On December 2, 2016, the Consumer Financial Protection Bureau (CFPB) released a status update regarding various initiatives that were proposed in its fall 2016 rulemaking agenda. The update provides readers with an overview of the CFPB’s proposals and observes that comments submitted in connection with a number of the proposals are currently under review. The following is a list of developments reported by the CFPB that industry participants may want to keep an eye on. These include “rulemaking actions in pre-rule, proposed rule, final rule, long-term, and completed stages.”
- Know Before You Owe Clarifications. On July 29, 2016, the CFPB “released a Notice of Proposed Rulemaking to make small clarifications and provide further guidance that will facilitate implementation of its Know Before You Owe mortgage rule.” Among other goals, the proposed update was designed to encourage lenders to make housing assistance loans by ensuring that more such loans qualified for a partial exemption from the rule’s disclosure requirements. The original rule was implemented in 2015 and was designed to, inter alia, streamline federal disclosures that consumers receive when securing mortgage loans. At this time, the CFPB reports that it is in the process of reviewing comments regarding these proposals.
- Increasing Mortgage Reporting Requirements. The CFPB is currently working to facilitate implementation of new mortgage reporting requirements under the Home Mortgage Disclosure Act (HMDA). These new requirements include the obligation of lenders to report additional information regarding loans, including “property value, the term of the loan, and the duration of any teaser or introductory interest rates.” In addition, “financial institutions will be required to provide more information about mortgage loan underwriting and pricing, such as an applicant’s debt-to-income ratio, the interest rate of the loan, and the discount points charged for the loan.” To this end, the CFPB reports that it is conducting outreach within the industry to prepare for the impending changes—some of which take effect in January 2017, but most of which will not take effect until January 2018.
- Expanding CFPB Authority Over Nonbank Entities. The CFPB plans to continue “rulemaking activities that will further establish [its] nonbank supervisory authority” over certain “larger participants” of the consumer financial products and services markets. Industry members can expect that the next such rulemaking will focus on the markets for consumer installment and vehicle title loans. In addition, the CFPB is also considering registration requirements for these or other non-depository lenders.
- Eliminating Mandatory Arbitration Clauses. On May 5, 2016, the CFPB issued a Notice of Proposed Rulemaking “concerning the use of arbitration clauses in consumer financial agreements.” Specifically, the CFPB proposed a ban on mandatory arbitration clauses, which was meant to address “concerns that arbitration clauses are being used to prevent groups of consumers from joining together to seek effective relief from wrongdoing by financial companies.” At this time, the CFPB reports that it is in the process of reviewing comments regarding this proposal.
- Reducing Consumer Debt Traps. On June 2, 2016, the CFPB released a Notice of Proposed Rulemaking “to address consumer harms from practices related to payday loans, vehicle title loans, and other similar credit products”—which the CFPB observed may become “debt traps” for consumers. Among the CFPB’s proposals include the requirement that lenders “take steps to make sure consumers have the ability to repay their loans.” At this time, the CFPB reports that it is in the process of reviewing comments regarding these proposals. For a summary of the CFPB’s findings on default patterns for single-payment vehicle title loans, see our previous blog post here.
- Addressing Debt Collection. Finally, the CFPB is currently “engaged in developing proposed rules to regulate debt collection practices.” The CFPB reports that the “federal government for many years has received more consumer complaints about debt collectors than about any other single industry.” The agency reports that it has “been analyzing the results of a survey to obtain information from consumers about their experiences with debt collection and plans to publish a report on the survey in coming months.”
LenderLaw Watch will continue to monitor and report on these rulemaking initiatives as they develop.