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CFPB Report October 18, 2013
CFPB Issues Bulletin, Interim Rules to Clarify Mortgage Servicing Requirements
On Tuesday, October 15, 2013, the CFPB released a bulletin and interim final rule providing additional guidance on the mortgage servicing rules issued in January. The guidance addresses several issues, such as communications with family members of deceased barrowers, contact with delinquent borrowers, and the treatment of consumers who have filed for bankruptcy or invoked certain protections under the Fair Debt Collection Practices Act (FDCPA). Regarding bankruptcy issues, the CFPB will continue to assess the interplay between the bankruptcy code, the FDCPA, and the CFPB mortgage servicing rules.
According to the CFPB, the interim final rule seeks to “clarify the specific disclosures that must be provided before counseling for high-cost mortgages can occur, and proper compliance regarding servicing requirements when a consumer is in bankruptcy or sends a cease communication request under the Fair Debt Collection Practices Act. The rule also makes technical corrections to provisions of other rules.” Comment will be due 30 days after the rule is published in the Federal Register.
CFPB Student Loan Ombudsman’s Issues Second Annual Report
On Wednesday, October 16, 2013, the CFPB unveiled its Annual Report of the CFPB Student Loan Ombudsman. More than 3,800 private student loan complaints, comments, and other input from borrowers between October 1, 2012 and September 30, 2013 were included in the analysis. The report focuses on servicing challenges for borrowers which may unintentionally increase cost to consumers. Three categories of complaints outlined in the report include: 1) “prepayment stumbling blocks,” 2) “partial payment snags,” and 3) “servicing transfer surprises.”
In a news release entitled, “CFPB Report Highlights Private Student Loan Payment Processing Pitfalls,” Director Cordray said, “Repaying a student loan should be simple. When servicers process payments to maximize fees and penalties, they undermine the trust of their customers. Student loan borrowers deserve better; they deserve transparency and accountability.”
The report also attempts to draw similarities between the private student loan market and the mortgage market, a theme increasingly present in CFPB communications. Similarities are made between private student loan complaints and servicing issues occurring in the mortgage market prior to the financial crisis. However, the report focuses its analysis on private student loan complaints from just 0.002 percent of customers with these products to draw broad conclusions and make market comparisons.
In its announcement, the Bureau also added a “Consumer Advisory,” containing sample instructions for servicers to direct any extra payments toward the highest-rate loan.
CBA issued a statement to address disagreements with particular aspects of the report, and to emphasize the banks’ desire to build lasting relationships with customers. “Today’s report skews the reality of today’s private loan market. The report relies on a sweeping characterization of the market based on 3,800 unverified complaints from 0.002 percent of customers,” said CBA President and CEO, Richard Hunt.
Fed OIG Issues Updated Work Plan for CFPB
On Tuesday, October 15, 2013, the Federal Reserve’s Office of the Inspector General (OIG) issued an updated work plan, detailing its pending and scheduled audits of CFPB activities. Several relevant reports are anticipated toward years end.
Pending projects to be completed in the fourth quarter of 2013 include separate audits of the CFPB’s:
- Civil penalty fund;
- Annual budget process;
- Analysis of the impact of proposed rules on small businesses;
- Hiring process;
- Inclusion of enforcement attorneys in exams (a practice the CFPB has since stopped);
- Supervision program; and
- Information security program.
Planned projects to begin in the fourth quarter of 2013 include:
- An audit of the CFPB’s public consumer complaint database; and
- A joint audit, with inspectors general from the Treasury and FDIC, of the CFPB’s coordination with other regulatory agencies.
Senate Hearing on Small Business
On Tuesday, October 15, 2013, the Senate Committee on Small Business and Entrepreneurship held ahearing entitled, “Small Businesses Speak: Surviving the Government Shutdown,” to discuss the economic impacts associated with the government shutdown. The hearing hosted a variety of CEOs who spoke to the disastrous impacts of the shutdown, from hiring freezes to unutilized lines of credit resulting from lack of consumer confidence. Chair, Mary Landrieu (D-LA) and Senator Heitkamp (D-ND) expressed concern regarding the Small Business Administration’s inability to complete loan obligations to small businesses, generating employer frustrations in their respective states.
Congresswoman Capito Urges Delay in Mortgage Rules
Congresswoman Shelly Moore Capito (R-WV) circulated a letter to colleagues urging CFPB Director Cordray to institute a one-year delay of mortgage rules, currently scheduled to take effect January 10, 2014. Citing the more than 4,000 pages of new regulations, Capito reminded the Bureau of the challenges financial institutions face in updating software systems to comply with the new law. The Congresswoman is the House Financial Services Financial Institutions Subcommittee Chair.