Regulatory Update NAFCU Webcast - yorkcast.comRegulatory Update NAFCU Webcast Thursday, November 14 2:00 – 3:30 p.m. Presented by: Steve Van Beek, Esq. (248)723-0521 [email protected]

Regulatory Update NAFCU Webcast

Thursday, November 14 2:00 – 3:30 p.m.

Presented by:

Steve Van Beek, Esq. (248)723-0521

[email protected]

© 2013 Howard & Howard Attorneys PLLC

Overview

• CFPB’s Agenda

• Supervisory Highlights

• CFPB’s Radar

• AKA, What is Coming Next?

• Recent Mortgage Guidance

• NCUA’s Final Liquidity Rule

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Objectives of the CFPB

Dodd-Frank included statutory objectives:

• Ensure consumers have timely and understandable information;

• Protect from unfair, deceptive or abusive acts;

• Reduce unnecessary regulatory burdens;

• Promote fair competition through consistent enforcement of laws and regulations; and

• Encourage markets that operate transparently and efficiently to facilitate access & innovation

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CFPB’s Agenda

• Dodd-Frank Mandates

• Mortgage Regulations

• International Remittance Transfers

• TILA-RESPA Integrated Disclosures

• Regulatory Agenda

• Political Agenda

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Regulatory Agenda

• Private Student Loans

• Overdraft Protection

• Payday Loans

• Prepaid Cards

• Checking Account Disclosures

• Credit Cards

• Vendor Relationships

• HELOCs

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Political Agenda • UDAAP

• Fair Lending

• Cordray Speech on September 24, 2013

• Four D’s Plaguing Consumers

1. Deceptive Marketing

2. Debt Traps

3. Dead Ends

4. Discrimination

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http://www.consumerfinance.gov/newsroom/director-cordray-remarks-at-the-american-banker-regulatory-symposium/


CFPB Supervisory Highlights – 2012

• From July 21, 2011 to September 30, 2012

• Compliance Management Systems

• Internal Policies & Procedures

• Oversight of Third-Party Providers

• Fair Lending

• Violations on Credit Cards and Mortgages

• For mortgages, improper GFE/HUD-1

• Remember – new changes coming soon!

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• Credit Card Violations

• Deceptive Marketing Practices

•Credit Card Add-On Products

• Ability-to-Repay Provision

•Credit Limit Increases without Co-Applicant’s Authorization

• Rate Reevaluation of Acquired Portfolios

•12 CFR 1026.59(g)

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• November 2012 through June 2013

• Mortgage Servicing

• Nonbanks’ Compliance Management Systems

• CFPB Criticizes Decentralized Compliance

• Four Main Elements

• Fair Lending

• Failure to Send Adverse Action Notices

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Four Main Elements:

1. Board and Management Oversight;

2. Compliance Program;

• [Policies & Procedures; Training; Monitoring; Corrective Action]

3. Consumer Compliant Management; &

4. Independent Compliance Audit.

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Complaint Management

“Entities should organize, retain, and analyze complaint data to identify trends, isolate areas of risk, and identify program weaknesses in their lines of business and overall CMS.”

Where are your complaints coming from?

• Facebook? Twitter? Formal Complaints?

• Are you preparing trend reports?

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CFPB Complaint Report

Complaint Report (July 2011 to June 2013)

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http://files.consumerfinance.gov/f/201307_cfpb_snapshot_complaints-received-july.pdf



Annual Report (July 2012 to June 2013)

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http://files.consumerfinance.gov/f/201311_cfpb_semi-annual-report.pdf



Annual Report (July 2012 to June 2013)

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http://files.consumerfinance.gov/f/201311_cfpb_semi-annual-report.pdf


