CFPB Report - April 17, 2015

CFPB Issues Rule Temporarily Suspending Obligation to Submit Card Agreements

On Wednesday, April 15, 2015, the CFPB issued a final rule temporarily suspending the requirement for certain credit card issuers to send their agreements to the CFPB on a quarterly basis. The Bureau had been publishing the agreements in a public database on its website. Other requirements, including card issuers' obligations to post these agreements on their own publicly available websites, remain unaffected by the rule.


"Today we are finalizing a rule that will help further the Bureau's work to improve the public credit card agreements database," said CFPB Director Richard Cordray. "Updating and streamlining the process for how credit card companies submit their agreements to us can benefit industry and our agency. Improving this process can also enable consumers and others to access the data faster and in a more useable form. "


The final rule suspends for one year credit card issuers' obligations to submit their credit card agreements directly to the CFPB. During this time, the Bureau will work to develop a more streamlined and automated electronic submission system. Accordingly, issuers will not be required to submit agreements otherwise due to the CFPB by the first business day on or after April 30, July 31, and October 31 of 2015, and January 31, 2016. Credit card issuers must resume submitting credit card agreements on a quarterly basis beginning on April 30, 2016. 


CFPB Released Housing Counselor Guidance and Online Tool

On April 15, 2015, the CFPB issued a final interpretive rule offering guidance on housing counselors and high-cost mortgage counseling requirements, which reiterated and expanded on the 2013 housing counselor interpretive rule. In the same announcement, the Bureau released a new online tool to generate housing counselor lists. Lenders can use the new tool to generate a list of ten housing counseling organizations to fulfill the current Real Estate Settlement Procedures Act (RESPA) rule. The following disclosure will ensure lenders are in compliance with the RESPA requirement:


"The counseling agencies on this list are approved by the U.S. Department of Housing and Urban Development (HUD), and they can offer independent advice about whether a particular set of mortgage loan terms is a good fit based on your objectives and circumstances, often at little or no cost to you. This list shows you several approved agencies in your area. You can find other approved counseling agencies at the Consumer Financial Protection Bureau's (CFPB) website: or by calling 1-855-411-CFPB (2372). You can also access a list of nationwide HUD-approved counseling intermediaries."


To comply with the pre-loan counseling for high-cost mortgages under the Truth in Lending Act (TILA), the interpretive rule clarifies qualifications necessary to provide high-cost mortgage counseling and offers guidance on the issue of lender participation in the counseling. Notably, the Bureau clarified a creditor may be "steering" if they insist on participating or listening to a counseling call if such behavior results in a consumer's selection of a particular counselor.


CFPB Initiates UDAAP Action For Refund Anticipation Loans

On Tuesday, April 14, the CFPB announced, together with the Navajo Nation, it is taking action under its unfair, deceptive, or abusive acts and practices (UDAAP) authority against companies and individuals who allegedly operated an illegal tax-refund scheme. The focus of the action is based on tax-preparation franchises allegedly steering low-income consumers, including many citizens of the Navajo Nation, toward high-cost tax-refund-anticipation loans.


"This scheme exploited vulnerable consumers by grossly understating loan rates and by deceiving them about the status of their tax refunds," said Director Cordray in a press release. "Today's joint action with the Navajo Nation to police illegal and abusive practices is a milestone for the Bureau. Through our coordination and cooperation, we are putting an end to this sorry chapter."


The CFPB contends the companies and individuals in question perpetrated a scheme which violated the law by illegally steering vulnerable consumers to high-cost products, illegally and grossly understating loan annual percentage rates and unfairly failing to disclose the availability of consumers' tax refunds.


House Committee Approves Data Security, Breach Notification Bill

On April 15, 2015, the House Energy and Commerce Committee approved H.R. 1770, the Data Security and Breach Notification Act of 2015, along a 29 to 20 party-line vote. The legislation would require merchants to implement "reasonable security measures" and notify customers within 30 days after discovery of a breach likely to cause them harm.


The bill was sponsored by Reps. Marsha Blackburn (R-TN) and Peter Welch (D-VT); however, Rep. Welch joined his Democratic colleagues in opposing the bill being reported out of committee after concerns were not addressed. Several Democratic amendments were offered unsuccessfully during the markup, including amendments to expand the scope of breached information subject to notification, strengthen the data security standard and avoid a level of preemption. A manager's amendment and an amendment to cap the fines and civil monetary penalties applicable to breached entities passed, along with a handful of other amendments.


