’s income or the purpose of the loan. For example, a creditor could consider a consumer’s receipt of disability benefits when conducting an ability to repay analysis under Regulation Z.

Furthermore, under the proposed rule, a consumer reporting agency would only be permitted to furnish a credit report containing the consumer’s medical debt information (e.g., collection items related to medical expenses) in very limited circumstances.

Comments on the proposed rule are due by August 12 ^th . You can find more information here .

NCUA Announces Voluntary Regulatory Review

michael@mchristiansconsulting.com (Michael Christians) — Fri, 24 May 2024 20:52:15 GMT

The Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA) of 1996 called on the federal bank regulatory agencies to review their regulations every 10 years to identify any outdated, unnecessary, or unduly burdensome regulations. Although the National Credit Union Administration (NCUA) is not subject to the EGRPRA, the agency intends to voluntarily participate in this decennial review process.

On May 23rd, the NCUA issued its first of four Federal Register notices requesting comment on the following regulations:

Part 701 - Organization and Operation of Federal Credit Unions
Part 702 - Capital Adequacy
Part 703 - Investment and Deposit Activities
Part 705 - Community Development Revolving Loan Fund Access for Credit Unions
Part 707 - Truth in Savings
Part 708 - Mergers and Conversions
Part 712 - CUSOs
Part 714 - Leasing
Part 721 - Incidental Powers
Part 723 - Member Business Loans / Commercial Lending
Part 724 - Trustees and Custodians of Certain Tax-Advantaged Savings Plans
Part 725 - NCUA Central Liquidity Facility
Part 741 - Requirements for Insurance

You can access the NCUA's notice here .

Supreme Court Sides With CFPB, Small Business Lending Data Collection Rule Compliance Dates Extended

michael@mchristiansconsulting.com (Michael Christians) — Sun, 19 May 2024 23:12:32 GMT

On Thursday, May 16 ^th , the United States Supreme Court issued its long-awaited ruling in CFPB v. Community Financial Services Association of America. In a 7-2 decision, the court rejected a challenge to the constitutionality of the Consumer Financial Protection Bureau’s funding structure.

As a result of the court’s opinion, the nationwide injunction delaying compliance with the Bureau’s Section 1071 small business lending data collection rule has now been lifted. Under the terms of the original injunction, the CFPB was to extend the mandatory compliance dates for a period of time equal to the length of the injunction (290 days).

On Friday, May 17 ^th , the agency announced its intention to issue an interim final rule to extend the mandatory compliance dates as follows:

From October 1, 2024, to July 18, 2025, for financial institutions that originated at least 2,500 covered transactions in both 2022 and 2023
From April 1, 2025, to January 16, 2026, for financial institutions that originated between 500 and 2,400 covered transactions in both 2022 and 2023
From January 1, 2026, to October 18, 2026, for financial institutions that originated between 100 and 499 covered transactions in both 2022 and 2023

The injunction delaying the effective date of the CFPB’s credit card late fee rule was also impacted by the Supreme Court’s decision. Large card issuers should monitor the ongoing litigation in connection with that rulemaking to determine next steps.

With its win at the nation’s highest court, an already aggressive CFPB is more emboldened than ever. The remainder of 2024 promises to be a whirlwind when it comes to compliance and consumer protection for financial institutions. Don’t hesitate to contact Michael Christians Consulting, LLC at michael@mchristiansconsulting.com for help!

Texas Court Hits Pause on CFPB's Credit Card Late Fee Rule

michael@mchristiansconsulting.com (Michael Christians) — Tue, 14 May 2024 00:39:22 GMT

On Friday, May 10th, Judge Mark Pittman of the United States District Court for the Northern District of Texas granted a preliminary injunction stopping the CFPB's credit card late fee rule from taking effect on May 14th. By way of reminder, the rule would have capped credit card late fees at $8 for large card issuers (those with one million or more open and active credit card accounts).

In his opinion, Judge Pittman said that the rule should be stayed pending resolution of CFPB v. Community Financial Services Association of America , a case about whether the CFPB's funding structure is constitutional. That case was argued before the Supreme Court in October 2023, with a decision expected any day.

Stay tuned for more details from Michael Christians Consulting, LLC!

Agencies Issue Revised Regulation CC Threshold Adjustments

michael@mchristiansconsulting.com (Michael Christians) — Mon, 13 May 2024 23:39:25 GMT

The Federal Reserve Board and the Consumer Financial Protection Bureau have issued the revised Regulation CC thresholds, a full 13 months ahead of schedule. By way of reminder, a 2020 rulemaking indexed several Regulation CC thresholds to inflation. Those thresholds are subject to change on July 1st of every fifth year. Effective July 1, 2025, the following changes will take effect:

Increase from $225 to $275 the amount of certain check deposits that must be made available on the next business day following the date of deposit (12 CFR 229.10(c)(1)(vii))
Increase the new account exception hold threshold from $5,525 to $6,725. Beginning 7/1/2025, a financial institution may delay the availability of funds in excess of $6,725 deposited to a new account in any one banking day (12 CFR 229.13(a)(1)(ii))
Increase the large deposit exception threshold from $5,525 to $6,725. Beginning 7/1/2025, a financial institution may delay the availability of funds in excess of $6,725 deposited to an existing account in any one banking day (12 CFR 229.13(b))
Change the definition of repeated overdrafts. Beginning 7/1/2025, an account will be considered repeatedly overdrawn if -
On 6 or more banking days within the preceding 6 months, the account balance was negative or would have become negative had checks or other charges to the account been paid, or
on 2 or more banking days within the preceding 6 months, the account balance was negative or would have become negative in an amount of $6,725 or more (12 CFR 229.13(d)(2)).

You can access the final rule here .

Federal Housing Finance Agencies Announce New ROV Policies

michael@mchristiansconsulting.com (Michael Christians) — Sat, 11 May 2024 19:30:21 GMT

Earlier this month, Fannie Mae, Freddie Mac, and FHA announced new requirements for lenders to establish and implement reconsideration of value (ROV) policies and procedures.

Fannie Mae and Freddie Mac

Lenders must establish policies and procedures that include the steps a borrower can take to appeal an appraisal when they believe the opinion of value is:

Unsupported,
Deficient due to unacceptable appraisal practices, or
Reflects discriminatory appraisal practices.

Borrowers must be notified at the time of application and again upon delivery of the appraisal of their right to request an ROV.

The new requirements apply to loan applications dated on or after August 8, 2024.

Federal Housing Administration

Lenders must disclose the following to a borrower at the time of application and again upon delivery of the appraisal:

The borrower has the right to initiate an ROV request,
The information that he/she will be required to provide in connection with their request, and
Expected processing times.

The new requirements apply to loans that have an FHA case number assigned on or after September 2, 2024.

DOL Expands Definition of Investment Advice Fiduciary

michael@mchristiansconsulting.com (Michael Christians) — Wed, 01 May 2024 21:49:09 GMT

The United States Department of Labor (DOL) has issued a final rule that expands the definition of an investment advice fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA).

Under the final rule, an investment advice fiduciary is a person who, for a fee or other compensation, provides professional investment recommendations to investors on a regular basis as part of their business and the recommendations are made under circumstances that would indicate to a reasonable investor in like circumstances that the recommendation:

Is based on review of the retirement investor's particular needs or individual circumstances,
Reflects the application of professional or expert judgment to the retirement investor's particular needs or individual circumstances, and
May be relied upon by the retirement investor as intended to advance the retirement investor's best interest.

Investment advice fiduciaries are required to adhere to stringent conduct standards and mitigate their conflicts of interest. Financial institutions should review the final rule, available here , to determine what activities (if any) would cause one or more of their employees to meet the revised definition of an investment advice fiduciary.

CFPB's Assault on Junk Fees Spreads to Mortgage Servicing

michael@mchristiansconsulting.com (Michael Christians) — Wed, 01 May 2024 21:42:25 GMT

On April 25th, the Consumer Financial Protection Bureau (CFPB) issued the 33rd edition of its Supervisory Highlights publication. This issue highlighted certain unfair, deceptive, or abusive acts and practices and other regulatory violations related to mortgage servicing.

First, examiners found that certain servicers unfairly charged late fees that exceeded the amount allowed for in the underlying loan agreement. Second, mortgage servicers failed to adequately describe fees on a borrower’s periodic statement as required by Regulation Z. Third, servicers failed to make timely payments out of a borrower’s escrow account, resulting in those borrowers incurring penalties due to late payments. Finally, examiners found that mortgage servicers engaged in deceptive acts and practices by sending inaccurate loss mitigation eligibility and/or delinquency notices.

You can access the CFPB's latest Supervisory Highlights here .

CFPB Issues Supervisory Highlights Related to Credit Reporting

michael@mchristiansconsulting.com (Michael Christians) — Tue, 16 Apr 2024 01:12:32 GMT

This month, the Consumer Financial Protection Bureau (CFPB) published issue 32 of its Supervisory Highlights. The document focused on Fair Credit Reporting Act (FCRA) requirements specific to both consumer reporting agencies as well as financial institutions.

A couple of highlights covering FCRA requirements for financial institutions that we have seen before:

Under 12 CFR 1022.43, a financial institution that receives a direct dispute from a consumer regarding inaccurate information reported by the institution on the consumer's credit report must investigate and respond within 30 days.
If the institution's investigation determines that inaccurate information was in fact reported about the consumer, the financial institution must promptly provide any information necessary to the consumer reporting agency to correct the error.

However, the document also references a couple of other FCRA requirements that many financial institutions are probably less familiar with:

Under 15 USC 1681s-2(a)(3), a financial institution investigating a direct dispute must do one of the following during the investigation -
Suspend information reporting for the consumer until the investigation has been completed, or
Include with any information reported to the consumer reporting agency a statement that the information is being disputed by the consumer.
Under 15 USC 1681s-2(a)(6)(B), if a financial institution receives a notice of identity theft from a consumer, it may not report information about the consumer to the consumer reporting agency unless it knows or is subsequently informed by the consumer that the information is correct.

You can access a copy of the Supervisory Highlights document here .

CFPB Issues Final Rule Regarding Credit Card Penalty Fees

Wed, 06 Mar 2024 00:48:43 GMT

On March 5th, the Consumer Financial Protection Bureau (CFPB) issued its long-awaited final rule regarding credit card penalty fees.

The rule, which goes into effect 60 days following its publication in the Federal Register, does the following:

Large Card Issuers

A large card issuer is defined as an issuer with one million or more open credit card accounts. A large card issuer may charge:

A late fee not to exceed $8
The following penalty charges for violating the terms or other requirements of a credit card account -
$32 for the initial violation
$43 for a subsequent violation of the same type that occurs during the same billing cycle or in one of the next six billing cycles

Small Card Issuers

A small card issuer is defined as an issuer with fewer than one million open credit card accounts. A small card issuer may charge:

Late fees and other penalty charges for violating the terms or other requirements of a credit card account that do not exceed -
$32 for the initial violation
$43 for a subsequent violation of the same type that occurs during the same billing cycle or in one of the next six billing cycles

The $32 and $43 amounts will be adjusted annually for inflation; however, the $8 maximum late fee charge for large card issuers will not change.

You can access a copy of the final rule here .

FCC Clarifies Right to Revoke Consent under the TCPA

Fri, 01 Mar 2024 01:24:16 GMT

The Federal Communications Commission (FCC) has finalized an order on how businesses must handle revocation requests under the Telephone Consumer Protection Act (TCPA). Under the TCPA, businesses must obtain prior express consent from a called party before initiating autodialed calls or text messages with a marketing or advertising purpose. This consent may be revoked by the consumer using "any reasonable means."

The order clarifies that a reply text message with any of the following words constitutes revocation: stop, quit, end, revoke, opt out, cancel, or unsubscribe. The order goes on to specify that a business has 10 days to process a revocation request and that a one-time text message to confirm the called party's revocation does not violate the TCPA so long as it is sent within five minutes of receipt of the opt-out request. You can access the FCC's order here .

FFIEC Issues Statement of Examination Principles Designed to Mitigate Appraisal Bias

michael@mchristiansconsulting.com (Michael Christians) — Sat, 17 Feb 2024 21:59:32 GMT

On February 12th, the Federal Financial Institutions Examination Council (FFIEC), on behalf of its member entities, issued a statement of examination principles designed to mitigate appraisal bias.

According to the statement, during a consumer compliance examination, examiners will consider the following when determining whether an institution's risk management practices are appropriate to identify and address valuation discrimination:

Board and senior management oversight of its real estate valuation program,
The institution's due diligence and ongoing monitoring of third-party valuation providers,
Policies and procedures in place to detect discriminatory valuation practices, and
Evaluation of consumer complaints alleging potential valuation discrimination.

The statement goes on to remind institutions that their real estate valuation programs must also comply with the following laws and regulations: Equal Credit Opportunity Act; Truth in Lending Act; prohibition against unfair, deceptive, and abusive acts and practices; Uniform Standards of Professional Appraisal Practice (USPAP); and other appraisal regulations (e.g., NCUA Part 722).

You can access the FFIEC's statement here .

NCUA to Increase Scrutiny on Overdraft and NSF Fees

michael@mchristiansconsulting.com (Michael Christians) — Tue, 13 Feb 2024 02:15:27 GMT

On February 6th, in prepared remarks outlining the National Credit Union Administration's 2024 supervisory priorities, Chairman Todd Harper indicated that credit unions should expect increased supervision in the area of overdraft and NSF fees.

In their expanded review of credit union overdraft programs, examiners will focus on advertising, balance calculation methods, and settlement processes. This includes ensuring that overdraft and NSF fees are reasonable and proportional, and that credit unions do not charge re-presentment fees or fees in connection with authorize positive/settle negative transactions.

In furtherance of this increased scrutiny, Chairman Harper indicated that credit unions with more than $1 billion in assets will be required to separately report information about their overdraft and NSF fees to the NCUA.

CFPB Issues Overdraft Proposed Rule

michael@mchristiansconsulting.com (Michael Christians) — Sat, 03 Feb 2024 00:24:10 GMT

On January 17th, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule that would dramatically change how very large financial institutions handle their overdraft programs. For purposes of the rule, a very large financial institution is one with assets of $10 billion or more.

Under the proposal, very large financial institutions would have two options for offering overdraft services:

Courtesy Service with Breakeven Fees
To maintain the payment of overdrafts as a courtesy service, the financial institution would have to limit its fees to a breakeven threshold. This threshold could be determined one of two ways. First, the institution can calculate its own threshold taking into account its overdraft losses and any direct costs associated with the payment of overdrafts. Alternatively, the institution could use a benchmark fee yet to be determined. Under the rule, the CFPB is proposing benchmark fees of $3, $6, $7, or $14.
Overdraft Line of Credit
The institution could instead choose to offer an overdraft line of credit. These lines would be subject to the disclosure and ability to repay requirements found in Regulation Z and consumers could not be required to set up automatic payment to repay their outstanding balance.

These requirements would go into effect the initial October 1st that is at least six months following the final rule's publication in the Federal Register. The CFPB anticipates this date would be October 1, 2025. Comments are due on or before April 1st. You can access a copy of the proposed rule here .

CFPB Issues Proposed Rule on NSF Fees

Sat, 03 Feb 2024 00:15:56 GMT

On January 31st, the Consumer Financial Protection Bureau (CFPB) published in the Federal Register a proposed rule that would prohibit financial institutions from charging an NSF fee in connection with instantaneously declined transactions.

Under the proposed rule, when a consumer attempts a transaction using his/her ATM or debit card or through a P2P service, and that transaction is instantaneously (or near instantaneously) declined due to insufficient funds, it would be considered an abusive act or practice for the financial institution to assess an NSF fee.

The rule provides that the CFPB has preliminarily determined that charging an NSF fee in connection with an instantaneously declined transaction would take unreasonable advantage of a consumer's lack of understanding of the material risks, costs, or conditions associated with their deposit account, thus constituting an abusive act or practice. This is based on the argument that if the consumer knew he/she lacked available funds to complete the transaction and would be charged an NSF fee in connection with the attempt, they would have opted for a different payment method.

It's curious to see the CFPB acknowledge in its proposed rule that "many financial institutions have oriented their practices to not charge fees when ATM and/or debit card transactions are declined" and is proposing this rule primarily as a preventative measure.

Comments are due on or before March 25th. You can access a copy of the proposed rule here .

NCUA Outlines Supervisory Priorities for 2024

michael@mchristiansconsulting.com (Michael Christians) — Tue, 23 Jan 2024 23:46:52 GMT

In a letter to credit unions (24-CU-01) dated January 22nd, the National Credit Union Administration (NCUA) announced its supervisory priorities for 2024. They include:

Credit Risk
Examiners will review the soundness of the credit union's lending program and its credit risk management practices.
Liquidity Risk
Credit unions will need to maintain strong liquidity risk management in 2024 due to uncertainty in interest rates and economic conditions.
Consumer Financial Protection
Examiners will focus on the credit union's overdraft programs, auto lending (including indirect lending), adherence to fair lending responsibilities, and compliance with the requirements of the Bank Secrecy Act.
Information Security
Examiners will assess whether the credit union has implemented a robust information security program to safeguard both itself and its members.
Interest Rate Risk
Examiners will look to make sure the credit union is proactively managing interest rate risk.
Small Credit Unions and Minority Depository Institutions
The NCUA will continue to offer customized support to both small credit unions and minority depository institutions.

You can access the supervisory priorities letter here .

NCUA Issues Advisory on Liquidity Risk Management

michael@mchristiansconsulting.com (Michael Christians) — Thu, 18 Jan 2024 23:49:56 GMT

On January 17th, the National Credit Union Administration (NCUA) issued an advisory on liquidity risk management. In its advisory, the agency says that credit unions experiencing liquidity stresses must ensure they are monitoring this area of the business closely.

In general, the key areas for credit unions to focus on for effective liquidity management include:

Forecasting cash flows under both normal and stressed operating conditions,
Controlling asset composition by managing loan volume and pricing,
Structuring liabilities to be congruent with asset growth,
Developing governance and monitoring structures suitable for the credit union's size, complexity, and financial condition, and
Maintaining diversified liquidity sources that can be accessed in various situations.

The agency maintains a liquidity risk resources page which is accessible here .

FinCEN Issues Beneficial Ownership Access Rule

Sun, 24 Dec 2023 16:10:55 GMT

On December 21st, the Financial Crimes Enforcement Network (FinCEN) issued a final rule providing who will have access to its beneficial ownership database. Remember that starting January 1, 2024, corporations, limited liability companies, and other similar entities will be required to report their beneficial ownership information directly to FinCEN.

Under the final rule, access to the beneficial ownership database will be provided to the following six categories of recipients:

Federal government agencies,
State, local, and tribal law enforcement agencies,
Foreign requesters,
Federal financial regulators and other appropriate regulatory agencies,
Treasury personnel, and
Financial institutions subject to customer due diligence requirements.

Before being provided access to the database, sometime later in 2024, financial institutions must develop and implement administrative, technical, and physical safeguards reasonably designed to protect the information received. Until access to the database is opened to financial institutions and FinCEN has completed rulemaking to revise existing customer due diligence requirements, banks and credit unions should continue to obtain beneficial ownership information directly from legal entity customers.

The final rule is available here .

CFPB Issues Two More Threshold Adjustments

michael@mchristiansconsulting.com (Michael Christians) — Wed, 20 Dec 2023 03:07:51 GMT

On December 18th, the Consumer Financial Protection Bureau (CFPB) issued two more threshold adjustments for 2024.

The first is the asset exemption threshold under Regulation C (Home Mortgage Disclosure Act). Effective January 1, 2024, this exemption threshold will increase from $54 million to $56 million. That means financial institutions must meet all of the following requirements to be a HMDA-reportable institution in 2024:

Assets in excess of $56 million as of 12/31/2023,
Home or branch office in a Metropolitan Statistical Area (MSA),
Originated at least one home purchase or refinance transaction in the preceding calendar year, and
Federally insured or regulated.

The second is the small creditor asset threshold under Regulation Z (Truth in Lending Act). Effective January 1, 2024, this asset threshold will increase from $2.537 billion to $2.64 billion. Therefore, a small creditor will be defined as an institution that:

During the preceding calendar year, originated 2,000 or fewer covered transactions secured by a first lien, and
As of 12/31/2023, had total assets of less than $2.64 billion.

Remember that a small creditor is exempt from the qualified mortgage pricing test as well as the requirement to establish an escrow account in connection with a higher priced mortgage loan secured by a first lien.

CFPB Publishes Fall 2023 Agency Rule List

michael@mchristiansconsulting.com (Michael Christians) — Tue, 12 Dec 2023 01:56:27 GMT

The Consumer Financial Protection Bureau's (CFPB's) most recent rulemaking agenda, available here , identifies the following regulatory actions the agency reasonably anticipates having under consideration during the time period from November 2023 to October 2024:

Fair Credit Reporting Act - continuing work on a proposed rule that would make several amendments to Regulation V. These include, but are not limited to, clarifying the permissible purposes to obtain a consumer credit report, and prohibiting a creditor from using medical debt collection information to determine a consumer's eligibility for credit.
Overdraft Fees - a proposed rule that would identify when an overdraft fee is considered a finance charge and subject to Regulation Z.
Personal Financial Data Rights - finalizing a proposed rule released in October 2023 to implement Section 1033 of the Dodd-Frank Act. The rule will require financial institutions to electronically fulfill information requests from consumers. Under the rule, a consumer can request information concerning a financial product and/or service that he/she has obtained from the fulfilling institution.
Mortgage Servicing - continuing work on a proposed rule that would simplify and streamline the mortgage servicing rules, particularly forbearance programs and loss mitigation requirements.
NSF Fees - a proposed rule that would preliminarily identify the assessment of NSF fees in certain circumstances as an unfair, deceptive, and/or abusive act or practice.
Automated Valuation Models - finalizing a rule proposed in June 2023 that would require creditors to establish quality control standards for AVM's.
Credit Card Penalty Fees - finalizing a rule proposed in February 2023 that would adjust the safe harbor dollar amount for credit card late fees to $8.

According to this agenda, 2024 promises to be yet another year of significant change in the financial services industry. To learn more about how Michael Christians Consulting, LLC can partner with your institution to help lessen your regulatory burden, please contact Michael at michael@mchristiansconsulting.com.

NCUA to Reinstate Penalties for Late Call Reports / FHFA Announces Conforming Loan Limits for 2024

michael@mchristiansconsulting.com (Michael Christians) — Wed, 29 Nov 2023 15:06:14 GMT

In response to the COVID-19 pandemic, the National Credit Union Administration (NCUA) had suspended the assessment of civil money penalties for an institution’s failure to timely file its Form 5300 Call Report. On November 28 ^th , the agency announced that it is reinstating its late filing civil money penalty program effective January 1, 2024.

Beginning with the December 2023 Call Report, submissions received after 11:59pm on January 30, 2024, may be subject to a penalty. In determining whether to assess a penalty, the NCUA will consider the following:

The size of financial resources and good faith of the credit union,
The gravity of the violation,
The history of previous violations, and
Other matters regarding the circumstances of late or false or misleading submissions, such as natural disasters and the incapacitation of key employees, among other factors.

Click here to read the press release.