Complaint Management

Example: Notices of Error – Mortgages

– CUs have new procedures

– Set up tracking mechanism to allow your credit union to create monthly reports

•Identify areas to improve

•Identify needs for additional training

•Improve member service

– PROACTIVELY ADDRESS ISSUES

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CFPB Guidance

• Credit Card Add-On Products

• Mortgage Servicing Transfers

• Self-Policing & Self-Reporting

• UDAAP in the Collection of Debts

• Requirement to Investigate FCRA Disputes

• Payroll Cards – Regulation E

• Privacy Guidance – Elder Abuse

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http://www.consumerfinance.gov/f/201207_cfpb_bulletin_marketing_of_credit_card_addon_products.pdf



http://www.consumerfinance.gov/f/201302_cfpb_bulletin-on-servicing-transfers.pdf

http://www.consumerfinance.gov/f/201306_cfpb_bulletin_responsible-conduct.pdf





http://www.consumerfinance.gov/f/201307_cfpb_bulletin_unfair-deceptive-abusive-practices.pdf

http://www.consumerfinance.gov/f/201309_cfpb_bulletin_furnishers.pdf

http://www.consumerfinance.gov/f/201309_cfpb_payroll-card-bulletin.pdf




http://www.consumerfinance.gov/f/201309_cfpb_elder-abuse-guidance.pdf





Unfair, Deceptive or Abusive

$309 Million Fine Against Chase Bank by CFPB

• Credit Card Add-On Products

• Third-Party Product (Credit Monitoring)

• Chase charged fees even if a consumer’s identity could not be verified

• Since identity was not verified, the third-party was not providing any service

• Vendor Management Policy; UDAAP Policy

• $20 Million fine to Civil Penalty Fund

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http://www.consumerfinance.gov/newsroom/cfpb-orders-chase-and-jpmorgan-chase-to-pay-309-million-refund-for-illegal-credit-card-practices/


The CFPB’s Radar (i.e. Your Radar) • Private Student Loans

• July 2013 – Snapshot of Complaints

• October 2013 – Annual Report

• Overdraft Protection

• Opt-In for Everything?

• June 2013 – Study of Overdraft Programs

• Payday Loans

• April 2013 – White Paper on Payday Loans

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http://files.consumerfinance.gov/f/201308_cfpb_complaint-snapshot.pdf

http://www.consumerfinance.gov/f/201310_cfpb_student-loan-ombudsman-annual-report.pdf

http://files.consumerfinance.gov/f/201306_cfpb_whitepaper_overdraft-practices.pdf

http://www.consumerfinance.gov/reports/white-paper-on-payday-loans-and-deposit-advance-products/


The CFPB’s Radar (i.e. Your Radar)

• Prepaid Cards

• ANPR in May 2012

• CFPB to Extend Reg E Protections to General Purpose Reloadable (GPR) Cards

• Checking Account Disclosures

• Pew Trust Reports

•April 2011; October 2012; May 2013

• Tabular Format (i.e. Schumer Box)?

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https://www.federalregister.gov/articles/2012/05/24/2012-12565/electronic-fund-transfers-regulation-e



• Pew Trust Recommendations

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The CFPB’s Radar (i.e. Your Radar) Trends in Disclosures

• Designed through consumer testing

• Limited ability to change or amend forms

Tabular Format

• Example: Credit Cards

• Next: TILA/RESPA Integrated Disclosures

• Next: Checking Accounts

• Next: Home Equity Lines of Credit (HELOCs)

• Costly and Timely Process

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• Credit Cards

• Add-On Products

• Review of Credit CARD Act

•October 2013 Report

• Vendor Relationships

• Regulators look past the third-party

• CU is responsible for oversight

• HELOCs

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http://www.consumerfinance.gov/f/201309_cfpb_card-act-report.pdf


Mortgage Rule Implementation Review your Process

• What Worked?

• What Didn’t Work?

Review your Teamwork

• Lenders

• Compliance

• Vendors

• Management

Determine Ways to Improve for the Next Time

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TILA-RESPA Integrated Disclosures

CFPB “Save the Date”

• Boston – Wednesday, November 20

• Know Before You Owe

Implementation Tips for TILA/RESPA

– Learn from current implementation

– Review the finalized model forms

– Adjust existing procedures

– KEY: Provide internal training

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CFPB Mortgage Servicing Guidance

Effective Date – January 10, 2014

• Same Exemption Levels Apply

• But, CFPB did not mention exemptions

Successors in Interest – 12 CFR 1024.38(b)(vi)

“(vi) Upon notification of the death of a borrower, promptly identify and facilitate communication with the successor in interest of the deceased borrower with respect to the property secured by the deceased borrower's mortgage loan.”

