Loan Growth and Compliance Pitfalls

Transcription

1 Loan Growth and Compliance Pitfalls presented by LOANLINER Compliance Information provided in this presentation, including all materials, should not be construed as legal services, legal advice, or in any way establishing an attorney-client relationship. Credit unions should contact their own legal counsel for advice. Information may have changed since this presentation was prepared. This information is intended to only be a summary of the issues. CUNA Mutual Group Proprietary Reproduction, Adaptation or Distribution Prohibited CUNA Mutual Group 2013

2 Marketing Compliance considerations around marketing Fair Credit Reporting Act (FCRA) pre-screened offers Advertising requirements (Reg Z, Reg B, etc) Unfair Deceptive and Abusive Acts or Practices (UDAAP) issues Telephone Consumer Protection Act (TCPA) 2

3 Prescreening Rules under FCRA CUs are required to provide special notices to members offered credit based on prescreened lists from credit reporting agency Members must be able to opt-out CUs must make a firm offer of credit to all members who pass the prescreening process CU must retain prescreen criteria for three years 3

4 Regulatory Advertising Requirements Regulation Z (TILA) Trigger terms requiring additional disclosures Regulation B (ECOA) and Fair Housing Act Prohibit discrimination based upon Race, Color, National origin, Religion, Sex, Handicap, Familial status, Marital status, Age, Receipt of public assistance, and the exercise of rights granted by the Consumer Credit Protection Act UDAAP 4

5 Online and mobile channels Process Compliance around new channels Advertising Disclosures Fraud 5

6 Telephone Consumer Protection Act (TCPA) Prior express written consent (effective as of October 2013): Required for advertisement or telemarketing calls/texts to wireless numbers using a system capable of making autodialed calls/texts, and/or using an artificial or pre-recorded voice/message. Design/content requirements for prior express written consent: Clear and Conspicuous Separate and distinguishable from other disclosures; Must include the specific number to which such calls will be made; Signed by the member; and Must not be a condition of purchasing any property, goods or services. 6

7 TCPA Prior express consent (can be oral or written) required for: Telemarketing calls to residential lines using artificial or pre-recorded voice and/or automatic dialing device; and Non-telemarketing (e.g. debt collection) calls/texts to wireless numbers using an autodialer or artificial or pre-recorded voice and/or automatic dialing device. NOTE: The FCC previously concluded that the act of providing a cell phone (wireless) number to a creditor (e.g. credit union) on an application reasonably evidences the (member s) prior express consent to be contacted at that number for debt collection calls. 7

8 TCPA No consent required for fraud calls/alerts: In its Declaratory Ruling issued in July 2015, the FCC clarified that fraud related calls/alerts are excluded from the above prior consent requirements as long as certain requirements are met (see Declaratory Ruling for requirements). Members still must be able to opt out of future fraud calls/alerts at the time a fraud-related call/text is made (see Declaratory Ruling for requirements). 8

9 New members CFPB statistics 19.4 million Americans have credit records that cannot be scored* 26 million Americans are credit invisible* Experian statistics 64 million consumers don t have a credit score** *Data Point: Credit Invisibles, May 2015 **Is it time for consumer lending to go social? February

10 Alternative data VantageScore: new credit scoring model from three major CRAs Looks at 24 months of credit history Adds alternative data such as rental history and utility and phone bill payment history Alternative lenders Location data from a personal social network and ecommerce cites to validate occupancy and stability of residences Small business allows access to ecommerce site and other online payment accounts (real-time sales and delivery information) Social media Online tools that create alternative credit scores (Happy Mango) Mine accounts for data on income, savings and spending Character testimonials 10

