Regulatory Compliance Update NAFCUs Regulatory Compliance Update - - PowerPoint PPT Presentation

Regulatory Compliance Update

NAFCU’s Regulatory Compliance Update Webcast Wednesday, November 18, 2015 Presented By:

Brandy Bruyere, NCCO, NAFCU Director of Regulatory Compliance Eliott C. Ponte, NCCO, NAFCU Regulatory Compliance Counsel Victoria Daka, NCCO, NAFCU Regulatory Compliance Counsel Elizabeth M. Young LaBerge, NAFCU Regulatory Compliance Counsel

Agenda

Other Regulators Update NCUA Update

• Recent Final Regulations
• Proposed Rules
• Other Issues and Guidance
• NCUA Letters

CFPB Update

• Recent Final Regulations
• Recently Proposed Rules
• Ongoing Initiatives and Possible Future Rulemakings

Regulatory Compliance Update

Recent Final Regulations and Guidance

DoD: Military Lending Act FCC: Telephone Consumer Protection Act NACHA: Same Day Automated Clearing House

Other Federal Regulators

• Compliance Dates
• Rule went into effect on October 1, 2015.
• Compliance required by October 3, 2016.
• Credit card are exempt until October 3, 2017.*
• More expansive definition of “Consumer Credit.”
• Previously, the DoD definition of “consumer credit” was defined to cover three

products:

• 1. closed-end payday loans for no more than $2,000 and with a term of 91

days or fewer;

• 2. closed-end auto title loans with a term of 181 days or fewer; and
• 3. closed-end tax refund anticipation loans.
• Under the new definition, “consumer credit” is defined as credit offered or extended

to a borrower for personal, family, or household purposes, and is subject to a finance charge, or payable by a written agreement in more than four installments. 32 C.F.R § 232.3(f)(1).

• Certain types of credit are excluded
• Residential mortgages.
• Auto loans that are secured by the auto being purchased.
• Personal property that is secured by the personal property being purchased.

Military Lending Act (MLA)

• Identification of Covered Borrower
• Covered Borrower is defined as “a consumer who, at the time the consumer

becomes obligated on a consumer credit transaction or establishes an account for consumer credit,” and is a member of the armed forces who is on active duty, or active guard and reserve duty.

• The rule also includes any of their dependents, as defined in 10 U.S.C. §

1072(2): spouse, unremaried widow, child, etc.

• “A creditor is permitted to apply its own method to assess whether a

consumer is a covered borrower.”

• Safe Harbor
• Until October 3, 2016, credit unions can continue to use a covered

borrower identification statement.

• After October 3, 2016, a credit union seeking a safe harbor must conduct

the covered borrower check through the MLA Database, a consumer report from a nationwide consumer reporting agency, or both.

• One-time Determinations permitted with exceptions. See 32

C.F.R 232.5(b)(3)

Military Lending Act (MLA)

• Military Annual Percentage Rate (MAPR)
• The MLA limits the amount of interest that a creditor may

charge on “consumer credit,” establishing a maximum MAPR of 36 percent.

• MAPR calculation is APR plus other charges.
• Includes: debt cancellation contracts, debt suspension

agreements, ancillary products, etc.

• Excluded from the MAPR:
• A fee that is bona fide and reasonable, and/or
• An application fee charged when making a “short-

term, small amount loan,” also known as a PAL loan

• However, the application fee may only be excluded
• nce in a rolling 12-month period.

Military Lending Act (MLA)

• Disclosures
• A statement of the applicable MAPR,
• Any disclosure required by Regulation Z, and
• A clear description of the payment obligation of the covered borrower,

including a payment schedule or account-opening disclosure.

• Method of Delivery
• Mandatory disclosures required to be delivered in both written and oral

form.

• Oral delivery may be provided either in person or by providing a toll-free

telephone number.

• For more information:
• Final Regulation Summary 15-EF-11
• NAFCU Compliance Blogs
• November 21, 2014
• July 24, 2015
• September 4, 2015
• NAFCU’s September 2015 Compliance Monitor

Military Lending Act (MLA)

Polling Question

Does your credit union or any of its vendors use an autodialer or robocaller?

