CFPB Report - January 16, 2015

CFPB Announces Mortgage Shopping Tool for Potential Borrowers

On Tuesday, January 13, 2015, the CFPB released a report detailing the way in which consumers shop for mortgages. Based on results from data in the National Survey of Mortgage Borrowers, conducted jointly by the CFPB and Federal Housing Finance Agency, the report found:

  • Almost half of consumers fail to shop around before applying for a mortgage;
  • Three out of four consumers only apply with one lender or broker;
  • Most consumers get their information from lenders or brokers, who have a stake in the outcome;
  • Borrowers who prioritize the terms of the loan over the characteristics of the lender are more likely to shop; and
  • Informed consumers are twice as likely to shop.

The Bureau also introduced a Rate Checker tool designed to provide potential homebuyers with mortgage rate information as part of its "Know Before You Owe" Program. The tool offers information such as:

  • Interest rates customized to the consumer;
  • How money is saved with lower rates;
  • The effects of different down payments and credit scores; and
  • Ways to get a better interest rate.
     

CFPB Issues RFI on Safe Student Account Scorecard

On Wednesday, January 14, 2015, the CFPB released a proposed "Safe Student Account Scorecard," which aims to help colleges evaluate and compare financial products before entering into agreement with a financial institution. According to the CFPB, the scorecard is an optional tool for colleges to evaluate four key components of financial products including:

  • A clear description of product fees and features;
  • Full disclosure about the financial institutions' marketing practices;
  • How much the financial institution earns from the accounts; and
  • An annual summary of fees.

The Bureau issued a request for information on the proposed scorecard, responses for which are due Monday, March 16, 2015.
 
Following release of the proposal, CBA's President and CEO, Richard Hunt, issued a statement highlighting the antiquated study and data used in the Bureau's request for information, as well as the CFPB's focus on the wrongdoings of a non-bank entity and not the actions of CBA members. CBA reiterated its commitment to a transparent market and pointed to the benefits of campus products offered by CBA members, as the GAO outlined in its report.

President Signs Extension of the Terrorism Risk Insurance Act

On Monday, January 12, 2015, President Barack Obama signed into law a bill extending the Terrorism Risk Insurance Program through 2020. The Terrorism Risk Insurance Program Reauthorization Act of 2015 (H.R. 26) increasing the trigger from $100 million to $200 million before the program takes effect. The program was allowed to temporarily lapse when Congress failed to reach agreement at the end of 2014.
 
The bill also includes language requiring the Federal Reserve Board to have a member with community banking experience, which traditionally has been the case for the Board's composition. The bill also creates the National Association of Registered Agents and Brokers (NARAB) national licensing system for insurance agents, and amends the margin requirements for certain end-users involved in derivatives trading to hedge risk.

President Introduces Blueprint for Consumer Data Security

On Monday, January 12, 2015, President Obama unveiled a package of proposed legislation and executive actions designed to improve national cybersecurity and protect consumers from data breaches. Included in the package is the Personal Data Notification & Protection Act, which would implement nationwide uniform consumer data breach notification rules. In a speech at the Federal Trade Commission, the President said, "Under the new standard that we're proposing, companies would have to notify consumers of a breach within 30 days. In addition, we're proposing to close loopholes in the law so we can go after more criminals who steal and sell the identities of Americans, even when they do it overseas."
 
The President also highlighted the Student Digital Privacy Act aimed at preventing the sale of sensitive student data for non-education purposes, and offered his support for a Consumer Privacy Bill of Rights.

Supreme Court Decides on Mortgage Rescission Requirements

On Tuesday, January 13, 2015 the U.S. Supreme Court in Jesinoski v. Countrywide Home Loans unanimously held that rescinding a mortgage transaction in the absence of Truth in Lending Act (TILA) disclosures requires only that the borrower notify the creditor of his intention and does not require initiating a lawsuit. Under TILA, a borrower has the right to rescind any residential mortgage transaction until three days after the lender provides the TILA-mandated disclosures. However, if the lender fails to provide the required disclosures, the period for rescission lasts for three years after commencing the transaction. According to the Supreme Court, during this time, the lender may rescind the transaction by conveying his intention to the lender and is not required to file a formal action.

House Approves Regulatory Accountability Act

On Tuesday, January 13, 2015, by a vote of 250-175, the U.S. House of Representatives passed the Regulatory Accountability Act of 2015 (H.R. 185). Only eight Democrats joined Republicans in approving the legislation, which would help to curb costly regulations and expand the scope of judicial review of agency rulemaking through modernization of the Administrative Procedures Act (APA). Specifically, the bill would require agencies conducting rulemaking to consider the legal authority for the rule; the nature of the problem and whether it warrants regulations; the potential alternatives to a rule; and the costs and benefits of alternatives. The legislation would also require agencies to identify whether new rules have a negative impact on jobs and wages.
 
In addition, H.R. 185 would ensure the most costly rules undergo greater scrutiny. For example, an Advanced Notice of Proposed Rulemaking will be required 90 days before major or high-impact rules are proposed. The bill also would require agencies to demonstrate the benefits of adopting a higher-cost rule over a lower-cost alternative.
 
This legislation, which passed the House during the 113th Congress, was reintroduced by House Judiciary Committee Chairman Bob Goodlatte (R-VA). "The Regulatory Accountability Act addresses the problem of escalating, excessive federal regulatory costs in a clear, commonsense way that we can all support. This legislation directs the Executive Branch to fulfill its statutory goals set by Congress and requires simply that they reach those goals in the least costly way with better public input to find the most efficient regulatory solutions," said Chairman Goodlatte upon introduction of the bill.
 
H.R. 185 has been sent to the Senate for consideration.

House Passes Bill Package

On Wednesday, January 14, 2015, the House voted 271-154 to pass the Promoting Job Creation and Reducing Small Business Burdens Act (H.R. 37). The package of bills failed to pass the House a week earlier under suspension of the rules, when the vote fell just short of the required two-thirds majority.
 
"All of these bills passed with overwhelming bipartisan majorities, and now, because of this almost religious zeal for the Dodd-Frank brand, again, some of my Democratic colleagues have decided that they were for it before they were against it," said House Financial Services Committee Chairman Jeb Hensarling (R-TX).
 
The bill includes 11 separate provisions pertaining to nearly all aspects of the financial services industry. The bill would delay a section of the Volcker Rule related to collateralized loan obligations, revise derivatives rules, and simplify Securities and Exchange Commission disclosure requirements.
 
While many of the provisions had strong bipartisan support, House Democrats were reluctant to vote for the package for fear it would allow Republicans to more easily amend Dodd-Frank.

SBA Announces New Electronic Signature Standards

Effective Thursday, January 1, 2015, U.S. Small Business Administration (SBA) lending partners may utilize compliant e-signature platforms to sign and process 7(a) and 504 loan guarantee applications.
 
SBA Administrator Maria Contreras Sweet called the new feature "a convenience that will save everyone time and money." She added, "By modernizing processes, I anticipate an increase in our lending portfolio with a particular boost in smaller dollar loans."
 
The introduction of SBA's electronic signature standards is the first of several improvements planned for 2015. For details on valid electronic signatures and eligibility, lenders are encouraged to review Procedural Notice 1500-1323.