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Examples of Practices:

• Promptly provide a list of documents or other evidence to establish the death of the borrower and the legal interest of successor

• Provide servicer with any documentation the servicer requires for the successor in interest to continue making payments, be evaluated for an assumption and loss mitigation options.

• Provide employees with information and training on servicer’s obligations after a borrower’s death.

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Early Intervention Rule – 12 CFR 1024.39

• Documentation is Key

• In addition to outbound calls, the following would “establish live contact”

• Ongoing contact on loss mitigation options

• Discussing loss mitigation options with the borrower during a borrower-initiated contact

• Adding brief script to live-person collection calls to inform member of loss mitigation options

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CFPB Mortgage Servicing Guidance Interim Final Rule – Bankruptcy Filing

• Exemptions apply once a petition is filed

• Notices and Communications to Delinquent Borrowers (Early Intervention Rule)

• 12 CFR 1024.39

• Periodic Statement for Mortgages

• 12 CFR 1026.41

• Credit unions should not send these notices as they could violate the bankruptcy automatic stay.

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CFPB Bulletin – Fair Debt Collection Practices Act (FDCPA)

Note: CUs are generally not considered “debt collectors” under the FDCPA as they are collecting their own debt under their own names.

• Under FDCPA, consumer can provide a “cease communication” letter to the debt collector.

• Which mortgage servicing notices can still be sent and which ones should not be sent?

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Still send – even if “cease communication”:

• Error Resolution Notice Responses

• Information Request Responses

• Force-Placed Insurance Notices

• Notices Related to Loss Mitigation

• Initial Interest Rate Adjustment Notice (ARMs)

• Periodic Statement for Mortgages

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Exemption – if “cease communication”:

• Notice or Communication to Delinquent Borrowers (Early Intervention Rule)

• Interest Rate Adjustment Notices (ARMs)

Exemption applies to “debt collectors” under the Fair Debt Collection Practices Act

• What about non “debt collectors”?

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Homeownership Counseling Disclosure

Underlying Requirement: 12 CFR 1024.20 (RESPA)

• Applicability: Federally-related mortgage loans as well as home-equity lines of credit (HELOCs)

• Timing: Within three business days of receiving an application, must provide a written list of homeownership counseling organizations in the applicant’s location

• Timeliness of List: The list must have been obtained no earlier than 30 days from when it is provided to the applicant (i.e., lists must be verified every 30 days)

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Two Compliance Methods for Providing the List:

1. Using a tool developed and maintained by the CFPB on its website;

2. Using data made available by the CFPB or HUD, provided that the data is used in accordance with instructions provided with the data.

CFPB Interpretive Rule – Effective 01/10/2014

– Provides instructions for using the data to create your own lists for consumers

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Using the Tool on the CFPB’s Website

– http://www.consumerfinance.gov/find-a-housing-counselor/

– Type in applicant’s zip code

– 10 results of HUD-approved counselors

– Option to Print or Save as PDF

Remember – lists must be refreshed at least every 30 days in order to ensure accurate disclosures

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http://www.consumerfinance.gov/find-a-housing-counselor/









“The Bureau believes that allowing lenders to obtain the list up to 30 days prior to providing it to the loan applicant strikes an appropriate balance between ensuring the information received by consumers is useful, and avoiding unnecessary burdens on lenders. The Bureau notes a lender may be able to keep counselor lists generated based on certain data inputs [i.e. Zip Code] on file, and provide those stored lists to applicants as appropriate for up to 30 days, in order to avoid generating a new list for each applicant.”

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Other CFPB Issues

• Cordray defends QM

• No extensions from the CFPB

• Fair Lending

• Is QM-only discriminatory?

