A recently released report by the Consumer Financial Protection Bureau (CFPB) found mixed outcomes for participants enrolling in credit-builder loan (CBL) program at a credit union.
CBLs are designed to allow individuals with no credit files or poor credit histories to build or repair their credit.
The CFPB’s study examined 1,531 CBL borrowers at a Midwestern credit union. Enrollment took place from September 2014 through February 2015.
About 82 percent of participants that entered the study had a credit score. Among participants who entered the study with a credit score, the average credit score was a subprime 560. Seventy percent of participants had an existing loan when entering the study, and 32 percent had a non-CBL loan from the credit union. Forty-five percent had been delinquent on one or more loans in the past twelve months. Sixty-two percent of participants had annual household income under $30,000. The majority of participants were female, nearly 90 percent were African American, the average age was 43, and about one in four had a college degree.
According to the study, when a borrower opened the CBL, the credit union moved $600 of its own dollars into a locked savings account. Borrowers were then required to make 12 monthly payments of $50 plus interest. After each payment, the lender released $50 to the borrower’s regular savings account. The credit union reported the borrowers’ payment histories to the three major credit reporting agencies: Equifax, Experian, and
TransUnion.
According to the study, CBLs were most likely to have positive outcomes for borrowers with no existing debt or credit score. For participants without an existing loan, opening a CBL increased their likelihood of having a credit score by 24 percent. Participants without existing debt saw their credit scores increase by 60 points higher than participants with existing debt. Forty-five of the participants entering the study without existing debt made at least one late payment on CBL.
However, the study found that CBLs appeared to cause a slight decrease in credit scores for participants with existing debt.
The CFPB concluded that borrowers with existing debt may have had difficulty making payments on their CBLs and their current debts. The CBL was associated with a higher late-payment rate on non-CBL loans, and nearly four in 10 CBL borrowers made at least one late payment on their CBL.
The CBL was associated with an average increase in participants’ savings balances of $253. This increase was entirely driven by borrowers with existing debt.
“Overall, the results suggest that the CBL worked as intended for people without existing debt, but not for consumers who already had debt,” the bureau found, adding that “CBL delinquency rates serve as a reminder that CBLs may harm some consumers’ credit.”
According to the National Credit Union Administration, 1,509 federally insured credit unions offer credit builder loans, as of March 2020.
Read the study.
Showing posts with label Consumer Financial Protection Bureau. Show all posts
Showing posts with label Consumer Financial Protection Bureau. Show all posts
Thursday, July 16, 2020
Monday, June 22, 2020
Groups Write in Support of Replacing CFPB Director with Five-Member Commission
A broad coalition of financial and housing industry groups, including bank and credit union trade groups, wrote Sen. Deb Fischer (R - NE) expressing their support for her recent bill, S. 3990, that would replace the Consumer Financial Protection Bureau’s sole director with a bipartisan, five-member commission.
In the June 18 letter, the groups noted that this structure “will provide a balanced and deliberative approach to supervision, regulation and enforcement by encouraging input from all stakeholders.”
They added that there has long been bipartisan support in Congress for a CFPB five-member commission, with several bills passed by the House with both Democratic and Republican support in recent years. Additionally, the House version of the Dodd-Frank Act that passed in 2009 also envisioned a commission governance structure for the bureau, the groups said.
The letter came as the Supreme Court prepares to render a decision in Seila Law v. the Consumer Financial Protection Bureau, where the question of the bureau’s governance structure is under review.
Read the letter.
In the June 18 letter, the groups noted that this structure “will provide a balanced and deliberative approach to supervision, regulation and enforcement by encouraging input from all stakeholders.”
They added that there has long been bipartisan support in Congress for a CFPB five-member commission, with several bills passed by the House with both Democratic and Republican support in recent years. Additionally, the House version of the Dodd-Frank Act that passed in 2009 also envisioned a commission governance structure for the bureau, the groups said.
The letter came as the Supreme Court prepares to render a decision in Seila Law v. the Consumer Financial Protection Bureau, where the question of the bureau’s governance structure is under review.
Read the letter.
Tuesday, April 7, 2020
Regulators Encourage Mortgage Servicers to Work with Homeowners Affected by COVID-19
Financial regulators on April 3 issued a joint policy statement granting flexibility to mortgage servicers to work with borrowers struggling as a result of the coronavirus pandemic. Under the CARES Act, servicers are required to grant payment forbearances to impacted borrowers for up to 180 days, and possibly longer.
The agencies confirmed that these forbearance offers are exempt from certain loss mitigation procedural requirements and servicers do not need to obtain a complete application before offering CARES Act forbearance to a borrower. The agencies also said that they would not penalize servicers for failing to provide the required notice of acknowledgement to borrowers who submit incomplete applications within the five-day timeframe described in the servicing rules, provided that the notice is given before the end of the forbearance period. The agencies also said that they would not penalize servicers for failing to provide other loss mitigation notices and outreach efforts, so long as servicers demonstrate good-faith efforts to comply “within a reasonable timeframe.”
