CFPB Report October 11, 2013

Enforcement Attorneys Will Not be Present at CFPB Examinations

On Wednesday, October 9, 2013, The Wall Street Journal reported that the Consumer Financial Protection Bureau (CFPB) indicated it is changing its policy regarding enforcement attorney involvement in the examination process. Beginning November 1, 2013, CFPB enforcement attorneys will no longer be present at examinations. Industry groups have widely criticized the practice as a barrier to a free exchange of information during examinations. The CFPB Ombudsman’s Office evaluated the issue in areport released in November 2012. The Federal Reserve Board’s Office of the Inspector General indicated in its Semiannual Report to Congress, dated April 2013, that it was looking into the issue. 

CFPB Finalizes New Trial Disclosure Policy Under Project Catalyst

On Thursday, October 3, 2013, the CFPB finalized a new trial disclosure policy. Under the new policy, companies can apply for a waiver from federal disclosure rules to test changes to consumer disclosures for a trial period. First announced in November 2012, Project Catalyst is a project designed to foster consumer-friendly innovation and entrepreneurship in the marketplace. 

On October 8, 2013, the CFPB updated this announcement to state the policy will be published in the Federal Register once it has the funding to resume its normal publication schedule. The policy will be effective upon publication. 

CFPB Announces HMDA Enforcement Actions Against

On Wednesday, October 9, the CFPB announced enforcement actions related to Home Mortgage Disclosure Act (HMDA) reporting. The Bureau penalized two nonbank mortgage lenders for incorrectly reporting mortgage data to regulators. The two firms, Mortgage Master and Washington Federal, were cited for failure to properly comply with HMDA requirements. 

As in previous incidents, today’s enforcement action is accompanied by the release of a bulletin outlining guidance in this area. This bulletin covers the components of an effective HMDA compliance management system and factors the CFPB may consider when evaluating whether to pursue a public enforcement action for HMDA violations. The CFPB has also released its HMDA ResubmissionSchedule and Guidelines, which lists the error thresholds that exam teams will use to determine when institutions should correct and resubmit HMDA data. Different guidelines will be used banks and nonbanks that have at least 100,000 mortgage loans to report.

FDIC Clarifies Policy on Facilitating Payment Processing for Certain Merchants

On Friday, September 27, 2013, the Federal Deposit Insurance Corporation (FDIC) issued a letterclarifying its policy and supervisory approach for financial institutions that facilitate payment processing for high-risk merchants. The letter states that financial institutions are not discouraged from providing payment processing to legally compliant merchants.  But it does not discuss the subjective standard involved with assessing reputational risk in connection with higher-risk merchants.

Federal Regulators Urge Banks to Work with Consumers Affected by Shutdown

On Wednesday, October 9, the FDIC, OCC, Federal Reserve, National Credit Union Administration and CFPB urged financial institutions to work with customers affected by the federal government shutdown. In a news release, the agencies asked banks to consider prudent workout arrangements that are “consistent with safe-and-sound lending practices are generally in the long-term best interest of the financial institution, the borrower, and the economy.”

FFIEC Guidance on Windows XP

The Federal Financial Institutions Examination Council (FFIEC) released their final statement on the anticipated April 8, 2014 deadline for systems obtaining further support, updates and patches from Microsoft and their XP Windows operating system. In their statement, FFIEC suggested financial institutions and automated teller machines running such software could be vulnerable to attacks and may not comply with the Payment Card Industry Data Security Standard (PCI DSS) if changes are not made prior to the deadline.

FDIC Board Approves Joint NPR for Biggert-Waters Implementation

On Tuesday, October 8, 2013 the FDIC Board of Governors approved a joint Notice of Proposed Rulemaking (NPR) and staff memorandum for the purpose of implementing certain aspects of the Biggert-Waters Flood Insurance Reform Act regarding loans in areas having special flood hazards. The proposed regulation would amend Part 339 of Title 12 of the Code of Federal Regulations. The NPR will be issued jointly by the FDIC, Board of Governors of the Federal Reserve System, OCC, National Credit Union Administration, and the Farm Credit Association. The comment period will be open for 60-days upon being published in the federal register. 

Government Shutdown Guidance Issued for HAMP

On Friday, October 4, 2013, the U.S. Department of the Treasury (Treasury) issued a servicer messageregarding program policy for the Home Affordable Modification Program (HAMP.) The program may be impacted by the federal government shutdown that began on October 1, 2013. Servicers are required to submit a borrower’s form to the IRS to obtain a transcript of the borrower’s most recent tax reform for borrowers with self-employment income or rental income, or to resolve inconsistencies in borrower-provided information and income documentation. Operating with limited resources during the shutdown, requests to the IRS to verify a borrower’s most recent tax return may not be processed. Additional guidance may be provided if the shutdown lasts for a prolonged period.