Supervisory Highlights, Issue 21 (Winter 2020)
| Published date | 20 February 2020 |
| Citation | 85 FR 9746 |
| Record Number | 2020-03301 |
| Section | Notices |
| Court | Consumer Financial Protection Bureau |
Federal Register, Volume 85 Issue 34 (Thursday, February 20, 2020)
[Federal Register Volume 85, Number 34 (Thursday, February 20, 2020)]
[Notices]
[Pages 9746-9750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03301]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
Supervisory Highlights, Issue 21 (Winter 2020)
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Supervisory highlights.
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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
issuing its twenty first edition of Supervisory Highlights. In this
issue of Supervisory Highlights, we report examination findings in the
areas of debt collection, mortgage servicing, payday lending and
student loan servicing that were completed between April 2019 and
August 2019. The report does not impose any new or different legal
requirements, and all violations described in the report are based only
on those specific facts and circumstances noted during those
examinations.
DATES: The Bureau released this edition of the Supervisory Highlights
on its website on February 14, 2020.
FOR FURTHER INFORMATION CONTACT: Jaclyn Sellers, Counsel, at (202) 435-
7449. If you require this document in an alternative electronic format,
please contact [email protected].
SUPPLEMENTARY INFORMATION:
1. Introduction
The Bureau of Consumer Financial Protection (Bureau) is committed
to a consumer financial marketplace that is free, innovative,
competitive, and transparent, where the rights of all parties are
protected by the rule of law, and where consumers are free to choose
the products and services that best fit their individual needs. To
effectively accomplish this, the Bureau remains committed to sharing
with the public key findings from its supervisory work to help industry
limit risks to consumers and comply with Federal consumer financial
law.
The findings included in this report cover examinations in the
areas of debt collection, mortgage servicing, payday lending, and
student loan servicing that were completed between April 2019 and
August 2019.
It is important to keep in mind that institutions are subject only
to the requirements of relevant laws and regulations. The information
contained in Supervisory Highlights is disseminated to help
institutions better understand how the Bureau examines institutions for
compliance with those requirements. This document does not impose any
new or different legal requirements. In addition, the legal violations
described in this and previous issues of Supervisory Highlights are
based on the particular facts and circumstances reviewed by the Bureau
as part of its examinations. A conclusion that a legal violation exists
on the facts and circumstances described here may not lead to such a
finding under different facts and circumstances.
We invite readers with questions or comments about the findings and
legal analysis reported in Supervisory Highlights to contact us at
[email protected].
2. Supervisory Observations
Recent supervisory observations are reported in the area of debt
collection, mortgage servicing, payday lending, and student loan
servicing.
2.1 Debt Collection
The Bureau's Supervision program has the authority to examine
certain entities that engage in consumer debt collection activities,
including nonbanks that are larger participants in the consumer debt
collection market. Recent examinations of larger participant debt
collectors identified one or more violations of the Fair Debt
Collection Practices Act (FDCPA).
2.1.1 Failure To Disclose in Subsequent Communications That
Communication is From a Debt Collector
Section 807 of the FDCPA prohibits the use of any false, deceptive,
or misleading representation or means in the collection of any debt.\1\
Specifically, section 807(11) of the FDCPA prohibits a collector from
failing to disclose in communications subsequent to the initial written
communication that the communication is from a debt collector.\2\
Examiners found that one or more debt collectors failed to disclose in
their subsequent communications that those communications were from a
debt collector. In response to these findings, the collectors revised
their section 807(11) policies and procedures, monitoring and/or audit
programs, and training.
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\1\ 15 U.S.C. 1692(e).
\2\ 15 U.S.C. 1692(e)(11).
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2.1.2 Failure To Send Notice of Debt
Section 809(a) of the FDCPA requires that within five days after
the initial communication with the consumer in connection with the
collection of any debt, a debt collector must send a written validation
notice unless the information is contained in the initial communication
or the consumer has paid the debt.\3\ Examiners found that one or more
debt collectors failed to send the prescribed validation notice within
five days of the initial communication with the consumer regarding
collection of the debt, where required. In response to these findings,
the collectors revised their section 807(11) policies and procedures,
monitoring and/or audit programs, and training.