11 Compliance considerations Policies and procedures for how you use alternative data Fair lending laws and regulations It is also important to note that creditors may not, with limited exceptions, request certain information, such as information about an applicant s race, color, religion, national origin, or sex. Since social media platforms may collect such information about participants in various ways, a creditor should ensure that it is not requesting, collecting, or otherwise using such information in violation of applicable fair lending laws. Particularly if the social media platform is maintained by a third party that may request or require users to provide personal information such as age and/or sex or use data mining technology to obtain such information from social media sites, the creditor should ensure that it does not itself improperly request, collect, or use such information or give the appearance of doing so.* Notices that may indicate data relied upon When denying credit, a creditor must provide an adverse action notice detailing the specific reasons for the decision or notifying the applicant of his or her right to request the specific reasons for the decision. This requirement applies whether the information used to deny credit comes from social media or other sources.* Privacy *FFIEC Social Media Guide 11

12 Other Compliance Considerations CUNA Mutual Group Proprietary Reproduction, Adaptation or Distribution Prohibited CUNA Mutual Group 2013

13 Home Mortgage Disclosure Act (HMDA) Dodd-Frank 1094 amends HMDA to improve the utility of data collected and revise Federal agency rulemaking and authorities Consumer Financial Protection Bureau (CFPB) sees implementation of the changes to HMDA as an opportunity to: Improve data collection; Reduce unnecessary burden on financial institutions; and Modernize data collection and reporting Proposed rule issued on July 24, 2014 Comment period closed in October 2014 Final rule issued in October

14 Amendments to HMDA A credit union will be subject to Regulation C in 2017 if it meets the asset-size, location, federally related, and loan activity tests under current Regulation C and it originates at least 25 home purchase loans, including refinancings of home purchase loans, (as those terms are defined in current Regulation C) in both 2015 and A credit union will be subject to Regulation C if it originated at least 25 covered closed-end mortgage loans or at least 100 covered open-end lines of credit in each of the two preceding calendar years, and it meets current Regulation C s asset-size, location, federally related, and loan activity tests. (Effective ) Begin collection of the new data as of January 1, 2018 for reporting in 2019 Effective date for loan threshold is effective January 1,

15 Transactional coverage Coverage generally will include closed-end mortgage loans and openend lines of credit secured by a dwelling. For open-end, only collect, record and report information if a covered institution that originated at least 100 covered open-end lines of credit in each of the two preceding calendar years. Dwelling-secured business-purpose loans and lines of credit will be covered only if they are home purchase loans, home improvement loans, or refinancings. Home improvement loans will only be covered loans if they are secured by a dwelling. 15

16 New Data Points Property address Age Credit score Total loan cost or total points and fees Origination charges Discount points Lender credits Interest rate Prepayment penalty term DTI Combined LTV Loan term Intro rate period Non-amortizing features Property value Manufactured home land property interest Total units Multi-family affordable units Application channel MLO NMLSR Identifier Automated underwriting system Reverse mortgage Open-end LOC Business or commercial purpose 16

17 Modified Data Points Legal entity identifier Universal loan identifier Loan purpose Preapproval Construction method Occupancy type Loan amount Ethnicity, race, and sex Type of purchaser Rate spread Lien status Reason for denial 17

18 Military Lending Act Department of Defense issued a rule to significantly expand the coverage of the Military Lending Act 32 CFR Part 232 Final rule issued July 2015 Effective date October 1, Compliance required by October 3, 2016 for all loans consummated or established on or after For a credit card account under an open-end plan, compliance is required by October 3, 2017 (or potentially a longer period of time) Generally provides protections to servicemembers or dependents for certain types of consumer credit. 18

19 Amended MLA Expands the definition of consumer credit (existing rule only covered 3 types of credit) Imposes 36% MAPR on consumer credit to a covered borrower Amends provisions related to assessing a covered borrower Modifies the disclosures that must be provided Nothing in this part applies to a credit transaction or account relating to a consumer who is not a covered borrower at the time he or she becomes obligated on a credit transaction or establishes an account for credit. Doesn t impose restrictions on existing credit or if becomes eligible after entering into the transaction Doesn t impose obligation to monitor covered borrower status 19

20 Information provided in this presentation, including all materials, should not be construed as legal services, legal advice, or in any way establishing an attorney-client relationship. Credit unions should contact their own legal counsel for advice. Information may have changed since this presentation was prepared. This information is intended to only be a summary of the issues. 20

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