• A. No.
• B. Yes.
• C. I don’t know.

Telephone Consumer Protection Act

• Telephone Consumer Protection Act—1991
• Regulation – 47 C.F.R. § 64.1200
• Limits calls and requires different types of

consent based on type of call and applies differently depending on a call’s purpose

• Telemarketing vs other commercial purpose vs

informational

• Landline versus cellphone
• Automated dialing systems and robocalls

TCPA—July 2015 Order

• On July 10, 2015 the FCC issued an order

clarifying nearly 20 requests for “clarification”

• Expands the term “autodialer”
• Addresses revocation of consent
• One-time safe harbor for calls to wireless

numbers ported to another consumer

• Limited exemption for certain free to end user

calls for purposes like fraud, data breaches

TCPA—Autodialers

• Autodialers include systems with the “potential

ability” to serve as an autodialer, even where those functions are not activated on the system.

• Unfortunately, the FCC declined to adopt a clear

standard, reasoning that the level of “human intervention” that is necessary for particular equipment to avoid functioning as an autodialer

• This is a problem as auto dialing capability varies

widely across products, so instead whether a particular system is an “autodialer” is a “case-by- case determination.”

TCPA—Consent, Transferred Numbers

• The FCC rejected requests to allow callers to designate

particular methods for consumers to revoke consent.

• Instead, consumers can revoke orally or in writing by “any reasonable

method,” including by phone or in person at a business’s location.

• The FCC rejected arguments that oral revocation presents recordkeeping

burdens, and instead “expect[s] that responsible callers…will maintain proper business records tracking consent.”

• Wireless numbers reassigned to another consumer—one

petitioner asked for a one year grace period

• The Order allows callers to avoid liability only for the

first call to a wireless number after reassignment

• After the first call “without reaching the original subscriber,” the credit

union is reasonably “considered to have constructive knowledge” that the number was reassigned

TCPA—Limited Exemption

• Four kinds of calls/texts will be exempt if the message is free to

the consumer:

• relates to fraud or identity theft,
• possible data breaches,
• conveys information regarding preventing or remedying the harm of a data

breach, or

• relates to pending money transfers.
• Calls must meet three other requirements:
• Can only be made to the number provided by the member.
• State the credit union’s name and contact information.
• Strictly limited to the purpose of the call/text.
• The credit union also cannot initiate more than 3 messages per

event over a 3 day period, & must offer “an easy means to opt

• ut” of the messages, honoring opt-outs immediately.

• NACHA finalized a change to its operating guidelines which will enable same-day

processing for ACH payments under $25,000.

• Receiving Financial Institutions must make funds from same-day ACH credits

available by 5:00 PM local time.

• NACHA recommends that the ACH Operator Implement two daily settlement

windows for same-day transactions:

• A morning submission deadline at 10:30 AM ET, with settlement occurring at

1:00 PM ET.

• An afternoon submission deadline at 3:00 PM ET, with settlement occurring at

5:00 PM ET.

• Each originating financial institution must pay the receiving financial institution a

Same Day Entry Fee of 5.2 cents for each same-day transaction.

Same Day ACH

3 Phase Implementation Phase 1 September 23, 2016 Receipt of credit entries as same-day entries. Phase 2 September 15, 2017 Receipt of debit entries as same-day entries. Phase 3 March 16, 2018 Requirement to provide funds availability at 5:00 PM local time

Same Day ACH

NCUA Recent Final Regulations

RBC2 Flood Insurance Field of Membership Associational Common Bond Fixed Assets Definition of Small Entity

NCUA Update

RBC2

• October 15, 2015- NCUA finalized its risk-based capital rule

which, among other things, establishes a new method for computing NCUA’s risk-based requirement, including a risk- based capital (RBC) ratio measure for “complex” credit unions.

• The rule sets forth ten categories of risk-weights for various

types of assets based on the risk associated with particular

• investments. For example, cash is assigned a zero percent risk

weight while riskier assets such as mortgage servicing and CUSO activities have substantially higher risk-weights.

• Final rule defines ‘‘complex’’ credit union using a single asset

size threshold of $100 million.

• Effective Date: January 1, 2019.