Finally, the agencies said they would not take action against servicers for delays in sending annual escrow statements, provided the servicers demonstrate good-faith efforts to comply “within a reasonable timeframe.” In addition to the statement, the CFPB offered further clarification in a set of frequently asked questions regarding compliance with the servicing rules during the COVID-19 emergency
Read more.
The agencies confirmed that these forbearance offers are exempt from certain loss mitigation procedural requirements and servicers do not need to obtain a complete application before offering CARES Act forbearance to a borrower. The agencies also said that they would not penalize servicers for failing to provide the required notice of acknowledgement to borrowers who submit incomplete applications within the five-day timeframe described in the servicing rules, provided that the notice is given before the end of the forbearance period. The agencies also said that they would not penalize servicers for failing to provide other loss mitigation notices and outreach efforts, so long as servicers demonstrate good-faith efforts to comply “within a reasonable timeframe.”
Finally, the agencies said they would not take action against servicers for delays in sending annual escrow statements, provided the servicers demonstrate good-faith efforts to comply “within a reasonable timeframe.” In addition to the statement, the CFPB offered further clarification in a set of frequently asked questions regarding compliance with the servicing rules during the COVID-19 emergency
Read more.
Friday, March 27, 2020
Agencies Encourage Banks and CUs to Engage in Responsible Small-Dollar Lending
The federal financial regulators on March 26 issued a joint statement urging financial institutions to offer “responsible small-dollar loans to both consumers and small businesses.” Such offerings should be made in accordance with safe and sound banking practices, and should ensure fair treatment of consumers and comply with applicable statutes and regulations, including consumer protection laws, the agencies said.
“The current regulatory framework allows financial institutions to make responsible small-dollar loans. Such loans can be offered through a variety of loan structures that may include, for example, open-end lines of credit, closed-end installment loans, or appropriately structured single payment loans,” the agencies said. “For borrowers who experience unexpected circumstances and cannot repay a loan as structured, financial institutions are encouraged to consider workout strategies designed to help enable the borrower to repay the principal of the loan while mitigating the need to re-borrow.”
The agencies also signaled that they plan to issue additional guidance on small-dollar loans to help banks and credit unions continue to meet the needs of customers who may be facing extreme financial hardships.
Read the letter.
“The current regulatory framework allows financial institutions to make responsible small-dollar loans. Such loans can be offered through a variety of loan structures that may include, for example, open-end lines of credit, closed-end installment loans, or appropriately structured single payment loans,” the agencies said. “For borrowers who experience unexpected circumstances and cannot repay a loan as structured, financial institutions are encouraged to consider workout strategies designed to help enable the borrower to repay the principal of the loan while mitigating the need to re-borrow.”
The agencies also signaled that they plan to issue additional guidance on small-dollar loans to help banks and credit unions continue to meet the needs of customers who may be facing extreme financial hardships.
Read the letter.
Thursday, February 6, 2020
Housing Policy Group Calls for Delay of ‘QRM’ Definition Review
The Coalition for Sensible Housing Policy -- a broad group of financial, housing and community development stakeholders -- wrote on January 30 to the federal banking agencies urging them to delay the conclusion of a mandated review of the “qualified residential mortgage” definition and related provisions of the credit risk retention rule.
The groups called for a delay until the Consumer Financial Protection Bureau (CFPB) finalizes and implements the changes it is currently considering to the Qualified Mortgage definition. “It is only after the CFPB has made its final determination on the definition of QM, and following some period of experience under the new QM configurations, that the agencies would be in a position to evaluate and seek comment on the market and consumer impacts of QM/QRM equivalency versus divergence of the definitions,” the groups wrote.
The agencies were required to begin the review no later than Dec. 24, 2019, pursuant to the timeline set forth in the original rule.
Read the letter.
The groups called for a delay until the Consumer Financial Protection Bureau (CFPB) finalizes and implements the changes it is currently considering to the Qualified Mortgage definition. “It is only after the CFPB has made its final determination on the definition of QM, and following some period of experience under the new QM configurations, that the agencies would be in a position to evaluate and seek comment on the market and consumer impacts of QM/QRM equivalency versus divergence of the definitions,” the groups wrote.
The agencies were required to begin the review no later than Dec. 24, 2019, pursuant to the timeline set forth in the original rule.
Read the letter.
Saturday, January 25, 2020
CFPB Policy Statement Clarifies Abusive Practices
The Consumer Financial Protection Bureau (CFPB) on January 24 issued a policy statement outlining how it intends to cite and challenge “abusive” conduct in supervision or enforcement actions. The statement provides some long-awaited guidance on how the bureau views abusive conduct versus conduct which is unfair or deceptive. The policy statement is effective immediately.