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\3\ 15 U.S.C. 1692(g)(a).
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2.2 Mortgage Servicing
Bureau examinations continue to focus on the loss mitigation
process. Examiners determined that one or more servicers violated
Regulation X, by failing to provide certain required loss mitigation
notices, providing incomplete notices, or not providing notices within
the time required by the regulation.\4\ These violations were caused,
in part, by servicers' efforts to handle an unexpected surge in
applications due to natural disasters and impacted both borrowers in
disaster areas and those outside of disaster areas. The Bureau had
issued a statement regarding supervisory practices during natural
disasters.\5\ The statement described flexibility in Regulation X that
may make it easier for servicers to assist borrowers affected by
natural disasters or emergencies but does not lift any requirements.
However, since the violations set forth below occurred during a time
period where the servicers were making specific efforts to address
borrower needs arising from natural disasters, Supervision did not
issue any matters requiring attention setting forth needed corrective
actions by servicers. Instead, servicers developed plans to enhance
staffing capacity in response to any future disaster-related increases
in loss mitigation applications.
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\4\ 12 CFR 1024.41.
\5\ Statement on Supervisory Practices Regarding Financial
Institutions and Consumers Affected by a Major Disaster or
Emergency--September 2018, available at https://www.consumerfinance.gov/policy-compliance/guidance/supervisory-guidance/statement-supervisory-practices-regarding-financial-institutions-and-consumers-affected-major-disaster-or-emergency/.
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[[Page 9747]]
2.2.1 Loss Mitigation Notice Violations
Regulation X generally requires servicers to send borrowers a
written notice acknowledging receipt of a loss mitigation application
and notifying borrowers of the servicers' determination that the loss
mitigation application is either complete or incomplete within 5 days
(excluding legal public holidays, Saturdays, and Sundays) after
receiving a loss mitigation application. The notice includes a
statement that the borrower should consider contacting servicers of any
other mortgage loans secured by the same property to discuss available
loss mitigation options.\6\
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\6\ 12 CFR 1024.41(b)(2)(i)(B). This notice is only required if
the servicer receives a loss mitigation application 45 days or more
before a foreclosure sale.
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In one or more examinations, examiners found that the servicers
violated Regulation X by failing to notify borrowers in writing that an
application was either complete or incomplete within 5 days of
receiving the application.
Regulation X also generally requires servicers to provide consumers
with a written notice stating the servicers' determination of which
loss mitigation options, if any, it will offer the consumer within 30
days of receiving the complete loss mitigation application.\7\
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\7\ 12 CFR 1024.41(c)(1). This notice is only required if the
servicer receives a loss mitigation application more than 37 days
before a foreclosure sale.
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In one or more examinations, examiners found that the servicers
violated Regulation X because the servicers did not provide a written
notice stating the servicers' determination of available loss
mitigation options within 30 days of receiving the complete loss
mitigation application.
Regulation X requires servicers to exercise reasonable diligence in
obtaining documents and information to complete a loss mitigation
application that servicers receive.\8\ In addition, Regulation X
generally requires servicers to evaluate the borrower for all loss
mitigation options available to the borrower and prohibits servicers
from evading those requirements by offering a loss mitigation option
based upon evaluation of an incomplete loss mitigation application,
unless an exception exists.\9\ As an exception to that requirement,
Regulation X permits servicers to offer a short-term loss mitigation
option (short-term payment forbearance program or short-term repayment
plan) to a borrower based upon an evaluation of an incomplete loss
mitigation application. Regulation X requires servicers that do so to
promptly provide a written notice stating that the offered program or
plan is based on an evaluation of an incomplete application, that other
loss mitigation options may be available, and that the borrower has the
option to submit a complete loss mitigation application to receive an
evaluation for all available loss mitigation options regardless of
whether the borrower accepts the plan.\10\
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\8\ 12 CFR 1024.41(b)(1).
\9\ 12 CFR 1024.41(c).
\10\ 12 CFR 1024.41(c)(2)(iii).