RBC2

The final rule makes the following key changes to the agency’s current capital requirements:

–Replaces Part 702’s risk-based net worth (RBNW) ratio with a new risk-based capital (RBC) ratio for federally insured natural person credit unions with over $100 million in assets; –Changes the definition of “complex credit union,” for the purposes of capital requirements, to include credit unions greater than $100 million in assets; –Establishes a risk-based capital ratio of 10 percent for well-capitalized credit unions; –Establishes a risk-based capital ratio of 8 percent for adequately-capitalized credit unions; –Revises existing risk weights to reflect recent changes made by other banking regulators under the Basel System; –Requires higher minimum levels of capital for credit unions with concentrations of assets in real estate loans, commercial loans or non-current loans; and –Sets forth how NCUA, through its supervisory authority, can address a credit union that does not hold capital that is commensurate with its risk.

Flood Insurance

• Effective Date for Escrow Requirements is January 1, 2016.
• NCUA and four other agencies finalized a rule implementing the mandatory escrow

and detached structure requirements in last year’s Homeowner Flood Insurance Affordability Act (HFIAA).

• HFIAA imposed mandatory escrow of flood insurance premiums and fees for loans

secured by residential improved real estate or mobile homes that are made, increased, extended or renewed on or after January 1, 2016, unless the loan qualifies for a statutory or small lender exemption.

• Small lender exemption – assets under $1 billion plus additional two-part

test:

• As of July 6, 2012, the lender:
• Was not required to escrow premiums and fees for the entire term
• f any secured loan by Federal or State law; and
• Did not have a policy of consistently and uniformly requiring the

escrow of premiums and fees for any secured loan.

• The final rule exempts detached structures from a requirement to be insured
• Also, the final rule implements the provisions of Biggert-Waters related to the force

placement of flood insurance.

Field of Membership

• Strengthening the federal charter and pushing for field-of-membership

(FOM) changes have been at the top of NAFCU’s list to effect positive change for credit unions.

• NCUA established a FOM working group in January, 2015, and all

three Board Members have recognized that FOM rules for federal credit unions need to be modernized.

• NAFCU convened a taskforce of over 50 of its members of various

asset sizes, charter types, and geographical locations to examine issues related to NCUA’s existing FOM procedures and regulations.

• A letter detailing the recommendations of NAFCU’s taskforce was

presented to NCUA on May 13, 2015, with the expectation that these suggestions would affect progressive procedural and regulatory FOM relief.

• Final Rule Effective July 6, 2015.
• All associations must first pass a threshold test - to determine it was not formed for the

primary purpose of expanding FCU membership.

• Totality of the circumstances test now has 8 factors – new factor related to corporate

separateness of the association and FCU.

• 12 categories of associations will automatically qualify to be added to the FOM
• Quality Assurance Review
• Office of Consumer Protection’s ongoing process of reviewing associational

groups on a case-by-case basis to determine compliance with current associational common bonds requirements.

• If NCUA finds these associations no longer meet the totality of the

circumstances test, it will remove them from the credit union’s field of membership.

• To date no credit unions have been divested of an associational group as a

result of these reviews.

Associational Common Bond

Fixed Assets

• Became effective October 2, 2015.
• Eliminates the 5% cap on the ownership of fixed assets.
• Establishes a single six year timeframe for partial occupancy of

any premises (regardless of whether it is improved or unimproved property).

• Allows credit unions to apply at any time for a waiver from the

partial occupancy rules within the six year timeframe.

• NCUA

staff is considering amending the

• ccupancy

requirements to count leasing and mixed-use buildings to qualify for full occupancy.

• A new proposal could be issued as early as next year.

Definition of “Small Entity”

• In September 2015, NCUA increased the small

entity asset threshold from $50 million or less in assets to $100 million or less in assets.

• The threshold is used to identify which credit

unions qualify as small entities for purposes of the Regulatory Flexibility Act (RFA).

• The proposed rule retains the three-year review

cycle to consider increases in the asset threshold.

• Effective on November 23, 2015

NCUA Update Proposed Rules

Member Business Lending Share Insurance for IOLTA Accounts Bank Notes

Member Business Lending

• June 18, 2015- NCUA Board proposed to eliminate the prescriptive MBL

waiver process, and instead allow each credit union to independently set its commercial underwriting standards under a board-approved policy.