When determining whether conduct meets the “abusive” standard in its supervision and enforcement activities, the CFPB said it will consider whether the harm to consumers outweighs the benefit to consumers. The bureau will also generally avoid “dual pleading” both abusiveness and unfairness or deception violations that stem from the same or nearly all of the same facts. Finally, the CFPB said it generally does not intend to seek monetary relief for abusive violations in instances where there is good-faith effort to comply with the abusiveness standard, except to address consumer injuries caused by the conduct.
“We’ve developed a policy that provides a solid framework to prevent consumer harm while promoting the clarity needed to foster consumer beneficial products as well as compliance in the marketplace, now and in the future,” said CFPB Director Kathy Kraninger. The CFPB did not rule out a future rulemaking to further define the abusiveness standard.
Read more.
When determining whether conduct meets the “abusive” standard in its supervision and enforcement activities, the CFPB said it will consider whether the harm to consumers outweighs the benefit to consumers. The bureau will also generally avoid “dual pleading” both abusiveness and unfairness or deception violations that stem from the same or nearly all of the same facts. Finally, the CFPB said it generally does not intend to seek monetary relief for abusive violations in instances where there is good-faith effort to comply with the abusiveness standard, except to address consumer injuries caused by the conduct.
“We’ve developed a policy that provides a solid framework to prevent consumer harm while promoting the clarity needed to foster consumer beneficial products as well as compliance in the marketplace, now and in the future,” said CFPB Director Kathy Kraninger. The CFPB did not rule out a future rulemaking to further define the abusiveness standard.
Read more.
Thursday, December 5, 2019
CFPB Remittance Proposal Will Provide Reg Relief to Certain Banks and CUs
The Consumer Financial Protection Bureau (CFPB) on December 3 issues a proposed remittance rule that will provide regulatory relief to certain banks and credit unions.
The CFPB proposed a change to permanently allow depository institutions to estimate certain fees and exchange rates when making disclosures to their customers. Institutions are currently allowed to do so under a temporary provision of the rule, which is set to expire in July 2020.
In addition, the proposed rule would increase the threshold at which institutions are considered to be “remittance transfer providers” from 100 to 500. The CFPB noted that increasing this safe harbor threshold would reduce the regulatory burden on more than 400 banks and almost 250 credit unions that send a relatively small number of remittances each year.
According to CFPB analysis, all credit unions and a majority of the banks affected by the change in the safe harbor threshold have less than $10 billion in assets.
Read proposed rule.
The CFPB proposed a change to permanently allow depository institutions to estimate certain fees and exchange rates when making disclosures to their customers. Institutions are currently allowed to do so under a temporary provision of the rule, which is set to expire in July 2020.
In addition, the proposed rule would increase the threshold at which institutions are considered to be “remittance transfer providers” from 100 to 500. The CFPB noted that increasing this safe harbor threshold would reduce the regulatory burden on more than 400 banks and almost 250 credit unions that send a relatively small number of remittances each year.
According to CFPB analysis, all credit unions and a majority of the banks affected by the change in the safe harbor threshold have less than $10 billion in assets.
Read proposed rule.
Thursday, October 24, 2019
Few Options to Offset Costs for CUs Topping $10 Billion Asset Threshold
S&P Global Market Intelligence recently wrote that large credit unions have few options available for offsetting the regulatory burden of breaching the $10 billion asset threshold.
This article should be of interest for credit unions that are within several years of the $10 billion asset threshold. As of June 2019, there were three credit unions with at least $9 billion in assets and another 5 credit unions with between $8 billion and $9 billion in assets.
The article notes that credit unions, which topped the $10 billion threshold, have seen a drop in fee revenue due to the Durbin Amendment and an increase in compliance cost, as the credit unions become subject to oversight by the Consumer Financial Protection Bureau and increased regulation by the National Credit Union Administration.
Credit unions that have topped the $10 billion asset threshold have seen an up to 50 percent decline in debit card interchange revenues due to the Durbin Amendment.
The article also states that credit unions that top the $10 billion asset threshold may lack the ability to scale up rapidly to offset these new costs, as they tend to grow organically.
Read the article.
This article should be of interest for credit unions that are within several years of the $10 billion asset threshold. As of June 2019, there were three credit unions with at least $9 billion in assets and another 5 credit unions with between $8 billion and $9 billion in assets.
The article notes that credit unions, which topped the $10 billion threshold, have seen a drop in fee revenue due to the Durbin Amendment and an increase in compliance cost, as the credit unions become subject to oversight by the Consumer Financial Protection Bureau and increased regulation by the National Credit Union Administration.
Credit unions that have topped the $10 billion asset threshold have seen an up to 50 percent decline in debit card interchange revenues due to the Durbin Amendment.