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In one or more examinations, servicers automatically granted short-
term payment forbearances if a borrower in a disaster area experienced
home damage or incurred a loss of income from the disaster. Borrowers
did not submit any form of written application to receive the
forbearance. Rather, borrowers spoke with the servicers over the phone
about their financial concerns due to the disaster and received the
forbearances based on these conversations. The borrowers' conversations
with the servicers constituted loss mitigation applications under
Regulation X.\11\ Examiners found that the servicers violated
Regulation X by not providing a written notice with the required
consumer information when it offered borrowers the short-term payment
forbearance program based upon evaluation of an incomplete loss
mitigation application. This consumer information is an important
element of the rule because some borrowers may be experiencing a
hardship where a longer-term loss mitigation option is more
appropriate.\12\
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\11\ Under Regulation X, a loss mitigation application ``means
an oral or written request for a loss mitigation option that is
accompanied by any information required by a servicer for evaluation
for a loss mitigation option.'' 12 CFR 1024.31.
\12\ Amendments to the 2013 Mortgage Rules Under the RESPA
(Regulation X) and the TILA (Regulation Z), 81 FR 72247 (October 19,
2016).
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As noted above, because the violations were caused, in part, by
servicers' efforts to handle an unexpected surge in applications due to
natural disasters and occurred during a time period where the servicers
were making specific efforts to address borrower needs arising from the
natural disasters, examiners did not issue any matters requiring
attention for these violations. Instead, servicers developed plans to
enhance staffing capacity in response to any future disaster-related
increases in loss mitigation applications.
2.3 Payday Lending
The Bureau's Supervision program covers entities that offer or
provide payday loans. Examinations of these lenders identified
violations of Regulation Z, Regulation B, and unfair acts or practices.
2.3.1 Failing To Apply Borrowers' Payments to Their Loans
Under the prohibition against unfair acts or practices in sections
1031 and 1036 of the CFPA,\13\ an act or practice is unfair when: (1)
It causes or is likely to cause substantial injury to consumers; (2)
which is not reasonably avoidable by consumers; and (3) such
substantial injury is not outweighed by countervailing benefits to
consumers or to competition.\14\
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\13\ 12 U.S.C. 5531, 5536.
\14\ 12 U.S.C. 5531(c)(1).
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One or more lenders engaged in unfair acts or practices in
violation of the CFPA when borrowers paid more than they owed because
the lenders failed to apply borrower payments to their loans in certain
circumstances, lacked systems to detect the unapplied payments, and
treated borrowers' accounts as delinquent.
Examiners determined that under certain circumstances, borrowers'
payments were being processed by lenders but not applied to the
borrowers' loan balances in the lenders' systems. The lenders continued
to assess interest as if the consumers had not made a payment and
incorrectly treated affected consumers as delinquent. A number of
consumers ultimately paid more than they owed. The lenders lacked
systems to confirm that borrower payments were applied to their loan
balances. Consumers who viewed their accounts online were given
incorrect information that did not account for the unapplied payment.
The borrowers' overpayments constituted substantial injury. The
injury was not reasonably avoidable by the borrowers because the
lenders conveyed incorrect information to them about their accounts and
failed to timely follow up on borrowers' complaints. The injury was not
outweighed by countervailing benefits to consumers or competition
because the cost to lenders to implement appropriate accounting
controls to reconcile payments against borrowers' loans would have been
reasonable; because any cost-savings associated with not investing in
such controls placed the lenders' competitors at a competitive
disadvantage; and because the lenders' practices conferred no benefits
to consumers. The Bureau is
[[Page 9748]]
reviewing the lenders' remedial and corrective actions.
2.3.2 Inaccurate Disclosure of Annual Percentage Rate
Regulation Z requires a creditor to disclose the annual percentage
rate (APR) for certain transactions.\15\ The APR disclosed to a
consumer will generally be considered accurate if it is not more than
\1/8\ of 1 percentage point above or below the APR calculated as
Regulation Z requires.\16\
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\15\ 12 CFR 1026.18(e).
\16\ 12 CFR 1026.22(a)(2).
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Examiners found that one or more lenders relied on employees to
calculate APRs when their loan origination systems were unavailable.
Because of errors in calculating the term of the loan, the APRs were
sometimes misstated to consumers, thereby violating Regulation Z.
