CFPB Report October 17, 2014

White House Announces Action on Data Security and Consumer Financial Transactions

On Friday, October 17, 2014, the President signed an Executive Order directing the government to lead by example in securing transactions and sensitive data. The BuySecure Initiative is intended to provide consumers with more tools to secure their financial future by assisting victims of identity theft, improving the Government's payment security as both a customer and a provider, and accelerating the broader economy's transition to new security technologies and the development of next-generation payment security tools.


During remarks at the CFPB, the President highlighted steps by his Administration and the private sector to improve security. The President reiterated the need to act and "to move our economy toward stronger, more secure technologies that better secure transactions and safeguard sensitive data."


The President also announced the White House Summit on Cybersecurity and Consumer Protection to promote partnership and innovation. The White House will convene the Summit later this year – bringing together major stakeholders on consumer financial protection issues to discuss how all members of our financial system can work together to further protect American consumers and their financial data, now and in the future.


Finally, the President renewed his call to Congress to enact cybersecurity legislation — particularly by clarifying companies' obligations when sensitive data is breached.


The White House released a summary of the President's fact sheet on safeguarding consumers' financial security.


In response, CBA's President and CEO Richard Hunt supported the President's mandate, but cautioned chip technology is not a silver bullet security solution. He highlighted retail banking's enhanced efforts to transition to chip cards, but reiterated the need for support from merchants to use corresponding point of sale technology.


CFPB Issues Proposed Policy on No-Action Letters

On Thursday, October 16, 2014, the Federal Register published the CFPB's proposed policy for issuing "no-action" letters (NALs). Based on circumstances of a regulated entity's request, the CFPB may issue an NAL stating the Bureau "has no present intention to recommend initiation of an enforcement or supervisory action against the requestor with respect to a specified matter."


The proposed policy mirrors no-action letters issued by other regulatory agencies, such as the Securities and Exchange Commission. Unlike the approach of these agencies which use the NAL to offer a legal opinion letter in response to a covered entity's request for clarity, the Bureau's proposal is generally towards promoting "innovative financial products or services that promise substantial consumer benefit." Given this objective, the CFPB expects to issue NALs "only rarely and on the basis of exceptional circumstances and a thorough and persuasive demonstration of the appropriateness of such treatment."


As outlined in the proposal, in response to a NAL request, CFPB staff will perform a review on several criteria, including the benefits to consumers, risks to consumers, and the level of regulatory uncertainty associated with the product or service. After a review process, the CFPB may grant a request, deny a request, or decline to grant or deny the request either with an explanation or without.


Comments on the proposal are due by Monday, December 15, 2014.


CFPB Issues Student Loan Market Annual Report, Bankruptcy Highlighted

On Thursday, October 16, 2014, the Bureau published its "Annual Report of the CFPB Student Loan Ombudsman." The report, required under the Dodd-Frank Act, analyzes consumer complaints over the previous fiscal year. This report identified 5,300 private student loan complaints; a 38 percent increase in complaints from last year. The report reconsiders a number of issues previously raised by the Bureau including options for loan modifications available to consumers, communication of these programs, and servicing issues, such as how to apply a payment when it less than the balance due for multiple loans serviced by one institution. The report also recommends allowing privates student loans to be more easily discharged in bankruptcy.


"We are hearing from consumers that they are driven into default because private student loan companies are not providing concrete loan modification options," said CFPB Director Richard Cordray in a press statement. "Struggling private student loan borrowers are finding themselves out of luck and out of options. Lenders and servicers must redouble their efforts to deal with these distressed borrowers."


"The response by the private student loan industry to distressed borrowers is failing to help them avoid default," said CFPB Student Loan Ombudsman Rohit Chopra, who submitted the report. "Too many borrowers are barely treading water, losing hope that these companies will throw them a lifeline."


CBA issued a statement following the report's release highlighting the incredibly low default rate of private student loans, which comes in at less than 3 percent in contrast to the 14 percent default rate for the federal student loan market. CBA also pointed out the 5,300 unverified complaints received by the CFPB represent 0.1 percent of private student loans.


For more information about the private student loan market visit


CFPB Proposes Amendments to TILA/RESPA

On Friday, October 10, 2014, the CFPB proposed amendments to the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) integration rule which, if adopted, would: (1) allow creditors to provide a revised Loan Estimate on the business day after the date the interest rate is locked, instead of the current requirement to provide the revised Loan Estimate on the date the rate is locked; and (2) correct an oversight by creating room on the Loan Estimate form for the disclosure which must be provided on the initial Loan Estimate as a condition of issuing a revised estimate for construction loans where the creditor reasonably expects settlement to occur more than 60 days after the initial estimate is provided. The proposal would also make a number of additional amendments, clarifications, and corrections, including:

  • Add the Loan Estimate and Closing Disclosure to the list of loan documents that must disclose the name and NMLSR ID number of the loan originator organization and individual loan originator;
  • Provide additional guidance related to the disclosure of escrow accounts, such as when an escrow account is established but escrow payments are not required with a particular periodic payment or range of payments; and
  • Clarify that, consistent with the requirement for the Loan Estimate, the addresses for all properties securing the loan must be provided on the Closing Disclosure, although an addendum may be used for this purpose.

Comments on the proposal are due by Monday, November 10, 2014.

Fed, FDIC Announce QRM Finalization

On Wednesday, October 15, 2014, an open board meeting agenda posted by the Federal Reserve indicates financial regulators are prepared to finalize a qualified residential mortgage (QRM) regulation on Wednesday, October 22, 2014. The Dodd-Frank Act requires companies issuing mortgage-backed securities (MBS) to retain part of the risk, with the intention that the risk would force closer attention to the quality of the loans. In 2011, regulators proposed MBS issuers must hold 5 percent of a loan risk, unless borrowers made at least a 20 percent down payment. This would be defined as a QRM. Industry strongly opposed the proposal due to its overly restrictive nature, and it was withdrawn. The new standards are expected to be less restrictive, with the intent of making credit more readily available.


The FDIC will meet on Tuesday, October 21, 2014 to also consider finalizing the regulation.