Consumer Financial Services Alert - February 26, 2008 February 26, 2008
In This Issue

OCC Publishes Bulletin Warning of Faulty Flood Hazard Determination Practices

The OCC issued a bulletin that identifies two concerns regarding certain practices relating to flood hazard determinations that may expose national banks to compliance and operational risks.

First, the OCC warns that some companies that provide flood determinations to national banks are not using the Community Status Book when obtaining community status information for their flood determinations. Instead, these companies rely solely on the information available through the Flood Map Status Information Service, the Federal Emergency Management Agency’s electronic flood data that is provided to subscribers on a monthly basis. This also may be true for national banks that are performing determinations for their own portfolio. FEMA has indicated that CSB is the final authority for community status information and that the community status information in FMSIS may not always be current. If the company making a flood determination fails to rely on CSB when obtaining community status information for flood determinations, the company could make incorrect flood determinations, which, in turn, could expose national banks and their customers to a risk of financial loss. Therefore, the OCC strongly encourages national banks to review their third-party vendor relationships and their own practices and procedures to ensure that appropriate information is used when performing flood determinations.

Second, the OCC also warns that some flood determination companies do not note on the Standard Flood Hazard Determination Form that they have revised or updated their determination. This also may be true for national banks that are performing determinations for their own portfolio. If the company revising or updating the form does not record the revised or updated date, national banks may not be able to determine or track compliance with the OCC’s flood insurance regulations. The OCC recommends that flood determination companies and national banks indicate any

dates of revision in the “comments” section of the Standard Flood Hazard Determination Form when a determination has been revised or updated.

Click here for a copy of the bulletin.

Massachusetts Requests Comments on CRA Regulations for Licensed Mortgage Lenders

The Massachusetts Division of Banks has requested comments on regulations to be issued implementing a new requirement that imposes Community Reinvestment Act requirements on licensed mortgage lenders. Comments are being requested on (1) the applicability of the current CRA regulations to the activities of licensed mortgage lenders; (2) what evaluation criteria in the current CRA regulations would not be applicable in the review of licensed mortgage lenders; (3) what additional criteria should be considered in evaluating a licensed mortgage lender’s performance in meeting the mortgage loan credit needs of communities; and (4) the means by which the Division of Banks should assess mortgage lenders’ performance in meeting the mortgage credit needs of communities in Massachusetts. Comments must be submitted by March 3, 2008. Click here for a copy of the request.

OCC Announces New Consumer Website

A new consumer website (helpwithmybank.gov) has been launched by the OCC that provides answers to common questions based on calls made to the OCC Customer Assistance Group. While targeted to national bank customers, the site answers many questions common to all banking consumers and provides information about contacting regulators of banks other than national banks.

FRB Provides Savings Resources for Consumers

The FRB has created a webpage that lists links to savings resources for consumers offered by various government agencies. Click here for the page.

FDIC Provides National Consumer Protection Week Resources

Next week is National Consumer Protection Week (March 2-8, 2008). The FDIC is a major sponsor of NCPW and in support of this event provides several consumer-based web products that can be accessed here.

Federal Appeals Court Holds that FDCPA Requires Mailing, not Receipt, of Dispute Notice Within 30 Days

The Second Circuit Court of Appeals recently held that a consumer need only mail notice disputing a debt within 30 days of a debt collector’s validation letter to comply with the Fair Debt Collection Practices Act. The class action complaint alleged, among other things, that defendant’s validation letter violated FDCPA by stating that defendant must receive plaintiff’s notice of dispute within 30 days. The Court held that under FDCPA’s stated goal of consumer protection, the statute should not be interpreted to shorten the time in which a debtor can dispute a debt, and therefore he need only have mailed his written notice of dispute within 30 days of receipt of the validation letter. As defendant’s validation letter expressly required that it receive any notice of dispute within 30 days, the Court found the validation letter violated FDCPA. Click here for a copy of Jacobson v. Healthcare Financial Services, Inc., No. 06-3147-cv (2d Cir. Feb.  14, 2008).