Examiners found that the errors resulted from weaknesses in employee
training by the lenders. In response to these findings, such training
will be improved.
2.3.3 Failure To Include a Fee in Calculation of Finance Charge and
Annual Percentage Rate
In addition to requiring disclosure of the APR,\17\ Regulation Z
requires a creditor to disclose the finance charge associated with
certain transactions.\18\ A finance charge is ``the cost of consumer
credit as a dollar amount'' and includes any charge imposed ``as an
incident to or condition of the extension of credit.'' \19\
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\17\ 12 CFR 1026.18(e).
\18\ 12 CFR 1026.18(d).
\19\ 12 CFR 1026.4(a).
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Examiners found that one or more lenders charged a loan renewal fee
to consumers who were refinancing delinquent loans. The fee was not
stated in the outstanding loan agreement, and therefore constituted a
change in terms. Because the lenders conditioned the new loans on
payment of the fee, the fee was a finance charge associated with the
new loan that required new transaction disclosures under Regulation Z.
However, the lenders did not include the renewal fee in their
calculation of the finance charge or APR. Because the fee was omitted
from the calculations, the finance charge and APR that the lenders
disclosed to consumers violated Regulation Z. Examiners found that a
lack of detailed policies and procedures for loan origination and a
lack of training on the requirements of Federal consumer financial laws
contributed to the violations of Regulation Z. As a result of these
findings, the lenders strengthened their policies and procedures and
training program. Additionally, the lenders refunded the fee to
consumers and explained the reason for the refund.
2.3.4 Failure To Retain Evidence of Compliance With Regulation Z
With certain exceptions, a creditor is generally required to retain
evidence of compliance with the requirements of Regulation Z for two
years.\20\ One or more lenders were unable to provide examiners with
evidence of compliance with Regulation Z. While payment histories and
loan data were maintained in the systems of record, other loan
origination documentation was not consistently maintained, and evidence
of compliance with Truth-in-Lending disclosure requirements could not
be provided. Examiners found that this violated the record-retention
requirements of Regulation Z. The violation resulted in part from a
lack of training and of detailed policies and procedures related to
record retention. In response to these findings, the lenders developed
and implemented a record-retention program to support compliance with
the requirements of Regulation Z.
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\20\ 12 CFR 1026.25(a).
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2.3.5 Adverse Action Notices That Failed To Disclose the Principal
Reason(s) for the Adverse Action
Regulation B requires a creditor to provide a consumer a notice
after taking certain adverse actions.\21\ Among the required content of
the notice is a statement of the specific reason or reasons for the
action taken,\22\ which ``must be specific and indicate the principal
reason(s) for the adverse action.'' \23\ Examiners found that one or
more lenders provided consumers with adverse action notices that stated
one or more incorrect principal reasons for taking an adverse action.
For example, lenders sent numerous incorrect notices due to a coding
system error. Examiners found that the relevant adverse action notices
violated Regulation B. As a result of this finding, the lenders sent
corrected adverse action notices to consumers and made changes to the
systems used to generate the notices.
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\21\ 12 CFR 1002.9(a).
\22\ 12 CFR 1002.9(a)(2)(i).
\23\ 12 CFR 1002.9(b)(2).
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2.3.6 Unfair Imposition of Unauthorized and Undisclosed Fee
Under the prohibition against unfair acts or practices in sections
1031 and 1036 of the CFPA,\24\ an act or practice is unfair when: (1)
It causes or is likely to cause substantial injury to consumers; (2)
which is not reasonably avoidable by consumers; and (3) such
substantial injury is not outweighed by countervailing benefits to
consumers or to competition.\25\
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\24\ 12 U.S.C. 5531, 5536.
\25\ 12 U.S.C. 5531(c)(1).
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Examiners found that one or more lenders assessed consumers a
particular fee as a condition of paying or settling a delinquent loan.
The fee was not authorized by the lenders' loan contract, which stated
that the expense at issue would be paid by the lender. During the
payment or settlement process, the fee was either incorrectly described
as a court cost (which the contract would have required the consumer to
pay) or not disclosed at all.