Also on November 28 ^th , the Federal Housing Finance Agency (FHFA) announced the new baseline conforming loan limit for loans that Fannie Mae and Freddie Mac will purchase in 2024. In most areas, the new limit will be $766,550, an increase of $40,350 from the current level.

Remember that this amount is important when determining whether a loan is classified as higher priced under Regulation Z. A higher priced mortgage loan is a closed-end consumer credit transaction secured by the borrower’s principal dwelling with an APR that exceeds the value of the APOR index by:

1.50% or more for first lien loans under the conforming loan limit
2.50% or more for first lien loans over the conforming loan limit
3.50% or more for subordinate lien loans

You can access the FHFA’s announcement here .

CFPB Publishes HPML Exemption Threshold for 2024

Mon, 13 Nov 2023 23:44:39 GMT

Today, the Consumer Financial Protection Bureau (CFPB) published a revised appraisal requirement exemption threshold for higher priced mortgage loans (HPMLs) that will go into effect on January 1, 2024.

An HPML is a closed-end consumer credit transaction secured by the borrower's principal dwelling in which the loan's annual percentage rate (APR) exceeds the value of the Average Prime Offer Rate (APOR) index by:

1.50% or more for non-jumbo 1st lien loans
2.50% or more for jumbo 1st lien loans
3.50% or more for subordinate lien loans

Higher priced mortgage loans have three additional compliance requirements. First, the institution must establish an escrow account in connection with an HPML secured by a first lien. Second, the institution must obtain two appraisals in connection with an HPML secured by a flipped property.

The third additional compliance requirement states that for most HPML’s, the institution must obtain a written appraisal. However, there are a number of exceptions in which the institution may use an alternative method of valuation. One of these exceptions is based on loan amount. For 2024, the institution may use an alternative method of valuation (and not obtain a full appraisal) in connection with an HPML of $32,400 or less. This is up from the current level of $31,000 for 2023.

The final rule is available here .

The Latest Developments on Beneficial Ownership

Fri, 29 Sep 2023 18:31:58 GMT

Under the Corporate Transparency Act, beginning January 1, 2024, corporations, LLCs, and other business entities created by a filing with a Secretary of State will be required to report information about their beneficial owners directly to the Financial Crimes Enforcement Network (FinCEN).

On September 18th, FinCEN issued a small entity compliance guide and FAQs to help businesses understand and comply with this new reporting requirement. Those resources can be found here:

Under the current rule, existing companies (those created or registered to do business before January 1, 2024) have until January 1, 2025, to file their beneficial owner information with FinCEN. New reporting companies (those created on or after January 1, 2024) must file their information within 30 days. However, on September 28 ^th , FinCEN published a proposed rule that would extend to 90 days the deadline for new reporting companies.

It is important to note that we still do not have a proposed rule from FinCEN as to how this direct reporting requirement for businesses will affect a financial institution’s obligation to collect beneficial ownership information at the time of account opening. Stay tuned to Michael Christians Consulting, LLC for future developments!

CFPB Announces Regulation Z Threshold Adjustments for 2024

michael@mchristiansconsulting.com (Michael Christians) — Wed, 20 Sep 2023 14:24:44 GMT

On September 18th, the Consumer Financial Protection Bureau (CFPB) issued a final rule amending several thresholds found within Regulation Z. These adjustments are required on an annual basis to account for inflation. You can access a copy of the final rule here .

High-Cost Mortgages

A high-cost mortgage is a consumer credit transaction secured by the borrower's principal dwelling that meets one of three criteria. One of these has to do with the amount of points and fees charged in connection with the transaction. Effective next year, the points and fees thresholds for a high-cost mortgage will be as follows:

5% of the loan amount for loans of $26,092 or greater
For loans less than $26,092, the lesser of -
8% of the loan amount, or
$1,305

Qualified Mortgage Pricing Test

A qualified mortgage (QM), as defined by Regulation Z, must meet four criteria. The first of these is a pricing test, which considers the spread between the APR charged in connection with the transaction and the value of the Average Prime Offer Rate (APOR) index. Beginning January 1, 2024, the QM pricing test will be as follows:

First Lien Loans

The APR charged in connection with the transaction does not exceed the current value of the APOR index by more than:

2.25% for loans greater than or equal to $130,461
3.50% for loans greater than or equal to $78,277 but less than $130,461
6.50% for loans less than $78,277

Subordinate Lien Loans

The APR charged in connection with the transaction does not exceed the current value of the APOR index by more than:

3.50% for loans greater than or equal to $78,277
6.50% for loans less than $78,277

Qualified Mortgage Points and Fees Test

Another test for a QM considers the points and fees charged in connection with the transaction. Effective next year, the points and fees charged in connection with a QM may not exceed the following thresholds:

NCUA Reminds Credit Unions About ECOA Nondiscrimination Requirements

michael@mchristiansconsulting.com (Michael Christians) — Wed, 02 Aug 2023 18:13:03 GMT

On August 1 ^st , the National Credit Union Administration (NCUA) issued a reminder about its Letter to Credit Unions (22-CU-04) issued in February 2022. That letter was titled “Equal Credit Opportunity Act Nondiscrimination Requirements”. While the reminder focused on avoiding age discrimination, let’s recap each of the nondiscrimination requirements discussed in the letter.

Marital Status

Generally, credit unions must evaluate married and unmarried applicants using the same standards. A credit union may not require a signature from an applicant’s spouse if he/she qualifies for the extension of credit individually, unless necessary to perfect the credit union’s security interest. A credit union may request a cosigner or guarantor; however, cannot require an applicant’s spouse to serve in that capacity.

Age

Generally, credit unions cannot consider an applicant’s age during underwriting. However, a credit union can deny an applicant who lacks the legal capacity to contract and/or offer loan programs that favor the elderly (those 62 years of age and older). A credit union cannot disqualify an applicant for automatic loan approval based on his/her age. In other words, the credit union cannot have a policy of performing a manual underwrite on all applications received from those age 25 and younger, when all other applications are submitted through its automatic loan approval system.

Protected Income

A credit union may not discount or exclude protected income. Protected income is defined as income from part-time employment, income from public assistance, or alimony/child support/separate maintenance income.

Redlining

Redlining is the practice of refusing to extend credit in certain geographical areas. Even though credit unions have defined fields of membership, they must ensure that they provide equal access to credit within those fields of membership.

Indirect Lending

Credit unions that allow auto dealers to mark-up the buy rate on a discretionary basis may be at an increased risk for claims of disparate treatment. Disparate treatment is defined as when similarly situated applicants are treated differently based on a protected classification. If data analysis shows that members of a protected classification are paying a higher mark-up than those that do not belong to a protected classification, this could indicate pricing disparities that are in violation of the Equal Credit Opportunity Act.

CFPB Issues Supervisory Highlights Summer 2023 Edition

michael@mchristiansconsulting.com (Michael Christians) — Mon, 31 Jul 2023 19:02:28 GMT

The Consumer Financial Protection Bureau (CFPB) has issued the latest edition of its Supervisory Highlights publication. Available here , the report covers findings from examinations conducted between July 1, 2022, and March 31, 2023. The report reminds financial institutions, among other things, of the following responsibilities under federal law:

Fair Credit Reporting Act / Regulation V

Furnishers must review their policies and procedures surrounding the accuracy and integrity of information reported to consumer reporting agencies, and update as necessary.
Creditors must timely investigate and respond to direct disputes concerning alleged inaccurate credit report information. This includes notifying borrowers that their direct dispute has been classified as frivolous or irrelevant by the creditor.

Equal Credit Opportunity Act / Regulation B

Creditors are prohibited from discriminating against an applicant/borrower based on their race, national origin, sex, age, etc. This includes failing to grant pricing exceptions based on competitive offers from other lenders to members of a protected classification.
Creditors may not exclude, or discount protected income when underwriting a loan application. Protected income includes income from a retirement source, income from public assistance, and alimony, child support, or separate maintenance income.

Truth in Lending Act / Regulation Z

Creditors may not compensate mortgage loan originators based on the terms of the transaction. This specifically includes adjusting compensation based on product type, since products are simply a bundle of particular credit terms.
Lenders are reminded that loan disclosures must reflect the terms of the legal obligation between the parties.

Real Estate Settlement Procedures Act / Regulation X

Servicers must adhere to specific timing requirements when reviewing applications for loss mitigation assistance from a delinquent borrower.
Servicers are required to establish continuity of contact with delinquent borrowers by assigning certain personnel to those borrowers within a specific period of time.
A transferee servicer may not treat a payment sent to the transferor servicer as late for the first 60 days following the transfer of the servicing of a mortgage loan.

Military Lending Act

In connection with certain credit transactions, lenders must determine whether an applicant is a covered borrower under the Military Lending Act. If yes, the lender must provide additional disclosures and adhere to more specific product limitations and restrictions.

NCUA Approves Final Member Expulsion Rule

michael@mchristiansconsulting.com (Michael Christians) — Fri, 28 Jul 2023 15:42:47 GMT

At its July board meeting, the National Credit Union Administration (NCUA) approved a final rule on member expulsion as required by the Credit Union Governance Modernization Act of 2022.

Previously, the only way that a federal credit union could expel a member was to obtain a two-thirds vote of its membership at a special meeting called for that purpose. Under the new rule, the credit union may now expel a member for cause upon a two-thirds vote of a quorum of its board of directors. For cause includes substantial or repeated violations of the credit union's membership agreement, dangerous or abusive behavior, substantial or repeated disruptions to the credit union's operations, or fraud, attempted fraud, or other illegal conduct in relation to the credit union.

To expel a member for cause, the federal credit union must follow these procedures:

Disclose to all members of the credit union its policy regarding member expulsion for cause.
Provide advance notice to a member about his/her potential expulsion. The notice must include -
Detailed information about the grounds for expulsion
The member's right to request a hearing, and how to do so, and
Notification that if the member does not request a hearing, his/her membership will terminate after 60 calendar days.

If the member requests a hearing, the board must vote on the member's expulsion within 30 calendar days of the hearing. If the member does not request a hearing, he/she will be expelled upon expiration of the 60-day period following written notice.

The rule will be effective 30 days following its publication in the Federal Register. You can access a copy of the final rule here .

SCIF Required on FHA Loans Beginning August 28, 2023

michael@mchristiansconsulting.com (Michael Christians) — Thu, 29 Jun 2023 18:19:04 GMT

In Mortgagee Letter 2023-13 dated June 27th, the US Department of Housing and Urban Development announced that it will require use of the Supplemental Consumer Information Form (SCIF) in connection with FHA insured mortgage loans with an application date on or after August 28, 2023.

The SCIF is an additional page of the 1003 mortgage application that asks the applicant to indicate:

Whether he/she has completed any homeownership counseling or education in the previous 12 months, and
His/her preferred language.

Remember, just because an applicant indicates a language preference other than English does not mean the financial institution agrees to communicate with the applicant or provide disclosures to the applicant in his/her preferred language.

The SCIF has been required in connection with loans sold to Fannie Mae and Freddie Mac since March 1, 2023.

NCUA Rescinds Most COVID-19 Guidance

Sun, 25 Jun 2023 23:04:22 GMT

On June 22 ^nd , the National Credit Union Administration (NCUA) announced that in conjunction with the federal government ending the COVID-19 public health emergency in April, it is rescinding much of its pandemic-related guidance.

Some of that guidance (now inactive) includes, but is not limited to:

A federal credit union's ability to conduct its annual meeting virtually (21-FCU-06)
Flexibility regarding the mortgage service rules under Regulation X. This joint agency statement, issued in April 2020, allowed institutions to provide a CARES Act forbearance based on an incomplete application for loss mitigation assistance and waived the specific timing requirements for early intervention and annual escrow account statements; and
The NCUA's offsite examination and supervision approach (20-CU-17).

A complete list is available on the NCUA's website here .

CFPB Publishes Spring 2023 Rulemaking Agenda

michael@mchristiansconsulting.com (Michael Christians) — Sun, 25 Jun 2023 22:39:56 GMT

The Consumer Financial Protection Bureau (CFPB) has published its Spring 2023 Rulemaking Agenda. The agenda covers regulatory matters the Bureau reasonably anticipates having under consideration from June 1, 2023, to May 31, 2024.

The matters specific to financial institutions include:

Overdraft and NSF Fees
The CFPB is considering whether to make changes to the special rules under Regulation Z regarding whether overdraft fees are considered a finance charge. Currently, overdraft fees are only considered a finance charge if the financial institution has agreed to the payment of overdrafts in writing. In addition, the agency is considering new rules regarding NSF fees.
Fair Credit Reporting Act
The agenda states that the CFPB is considering whether to amend Regulation V; however, provides no further explanation of what specific items may be under consideration.
Automated Valuation Models
The Bureau, in consultation with the other joint agencies, will continue its work on quality control standards for automated valuation models (AVMs). The joint agencies issued a proposed rule on this topic in June. We blogged about that proposed rule here .
PACE Financing
In May, the CFPB issued a proposed rule making it clear that PACE loans are subject to Regulation Z and its ability to repay requirements. PACE financing is a non-traditional funding mechanism in which a borrower obtains financing for energy efficient improvements but repays that financing through voluntary property tax assessments. The agenda provides that the agency will continue its work on moving this proposed rule to the final rule stage.
Personal Financial Data Rights
Section 1033 of the Dodd-Frank Act requires the CFPB to promulgate rules that would require financial institutions to make available to consumers, upon request, data concerning the financial products and/or services that the consumer receives from the financial institution. The agenda provides that a proposed rule on this topic is imminent.
Credit Card Penalty Fees
In February, the CFPB issued a proposed rule to cap credit card late fees at $8. The agenda states that the Bureau is continuing its work on finalizing this rule.

Joint Agencies Issue Proposed Guidance on Reconsiderations of Value

michael@mchristiansconsulting.com (Michael Christians) — Fri, 09 Jun 2023 18:34:25 GMT

On June 8th, the joint agencies issued proposed guidance on reconsiderations of value and residential real estate valuations.

A reconsideration of value (ROV) is a request to an appraiser to reassess his/her report based on deficiencies or other information that may negatively affect the value conclusion. This may include, but is not limited to:

An ask of the appraiser to consider other comparable properties not previously identified,
Communication of unique property characteristics to the appraiser, or
Amending property information that appeared incorrectly in the report.

While ROVs should always be communicated to the appraiser by the financial institution, they may originate from either the creditor's internal review of the report or from the request of the applicant or borrower.

The proposed guidance suggests the following considerations for a financial institution as it develops its ROV policies, procedures, and control systems:

Make sure the institution's procedures are not so complex that they have the effect of discouraging a customer from requesting an ROV.
Inform customers how to properly raise their objection to a valuation (e.g., early in the loan process, supported by sufficient information to substantiate the objection, etc.)
Have a clearly identified process as to who at the bank will receive ROVs, escalate ROVs, and analyze/resolve ROVs.
Establish consistency in considering and resolving ROVs, including when a second appraisal is warranted and who will bear the cost.

A financial institution's ROV policies and procedures should be consistent with the existing body of law that covers appraisals and other valuations, including, but not limited to the Equal Credit Opportunity Act, the Fair Housing Act, the Truth in Lending Act, the Interagency Appraisal and Valuation Guidelines, and the Uniform Standards of Professional Appraisal Practice (USPAP).

You can find the proposed guidance here . Comments are due within 60 days of the proposal's publication in the Federal Register.

Joint Agencies Issue Proposed Rule re: AVM Quality Control Standards

michael@mchristiansconsulting.com (Michael Christians) — Fri, 02 Jun 2023 23:45:18 GMT

As required by Section 1473(q) of the Dodd-Frank Act, the joint agencies (including the NCUA) have issued a proposed rule to promulgate regulations implementing quality control standards regarding automated valuation models (AVMs).

The proposed rule would add Subpart B to Part 722 of the NCUA's rules and regulations (appraisals).

Under the proposal, federally insured credit unions originating mortgage loans must adopt and maintain policies, practices, procedures, and control systems to ensure that AVMs adhere to quality control standards designed to:

Ensure a high level of confidence in the estimates produced,
Protect against the manipulation of data,
Avoid conflicts of interest,
Require random sample testing and reviews, and
Comply with applicable nondiscrimination laws.

Comments are due within 60 days of the proposed rule's publication in the Federal Register. You can access the proposed rule here .

CFPB Issues PACE Financing Proposed Rule

michael@mchristiansconsulting.com (Michael Christians) — Tue, 09 May 2023 01:36:00 GMT

On May 2nd, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule related to Property Assessed Clean Energy (PACE) financing. PACE financing is a non-traditional funding mechanism in which a borrower obtains financing for energy efficient improvements (e.g., solar panels), and that financing is repaid through voluntary property tax assessments.

Among other things, the proposed rule:

Makes it clear that PACE loans are subject to the Truth in Lending Act and Regulation Z. It also provides that PACE lenders are subject to civil liability for failure to comply with the regulation's requirements.
Clarifies that PACE loans must meet the ability to repay standards set forth in Section 1026.43 of Regulation Z. The rule also states that for PACE loans, the creditor's only option to show repayment ability is to evaluate the eight factors. In other words, a PACE loan cannot be a qualified mortgage.
Exempts PACE loans from the mandatory escrow requirement if the loan is considered higher priced and secured by a first lien.
Exempts PACE loans from the periodic statement requirement under Section 1026.41 of Regulation Z.
Establishes a model Loan Estimate and Closing Disclosure form specific to PACE financing transactions.

Comments are due on the proposal the later of 30 days following the rule's publication in the Federal Register or July 26, 2023. You can access a copy of the proposed rule here .

MLA Confusion Continues... And We're Still Talking About LIBOR

michael@mchristiansconsulting.com (Michael Christians) — Sat, 29 Apr 2023 15:55:04 GMT

Military Lending Act

On April 12th, the United States Court of Appeals for the 4th Circuit ruled that a hybrid loan which finances Guaranteed Asset Protection (GAP) coverage in addition to the purchase price of an automobile is exempt from the requirements of the Military Lending Act (MLA). The MLA provides that a loan for the express purpose of purchasing an automobile is exempt from the statute's requirements. In its decision, the court determined that express purpose does not mean sole purpose, so the addition of GAP coverage would not cause a loan to lose its exemption.

The ruling is in direct contradiction to the Department of Defense's interpretive rule from December 2017. FAQ #2 from that interpretive rule stated that a credit transaction that also finances a credit-related product, such as GAP insurance, does not qualify for the exemption. It's important to note that the 4th Circuit's decision is only applicable in Maryland, North Carolina, South Carolina, Virginia, and West Virginia.

Interim Final Rule on the LIBOR Transition

On April 28th, the Consumer Financial Protection Bureau (CFPB) issued an interim final rule in relation to the transition away from the LIBOR index. Among other things, the interim final rule identifies the 12-month USD IBOR Consumer Cash Fallbacks index as a comparable index to the 12-month LIBOR index. A comparable index is important under Regulation Z because:

A creditor must substitute a comparable index when changing the index in connection with a home equity line of credit (HELOC), and
If a creditor substitutes a non-comparable index when changing the index in connection with an adjustable-rate mortgage loan, replacement of the index will constitute a refinance that will trigger new disclosures and a new ability to repay analysis.

The interim final rule was follow-up to a December 2021 CFPB rule that promised identification of a comparable index for the 12-month LIBOR not later than June 30, 2022.

CFPB Issues Final Small Business Lending Data Collection Rule

michael@mchristiansconsulting.com (Michael Christians) — Sun, 09 Apr 2023 17:32:18 GMT

On March 30th, the Consumer Financial Protection Bureau (CFPB) issued its long-awaited small business lending data collection rule as mandated by Section 1071 of the Dodd-Frank Act. Below is a high-level summary of the rule.

Scope and Coverage

The rule applies to covered financial institutions, defined as those who originated at least 100 covered loans in each of the two preceding calendar years. A covered loan is an extension of credit made to a small business, which is a business that had $5 million or less in gross revenue during its preceding fiscal year. Covered loans includes loans, lines of credit, credit cards, and agricultural purpose credit products. However, a loan that is a HMDA reportable transaction is not covered by the rule.

Data Collection

A covered financial institution must report the following in connection with an application for a covered loan:

General Application Information

A unique identifier for the application,
The application date,
The application method (e.g., in-person, over the phone, electronically),
The application recipient (e.g., submitted to the financial institution directly or through a third-party),
The type of credit applied for,
The purpose of the loan,
The amount applied for,
The action taken on the application, and
The action taken date.

Information About the Small Business

A census tract based on an address provided by the applicant,
Gross annual revenue of the small business during its preceding fiscal year,
NAICS code for the business,
The number of employees of the small business,
The length of time the small business has been in operation, and
The number of principal owners of the business.

Information Specific to Approved Applications

Amount approved or originated, and
Pricing information (e.g., interest rate, origination charges, etc.)

Information Specific to Denied Applications

Denial reasons.

Demographic Information

Whether the small business is -
Minority-owned,
Women-owned, or
LGBTQI+-owned.
The ethnicity, race, and sex of the small business' principal owners.

NOTE: The applicant's provision of demographic information is voluntary. However, the financial institution is not permitted to provide this information on the applicant's behalf based on visual observation and surname.

Reporting Data

The financial institution must report its data about covered applications not later than June 1st of the year following data collection.

Effective Date

The rule has a tiered effective date depending on the volume of covered loans that a financial institution originates.

October 1, 2024

If the financial institution originated at least 2,500 covered loans in both 2022 and 2023.

April 1, 2025

If the financial institution originated at least:
500 covered loans in both 2022 and 2023, and
Originated at least 100 covered loans in 2024.

NOTE: For purposes of determining the number of covered loans it originated in 2022 and 2023, a financial institution may count the number of covered loans it originates during the 4th quarter of 2023 and multiply that by four.

January 1, 2026

If the financial institution originated at least 100 covered loans in both 2024 and 2025.

You can access a copy of the final rule here . The CFPB also has made several resources available to assist with implementation (e.g., executive summary, fact sheet, etc.) These resources are located here .

CFPB Policy Statement on Abusive Acts and Practices

Fri, 07 Apr 2023 02:22:59 GMT

On April 3rd, the Consumer Financial Protection Bureau (CFPB) issued a policy statement providing an analytical framework, through relevant examples, on how to identify abusive acts or practices.

In 2010, Congress passed the Consumer Financial Protection Act which added abusive to the existing prohibition against Unfair and Deceptive Acts and Practices (UDAP). The statute defines an abusive act or practice as one that:

Materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service, or
Takes unreasonable advantage of -
A lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service,
The inability of the consumer to protect his/her interests in selecting or using a consumer financial product or service, or
The reasonable reliance by the consumer on a covered person to act in his/her best interests.

The CFPB's policy statement provides guidance on each prong of the abusive standard.

Material Interference

The statement provides that material interference can occur via an affirmative act or an omission. Furthermore, the guidance identifies three ways in which material interference can be shown:

Intentional interference,
The natural consequence of the act or omission is to impede the consumer's ability to understand, or
Evidence showing the act or omission did in fact impede the consumer's actual understanding.

