Last week the Bureau of Consumer financial Protection (BCFP) issued revised versions of the small entity compliance guides for the Loan Originator Rule and the Home Ownership and Equity Protection Act (HOEPA) Rule. Both Guides are updated for changes resulting from the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).

The Loan Originator Rule, among other requirements,  addresses loan originator compensation, defines the concept of a loan originator and addresses qualification and other requirements related to loan originators. The updated guide includes:

• An expansion of an exemption from the concept of a loan originator with regard to retailers of manufactured and modular homes and their employees, which resulted from the EGRRCPA;
• Revisions to the process for contacting the CFPB with informal inquiries about the rule; and
• A declaration that the TILA/RESPA Integrated Disclosure (TRID) rule is now in effect (the prior version of the guide was issued in March 2015 and the TRID rule became effective in October 2015).

The revised HOEPA Guide addresses:

• An expansion of the exemption from the concept of a loan originator made by the EGRRCPA (see Loan originator rule above), as this can affect the requirement to include loan originator compensation in points and fees for purposes of the points and fees threshold under the HOEPA rule; and
• Revisions to the process for contacting the CFPB with informal inquiries about the rule.

It is expected that the BCFP will also soon revise the Small Entity Compliance Guide for the Ability to Repay (ATR) Rule since that Rule is impacted by the HOEPA changes described above. For purposes of the points and fees cap to determine qualified mortgage loan status under the ATR Rule, the definition of “points and fees” set forth in the HOEPA rule is used.

The Home Ownership and Equity Protection Act Rule Guide is available at: https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/bcfp_hoepa_small-entity_compliance-guide.pdf

The Loan Originator Guide is available at: https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/bcfp_loan-originator_small-entity_compliance-guide.pdf

On November 14, 2018 the FDIC  issued a nine-page request for information on small dollar lending, including steps that can be taken to encourage FDIC-supervised financial institutions to offer small-dollar credit products that are responsive to customers’ needs and that are underwritten and structured prudently and responsibly. The request was issued as FIL-71-2018. Comments will be accepted for 60 days following publication in the Federal Register, which is expected soon.

The FDIC recognizes the important role small-dollar credit products can play, as part of the spectrum of credit and savings products offered by banks, in helping consumers meet the need for credit for purposes such as addressing cash-flow imbalances, unexpected expenses, or income volatility. Recent research from the FDIC indicates that 20 percent of U.S. households reported that their income varied “somewhat” or “a lot” from month-to-month. Moreover, according to research from the Federal Reserve, if faced with a hypothetical $400 expense, 4 in 10 U.S. adults in 2017 would borrow, sell something, or not be able to pay.

Comments are requested on the following topics:

Consumer Demand

1. To what extent is there an unmet consumer demand for small-dollar credit products offered by banks?
2. To what extent do banks currently offer small-dollar credit products to meet consumer demand?
3. To what extent and in what ways do entities outside the banking sector currently satisfy the consumer demand for small-dollar credit products?
4. What data, information, or other factors should the FDIC consider in assessing the consumer demand for small-dollar credit products?

Benefits and Risks

5. What are the potential benefits and risks to banks associated with offering responsible, prudently underwritten small-dollar credit products?
6. What are the potential benefits and risks to consumers associated with bank-offered small-dollar credit products?
7. What are the key ways that banks offering small-dollar loan products should manage or mitigate risks for banks and risks for consumers?
8. What are the potential benefits and risks related to banks partnering with third parties to offer small-dollar credit?
9. What steps could the FDIC take, consistent with its statutory authority, to encourage banks to develop and offer responsible, prudently underwritten small-dollar credit products?

Challenges

10. Are there any legal, regulatory, or supervisory factors that prevent, restrict, discourage, or disincentivize banks from offering small-dollar credit products? If so, please explain.
11. Are there any operational, economic, marketplace, or other factors that prevent, restrict, discourage, or disincentivize banks from offering small-dollar credit products? If so, please explain.
12. What factors may discourage consumers from seeking responsible, prudently underwritten small-dollar credit products offered by banks?

