The CFPB recently revealed details about proposals it is considering to stop what it characterized as payday “debt traps,” targeting payday loans, deposit advance products, vehicle title loans, and certain high-cost installment and open-end products – a scope of rulemaking so comprehensive it threatens to push a number of lenders out of the small-dollar lending market entirely. “[T]he contemplated rules are sweeping. We believe that, if they are adopted, the rules will lead to many lenders exiting the business of making covered loans and radically contract consumer access to covered loans,” Jeremy Rosenblum, a partner in the Philadelphia office of the Ballard Spahr law firm, said in a recent client note. The proposals under consideration cover both short-term and longer-term credit ...
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Shortly before the U.S. Congress vacated the nation’s capital for its spring recess, the House Financial Services Committee passed, with varying levels of bipartisan support, a package of regulatory relief bills, including a handful related to rulemakings from the CFPB. Most notable among them is H.R. 685, the Mortgage Choice Act, sponsored by Rep. Bill Huizenga, R-MI. H.R. 685 aims to assist banks that originate mortgages through the wholesale channel by modifying the points-and-fees formula in the CFPB’s ability-to-repay rule. The measure would exclude from the calculation insurance and taxes held in escrow and fees paid to affiliated companies as a result of participating in an affiliated business arrangement. The committee approved the bill by a 43-12 vote, despite a ...
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The Independent Community Bankers of America told the CFPB that it strongly supports some of the key proposed changes to the ability-to-repay/qualified mortgage rule. However, more must be done, including the establishment of a safe harbor for community bank mortgages held in portfolio. “[W]e strongly believe community bank loans that are held in portfolio, including balloon mortgage loans, should be considered QM loans that receive automatic legal safe harbor protections and an exception from any escrow requirements for higher-priced mortgage loans,” the trade group said in a comment letter. When a community bank holds a loan in portfolio, it has 100 percent of the credit risk, a direct stake in the loan’s performance and every incentive to ensure it is ...
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Many financially struggling consumers echoed the American Bankers Association in arguing that the CFPB’s proposed rules on prepaid products could hurt the so-called underbanked and those who sometimes have more month than they do money. “The CFPB’s proposed rules for prepaid products include some onerous provisions that could create insurmountable compliance barriers for banks offering the cards,” the ABA said in a comment letter. “This would be particularly harmful for ‘underbanked’ individuals, many of whom rely on prepaid accounts as an alternative to traditional deposit products.” One barrier is the CFPB’s proposed treatment of overdrafts, which “effectively prohibits linking prepaid cards to overdraft services ... and prohibits imposing any fee when an account is in overdraft status,” the trade group ...
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In response to the CFPB’s draft “scorecard” for safe financial products to be offered on college campuses, two lender trade groups said that colleges should be able to work with banks to offer a flexible array of deposit products to their students and not be pigeon-holed into just one approach. In a joint comment letter to the CFPB, the American Bankers Association and the Consumer Bankers Association said they strongly support transparency and strong protections for consumers when using any financial service and will continue to work with the bureau to achieve that goal. “However, the proposed scorecard appears singularly focused on driving colleges and universities into limiting insured depository institutions to offering a particular type of deposit program with ...
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Consumer complaints to the CFPB fell in most financial service product segments during the first quarter, not only from the previous quarter but also from one year ago, according to the latest analysis of bureau data by Inside the CFPB. Total gripes in the first quarter of 2015 declined 8.2 percent from the fourth quarter of 2014, and slid 17.0 percent compared to the first quarter of 2014. Once again, consumer criticisms about residential mortgages led the decline in both timeframes, dropping 20.3 percent quarter over quarter and plunging 33.5 percent year over year. The fall-off is likely due to the shrinkage in overall mortgage originations as well as the continued recovery in the overall housing and mortgage markets.The [with exclusive data chart] ...
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CFPB Deputy Director Steven Antonakes revealed recently that the bureau is increasingly concerned about the subprime auto finance sector and will crack down on any practices that prove to be too risky for consumers. Speaking at an event of the Consumer Bankers Association, Antonakes identified a loosening of credit in the subprime auto loan market as one of the emerging risks the bureau is paying close attention to. “From our standpoint, it is not inherently troubling that more consumers are getting auto loans; under the right conditions, increased access to credit is good for the economy and individual upward mobility,” the deputy director said. “However, we have noticed some trends in connection with this credit expansion that give us cause ...
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The CFPB brought an enforcement action against National Corrective Group, a nationwide debt collection operation based in San Clemente, CA, and CEO Mats Jonsson, accusing them of using deceptive threats of criminal prosecution and jail time in order to intimidate consumers into paying debts for bounced checks. The bureau also accused the company of misleading consumers into believing they have to sign up for a costly financial education program to avoid criminal charges. The CFPB complaint also alleges that National Corrective Group created a false impression for consumers that its communications were from a state or district attorney’s office. “The company sent letters on prosecutors’ letterheads that appeared to be signed by the state or district attorney,” the bureau said...
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Some of the top mortgage lenders in the United States plan to move up their consumer disclosure- related processes even more than the CFPB is requiring under its integrated disclosure rule, which takes effect Aug. 1, 2015. It looks like they are just trying to be conservative and provide a bit of a cushion, at least in the initial transition period to a revamped disclosure regime. Bob Kelly, head of Truth in Lending Act/Real Estate Settlement Procedures Act implementation at Bank of America, told Inside the CFPB, “One thing that I think the CFPB sought to really have is that customers know before they owe. From a customer perspective, they often felt that the process to close was hurried and ...
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The CFPB has done much to secure its “Tableau” system, but there are a few areas that need to be improved, according to an executive summary of a new report from the bureau’s Office of Inspector General. Tableau is a commercial, off-the-shelf tool deployed on the CFPB’s cloud computing – based general support system (GSS) that provides business intelligence capabilities, such as data analysis and integration, for multiple CFPB systems. “Overall, we found that the CFPB has taken a number of steps to secure the Tableau system in accordance with the Federal Information Security Management Act of 2002 (FISMA) and the agency’s information security policies and procedures,” the OIG said. For example, the OIG found that the CFPB has implemented risk ...
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It’s Time to Scale Back Dodd-Frank, Industry Says. With a new Republican majority now in power and calling the shots on Capitol Hill, the industry consultants at The Collingwood Group recently asked mortgage industry officials what they thought the new Congress could do to bolster the housing market. Their answer? Rein in Dodd-Frank. “Although just fewer than 50 percent of respondents selected ‘repeal Dodd-Frank’ or ‘abolish the CFPB,’ the comments submitted clearly indicate that these industry insiders prefer a tempered approach with reasonable modifications to these two reactionary reform measures stemming from the crisis,” Collingwood said. “Many respondents stated that the Dodd-Frank Act should be revised to remove barriers to innovation and to reduce the cost of manufacturing a mortgage.” ...
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