Unreasonable Advantage

Lack of Understanding

A lack of understanding can occur when there are gaps in understanding regarding the risks, costs, or conditions of the financial product or service. This element can be proven in several ways:

Direct evidence of a lack of understanding, such as complaints,
Analysis showing that reasonable consumers were not likely to understand, or
Considering a consumer's course of conduct and likely consequences.

Inability to Protect Interests

This element is present when there is unequal bargaining power between the parties. For example, if a consumer must take unreasonable or onerous steps to protect their interests, that would be abusive. In addition, steering or contractual agreements that eliminate consumer choice would also be considered abusive.

Reasonable Reliance

Reasonable reliance may be established in a couple of different ways:

The entity expressly indicates to a consumer that it will act in his/her best interests, or otherwise holds itself out as doing so, or
The entity helps the consumer select providers in the financial products and services market.

You can access the policy statement here .

Time to Update Your Adverse Action Notices

Fri, 07 Apr 2023 02:04:52 GMT

Under Regulation B, a credit union's adverse action notice must contain, among other things, the name and address of the federal agency that administers the institution's compliance with the requirements of the Equal Credit Opportunity Act.

On Monday, March 20th, the Consumer Financial Protection Bureau (CFPB) issued a final rule updating the contact information for several federal regulatory agencies that credit unions may list on their adverse action notices. Credit unions have until March 20, 2024, to update their adverse action notices with the new addresses as outlined below:

Credit Unions with Assets Over $10 Billion

Bureau of Consumer Financial Protection

1700 G Street NW

Washington, DC 20552

Federally Chartered Credit Unions

National Credit Union Administration

Office of Consumer Financial Protection (OCFP)

Division of Consumer Compliance Policy and Outreach

1775 Duke Street

Alexandria, VA 22314

State Chartered Credit Unions

Federal Trade Commission

Consumer Response Center

600 Pennsylvania Avenue NW

Washington, DC 20580

CFPB Issues Special Edition of its Supervisory Highlights Related to Junk Fees

Sat, 18 Mar 2023 21:04:59 GMT

On March 8 ^th , the Consumer Financial Protection Bureau (CFPB) issued a special edition of its Supervisory Highlights publication specific to junk fees.

The agency identified the following fee practices as unfair when it comes to deposit accounts:

Charging overdraft fees in connection with authorize positive, settle negative (APSN) transactions
Charging multiple overdraft fees when the same transaction is presented multiple times for payment

The agency also identified the following fee practices as unfair or deceptive when it comes to mortgage servicing:

Charging a higher late fee than what is contractually permitted
Charging a borrower late fees when his/her periodic statement shows no such fees due
Providing a periodic statement showing that the borrower owes a monthly premium in connection with a lender-paid private mortgage insurance policy
Charging borrowers private mortgage insurance premiums after cancellation or termination, in direct violation of the Homeowner's Protection Act
Charging borrowers late fees, charges, or other penalties, while in forbearance, in direct violation of the CARES Act
Charging borrowers for unnecessary property inspections

The report also found instances where junk fees were charged in connection with auto loan servicing, student loan servicing, and payday/small dollar lending.

Finally, the report listed the most recent developments under the CFPB's supervisory program to combat junk fees:

The agency has issued a proposed rule to cap credit card late fees at $8
The agency has issued a bulletin advising financial institutions that charging a customer a returned deposit item fee regardless of the circumstances or patterns of behavior on the account is an unfair act and practice
The agency has issued an advisory opinion informing debt collectors that federal law often prohibits pay-to-pay fees

You can access a copy of the report here .

CFPB Announces Review of its Loan Originator Rules

michael@mchristiansconsulting.com (Michael Christians) — Sat, 18 Mar 2023 20:55:47 GMT

Section 610 of the Regulatory Flexibility Act requires each federal agency to periodically review its rules that may have a significant economic impact upon a substantial number of small entities. Pursuant to this requirement, the Consumer Financial Protection Bureau (CFPB) announced that it would be conducting a review of its loan originator rules.

The CFPB seeks comment concerning the economic impact the following provisions of Regulation Z have on small entities:

Definition of loan originator - Section 1026.36(a)(1)
Loan originator compensation requirements - Sections 1026.36(d)(1) and (d)(2)
Prohibition on steering - Section 1026.36(e)
Loan originator qualification requirements - Section 1026.36(f)
Prohibition on mandatory arbitration clauses - Section 1026.36(h)
Prohibition on financing credit insurance - Section 1026.36(i)

Comments may be submitted to the CFPB until May 1st.

NCUA Finalizes Cyber Incident Reporting Rule

Thu, 23 Feb 2023 00:09:15 GMT

At its February board meeting, the National Credit Union Administration (NCUA) approved a final rule requiring federally insured credit unions to notify the NCUA within 72 hours after the occurrence of a reportable cyber incident.

The rule defines a reportable cyber incident as:

A substantial loss in the confidentiality, integrity, or availability of a network or information system that disrupts vital member services or has a serious impact on the safety and resiliency of operational systems and processes,
A disruption of business operations, vital member services, or a member information system resulting from a cyberattack, or
A disruption of business operations or unauthorized access to sensitive data facilitated through or caused by a third-party service provider.

The rule, which takes effect on September 1st of this year, makes it clear that the 72-hour notification is an early alert to the NCUA and does not require delivery of a full incident assessment within that timeframe.

You can find a copy of the final rule here .

CFPB Issues Proposed Rule Regarding Credit Card Penalty Fees

michael@mchristiansconsulting.com (Michael Christians) — Thu, 02 Feb 2023 16:09:10 GMT

On February 1st, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule regarding credit card penalty fees.

Section 1026.52(b) of Regulation Z imposes limitations on penalty fees that may be charged by a card issuer in connection with a credit card account. Currently, the rule provides for a safe harbor. It states that a card issuer may impose a fee for a cardholder's violation of the terms or other requirements of a credit card account so long as the fee does not exceed:

$30 for a first violation (current as of 1/1/2022)
$41 for a subsequent violation (current as of 1/1/2022)

The CFPB's proposed rule adjusts the safe harbor amount specifically for late fees to $8 for both first and subsequent violations. This new late fee safe harbor amount would not be subject to adjustment on an annual basis. It also imposes a cap on late fees, not to exceed 25% of the required payment amount.

It retains the current structure for other penalty fees (other than late fees) of $30 for a first violation and $41 for a subsequent violation. Those amounts remain subject to adjustment on an annual basis based on changes to the Consumer Price Index.

You can access the text of the proposed rule here .

Fannie Mae and Freddie Mac Announce Replacement Indices for Legacy LIBOR ARM Loans

michael@mchristiansconsulting.com (Michael Christians) — Thu, 26 Jan 2023 16:43:57 GMT

On January 25th, both the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (Freddie Mac) announced the replacement indices for their existing LIBOR-based adjustable-rate mortgage (ARM) loans.

By way of reminder, the 1-month, 3-month, 6-month, and 1-year London Interbank Offered Rate (LIBOR) indices will cease publication on June 30, 2023. In response, the Federal Reserve's Alternative Reference Rates Committee identified the Secured Overnight Financing Rate (SOFR) index as a recommended replacement.

While both Fannie Mae and Freddie Mac have been using the SOFR index on new ARM plans for some time, up until now, they had not identified what index would replace LIBOR in connection with their existing ARM loans. However, based on the January 25th announcement from both agencies, we now have that information.

Fannie Mae

The current 1-month LIBOR index will be replaced by the 1-month CME SOFR
The current 6-month LIBOR index will be replaced by the 6-month CME SOFR
The current 1-year LIBOR index will be replaced by the 1-year CME SOFR

Freddie Mac

The current 1-month LIBOR index will be replaced by the 1-month CME SOFR
The current 6-month LIBOR index will be replaced by the 6-month CME SOFR
The current 1-year LIBOR index will be replaced by the 1-year CME SOFR

CME stands for the spread-adjusted term SOFR index as administered by the CME Group Benchmark Administration, LTD.

You can access Fannie Mae's announcement here and Freddie Mac's announcement here .

NCUA Identifies Supervisory Priorities for 2023

michael@mchristiansconsulting.com (Michael Christians) — Thu, 19 Jan 2023 22:02:48 GMT

The National Credit Union Administration (NCUA) has notified federally insured credit unions of its supervisory priorities for 2023 via letter 23-CU-01. You can access the full letter here .

The NCUA's primary areas of supervisory focus for the new year include:

Interest Rate Risk
Liquidity Risk
Credit Risk
Fraud Prevention and Detection
Information Security; and
Succession Planning.

In addition, the agency will target the following areas specifically related to consumer financial protection:

Overdraft Programs
Fair Lending
The Truth in Lending Act; and
The Fair Credit Reporting Act.

Finally, the letter reminds us that the new Current Expected Credit Loss (CECL) accounting standards took effect for most credit unions on January 1, 2023.

CFPB Revises HMDA and Small Creditor Asset Thresholds for 2023

michael@mchristiansconsulting.com (Michael Christians) — Wed, 28 Dec 2022 20:32:34 GMT

Rounding out the required threshold adjustments for 2023, the Consumer Financial Protection Bureau (CFPB) has published the revised asset thresholds under Regulation C's institutional coverage test and Regulation Z's definition of a small creditor.

Home Mortgage Disclosure Act (HMDA)

A creditor that meets the following institutional coverage test under Regulation C is required to report its HMDA data:

Assets over a certain threshold as of December 31st of the preceding calendar year
Home or branch office in a Metropolitan Statistical Area (MSA)
Originated at least one home purchase or refinance transaction in the preceding calendar year; and
Federally insured or regulated.

For 2023, the asset threshold has increased from $50 million to $54 million.

Small Creditor

Among other things, institutions that meet the definition of a small creditor are exempt from the following regulatory requirements:

The pricing test component of the revised definition of a qualified mortgage; and
Establishing an escrow account in connection with a higher priced mortgage loan secured by a first lien.

For 2023, a small creditor is an institution that:

During the preceding calendar year, together with its affiliates originated 2,000 or fewer covered transactions secured by a first lien; and
At the end of the preceding calendar year, together with its affiliates has total assets of less than $2.537 billion.

It's a Christmas Miracle! The CFPB Got It's 10-Key Working Again (Revised Thresholds for 2023)

michael@mchristiansconsulting.com (Michael Christians) — Fri, 23 Dec 2022 17:02:43 GMT

Each year, the Consumer Financial Protection Bureau (CFPB) is required to adjust certain thresholds under Regulation Z to account for any increase in either the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) or the Consumer Price Index for All Urban Consumers (CPI-U). The adjustments are based on the CPI-W or CPI-U in effect as of June 1st. Although that was 205 days ago, the final rule was published today...

Appraisal Exemption Threshold for Higher Priced Mortgage Loans

In connection with a higher priced mortgage loan, a creditor must generally obtain a written appraisal of the subject property. However, there are certain instances in which the use of an alternative method of valuation is permissible. One of these is dependent upon the amount of the loan. For 2023, a creditor may use an alternative method of valuation in connection with a higher priced mortgage loan of $31,000 or less.

Points and Fees Thresholds for High-Cost Mortgages

A high-cost mortgage is a consumer credit transaction secured by the borrower's principal dwelling that meets one of three tests. One of these tests is contingent upon the points and fees charged in connection with the transaction. For 2023, a loan is considered high-cost if the points and fees charged in connection with the transaction exceed:

5.00% of the loan amount for loans of $24,866 or greater
For loans less than $24,866, the lesser of -
8.00% of the loan amount, or
$1,243

Loan Amounts for the Qualified Mortgage Pricing Test

One component of the revised definition of a qualified mortgage is that the APR charged in connection with the transaction cannot exceed the value of the Average Prime Offer Rate (APOR) index by certain thresholds, dependent upon loan amount and lien position.

In 2023, for first lien loans, the applicable thresholds will be:

2.25% or more for loans greater than or equal to $124,331
3.50% or more for loans greater than or equal to $74,599 but less than $124,331
6.50% or more for loans less than $74,599

The applicable thresholds for subordinate lien loans in the new year will be:

3.50% or more for loans greater than or equal to $74,599
6.50% or more for loans less than $74,599

Points and Fees Thresholds for Qualified Mortgages

An additional component of the revised definition of a qualified mortgage is a limitation on the amount of points and fees that may be charged in connection with the transaction. The revised points and fees caps for 2023 are:

For loans greater than $124,331
3.00% of the loan amount
For loans between $74,599 and $124,331
$3,730
For loans between $24,866 and $74,599
5.00% of the loan amount
For loans between $15,541 and $24,866
$1,243
For loans less than $15,541
8.00% of the loan amount

Revised HELOC Brochure and Standard Flood Hazard Determination Form

michael@mchristiansconsulting.com (Michael Christians) — Tue, 20 Dec 2022 22:38:38 GMT

On December 16th, the Consumer Financial Protection Bureau (CFPB) announced that it has updated the publication "What You Should Know About Home Equity Lines of Credit." Under Section 1026.40 of Regulation Z, this brochure must be provided in connection with a consumer's application for a home equity line of credit. The updated brochure has a revision date of 08/22 and can be found here .

Alternatively, without any announcement whatsoever, the Federal Emergency Management Agency (FEMA) has apparently issued a revised Standard Flood Hazard Determination Form. This form must be used by creditors to determine whether a property is located in a special flood hazard area. The revised form has an expiration date of 09-30-2023 and may be downloaded from FEMA's website here .

Another Change to HMDA's Reporting Thresholds

Mon, 12 Dec 2022 23:28:42 GMT

In 2015, the Consumer Financial Protection Bureau (CFPB) issued a final rule to implement Dodd-Frank Act required changes to Regulation C. Among these was to establish separate reporting thresholds for both closed-end and open-end mortgage loans under the Home Mortgage Disclosure Act (HMDA). Beginning January 1, 2018, a financial institution was required to collect and report HMDA data as follows:

In connection with its closed-end mortgage loans if it originated at least 25 of these loans in each of the two preceding calendar years
In connection with its open-end mortgage loans if it originated at least 100 of these loans in each of the two preceding calendar years

In 2017, the Bureau temporarily increased the open-end reporting threshold to 500 until January 1, 2022.

In 2020, the CFPB issued a final rule that once again made changes to the HMDA reporting thresholds. The closed-end reporting threshold was increased to 100 effective July 1, 2020. The open-end reporting threshold was set at 200 effective January 1, 2022 (when the 2017 temporary increase expired).

However, on September 23rd, the United States District Court for the District of Columbia issued an order vacating the Bureau's 2020 HMDA rule as it pertains to closed-end mortgage loans. As a result, the closed-end reporting threshold is now back to 25 . This means that effective immediately, financial institutions must collect and report HMDA data as follows:

In connection with its closed-end mortgage loans if it originated at least 25 of these loans in each of the two preceding calendar years
In connection with its open-end mortgage loans if it originated at least 200 of these loans in each of the two preceding calendar years

On December 6th, the CFPB issued a blog post stating that it does not intend to initiate an enforcement action or cite a HMDA violation against a financial institution for its failure to report closed-end mortgage loans in 2020, 2021, or 2022 if it originated at least 25 but fewer than 100 closed-end mortgage loans in either, or both, of the two preceding calendar years. You can read that blog post here .

CFPB Issues Fall 2022 Supervisory Highlights, FCRA Circular

michael@mchristiansconsulting.com (Michael Christians) — Wed, 30 Nov 2022 18:01:43 GMT

Fall 2022 Supervisory Highlights

On November 25th, the Consumer Financial Protection Bureau (CFPB) issued the fall 2022 edition of its supervisory highlights. This document details common findings from examinations conducted between January 1st and June 30th.

The Bureau continues to see compliance weaknesses in the following areas:

Auto loan servicers failed to assist borrowers with refund requests in connection with unearned premiums for Guaranteed Asset Protection (GAP) coverage
Financial institutions failed to timely investigate disputes by consumers concerning information reported by the financial institution to a consumer reporting agency
Financial institutions failed to establish and implement reasonable policies and procedures concerning the accuracy and integrity of information furnished by the financial institution to consumer reporting agencies
Credit card issuers failed to investigate and resolve billing errors within two complete statement cycles
Credit card issuers failed to reevaluate rate increases to a cardholder's APR at least once every six months
Some financial institutions continue to engage in unfair, deceptive, or abusive acts or practices in connection with the collection of consumer debts

These findings were also noted in the agency's spring 2022 supervisory highlights, which we blogged about here .

You can access a copy of the latest supervisory highlights here .

Circular 2022-07: Reasonable Investigation of Consumer Reporting Disputes

On November 23rd, the CFPB issued a circular clarifying the direct dispute requirements for furnishers under the Fair Credit Reporting Act (FCRA). Under the FCRA, a financial institution is required to investigate a dispute by a consumer concerning information reported by the financial institution to a consumer reporting agency. The investigation must be completed within 30 days.

If the financial institution requires additional information and/or documentation from the consumer to investigate the dispute, it must notify the consumer within five business days of the additional information and/or documentation required.

You can access the circular here .

Are These Treats, or is This a Trick?

michael@mchristiansconsulting.com (Michael Christians) — Fri, 28 Oct 2022 19:56:47 GMT

Just like the person in your neighborhood that hands out apple slices, circus peanuts or loose change during Beggar's Night, the Consumer Financial Protection Bureau (CFPB) is doing all it can to suck the fun out of Halloween. Let's review a few of the October surprises from our friends at the Bureau.

Availability of Electronic Consumer Financial Account Data

As we blogged about here , the CFPB's Semiannual Regulatory Agenda includes development of a proposed rule to require financial institutions to make transaction data and other information concerning financial products and services available to consumers upon request. The agency believes that making this information available to consumers in a standardized format is increasingly important at a time when many creditors are using alternative data to make credit decisions.

Director Chopra has effectively fired the starting pistol here. In a speech to the FDIC's board of directors earlier this month, the Director stated, "The CFPB will launch the first step of the rulemaking process on personal financial data rights, pursuant to a dormant authority under Section 1033 of the Consumer Financial Protection Act." Dormant being the operative word here. This authority comes from the Dodd-Frank Act, which was signed into law by President Obama just a short 12 1/2 years ago. It's not the fact that you came 12 1/2 years late to the party, it's the fact that you showed up at all.

The Bureau is So Over Overdrafts

On October 26th, the CFPB issued Circular 2022-06 titled "Unanticipated Overdraft Fee Assessment Practices." In case you've yet to come out of your COVID-19 bunker, the Bureau loathes overdraft fees of any kind. The primary focus of this circular was to rage against so called APSN (Authorize Positive, Settle Negative) transactions. This is when a consumer had sufficient funds at the time a debit card transaction was authorized; however, they no longer have sufficient funds at the time it is presented for payment and are charged an overdraft fee as a result.

To make sure financial institutions truly feel like they are getting smacked with a garbage can lid against both sides of their head, that same day the CFPB also put out a compliance bulletin titled "Unfair Returned Deposit Item Fee Assessment Practices." This bulletin clarifies that a blanket policy of imposing a fee for a returned deposit item irrespective of the circumstances or patterns of behavior on the account likely constitutes an unfair act or practice under the Consumer Financial Protection Act.

On second thought, maybe that neighbor handing out loose change during Beggar's Night is not so bad after all. That's one non-interest income generation tactic that has yet to be targeted by the Bureau. On that note, have a safe and happy Halloween!

CFPB Rescinds its Policy on No Action Letters

michael@mchristiansconsulting.com (Michael Christians) — Tue, 27 Sep 2022 14:11:48 GMT

In 2016, the Consumer Financial Protection Bureau (CFPB) instituted a policy on no action letters to facilitate innovation in markets for consumer financial products and services. Under the policy, a company could petition the agency for a no action letter in connection with a new consumer financial product or service. The no action letter would reassure the company that the Bureau did not intend to make supervisory findings or bring an enforcement action in connection with the new consumer financial product or service.

On September 27th, the CFPB published in the Federal Register a statement that it intends to allow its no action letter policy to expire at the end of the month. In its statement, the agency said that the policy does not advance its stated objective of facilitating innovation. In addition, the Bureau expressed concern that the policy failed to meet appropriate standards for transparency and stakeholder participation. As a result, effective September 30, 2022, the CFPB will no longer accept applications for a no action letter.

SCIF and the Implications of Marketing Products in a Foreign Language

michael@mchristiansconsulting.com (Michael Christians) — Sat, 10 Sep 2022 22:46:35 GMT

For loans intended for sale to Fannie Mae or Freddie Mac with an application date on or after March 1, 2023, creditors will be required to submit with the loan package the Supplemental Consumer Information Form (SCIF). On this form, borrowers will:

Attest to any homeownership counseling they have completed (if applicable), and
Select their language preference.

While borrowers will be able to select their preferred language, the form makes it clear that the lender does not necessarily agree to communicate with or provide documents in the borrower's preferred language.

If your financial institution is considering marketing products and services in a language other than English, be sure that you can fully support those consumers who respond to that marketing. Financial institutions have been criticized for engaging in unfair and deceptive acts and practices for marketing products and services in languages other than English, but not having the necessary resources, such as disclosures, contracts, or personnel to support those languages.

CFPB Again Expands Scope of UDAAP

michael@mchristiansconsulting.com (Michael Christians) — Sat, 10 Sep 2022 22:38:08 GMT

On Tuesday, September 6th, the Consumer Financial Protection Bureau (CFPB) issued Circular 2022-04 titled "Insufficient Data Protection or Security for Sensitive Consumer Information." In the circular, the CFPB puts financial institutions on notice that they can violate the prohibition against unfair acts and practices by having insufficient data protection or information security practices.

In addition to violating other federal laws governing data security, financial institutions with insufficient data protection or information security practices will likely also violate the prohibition against unfair acts and practices. An act or practice is unfair when:

It causes or is likely to cause substantial injury to consumers,
The injury is not reasonably avoidable by consumers, and
The injury is not outweighed by countervailing benefits to consumers or to competition.

You can review Circular 2022-04 here .

CFPB Issues Supervisory Highlights for Spring 2022

michael@mchristiansconsulting.com (Michael Christians) — Mon, 01 Aug 2022 16:32:45 GMT

The Consumer Financial Protection Bureau (CFPB) recently issued the latest edition of its supervisory highlights publication. The Spring 2022 installment covers findings from examinations completed between July 2021 and December 2021.

The report covers the following:

Servicing of Auto Loans
Some servicers continue to wrongly repossess automobiles
Servicers need to properly disclose the effect a consumer's deferral will have on his/her final periodic payment amount
Some servicers failed to request refunds in connection with unearned fees for GAP products
Consumer Reporting
Financial institutions must timely investigate a consumer's dispute concerning inaccurate information on his/her credit report
Financial institutions must have policies and procedures in place to ensure the accuracy and integrity of information reported to the consumer reporting agencies
Credit Cards
Card issuers must investigate and resolve billing errors within two complete statement cycles
Card issuers must reevaluate an increase to a cardholder's APR at least once every six months
Some issuers failed to properly advertise the preconditions associated with obtaining 0% financing
Debt Collection
Some financial institutions engaged in unfair, deceptive, and/or abusive acts and practices in connection with the collection of a consumer debt
Electronic Fund Transfers
Some financial institutions failed to honor stop payment requests that were timely submitted by consumers
Financial institutions must timely investigate a consumer's notice of error
Some financial institutions failed to notify consumers when provisional credit had been removed from their account
Mortgage Lending
Some financial institutions compensated loan originators differently based on product type
Some financial institutions failed to retain proper documentation to support redisclosure in the event of a changed circumstance

You can access a copy of the CFPB's latest supervisory highlights here .