Examiners found that imposition of the fee was an unfair act or
practice. The fee caused or was likely to cause substantial injury to
consumers who were required to pay extra in order to pay or settle
their debts. The consumers could not reasonably avoid the fee. Often,
consumers were not provided with an itemization of the amount due while
paying or settling their debts. If they were provided with an
itemization, the fee was inaccurately described as a court cost. The
substantial injury was not outweighed by countervailing benefits
because there were no benefits to consumers or to competition.
Examiners found that the practice resulted in part from a lack of
monitoring and/or auditing of the lenders' collection practices.
As a result of this finding, the lenders made changes to their
compliance management system and refunded the fee to affected
consumers.
2.4 Student Loan Servicing
The Bureau continues to examine student loan servicing activities,
primarily to assess whether entities have engaged in any unfair,
deceptive or abusive acts or practices prohibited by the CFPA.
Examiners found one or more student loan servicers engaged in an unfair
practice related to monthly payment calculations.
2.4.1 Inaccurate Monthly Payment Amounts After Servicing Transfer
Under the prohibition against unfair acts or practices in sections
1031 and 1036 of the CFPA,\26\ an act or practice is unfair when: (1)
It causes or is likely to cause substantial injury to consumers; (2)
which is not reasonably avoidable by consumers; and (3) the substantial
injury is not outweighed by
[[Page 9749]]
countervailing benefits to consumers or to competition.\27\
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\26\ 12 U.S.C. 5531, 5536.
\27\ 12 U.S.C. 5531(c)(1).
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In one or more examinations, examiners found that servicers engaged
in an unfair act or practice by stating monthly amounts due in periodic
statements that exceeded those authorized by consumers' loan notes,
where either the servicers automatically debited incorrect amounts or,
for borrowers not enrolled in auto debit, the borrowers submitted an
inflated payment or were assessed a late fee for failing to submit the
inflated payment by the due date. More specifically, during the
transfer of private loans between servicing systems, data mapping
errors led to inaccurate calculations of monthly payment amounts. The
servicers sent periodic statements with the inaccurate monthly payment
amounts to consumers, and, for some consumers enrolled in automatic
debit, debited the inaccurate amounts from their accounts. Consumers
not enrolled in auto debit may have submitted an inflated payment or
were assessed late fees for failing to do so by the due date.
The conduct caused or was likely to cause substantial injury to
consumers for one of three reasons: (1) Because incorrect amounts were
automatically debited from their accounts, (2) because they made
payments based on the incorrect periodic statement amounts, or (3)
because they incurred late fees when they did not pay the incorrect
amounts. Consumers could not reasonably have avoided the injury because
they reasonably relied on the servicers' calculations and
representations in the periodic statements. The injury from this
activity is not outweighed by the countervailing benefits to consumers
or competition. For example, the benefits to consumers or competition
from avoiding the cost of better monitoring of servicing transfers
between entities would not outweigh the substantial injury to
consumers. In response to the examination findings, the servicers have
conducted reviews to identify and remediate affected consumers.
Servicers also implemented new processes to mitigate data mapping
errors.
3. Supervision Program Developments
3.1 Recent Bureau Rules and Guidance
3.1.1 Federal Regulators Issue Joint Statement on the Use of
Alternative Data in Credit Underwriting
On December 3, 2019, five Federal financial regulatory agencies
issued a joint statement on the use of alternative data in underwriting
by banks, credit unions, and non-bank financial firms.
The statement from the Bureau, the Federal Reserve Board, the
Federal Deposit Insurance Corporation, the Office of the Comptroller of
the Currency, and the National Credit Union Administration notes the
benefits that using alternative data may provide to consumers, such as
expanding access to credit and enabling consumers to obtain additional
products and more favorable pricing and terms. The statement explains
that a well-designed compliance management program provides for a
thorough analysis of relevant consumer protection laws and regulations
to ensure firms understand the opportunities, risks, and compliance
requirements before using alternative data.
