Regulatory Update NAFCU Webcast

Transcription

1 Regulatory Update NAFCU Webcast Thursday, November 14 2:00 3:30 p.m. Presented by: Steve Van Beek, Esq. (248)

2 Overview CFPB s Agenda Supervisory Highlights CFPB s Radar AKA, What is Coming Next? Recent Mortgage Guidance NCUA s Final Liquidity Rule 2

3 Objectives of the CFPB Dodd-Frank included statutory objectives: Ensure consumers have timely and understandable information; Protect from unfair, deceptive or abusive acts; Reduce unnecessary regulatory burdens; Promote fair competition through consistent enforcement of laws and regulations; and Encourage markets that operate transparently and efficiently to facilitate access & innovation 3

4 CFPB s Agenda Dodd-Frank Mandates Mortgage Regulations International Remittance Transfers TILA-RESPA Integrated Disclosures Regulatory Agenda Political Agenda 4

5 Regulatory Agenda Private Student Loans Overdraft Protection Payday Loans Prepaid Cards Checking Account Disclosures Credit Cards Vendor Relationships HELOCs 5

6 Political Agenda UDAAP Fair Lending Cordray Speech on September 24, 2013 Four D s Plaguing Consumers 1. Deceptive Marketing 2. Debt Traps 3. Dead Ends 4. Discrimination 6

7 CFPB Supervisory Highlights 2012 From July 21, 2011 to September 30, 2012 Compliance Management Systems Internal Policies & Procedures Oversight of Third-Party Providers Fair Lending Violations on Credit Cards and Mortgages For mortgages, improper GFE/HUD-1 Remember new changes coming soon! 7

8 CFPB Supervisory Highlights 2012 Credit Card Violations Deceptive Marketing Practices Credit Card Add-On Products Ability-to-Repay Provision Credit Limit Increases without Co- Applicant s Authorization Rate Reevaluation of Acquired Portfolios 12 CFR (g) 8

9 CFPB Supervisory Highlights 2013 November 2012 through June 2013 Mortgage Servicing Nonbanks Compliance Management Systems CFPB Criticizes Decentralized Compliance Four Main Elements Fair Lending Failure to Send Adverse Action Notices 9

10 CFPB Supervisory Highlights 2013 Four Main Elements: 1. Board and Management Oversight; 2. Compliance Program; [Policies & Procedures; Training; Monitoring; Corrective Action] 3. Consumer Compliant Management; & 4. Independent Compliance Audit. 10

11 CFPB Supervisory Highlights 2013 Complaint Management Entities should organize, retain, and analyze complaint data to identify trends, isolate areas of risk, and identify program weaknesses in their lines of business and overall CMS. Where are your complaints coming from? Facebook? Twitter? Formal Complaints? Are you preparing trend reports? 11

12 CFPB Complaint Report Complaint Report (July 2011 to June 2013) 12

13 CFPB Complaint Report Annual Report (July 2012 to June 2013) 13

14 CFPB Complaint Report Annual Report (July 2012 to June 2013) 14

15 Complaint Management Example: Notices of Error Mortgages CUs have new procedures Set up tracking mechanism to allow your credit union to create monthly reports Identify areas to improve Identify needs for additional training Improve member service PROACTIVELY ADDRESS ISSUES 15

16 CFPB Guidance Credit Card Add-On Products Mortgage Servicing Transfers Self-Policing & Self-Reporting UDAAP in the Collection of Debts Requirement to Investigate FCRA Disputes Payroll Cards Regulation E Privacy Guidance Elder Abuse 16

17 Unfair, Deceptive or Abusive $309 Million Fine Against Chase Bank by CFPB Credit Card Add-On Products Third-Party Product (Credit Monitoring) Chase charged fees even if a consumer s identity could not be verified Since identity was not verified, the thirdparty was not providing any service Vendor Management Policy; UDAAP Policy $20 Million fine to Civil Penalty Fund 17

18 The CFPB s Radar (i.e. Your Radar) Private Student Loans July 2013 Snapshot of Complaints October 2013 Annual Report Overdraft Protection Opt-In for Everything? June 2013 Study of Overdraft Programs Payday Loans April 2013 White Paper on Payday Loans 18

19 The CFPB s Radar (i.e. Your Radar) Prepaid Cards ANPR in May 2012 CFPB to Extend Reg E Protections to General Purpose Reloadable (GPR) Cards Checking Account Disclosures Pew Trust Reports April 2011; October 2012; May 2013 Tabular Format (i.e. Schumer Box)? 19