If your institution has questions or needs guidance on any of the items highlighted above, please don't hesitate to reach out to Michael Christians Consulting, LLC at michael@mchristiansconsulting.com.

Updates from the CFPB Regarding the Fair Credit Reporting Act

michael@mchristiansconsulting.com (Michael Christians) — Mon, 01 Aug 2022 16:21:27 GMT

Permissible Purpose

On July 7, 2022, the Consumer Financial Protection Bureau (CFPB) issued an advisory opinion reminding financial institutions that under Section 604 of the Fair Credit Reporting Act (FCRA), they must have a permissible purpose for accessing a consumer's credit report.

Section 604 of the FCRA identifies several permissible purposes, including, but not limited to:

In accordance with the written instructions of the consumer (e.g., consent),
In connection with a new extension of credit,
In connection with the review and/or collection of an existing credit account,
For employment purposes (e.g., credit screening of new hires), and
In connection with the underwriting of insurance.

Limited Preemption of State Laws

On July 11, 2022, the CFPB issued an interpretive rule concerning when the FCRA specifically preempts state law.

Generally, when a federal and state statute are in direct conflict, the federal statute will control. However, the CFPB's interpretive rule provides that only in specific instances does the FCRA preempt state law. For example, a state law in direct conflict with any of the following provisions of the FCRA would be preempted:

Permissible purposes of consumer reports (15 U.S.C. 1681b)
Procedure in case of disputed accuracy (15 U.S.C. 1681i)
Requirements on users of consumer reports (15 U.S.C. 1681m)
Requirements relating to information contained in consumer reports (15 U.S.C. 1681c)
Administrative enforcement (15 U.S.C. 1681s)
Disclosures to consumers (15 U.S.C. 1681g)

Aside from the provisions identified above, other state laws that are not inconsistent with the FCRA are generally not preempted. As a result, states retain substantial flexibility to pass laws involving consumer reporting to reflect emerging problems affecting their local economies and citizens.

You can access the CFPB's interpretive rule here .

CFPB Issues Update to its UDAAP Examination Procedures

michael@mchristiansconsulting.com (Michael Christians) — Sat, 26 Mar 2022 17:01:15 GMT

On March 16th, the Consumer Financial Protection Bureau ("CFPB") issued an update to its UDAAP examination procedures. UDAAP of course refers to unfair, deceptive or abusive acts or practices.

An act or practice is considered unfair when:

It causes or is likely to cause substantial injury to consumers,
The injury is not reasonably avoidable by consumers, and
The injury is not outweighed by countervailing benefits to consumers or to competition.

An act or practice is considered deceptive when the:

Act or practice misleads or is likely to mislead the consumer,
Consumer's interpretation is reasonable under the circumstances, and
Misleading act or practice is material.

An act or practice is considered abusive when it:

Materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service, or
Takes unreasonable advantage of a consumer's -
Lack of understanding of the material risks, costs or conditions of the product or service,
Inability to protect his or her interests in selecting or using a consumer financial product or service, or
Reasonable reliance on a covered person to act in his or her interests.

The updates essentially expand anti-discrimination principles beyond traditional credit products. While anti-discrimination considerations previously focused largely on credit products (under the Equal Credit Opportunity Act and the Fair Housing Act), the CFPB will now expand these same concepts to all financial products and services, including, but not limited to deposit accounts, add-on products and services, fees charged to consumers, processing of consumer payments and remittances, and advertising.

Financial institutions can find the CFPB's updated UDAAP examination procedures here .

Federal Credit Unions Will Receive More Flexibility to Expel Members for Fraudulent or Abusive Conduct

michael@mchristiansconsulting.com (Michael Christians) — Sat, 26 Mar 2022 16:44:35 GMT

Folded into the $1.5 trillion omnibus spending package signed into law by President Biden on Tuesday, March 15th was the Credit Union Governance Modernization Act of 2022 (the "Act"). The legislation is designed to give Federal Credit Unions ("FCUs") more flexibility in expelling members for fraudulent or abusive conduct.

Currently, under Section 118 of the Federal Credit Union Act, FCU's may only expel a member for fraudulent or abusive conduct with a 2/3 vote of credit union members present at a special meeting. Under the Act, FCU's will be able to expel a member for cause with a simple 2/3 majority vote of a quorum of the board of directors ("Board"), so long as the following conditions have been met:

The FCU has an established expulsion policy that has been distributed to all members
The member is notified in advance of the pending expulsion along with the associated reason(s)
The member was permitted to request a hearing in front of the FCU's Board within 60 days
If the Board votes to expel, written notice to that effect was provided to the member
An expelled member is permitted the opportunity to be reinstated upon a majority vote of a quorum of the Board

The National Credit Union Administration has 18 months to promulgate the regulations necessary to enforce the Act.

CFPB Publishes Semiannual Regulatory Agenda

michael@mchristiansconsulting.com (Michael Christians) — Sun, 06 Feb 2022 00:33:31 GMT

On January 31st, the Consumer Financial Protection Bureau (CFPB) published its semiannual regulatory agenda. Per the agenda, the CFPB anticipates having the following regulatory matters under consideration during the time period from November 1, 2021 to October 31, 2022:

Finalizing its proposed rule to implement Section 1071 of the Dodd-Frank Act. The rule would require certain financial institutions to collect and report information in connection with applications for credit submitted by women-owned, minority-owned and small businesses
Development of a proposed rule that would require covered financial institutions to make transaction data and other information concerning consumer financial products and services available to consumers upon request. Making this information available to consumers in a standardized format is increasingly important at a time when many lenders are using alternative data to make credit decisions
Continued rulemaking in the area of Property Assessed Clean Energy (PACE) financing. PACE financing is a funding mechanism available to homeowners to make energy efficient home improvements, repayable through property tax assessments vs. traditional financing
Participation in interagency rulemaking that will implement quality control standards for automated valuation models (AVMs)
Conducting an assessment of changes made to the Home Mortgage Disclosure Act (HMDA) and Regulation C in January 2018

NCUA Issues Proposed Rule on Succession Planning

michael@mchristiansconsulting.com (Michael Christians) — Sun, 06 Feb 2022 00:26:51 GMT

On February 3rd, the National Credit Union Administration (NCUA) issued a proposed rule that would require the board of directors of each federally chartered credit union (FCU) to establish and adhere to processes for succession planning.

Under the proposed rule, each FCU's board of directors would be required to approve a written succession plan applicable to officers of the board, management officials and members of the executive, supervisory and credit committees.

Each FCU's succession plan must include, at a minimum:

Identification of key positions covered by the plan,
The general competencies and skills required for those positions, and
Strategies to fill vacancies.

Comments on the proposed rule must be received by April 4, 2022.

CFPB Updates Rural and Underserved Areas and Counties List for 2022

michael@mchristiansconsulting.com (Michael Christians) — Wed, 02 Feb 2022 18:55:43 GMT

The Consumer Financial Protection Bureau (CFPB) recently announced that it has updated its list of rural and underserved areas and counties for purposes of applying certain regulatory provisions related to higher priced mortgage loans and qualified mortgages in 2022.

Under Section 1026.35 of Regulation Z, a creditor must generally establish an escrow account for the payment of property taxes and homeowner's insurance premiums in connection with a higher priced mortgage loan secured by a first lien. Small creditors that extended at least one covered transaction in a rural or underserved area in either of the two preceding calendar years are exempt from this escrow requirement in 2022.

Under Section 1026.43 of Regulation Z, the loan contract in connection with a qualified mortgage must generally call for regular, periodic payments (e.g., no balloon payment). Small creditors that extended at least one first-lien covered transaction in a rural or underserved area in either of the two preceding calendar years are permitted to originate a qualified mortgage with a balloon payment in 2022.

The updated list can be found here .

NCUA Outlines 2022 Supervisory Priorities, FFIEC Issues Statement of Principles on Examination Information Requests

michael@mchristiansconsulting.com (Michael Christians) — Sat, 22 Jan 2022 23:27:03 GMT

In a letter to credit unions dated January 18th, the National Credit Union Administration (NCUA) outlined its supervisory priorities for the upcoming year. They include:

Credit Risk Management
Information Security (Cybersecurity)
Payment Systems
Bank Secrecy Act Compliance
Capital Adequacy and Risk Based Capital Rule Implementation
Loan Loss Reserving
Loan Participations
Fraud
LIBOR Transition; and
Interest Rate Risk

In addition, the NCUA plans to focus on the following areas related to consumer financial protection:

COVID-19 Pandemic
Fair Lending
Servicemembers Civil Relief Act
Fair Credit Reporting Act; and
Overdraft Programs

On January 21st, the Federal Financial Institutions Examination Council (FFIEC), whose members include the NCUA, OCC, Federal Reserve, FDIC and CFPB, issued a statement announcing best practices for requesting examination information from supervised entities. These include:

Information requests should be risk-focused and relevant to the examination.
Supervised institutions should be given sufficient time to produce new or additional requested information.
Examiners should coordinate information requests among the examination team to avoid duplicative and/or redundant requests.
Information requests should be made through the supervised institution's designated regulatory examination point-of-contact, if applicable, to avoid placing burden on other institution staff.
Information requests and supplemental information requests should be clearly articulated in writing.

CFPB Issues Final Rule to Facilitate Transition from LIBOR

michael@mchristiansconsulting.com (Michael Christians) — Tue, 28 Dec 2021 21:06:54 GMT

As we've blogged about previously, the 1-month, 3-month, 6-month and 12-month USD LIBOR indices will cease publication on June 30, 2023. To facilitate a smooth transition in advance of the cessation date, on December 7, 2021, the Consumer Financial Protection Bureau issued a final rule covering the following:

When financial institutions must cease referencing LIBOR in connection with new loan contracts,
Factors to consider when selecting a replacement index for existing credit products,
Transition requirements for credit card accounts,
Transition requirements for home equity lines of credit, and
Transition requirements for adjustable-rate mortgage loans.

Even a high-level summary of the rule is too voluminous to include in a blog. For that reason, Michael Christians Consulting, LLC has prepared a white paper that outlines the major components of the final rule. This white paper is available free of charge and will prove to be a very helpful resource for those financial institutions looking to transition one or more of their existing credit products away from the LIBOR index.

If you are interested in receiving a free copy of the white paper, please contact us at michael@mchristiansconsulting.com.

Additional Threshold Adjustments from the CFPB

michael@mchristiansconsulting.com (Michael Christians) — Thu, 23 Dec 2021 19:44:40 GMT

In two final rules issued by the Consumer Financial Protection Bureau (CFPB) on December 23rd, the agency adjusted the asset thresholds under the Home Mortgage Disclosure Act's institutional coverage test and Regulation Z's definition of a small creditor.

Under the Home Mortgage Disclosure Act, creditors that meet a four-part institutional coverage test are required to collect and report data in connection with their mortgage lending activities. One component of this test is that the institution must have assets above a certain threshold as of December 31st of the preceding calendar year. For 2022, this asset threshold will increase from $48 million to $50 million.

There are a number of benefits available to small creditors under Regulation Z. First, a small creditor is permitted to originate a qualified mortgage regardless of the borrower's debt-to-income ratio. In addition, small creditors are exempt from the requirement to establish an escrow account in connection with a higher priced mortgage loan secured by a first lien. By definition, small creditors must have assets below a certain threshold at the end of the preceding calendar year. For 2022, this asset threshold will increase from $2.230 billion to $2.336 billion.

CFPB Publishes Supervisory Highlights for Fall 2021

Tue, 14 Dec 2021 17:12:24 GMT

The Consumer Financial Protection Bureau's (CFPB) supervisory highlights covering examinations completed between January 2021 and June 2021 was published in the Federal Register on December 14th. The supervisory highlights note examination findings in the areas of credit cards, debt collection, deposit accounts, fair lending, mortgage servicing, payday lending, prepaid accounts, and remittance transfers. Some of the more notable observations are identified below.

Open-End Credit Billing Error Resolution Requirements

Regulation Z generally requires financial institutions to resolve a billing error in connection with a consumer’s open-end credit plan within two full billing cycles. The CFPB identified several instances in which institutions failed to adhere to this timing requirement. By way of reminder, on April 1, 2021, the CFPB rescinded its COVID-19 related policy statement providing financial institutions with additional time to resolve billing errors.

Error Resolution Requirements for P2P Transfers

The CFPB identified several instances in which financial institutions failed to investigate errors in connection with person-to-person transfers (e.g., Venmo, PayPal, etc.) Remember that Regulation E defines an electronic fund transfer (EFT) as any electronically initiated transfer for the purpose of authorizing a financial institution to credit or debit a consumer’s account and unauthorized EFTs must generally be investigated within 10 business days.

Fair Lending

There were a couple of interesting observations made by the CFPB when it comes to fair lending. First, the agency identified pricing discrimination in connection with applications for credit submitted by African American and female borrowers. In several instances, financial institutions failed to grant pricing exceptions to these applicants, yet regularly granted pricing exceptions to others. Second, examiners noted that some institutions improperly requested an applicant’s religious affiliation in connection with his/her application for small business credit.

Mortgage Servicing

There were also several issues identified by the CFPB related to mortgage servicing, including, but not limited to:

Mortgage servicers that imposed late fees and other charges against borrowers in connection with their forbearance programs, in direct violation of the CARES Act
Failing to evaluate a borrower’s completed application for loss mitigation assistance within 30 days
Failing to automatically terminate private mortgage insurance as required by the Homeowner’s Protection Act when the borrower’s loan balance reaches 78% of the original property value.

You can find the CFPB’s full report here .

Updated Regulation Z Thresholds for 2022

michael@mchristiansconsulting.com (Michael Christians) — Tue, 30 Nov 2021 23:21:23 GMT

Each year, the Consumer Financial Protection Bureau (CFPB) is required to adjust certain thresholds under Regulation Z to reflect any increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) or the Consumer Price Index for All Urban Consumers (CPI-U). The following revised thresholds will be effective January 1, 2022.

Safe Harbor Amount for Credit Card Penalty Fees

The penalty fees assessed to a cardholder for a violation of the terms and/or conditions of a credit card account should not exceed certain amounts. For 2022, these amounts will be:

$30.00 for an initial violation; and
$41.00 for any subsequent violation.

Appraisal Exemption Threshold for Higher Priced Mortgage Loans

In connection with a higher priced mortgage loan, a creditor must generally obtain a written appraisal of the subject property. However, there are certain instances in which the use of an alternative method of valuation is permissible. One of these is dependent upon the amount of the loan. For 2022, a creditor may use an alternative method of valuation in connection with a higher priced mortgage loan of $28,500 or less.

Points and Fees Threshold for High-Cost Mortgages

A high-cost mortgage is a consumer credit transaction secured by the borrower's principal dwelling that meets one of three tests. One of these tests is contingent upon the points and fees charged in connection with the transaction. For 2022, a loan is considered high-cost if the points and fees charged in connection with the transaction exceed:

5% of the loan amount for loans of $22,969 or greater
For loans less than $22,969, the lesser of -
8% of the loan amount, or
$1,148

Loan Amounts for the Qualified Mortgage Pricing Test

One element of the CFPB's revised definition of a qualified mortgage is that the APR charged in connection with the transaction cannot exceed the value of the Average Prime Offer Rate (APOR) index by certain thresholds, dependent upon loan amount.

In 2022, for first lien loans, the applicable thresholds will be:

2.25% or more for loans greater than or equal to $114,847
3.50% or more for loans greater than or equal to $68,908 but less than $114,847
6.50% or more for loans less than $68,908

The applicable thresholds for subordinate lien loans in the new year will be:

3.50% or more for loans greater than or equal to $68,908
6.50% or more for loans less than $68,908

Points and Fees Thresholds for Qualified Mortgages

One additional element of the qualified mortgage test is a limitation on the amount of points and fees that may be charged in connection with the transaction. The revised points and fees caps for 2022 are:

For loans greater than $114,847
3% of the loan amount
For loans between $68,908 and $114,847
$3,445
For loans between $22,969 and $68,908
5% of the loan amount
For loans between $14,356 and $22,969
$1,148
For loans less than $14,356
8% of the loan amount

A Proposed Rule Eleven Years in the Making

michael@mchristiansconsulting.com (Michael Christians) — Wed, 01 Sep 2021 19:09:51 GMT

On September 1st, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule to implement the small business data collection requirements found in Section 1071 of the Dodd-Frank Act. By way of reminder, the Dodd-Frank Act was signed into law on July 21, 2010.

Under the proposed rule, the data collection requirements would apply to any financial institution that originated at least 25 covered transactions to small businesses in each of the two preceding calendar years. The rule defines a covered transaction as an extension of credit primarily for a business, commercial or agricultural purpose. In addition, the rule defines a small business as one that had $5 million or less in gross annual revenue during its preceding fiscal year.

The proposal would require covered financial institutions to collect and report the following data in connection with applications for small business credit:

Unique identifier for the loan or application
Application date
Application method
Application recipient
Credit type
Credit purpose
Amount applied for
Amount approved or originated
Action taken
Action taken date
Denial reasons (if applicable)
Pricing information
The following information about the small business applicant -
Census tract where its principal office is located
Gross annual revenue
NAICS code
Number of employees
Length of time in operation
Whether the business is minority-owned or women-owned
Number of principal owners
Ethnicity, race and sex of principal owners

Under the rule, covered financial institutions would collect this information over the course of a calendar year with submission to the CFPB not later than June 1st of the following year. Information would then be made publicly available following certain modifications to protect applicant privacy.

If finalized as proposed, compliance with the rule's requirements would be mandatory 18 months following its publication in the Federal Register.

CFPB Provides Guidance on Juneteenth...49 Days Later

michael@mchristiansconsulting.com (Michael Christians) — Sun, 08 Aug 2021 21:53:30 GMT

On August 5 ^th , the Consumer Financial Protection Bureau (CFPB) published an interpretive rule providing lenders guidance related to the new Juneteenth federal holiday. Its hard to assign value to a rulemaking that comes 49 days too late; however, I suppose it will prove insightful the next time Congress gets around to adding another federal holiday. Note: the last federal holiday added prior to Juneteenth was in 1983 when Congress officially recognized Dr. Martin Luther King Jr.’s birthday as a legal public holiday.

Four different timing provisions under Regulation Z exclude legal public holidays from the definition of the term business day. These include:

· Providing a consumer three days to cancel a transaction subject to the right of rescission,

· Ensuring a consumer receives his/her Loan Estimate at least seven business days before consummation,

· Ensuring a consumer receives any revised Loan Estimate at least four business days before consummation, and

· Ensuring a consumer receives his/her Closing Disclosure at least three business days before consummation.

The CFPB’s interpretive rule states that the applicable list of legal public holidays is the one in effect at the time the waiting period begins to run. Let’s consider a couple of examples…

Right of Rescission

The consumer’s rescission period began Wednesday, June 16 ^th , before Juneteenth was officially added as a legal public holiday. The creditor disclosed Saturday, June 19 ^th as the end of the rescission period. This is permissible because, at the time the rescission period began to run, June 19 ^th was not yet a legal public holiday. Had the consumer’s rescission period began to run anytime after June 17 ^th (the day Juneteenth officially became a legal public holiday), the creditor would have been required to exclude June 19 ^th as a business day.

Delivery of the Closing Disclosure Prior to Consummation

The creditor provided a Closing Disclosure to the consumer in-person on Thursday, June 17 ^th . Closing could occur at any time on or after June 21 ^st because, at the time the three-day waiting period began to run, June 19 ^th was not yet a legal public holiday. Had the waiting period began to run anytime after June 17 ^th , the creditor would have been required to exclude June 19 ^th as a business day.

Nothing in the interpretive rule prohibits a creditor from excluding a newly identified legal public holiday from the definition of business day prior to its “effective” date. This is because nothing in Regulation Z prohibits a creditor from providing a consumer with a longer rescission period or longer waiting period prior to consummation.

Recent Updates from the CFPB

michael@mchristiansconsulting.com (Michael Christians) — Mon, 02 Aug 2021 17:08:23 GMT

Rulemaking Agenda

The Consumer Financial Protection Bureau (CFPB) has published its most recent rulemaking agenda which identifies the regulatory matters the agency is currently pursuing. Items on the CFPB’s agenda through the fall of 2021 include:

· Issuing a Notice of Proposed Rulemaking (NPRM) in September to implement Section 1071 of the Dodd-Frank Act. Section 1071 requires financial institutions to collect and report certain information in connection with applications for credit submitted by women-owned, minority-owned, and small businesses

· Considering an NPRM that would prescribe regulations related to Property Assessed Clean Energy (PACE) financing. PACE financing allows a consumer to make energy efficiency and water conservation improvements to their home through a financing mechanism repaid through future property tax assessments

· Pursuing a joint agency rulemaking that would establish quality control standards for automated valuation models (AVMs)

· Issuing a final rule in January 2022 to help facilitate the transition away from the LIBOR index. Remember that the 1-day, 1-month, 6-month and 1-year LIBOR indices will cease publication in June 2023

· Completing a review of the changes made to the Home Mortgage Disclosure Act (HMDA) and Regulation C in 2018

Fair Debt Collection Practices Act (FDCPA)

The CFPB issued two final rules in late 2020 designed to modernize the 40-year-old FDCPA. In April 2021, the agency issued a proposed rule that would have delayed the effective date of these changes until January 29, 2022. However, after further consideration, the Bureau does not believe that such an extension is necessary. As a result, the CFPB will allow the FDCPA changes to take effect on their regularly scheduled effective date, November 30, 2021.

Additional Servicing Protections for Borrowers Affected by the COVID-19 Pandemic

michael@mchristiansconsulting.com (Michael Christians) — Mon, 02 Aug 2021 17:06:20 GMT

The Consumer Financial Protection Bureau (CFPB) has issued a final rule amending a number of the servicing provisions found in Regulation X to provide additional relief for borrowers impacted by the COVID-19 pandemic. These changes take effect on August 31, 2021.

Early Intervention Requirements

Creditors must now provide additional information to delinquent borrowers during their live contact as required under RESPA’s early intervention requirements. If the borrower is not currently in a forbearance program at the time of live contact, the creditor must:

· Inform the borrower that forbearance programs are available for those experiencing a COVID-19 related financial hardship

· Briefly describe the programs that are available; and

· Inform the borrower as to how he/she can find contact information for homeownership counseling services

If the borrower is already in a forbearance program at the time of live contact, the creditor must:

· Identify when the borrower’s current forbearance program will end

· Provide a list of additional loss mitigation options that may be available to the borrower at that time; and

· Inform the borrower as to how he/she can find contact information for homeownership counseling services

Loss Mitigation: Temporary Foreclosure Procedural Safeguards

Through at least the end of 2021, before referring a 120+ day delinquent account for foreclosure, a creditor must ensure at least one of the following additional procedural safeguards has been met:

· The borrower was evaluated for loss mitigation assistance based on his/her submission of a complete application

· The property securing the mortgage loan has been abandoned

· The borrower has been unresponsive (for at least 90 days) to the creditor’s outreach

Loss Mitigation: Streamlined Loan Modifications

A creditor may provide a loan modification based on the borrower’s submission of an incomplete application for loss mitigation assistance so long as:

· The modification does not extend the borrower’s loan term for more than 40 years

· The modification does not increase the borrower’s principal and interest payment

· Interest does not accrue on any amount for which repayment is delayed

· The streamlined modification is available to any borrower facing a COVID-19 related financial hardship

· The modification ends any pre-existing delinquency; and

· The borrower is not charged a fee to participate in the modification

Loss Mitigation: Reasonable Due Diligence

For borrowers currently participating in a short-term forbearance program, not later than 30 days before the scheduled end date of the forbearance program, a creditor must contact the borrower to determine whether he/she plans to submit a complete application for loss mitigation assistance.