• This proposal would, among other things, remove or modify the following

prescriptive limits and definitions:

• The requirement for a personal guarantee
• The 80 percent limit on Loan-to-V

alue ratios

• The limit on unsecured MBLs
• The requirement that staff have 2 years of direct experience
• Detailed limits on construction and development loans
• The restrictive definition of “associated borrower”
• The 15 percent of net worth limit on loans to one borrower, which will now increase to

25 percent if the additional 10 percent is supported by readily marketable collateral

• Comments were due to NCUA by August 31, 2015. Final Rule

expected in December 2015.

Share Insurance Coverage for IOLTA Accounts

• Congress passed the Credit Union Share Insurance Parity Act on December 18, 2014.
• Statute directs NCUA to provide pass-through share insurance for interest on

lawyers trust accounts (IOLTAs) “or other similar escrow accounts.”

• On December 19, 2014, Chairman Matz publically stated that IOLTAs would receive

immediate pass-through coverage. However, “other similar” accounts required clarification.

• On April 30, 2015, the NCUA Board proposed a rule seeking to define “other similar

escrow accounts” and addressing recordkeeping requirements.

• “Other similar escrow accounts”—a “licensed professional” or other person

holding funds in a “fiduciary capacity” and “for the benefit of a client.” Examples:

• Realtor escrow accounts
• Prepaid funeral accounts
• NOT prepaid accounts
• NAFCU submitted comments to NCUA on July 13, 2015.

Bank Notes

• Proposed on October 15, 2015. The comment

period closes on November 23, 2015.

• This proposed rule would amend NCUA regulations

12 C.F.R. 703.14(f)(5).

• Currently, federal credit unions may only invest in

bank notes with an original weighted average maturity of less than 5 years.

• The proposal would allow credit unions to invest in

bank notes with a remaining weighted average maturity of less than 5 years.

NCUA Update Other Issues and Guidance

Cybersecurity Consumer Complaint Database CUSO Registry

Polling Question

Is your credit union using, or planning to use, FFIEC’s voluntary Cybersecurity Assessment Tool?

• A. No.
• B. Yes.
• C. I don’t know.

• FFIEC member agencies (including NCUA) released a voluntary Cybersecurity

Assessment Tool (Assessment), which can be used by individual credit unions to identify their individual risks and assess their cybersecurity preparedness.

• A credit union can use the Assessment when considering changes to its business

strategy, such as expanding operations, offering new products and services, or entering into new third-party relationships.

• The Assessment has two parts: Inherent Risk Profile and Cybersecurity Maturity.
• Part one – the Inherent Risk Profile – identifies a credit union’s inherent risk

relevant to cyber risks by the following activities: (1) Technologies and Connection Types; (2) Delivery Channels; (3) Online/Mobile Products and Technology Services; (4) Organizational Characteristics; (5) External Threats

• Part two – the Cybersecurity Maturity – determines a credit union’s current state
• f cybersecurity preparedness represented by maturity levels across five

domains: (1) Cyber Risk Management and Oversight; (2) Threat Intelligence and Collaboration; (3) Cybersecurity Controls; (4) External Dependency Management; (5) Cyber Incident Management and Resilience.

Cybersecurity

Cybersecurity

Cybersecurity Resources

• FFIEC: Cybersecurity Assessment Tool

– NCUA: How the Cybersecurity Assessment Tool Works – NAFCU Final Regulation: Cybersecurity Self-Assessment Tool – NAFCU Compliance Monitor: FFIEC Releases Cybersecurity Self-Assessment Tool

• FFIEC: Information Technology Examination Handbook, “Business Continuity

Planning,” Appendix J – NAFCU Cyber Café: Strengthening Cyber Resilience in Business Continuity Plans

• FFIEC: Information Technology Examination Handbook, “Management”
• FFIEC: Information Technology Examination Handbook, “Information Security”
• FFIEC: Joint Statement on Destructive Malware
• FFIEC: Joint Statement on Cyber Attacks Compromising Credentials
• FFIEC: Joint Statement on Cybersecurity Threat and Vulnerability Monitoring and

Sharing

• FFIEC: Joint Statement on Distributed Denial-of-Service (DDoS) Cyber-Attacks,

Risk Mitigation, and Additional Resources

Consumer Complaint Database

NCUA:

• To assist both consumers and FCU’s in the consumer complaint process, CAC is

making improvements to its intake process in two distinct phases.