20 The CFPB s Radar (i.e. Your Radar) Pew Trust Recommendations 20

21 The CFPB s Radar (i.e. Your Radar) Trends in Disclosures Designed through consumer testing Limited ability to change or amend forms Tabular Format Example: Credit Cards Next: TILA/RESPA Integrated Disclosures Next: Checking Accounts Next: Home Equity Lines of Credit (HELOCs) Costly and Timely Process 21

22 The CFPB s Radar (i.e. Your Radar) Credit Cards Add-On Products Review of Credit CARD Act October 2013 Report Vendor Relationships Regulators look past the third-party CU is responsible for oversight HELOCs 22

23 Mortgage Rule Implementation Review your Process What Worked? What Didn t Work? Review your Teamwork Lenders Compliance Vendors Management Determine Ways to Improve for the Next Time 23

24 TILA-RESPA Integrated Disclosures CFPB Save the Date Boston Wednesday, November 20 Know Before You Owe Implementation Tips for TILA/RESPA Learn from current implementation Review the finalized model forms Adjust existing procedures KEY: Provide internal training 24

25 CFPB Mortgage Servicing Guidance Effective Date January 10, 2014 Same Exemption Levels Apply But, CFPB did not mention exemptions Successors in Interest 12 CFR (b)(vi) (vi) Upon notification of the death of a borrower, promptly identify and facilitate communication with the successor in interest of the deceased borrower with respect to the property secured by the deceased borrower's mortgage loan. 25

26 CFPB Mortgage Servicing Guidance Examples of Practices: Promptly provide a list of documents or other evidence to establish the death of the borrower and the legal interest of successor Provide servicer with any documentation the servicer requires for the successor in interest to continue making payments, be evaluated for an assumption and loss mitigation options. Provide employees with information and training on servicer s obligations after a borrower s death. 26

27 CFPB Mortgage Servicing Guidance Early Intervention Rule 12 CFR Documentation is Key In addition to outbound calls, the following would establish live contact Ongoing contact on loss mitigation options Discussing loss mitigation options with the borrower during a borrower-initiated contact Adding brief script to live-person collection calls to inform member of loss mitigation options 27

28 CFPB Mortgage Servicing Guidance Interim Final Rule Bankruptcy Filing Exemptions apply once a petition is filed Notices and Communications to Delinquent Borrowers (Early Intervention Rule) 12 CFR Periodic Statement for Mortgages 12 CFR Credit unions should not send these notices as they could violate the bankruptcy automatic stay. 28

29 CFPB Mortgage Servicing Guidance CFPB Bulletin Fair Debt Collection Practices Act (FDCPA) Note: CUs are generally not considered debt collectors under the FDCPA as they are collecting their own debt under their own names. Under FDCPA, consumer can provide a cease communication letter to the debt collector. Which mortgage servicing notices can still be sent and which ones should not be sent? 29

30 CFPB Mortgage Servicing Guidance CFPB Bulletin Fair Debt Collection Practices Act (FDCPA) Still send even if cease communication : Error Resolution Notice Responses Information Request Responses Force-Placed Insurance Notices Notices Related to Loss Mitigation Initial Interest Rate Adjustment Notice (ARMs) Periodic Statement for Mortgages 30

31 CFPB Mortgage Servicing Guidance CFPB Bulletin Fair Debt Collection Practices Act (FDCPA) Exemption if cease communication : Notice or Communication to Delinquent Borrowers (Early Intervention Rule) Interest Rate Adjustment Notices (ARMs) Exemption applies to debt collectors under the Fair Debt Collection Practices Act What about non debt collectors? 31

32 Homeownership Counseling Disclosure Underlying Requirement: 12 CFR (RESPA) Applicability: Federally-related mortgage loans as well as home-equity lines of credit (HELOCs) Timing: Within three business days of receiving an application, must provide a written list of homeownership counseling organizations in the applicant s location Timeliness of List: The list must have been obtained no earlier than 30 days from when it is provided to the applicant (i.e., lists must be verified every 30 days) 32

33 Homeownership Counseling Disclosure Two Compliance Methods for Providing the List: 1. Using a tool developed and maintained by the CFPB on its website; 2. Using data made available by the CFPB or HUD, provided that the data is used in accordance with instructions provided with the data. CFPB Interpretive Rule Effective 01/10/2014 Provides instructions for using the data to create your own lists for consumers 33