The article also states that credit unions that top the $10 billion asset threshold may lack the ability to scale up rapidly to offset these new costs, as they tend to grow organically.
Read the article.
Wednesday, September 11, 2019
Groups Call for Changes to QM Framework Ahead of GSE Patch Expiration
A broad coalition of financial industry stakeholders, civil rights groups and other advocacy organizations wrote the Consumer Financial Protection Bureau (CFPB) on September 9 offering feedback on the expiration of the temporary “GSE patch,” which grants Qualified Mortgage (QM) status to loans eligible to be purchased or guaranteed by Fannie Mae or Freddie Mac.
The letter was sent in response to an advanced notice of proposed rulemaking by the CFPB.
With the CFPB poised to allow the GSE patch to expire as scheduled in January 2021, “or after a short extension,” the groups proposed several changes to the QM framework. The groups called on the CFPB to eliminate from the general QM category the debt-to-income ratio and the associated Appendix Q. They noted that doing so is “the best way to enable fair market competition across all lending channels while also ensuring that these creditworthy individuals can be served in a safe and sound manner under the existing ATR-QM framework.”
The groups also called on the bureau to maintain and enhance the existing Ability-to-Repay Rule’s regulatory language and maintain the existing QM statutory safe product restrictions that prohibit certain risky loan features—such as loan terms over 30 years, negative amortization or interest-only payments—and clarify provisions related to documentation and verification of income.
Both the American Bankers Association and the Credit Union National Association signed the letter.
Read the letter.
The letter was sent in response to an advanced notice of proposed rulemaking by the CFPB.
With the CFPB poised to allow the GSE patch to expire as scheduled in January 2021, “or after a short extension,” the groups proposed several changes to the QM framework. The groups called on the CFPB to eliminate from the general QM category the debt-to-income ratio and the associated Appendix Q. They noted that doing so is “the best way to enable fair market competition across all lending channels while also ensuring that these creditworthy individuals can be served in a safe and sound manner under the existing ATR-QM framework.”
The groups also called on the bureau to maintain and enhance the existing Ability-to-Repay Rule’s regulatory language and maintain the existing QM statutory safe product restrictions that prohibit certain risky loan features—such as loan terms over 30 years, negative amortization or interest-only payments—and clarify provisions related to documentation and verification of income.
Both the American Bankers Association and the Credit Union National Association signed the letter.
Read the letter.
Friday, June 14, 2019
Student CU Connect CUSO Settles with CFPB over ITT Private Student Loan Program
The Consumer Financial Protection Bureau (CFPB) on June 14 announced a settlement with Student CU Connect CUSO, LLC (CUSO), a company set up to hold and manage private loans for students at ITT Technical Institute.
Student CU Connect CUSO is headquartered in Overland Park, Kansas.
In a complaint, the CFPB alleged that the CUSO provided substantial assistance to ITT Educational Services, Inc. in engaging in unfair acts and practices.
Under the terms of the proposed stipulated judgment, CUSO must stop collecting on all outstanding CUSO loans, discharge all outstanding CUSO loans, and ask all consumer reporting agencies to which CUSO furnished information to delete tradelines relating to CUSO loans. The order also requires CUSO to provide notice to all consumers with outstanding CUSO loans that their debt has been discharged and is no longer owed and that CUSO is seeking to have the relevant tradelines deleted. The total amount of loan forgiveness is currently estimated to be $168 million.
Forty-four states plus the District of Columbia have also settled with CUSO today on the same terms.
Read the complaint.
Read the settlement.
Student CU Connect CUSO is headquartered in Overland Park, Kansas.
In a complaint, the CFPB alleged that the CUSO provided substantial assistance to ITT Educational Services, Inc. in engaging in unfair acts and practices.
Under the terms of the proposed stipulated judgment, CUSO must stop collecting on all outstanding CUSO loans, discharge all outstanding CUSO loans, and ask all consumer reporting agencies to which CUSO furnished information to delete tradelines relating to CUSO loans. The order also requires CUSO to provide notice to all consumers with outstanding CUSO loans that their debt has been discharged and is no longer owed and that CUSO is seeking to have the relevant tradelines deleted. The total amount of loan forgiveness is currently estimated to be $168 million.
Forty-four states plus the District of Columbia have also settled with CUSO today on the same terms.
Read the complaint.
Read the settlement.
Wednesday, May 22, 2019
Bank and CU Trade Groups Write in Opposition of Amendment to Reinstate Flawed Arbitration Rule
Bank and credit union trade groups wrote a joint letter on May 21 to members of the House of Representatives opposing a proposed amendment to H.R. 1500 (Consumers First Act) that would reinstate the Consumer Financial Protection Bureau's arbitration rule.
The trade group wrote: "Returning to this flawed rule would undermine the ability of the members of our organizations to continue to offer arbitration, which is a convenient, simple, and efficient dispute resolution process for our customers."