Product Features

13. Are there specific product features or characteristics of small-dollar loan products that are key to meeting the credit needs of consumers while maintaining prudent underwriting?
14. Are there specific product features or characteristics that are key to ensuring the economic viability to a bank of responsible, prudently underwritten small-dollar credit products?

Innovation

15. How can technology improve the ability of banks to offer responsible, prudently underwritten small-dollar loan products in a sustainable and cost-effective manner? Please specify the technology or technologies and the use case(s).
16. Are there innovations that might enable banks to better assess the creditworthiness of potential small-dollar loan borrowers with limited or no credit records with a nationwide credit reporting agency?
17. What role should the FDIC play, if any, in supporting innovations that enhance banks’ abilities to offer responsible, prudently underwritten small-dollar loans? Are there specific barriers that prevent banks from implementing such technologies or innovations?
18. How can technology be leveraged to improve consumers’ experiences and reduce potential risks to consumers associated with small-dollar credit products?

Alternatives

19. What other products and services that supplement or complement small-dollar credit offerings should banks consider? Are there other ways that banks can help consumers address cash-flow imbalances, unexpected expenses, or income volatility besides small-dollar credit products?

Other

20. Are there any distinguishing characteristics of particular institutions, such as a bank’s size, complexity, or business model, that the FDIC should consider, and if so how?
21. Please provide any other comments or information that would be useful for the FDIC to consider.

Other recent news on small dollar loans is available at: https://www.jackscomplianceresource.com/bcfp-puts-brakes-on-payday-loans/

A copy of the FIL is available at https://www.fdic.gov/news/news/financial/2018/fil18071.html?source=govdelivery&utm_medium=email&utm_source=govdelivery.

A copy of the request for information is available at:  https://www.fdic.gov/news/news/press/2018/pr18084a.pdf

The Bureau of Consumer Financial Protection has released the Filing Instructions Guide, or FIG, for Home Mortgage Disclosure Act (HMDA) data collected in 2019 and reported in 2020. There are no significant changes to the submission process for data collected in 2019 and reported in 2020 and, therefore, no significant changes to the FIG. However, updates were made and financial institutions will need to be aware of the changes to the FIG for data collected in 2019.

A few of the changes include, but are not limited to, added and updated AUS values; updated instructions for reporting DTI to accept a negative number; reporting the credit score; reporting AUS results; numerous edit revisions including verifying institutions are eligible to take exemption for applicable data points; and, less consequential, an adjustment to the Bureau’s name (i.e. Consumer Financial Protection Bureau is now Bureau of Consumer Financial Protection or the Bureau).

To access the 2019 FIG, including a full list of changes, click here.

A full list of HMDA resources is available here.

On October 23, the Bureau of Consumer Financial Protection (the Bureau) released its Complaint Snapshot: 50 State Report. According to the Bureau, the report “…provides a high-level overview of trends in consumer complaints and supplements the Consumer Response Annual Report with more recent information on complaints about consumer financial products and services by state.”

From July 2011, when the Bureau began receiving complaints, through June 30, 2018, the Bureau had received approximately 1,578,700 complaints. The Complaint Snapshot: 50 State Report breaks down information at the national and state level. Information analyzed from January 2017 through June 2018 includes the number of complaints, average number of complaints per month, percentage change, and timely response for the US and each state, respectively. The report also analyzes product complaint trends for the top complaint-prone products, submitted from January 1, 2015 through June 30, 2018, for the US and each state, respectively, allowing financial institutions to recognize potential issues in their areas.

Based on complaints received from January 2017 through June 2018, the report notes the following:

• Collectively, US consumers submitted 494,540 complaints to the Bureau, with an average of 27,474 per month;
• The top five complaints for consumers nationwide (based on percentage changed) were money transfer/service and virtual currency, vehicle loans or leases, personal loans, payday loans, and title loans;
• The top five complaints for consumers nationwide (based on volume) were debt collection, credit or consumer reporting, mortgage, credit card, and checking or savings;
• Timely company response rates during this time were 98% nationwide;
• California consumers submitted more complaints that consumers in any other state with 63,096, while Florida, Texas, New York, and Georgia took the next four spots; and
• Wyoming had the fewest complaints with 386 submitted.

