DELAY IN CREDIT INSURANCE EFFECTIVE DATE

On May 8 the Consumer Financial Protection Bureau (CFPB) published a proposal to temporarily delay the June 1, 2013, effective date of the prohibition on financing credit insurance premiums in connection with consumer credit transactions secured by a dwelling. The temporary delay provides the CFPB time to clarify, before the provision takes effect, its applicability to transactions other than those in which a lump-sum premium is added to the loan amount at closing.

The proposal will have a comment period of 15 days that begins on the date the proposal is published in the Federal Register. Then the delayed effective date will be made final. The CFPB is going down to the wire on this one. Generally it takes about a week toget a rule published in the Federal Register. Assuming the proposal is published on May 15 that barely leaves 15 days including weekends and the Memorial Day holiday to complete this action. Presumably following the comment period the CFPB will issue a final rule that actually completes the delay. A big question is, can they turn the final rule before the June 1, 2013 effective date? This should be interesting to watch.

 The CFPB plans to issue another proposal in June requesting comment on clarifications regarding premiums that are charged periodically. The June proposal will also propose a new effective date for the rule.

 Let’s summarize:

  The CFPB published 3,500 pages of new and revised regulations in January.

  On the date the final regulations were published several proposed rules were also published to change the final rules published that day.

  In the past few months the CFPB has published several additional proposed changes to the January final rules.

  Most of the final regulations published in January 2013 had effective dates in January 2014.

  For a few regulations, including the one that is the subject of this article, the CFPB succumbed to pressure from community groups and adopted an earlier effective date of June 1, 2013.

  Now the CFPB has discovered some potential issues with the final rule and has proposed a last minute delay, to be followed by more changes.

  Why weren’t the problems with the final rule on credit insurance identified earlier? The CFPB is pointing at the banking industry for not providing comment on the earlier proposed regulation. Shame on us.

 The CFPB is still a very young agency. I am certain the industry veterans on the CFPB staff are trying their hardest to handle the huge volume of regulations and the time constraints they were handed by the Dodd-Frank Act. But this is really starting to look like the amateur hour. The banking industry deserves better. But at least we have additional time to complete work on implementing the prohibition on financing credit insurance, if the CFPB can get the proposed delay completed in time.

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