Congress under the Congressional Review Act in 2017 disapproved the arbitration rule.
The amendment was introduced by Representative Al Green (D-TX).
The House of Representatives is expected to consider H.R. 1500 and its amendments in the coming days.
The trade groups signing the letter are the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Credit Union National Association, and the National Association of Federally Insured Credit Unions.
Read the letter.
The trade group wrote: "Returning to this flawed rule would undermine the ability of the members of our organizations to continue to offer arbitration, which is a convenient, simple, and efficient dispute resolution process for our customers."
Congress under the Congressional Review Act in 2017 disapproved the arbitration rule.
The amendment was introduced by Representative Al Green (D-TX).
The House of Representatives is expected to consider H.R. 1500 and its amendments in the coming days.
The trade groups signing the letter are the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Credit Union National Association, and the National Association of Federally Insured Credit Unions.
Read the letter.
Tuesday, May 7, 2019
Bank Groups Write CFPB to Not Cede Supervisory Authority of Large CUs to NCUA
The American Bankers Association and the Consumer Bankers Association on May 3 wrote to the Consumer Financial Protection Bureau (CFPB) director expressing strong opposition to a recent request for the bureau to cede its supervisory authority for the nation’s largest credit unions to the National Credit Union Association (NCUA).
The letter was in response to a years-long campaign waged by credit unions, their trade associations, and, remarkably, their federal prudential regulator, seeking special treatment from the CFPB for the credit union industry.
The associations pointed out that the Dodd-Frank Act clearly communicates Congress’ intention that the credit unions be held to the same supervisory standards as other large depository institutions. Granting the request for special treatment to credit unions with at least $10 billion in assets would be in direct conflict with congressional intent and would contribute to an unlevel regulatory playing field between banks and credit unions, they said.
“While we believe that the bureau should take every opportunity to reduce the regulatory burden for all financial institutions and eliminate duplicative supervision, we strongly disagree with the premise that the consumer financial services offered by credit unions inherently differ from those offered by other financial institutions competing in the marketplace,” the groups wrote. “Policymakers have reason to seriously question the appropriateness of the special treatment being sought by credit unions and their federal prudential regulatory authority, the National Credit Union Administration.”
Read the letter.
The letter was in response to a years-long campaign waged by credit unions, their trade associations, and, remarkably, their federal prudential regulator, seeking special treatment from the CFPB for the credit union industry.
The associations pointed out that the Dodd-Frank Act clearly communicates Congress’ intention that the credit unions be held to the same supervisory standards as other large depository institutions. Granting the request for special treatment to credit unions with at least $10 billion in assets would be in direct conflict with congressional intent and would contribute to an unlevel regulatory playing field between banks and credit unions, they said.
“While we believe that the bureau should take every opportunity to reduce the regulatory burden for all financial institutions and eliminate duplicative supervision, we strongly disagree with the premise that the consumer financial services offered by credit unions inherently differ from those offered by other financial institutions competing in the marketplace,” the groups wrote. “Policymakers have reason to seriously question the appropriateness of the special treatment being sought by credit unions and their federal prudential regulatory authority, the National Credit Union Administration.”
Read the letter.
Thursday, November 8, 2018
Report Provides Snapshot of CU Remittance Transfers
Credit unions are a small share of the remittance transfer market, according to a recent report by the Bureau of Consumer Financial Protection (Bureau).
The report found that credit unions in 2017 conducted 0.2 percent of remittance transfers and 2.8 percent of the dollar volume based on the average dollar value of remittance transfers by credit unions in the industry survey. Credit unions reported 762,609 remittance transfers in 2017.
The Bureau found that 1,444 credit unions in 2017 offer remittance transfers, up from 863 credit union in 2009.
The number of credit unions that transferred more than 100 remittances in 2017 was 330. In 2014, only 280 credit unions transferred more than 100 remittances, which was down from 372 credit union in 2013. Credit unions that make more than 100 remittance transfers per year are subject to the Bureau's Remittance Rule.
Credit unions that offer and transfer more than 100 remittances are typically larger than credit unions that offer but transfer 100 or fewer remittances. In every year, the median asset size of credit unions that offered and transferred more than 100 remittances exceeded $125 million versus under $20 million for credit unions that offered, but did not transfer 100 remittances.
In 2017, the top 10 credit unions transferred 63 percent of all remittances by credit unions and credit unions that transferred more than 2,000 remittances accounted for 78 percent of all credit union transfers.
Read the report.
The report found that credit unions in 2017 conducted 0.2 percent of remittance transfers and 2.8 percent of the dollar volume based on the average dollar value of remittance transfers by credit unions in the industry survey. Credit unions reported 762,609 remittance transfers in 2017.
The Bureau found that 1,444 credit unions in 2017 offer remittance transfers, up from 863 credit union in 2009.