• In the first phase, the FCU is given 60 days to attempt to resolve the issue.
• In the second phase, CAC formally investigates the matter.

CFPB: Consumer Complaint Database Narratives

• The CFPB has expanded its current complaint database to include publishing

consumer complaint narratives.

• The narratives will only be published regarding credit unions under the

CFPB’s authority, i.e., those with more than $10 billion in assets.

• All narratives will be scrubbed of personally identifiable information and

consumers must affirmatively opt-in to have their complaint published.

• After the initial round of consumer narratives were published in June, the CFPB is

inviting comments on how to improve the database.

CUSO Registry

• In November 2013, NCUA finalized a rule that

expands its supervision of credit union service

• rganizations (CUSOs). 12 CFR §712.3.
• Requires annual reporting to NCUA and appropriate state

regulators basic information like name, services offered, TIN, address, etc.

• Included requirement that CUSOs offering complex or high-risk

services report more detailed information

• NCUA anticipates the registry will go live in January

2016 with initial registration ongoing through March.

• NCUA will review data to ensure it is valid and not

duplicative

• The agency expects 1,300 CUSOs will register.

NCUA Update NCUA Letters

Legal Opinion Letters Letters to Credit Unions Letters to Federal Credit Unions

2015 Legal Opinion Letters

15-0818 Legal Analysis of Overhead Transfer Rate 15-0813 Loan Participations in Indirect Loans – Originating Lenders 14-0902 Monthly Membership Fees

2015 Letters to Credit Unions

15-CU-01 Supervisory Priorities for 2015 15-CU-02 Private Student Loans with Graduated Repayment Term s at Loan Origination 15-CU-03 Taxi Medallion Lending Questions and Answers 15-CU-04 Improving the Process for Consumer Complaints​ 15-CU-05 Standards for Assessing Diversity Policies and Practices​ 15-CU-06 Fixed Assets Limit Removed

2015 Letters to Federal Credit Unions

15-FCU-01 Operating Fee Schedule for 2015 15-FCU-02 Permissible Interest Rate Extended 15-FCU-03 How to Add Associations to FOM

Final Regulations

HMDA Small Creditor Exemption

• Reg. Z Threshold Adjustments for 2016

Points and Fees Cure Credit Card Agreement Reporting TRID

CFPB Update

• Last month, the CFPB issued a 790-page final rule

amending Regulation C to implement amendments to the Home Mortgage Disclosure Act (HMDA) made by the Dodd-Frank Act.

• While Dodd-Frank required some changes, the CFPB

went above and beyond their statutory requirements. In particular, they added a number of HMDA reporting requirements that the Bureau “believes may be necessary to carry out the purposes of HMDA.”

Home Mortgage Disclosure Act (HMDA)

• The final rule made several substantive changes to Regulation C,

including:

• Expands the scope of transactions subject to Regulation C—all

closed-end loans, HELOCs, and reverse mortgages.

• Changes the institutional coverage test
• Expands the data collection points (age, credit score, debt-to-income

ratio, reasons for denial, application channel, automated underwriting system results, information about the loan features such as pricing, etc.).

• Requires quarterly reporting for certain institutions that report large

volumes of transactions (60,000+ covered loans).

HMDA/Regulation C

• The current rule includes 17 data points for collection.
• The Dodd-Frank Act added 10 new data points, but permitted the

CFPB to include data points “necessary to carry out the purposes of HMDA” so the final rule includes 38 data points such as:

• A universal loan identifier.
• Except for purchased covered loans:
• the applicant/borrower’s monthly debt-to-income ratio;
• the credit score(s) relied on and the name/version of the scoring model

used; and

• the name of the underwriting system used to evaluate the application
• The total amount of lender credits.
• Whether contractual terms included features such as a balloon payment,

interest-only payments, negative amortization.