34 Homeownership Counseling Disclosure Using the Tool on the CFPB s Website Type in applicant s zip code 10 results of HUD-approved counselors Option to Print or Save as PDF Remember lists must be refreshed at least every 30 days in order to ensure accurate disclosures 34

35 Homeownership Counseling Disclosure The Bureau believes that allowing lenders to obtain the list up to 30 days prior to providing it to the loan applicant strikes an appropriate balance between ensuring the information received by consumers is useful, and avoiding unnecessary burdens on lenders. The Bureau notes a lender may be able to keep counselor lists generated based on certain data inputs [i.e. Zip Code] on file, and provide those stored lists to applicants as appropriate for up to 30 days, in order to avoid generating a new list for each applicant. 35

36 Homeownership Counseling Disclosure 36

37 Homeownership Counseling Disclosure 37

38 Homeownership Counseling Disclosure 38

39 Other CFPB Issues Cordray defends QM No extensions from the CFPB Fair Lending Is QM-only discriminatory? Interagency Statement Legitimate business needs Compliance = Good Faith Efforts?? 39

40 NCUA Final Rule on Liquidity New Requirement 12 CFR Applicability: All Federally-Insured CUs (FICU) Effective Date: March 31, 2014 Three Asset Categories 1. FICUs with assets of less than $50 million 2. FICUs with assets more than $50 million but less than $250 million; and 3. FICUs with assets of more than $250 million 40

41 NCUA Final Rule on Liquidity What if you are close to moving up a threshold? Move up when FICUs assets are above the threshold on two consecutive Call Reports Final rule indicates that credit unions will have 120 days from the date of the second Call Report to comply with the increased requirements Tip: If you are close now (i.e. $47 million or $245 million), comply with the higher asset tier to prevent having to comply twice 41

42 NCUA Final Rule on Liquidity FICUs Under $50 Million Must maintain a basic written liquidity policy Elements of basic policy outlined in LCU 13-CU-10 FICUs Between $50 Million and $250 Million Must have a written Contingency Funding Plan Section (d) outlines minimum components FICUs With $250 Million or More Must have a written Contingency Funding Plan Access to contingent federal liquidity source 42

43 NCUA Final Rule on Liquidity FICUs With $250 Million or More Access to contingent federal liquidity source Establish and document access to at least one Must conduct advance planning and periodic testing first test required by Dec. 31, 2014 Three Contingent Federal Liquidity Sources 1. Regular Membership in Central Liquidity Facility (CLF); 2. Membership in CLF through an Agent; or 3. Borrowing access at the Federal Reserve Discount Window 43

44 Frequently Asked Questions Where are the new regulations located? 12 CFR Does the basic written policy need to be Board-approved? Yes, the regulation requires Board-approval. Does our written policy and Contingent Funding Plan need to be a separate policy? No. Your policies may be incorporated into your existing policies (e.g., ALM or business continuity policy). Do the Federal Home Loan Banks qualify as a contingent federal liquidity source? No, but FHLBs can be part of FICUs overall plan. 44

45 Frequently Asked Questions Can a credit union establish access with both the Central Liquidity Facility and the Discount Window? Yes. For FICUs with assets of $250 million or more, do we need to have tested the federal liquidity source prior to the March 31, 2014 compliance date? No. Credit unions that by March 31, 2014 have submitted either a completed application for access to the CLF or the necessary lending agreements and corporate resolutions to obtain credit from the Discount Window will be in compliance with the rule. 45

46 Frequently Asked Questions For FICUs with assets of $250 million or more, when do we need to complete the advance planning and test of contingent funding sources? The testing must be completed by December 31, Does the regulation include a periodic testing requirement? If so, how frequently must we test? Yes. FICUs with assets of $50 million or more must include the testing frequency in their Contingency Funding Plan. While no timeframe is provided, FICUs should perform testing at least annually. NCUA s LCU indicates that FICUs with assets of $250 million or more should test their federal contingency liquidity sources at least annually. 46

47 Key Takeaways CFPB Moving Past Dodd-Frank Mandates UDAAP is on the CFPB s Mind Review marketing and disclosures Member Complaints Identify trends and adjust procedures New disclosure requirements coming NCUA is not sitting idle Complexity of new regulations 47

48 Thank You! Questions? Steve Van Beek, Esq. Howard & Howard Attorneys PLLC 450 West Fourth Street Royal Oak, MI

49 Creativity. Results. Practicality. Solutions. Words that define not only successful businesses, but also the law firm that represents them. Howard & Howard is the law firm businesses use because our vision of success isn t lavishly decorated offices. The attorneys at Howard & Howard use a different measure. 49