The number of credit unions that transferred more than 100 remittances in 2017 was 330. In 2014, only 280 credit unions transferred more than 100 remittances, which was down from 372 credit union in 2013. Credit unions that make more than 100 remittance transfers per year are subject to the Bureau's Remittance Rule.
Credit unions that offer and transfer more than 100 remittances are typically larger than credit unions that offer but transfer 100 or fewer remittances. In every year, the median asset size of credit unions that offered and transferred more than 100 remittances exceeded $125 million versus under $20 million for credit unions that offered, but did not transfer 100 remittances.
In 2017, the top 10 credit unions transferred 63 percent of all remittances by credit unions and credit unions that transferred more than 2,000 remittances accounted for 78 percent of all credit union transfers.
Read the report.
Monday, June 25, 2018
Judge Rules CFPB Structure Is Unconstitutional
A federal judge on June 21 ruled that the Consumer Financial Protection Bureau’s structure is unconstitutional.
Specifically, the judge noted that the existence of a single powerful director who cannot be removed at will by the president is unconstitutional.
In her decision, Judge Loretta Preska forbade the CFPB from pursuing its lawsuit -- which it filed together with the state of New York -- against New Jersey-based RD Legal Funding.
The lawsuit alleged that the company misled customers into entering cash advance agreements that functioned as usurious loans that were void under state law. She added that the New York attorney general would be permitted to proceed with its lawsuit independently.
Judge Preska’s ruling contradicts a ruling earlier this year by the D.C. Circuit Court of Appeals, which found in a complex ruling that the limitation on the president’s power to remove is consistent with Supreme Court rulings on other federal agencies, including the Federal Trade Commission and the Securities Exchange Commission.
Read the order.
Specifically, the judge noted that the existence of a single powerful director who cannot be removed at will by the president is unconstitutional.
In her decision, Judge Loretta Preska forbade the CFPB from pursuing its lawsuit -- which it filed together with the state of New York -- against New Jersey-based RD Legal Funding.
The lawsuit alleged that the company misled customers into entering cash advance agreements that functioned as usurious loans that were void under state law. She added that the New York attorney general would be permitted to proceed with its lawsuit independently.
Judge Preska’s ruling contradicts a ruling earlier this year by the D.C. Circuit Court of Appeals, which found in a complex ruling that the limitation on the president’s power to remove is consistent with Supreme Court rulings on other federal agencies, including the Federal Trade Commission and the Securities Exchange Commission.
Read the order.
Thursday, April 12, 2018
Financial Trades Support CFPB Commission Bill
In an April 9th letter, over 20 financial trade groups expressed support for a bill that would transition the governance structure of the Consumer Financial Protection Bureau (CFPB) from having a sole director to a five-person, bipartisan commission.
The Financial Product Safety Commission Act of 2018 (H.R. 5266) was introduced by Reps. Dennis Ross (R-Fla.), Kyrsten Sinema (D-Ariz.), David Scott (D-Ga.) and Ann Wagner (R-Mo.).
“The current single director structure leads to uncertainty as we have witnessed in CFPB leadership from the Obama administration to the Trump administration. This uncertainty is not only borne by financial institutions providing significant lending services, but it negatively impacts America’s consumers, small businesses and our local economies,” the groups said. “A Senate-confirmed, bipartisan commission will provide a balanced and deliberative approach to supervision, regulation and enforcement by encouraging input from all stakeholders.”
The associations added that transitioning to a bipartisan commission structure has wide support, both from Congress and the public; similar bills have been passed multiple times on bipartisan votes by the House Financial Services Committee and the full House, and a recent Morning Consult poll noted that only 14 percent of the public favors maintaining the bureau’s current leadership structure.
Read the letter.
Read the bill.
The Financial Product Safety Commission Act of 2018 (H.R. 5266) was introduced by Reps. Dennis Ross (R-Fla.), Kyrsten Sinema (D-Ariz.), David Scott (D-Ga.) and Ann Wagner (R-Mo.).
“The current single director structure leads to uncertainty as we have witnessed in CFPB leadership from the Obama administration to the Trump administration. This uncertainty is not only borne by financial institutions providing significant lending services, but it negatively impacts America’s consumers, small businesses and our local economies,” the groups said. “A Senate-confirmed, bipartisan commission will provide a balanced and deliberative approach to supervision, regulation and enforcement by encouraging input from all stakeholders.”
The associations added that transitioning to a bipartisan commission structure has wide support, both from Congress and the public; similar bills have been passed multiple times on bipartisan votes by the House Financial Services Committee and the full House, and a recent Morning Consult poll noted that only 14 percent of the public favors maintaining the bureau’s current leadership structure.
Read the letter.
Read the bill.
Friday, March 2, 2018
GAO: Regulators Failing to Assess Cumulative Burden of Rules on CUs and Community Banks
The Government Accountability Office (GAO) found that depository institution regulators fail to assess the cumulative burden of all rules imposed on community banks and credit unions.