After the bill's passage Rep. Blackburn stated: "Passing this data security bill out of committee today is an important milestone. While I hoped we could have reached a bipartisan agreement today, it is only a small bump in the road. Mr. Welch and I will continue to work closely together in the days ahead to ultimately achieve a strong bipartisan vote on the House floor." Ranking Member Frank Pallone (D-NJ) expressed his concerns with the bill: "I just think that this is moving much too quickly. There are a lot of changes that I think need to be made. I'm very concerned, particularly, about the preemption issue. All of these things need a lot of time and work ... I would like to see the process slowed down."


Prior to the markup, CBA joined several financial services trade organizations in a letter to Energy and Commerce Chairman Fred Upton (R-MI) and Ranking Member Pallone (D-NJ) outlining concerns about the legislation. In particular, the letter expresses concern about the bill's one-line data security standard combined with its lack of FTC rulemaking to prescribe security requirements. The letter also outlines the joint trade group's concern that the bill does not address the financial industry's disproportionate burden in covering the costs of a breach nor the issue of federal preemption for financial institutions already covered by the Gramm-Leach-Bliley Act.


Senators Introduce Bipartisan Data Security Bill

This week, Sens. Tom Carper (D-Del) and Roy Blunt (R-Mo) introduced the Data Security Act of 2015 (S. 961). The bill recognizes the flexibility, scalability, and overall success of the internal safeguards and processes financial institutions have put into place under the Gramm-Leach-Bliley Act (GLBA) and the need for other industries to develop and maintain similar common-sense safeguards. By complying with stronger data security standards under GLBA, financial institutions accounted for less than six percent of nationwide breaches in 2014 – with the remaining 94 percent of breaches occurring in the retail, healthcare, government, and education sectors. Despite fewer breaches, financial institutions have had to incur significant costs to notify customers, reissue cards, and make customers whole every time a breach occurs at a retailer. By implementing a strong data security standard across all industries, there will be fewer breaches, less fraud-related costs, and greater consumer protections.


Additionally, this bill creates a uniform federal standard preempting the confusing patchwork of 47 inconsistent state breach notification laws, and allows for banks, which often have the most direct relationship with affected consumers, to notify their customers of the type and origin of a breach so they may take proper precautions to safeguard their financial information in the future.


House Committee Looks at Regulatory Relief for Non-Depository Institutions

On Wednesday, April 15, 2015, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing: "Examining Regulatory Burdens on Non-Depository Financial Institutions," which reviewed a number of regulatory challenges facing non-depository institutions such as implementation of the TILA-RESPA Integrated Mortgage Disclosures (TRID), the CFPB rulemaking for short-term small-dollar lending, the Bureau's fair lending concerns for indirect automotive lending, and some distinctions for what products should be regulated at the state-level. In his opening statement, Subcommittee Chairman Randy Neugebuaer said, "We must push forward in our bipartisan efforts to provide regulatory relief for our Main Street financial institutions and protect the financial independence of the individuals and families they serve." Ranking Member Lacy Clay (D-MO) shared many of these sentiments, but expressed some reservations about the APR offered on short-term lending products.


House Passes Bipartisan, Non-Controversial Regulatory Relief Bills

This week, the House considered and voted on a number of bills designed to offer more consumer choice and  provide regulatory relief to certain financial services providers. Following passage of these bills, House Financial Services Committee Chairman Jeb Hensarling (R-TX) stated: "The American dream for so many low and moderate income Americans is that one day they can achieve financial independence. We are trying to ensure that low- and moderate-income Americans have convenience, that they have choice, that they have lower prices."


The bills included:

  • Preserving Access to Manufactured Housing Act (H.R. 650)
  • Mortgage Choice Act (H.R. 685)
  • Capital Access for Small Community Financial Institutions Act (H.R. 299)
  • Eliminate Privacy Notice Confusion Act (H.R. 601)
  • Helping Expand Lending Practices in Rural Communities Act (H.R. 1259)
  • Bureau Advisory Commission Transparency Act (H.R. 1265)
  • A bill to improve check-clearing wait times in American Samoa and the Northern Mariana Islands (H.R. 1367)
  • SAFE Act Confidentiality and Privilege Enhancement Act (H.R. 1480)


Fed Accepting Applications for Community Advisory Council

In January of 2015, the Federal Reserve Board established a Community Advisory Council (CAC) comprised of individuals with consumer and community development related expertise to provide insight to Treasury officials on "economic circumstances and financial services needs of consumers and communities, with a particular focus on the concerns of low- and moderate-income consumers and communities." On Monday, April 13, 2015, the Board began accepting Statements of Interest from applicants wishing to participate on the CAC and plans to announce CAC membership in the fall of 2015.