CFPB Officially Delays QM Changes

michael@mchristiansconsulting.com (Michael Christians) — Sun, 02 May 2021 15:43:14 GMT

On April 27th, the Consumer Financial Protection Bureau (CFPB) issued a final rule that extends the mandatory compliance date with the changes to the general definition of a Qualified Mortgage (QM) from July 1, 2021, to October 1, 2022. I've previously blogged about these changes here . The final rule also extends the sunset date for the eligible loan exception (a/k/a the GSE patch) to October 1, 2022.

For applications received prior to October 1, 2022, financial institutions have the option of following the new pricing-based test for a QM or they can continue to rely upon the current definition of a QM which limits the borrower's DTI ratio to 43%. For applications received on or after October 1, 2022, only the new pricing-based test for a QM will be available.

Feel Good Friday for Debt Collectors

michael@mchristiansconsulting.com (Michael Christians) — Fri, 09 Apr 2021 15:40:57 GMT

Those of you in the debt collection business have a couple of reasons to celebrate today. If you’re on the edge of your seat as to why, read on…

Telephone Consumer Protection Act (TCPA)

The United States Supreme Court (SCOTUS) recently dealt a significant blow to plaintiff’s attorneys looking to pad their retirement accounts off TCPA litigation. Since 1991, the TCPA has prohibited businesses from using auto-dialers to contact consumers without first getting their permission. An auto-dialer is a device that has the capacity to:

· Store or produce telephone numbers to be called, using a random or sequential number generator, and

· Dial such numbers.

In Facebook, Inc. v. Noah Duguid, SCOTUS ruled that for the TCPA’s auto-dialer restrictions to apply, the calling system utilized must use a random or sequential number generator to both store and produce numbers to call. The unanimous decision dramatically limits the reach of the TCPA and answers the question once and for all as to whether a cell phone could be classified as an auto-dialer.

Fair Debt Collection Practices Act (FDCPA)

On October 30, 2020, the Consumer Financial Protection Bureau (CFPB) issued a final rule amending certain portions of the FDCPA. I previously blogged about those changes here .

On April 7 ^th , the CFPB issued a proposed rule that would delay the effective date of those changes from November 30, 2021 to January 29, 2022. In its announcement, the CFPB said that a delay would allow stakeholders affected by the pandemic additional time to review and implement the amendments.

CFPB Proposes Additional Protections for Homeowners Impacted by COVID-19

michael@mchristiansconsulting.com (Michael Christians) — Thu, 08 Apr 2021 17:22:32 GMT

On April 5, 2021, the Consumer Financial Protection Bureau (CFPB) proposed changes to the mortgage servicing rules found in Regulation X that would provide additional protections for homeowners affected by the COVID-19 pandemic. If finalized, these additional protections would be effective beginning August 31, 2021.

Early Intervention Requirements (Section 1024.39)

The CFPB's proposal would require the following in connection with a mortgage servicer's live contact responsibilities under Regulation X:

For borrowers not yet in a forbearance plan at the time of live contact, the servicer must ask the borrower if he/she is experiencing a COVID-19 related financial hardship. If the borrower answers in the affirmative, the servicer must provide a list of available forbearance options.
For borrowers already in a forbearance plan at the time of live contact, the servicer must identify the date that the current forbearance program will end and describe any additional loss mitigation options that may be available.

Loss Mitigation Rules (Section 1024.41)

The proposed rule also makes changes to the loss mitigation rules found in Regulation X. First, if a borrower was offered a short-term forbearance option based on an incomplete loss mitigation application, the servicer would be required to contact the borrower to determine if he/she wants to complete the application and be considered for a full evaluation of their loss mitigation options. In addition, the proposed rule would allow a servicer to offer a loan modification in response to a COVID-19 related financial hardship based on an incomplete application for loss mitigation assistance under the following circumstances:

The modification would extend the term of the loan by not more than 480 months,
The borrower's principal/interest payment will not increase,
Any amount deferred under the modification will not accrue interest,
The servicer will not charge a fee in connection with the modification,
Any existing fees (e.g. late fees) are waived by the servicer, and
The modification resolves the borrower's delinquency.

Foreclosure Referral (Section 1024.41)

Finally, the proposed rule adds a new temporary blanket exception that prohibits a servicer from making the first filing for foreclosure until after December 31, 2021.

CFPB Rescinds Policy Statement on Abusive Acts and/or Practices, Expands Scope of Regulation B’s Prohibition Against Sex Discrimination

michael@mchristiansconsulting.com (Michael Christians) — Sun, 21 Mar 2021 14:37:56 GMT

Policy Statement on Abusive Acts and/or Practices

On March 19 ^th , the Consumer Financial Protection Bureau (CFPB) rescinded its January 2020 policy statement on abusive acts and/or practices. By way of reminder, the January 2020 policy statement provided that the Bureau would:

· Cite a financial institution’s conduct as abusive only if the harm to consumers outweighed the benefit to consumers,

· Not cite a financial institution’s conduct as abusive if the conduct could also be considered unfair and/or deceptive, and

· Not seek monetary relief for abusiveness violations if a financial institution was making a good-faith effort to comply with the abusiveness standard.

In its rescission statement, the CFPB indicated that on a go-forward basis it will exercise the full scope of its supervisory and enforcement authority to identify and remediate abusive acts and/or practices.

Regulation B’s Prohibition Against Sex Discrimination

Section 1002.6 of Regulation B prohibits a financial institution from considering an applicant’s sex in any aspect of a credit transaction. On March 9 ^th , the CFPB issued an interpretive rule clarifying that this prohibition extends to discrimination on the basis of sexual orientation and/or gender identity.

The interpretive rule was effective on March 16 ^th upon its publication in the Federal Register.

CFPB Delays Changes to the ATR/QM Rule; NCUA Updates Share Insurance Requirements

michael@mchristiansconsulting.com (Michael Christians) — Sat, 06 Mar 2021 17:31:20 GMT

Ability to Repay / Qualified Mortgages

On December 10, 2020, the Consumer Financial Protection Bureau (CFPB) issued two final rules related to the Ability to Repay / Qualified Mortgage requirements found in Regulation Z. I blogged previously about those changes here .

The December 2020 rulemaking established a new category of Qualified Mortgages, the Seasoned Qualified Mortgage. That rule took effect on March 1, 2021. In a statement released by the agency on February 23rd, the CFPB indicated that it is considering whether to initiate a rulemaking to revisit this new category of Qualified Mortgages. In the interim, that rule remains in place.

The December 2020 rulemaking also made changes to the general definition of a Qualified Mortgage. Specifically, it eliminated the 43% maximum debt-to-income ratio requirement and established a new four-part test for determining whether a loan may be classified as a Qualified Mortgage. The mandatory compliance date for this change was set for July 1st.

On March 2nd, the CFPB issued a rule proposing to delay this mandatory compliance date from July 1st to October 1, 2022. The proposed rule also extends the sunset date of the eligible loan exception from July 1st to October 1, 2022. Remember, the eligible loan exception allows your institution to originate a Qualified Mortgage even if the borrower's debt-to-income ratio exceeds 43% so long as the loan is eligible for sale to the secondary market at the time of consummation.

Comments on the proposed rule must be received by the CFPB on or before April 5th.

NCUA's Share Insurance Requirements

Under Part 745 of the National Credit Union Administration's (NCUA) rules and regulations, in order for a joint account to qualify for separate share insurance coverage, the account must be evidenced by a signature card and/or membership agreement personally signed by each owner.

On February 24th, the NCUA issued a final rule that provides alternative methods by which a joint account may qualify for separate share insurance coverage. Absent a signature card and/or membership agreement personally signed by each owner, a joint account may be evidenced by:

The issuance of an access device (e.g., debit card) to more than one party; or
Historical usage of the account by more than one party.

These changes to Part 745 are effective on March 26, 2021.

CFPB Adds Additional Exemption to HPML Escrow Requirement

michael@mchristiansconsulting.com (Michael Christians) — Sat, 20 Feb 2021 16:18:07 GMT

On January 19th, the Consumer Financial Protection Bureau (CFPB) issued a final rule adding an additional exemption for certain financial institutions to the escrow requirement for higher priced mortgage loans (HPMLs) secured by a first lien.

By definition, an HPML is a closed-end consumer credit transaction secured by the borrower's principal dwelling if the APR charged in connection with the loan exceeds the current value of the Average Prime Offer Rate by:

1.5% or more for non-jumbo first lien loans,
2.5% or more for jumbo first lien loans, or
3.5% or more for subordinate lien loans

Regulation Z requires a creditor to establish an escrow account for property taxes and hazard insurance premiums in connection with an HPML secured by a first lien.

Currently, a small creditor that originated at least one covered transaction in a rural and/or underserved area in the preceding calendar year is exempt from this escrow requirement. By way of reminder, a small creditor is an institution with assets of less than $2.230 billion that originated 2,000 or fewer covered transactions secured by a first lien in the preceding calendar year.

The CFPB's January 19th rule adds an additional exemption to the first lien HPML escrow requirement. Under the rule, a financial institution that meets the following requirements is exempt from the escrow account requirement so long as the HPML in question will be retained in the institution's portfolio:

The financial institution has assets of less than $10 billion,
During the preceding calendar year, the financial institution originated not more than 1,000 covered transactions secured by a first lien, and
The financial institution originated at least one covered transaction in a rural and/or underserved area in the preceding calendar year.

The final rule was effective as of its date of publication in the Federal Register - Wednesday, February 17th.

Welcome to our new website!

websites@8am.com (Professional Websites) — Wed, 30 Dec 2020 21:12:14 GMT

Welcome to our new website! This site has been professionally designed to be responsive and mobile friendly, so it looks great and is accessible no matter what type or size of device you are using.

Our new website also has an integrated Client Portal, meaning you are able to access your case documents, correspondence, and calendars directly from our website!

If you have any questions, don’t hesitate to contact us today.

It’s a Christmas Miracle! CFPB and NCUA Engage in Late 2020 Rulemaking

Tue, 22 Dec 2020 20:39:00 GMT

On December 22nd, the Consumer Financial Protection Bureau (CFPB) published rulemaking that amends the commentary to both Regulation C / the Home Mortgage Disclosure Act (HMDA) and Regulation Z / the Truth in Lending Act (TILA).

Under Regulation C, a financial institution is required to collect and report HMDA data if it exceeds a certain asset threshold. This threshold is subject to change annually based on any percentage change to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CFPB has announced an increase to this threshold for next year. As a result, financial institutions with assets of more than $48 million as of December 31, 2020 will be required to collect and report HMDA data in calendar year 2021.

Under Regulation Z, a financial institution that is classified as a small creditor:

A financial institution qualifies for small creditor status if it, among other things, had assets of less than $2.202 billion at the end of the preceding calendar year. This threshold is subject to change annually based on any percentage change to the CPI-W. To qualify for small creditor status in 2021, a financial institution must have had assets of less than $2.230 billion as of December 31, 2020.

Also, on December 22nd, the National Credit Union Administration (NCUA) published rulemaking that extends regulatory relief provisions put into place in April in response to the COVID-19 pandemic. Per the NCUA, the following regulatory relief provisions will remain in place until December 31, 2021:

The post It’s a Christmas Miracle! CFPB and NCUA Engage in Late 2020 Rulemaking appeared first on Michael Christians Consulting, LLC .

CFPB Finalizes Changes to the ATR/QM Rule

Mon, 21 Dec 2020 02:52:00 GMT

On December 10th, the Consumer Financial Protection Bureau (CFPB) issued two final rules that make significant changes to Regulation Z’s ability to repay requirements. These changes include:

General Definition of a Qualified Mortgage

Beginning on the final rule’s effective date (July 1, 2021), a QM must meet the following four-part test:

Seasoned QM

The CFPB’s seasoned QM final rule will take effect 60 days following its publication in the Federal Register. For a loan to be considered a seasoned QM, it must meet the following three-part test:

Please contact Michael Christians Consulting, LLC at michael@mchristiansconsulting.com if your institution needs assistance with implementing these changes.

The post CFPB Finalizes Changes to the ATR/QM Rule appeared first on Michael Christians Consulting, LLC .

Consumer Financial Protection Bureau Updates: HPML Appraisal Exemption and Debt Collection Final Rule

Sat, 21 Nov 2020 14:23:00 GMT

One requirement in connection with originating a higher priced mortgage loan (HPML) is that the creditor must obtain a written appraisal of the subject property. However, there are exceptions when the creditor is permitted to rely upon an alternative method of valuation. One of these exceptions is when the extension of credit is equal to or less than a certain dollar amount.

The Consumer Financial Protection Bureau (CFPB) is required to adjust this dollar amount annually based on any changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). On November 18 ^th , the CFPB announced that this amount would remain unchanged at $27,200 through 2021.

On October 30 ^th , the CFPB issued a final rule to amend certain portions of the Fair Debt Collection Practices Act (FDCPA).

While the amendments are too exhaustive to fully detail in this blog post, generally speaking, the final rule:

To learn more about the final rule’s impact on the FDCPA’s requirements, please join me for the following – “An FDCPA for the 21 ^st Century”. I will be conducting one session for community banks on July 23, 2021 at 10:00am CDT and a second session for credit unions on August 12, 2021 at 10:00am CDT. More information is available at www.bankwebinars.com and www.cuwebinars.com .

The post Consumer Financial Protection Bureau Updates: HPML Appraisal Exemption and Debt Collection Final Rule appeared first on Michael Christians Consulting, LLC .

NCUA Extends Annual Meeting Relief, Issues Proposed Rule on Capitalization of Interest

Sat, 21 Nov 2020 14:19:00 GMT

Yesterday, the National Credit Union Administration (NCUA) issued Letter to Federal Credit Unions 20-FCU-04 which extends certain meeting flexibilities during the COVID-19 pandemic.

The letter provides that a federal credit union may adopt, by a two-thirds vote of its board of directors, a bylaw amendment allowing it to hold the following meetings virtually without an in-person quorum:

Certain conditions apply as outlined in the letter. You can access it here .

At its meeting on November 19 ^th , the NCUA issued a proposed rule that would remove the prohibition against the capitalization of interest in connection with loan workouts and modifications. The agency believes this change will provide credit unions even greater flexibility in working with borrowers experiencing economic hardship as a result of the Coronavirus pandemic.

While the proposed rule would remove the capitalization restriction currently found in Appendix B to Part 741, it retains a number of other requirements applicable to loan workouts and modifications. These include:

The post NCUA Extends Annual Meeting Relief, Issues Proposed Rule on Capitalization of Interest appeared first on Michael Christians Consulting, LLC .

NCUA Approves Statement on Supervisory Guidance; FFIEC Issues Proposed Changes to BSA’s Travel Rule

Fri, 30 Oct 2020 16:34:00 GMT

At its board meeting on October 28 ^th , the National Credit Union Administration (NCUA) approved a proposed rule that would codify a 2018 interagency statement on supervisory guidance.

The 2018 statement provides that supervisory guidance does not have the full force and effect of law and that enforcement actions will not be taken on the basis of supervisory guidance. Rather, supervisory guidance lays out appropriate practices consistent with general safety and soundness standards. The statement goes on to provide that examiners will not criticize financial institutions for a “violation” of supervisory guidance. While regulators may reference supervisory guidance in an examination, citations will only be issued in response to violations of law or regulation.

On October 23 ^rd , the Financial Crimes Enforcement Network (FinCEN) issued a proposed rule to update the recordkeeping requirements associated with funds transfers. Currently under the Bank Secrecy Act (BSA), financial institutions are required to collect and retain certain information in connection with each payment order of $3,000 or more.

Under the proposed rule, the recordkeeping threshold for international transactions would be lowered to $250 (for domestic transactions, the recordkeeping threshold would remain unchanged at $3,000). The proposed rule also clarifies that these recordkeeping requirements apply to funds transfers involving virtual and/or digital currencies.

Stay safe and healthy. And have a Happy Halloween!

The post NCUA Approves Statement on Supervisory Guidance; FFIEC Issues Proposed Changes to BSA’s Travel Rule appeared first on Michael Christians Consulting, LLC .

RESPA Section 8 and HMDA Updates from the CFPB

Mon, 19 Oct 2020 17:24:00 GMT

On Wednesday, October 7 ^th the Consumer Financial Protection Bureau (CFPB) issued a set of FAQs pertaining to compliance with Section 8 of the Real Estate Settlement Procedures Act (RESPA).

Generally, Section 8 of RESPA prohibits kickbacks and unearned fees. A kickback is defined as an arrangement in which a person gives or accepts a fee, kickback, or other thing of value in exchange for the referral of settlement service business involving a federally related mortgage loan. An unearned fee is defined as a fee for which no or nominal services are performed.

The FAQ document also provides extensive guidance with regard to the permissibility of marketing service agreements (MSA’s).

The CFPB’s FAQ document can be found here .

In addition, on Monday, October 19 ^th the CFPB published its regulatory and reporting overview reference chart for 2021 HMDA reportable data. The chart identifies the 48 data points required to be collected and reported in connection with each HMDA reportable transaction. Furthermore, it provides clear and concise filing instructions (e.g. the reporting codes applicable to each data point) and when a financial institution may report “N/A” in connection with a particular data point.

The CFPB’s 2021 HMDA reference chart is available here .

The post RESPA Section 8 and HMDA Updates from the CFPB appeared first on Michael Christians Consulting, LLC .

CFPB Proposes a New Category of Qualified Mortgages – The Seasoned QM

Fri, 28 Aug 2020 02:43:00 GMT

On August 18th, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule to add an additional category of qualified mortgages (QM’s) to Regulation Z’s ability to repay requirements.

Under the proposed rule, a loan would be classified as a Seasoned QM if it meets certain product limitations, satisfies certain underwriting requirements and meets certain standards during a 36-month seasoning period.

Product Limitations

The following product restrictions would apply to a Seasoned QM:

Underwriting Requirements

Eligibility for Seasoned QM status would require the creditor to have considered the borrower’s debt-to-income ratio or residual income during the initial underwrite. In addition, the creditor must have considered the borrower’s debt obligations including his/her monthly payment for mortgage-related obligations.

Seasoning Period Standards

A Seasoned QM must be held in the creditor’s portfolio until the end of a 36-month seasoning period which begins on the date upon which the first periodic payment is due after consummation. During this seasoning period, the loan could have no more than two delinquencies of 30 days or more and no delinquencies of 60 days or more.

Any temporary payment accommodations extended as a result of a disaster or pandemic-related national emergency would not disqualify a loan from becoming a Seasoned QM; however, any time period spent in such an accommodation would not count toward the required 36-month seasoning period.

If finalized, the Seasoned QM proposed rule’s effective date would coincide with the effective date of the CFPB’s proposed rule amending the general definition of a qualified mortgage.

Comments on the proposed rule will be accepted for a period of 30 days following its publication in the Federal Register.

The post CFPB Proposes a New Category of Qualified Mortgages – The Seasoned QM appeared first on Michael Christians Consulting, LLC .

CFPB Announces Revised Regulation Z Thresholds for 2021

Tue, 21 Jul 2020 14:15:00 GMT

On July 17th, the Consumer Financial Protection Bureau (CFPB) issued a final rule updating several Regulation Z thresholds for the next calendar year. The final rule is effective January 1, 2021.

Safe Harbor Amount for Credit Card Penalty Fees

Section 1026.52 of Regulation Z establishes a safe harbor for the imposition of penalty fees in connection with a credit card account. To remain in compliance with Section 1026.52, a card issuer may not impose a penalty fee above a certain dollar amount for:

These safe harbor dollar amounts are adjusted annually by the CFPB based on the value of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

In 2021, these safe harbor amounts will remain unchanged at:

Adjustment to the Points and Fees Trigger for High-Cost Mortgages

Section 1026.32 of Regulation Z outlines the three tests that must be applied to determine whether a loan is classified as a high-cost mortgage. The three tests include an APR trigger, a prepayment penalty trigger and a points and fees trigger.

The points and fees trigger provides that if the total points and fees charged in connection with the transaction exceed a certain threshold, the loan will be classified as high-cost. These amounts are adjusted annually by the CFPB based on the value of the Consumer Price Index for all Urban Consumers (CPI-U).

Effective January 1, 2021, if the total points and fees charged in connection with the transaction exceed the following, the loan will be classified as high-cost:

Adjustment to the Qualified Mortgage Limitation on Points and Fees

Section 1026.43 of Regulation Z identifies the requirements a loan must meet to be considered a qualified mortgage. The elements of a qualified mortgage are as follows:

The points and fees caps associated with a qualified mortgage are adjusted annually by the CFPB based on the value of the Consumer Price Index for all Urban Consumers (CPI-U).

Effective January 1, 2021, the points and fees caps for a qualified mortgage will be as follows:

The post CFPB Announces Revised Regulation Z Thresholds for 2021 appeared first on Michael Christians Consulting, LLC .

NCUA Updates its 2020 Supervisory Priorities in Light of the COVID-19 Pandemic

Sat, 18 Jul 2020 20:59:00 GMT

The National Credit Union Administration (NCUA) has updated its supervisory priorities for 2020 in response to economic conditions that have emerged as a result of the COVID-19 pandemic.

Coronavirus Aid, Relief and Economic Security (CARES) Act

The NCUA has added the CARES Act as a supervisory priority to reflect the importance of its provisions, including but not limited to:

Allowance for Loan and Lease Losses

Although credit risk was previously a supervisory priority for the NCUA, the agency is now shifting its focus to address the adequacy of a credit union’s allowance for loan and lease losses in light of the economic downturn resulting from the pandemic.

Serving Hemp-Related Businesses

Credit unions providing financial services to hemp-related businesses can expect examiners to monitor their performance in light of the NCUA’s letter to credit unions issued in June. The letter (20-CU-19) provides additional guidance for credit unions serving hemp-related businesses.

The following items remain supervisory priorities for the NCUA in 2020:

The agency has removed from its supervisory priorities any reference to the current expected credit losses (CECL) accounting methodology.

More information can be found here .

The post NCUA Updates its 2020 Supervisory Priorities in Light of the COVID-19 Pandemic appeared first on Michael Christians Consulting, LLC .

CFPB Issues Final Rules on Mortgage Servicing and Payday Lending

Wed, 08 Jul 2020 16:37:00 GMT

Mortgage Servicing

On June 30th, the Consumer Financial Protection Bureau (“CFPB”) published in the Federal Register an interim final rule lessening the compliance burden associated with offering loss mitigation options under Regulation X to a borrower experiencing a financial hardship as a result of the COVID-19 pandemic.