The GAO conducted interviews and focus groups with over 60 representatives from community banks and credit unions regarding the most burdensome regulations.
These representatives identified regulations for reporting mortgage characteristics, reviewing transactions for potentially illicit activity, and disclosing mortgage terms and costs to consumers as the most burdensome.
GAO was told that these regulations were time-consuming and costly to comply with, in part because the requirements were complex, required individual reports that had to be reviewed for accuracy, or mandated actions within specific timeframes.
GAO made 10 recommendations to the Consumer Financial Protection Bureau (CFPB) and the four depository institution regulators.
GAO recommended that the CFPB "assess the effectiveness and guidance on mortgage disclosure regulations and publicly issue its plans for the scope and timing of its regulation reviews and coordinate these with other regulators' review process."
In addition as part of their regulatory burden reviews, the depository institution regulators should develop plans to report quantitative rationales for their actions and addressing the cumulative burden of regulations.
Read the report.
The GAO conducted interviews and focus groups with over 60 representatives from community banks and credit unions regarding the most burdensome regulations.
These representatives identified regulations for reporting mortgage characteristics, reviewing transactions for potentially illicit activity, and disclosing mortgage terms and costs to consumers as the most burdensome.
GAO was told that these regulations were time-consuming and costly to comply with, in part because the requirements were complex, required individual reports that had to be reviewed for accuracy, or mandated actions within specific timeframes.
GAO made 10 recommendations to the Consumer Financial Protection Bureau (CFPB) and the four depository institution regulators.
GAO recommended that the CFPB "assess the effectiveness and guidance on mortgage disclosure regulations and publicly issue its plans for the scope and timing of its regulation reviews and coordinate these with other regulators' review process."
In addition as part of their regulatory burden reviews, the depository institution regulators should develop plans to report quantitative rationales for their actions and addressing the cumulative burden of regulations.
Read the report.
Tuesday, December 26, 2017
NCUA Identifies Supervisory Priorities for 2018
The National Credit Union Administration (NCUA) in a letter to credit unions announced its supervisory priorities in 2018.
The agency identified the following seven areas for supervisory focus in 2018: cybersecurity assessment, Bank Secrecy Act compliance, internal controls and fraud prevention, interest rate and liquidity risk, automobile lending, commercial lending, and consumer compliance.
With respect to automobile lending, NCUA will focus on portfolios with the following concentrations -- extended loan maturities of over 7 years, high loan-to-value ratios, near-prime and subprime, and indirect lending programs.
With regard to consumer compliance, NCUA examiners will focus on three areas -- federal credit unions’ good faith efforts to comply with the Consumer Financial Protection Bureau’s amendments to the regulations implementing the Home Mortgaage Disclsoure Act (HMDA), credit unions' effort to comply with the Military Lending Act, and credit unions' overdraft policies and procedures for compliance with Regulation E.
Read the letter.
The agency identified the following seven areas for supervisory focus in 2018: cybersecurity assessment, Bank Secrecy Act compliance, internal controls and fraud prevention, interest rate and liquidity risk, automobile lending, commercial lending, and consumer compliance.
With respect to automobile lending, NCUA will focus on portfolios with the following concentrations -- extended loan maturities of over 7 years, high loan-to-value ratios, near-prime and subprime, and indirect lending programs.
With regard to consumer compliance, NCUA examiners will focus on three areas -- federal credit unions’ good faith efforts to comply with the Consumer Financial Protection Bureau’s amendments to the regulations implementing the Home Mortgaage Disclsoure Act (HMDA), credit unions' effort to comply with the Military Lending Act, and credit unions' overdraft policies and procedures for compliance with Regulation E.
Read the letter.
Tuesday, December 5, 2017
Reuters: CU Sues to Remove Mulvaney as Acting Head of CFPB
Reuters is reporting that Lower East Side People's Federal Credit Union (New York, NY) has filed a lawsuit in federal court to remove Mick Mulvaney as the head of the Consumer Financial Protection Bureau (CFPB).
Citing regulatory chaos, the credit union is asking a federal court to determine who is in charge of the CFPB. The complaint contends that Leandra English, the CFPB’s deputy director, is the proper acting head of the agency.
The lawsuit was filed in U.S. District Court in Manhattan.
Last week a federal judge sided with the Trump Administration ruling against English and allowing Mulvaney to serve as the agency’s acting head.
English continues to pursue her case.
Read the story.
Citing regulatory chaos, the credit union is asking a federal court to determine who is in charge of the CFPB. The complaint contends that Leandra English, the CFPB’s deputy director, is the proper acting head of the agency.
The lawsuit was filed in U.S. District Court in Manhattan.
Last week a federal judge sided with the Trump Administration ruling against English and allowing Mulvaney to serve as the agency’s acting head.
