CFPB Report January 17, 2014

CFPB Extends Comment Period for Debt Collection ANPR

On Tuesday, November 12, 2013, the CFPB issued an Advance Notice of Proposed Rulemaking (ANPR) on debt collection practices, which included a 90-day comment period ending February 10, 2014. On January 14, 2014, the Bureau published a notice in the Federal Register announcing an extension of the comment period to February 28, 2014.


The proposed rules will likely have longstanding implications on ways in which banks mitigate default and collect past-due debt. CBA’s Default Management Committee is developing a comprehensive response to the ANPR.


CFPB Issues Consent Order against Mortgage Lender

On Thursday, January 16, 2014, the CFPB ordered Fidelity Mortgage Corporation, a Missouri mortgage lender, and its former owner/current president to pay $81,076 for funneling illegal kickbacks to a bank in exchange for real estate referrals.


“Kickbacks harm consumers by hampering fair market competition and by unnecessarily increasing the costs of getting a mortgage,” said Director Cordray in press statement. “The Consumer Financial Protection Bureau will continue to take action against schemes that steer consumers to lenders through unscrupulous and illegal business practices.”


House Financial Services Subcommittee Examines QM Rule’s Impact

On Tuesday, January 14, 2014, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit convened a hearing entitled, “How Prospective and Current Homeowners Will be Harmed by the CFPB’s Qualified Mortgage Rule.” Witnesses included industry trade groups, Habitat for Humanity, and the Center for Responsible Lending. The National Association of Consumer Advocates attended the hearing, which focused on predatory lending leading up to the financial crisis, credit availability for low income borrowers, and estimates for the size of the non-qualified mortgage (QM) loan market.


Rep. Shelley Moore Capito (R-WV), the subcommittee's chair, called the mortgage rules, “another example of the consequences of removing underwriting discretion from the hands of lenders and borrowers and placing it in the hands of unelected bureaucrats in Washington.” The three panel witnesses indicated they are only underwriting QM loans. Some subcommittee members called for amending the rule, concerned the pendulum had swung too far and is now unnecessarily impeding access to credit. Other members denounced the concern: “I think the folks on this committee would do well to tone down the doomsday talk and rhetoric about the rule that is going to do enormous good for homebuyers,” stated Rep. Stephen Lynch (D-MA).

CBA Joins Trades Letter on Cybersecurity Bill

On Monday, January 13, 2014, CBA with other financial trade associations sent a letter supporting the introduction and markup of H.R. 3696, the “National Cybersecurity and Critical Infrastructure Protection Act.” On Wednesday, January 15, 2014, the House Homeland Security Subcommittee passed the legislation by voice vote after the markup. Cybersecurity has remained a concern for the financial services industry. CBA will continue to monitor this issue.

Fed Issues Debit Interchange Surveys

On Wednesday, January 15, 2014, the Federal Reserve Board (Fed) released its 2013 payment cardnetwork survey and debit card issuer survey. The 2013 Surveys, which collect information on costs, debit card usage, and interchange fees, are mandatory for issuers and payment card networks, as applicable, which the Fed has determined are within the scope of Section 920(a) of the Electronic Funds Transfer Act (EFTA), as amended by Dodd-Frank. The Fed has also indicated information collected in response to the current Interchange Issuer Survey and Interchange Network Survey may be used to respond to possible outcomes of ongoing litigation regarding Regulation II.


Section 920(a) of the EFTA, states the Fed shall, at least every two years, disclose aggregate or summary information concerning the costs incurred, and interchange transaction fees charged or received, by issuers or payment card networks in connection with debit card transactions. Section 920(a) provides the Fed with the authority to require issuers and payment card networks to provide information to enable the Fed to carry out the cost and interchange fee data collection task.

Congress Seeks More Information on Target Data Breach

On Tuesday, January 14, 2014, Rep. Elijah Cummings (D-MD), the Ranking Member of House Committee on Oversight and Government Reform wrote to the Committee’s Chairman, Darrell Issa (R-CA), requesting a hearing with senior Target executives and security experts to “investigate the cause of this breach, its implications for American consumers, and the steps Target has taken to address this specific breach and implement mitigation measures to ensure that similar attacks are not successful in the future.” The Chairman of the Senate Commerce Committee, Sen. John Rockefeller (D-WV),also hasrequested a briefing from Target’s information security officials.


Legislation has been introduced aimed at addressing such data breach concerns. On January 15, 2014, Sen. Tom Carper (D-DE) introduced a bill (S. 1927) to protect consumer information and require notice of security breaches. “Unfortunately, consumers, government agencies, and businesses of all kinds have proven to be extremely vulnerable to fraud and identity theft, and the Target data breach is just the latest example of this serious problem,” Carper said in a statement.

OCC Issues Guidelines on Governance and Risk Management

On Thursday, January 16, 2014, the OCC released proposed guidelines outlining new standards for large national banks and federal savings associations. Shortly after the financial crisis, the OCC developed a set of "heightened expectations" aimed at strengthening the governance and risk management practices of large national banks and federal savings associations, and to enhance the agency's supervision of those institutions. The guidelines enhance and formalize the expectations providing additional clarity and specificity to the large financial institutions the OCC oversees.


The guidelines would require a bank’s board of directors ensure the banking unit does not function as a profit center for its parent company, and the parent company’s decisions do not jeopardize the bank’s safety and soundness. The OCC also expects large banks to develop and execute a process to attract and retain the staff needed to manage their business in a safe and sound manner. The OCC also expects institutions to communicate and define the amount of risk a bank is taking, or planning to take, across their organizations. Banks are also expected to maintain strong internal controls and audits, and directors and managers must be engaged and present credible challenges to bank management.


"The standards announced today build on lessons learned from the financial crisis," said Comptroller of the Currency Tom Curry in a press release. "They will contribute to a safer financial system for all of us by providing clear and enforceable standards for the risk management and governance of our largest institutions. They provide additional supervisory tools to examiners of large national banks and federal savings associations, and they will measurably enhance our supervision of these institutions."