CFPB Report - June 5, 2015

IGs Assess Coordination among Regulators
On Thursday, June 4, 2015, the Inspectors General for the FDIC, OCC, National Credit Union Administration (NCUA), Federal Reserve (Fed) and CFPB (OIGs) issued a report assessing the level of coordination among the prudential regulators and the CFPB. The evaluation was prompted by a March 20, 2013 hearing before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, during which concerns were raised about potential regulatory overlap between the CFPB and FDIC.
 
In the report, which covered the period of March 2014 thru October 2014, the OIGs found “the CFPB and prudential regulators were generally coordinating their supervisory efforts, and did not identify instances of regulatory overlap.” However, the OIGs stated, and sometimes implied, there were areas where the agencies could improve their levels of coordination. For instance, the OIGs noted the agencies infrequently conduct simultaneous examinations – as of October 2014, the prudential regulators and CFPB had only conducted 19 joint exams (five FDIC-supervised institutions, 13 Fed-supervised institutions, and one NCUA-supervised institution). Another area for improved coordination was the sharing of draft examination reports for interagency comments; the prudential regulators all said the CFPB’s slow pace for closing out exams posed a challenge, but noted recent improvements in the Bureau’s timeliness. Finally, the report noted the agencies lack any provisions in their Memorandum of Understanding pertaining to the sharing of supervisory letters or coordination of enforcement proceedings. While the agencies stated most of these issues are dealt with during their biweekly interagency meetings, the OIGs observed there are no formal policies to address conflicting determinations.
 
CFPB Files Lawsuit for Costly Mortgages
On Thursday, June 4, 2015, the CFPB filed a complaint against RPM Mortgage and its CEO for alleged violations of the Loan Originator Compensation Rule and the Consumer Financial Protection Act (CFPA). In a press release, the CFPB alleged the violations resulted from funding of illegal bonuses, paying tens of millions of dollars in higher commissions based on high-interest loans, and allowing loan officers to use expense accounts to pay for pricing incentives to close new mortgages. Along with the complaint, the CFPB also filed a proposed order that, if approved, would require RPM to pay $18 million in redress to consumers and a $1 million civil penalty, and would require the CEO to pay an additional $1 million civil penalty.
 
CFPB Report, Consumer Advisory on Reserve Mortgages
On Thursday, June 4, 2015, the CFPB published a study titled: “A Closer Look at Reverse Mortgage Advertisements and Consumer Risks,” asserting reverse mortgage advertisements may promote ambiguity, create false impressions, contain difficult to read fine print, and include celebrities to imply reliability and trust. The study is based on findings from analyzing 97 advertisements in five large urban U.S. markets and receiving input from focus groups and interviews.
 
In conjunction with the study, the Bureau also released a consumer advisory entitled, “Don’t Be Misled By Reverse Mortgage Advertising,” advising consumers to consider that a reverse mortgage is a home loan, not a government benefit, and that reverse mortgage ads don’t always tell the whole story. They also cautioned consumers that, without a good plan, they could outlive the loan money.
 
CFPB Submits Letter on TRID
On Wednesday, June 3, 2015, CFPB Director Richard Cordray sent a letter to Congress officially announcing a grace period on enforcement for the TILA-RESPA Integrated Disclosure rule (TRID) which becomes effective on August 1, 2015. The Bureau believes this approach is consistent with an earlier approach in the implementation of the Title XIV mortgage rules.
 
Director Cordray said, “We share your desire for a smooth and successful implementation of the Rule, and we continue to work closely with all stakeholders to support that goal. As we do so, and in response to considerable input we have received from your constituents, I have spoken with our fellow regulators to clarify that our oversight of the implementation of the rule will be sensitive to the progress made by those entities that have squarely focused on making good-faith efforts to come into compliance with the rule on time.”
 
The letter also outlined efforts made by the Bureau to provide guidance, and indicated that regarding the limited circumstances in which the TRID rule requires a revised Closing Disclosure with a new waiting period. This guidance is included in an accompanying fact sheet.
 
CBA has maintained that meeting the implementation date is a colossal undertaking dependent on timely deliverables from outside vendors which require significant testing and training. Members are working hard to meet the deadline so as not to delay or slow consumers' access to credit.
 
CFPB Announces Financial Independence Initiative
On Wednesday, June 3, 2015, the CFPB announced the launch of the “Reach Outcomes. Achieve Dreams. Succeed. (ROADS)” to Financial Independence initiative, aimed at improving the financial well-being and economic security of individuals with disabilities. The initiative, currently in pilot phase, includes local partners in six communities across the country, and will integrate financial counseling with employment, independent living, and other support services provided to individuals with disabilities.
 
“Historically, people with disabilities have been excluded from the economic mainstream,” said Director Cordray. “The ROADS to Financial Independence initiative aims to help provide them with the proper support and services to lead financially healthy and independent lives.”
 
CFPB Releases Bulletin on Planning for Diminished Capacity and Illness
On Monday, June 1, 2015, the CFPB in conjunction with the U.S. Securities and Exchange Commission, published a consumer advisory and investor bulletin regarding financial planning for people with diminished capacity and illness. The bulletin advises consumers to organize their important documents such as banking and account statements, mortgage and credit information, insurance policies, pension or retirement information, social security details and contact information for medical professional. The agencies also suggested consumers provide their financial professionals with trusted emergency contacts and consider creating a durable financial power of attorney. They also recommended giving a trusted relative, friend, or professional an overview of finances and to ensure things are kept up to date if there are changes. The agencies stressed that consumers should speak up if they think someone is taking advantage of them.
 
The bulletin provided guidance to relatives and friends helping those who may have diminished financial capacity, instructing the caretakers to:

  • Have an open conversation about investments and other financial matters sooner rather than later.
  • Help a relative or friend with managing finances;
  • Understand the responsibilities of managing money or property, if delegated to them;
  • Help with ongoing financial responsibilities;
  • Review their investment portfolio; and
  • Assess the riskiness of their investment portfolio.

CBA Expresses Concern Over New 1099 Reporting Requirements
This week, CBA joined and other trades sent a letter to Senate Majority Leader Mitch McConnell (R-KY) and House Speaker John Boehner (R-OH) expressing concern about an onerous revenue provision included in the Trade Preferences Extension Act (H.R. 1295), which passed the Senate on May 14, 2015. Currently, information reports are not required on non-interest accounts, while there is a $10 threshold for reporting on interest bearing accounts. However Section 603 of the legislation would change current law to require that banks and credit unions report to the IRS and customers on all interest bearing as well as non-interest bearing accounts.
 
“Should this provision be enacted, our Nation’s taxpayers will be awash in new 1099s reporting de minimus amounts of interest – in many cases less than $1 – which will now be reportable and taxable,” CBA said. “Many information reports will contain no interest at all, resulting in confusion for taxpayers who may not be aware of their new reporting liability. This will create an environment ripe for taxpayer and IRS error and may trigger unnecessary audits. This new requirement will create another unnecessary burden on our nation’s financial institutions. The nominal tax revenue raised by the reporting of de minimus amounts of interest will come at the cost of added complexity and be an unnecessary nuisance for millions of taxpayers. We strongly oppose Section 603 because of its harmful consumer impact and urge you to remove this section from H.R. 1295 as soon as practicable.”