CFPB Report September 5, 2014

CFPB Eyes Credit Card Interest Rate Promotions

On Wednesday, September 3, 2014, the CFPB issued a bulletin cautioning credit card issuers on interest rate promotions to consumers. "Credit card offers that lure in consumers and hit them with surprise charges are against the law," said CFPB Director Richard Cordray, alluding to marketing practices by credit card companies when providing "grace periods" for interest rates on cards. The Bureau raised concerns pertaining to the marketing of credit card interest-rate offers such as balance transfers, deferred-interest offers, and convenience checks. The bulletin concludes with recommendations, such as Regulation Z applicability and risk standards in accordance and defined by section 1031 of the Dodd-Frank Act. The CFPB also issued consumer tips aimed to better educate consumers on interest rate promotional offers.

Senior Settlement Negotiator Leaving DOJ

On Wednesday, September 3, 2014, the head of the of the U.S. Department of Justice's (DOJ) Civil Division, Tony West, announced he would be leaving DOJ effective September 15, 2014. West has served as the DOJ's lead negotiator with financial institutions over recent record settlements for misconduct in mortgage lending.


"His service as Associate Attorney General has been marked by significant achievement – from his leadership in securing the landmark reauthorization of the Violence Against Women Act; to his passionate advocacy for the rights of American Indian and Alaska Native peoples; to his tireless work to combat financial fraud, hold corporations accountable, and fight for American consumers," said U.S. Attorney General, Eric Holder in a press release. The DOJ has not yet announced his replacement.

Education Department Announces Changes for Repayment of Federal Student Loans

On Wednesday, September 3, 2014, the U.S. Department of Education (DOE) announced changes to the process by which borrowers repay their federal student loans. DOE will conduct a negotiated rulemaking to implement President Barack Obama's June 10, 2014 Executive Order to expand income-based repayment programs for federal student loans. The Department plans to hold two public hearings this fall before negotiators begin meeting in February of 2015. The Executive Order calls for the expansion of the Pay As You Earn (PAYE) program to cover all federal student loan borrowers - an additional five million borrowers. PAYE caps payments at 10 percent of discretionary income and forgives remaining debt after 20 years.


On Friday, August 29, 2014, the DOE announced renegotiated contracts with federal student loan servicers. The new contract terms are designed to encourage more effective counseling and outreach for borrowers to select the best repayment options. The new incentive structure includes: 1) revised performance metrics which more heavily weigh the existing borrower customer satisfaction; 2) payment structure which keeps borrowers payments current; and 3) additional incentives for servicers to help borrowers avoid delinquency.


"All hard-working students and families deserve high-quality support from their federal loan servicer, and we are continuing to take steps to make sure that is the case," DOE Secretary Arne Duncan said.

Financial Regulators Finalize Liquidity Coverage Ratio

On Wednesday, September 3, 2014, the Federal Reserve (Fed), FDIC, and OCC finalized the liquidity coverage ratio (LCR) for U.S. banks. The rule creates a standardized minimum liquidity requirement for larger banks, as well as banks conducting international activities. The final rule requires institutions to hold high quality liquid assets (HQLA) such as central bank reserves and corporate debt.


"In the wake of the crisis, regulatory bodies from around the globe convened to develop the first internationally consistent quantitative liquidity standard for banking firms. The final rule under consideration today will complement the Federal Reserve's enhanced supervision and regulation of these firms' liquidity positions and thus further bolster financial stability," said Fed Chair Janet Yellen in astatement.


The rule will apply to banks with $250 billion or more in total consolidated assets, or $10 billion or more in on-balance sheet foreign exposure, and to their subsidiaries with assets exceeding $10 billion. The modified LCR will apply to holding companies not meeting these thresholds, but with more than $50 billion in assets. U.S. firms are required to be compliant by January 1, 2017.

Evans Bank Sued for Fair Housing Act Violations

On Tuesday September 2, 2014, New York Attorney General Eric Schneiderman filed a lawsuit against Evans Bank for alleged "redlining" practices and "unlawful discrimination on the basis of race in violation of the Fair Housing Act" in certain Buffalo, N.Y. neighborhoods. The complaint alleges Evans Bank engaged in and redlined areas by:

  • Intentionally excluding predominantly African-American neighborhoods from its lending area;
  • Developing mortgage lending products it made unavailable to those in predominantly African-American neighborhoods, notwithstanding the creditworthiness of the applicants; and
  • Refusing to solicit customers, market loan products, and provide banking facilities in those predominantly African-American neighborhoods.  

Responding in a press statement, Evans Bank President and Chief Executive, David Nasca, asserted the charges were "unfounded and without substance" and said the bank will "vigorously defend this complaint through the legal system."

FHFA Proposes Affordable Housing Goals for Fannie and Freddie

On Friday, August 29, 2014, the Federal Housing Finance Agency (FHFA) proposed new goals for the Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac. The proposal would leave the affordable housing goal number current, requiring the GSEs to fund 23 percent of mortgages in low-income areas. FHFA is also proposing alternatives to the way the GSEs and overall mortgage market is serving low and moderate-income areas.