The Bureau’s Complaint Snapshot: 50 State Report is available here.

On October 26, 2018 the Bureau of Consumer Financial Protection announced that it expects to issue proposed rules in January 2019 that will reconsider its rule regarding Payday, Vehicle Title, and Certain High-Cost Installment Loans and address the rule’s compliance date. The Bureau will make final decisions regarding the scope of the proposal closer to the issuance of the proposed rules. However, the Bureau is currently planning to propose revisiting only the ability-to-repay provisions and not the payments provisions, in significant part because the ability-to-repay provisions have much greater consequences for both consumers and industry than the payment provisions. The proposals will be published as quickly as practicable consistent with the Administrative Procedure Act and other applicable law.

Stay tuned for further details in January.

On October 25, 2018 the federal banking agency members of the Federal Financial Institutions Examination Council (FFIEC) with Community Reinvestment Act (CRA) responsibilities today announced the availability of data on small business, small farm, and community development lending reported by certain commercial banks and savings associations, pursuant to the CRA. The agencies releasing the data are the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.

An FFIEC disclosure statement on the reported 2017 CRA data, in electronic form, is available for each reporting commercial bank and savings association. The FFIEC also prepared aggregate disclosure statements of small business and small farm lending for all of the metropolitan statistical areas and non-metropolitan counties in the United States and its territories. These statements are available for public inspection on the FFIEC website (www.ffiec.gov/cra).

A copy of the FFIEC’s press release is available at :  https://www.ffiec.gov/press/pr102518.htm

A copy of the Fact Sheet on the 2017 Data is available at:  https://www.ffiec.gov/hmcrpr/cra_fs18.htm

Details on the upcoming Compliance Resource webinar entitled CRA Data Collection and Reporting are available at:  https://www.jackscomplianceresource.com/event-registration/?ee=193

The current version of the Special Flood Hazard Determination Form (SFHDF), FEMA Form 086-0-32 published on June 1, 2016, is set to expire on October 31, 2018. The SFHDF is required for all federally backed loans and is used by lenders to determine the flood risk for their building loans. FEMA (Federal Emergency Management Agency) oversees the National Flood Insurance Program (NFIP) and is responsible for updates to the SFHDF.

As we near the expiration date of the form, FEMA has yet to indicate when an updated form will be released. However, those of us in the banking industry who have been around a few years know, FEMA’s lack of punctuality in renewing the form is not new. For example, the previous version of the SFHDF (published 4/2012) was set to expire on May 30, 2015; the new and current form was not published until June 1, 2016. And before that the SFHDF (published 12/2008) was set to expire on December 31, 2011, but a newly approved form was not published by FEMA until April 2012.

But perhaps we shouldn’t be too hard on FEMA – it is an agency that generously spends its resources in the trenches helping those in need after disasters. And historically, FEMA has recognized expiring forms and indicated lenders should continuing using the current form until a new form is published. With this in mind, lenders should continue using the current form until a new form is released by FEMA and be mindful that a new SFHDF will likely be released in the not too distant future.

We will monitor FEMA’s progress and be sure to let you know of any updates or information related to the form. The SFHDF is available on FEMA’s website.

It’s that time of year again…the National Multistate Licensing System and Registry’s (NMLS) 2019 renewal period begins November 1 and continues through December 31. All Mortgage Loan Originators (MLOs), as defined in Regulation G, 12 CFR 1007, who are registered with the Registry are required to complete the annual registration renewal.

One exception to the renewal requirement is for MLOs who completed their registration with the Registry less than 6 months prior to the end of the annual renewal period which is December 31, 2018. For example, if an MLO was registered on or before June 30, 2018, they must renew their registration during the 2019 renewal period; however, if the MLO was registered on or after July 1, 2018, renewal is not required during the 2019 renewal period.

Information regarding the NMLS registration renewal process is available here.