English continues to pursue her case.
Read the story.
Tuesday, November 7, 2017
CFPB Flags Risk Associated by Longer Maturity Car Loans
A study by the Consumer Financial Protection Bureau (CFPB) flags the higher risk posed by longer term auto loans.
The study noted that auto loans with longer maturities continue to expand market share, despite a cooling in the auto finance market. According to the CFPB, loans with maturities of six years or longer accounted for 42 percent of the market in 2017 year-to-date, up from 26 percent in 2009.
Six-year auto loans are the most common term used to finance auto loans.
Longer-maturity loans may pose greater risks to consumers. These loans are more likely to be used for larger loan amounts and by borrowers with lower credit scores. The average credit score for a borrower for taking out a six-year auto loans was 674 -- 39 points below the credit score for borrowers taking out a five-year auto loans. And given that the average length of U.S. car ownership is 6.5 years, longer loan maturities may mean borrowers are paying off loans for cars they no longer drive.
The dividing line in loan quality between five-year loans and six-year loans was especially stark, with default rates for the latter roughly double the former at comparable points since origination. For example, a six-year car loan made in 2014 had a cumulative default rate of over 5 percent two years after origination, but a similar five-year loan saw a default rate of just over 2.5 percent.
Read the report.
The study noted that auto loans with longer maturities continue to expand market share, despite a cooling in the auto finance market. According to the CFPB, loans with maturities of six years or longer accounted for 42 percent of the market in 2017 year-to-date, up from 26 percent in 2009.
Six-year auto loans are the most common term used to finance auto loans.
Longer-maturity loans may pose greater risks to consumers. These loans are more likely to be used for larger loan amounts and by borrowers with lower credit scores. The average credit score for a borrower for taking out a six-year auto loans was 674 -- 39 points below the credit score for borrowers taking out a five-year auto loans. And given that the average length of U.S. car ownership is 6.5 years, longer loan maturities may mean borrowers are paying off loans for cars they no longer drive.
The dividing line in loan quality between five-year loans and six-year loans was especially stark, with default rates for the latter roughly double the former at comparable points since origination. For example, a six-year car loan made in 2014 had a cumulative default rate of over 5 percent two years after origination, but a similar five-year loan saw a default rate of just over 2.5 percent.
Read the report.
Tuesday, October 3, 2017
Trade Groups Sue CFPB over Arbitration Rule
The American Bankers Association, the U.S. Chamber of Commerce, the Consumer Bankers Association, the Financial Services Roundtable and several other national and regional trade associations on Friday filed suit in federal court to block the Consumer Financial Protection Bureau’s arbitration rule from taking effect.
The lawsuit was filed in the U.S. District Court for the Northern District of Texas, Dallas Division.
The groups challenged the rule on several grounds: that the Consumer Financial Protection Bureau (CFPB) itself is unconstitutional (a claim currently being appealed), that the CFPB violated the Administrative Procedures Act (APA) in its rulemaking, and that the bureau violated the Dodd-Frank Act by precluding use of a consumer-benefiting dispute mechanism.
“For years, our organizations have tried to work with the CFPB to promote strong consumer protection while maintaining a functional arbitration system,” the plaintiffs said in a joint statement. “Unfortunately, the CFPB chose to instead finalize a rule that will harm consumers and businesses by effectively banning arbitration and increasing speculative class action litigation. As Congress continues to consider action within its purview, we are filing this challenge to ensure all legal remedies are utilized to preserve arbitration for consumers.”
By ignoring the results of its own study, which showed that consumers who prevail in disputes under arbitration win 166 times the award that successful class action plaintiffs do, the bureau acted arbitrarily and capriciously in violation of the APA, the lawsuit said.
Read the lawsuit.
The lawsuit was filed in the U.S. District Court for the Northern District of Texas, Dallas Division.
The groups challenged the rule on several grounds: that the Consumer Financial Protection Bureau (CFPB) itself is unconstitutional (a claim currently being appealed), that the CFPB violated the Administrative Procedures Act (APA) in its rulemaking, and that the bureau violated the Dodd-Frank Act by precluding use of a consumer-benefiting dispute mechanism.
“For years, our organizations have tried to work with the CFPB to promote strong consumer protection while maintaining a functional arbitration system,” the plaintiffs said in a joint statement. “Unfortunately, the CFPB chose to instead finalize a rule that will harm consumers and businesses by effectively banning arbitration and increasing speculative class action litigation. As Congress continues to consider action within its purview, we are filing this challenge to ensure all legal remedies are utilized to preserve arbitration for consumers.”
By ignoring the results of its own study, which showed that consumers who prevail in disputes under arbitration win 166 times the award that successful class action plaintiffs do, the bureau acted arbitrarily and capriciously in violation of the APA, the lawsuit said.
Read the lawsuit.
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