CFPB Report - July 10, 2015

CFPB Cites Problems with Student Loan Servicing for Members of the Military
On Tuesday, July 7, 2015, the CFPB released a report entitled: "Overseas & Underserved: Student Loan Servicing and the Cost to Our Men and Women in Uniform." The report, by the Bureau's Assistant Director of Office of Servicemember Affairs Holli Petraeus, and Seth Frotman, the Acting CFPB Student Loan Ombudsman, identified deficiencies in student loan servicing to members of the military, particularly related to the six percent interest rate guarantee under the Servicemembers Civil Relief Act (SCRA). The report also highlights complaints from military borrowers suggesting servicers are slow to respond to requests and unclear about the SCRA application requirements and process.
 
"We continue to receive complaints from military student loan borrowers detailing a range of breakdowns and roadblocks," CFPB Director Richard Cordray said in a press release. "Our deployed servicemembers should be able to focus on their military mission and spend precious free time talking with loved ones, not wrangling over problems with student loan servicers."
 
Senators Introduce Bill to Provide TRID Hold Harmless Period
Sen. Tim Scott (R-SC), together with Sens. Joe Donnelly (D-IN), Mike Crapo (R-ID), Jeanne Shaheen (D-NH), Dean Heller (R-NV), Angus King (I-ME), Mike Rounds (R-SD), Steve Daines (R-MT), Kelly Ayotte (R-NH), Pat Roberts (R-KS), and Johnny Isakson (R-GA), introduced S. 1711, which provides for limited liability for lenders who, in good faith, attempt to comply with the new TILA-RESPA Integrated Disclosure (TRID) requirements through the end of 2015. The legislation is a companion bill to H.R. 2213, introduced in the House by Reps. Steve Pearce (R-NM) and Brad Sherman (D-CA). According to Sen. Scott's office, he believes legislation—as opposed to reliance on promises of bureaucratic "sensitivity" after the effective date or Congressional Review Act—provides the highest degree of certainty for mortgage lenders.
 
Regulators, Attorneys General Bring Action Against JPMorgan Chase
On Wednesday, July 8, 2015, the CFPB along with 47 Attorneys General and the District of Columbia announced they entered into a consent order with JPMorgan Chase related to its credit card debt collection and sales practices between 2009 and 2012.
 
In a press statement, Director Cordray said, "Chase sold bad credit card debt and robo-signed documents in violation of law. Today we are ordering Chase to permanently halt collections on more than 528,000 accounts and overhaul its debt-sales practices. We will continue to be vigilant in taking action against deceptive debt sales and collections practices that exploit consumers."
 
The Bureau alleges Chase violated Dodd-Frank's unfair, deceptive, abusive acts or practices prohibitions by selling faulty or false debt to debt buyers, including accounts already settled, paid in full, discharged in bankruptcy, identified as fraudulent, not owed by the debtor, subject to a payment plan, no longer owned by Chase, or otherwise no longer enforceable. Chase also allegedly engaged in misleading debt collection lawsuits. The Bureau claims Chase "systematically failed to prepare, review, and execute truthful statements as required by law."
 
According to the final consent order, among other things, Chase must: 

  • Cease collecting on 528,000 accounts, covering the period between January 1, 2009 and June 30, 2014;
  • Pay at least $50 million in cash redress to consumers;
  • Prohibit debt buyers from reselling accounts;
  • Confirm debt before reselling to debt buyers;
  • Notify consumers their debt has been sold and make their account information available to them;
  • Not sell debt without required documentation, or debt which has been charged off for more than three years or where the consumer has not paid for three years, is in litigation, is owed by a servicemember, is owed by someone who is deceased, or where the debtor has a payment plan;
  • Withdraw, dismiss or terminate collections litigation;
  • Stop "robo-signing" affidavits;
  • Verify debt when filing a lawsuit; and
  • Pay a $30 million civil penalty.

In a separate but related action, Chase also entered into a consent order with the OCC, which assesses a $30 million civil penalty for unsafe and unsound practices in connection with Chase's collection litigation practices and weaknesses in SCRA compliance. 
 
CFPB Outlines Faster Payments Principles
On Thursday, July 9, 2015, the CFPB outlined its guiding principles for protecting consumers as the private sector develops new, faster payment systems. The CFPB stated it intends to ensure any new payment systems are secure, transparent, accessible, and affordable to consumers, including robust protections for fraud and error resolution.
 
"Companies developing new financial technologies should be building systems from the outset with consumer protections in mind," said Director Cordray in a press release. "It is a lot easier to build something right from the start than it is to retrofit it. The CFPB will continue our work to help ensure that financial services marketplaces are safe and transparent for consumers."
 
The CFPB has advocated for development of faster and safer consumer payment capabilities in new and existing payment systems, and sent a letter on February 9, 2015, in response to a faster payment proposal by the National Automated Clearinghouse Association.