The rule provides that a servicer may make an offer of loss mitigation assistance based on an incomplete application, provided that all of the following criteria are met:

The rule is effective immediately.

Payday Lending

In October 2017, the CFPB promulgated its payday lending regulations at Part 1041. The regulation had three main requirements:

Today, the CFPB issued a final rule that revokes both the underwriting and information reporting requirements under Part 1041. The payment provisions of the regulation are unaffected by the rule. To assist financial institutions, the CFPB has provided an unofficial and informal redlined version of the rule which is available here .

The post CFPB Issues Final Rules on Mortgage Servicing and Payday Lending appeared first on Michael Christians Consulting, LLC .

New Exception Coming to Escrow Requirement for HPML’s

Fri, 03 Jul 2020 16:13:00 GMT

As required by Section 108 of the Economic Growth, Regulatory Relief and Consumer Protection Act, the Consumer Financial Protection Bureau (CFPB) has issued a proposed rule adding an additional exemption to the escrow requirement associated with certain higher priced mortgage loans (HPMLs).

Under Section 1026.35 of Regulation Z, a financial institution is required to establish an escrow account in connection with an HPML secured by a first lien. The escrow account must remain in place until the earlier of five years following consummation of the transaction or termination of the underlying debt obligation. Currently, only small creditors operating in a rural and/or underserved area are exempt from the escrow requirement.

Under the CFPB’s proposal, a financial institution that meets all of the following criteria would also be exempt from the HPML escrow requirement:
• The institution has assets of $10 billion or less,
• During the preceding calendar year, the institution (together with its affiliates) originated no more than 1,000 covered transactions secured by a first lien,
• During the preceding calendar year, the institution extended at least one loan secured by a first lien in a rural and/or underserved area, and
• The institution does not regularly maintain escrow accounts for its borrowers.

The CFPB will accept comments on the proposed rule for a period of 60 days following its publication in the Federal Register. You can access the proposed rule here .

The post New Exception Coming to Escrow Requirement for HPML’s appeared first on Michael Christians Consulting, LLC .

CFPB Proposes Significant Changes to Regulation Z’s Ability to Repay Requirements

Wed, 24 Jun 2020 19:57:00 GMT

On Monday, the Consumer Financial Protection Bureau (CFPB) made good on its promise to amend the ability to repay requirements found under Regulation Z. Let’s walk through the specifics of the CFPB’s two proposed rules…

Proposed Rule #1: Extension of the GSE Patch

Currently, a creditor may originate a loan as a qualified mortgage (QM) with a debt-to-income (DTI) ratio over 43% under the temporary GSE QM exception, often referred to as “the patch.” The exception provides that if a loan with a DTI ratio that exceeds 43% is eligible for sale to the secondary market at the time of consummation, the loan may be retained in the creditor’s portfolio as a QM so long as the remaining QM requirements are met.

The patch is currently scheduled to sunset on January 10 ^th of next year. In its proposed rule, the CFPB is extending the sunset date of the patch to correspond with the effective date of its proposed amendments to the general definition of a QM (discussed below).

Comments on this proposed rule will be accepted by the CFPB for a period of 30 days following the rule’s publication in the Federal Register.

Proposed Rule #2: Changes to the QM Requirements

Currently, in order for a loan to be considered a QM it must meet the following requirements:

Under the CFPB’s proposed rule, classification of a loan as a QM would be based on a new four-part test.

Product Test
First, the proposed rule retains the requirement that a QM must call for regular, periodic payments and may not have a term that exceeds 30 years.

Points and Fees Test
Second, the proposed rule also retains the requirement that the points and fees charged in connection with a QM may not exceed certain thresholds (determined by loan amount).

Pricing Test
Third, the proposed rule establishes a new pricing test that a loan must meet in order to be considered a QM. Generally speaking, the annual percentage rate (APR) charged in connection with a QM may not exceed the value of the Average Prime Offer Rate (APOR) index by more than 2%. The rule establishes alternative thresholds for first lien loans of less than $109,898 and subordinate lien loans.

Underwriting Test
Finally, while the proposed rule eliminates the requirement that the borrower’s DTI ratio not exceed 43%, it does require the creditor to consider and verify the borrower’s income, assets, and debt obligations.

The rule does away with the overly prescriptive underwriting requirements found in Appendix Q. In its place, the rule establishes a new safe harbor for creditors when it comes to the verification requirement. The rule proposes that a creditor who adheres to underwriting standards promulgated by Fannie Mae, Freddie Mac, the Federal Housing Administration, the United States Department of Veterans Affairs or the United States Department of Agriculture will have successfully verified the borrower’s income, assets and debt obligations for purposes of the ability to repay rule.

In addition, the rule requests comment on the following alternative approaches to the underwriting test:

Comments on this proposed rule will be accepted by the CFPB for a period of 60 days following the rule’s publication in the Federal Register.

The post CFPB Proposes Significant Changes to Regulation Z’s Ability to Repay Requirements appeared first on Michael Christians Consulting, LLC .

CFPB Factsheet on Disclosure of Title Insurance Premiums

Tue, 09 Jun 2020 21:38:00 GMT

On June 9th, the Consumer Financial Protection Bureau (CFPB) published guidance for financial institutions on how to properly disclose title insurance premiums under the Integrated Disclosure Rule (TRID). You can find the CFPB’s fact sheet here .

There are two common types of title insurance applicable to a residential real estate transaction. The first is lender’s title insurance, which protects the creditor in the event of a cloud on title. The second is owner’s title insurance, which protects the borrower in the event of a cloud on title. While creditors generally require a lender’s title insurance policy, the purchase of an owner’s title insurance policy is more often than not at the discretion of the borrower.

The cost associated with a lender’s title insurance policy is disclosed on both the Loan Estimate and the Closing Disclosure under Services Borrower Did/Did Not Shop For (as applicable) in the following manner:
Title – Premium for Lender’s Coverage

The cost associated with an optional owner’s title insurance policy is disclosed on both the Loan Estimate and the Closing Disclosure under Other Costs in the following manner:
Title – Owner’s Title Policy (Optional)

In some instances, a discounted rate is available if both a lender’s title insurance policy and an owner’s title insurance policy are issued simultaneously by the same title insurance company. The CFPB’s factsheet identifies the proper way to disclose such a simultaneous or single issue title insurance policy under TRID. The creditor should disclose the premium for the owner’s policy according to the following formula: (full owner’s policy premium + simultaneous lender’s policy premium) – full lender’s premium.

For example, assume that the premium associated with the owner’s policy is $2,568 and the title insurer will provide a simultaneous lender’s policy for an additional $200. If the policies were purchased separately, the lender’s policy would cost $1,175. The creditor should disclose the full amount of the lender’s policy premium as $1,175. The owner’s policy premium is calculated as follows: ($2,568 + $200) – $1,175 = $1,593.

Finally, the CFPB’s fact sheet provides that in some instances it may be permissible to disclose the owner’s policy premium as a negative number. If the full cost of the lender’s policy alone is more than the cost of the owner’s policy premium plus the simultaneous issue premium for the lender’s policy, then using the formula identified above the owner’s policy premium would be disclosed as a negative number.

Don’t hesitate to reach out to Michael Christians Consulting, LLC with any questions you may have!

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The Labor Associated with LIBOR

Sun, 07 Jun 2020 22:08:00 GMT

I’ve blogged previously about the industry’s transition away from the LIBOR index. However, recent rulemaking from our friends at the Consumer Financial Protection Bureau (CFPB) requires us to return to the topic once more.

First, some background. LIBOR stands for the London Interbank Offered Rate. It is an index used by many financial institutions in connection with their adjustable rate mortgages, home equity lines of credit and credit cards. The UK’s Financial Conduct Authority has stated that publication of the index is not guaranteed beyond 2021.

On June 4th, the CFPB issued both a proposed rule and an FAQ document to help the industry prepare for discontinuation of the LIBOR index. I’ll discuss the content of both based on product type.

Adjustable Rate Mortgages (ARMs)
Financial institutions (FIs) with an ARM product tied to the LIBOR index need to be aware of the following:

Home Equity Lines of Credit (HELOCs)
FIs with a HELOC tied to the LIBOR index need to be aware of the following:

Credit Cards
FIs with credit cards tied to the LIBOR index need to be aware of the following:

Should your financial institution need any guidance or support in preparing for the LIBOR transition, please don’t hesitate to reach out to Michael Christians Consulting, LLC at michael@mchristiansconsulting.com. We’d be more than happy to help!

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CFPB Finalizes Amendments to Regulation E’s Remittance Transfer Requirements

Wed, 13 May 2020 21:37:00 GMT

On May 11th, the Consumer Financial Protection Bureau (CFPB) issued a final rule which makes several changes to the remittance transfer requirements found in Subpart B of Regulation E. The final rule is effective on July 21, 2020.

Scope and Coverage
Currently, a financial institution is not subject to Regulation E’s remittance transfer requirements if it:

Upon the rule’s effective date, a financial institution that provides 500 or fewer remittance transfers in both the previous and current calendar years will not be subject to the remittance transfer requirements.

Estimates
Under Regulation E, a financial institution subject to the remittance transfer requirements must provide the sender with both a pre-payment disclosure (before the sender is required to pay for the remittance transfer) and a receipt (after the sender makes payment for the remittance transfer). These disclosures contain, among other things: the exchange rate, fees charged by a third-party in connection with the transfer, etc.

Under the temporary exception found in Section 1005.32, a financial institution is permitted to use estimates in connection with these disclosures if it is unable to determine exact amounts for reasons beyond its control. However, this temporary exception expires on July 21, 2020.

In response, the CFPB included the following permanent exceptions in the final rule:

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The Regulators Are More Productive Working From Home

Thu, 16 Apr 2020 19:34:00 GMT

I hope this blog post finds you, your family, friends, and colleagues safe and healthy during this extraordinary time in our history. I participated in a conference call the other day in which someone said that the pace of regulatory rulemaking and the issuance of guidance documents during the COVID-19 pandemic exceeds that which occurred in response to the Great Recession. Based on the number of items in my inbox, I could not agree more!

CFPB Updates HMDA Transaction Thresholds
On April 16, 2020, the Consumer Financial Protection Bureau (CFPB) issued a final rule making the following changes to the transaction thresholds under the Home Mortgage Disclosure Act (HMDA):

Joint Agencies Issue Temporary Exception to Appraisal Requirements
A majority of the country finds itself under shelter-in-place directives to promote social distancing during the pandemic. As a result, many financial institutions are finding it difficult to obtain a full appraisal (including a full interior inspection) in connection with their residential mortgage loans.

To address this, the joint agencies have issued an interim final rule providing for a new temporary exception to the mandatory appraisal requirement. While the agencies continue to encourage financial institutions to make a good faith effort to obtain a full appraisal; if necessary, an institution may delay the requirement for a full appraisal for up to 120 days from the date of closing.

The exception is not applicable to transactions for the acquisition, development, or construction of real estate. In addition, the temporary exception will sunset on December 31, 2020.

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Joint Statement on Supervisory and Enforcement Practices Regarding Mortgage Servicing

Mon, 06 Apr 2020 15:50:00 GMT

On April 3 ^rd , the joint agencies (CFPB, Federal Reserve, FDIC, NCUA and OCC) issued a statement on supervisory and enforcement practices regarding the mortgage servicing rules. The statement relaxes a number of the mortgage servicing compliance requirements found under federal law and provides an overview of additional consumer protections available to those affected by the Coronavirus pandemic.

CARES Act Forbearance

On March 27 ^th , the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law. Under the CARES Act, those experiencing a financial hardship in connection with their federally backed mortgage loan as a result of the COVID-19 emergency may request a forbearance. Upon receipt of a borrower’s request for a forbearance, the mortgage servicer must provide a forbearance for up to 180 days. The forbearance may be extended for an additional 180-day period if the borrower makes such a request during the initial forbearance period. The only documentation the mortgage servicer may require in connection with a CARES Act forbearance is an attestation from the borrower that he/she is experiencing a financial hardship as a result of the COVID-19 emergency.

Mortgage Servicing Rules

Loss Mitigation Procedures

Section 1024.41 of Regulation X contains a number of requirements mortgage servicers must follow in connection with loss mitigation options offered to consumers. The joint agency statement issued on April 3 ^rd reminds mortgage servicers of the following:

Early Intervention Requirements

Section 1024.39 of Regulation X requires mortgage servicers not considered small servicers to:

The joint agency statement issued on April 3 ^rd provides that the regulators do not intend to cite in an examination or bring an enforcement action against servicers for delays in meeting these timing requirements.

Continuity of Contact Provisions

Under Section 1024.40 of Regulation X, most servicers are required to establish a single point of contact for delinquent borrowers (small servicers are exempt from this requirement). For mortgage servicers struggling to staff their customer service call centers during the COVID-19 emergency, the joint agency statement issued on April 3 ^rd reminds them that they have discretion in determining whether to assign a single person or a team of personnel to a delinquent borrower.

Annual Escrow Account Statements

Section 1024.17 of Regulation X requires mortgage servicers to provide an annual escrow account statement within 30 days of completion of the escrow account computation year. The joint agency statement issued on April 3 ^rd provides that the regulators do not intend to cite in an examination or bring an enforcement action against servicers for delays in providing this annual escrow account statement.

Payoff Statements

Under Section 1026.36 of Regulation Z, mortgage servicers are required to respond to a request for a payoff statement within seven business days. The joint agency statement issued on April 3 ^rd states that servicers may provide a payoff statement within a reasonable period of time if unable to do so within seven business days due to the COVID-19 emergency.

This and additional guidance for financial institutions dealing with the Coronavirus pandemic is available on our COVID-19 resource page at www.mchristiansconsulting.com . Stay safe everyone!

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CFPB Updates Responsible Conduct Bulletin

Fri, 20 Mar 2020 18:53:00 GMT

On March 20, 2020, the Consumer Financial Protection Bureau (CFPB) updated its responsible conduct bulletin (originally issued in 2013). The purpose of the bulletin is to identify activities that financial institutions can engage in that can prevent and minimize harm to consumers. Institutions that meaningfully engage in these activities may receive favorable consideration of such conduct during supervisory and enforcement matters.

As outlined in the bulletin, the CFPB generally considers four categories of responsible conduct:

Self-Assessment

Self-assessment reflects a proactive commitment by the financial institution to utilize resources for the prevention and early detection of violations of federal consumer financial law.

Self-Reporting

A financial institution’s prompt self-reporting of likely violations of federal consumer financial law represents concrete evidence of its commitment to responsibly address the conduct at issue.

Remediation

When violations of federal consumer financial law occur, the CFPB encourages financial institutions to concentrate on the following remedial priorities:

Cooperation

The CFPB will look favorably upon those financial institutions that cooperate with regulators once it has been determined that a violation of federal consumer financial law has occurred.

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Groundhog Day!

Fri, 28 Feb 2020 16:48:00 GMT

No, I’m not referring to the prognostication of an early spring we received from Punxsutawney Phil earlier this month. Nor am I referring to the 1993 Harold Ramis classic starring Bill Murray. Unfortunately, I’m referring to yet another interpretive rule issued by our friends at the Department of Defense (DOD) regarding the Military Lending Act (MLA).

First, some background. In July 2015, the DOD issued a final rule amending its MLA regulation to greatly expand the scope of credit products to which it applies. The regulation provides that a covered Servicemember and his/her dependent may not be charged a military annual percentage rate in excess of 36%, must receive additional disclosures in connection with covered transactions and are entitled to several other substantive protections.

In August 2016, the DOD issued interpretive rule #1 in an attempt to clarify what cash-out transactions might be eligible for the purchase money exemption under the MLA. In December 2017, the DOD issued interpretive rule #2 which stated that whether or not a cash-out loan is eligible for the purchase money exemption under the MLA will depend upon what the additional cash out is used for. In particular, it provided that a credit transaction that included financing for guaranteed asset protection (GAP) insurance would NOT qualify for the exemption.

On February 28th, the DOD issued interpretive rule #3 which withdraws its December 2017 guidance regarding purchase money loans with additional cash out. So where does that leave us? Right back where we started. DOD’s official interpretation as of today regarding purchase money loans with additional cash out is as follows:
A hybrid purchase money and cash advance loan is not expressly intended to finance the purchase of property, because the loan provides additional financing that is unrelated to the purchase (emphasis added). To qualify for the purchase money exception, a loan must finance only the acquisition of property (emphasis added).

As a result of this change in DOD’s position, I would vehemently argue that auto loans with GAP coverage ARE eligible for the purchase money exception. GAP coverage is certainly related to the purchase and more often than not the cost of such coverage is baked into the acquisition price of the automobile.

While this seemingly represents a favorable shift in DOD policy, all I can say is don’t get too comfortable. While we’ve all seen this movie before, the ending never seems to be the same. Or is it? On that note, enjoy your weekend.

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Consumer Financial Protection Bureau Issues Latest Supervisory Highlights

Tue, 25 Feb 2020 19:15:00 GMT

On February 20th, the Consumer Financial Protection Bureau (CFPB) issued the latest edition of its Supervisory Highlights. It covers examination findings during the time period between April and August 2019. Based on the information provided, financial institutions are reminded of the following compliance responsibilities in the areas of mortgage servicing, Regulation Z and adverse action notices.

Mortgage Servicing

For those financial institutions subject to the loss mitigation procedures found in Section 1024.41 of Regulation X:

Regulation Z

Financial institutions should pay close attention to the following requirements found in Regulation Z:

Adverse Action Notices

Financial institutions required to provide a notice of adverse action under Regulation B are required to provide on that notice the principal reasons for which adverse action was taken.

If you think your financial institution may be deficient in one of these areas, please contact Michael Christians Consulting, LLC for a free consultation!

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CFPB Issues Policy Statement on Abusive Acts and Practices

Mon, 27 Jan 2020 17:29:00 GMT

On Friday, January 24th, the Consumer Financial Protection Bureau (CFPB) issued a statement of policy regarding its supervision and enforcement authority for abusive acts and practices. First, some background…

Section 1031 of the Dodd-Frank Act makes it unlawful to engage in an abusive act or practice in connection with a consumer financial product or service. Specifically, the statute provides that an act or practice is considered abusive if it:

The industry has complained for years that the vagueness of the statutory definition along with limited to no additional regulatory guidance as to what constitutes an abusive act or practice makes it nearly impossible to comply with this prohibition. In late 2018, under the reign of then acting director Mick Mulvaney, the CFPB announced that it would engage in rulemaking to further define what types of acts and practices qualify as abusive. While it remains to be seen if/when this rulemaking will occur, the CFPB’s policy statement makes it clear that in the interim the agency plans to significantly curtail its enforcement authority in this area.

First, the policy statement provides that for an act or practice to be considered abusive, any harm to consumers MUST outweigh any benefits. Second, the CFPB will generally avoid citing an act or practice as abusive if it arises out of the same course of conduct that the agency has already declared to be unfair or deceptive. Finally, the CFPB does not intend to seek punitive damages in connection with an abusive act or practice committed by a covered person who was making a good faith effort to comply with the law based on a reasonable – albeit mistaken – interpretation of the abusiveness standard.

The policy statement is consistent with the more hands-off approach we’ve seen taken by the CFPB in recent years. However, this isn’t necessarily all good news. Remember that Section 1042 of the Dodd-Frank Act also provides UDAAP enforcement authority to state attorneys general and state financial regulators. As a result, this may be another area in which we see individual states playing a more active role in consumer financial protection than their federal government counterpart (see California Consumer Privacy Act).

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NCUA Supervisory Priorities for 2020

Sat, 11 Jan 2020 22:40:00 GMT

Recently, the National Credit Union Administration (NCUA) published its supervisory priorities for the new year in a letter to credit unions. The agency’s primary areas of supervisory focus for 2020 are identified below.

Bank Secrecy Act

No surprise here as I believe BSA compliance has been on every list of supervisory priorities since the Thomas Jefferson administration. Specifically, examiners will focus on:

Consumer Financial Protection Regulations

NCUA examiners will specifically review an institution’s compliance efforts in connection with the following consumer protection regulations:

In addition, federal credit unions originating payday alternative (PAL) loans under Part 701.21 can expect that topic to come up during their next examination.

Credit Risk

Examiners plan to review each credit union’s underwriting standards and procedures; particularly, whether the credit union adequately determined a borrower’s ability to repay his/her loan.

CECL

Although the mandatory compliance date for the current expected credit losses standard has been delayed yet again, examiners will continue to discuss with credit unions the steps they have taken and/or will be taking to implement the new accounting approach in January 2023.

Cybersecurity Maturity Assessments

The NCUA’s work to assess a credit union’s cybersecurity maturity will continue in 2020. NCUA plans to finish this year the cybersecurity assessments for institutions with over $250 million in assets. All assessments should be completed by the end of 2021.

LIBOR Cessation Planning

Publication of the London Interbank Offered Rate (LIBOR) index is not guaranteed beyond 2021. As a result, credit unions with adjustable rate loan products tied to this index must begin planning now for the transition. Items on the to-do list include selecting a replacement index and planning for advance notice to your affected borrowers.

Liquidity Risk

And finally, during the 2020 examination cycle credit unions can expect the NCUA to review their liquidity management and planning practices.

The full text of NCUA Letter to Credit Unions 20-CU-01 can be found here .

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CFPB Publishes Fall 2019 Regulatory Agenda

Sat, 04 Jan 2020 18:00:00 GMT

On December 26th, the Consumer Financial Protection Bureau (CFPB) published its fall 2019 regulatory agenda. It covers the CFPB’s anticipated rulemaking activities for the period between October 1, 2019 and September 30, 2020. Here are the highlights:

Data Collection for Women-Owned, Minority-Owned and Small Businesses
Section 1071 of the Dodd-Frank Act requires the CFPB to prescribe rules for the collection of information in connection with applications for credit submitted by women-owned, minority-owned and small businesses. Expect rulemaking to commence in the new year to address the following statutory requirements:
• Creditors will be required to collect certain information such as the purpose of the loan, the census tract in which the entity’s principal place of business is located and the gross annual revenue of the business during its last fiscal year
• This information must be submitted to the CFPB annually and retained by the creditor for a period of 3 years

Home Mortgage Disclosure Act
The CFPB anticipates issuing a final rule in the spring of 2020 to increase the transactional coverage threshold for closed-end mortgage loans to either 50 or 100 loans in each of the two preceding calendar years. Remember that the CFPB has already temporarily extended the transactional coverage threshold for open-end mortgage loans (500) for an additional two years.

In addition, the CFPB is expected to take action in the summer of 2020 on its Advance Notice of Proposed Rulemaking (ANPR). The May 2019 ANPR sought commentary regarding whether to make changes to the data points currently required for collection under Regulation C.

Payday, Vehicle Title and Certain High-Cost Installment Loans
In February 2019, the CFPB issued a Notice of Proposed Rulemaking (NPRM) to rescind the mandatory underwriting provisions of its Payday, Vehicle Title and Certain High-Cost Installment Loans rule. The CFPB expects to take final action with regard to this NPRM in April 2020.

