MASSIVE REGULATION Z RULES ARE SHELVED

Recently the Federal Reserve Board announced that it does not expect to finalize three pending rulemakings under Regulation Z prior to the transfer of authority for such rulemakings to the Consumer Financial Protection Bureau (CFPB).

The proposed rules were massive. They would have changed all of the rules regarding the disclosures for mortgage loans, both open-end (HELOCs) and closed-end. But we haven’t seen the last of these proposals; they will be revived by the new CFPB.

General rulemaking authority for the Truth in Lending Act (TILA) is scheduled to transfer to the CFPB in July 2011. The Dodd-Frank Wall Street Reform and Consumer Protection Act also requires that the CFPB issue a proposal within 18 months after the designated transfer date to combine, in a single form, the mortgage disclosures required by TILA and the disclosures required by the Real Estate Settlement Procedures Act (RESPA).

Any new disclosures adopted by the Board would be subject to the CFPB’s further revision in carrying out its mandate to combine the TILA and RESPA disclosures. In addition, a combined TILA-RESPA disclosure rule could well be proposed by the CFPB before any new disclosure requirements issued by the Board could be fully implemented. For these reasons, the Board has determined that proceeding with the 2009 and 2010 proposals would not be in the public interest.

Finally we have some good news in the compliance arena. But I am not sure who to thank for the good news – is it the Federal Reserve Board or the Consumer Financial Protection Bureau? I suspect it is the latter.

Until recently I would have wagered a substantial sum of money that Elizabeth Warren didn’t have a chance of being appointed the permanent head of the CFPB. It seemed as if she had few powerful supporters. But the support seems to be building.

Professor Warren is clearly very intelligent; that has never been the issue. Many in Congress and in the banking industry felt that her political beliefs were not good for the industry or the country. Professor Warren is demonstrating considerable political skill. She has been courting the banking industry, the industry that did not want her in the job. She keeps making one smart move after another. Her latest smart move, the delay in the massive changes to Regulation Z, makes sense for all involved, and the delay should build more support within the banking industry.

The race isn’t over, but I am considering a bet on Elizabeth Warren.

Leave a Reply

Your email address will not be published. Required fields are marked *