Alternative data includes information not typically found in
consumers' credit reports or customarily provided by consumers when
applying for credit. Alternative data include cash flow data derived
from consumers' bank account records. The agencies recognize that use
of alternative data in a manner consistent with applicable consumer
protection laws may improve the speed and accuracy of credit decisions
and may help firms evaluate the creditworthiness of consumers who
currently may not obtain credit in the mainstream credit system.
3.1.2 CFPB Issues Interpretive Rule on Screening and Training
Requirements for Mortgage Loan Originators
On November 15, 2019, the Bureau issued an interpretive rule
clarifying screening and training requirements for financial
institutions that employ loan originators with temporary authority. The
rule went into effect on November 24, 2019.
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008
(SAFE Act) established a national system for licensing and registration
of loan originators. It contemplates two categories of loan
originators, those working for state-licensed mortgage companies and
those working for Federally-regulated financial institutions. Section
106 of the Economic Growth, Regulatory Relief, and Consumer Protection
Act (EGRRCPA) establishes a third category, loan originators with
temporary authority to originate loans. Loan originators with temporary
authority are loan originators who were previously registered or
licensed, are employed by a state-licensed mortgage company, are
applying for a new state loan originator license, and meet other
criteria specified in the statute. Loan originators with temporary
authority may act as a loan originator for a temporary period of time,
as specified in the statute, in a state while that state considers
their application for a loan originator license.
All loan originators must satisfy certain criminal history
screening and training requirements. Under the SAFE Act, before issuing
a state loan originator license, states must ensure that the individual
never has had a loan originator license revoked; has not been convicted
of enumerated felonies within specified timeframes; demonstrated
financial responsibility, character, and fitness; completed 20 hours of
pre-licensing education; and passed state specific testing
requirements. Under Regulation Z, which implements the Truth in Lending
Act, employers must perform substantially the same screening of certain
loan originators before permitting them to originate loans. Employers
must also ensure certain training for those loan originators. The
interpretive rule clarifies that the employer is not required to
conduct the screening and ensure the training of loan originators with
temporary authority. The state will perform the screening and training
as part of its review of the individual's application for a state loan
originator license.
3.1.3 Agencies Announce Dollar Thresholds in Regulation Z and M for
Exempt Consumer Credit and Leasing Transactions
On October 31, 2019, the Bureau and Federal Reserve Board announced
the dollar thresholds in Regulation Z (Truth in Lending) and Regulation
M (Consumer Leasing) that will apply for determining exempt consumer
credit and lease transactions in 2020. These thresholds are set
pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection
Act (Dodd-Frank Act) amendments to the Truth in Lending Act and the
Consumer Leasing Act that require adjusting these thresholds annually
based on the annual percentage increase in the Consumer Price Index for
Urban Wage Earners and Clerical Workers (CPI-W). If there is no annual
percentage increase in the CPI-W, the Federal Reserve Board and the
Bureau will not adjust this exemption threshold from the prior year.
However, in years following a year in which the exemption threshold was
not adjusted, the threshold is calculated by applying the annual
percentage change in CPI-W to the dollar amount that would have
resulted, after rounding, if the decreases and any subsequent increases
in the CPI-W had been taken into account. Transactions at or below the
thresholds
[[Page 9750]]
are subject to the protections of the regulations.
Based on the annual percentage increase in the CPI-W as of June 1,
2019, the protections of the Truth in Lending Act and the Consumer
Leasing Act generally will apply to consumer credit transactions and
consumer leases of $58,300 or less in 2020. However, private education
loan and loans secured by real property (such as mortgages) are subject
to the Truth in Lending Act regardless of the amount of the loan.
Although the Dodd-Frank Act generally transferred rulemaking
authority under the Truth in Lending Act and the Consumer Leasing Act
to the Bureau, the Federal Reserve Board retains authority to issue
rules for certain motor vehicle dealers. Therefore, the agencies issued
the notice jointly.
3.1.4 Agencies Announce Threshold for Smaller Loan Exemption From
Appraisal Requirements for Higher-Priced Mortgage Loans
On October 31, 2019, the Bureau, the Federal Reserve Board, and the
Office of the Comptroller of the Currency announced that the threshold
for exempting loans from special appraisal requirements for higher-
priced mortgage loans during 2020 will increase from $26,700 to
$27,200.