CBA Comments on Education Department Rulemaking
On Thursday, July 2, 2015, CBA and other trade associations submitted comments to the U.S. Department of Education on its Notice of Proposed Rulemaking (NPR) for the disbursement of Title IV Higher Education Act program funds (federal student loans and federal aid) and programs between colleges and universities and financial institutions. Among the key points addressed in the letter, CBA said: 

  • Financial institutions help provide low cost accounts to students;
  • The proposed regulation exceeds the statutory authority of the Education Department – it does not have the authority to regulate financial products and services;
  • Students have options and oftentimes fare better under such relationships between schools and financial institutions;
  • Privacy concerns about student information schools would have to share with financial institutions in order to comply with the proposed regulation;
  • The proposal references a disclosure scheme which the Department has not made available, and the public is thus unable to provide comment;
  • The proposal includes ambiguous terms making compliance nearly impossible;
  • The comment period is unusually short given the complexity of the proposal;
  • The proposed regulation is retroactive and would impact existing relationships between schools and financial institutions.

The Department is expected to issue a final rule by November 1, 2015. CBA plans to remain engaged on this issue.

Regulators Announce EGRPRA Meeting
On Monday, July 6, 2015 the Federal Reserve Board, FDIC and OCC announced they will hold an outreach meeting on Tuesday, August 4, 2015, at the Federal Reserve Bank of Kansas City as part of their regulatory review under the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). This is the fourth meeting in a series of outreach sessions designed to reduce outdated and unnecessary regulations. The meeting will focus on rural banking issues and will feature presentations by industry participants and community groups.

FDIC Advisory Committee Meeting Announced
The FDIC Advisory Committee on Community Banking will hold an open meeting on Friday July 10, 2015. According to the agenda, FDIC staff will discuss their Community Banking Initiatives and issues, including examination frequency and offsite monitoring, as well as call report streamlining. The meeting also will cover the cybersecurity assessment tool and recent rulemakings. Additionally, the Committee will address high volatility commercial real estate loans and the review of banking regulations under EGRPRA.

FDIC, Fed Board Published Portions of "Living Wills"
On Monday, July 6, 2015, the FDIC and Federal Reserve Board released public portions of "living wills" for 12 larger financial institutions, including Bank of America, Bank of New York Mellon, Barclays PLC, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group, JPMorgan Chase & Co., Morgan Stanley, State Street, UBS AG, and Wells Fargo & Company. Under Dodd-Frank, each plan must describe the company's strategy for rapid and orderly resolution under the U.S. Bankruptcy Code in the event of material financial distress or failure of the company. The plans are listed on the FDIC and Federal Reserve Board websites.

Agencies Release CRA Credit Geographies
On Wednesday, July 8, 2015, the FDIC, Federal Reserve Board, and OCC released the 2015 list of distressed or underserved nonmetropolitan middle-income geographies, where revitalization or stabilization activities will receive Community Reinvestment Act consideration as community development.

House Subcommittee Holds SIFI Designation Hearing
On Wednesday, July 8, 2015, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit held a hearing entitled: "Examining the Designation and Regulation of Bank Holding Company SIFIs." Subcommittee Chairman Randy Neugebauer (R-TX) said in his opening statement, "As policy makers, we must always strive to be precise when improving legislative frameworks as to minimize unintended consequences."
 
The hearing addressed how and why bank holding companies are designated as systemically important financial institutions (SIFIs), alternative ways of measuring the systemic importance of financial institutions, requirements and standards bank holding companies are subject to once designated, and the operational challenges and limitations of complying with enhanced prudential standards.

House Committee Holds Hearing on Fifth Anniversary of Dodd-Frank
On Thursday, July 9, 2015, the House Financial Services Committee held a hearing on "The Dodd-Frank Act Five Years Later: Are We More Stable?" which explored the effect of the law on the financial services industry, consumers, American competitiveness, and financial stability. Witnesses included scholars from Patomak Global Partners, the Cato Institute, the AFL-CIO, and the George Mason University School of Law. This hearing was the first of three the Committee will hold on the subject.
 
In his opening statement, Chairman Jeb Hensarling (R-TX) stated: "Five years ago this month Dodd-Frank was signed into law. Undoubtedly it is the most sweeping and dramatic rewrite of banking and capital markets laws since the New Deal. Weighing in at 2,300 pages, 400 new rules, it is clearly dramatic. Whether fan or detractor, this committee would be negligent if we were not vigilant in our oversight in both the impact and the implementation of Dodd-Frank; negligent we will not be."
 
Ranking Member Maxine Waters (D-CA) said, "It's important to remember that the 2008 financial crisis was not a natural disaster. Instead, it was the result of deliberate choices – choices on the part of some on Wall Street, who put their own short-term interests ahead of the long-term economic health of our nation's investors and consumers. It's the result of choices on the part of some of our regulators, who failed to respond as both vulnerabilities and illegalities in our financial system emerged."
 
The hearing focused on a myriad of issues from the CFPB to the Volcker rule and other regulations. Additional hearings will take place this month.