Regulation F
Regulation F implements the requirements of the Fair Debt Collection Practices Act. It makes it illegal for a debt collector to engage in unfair, deceptive or abusive acts or practices while attempting to collect a debt. In May 2019, the CFPB issued a proposed rule identifying several substantive changes to Regulation F. The CFPB anticipates taking final action with regard to Regulation F in 2020.

Note: most financial institutions will not be affected by these changes as Regulation F only applies to those who regularly collect or attempt to collect a debt owed to another.

Remittance Transfers
Subpart B of Regulation E contains the requirements for remittance transfers, defined as the electronic transfer of funds from a consumer in the United States to a receiver in a foreign country. Currently, the requirements do not apply to financial institutions that provide 100 or fewer remittance transfers in a calendar year. In April 2019 the CFPB issued a request for information, that among other things, sought commentary as to whether or not to raise this threshold. The regulatory agenda states that the CFPB will continue its work related to any potential remittance transfer rulemaking into the new year.

Qualified Mortgage GSE Patch
Under certain conditions, a financial institution may originate a loan as a qualified mortgage (QM) even if the borrower’s debt-to-income (DTI) ratio exceeds 43%. Under the GSE patch, if a loan with a DTI ratio over 43% is eligible for sale to the secondary market at the time of consummation, the loan may be considered a QM even if retained in the creditor’s portfolio. The catch is that the GSE patch is only temporary. It is set to expire on January 1, 2021.

In July 2019, the CFPB issued an ANPR indicating that it plans to allow the GSE patch to expire as originally scheduled. However, the ANPR also sought commentary on the following questions:
• Should the QM requirements continue to demand a maximum DTI ratio, and if so, should that remain at the current 43%; and
• Should the QM underwriting standards found in Appendix Q to Regulation Z be retained as is, amended, or eliminated altogether?
As a result, it is possible that the CFPB will engage in further rulemaking in 2020 regarding the QM requirements of Regulation Z.

Loan Originator Compensation
Based on feedback that certain provisions of its loan originator compensation requirements are unnecessarily restrictive, the CFPB is considering further rulemaking to address the following:
• Permitting adjustments to a loan originator’s compensation to facilitate the origination of state housing finance authority loans; and
• Permitting adjustments to a loan originator’s compensation due to errors made during the origination process

E-Sign Act
The CFPB is considering a rulemaking to address a range of issues related to the Electronic Signatures in Global and National Commerce (E-Sign) Act and credit cards. Any potential rulemaking would make it easier for consumers to apply for and receive information about credit cards via electronic channels.

Regulatory Flexibility Act
The Regulatory Flexibility Act requires the CFPB to consider how its rulemakings have impacted small businesses. According to the fall 2019 regulatory agenda, the CFPB plans to review the following in the new year:
• Regulation E’s rules concerning overdrafts; and
• The Credit Card Accountability, Responsibility and Disclosure (CARD) Act.

As you can see, another busy year awaits from a regulatory compliance perspective. Should your financial institution or organization need help navigating this complex regulatory environment in the new year, please contact Michael Christians Consulting, LLC at michael@mchristiansconsulting.com. We’d love to be your compliance partner!

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Did Kraninger Not Get the Memo? It’s Christmas!

Mon, 23 Dec 2019 16:39:00 GMT

On this eve of Christmas Eve, I was pleasantly surprised with how quiet my commute to the office was this morning. I’m sure if my office were close to the mall or a big box store, I’d be singing a different tune right now. However, one place that isn’t quiet right now is the Consumer Financial Protection Bureau. Kathy Kringle and her crew continue to deck the halls of 1700 G Street with new rulemaking just in time for the New Year!

HMDA Asset Threshold
Banks and credit unions that meet the following four-part institutional coverage test are reportable institutions for purposes of the Home Mortgage Disclosure Act (HMDA):
• Assets in excess of a certain threshold;
• Home or branch office in a Metropolitan Statistical Area;
• Originated at least one home purchase or refinance transaction in the preceding calendar year; and
• Federally insured or regulated.

The asset threshold is subject to change annually based on any percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). A final rule released on Friday makes an adjustment to the asset threshold for 2020. In order to be a reportable institution for calendar year 2020, financial institutions must have assets in excess of $47 million as of 12/31/2019.

Small Creditors
Small creditors are exempt from a couple of requirements under Regulation Z. First, a small creditor may originate a qualified mortgage even if the borrower’s debt-to-income ratio exceeds 43%. Second, small creditors operating in a rural and/or underserved area are exempt from the requirement to establish an escrow account in connection with a higher priced mortgage loan in first lien position.

A small creditor, by definition, is an institution that meets the following two-part test:
• During the preceding calendar year, the institution (together with any affiliates) originated 2,000 or fewer covered transactions secured by a first lien; and
• At the end of the preceding calendar year, the institution (together with any affiliates) had total assets below a certain threshold.

The small creditor asset threshold is subject to change annually based on any percentage change in the CPI-W. Effective January 1, 2020, the small creditor asset threshold is increasing from $2.167 billion to $2.202 billion.

Finger crossed this will be one of my last blog posts for 2019. If so, best wishes to you and yours for a wonderful holiday season. See you in the New Year!

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Holiday Hoopla

Thu, 19 Dec 2019 15:33:00 GMT

With only 140 hours remaining until the big day, there is still more than enough time for me to get you up to speed on a couple of regulatory developments AND start/finish my Christmas shopping!

New Implementation Timeline for Revised URLA
Yesterday, Fannie Mae and Freddie Mac announced a new implementation timeline for use of the redesigned Uniform Residential Loan Application (URLA):
• Beginning June 1, 2020, approved participants may begin submitting the redesigned URLA
• Beginning September 1, 2020, any lender may begin submitting the redesigned URLA
• Beginning November 1, 2020, ALL lenders MUST begin submitting the redesigned URLA

What’s Next for the Consumer Financial Protection Bureau?
Back in 2016, a three-judge panel of the United States Court of Appeals for the D.C. Circuit ruled that the leadership structure of the Consumer Financial Protection Bureau (CFPB) was unconstitutional because its director may only be removed by the President for cause. For those of you following this single piece of drama coming out of our nation’s capital, the case I am referring to is PHH Corporation v. CFPB . However, upon rehearing en banc, that decision was reversed in 2018.

On October 18th, the United States Supreme Court (SCOTUS) granted a writ of certiorari to settle once and for all the constitutionality of the CFPB. Oral arguments in Seila Law, LLC v. CFPB are scheduled for March 3, 2020.

Let’s assume for the sake of argument that SCOTUS does indeed find the CFPB unconstitutional. So what happens next? There are a couple of suggested methods for remedying this constitutional defect. First, making the director of the CFPB subject to removal by the President with or without cause would appear to do the trick. However, there are others that argue the agency should be scrapped in its entirety. This argument translates into a 0% ROI on the billions of dollars already spent by the industry on regulatory compliance since the financial crisis. Reminds me of what I used to hear in law school on a pretty consistent basis – that’s an argument, but not a winning argument.

Most Importantly, THANK YOU
2019 has been an exciting year for Michael Christians Consulting, LLC. I’ve had the absolute pleasure of assisting countless financial institutions and organizations across the country. So first and foremost, THANK YOU. THANK YOU to all those who have placed their trust in me to be their compliance partner. The most rewarding part of my job is knowing that my success derives 100% from your success. We are only as good as we make each other. So THANK YOU for your business and your loyalty. I wish each and every one of you the happiest of holiday seasons and I look forward to what the New Year holds for us together.

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Quick Hit: JUMBO Higher Priced Mortgage Loans

Wed, 04 Dec 2019 17:01:00 GMT

The Federal Housing Finance Agency recently announced an increase to the maximum conforming loan limits eligible for purchase by Fannie Mae and/or Freddie Mac. These are commonly referred to as jumbo loans.

Beginning January 1, 2020, the jumbo loan limit for the lower 48 states will be $510,400. Other limits apply to Alaska, Hawaii, Guam, the U.S. Virgin Islands and other high-cost areas.

Those of you originating higher priced mortgage loans (HPMLs) under §1026.35 of Regulation Z will need to pay close attention to this change. By definition, an HPML is a closed-end consumer credit transaction secured by the borrower’s principal dwelling with an APR that exceeds the APOR by:
• 1.5% or more for non-jumbo 1st lien loans
• 2.5% or more for jumbo 1st lien loans
• 3.5% or more for subordinate lien loans

Just a friendly reminder to update your policies, procedures and systems accordingly effective 1/1/2020.

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Additional Changes on Tap for NCUA’s Appraisal Rules

Tue, 03 Dec 2019 03:31:00 GMT

For those faithful followers of our blog (again, hi mom), you’ll remember that we informed our compliance collective on July 20th about several changes to the NCUA’s appraisal rules found in Part 722.

On Friday, November 29th, the NCUA Board published a proposed rule recommending additional changes to Part 722. Assuming the proposed rule is finalized as is, credit unions can expect the following when it comes to appraisal requirements for real estate-related financial transactions.

Appraisals Completed by a State-Certified Appraiser

The following transactions will require an appraisal performed by a state-certified appraiser:

Appraisals Completed by a State-Certified or State-Licensed Appraiser

The following transactions will require an appraisal performed by either a state-certified or state-licensed appraiser:

Exemptions from the Appraisal Requirement

The proposed rule does not alter any of the exemptions provided for in Part 722.3 (e.g. rural property exemption, existing extensions of credit, etc.)

Written Estimates of Market Value

For any transaction in which an appraisal is not required, the credit union must at a minimum obtain a written estimate of market value.

Comments on the proposed rule are being accepted until January 28, 2020. Watch our blog for more information about the final rule. And as always, please don’t hesitate to reach out to Michael Christians Consulting, LLC at michael@mchristiansconsulting.com for assistance with all of your regulatory compliance needs!

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New Consent Requirements under the Taxpayer First Act

Wed, 13 Nov 2019 14:26:00 GMT

On July 1, 2019, the Taxpayer First Act was signed into law. Section 2202 of the Act contains new consent requirements that take effect on December 28, 2019.

Financial institutions that receive an applicant’s tax transcript directly from the Internal Revenue Service (IRS) during the origination process may not share that information with any other party without the express permission of the applicant. In connection with certain mortgage loans, this restriction on information sharing would also apply to any secondary market investor to whom the loan may eventually be sold. Both Fannie Mae (FNMA) and FreddieMac (FHLMC) have indicated that they will require said consent in connection with any loan to be sold to or securitized by them.

Although the IRS has not prescribed model language for the required consent, the Mortgage Industry Standards Maintenance Organization (MISMO) has established model language that may be used:

Financial institutions are encouraged to check with their forms provider to determine whether or not a consent form will be available in advance of the December 28 ^th effective date.

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Another One for the White Board: The Transition Away from LIBOR

Mon, 04 Nov 2019 15:53:00 GMT

In my ongoing battle to keep apprised of the ever-changing landscape of regulatory compliance, my one true ally is the 4’ x 6’ white board that hangs in my office. While most of the board is dedicated to short-term projects, a small section is reserved specifically for those future to-do list items I don’t want to lose track of. I should have got a bigger white board…

As many of you may already know, the UK’s Financial Conduct Authority announced that publication of the London Interbank Offered Rate (LIBOR) index is not guaranteed beyond 2021. This is significant for financial institutions in the United States as many have variable rate lending products tied to the LIBOR index, such as adjustable rate mortgages, home equity lines of credit, credit cards, etc.

The Alternative Reference Rates Committee (ARRC), a committee of the Federal Reserve, has recommended the Secured Overnight Financing Rate (SOFR) as an alternative to LIBOR. The Federal Reserve Bank of New York publishes the SOFR index here .

If you’re looking for something to add to that tiny bit of remaining open space on your white board, make note of the advance disclosure requirements you may have in connection with this transition:
• If your financial institution has an adjustable rate mortgage (ARM) product tied to LIBOR, §1026.20 of Regulation Z requires notice in advance of a rate adjustment with a corresponding change in payment. This notice must be provided at least 60 days, but not more than 120 days, before the first payment at the adjusted level is due.
• If your financial institution’s home equity line of credit (HELOC) product is tied to LIBOR, §1026.9 of Regulation Z requires a change in terms notice. This notice must be provided at least 15 days before the effective date of the change.
• If your financial institution has a credit card product tied to LIBOR, §1026.9 of Regulation Z requires a change in terms notice. This notice must be provided at least 45 days before the effective date of the change.

For questions about the transition away from LIBOR or any other really exciting regulatory compliance topic, don’t hesitate to contact Michael Christians Consulting, LLC at michael@mchristiansconsulting.com!

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CFPB Updates HPML Appraisal Exception; Gears Up for Section 1071 Rulemaking

Thu, 31 Oct 2019 13:28:00 GMT

HPML Appraisal Exception
Under Section 1026.35 of Regulation Z, higher priced mortgage loans (“HPMLs”) carry additional compliance responsibilities. Whether a loan is considered an HPML depends on the spread between its APR and the value of the Average Prime Offer Rate at the time of origination.

HPML’s require, among other things, a full appraisal (unless an exception applies). One of the exceptions to the mandatory appraisal requirement is based on loan amount. In 2019, HPML’s originated for $26,700 or less do not require a full appraisal. In other words, an alternative method of valuation of the subject property may be used.

The Consumer Financial Protection Bureau (“CFPB”) is required to update the dollar amount of this exception annually based on any percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. Effective January 1, 2020, the exception amount will increase to $27,200.

Section 1071 of the Dodd-Frank Act
Those with a much better memory than me may recall that 9 years ago when the Dodd-Frank Act was enacted, the legislation required the CFPB to engage in rulemaking to require financial institutions to collect and make publicly available data in connection with applications for credit by women-owned, minority-owned and small businesses.

It appears as though the CFPB is ready to begin that rulemaking process. The agency has announced that it will hold a symposium regarding Section 1071 of the Dodd-Frank Act on November 6th. The symposium will feature two panel discussions. One will focus on the current state of, and future outlook for, the small business lending marketplace. The other will include a discussion surrounding the implementation of Section 1071.

Stay tuned to our blog at www.mchristiansconsulting.com for more information!

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Sigh… More HMDA Rulemaking

Fri, 11 Oct 2019 15:24:00 GMT

On October 10th, the Consumer Financial Protection Bureau (CFPB) issued its latest iteration of amendments to the Home Mortgage Disclosure Act (HMDA). We’ll call this the 2019 Final HMDA Rule.

The 2019 HMDA Final Rule consists of two main components:
• It incorporates into regulatory text the August 2018 interpretive and procedural rule concerning partial exemptions available for low-volume filers; and
• It extends for two years the current reporting threshold of 500 for open-end mortgage loans.

Partial Exemptions for Low-Volume Filers
The Economic Growth, Regulatory Relief and Consumer Protection Act provides for partial exemptions from HMDA’s reporting requirements for certain low-volume filers. In August 2018, the CFPB issued an interpretive and procedural rule regarding these partial exemptions.

As part of the 2019 HMDA Final Rule, the following portions of the August 2018 interpretive and procedural rule have been incorporated into the regulatory text of Regulation C:
• Clarification as to how a reportable institution can determine whether it qualifies for a partial exemption;
• Identification of the specific data points covered by the partial exemptions; and
• Explanation that a reportable institution which qualifies for a partial exemption may, at its option, continue to report otherwise exempt data.

Open-End Reporting Threshold
Also, under the 2019 HMDA Final Rule, the current reporting threshold of 500 for open-end mortgage loans has been extended until January 1, 2022. As a result, for the data collection years of 2020 and 2021, a reportable institution that originated fewer than 500 open-end mortgage loans in either of the two preceding calendar years will continue to be exempt from including open-end mortgage loans on its HMDA loan application register.

The 2019 HMDA Final Rule is effective January 1, 2020.

If your financial institution needs advice on how to comply with the ever-changing requirements of HMDA, please contact Michael Christians Consulting, LLC at michael@mchristiansconsulting.com.

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NCUA Board Has a Busy September Meeting

Fri, 20 Sep 2019 16:26:00 GMT

On Thursday, the National Credit Union Administration (NCUA) Board held its eighth open meeting of 2019 and approved several items. Most of these items affect federally chartered credit unions (FCUs) only.

PAL 2.0
Currently, FCUs may originate payday alternative loans (PAL loans) under Part 701.21 of the NCUA’s rules and regulations. Among other things, these loans must be:
• For an amount between $200 and $1,000;
• For a term of at least one month and not more than six months; and
• Only made to those who have had membership in the FCU for at least one month.

The NCUA Board approved an alternative version of the PAL loan, known as PAL II. These loans differ from PAL I loans because they may be made:
• For any amount up to $2,000;
• For a term of at least one month and not more than 12 months; and
• Immediately upon the borrower establishing membership.

FCUs may only offer one type of PAL loan to a member at any given time.

FCU Bylaws
The NCUA Board also approved a final rule to update, clarify and simplify the FCU Bylaws. These changes codify in one place several existing legal opinions and provide detailed guidance to help FCU officials and employees better understand the bylaw provisions. For example, the final rule discusses an FCU’s ability to limit services to a disruptive or abusive member.

Supervisory Committee Audits
Finally, the NCUA Board approved changes to Part 715 which discusses supervisory committee audit requirements for both FCUs and federally-insured state-chartered credit unions. Among other things, these changes:
• Eliminate two types of audits that are rarely used by federally insured credit unions; and
• Gives credit unions the ability to negotiate a delivery date for their third-party audit report.

Please contact Michael Christians Consulting, LLC at michael@mchristiansconsulting.com if you have any questions.

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CFPB Issues 19th Edition of its Supervisory Highlights

Fri, 20 Sep 2019 15:14:00 GMT

Yesterday, the Consumer Financial Protection Bureau (CFPB) issued the latest edition of its supervisory highlights which generally covers the examination period between December 2018 and March 2019. This is an important document for all financial institutions to review on a regular basis. It provides insight as to observed compliance deficiencies across the industry. It also serves as a friendly reminder of those smaller compliance requirements that get lost in the shadows of major rulemakings. Below is a high-level overview of the report by category.

Consumer Lending
The CFPB has observed the sale of guaranteed asset protection (GAP) coverage in connection with low loan-to-value automobile loans that generally will not benefit from the product. The CFPB considers this an abusive act or practice because it takes advantage of a consumer’s lack of understanding about GAP coverage.

Credit Cards
Financial institutions are reminded of the following when it comes to credit card accounts:
• The open-end advertising requirements found in §1026.16 of Regulation Z apply to credit card accounts, including additional disclosures in connection with an advertisement that contains a trigger term
• Generally, a card issuer may not offset credit card indebtedness against funds on deposit with the issuer. However, the issuer may enforce a consensual security interest so long as very specific requirements are met

Debt Collection
In July 2013, the CFPB issued a bulletin regarding unfair, deceptive and abusive acts and practices in the collection of consumer debts. The supervisory highlights reminds financial institutions of the following from that bulletin:
• Do not threaten any action that is not intended or that the financial institution does not have the authorization to pursue, such as false threats of lawsuit, prosecution or imprisonment for the non-payment of debt
• Do not attempt to collect any additional amount in connection with a debt that is not expressly authorized by the agreement or permitted by law

Fair Credit Reporting
The CFPB identified several compliance deficiencies with regard to the following requirements found in the Fair Credit Report Act (Regulation V):
• If a consumer disputes the accuracy of information reported by a financial institution to a consumer reporting agency (CRA), the financial institution must generally investigate the dispute within 30 days. The financial institution must also notify the CRA that the reported information is under dispute. If the reported information is found to be inaccurate, the financial institution must provide necessary corrections/updates to the CRA
• §1022.42 requires financial institutions to have policies and procedures in place concerning the accuracy and integrity of information furnished to a CRA. In developing these policies and procedures, financial institutions should consider the interagency guidelines found in Appendix E

The latest edition of the supervisory highlights may be found on the CFPB’s website at www.consumerfinance.gov. For more information, please contact Michael Christians Consulting, LLC at michael@mchristiansconsulting.com.

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FFIEC Announces Availability of 2018 HMDA Data

Fri, 30 Aug 2019 21:00:00 GMT

Today the Federal Financial Institutions Examination Council (FFIEC) announced the availability of 2018 HMDA data from 5,683 reportable financial institutions in the United States. This is the first time the revised HMDA data set, consisting of 48 data points, has been made publicly available. The data is available at https://ffiec.cfpb.gov/data-publication/.

This is a good time to remind HMDA reportable financial institutions of their disclosure requirements under Section 1003.5 of Regulation C.

Within three business days of the FFIEC announcing the public availability of HMDA data, a reportable financial institution must make the following written notice available, upon request, at its home office and each branch office that is physically located in a Metropolitan Statistical Area or Metropolitan Division:

Each reportable financial institution must also post a general notice of availability in the lobby of its home office and of each branch physically located in a Metropolitan Statistical Area or Metropolitan Division. This general notice of availability should read as follows:

Please don’t hesitate to contact Michael Christians Consulting, LLC for any of your regulatory compliance needs!

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CFPB Announces Revised Regulation Z Thresholds for 2020

Sun, 04 Aug 2019 23:10:00 GMT

On August 1st, the Consumer Financial Protection Bureau (CFPB) issued a final rule updating several Regulation Z thresholds for the next calendar year. The final rule is effective January 1, 2020.

Safe Harbor Amount for Credit Card Penalty Fees
Section 1026.52 of Regulation Z establishes a safe harbor for the imposition of penalty fees in connection with a credit card account. To remain in compliance with this safe harbor provision, a card issuer may not impose a penalty fee above a certain dollar amount for:
• First time violations of the terms or other requirements of a credit card account; and
• Subsequent violations (of the same type) of the terms or other requirements of a credit card account.

These safe harbor dollar amounts are adjusted annually by the CFPB based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in effect on the preceding June 1st.

Effective January 1, 2020, the safe harbor dollar amounts will be:
• $29 for a first time violation; and
• $40 for a subsequent violation (of the same type).

Adjustment to Points and Fees Trigger for High-Cost Mortgages
Section 1026.32 of Regulation Z outlines the three tests that must be applied to determine whether a loan is classified as a high-cost mortgage. The three tests include an APR trigger, a prepayment penalty trigger and a points and fees trigger.

The points and fees trigger provides that if the total points and fees charged in connection with the transaction exceed a certain threshold, the loan will be classified as high-cost. These amounts are adjusted annually by the CFPB based on the Consumer Price Index for All Urban Consumers (CPI-U) in effect on the preceding June 1st.

Effective January 1, 2020, if the total points and fees charged in connection with the transaction exceed the following, the loan will be classified as high-cost:
• 5% of the loan amount for loans of $21,980 or greater;
• For loans of less than $21,980, the lesser of 8% of the loan amount or $1,099.

Adjustment to Qualified Mortgage Limitation on Points and Fees
Section 1026.43 of Regulation Z identifies the requirements a loan must meet to be considered a qualified mortgage. The elements of a qualified mortgage are as follows:
• Regular, periodic payments;
• A term that does not exceed 30 years;
• The borrower’s debt-to-income ratio does not exceed 43%; and
• A limitation on points and fees charged in connection with the transaction.

The points and fees caps associated with a qualified mortgage are adjusted annually by the CFPB based on the Consumer Price Index for All Urban Consumers (CPI-U) in effect on the preceding June 1st.