•Interagency Statement

•“Legitimate business needs”

• Compliance = “Good Faith Efforts”??

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NCUA Final Rule on Liquidity

New Requirement – 12 CFR 741.12

• Applicability: All Federally-Insured CUs (FICU)

• Effective Date: March 31, 2014

Three Asset Categories

1. FICUs with assets of less than $50 million

2. FICUs with assets more than $50 million but less than $250 million; and

3. FICUs with assets of more than $250 million

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What if you are close to moving up a threshold?

• Move up when FICUs assets are above the threshold on two consecutive Call Reports

• Final rule indicates that credit unions will have 120 days from the date of the second Call Report to comply with the increased requirements

Tip: If you are close now (i.e. $47 million or $245 million), comply with the higher asset tier to prevent having to “comply twice”

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FICUs Under $50 Million

• Must maintain a basic written liquidity policy

• Elements of basic policy outlined in LCU 13-CU-10

FICUs Between $50 Million and $250 Million

• Must have a written Contingency Funding Plan

• Section 741.12(d) outlines minimum components

FICUs With $250 Million or More

• Must have a written Contingency Funding Plan

• Access to “contingent federal liquidity source”

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NCUA Final Rule on Liquidity FICUs With $250 Million or More

• Access to “contingent federal liquidity source”

• Establish and document access to at least one

• Must conduct “advance planning and periodic testing” – first test required by Dec. 31, 2014

Three “Contingent Federal Liquidity Sources”

1. Regular Membership in Central Liquidity Facility (CLF);

2. Membership in CLF through an Agent; or

3. Borrowing access at the Federal Reserve Discount Window

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Frequently Asked Questions Where are the new regulations located?

– 12 CFR 741.12

Does the basic written policy need to be Board-approved?

– Yes, the regulation requires Board-approval.

Does our written policy and Contingent Funding Plan need to be a separate policy?

– No. Your policies may be incorporated into your existing policies (e.g., ALM or business continuity policy).

Do the Federal Home Loan Banks qualify as a “contingent federal liquidity source?

– No, but FHLBs can be part of FICUs overall plan.

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Frequently Asked Questions

Can a credit union establish access with both the Central Liquidity Facility and the Discount Window?

– Yes.

For FICUs with assets of $250 million or more, do we need to have tested the federal liquidity source prior to the March 31, 2014 compliance date?

– No. Credit unions that – by March 31, 2014 – have submitted either a completed application for access to the CLF or the necessary lending agreements and corporate resolutions to obtain credit from the Discount Window will be in compliance with the rule.

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Frequently Asked Questions For FICUs with assets of $250 million or more, when do we

need to complete the “advance planning and test of contingent funding sources”?

– The testing must be completed by December 31, 2014.

Does the regulation include a periodic testing requirement? If so, how frequently must we test?

– Yes. FICUs with assets of $50 million or more must include the testing frequency in their Contingency Funding Plan. While no timeframe is provided, FICUs should perform testing at least annually. NCUA’s LCU indicates that FICUs with assets of $250 million or more should test their “federal contingency liquidity sources” at least annually.

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Key Takeaways • CFPB Moving Past Dodd-Frank Mandates

• UDAAP is on the CFPB’s Mind

• Review marketing and disclosures

• Member Complaints

• Identify trends and adjust procedures

• New disclosure requirements coming

• NCUA is not sitting idle

• Complexity of new regulations

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Thank You!

Steve Van Beek, Esq.

Howard & Howard Attorneys PLLC

450 West Fourth Street

Royal Oak, MI 48067

248-723-0521

[email protected]

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Questions?


Creativity. Results. Practicality. Solutions. Words that define not only successful businesses, but also the law firm that represents them. Howard & Howard is the law firm businesses use because our vision of success isn’t lavishly decorated offices. The attorneys at Howard & Howard use a different measure.

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Documents

Regulatory Update NAFCU Webcast - yorkcast.comRegulatory Update NAFCU Webcast Thursday, November 14 2:00 – 3:30 p.m. Presented by: Steve Van Beek, Esq. (248)723-0521 [email protected]