On Wednesday, October 17, the Consumer Financial Protection Bureau (CFPB, or the Bureau) released its second of two rulemaking agendas for 2018. The Fall 2018 installment of the semi-annual agenda includes items in the prerule, proposed rule, and final rule stages. In addition, the CFPB released a list of long term actions anticipated beyond the next 12 months.

Three items are listed in the pre-rule stage. Those include rulemakings to exempt certain creditors with assets of $10 billion or less from the Higher Priced Mortgage Loans escrow requirements with action expected in June 2019, action to develop standards for assessing consumers’ ability to repay “Property Assess Clean Energy” (PACE) financing expected in June 2019, and modification of public HMDA data for the purpose of protecting consumer privacy interests final with guidance expected in the next few months and further rulemaking in future years.

Six items are on the agenda in the proposed rule stage and three items are in the final rule stage. Among the six proposed rule items are anticipated debt proposals regarding collection practices and disclosures under the Fair Debt Collection Practices Act with a proposed rule expected by March 2019 and Payday, Vehicle Title, and Certain High-Cost Installment Loans with a proposed rule expected January 2019. The final rule items include a rule related to the disclosure of records and information, which was effective October 12, and a rule related to Fair Credit Reporting Act disclosures, which was effective on September 18 with an additional comment period through November 19, 2018. Lastly, a final rule related to technical specifications for submissions of prepaid account agreements is expected in February 2019, a couple of months prior to the Prepaid Account rule’s April 1, 2019 effective date.

Perhaps one of the most notable items is found in the long-term actions. The CFPB has reclassified the Regulation B business lending data collection and reporting for applications by women-owned, minority-owned, and small businesses from prerule status in the Spring 2018 Rulemaking Agenda to a long-term action item in the Fall 2018 Rulemaking Agenda. Along with Regulation B business lending data, another item added to the long-term agenda is further clarification on what constitutes abusive act and practices.

In its statement the CFPB recognizes that the significant tasks currently underway at the Bureau, such as implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) provisions and conducting an effectiveness assessment of significant rulemakings, among other initiatives, could affect future rulemaking. The Bureau expects by no later than the Spring 2019 Agenda to issue a more comprehensive statement of priorities to reflect its ongoing market monitoring and results of these current initiatives.

The 2018 Fall Rulemaking Agenda and 2018 Fall Long Term Agenda are available here:

2018 Fall Rulemaking Agenda

2018 Fall Long Term Agenda

Information on the 2018 Spring Rulemaking Agenda is available here.

On October 3, 2018, the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) (the Agencies), issued a statement giving certain financial institutions the ability to collaborate on Bank Secrecy Act (BSA)/Anti- Money Laundering (AML) requirements. The Agencies believe increased collaboration would be suitable for banks with a community focus, less complex operations, and lower-risk profiles for money laundering or terrorist financing, in order to increase the efficiency and efficacy of their BSA/AML efforts while reducing costs.

Types of collaboration among banks could include, but isn’t limited to, pooling human, technology and other resources to fulfill the requirement of a banks BSA/AML compliance program such as:

• Internal monitoring (reviewing, updating, and drafting BSA/AML policies and procedures; reviewing and developing risk-based customer identification and account monitoring processes; and tailoring monitoring systems and reports for the risks posed)
• Independent Testing
• Training

However, the Agencies’ statement does caution against collaboration on one element of the BSA/AML compliance program, the BSA Officer. The Agencies note it may not be appropriate to share a BSA Officer due to the confidential nature of suspicious activity reports, managing coordination and facilitation of each bank’s daily BSA/AML compliance functions, and potential challenges the BSA Officer may have communicating with each bank’s board of directors and senior management.

If a bank does consider collaborating with other banks there are key risks to consider and necessary controls that should be built into the arrangement to mitigate those risks. Such controls include, but aren’t limited to: considering legal restriction; instituting oversight mechanisms by board and senior management; contractual agreements; and confidentiality agreements. The Agencies state that banks should approach these arrangements with due diligence and consideration of risk and benefits. As always, it is important to remember that the ultimate obligation and risk lies with each financial institution.

Banks should consult their primary regulator before entering into an agreement to share BSA resources.

The Interagency statement is available here.