Effective January 1, 2020, the points and fees caps for a qualified mortgage will be as follows:

For more information, contact Michael Christians Consulting, LLC at michael@mchristiansconsulting.com.

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Ripping Off the Patch

Sat, 03 Aug 2019 23:57:00 GMT

On July 31st, the Consumer Financial Protection Bureau (CFPB) published in the Federal Register an advance notice of proposed rulemaking (ANPRM) concerning Regulation Z’s ability to repay rule; specifically, the temporary GSE QM exception.

In connection with certain consumer credit transactions secured by a dwelling, Regulation Z’s ability to repay rule requires a creditor to make a reasonable and good faith determination, at or before closing, that the borrower will have the ability to repay the loan according to its terms. A creditor has two ways in which to satisfy this requirement:
• Originate the loan in accordance with eight specific ability to repay factors; or
• Originate the loan as a qualified mortgage (QM).

A loan must meet four very specific requirements to be considered a QM. They include:
• Regular, periodic payments;
• A term not to exceed 30 years;
• A limitation on points and fees charged in connection with the transaction; and
• A maximum debt-to-income (DTI) ratio of 43%.

Under §1026.43(e)(4), a creditor may originate a QM with a DTI ratio over 43% under the temporary GSE QM exception, often referred to as “the patch”. This exception provides that so long as it meets the other applicable QM requirements, if a loan with a DTI ratio over 43% is eligible for sale to the secondary market at the time of consummation, it will be considered a QM. The catch being that this exception is temporary. It is scheduled to expire January 10, 2021.

In its ANPRM, the CFPB put the industry on notice that it is moving forward with ripping off “the patch” as originally scheduled. The CFPB has no plans to extend the temporary GSE QM exception beyond January 2021. While this date may seem like light years away, the reality is that financial institutions only have a short 17 months to completely overhaul their mortgage lending policies and procedures to account for those borrowers who don’t fit nicely into the traditional QM box.

Also, as part of its ANPRM, the CFPB is soliciting feedback on the following:
• Should the QM requirements continue to demand a maximum DTI ratio; and if so, should that ratio remain at the current 43%?
• Should the QM underwriting standards found in Appendix Q to Regulation Z be retained as is, amended, or scrapped altogether?
If your financial institution would like to weigh in on these questions, comments are due not later than September 16th.

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NCUA Finalizes Amendments to Part 722 – Appraisals

Sat, 20 Jul 2019 14:18:00 GMT

At its meeting on Thursday, July 18th, the NCUA Board finalized amendments to its appraisal rules found in Part 722.

Exemptions

The final rule reaffirms the exemptions currently found in Part 722.3. If one of the following exemptions applies, an appraisal is not required:

In addition, the final rule establishes a new exemption for real estate located in a rural area. A credit union is permitted to waive the appraisal requirement under Part 722 under the following conditions:

Appraisal Requirement

If one of the exemptions identified above does not apply, the final rule provides the conditions under which an appraisal is required:

Written Estimate of Market Value

All other transactions require at minimum a written estimate of market value, unless the loan is fully insured or guaranteed by a United States government agency. The final rule requires that a written estimate of market value be performed by an individual that:

The changes to NCUA Part 722 become effective 90 days following publication of the final rule in the Federal Register.

To assist credit unions with implementation of the changes to NCUA Part 722, Michael Christians Consulting, LLC has developed a flow chart available free of charge. Please contact Michael at michael@mchristiansconsulting.com for more information.

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CFPB and FRB Finalize Amendments to Regulation CC

Tue, 25 Jun 2019 20:51:00 GMT

On Monday, June 24th the Consumer Financial Protection Bureau (“CFPB”) and Federal Reserve Board (“FRB”) jointly issued a final rule containing several amendments to Regulation CC which implements the Expedited Funds Availability Act. The rule implements a handful of statutory changes as required under the Dodd-Frank and Economic Growth, Regulatory Relief and Consumer Protection Acts.

Expanded Scope of Regulation CC
Effective 60 days following publication of the final rule in the Federal Register, financial institutions located in American Samoa, the Commonwealth of the Northern Mariana Islands and Guam will be subject to Regulation CC’s requirements.

Threshold Adjustments under Regulation CC
Effective July 1, 2020, the following amounts will be adjusted within Regulation CC:

Following the first round of threshold adjustments effective in 2020, these amounts will be subject to change on July 1 ^st every fifth year (2025, 2030, 2035, etc.) based on any aggregate percentage change to the Consumer Price Index for Urban Wage Earners and Clerical Workers (“CPI-W”).

Please contact Michael Christians Consulting, LLC for more information!

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CFPB Delays Underwriting and Reporting Requirements of its Payday Lending Rule

Tue, 25 Jun 2019 01:41:00 GMT

On June 7th, the Consumer Financial Protection Bureau (“CFPB”) issued a final rule delaying the underwriting and reporting requirements located within its payday lending rule.

First, some background. In October 2017, the CFPB promulgated new regulations at Part 1041 (“payday lending rule”) making it an unfair and abusive practice for a financial institution to:

For purposes of the payday lending rule, a covered loan includes certain short-term (less than 45 days), single payment and high-cost (APR greater than 36%) loans.

There are 3 main components of the payday lending rule:

The CFPB’s June 7th rule delays the effective date of the ability to repay and information furnishing sections of the payday lending rule until November 19, 2020. However, the payment transfers section will still take effect on August 19, 2019.

For further information, please contact Michael Christians Consulting, LLC.

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Multi-Purpose Loans and HMDA Reporting

Sat, 15 Jun 2019 14:39:00 GMT

As most of us are aware, one of the 973 data points that must be collected and reported under the Home Mortgage Disclosure Act (“HMDA”) is the purpose of the loan. HMDA allows us to choose from one of the following six purposes codes:

However, many times the proceeds of a loan will be used for multiple purposes. For example, your borrower may want to refinance their existing closed-end home equity loan AND take out an additional $20,000 for home improvements. So in that situation, what purpose code should you use?

Comment 3 to §1003.4(a)(3) of Regulation C sheds some light on this question for us. Specifically for multi-purpose loans, financial institutions should adhere to the following rules when it comes to selecting the proper HMDA purpose code:

If your institution needs help with HMDA or any other federal consumer protection law or regulation, please contact Michael at michael@mchristiansconsulting.com .

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CFPB Issues FAQs Regarding TRID’s Applicability to Construction Loans

Wed, 05 Jun 2019 01:40:00 GMT

On May 31 ^st , the Consumer Financial Protection Bureau (the “Bureau”) added two additional questions, specific to construction loans, to its Integrated Disclosure Rule FAQs. The FAQs are available here .

TRID’s Applicability to Construction Loans

First, the Bureau addresses the applicability of TRID to construction loans. Generally speaking, both construction only loans and construction to permanent loans are subject to TRID. Remember that TRID applies to all closed-end consumer credit transactions secured by real property unless the loan is a reverse mortgage or specifically exempted by §1026.3 of Regulation Z.

Special Disclosure Provisions for Construction Loans

The Bureau goes on to address the following special disclosure provisions relative to construction loans:

Separate or Combined Disclosures

For construction to permanent loans, financial institutions are permitted to treat the loan as two separate transactions or a single transaction. If the creditor chooses to treat the loan as two separate transactions, it will provide a separate Loan Estimate/Closing Disclosure for both the construction phase and the permanent phase. If the creditor chooses to treat the loan as a single transaction, it will provide one combined Loan Estimate at application and one combined Closing Disclosure at closing.

Proper Disclosure Method for Construction Loans

Financial institutions should use Appendix D of Regulation Z for guidance on how to properly disclose a construction loan. For construction transactions, often information is not be reasonably available at the time of disclosure. For example, the timing and amount of construction advances may not be known. Appendix D provides special procedures and assumptions that a creditor may use to provide consistent and compliant disclosures.

Revised Loan Estimates for Construction Loans

Finally, the Bureau reminds creditors that they may be permitted to issue a revised Loan Estimate in connection with a construction loan where settlement will occur more than 60 days following delivery of the original Loan Estimate. To reserve the right to issue a revised Loan Estimate under these circumstances, the creditor must include the following statement in the “Other Considerations” section found on page 3 of the Loan Estimate – You may receive a revised Loan Estimate at any time prior to 60 days before consummation.

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Bureau Issues Long Anticipated Proposal to Amend Regulation F

Thu, 09 May 2019 01:11:00 GMT

On May 7th the Consumer Financial Protection Bureau (“the Bureau”) issued a proposed rule to amend Regulation F, which implements the Fair Debt Collection Practices Act (“FDCPA”). The FDCPA is a consumer protection statute enacted in 1977 that makes it illegal for a debt collector to use unfair, deceptive or abusive acts or practices while collecting a debt. The proposal seeks to modernize the four decades old law to bring it in line with advancements in communications technology, such as e-mail and mobile phones.

First, the important news for most financial institutions… you would continue to be exempt from the FDCPA’s requirements under the proposed rule. The FDCPA applies to debt collectors, defined as those who regularly collect or attempt to collect a debt owed to another. Furthermore, the FDCPA expressly exempts creditors collecting debts in their own name. The proposed rule makes no substantive changes to the definition of debt collector.

However, a financial institution that uses a name other than its own during the debt collection process would fall within the scope of the FDCPA. If your institution falls into this category, below is a high-level overview of some of the proposed changes:
• Makes safe harbor provisions available to a debt collector who unintentionally communicates with a third-party about a consumer’s debt when attempting to communicate with the consumer via e-mail or text message.
• Requires a debt collector to include in e-mails and text messages an option for the consumer to unsubscribe from future communications.
• Allows the consumer to request that a debt collector not communicate through a particular channel, such as a specific e-mail address or mobile phone number.
• Brings electronic communications (calls to mobile phones, text messages and e-mail) within the FDCPA’s prohibition on communicating with a consumer before 8am and after 9pm.
• Prohibits a debt collector from communicating with a consumer via an e-mail address that the debt collector knows or should have known is the consumer’s work e-mail address.
• Prohibits a debt collector from contacting a consumer through a social media platform except through the use of a private messaging function.
• Clarifies the number of attempted calls permitted to a consumer to avoid classifying the debt collector’s actions as an “intent to harass”, a practice specifically prohibited by the FDCPA.
• Clarifies to whom the debt collector may communicate when attempting to collect on a deceased consumer’s debt.
• Makes changes to the debt validation form required to be provided under the FDCPA.

While it’s good news that the proposed rule did not specifically bring first-party debt collectors within the scope of the FDCPA, a word of caution. We’ve seen the Bureau use the FDCPA before, within the scope of its UDAAP authority, to define what constitutes an unfair, deceptive or abusive debt collection practice (see CFPB Bulletin 2013-07). As a result, it’s probably a good idea for all financial institutions to familiarize themselves with the proposed rule and prepare to make changes to their debt collection practices accordingly.

The comment period closes 90 days after the proposed rule’s publication in the Federal Register.

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Will It Ever End? The CFPB Proposes Additional HMDA Rulemaking

Fri, 03 May 2019 01:37:00 GMT

On May 2nd, the Consumer Financial Protection Bureau (“CFPB”) issued an NPRM which proposes to raise the coverage thresholds for collecting and reporting HMDA data in connection with both closed-end mortgage loans and open-end lines of credit. Alongside the NPRM, the CFPB also issued an ANPR seeking information about the costs and benefits associated with reporting certain data points under HMDA.

Notice of Proposed Rulemaking (“NPRM”)
Currently, a financial institution is required to report HMDA data in connection with closed-end mortgage loans if it originated at least 25 of these loans in each of the two preceding calendar years. The CFPB is proposing two options for increasing this closed-end reporting threshold:
• 50 closed-end mortgage loans in each of the two preceding calendar years; or
• 100 closed-end mortgage loans in each of the two preceding calendar years.
As a result, under the proposed rule, a financial institution that originates fewer than 50 (or alternatively, 100) closed-end mortgage loans in each of the two preceding calendar years would not be required to collect and report HMDA data in connection with closed-end mortgage loans beginning January 1, 2020.

The CFPB’s original HMDA rule set the open-end reporting threshold at 100. This was temporarily increased to 500 for calendar years 2018 and 2019. However, this temporary increase is currently scheduled to expire on January 1, 2020. Under the CFPB’s NPRM, the agency is proposing to extend the temporary increase for another two years and then permanently set the reporting threshold for open-end lines of credit at 200. As a result, a financial institution that originated fewer than 500 open-end lines of credit in each of the two preceding calendar years would continue to be exempt from open-end reporting until January 1, 2022. Thereafter, to continue to qualify for the exemption from open-end reporting the financial institution will need to originate less than 200 open-end lines of credit in each of the two preceding calendar years.

Advance Notice of Proposed Rulemaking (“ANPR”)
In its ANPR, the CFPB is soliciting comments on the following aspects of HMDA and Regulation C:
• Effective January 1, 2018, HMDA reportable institutions were required to begin collecting 27 additional data points in connection with every HMDA reportable transaction. Recognizing the significant compliance burden placed on financial institutions as a result of the increased collection requirements, the CFPB is soliciting feedback as to what modifications can be made to balance the benefits and burdens associated with data reporting.
• Currently, business or commercial purposes loans made to a non-natural person and secured by a multifamily dwelling are reportable under HMDA. The CFPB is soliciting feedback as to whether it would be appropriate to exclude these types of transactions from HMDA’s requirements.

The comment period for the NPRM closes 30 days after publication in the Federal Register. The comment period for the ANPR closes 60 days after publication in the Federal Register.

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Consumer Financial Protection Bureau Updates

Sat, 16 Mar 2019 14:07:00 GMT

2019 List of Rural and Underserved Counties

The Consumer Financial Protection Bureau (“CFPB”) has updated its list of rural and underserved counties for 2019. The revised list is available on the CFPB’s website at www.consumerfinance.gov .

Small creditors who originate at least one loan secured by a first lien on property located in a rural or underserved county are exempt from the following under Regulation Z:

If your financial institution originates at least one qualifying loan in a rural or underserved county in 2019, you will be eligible for the exemptions mentioned above for calendar year 2020.

In addition, the dual appraisal requirement for an HPML secured by a “flipped property” is not applicable if the property securing the loan is located in a rural or underserved county.

Payday Lending Rule

The CFPB has issued a notice of proposed rulemaking (“NPRM”) to significantly lessen the compliance burden associated with its previously released payday lending rule.

Currently, the payday lending rule:

The NPRM proposes to eliminate both the ability to repay and registered information system network requirements. However, the restriction on repeated payment transfer attempts and associated disclosure requirements are unaffected. The comment period closes on May 15, 2019.

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Joint Agencies Issue Private Flood Insurance Final Rule

Thu, 07 Feb 2019 03:19:00 GMT

Recently, the joint agencies (OCC, FRB, FDIC, Farm Credit Administration and NCUA) issued a final rule implementing the private flood insurance requirements of the 2012 Biggert-Waters Act. The rule requires regulated lending institutions to accept private flood insurance in satisfaction of the mandatory flood insurance purchase requirements found in the National Flood Insurance Act and Flood Disaster Protection Act.

First, the rule provides financial institutions with a safe harbor for accepting private flood insurance. If the policy states “this policy meets the definition of private flood insurance contained in 42 U.S.C.4012a(b)(7) and the corresponding regulation”, it is considered sufficient to satisfy the mandatory flood insurance purchase requirement.

Absent such a statement, a financial institution may still accept a private flood insurance policy if a number of conditions are met. The policy must, among other things:

Second, the rule allows a financial institution to accept a private flood insurance policy at its discretion if it is issued by a licensed or approved insurer and provides sufficient protection of the designated loan consistent with general safety and soundness principles.

Finally, the rule allows financial institutions to accept flood insurance policies issued by mutual aid societies under certain conditions.

The final rule takes effect July 1, 2019. For more information about the final rule and to learn how it will affect your financial institution’s real estate lending operations, please contact Michael Christians Consulting, LLC at michael@mchristiansconsulting.com.

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ICYMI: Additional Threshold Adjustments Announced by the CFPB

Sat, 26 Jan 2019 16:16:00 GMT

On December 20, 2018, the Consumer Financial Protection Bureau (“CFPB”) published two final rules adjusting certain thresholds under both Regulation C and Regulation Z.

Home Mortgage Disclosure Act / Regulation C

The Home Mortgage Disclosure Act (“HMDA”) has a multi-part coverage test for determining those institutions required to collect and report HMDA data. One element of this multi-part test is the asset size of the institution. The CFPB is required to adjust this amount annually based on any change to the Consumer Price Index for Urban Wage Earners and Clerical Workers (“CPI-W”).

The CFPB’s final rule increases this asset threshold from $45 million in 2018 to $46 million in 2019. As a result, financial institutions with assets of $46 million or less as of December 31, 2018 will not be required to collect or report HMDA data for calendar year 2019.

Truth in Lending Act / Regulation Z

Section 1026.35 of Regulation Z discusses the additional compliance requirements associated with making a higher-priced mortgage loan (“HPML”). One of these additional requirements is that the financial institution must open an escrow account for the payment of property taxes and insurance in connection with an HPML secured by a first lien.

Certain small creditors are exempt from this mandatory escrow requirement. To be eligible for the exemption, the small creditor must:

This threshold is also adjusted annually by the CFPB based on any change to the CPI-W. For 2019, a small creditor with total assets (together with any affiliates) of less than $2.167 billion as of December 31, 2018 will be eligible for the exemption so long as the other requirements identified above are met. This is up from $2.112 billion the previous year.

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CFPB Issues Final Policy Guidance for Disclosure of HMDA Data

Fri, 04 Jan 2019 18:02:00 GMT

On December 21, 2018, the Consumer Financial Protection Bureau (“CFPB”) issued final policy guidance regarding modifications that it will apply to loan-level HMDA data prior to its release to the public.

In developing its policy guidance, the CFPB engaged in a balancing test of protecting applicant and borrower privacy while at the same time fulfilling HMDA’s public disclosure purposes. The following table identifies how the CFPB intends to make HMDA data available to the public beginning in 2019 with respect to data compiled by financial institutions in or after 2018.

If your financial institution has any questions about this policy guidance or needs help with HMDA implementation generally, please reach out to Michael Christians Consulting, LLC at michael@mchristiansconsulting.com.

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4 Things You Need to Know Before the Long Holiday Weekend

Thu, 20 Dec 2018 18:01:00 GMT

The CFPB is Here to Stay
During his tenure as interim director of the Consumer Financial Protection Bureau, Mick Mulvaney insisted that the CFPB be referred to as the Bureau of Consumer Financial Protection, consistent with how the agency is identified in Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act. In one of her first official acts as director since winning Senate confirmation in early December, Kathy Kraninger has abandoned efforts to rename the bureau. While legal filings and other official business from the office of the director will identify the agency as the Bureau of Consumer Financial Protection, the name Consumer Financial Protection Bureau and the existing CFPB logo will continue to be used on all other materials.

Prime Rate Increases to 5.50%
At its quarterly meeting yesterday, the Federal Reserve Board’s Federal Open Market Committee (FOMC) raised the target range for the federal funds rate to 2.25% – 2.5%. As a result, effective today the Wall Street Journal Prime Rate has increased to 5.50%. Just a friendly reminder for any of you that may have a variable rate lending product tied to this particular index.

Subscribe to Our Blog
We’ve added a form to our website that allows followers to subscribe to our blog. If you’re interested, visit www.mchristiansconsulting.com/blog and enter your information. You’ll be notified via e-mail anytime a new blog is posted to our site!

Happy Holidays
As we close out 2018 and embark on a new year, I’d like to thank all of you who have supported Michael Christians Consulting, LLC in the past year. Your business is so very much appreciated. And for those who may need a compliance partner in 2019, I hope you’ll check us out! Here’s wishing all of you a happy and healthy holiday season and best of luck in the year to come.

The post 4 Things You Need to Know Before the Long Holiday Weekend appeared first on Michael Christians Consulting, LLC .

Proposed Rule: Inflationary Adjustments to Regulation CC

Mon, 10 Dec 2018 17:25:00 GMT

Today the Consumer Financial Protection Bureau published a proposed rule in the Federal Register which will make several substantive changes to Regulation CC (The Expedited Funds Availability Act).

First, as required by Section 208 of the Economic Growth, Regulatory Relief and Consumer Protection Act, the proposed rule would bring financial institutions located in the following jurisdictions within the scope of Regulation CC’s requirements:

Second, the proposed rule implements a statutory provision found in Section 1086(f) of the Dodd-Frank Wall Street Reform and Consumer Protection Act that mandates certain thresholds within Regulation CC be adjusted every 5 years based on the annual percentage increase to the Consumer Price Index for Urban Wage Earners and Clerical Workers (“CPI-W”). The proposal states that the effective date for the first round of inflationary adjustments would be April 1, 2020 with further adjustments occurring April 1st of every fifth year thereafter.

The changes to the availability thresholds within Regulation CC would be as follows:

The proposed rule would also:

Comments on the proposed rule are due on or before February 8, 2019.

For more information, please contact Michael Christians Consulting, LLC at michael@mchristiansconsulting.com.

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2019 Threshold Adjustments Under Regulation Z

Sat, 01 Dec 2018 19:08:00 GMT

The following thresholds found within Regulation Z are subject to change annually based on the percentage increase reflected in the Consumer Price Index (CPI):
• Qualified Mortgage (QM) Limitation on Points and Fees;
• High-Cost Mortgage Points and Fees Test; and
• Higher Priced Mortgage Loan Appraisal Exemption Threshold.
In recent rulemaking, the Consumer Financial Protection Bureau announced what these thresholds will be for calendar year 2019.

Qualified Mortgage (QM) Limitation on Points and Fees
One of the requirements for a loan to meet the definition of a Qualified Mortgage is that the points and fees charged in connection with the transaction must not exceed a certain cap based on loan amount. The applicable QM points and fees caps will be as follows beginning January 1, 2019:
• 3% of the loan amount for loans greater than $107,747
• $3,232 for loans between $64,648 and $107,747
• 5% of the loan amount for loans between $21,549 and $64,648
• $1,077 for loans between $13,468 and $21,549
• 8% of the loan amount for loans less than $13,468

High-Cost Mortgage Points and Fees Test
A loan may be classified as high-cost based on meeting the requirements of one of three independent tests. One of these tests looks at the points and fees charged in connection with the transaction. Beginning January 1, 2019, a loan will be considered high-cost if the total points and fees charged in connection with the transaction exceed:
• 5% of the loan amount for loans greater than $21,549
• For loans of less than $21,549, the lesser of 8% of the loan amount or $1,077

Higher Priced Mortgage Loan Appraisal Exemption Threshold
If a loan is considered higher priced by definition under Regulation Z, additional compliance requirements apply. One of these is that the financial institution must obtain a written appraisal of the subject property securing the loan. Several exceptions to this mandatory appraisal requirement permit a financial institution to use an alternative method of valuation even if the loan is considered higher priced. One of these exceptions is based on loan amount. Beginning January 1, 2019, a higher priced mortgage loan equal to or less than $26,700 is exempt from the mandatory appraisal requirement.

For more information, please contact Michael Christians at michael@mchristiansconsulting.com.

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