• These changes will be challenging to implement operationally, especially

for HELOCs since many credit unions use consumer loan platforms instead of mortgage loan platforms for HELOC products.

HMDA/Regulation C

• Tiered implementation:
• New institutional coverage test: January 1, 2017.
• New transactional coverage test and data point collection:

January 1, 2018.

• Institutions begin collecting new data points.
• New data point reporting: January 1, 2019.
• Institutions begin reporting new data points to the CFPB.
• Quarterly submission for large-volume filers: January 1, 2020.

HMDA/Regulation C

Small Creditor Exemption

• Currently, “small creditors” are defined as lenders with $2.06

billion or less in assets and that originate less than 500 first mortgages per year.

• Three mortgage rules have exemptions or other carve-outs for

small creditors:

– The rule pertaining to high-cost mortgages has a prohibition against balloon payment features on some of these mortgages but contains an exemption for small creditors; – The ability-to-repay/qualified mortgage (ATR/QM) rule allows certain small creditors to make portfolio and balloon payment QMs; and – The higher-priced mortgage loan (HPML) escrow account rule, which has an exemption for small creditors.

Small Creditor Exemption

• The CFPB finalized amendments and revisions to Regulation Z. The

Bureau’s final rule amends the definition of “small creditor” by: – Raising the origination limit from 500 first-lien mortgage loans to 2,000; – Excluding loans held in portfolio by the creditor and its affiliates; and – Including assets of a credit union’s mortgage-originating CUSO into the $2.06 billion threshold

• The final rule changes the definition of “rural” and “underserved” areas to

include census blocks that are not in urban areas.

• These changes would also impact the other two exemptions because they

rely on the same asset size and total mortgage origination thresholds to determine which credit unions are “small creditors” for the purposes of the ATR/QM rule.

Regulation Z Threshold Adjustments for 2016

• The Dodd-Frank Act and the CARD Act require the CFPB to

adjust a variety of thresholds annually for inflation.

• Dollar Threshold for Exempt Consumer Credit Transactions:
• Student loans, real property, and personal property used as

the principal dwelling of a consumer are never exempt.

• The 2015 exemption threshold under Regulation Z is $54,600.
• Note, this also impacts Regulation M (Consumer Leases)
• Updated 2016 threshold expected soon.

• HOEPA Threshold and Fee Trigger Adjustments
• Determines which mortgages are “high-cost”
• Loans $20,350 or above are high-cost if points & fees

exceed 5% of the total loan amount

• Loans under $20,350 are also high-cost if the points & fees

exceed the lesser of 8% of the total loan amount OR $1,017 small creditors to make certain portfolio and balloon payment

• CARD Act Safe Harbor Late Fee Adjustment
• Under the CARD Act, credit card fees must be “reasonable”
• Regulation Z contains a safe harbor for penalty fees
• The safe harbor for first late fee is $27 and is $37for late

fees for subsequent late payments in the same 6 month period

Regulation Z Threshold Adjustments for 2016

• ATR/QM Mortgage Threshold Adjustments
• Loans $101,749 or above, points & fees ≤ 3% of the loan

total

• Loans between $61,050 and $101,749, points & fees ≤ $3,052
• Loans between $20,350 and $61,050, points and fees ≤ 5%
• f the loan total
• Loans between $12,719 and $20,350, points and fees ≤ $1,017
• Loans under $12,719, points and fees ≤ 8% of the loan total

Regulation Z Threshold Adjustments for 2016

Points and Fees “Cure”

• Final rule allows credit unions to refund excess points

and fees to a mortgage borrower if it discovers that the borrower has paid fees in excess of the 3 percent QM threshold.

• To exercise this ability to “cure” points and fees, a

credit union would have to:

• Pay the refund within 210 days of consummation,

and

• Follow certain policies and procedures for post

consummation review and refunding.

Temporary Suspension of Credit Card Agreement Reporting

• The CFPB issued a final rule temporarily suspending card

issuers’ obligations to submit credit card agreements to the Bureau for a period of one year.

• Credit unions otherwise required to submit their credit card

agreements would not have to make any submissions until April 30th, 2016.