The threshold amount went into effect on January 1, 2020, and is
based on the annual percentage increase in the CPI-W as of June 1,
2019.
The Dodd-Frank Act amended the Truth in Lending Act to add special
appraisal requirements for higher-priced mortgage loans, including a
requirement that creditors obtain a written appraisal based on a
physical visit to the home's interior before making a higher-priced
mortgage loan. The rules implementing these requirements contain an
exemption for loans of $25,000 or less and also provide that the
exemption threshold will be adjusted annually to reflect increases in
the CPI-W. If there is no annual percentage increase in the CPI-W, the
agencies will not adjust this exemption threshold from the prior year.
However, in years following a year in which the exemption threshold was
not adjusted, the threshold is calculated by applying the annual
percentage change in CPI-W to the dollar amount that would have
resulted, after rounding, if the decreases and any subsequent increases
in the CPI-W had been taken into account.
3.1.5 CFPB Issues Final HMDA Rule To Provide Relief to Smaller
Institutions
On October 10, 2019, the Bureau issued a rule which finalizes
certain aspects of its May 2019 Notice of Proposed Rulemaking under the
Home Mortgage Disclosure Act (HMDA). It extends for two years the
current temporary threshold for collecting and reporting data about
open-end lines of credit under HMDA. The rule also clarifies partial
exemptions from certain HMDA requirements which Congress added in
EGRRCPA.
For open-end lines of credit, the rule extends for another two
years, until January 1, 2022, the current temporary coverage threshold
of 500 open-end lines of credit. For data collection years 2020 and
2021, financial institutions that originated fewer than 500 open-end
lines of credit in either of the two preceding calendar years will not
need to collect and report data with respect to open-end lines of
credit.
For the partial exemptions under the EGRRCPA, the rule incorporates
into Regulation C the clarifications from the Bureau's August 2018
interpretive and procedural rule. This final rule further effectuates
the burden relief for smaller lenders provided by the EGRRCPA by
addressing certain issues relating to the partial exemptions that the
August 2018 rule did not address.
This rule finalizes the above aspects of the May 2019 Notice of
Proposed Rulemaking, which also proposed raising the permanent coverage
thresholds for closed-end mortgage loans and open-end lines of credit.
On July 31, 2019, the Bureau reopened the comment period until October
15, 2019 for aspects of the May 2019 Notice of Proposed Rulemaking
related to raising the permanent coverage thresholds. The Bureau
intends to issue a separate final rule in 2020 addressing these
thresholds.
4. Remedial Actions
4.1 Public Enforcement Actions
Maxitransfers Corporation
On August 27, 2019, the Bureau announced a settlement with
Maxitransfers Corporation (Maxi), which provides remittance transfer
services that allow consumers to send money overseas electronically.
This was the Bureau's first action alleging violations of the
``Remittance Transfer Rule'' of the Electronic Fund Transfer Act
(EFTA). From October 2013 until May 2017, Maxi sent approximately 14.5
million remittance transfers for U.S. consumers. The Bureau found that
Maxi failed to provide certain consumer protection disclosures and did
not maintain all of the policies and procedures required under the
Remittance Transfer Rule. Maxi also violated the CFPA by stating to
consumers that it was not responsible for errors made by its third-
party payment agents when in fact under the Remittance Transfer Rule, a
provider is liable for any violation by an agent when such agent acts
for the provider. The consent order required Maxi to pay a civil money
penalty of $500,000 and prohibited Maxi from stating that it is not
responsible for the acts of its agents. The consent order also required
Maxi to take steps to improve its compliance management to prevent
future violations of the CFPA, EFTA, and the Remittance Transfer Rule.
5. Conclusion
The Bureau will continue to publish Supervisory Highlights to aid
Bureau-supervised entities in their efforts to comply with Federal
consumer financial law. The report shares information regarding general
supervisory and examination findings (without identifying specific
institutions, except in the case of public enforcement actions),
communicates operational changes to the program, and provides a
convenient and easily accessible resource for information on the
Bureau's guidance documents.
Dated: February 10, 2020.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2020-03301 Filed 2-19-20; 8:45 am]
BILLING CODE 4810-AM-P
