Consumer Financial Services Alert - February 8, 2011

The FRB announced that it does not expect to finalize three pending rulemakings under Regulation Z before its rulemaking authority is transferred to the Consumer Financial Protection Bureau. The proposed rules were part of the FRB’s comprehensive review of its mortgage lending regulations under the Truth in Lending Act. The first phase of the review consisted of two proposals issued in August 2009, which would have reformed the consumer disclosures under TILA for closed-end mortgage loans and home equity lines of credit. The third proposal, issued in September 2010, would have included changes to the disclosures consumers receive to explain their right to rescind certain loans and would have clarified the responsibilities of the creditor if a consumer exercises this rescission right. In addition, the September 2010 proposal would have included changes to the disclosures for reverse mortgages, proposed new disclosures for loan modifications, restrictions on certain advertising practices and sales practices for reverse mortgages, and changes to the disclosure obligations of loan servicers. Because the Dodd-Frank Wall Street Reform and Consumer Protection Act requires the Consumer Financial Protection Bureau to issue a proposal to combine the TILA and Real Estate Settlement Procedures Act disclosures within approximately one year, the FRB determined that proceeding with the 2009 and 2010 proposals was not in the public interest. Click here for the FRB’s press release.

The federal banking agencies announced that federal registration of mortgage loan originators under the Secure and Fair Enforcement for Mortgage Licensing Act is now available through the Nationwide Mortgage Licensing System and Registry. The initial registration period ends July 29, 2011, at which time employees of banks and credit unions will be prohibited from originating residential mortgage loans unless they have registered. Click here for the agencies’ press release.

The FRB published a final rule raising to $40 million the asset-size exemption threshold for depository institutions in connection with reporting data under the Home Mortgage Disclosure Act. The rule increases the threshold from $39 million to $40 million in assets as of December 31, 2010. The adjustment was effective January 1, 2011, so it does not affect a depository institution’s 2010 HMDA reporting obligation. Click here for the rule.

The FDIC issued a Notice of Proposed Rulemaking to improve consumer awareness of deposit insurance coverage. The proposed rule would require certain bank staff to receive annual training on the basic principles of deposit insurance coverage with the FDIC providing the materials – a computer-based module – with no recordkeeping required of the bank. The proposal would limit the required training to those employees who open accounts or are authorized by the bank to answer deposit insurance questions.  The proposal also would require bank staff opening a new account to inquire whether the customer has other accounts at the bank and whether the aggregate deposits may exceed the deposit insurance limit of $250,000. If a customer's deposits exceed the deposit insurance limit, the bank would provide basic literature to the customer including a copy of the FDIC's publication, Deposit Insurance Summary. Click here for the FDIC’s press release which includes a link to the proposal.

The Treasury Department announced the launch of a “beta” Consumer Financial Protection Bureau website, designed to solicit ideas on the Bureau’s creation and priorities, and for answering questions on laws on credit cards, mortgages, student loans, prepaid cards, and other kinds of consumer financial products and services.  The site encourages communication directly with the Bureau implementation team through email and YouTube video questions.  Click here for Treasury’s press release and here for the website.