• Noting the current process is “cumbersome” - suspension is

intended to provide the Bureau with time to create a new, streamlined system that is automatic and electronic.

TILA/RESPA Integrated Disclosures

• Final Rule amending Regulation Z (TILA) and

Regulation X (RESPA) to integrate mortgage loan disclosures.

• Effective Date: October 3, 2015.
• CFPB/NCUA responses to NAFCU’s request

for consideration of “good faith efforts.”

• NAFCU monitoring the post-implementation

phase for members’ issues and concerns.

CFPB Update Proposed Rules

CFPB Rule Making Agenda Mortgage Servicing Prepaid Accounts

CFPB Rulemaking Agenda

Mortgage Servicing

• Proposed on December 15, 2014, the CFPB issued a 500

page proposal that is a “grab bag” of amendments to the mortgage servicing rules. Comment period closed March 16,

• 2015. NAFCU has a Regulatory Alert that explains the proposed rule (15-

EA-01).

– Successors in interest. The proposal would expand consumer protections to surviving family members and other

• homeowners. All of Regulation Z’s and X’s mortgage servicing

requirements would apply to successors in interest once a servicer confirms the successor in interest’s identity and

• wnership interest in the property.

– Force-placed insurance. The proposal would amend the required disclosures for force-placing insurance when the borrower has insufficient, rather than expiring or expired, hazard insurance coverage on the property.

Prepaid Accounts

• The CFPB issued a proposal in December 2014 that

would establish new federal consumer protections for the prepaid products.

• In general, the CFPB intends to mandate:
• New disclosures
• Error resolution procedures
• Consumer liability limits for unauthorized transactions
• Fee limits; and
• Additional requirements for accounts with overdraft or credit

features.

• The CFPB is expected to finalize in early 2016.

Prepaid Accounts

• Would require issuers to post prepaid account agreements
• n issuer website and submit such agreements to the

CFPB for posting on the Bureau’s maintained website.

• This is related to temporarily suspended requirement to submit

credit card agreements.

• While it would not require prepaid accounts to have share

insurance coverage, credit unions would have to disclose when a prepaid account is not set up to be eligible for NCUSIF pass-through share insurance.

• Would treat overdraft services offered on prepaid

accounts for fee as “open-end credit” under Reg. Z.

CFPB Update Ongoing Initiatives and Possible Rulemakings

Elder Financial Abuse RESPA Bulletin Overdraft Payday Lending Arbitration Student Loan Servicing FCRA, Checking Accounts, & Credit Report Accuracy

Elder Financial Abuse

• The CFPB is developing voluntary advisory guidance

for financial institutions to assist in identifying and preventing elder financial abuse.

• NAFCU is working with the Bureau to identify best

practices for financial institutions to protect their elder account holders by preventing, recognizing, and responding to suspected elder financial exploitation.

RESPA Bulletin

• On October 8, 2015, the CFPB issued Compliance Bulletin 2015-05 regarding

RESPA Compliance and Marketing Services Agreements.

• The Bulletin stated that many MSAs are designed to evade RESPA
• prohibitions. Facts indicating that an MSA is a disguise of prohibited

compensation for referrals included:

• payments being made, though contracted-for services were never

provided.

• marketing services being directed at other settlement service providers

rather than consumers, to establish more MSAs.

• failing to advise consumers of relationships or their opportunity to shop

service providers.

• direct correlations between fees paid under the MSA and the number of

referrals received.

Overdraft

• The CFPB’s Spring 2015 Rulemaking Agenda indicated the Bureau is

continuing to monitor overdraft services and study whether rulemaking is needed.

• NAFCU has learned from the CFPB that the Bureau will not issue a proposal

in 2015.

• Director Cordray has indicated to NAFCU that the Bureau is ultimately

seeking consistency in how financial institutions calculate a consumer’s available funds.

• The CFPB will likely continue enforcement actions on overdraft violations

even before formal rulemaking.

• In April, the CFPB issued an enforcement action against Regions Bank of

$56.5 million for charging overdraft fees to consumers who had not

• pted-in for overdraft coverage.

Payday Lending

• On March 26, the CFPB released an outline of ideas under consideration for

regulating the payday lending space.

• The CFPB is considering developing rules based on whether the product is

short-term or long-term.

• Short-term: payday loans, deposit advance products and vehicle title

loans less than 45 days.

• Long-term: loans with an “all-in” annual percentage rate higher than 36%

and last longer than 45 days.

• CFPB proposed changes to NCUA’s Payday Alternative Loans (PAL loans)
• NCUA allows 3 PALs in 6 months and 30 day repayment. CFPB would

limit to 2 PALs in 6 months, and require 45 day repayment.

• CFPB may impose advanced notice requirements prior to accessing

consumer account for payment on a covered loan.

Polling Question

Does your credit union use arbitration as a method for resolving disputes?

• A. No.
• B. Yes.
• C. I don’t know.

Arbitration

• In October, the CFPB announced it is considering

rulemaking to ban the use of certain arbitration clauses in consumer contracts.

• A proposed rule would likely prohibit covered institutions from

contracting away a members right to engage in class arbitration.

– Generally, class arbitrations are allowed when the underlying agreement (1) requires arbitration to settle disputes arising out of the agreement, and (2) is silent with respect to class claims, consolidation,

• r joinder of claims.

– A proposed rule would likely require covered institutions to give consumers the option to file in court.

• The CFPB would not change the conduct of arbitrations.

Arbitration

• A proposed rule would also likely require covered institutions

to submit information on arbitration claims and awards to the CFPB.

– Significant reporting obligations for covered companies. – This would apply to class and non-class arbitration.

• The CFPB is considering publishing those filings and awards

to its website.

– The CFPB notes that it will take appropriate measures to comply with privacy considerations. – The CFPB believes this will create more transparency.

Student Loan Servicing

• CFPB held a public hearing on the student loan servicing market

and released a Request for Information (RIF) to solicit information related to student loan servicing practices that create repayment challenges for distressed borrowers.

• The CFPB sought information related to:

(1) student loan repayment, (2) the applicability of consumer protections from other consumer financial product markets, and (3) the impact of limited available data on student loan servicing.

Student Loan Servicing

• On September 29, 2015 the CFPB issued a report on the information they

gathered entitled Student Loan Servicing Analysis of Public Input and Recommendations for Reform.

• At the same time, it issued a Joint Statement on Principles on Student Loan

Servicing, with the U.S. Departments of Education and the Treasury.

• The Departments and the CFPB intend to write student loan servicing rules to

ensure:

• consistency among servicers.
• accurate and actionable information is provided to borrowers.
• accountability for fair, efficient and effective servicing.
• transparency throughout the industry, including the sharing of portfolio

data.

FCRA Issues: Checking Accounts, Credit Report Accuracy

• The CFPB held a forum this year on Access to

Checking Accounts.

– The CFPB expressed interested in how financial institutions implement checking account screening policies and how these policies/practices affect consumers.

• Director Cordray mentioned (1) the information being assessed by

banks and credit unions, (2) consumers access to these “special” reports, and (3) how they are being used by financial institutions.

• Recent CFPB enforcement activity includes accuracy

in reporting to credit bureaus and expectations FCRA policies and procedures on reporting address handling

• f information relating to deposit products like

checking accounts.

Questions?

Brandy Bruyere, NCCO, NAFCU Director of Regulatory Compliance, bbruyere@nafcu.org Eliott C. Ponte, NCCO, NAFCU Regulatory Compliance Counsel, eponte@nafcu.org Victoria Daka, NCCO, NAFCU Regulatory Compliance Counsel, vdaka@nafcu.org Elizabeth M. Young LaBerge, NAFCU Regulatory Compliance Counsel, elaberge@nafcu.org

Regulatory Compliance Update

NAFCU’s Regulatory Compliance Update Webcast Wednesday, November 18, 2015 Presented By:

Brandy Bruyere, NCCO, NAFCU Director of Regulatory Compliance Eliott C. Ponte, NCCO, NAFCU Regulatory Compliance Counsel Victoria Daka, NCCO, NAFCU Regulatory Compliance Counsel Elizabeth M. Young LaBerge, NAFCU Regulatory Compliance Counsel