CFPB Proposes Changes to TILA-RESPA Integrated Disclosures Rule

The Consumer Financial Protection Bureau has issued two proposed changes to the TILA-RESPA Integrated Disclosures Rule (Final Rule) that will be effective for applications received on or after August 1, 2015: an adjustment to the timing requirement for revised Loan Estimate disclosures when the consumer locks a rate or extends a rate lock after the initial Loan Estimate is provided, and an amendment to permit language related to new construction loans to be included on the Loan Estimate form. Comments must be received by the CFPB on or before November 10, 2014.

As originally adopted, the Final Rule requires creditors to disclose the locked interest rate dependent charges and loan terms by providing a revised Loan Estimate on the same business day that a rate is locked. The CFPB is now proposing to relax the timing requirement to state that creditors must provide a revised Loan Estimate no later than the next business day after the date the rate is locked, instead of the same date.

The changes in the disclosure requirement for interest rate locks comes in response to significant feedback from industry stakeholders on the provision since the Final Rule was published in 2013. Specifically, creditors have raised consumer protection and operational concerns. With the CFPB’s announcement, it appears that the Bureau has listened to those concerns and assessed the potential negative consequences for consumers.

In the preamble to the proposed rule, the CFPB states it “believes that, absent the proposed change, this requirement is likely to result in at least some creditors limiting consumers’ ability to lock their interest rates only to times early in a business day due to the implementation of costs of getting the disclosure to the consumer the same date if the consumer requested a rate lock sufficiently late during the business day or after hours.” The CFPB then states it “believes that consumers are unlikely to choose creditors based on the creditors’ policies regarding interest rate locks. Moreover, consumers would be unlikely to know whether their creditors will in fact allow interest rate locks at all times until the consumer actually attempts to lock the interest rate.”

Although the proposal is a welcome change from the same-business-day timing requirement of the Final Rule, the industry still may be concerned about having to issue a revised Loan Estimate on the next business day, and may still tighten interest rate lock practices if the proposed time period is adopted. The industry may well support the ability to issue a revised Loan Estimate to reflect a locked rate in the standard time frame for other changes, which is three business days after learning of the change.

The CFPB also is proposing to permit a change to the Loan Estimate form for loans on new construction. In cases of new construction when closing is expected to occur more than 60 days after the initial Loan Estimate is provided, the Final Rule permits a creditor to reserve the right to provide a revised Loan Estimate any time before 60 days prior to closing if the initial Loan Estimate includes a clear and conspicuous statement of such right. However, for most transactions the Loan Estimate is a standard form, and it may not be modified except as provided by the Final Rule, which does not list the inclusion of such a statement as one of the permitted revisions.

The proposal would correct this oversight and provide for the inclusion of such a statement in the initial Loan Estimate. In announcing the proposal, the CFPB stated that the proposal would “create a space on the Loan Estimate form where creditors could include language informing consumers that they may receive a revised Loan Estimate for a construction loan that is expected to take more than 60 days to settle.” The proposal does not actually include a model version of the Loan Estimate with a model statement. Instead, the proposal simply permits the inclusion of a statement among the information disclosed on page 3 of the Loan Estimate in the “Other Considerations” section. Industry members may well request that the CFPB provide a model form with a model statement.

Finally, the proposal amends the 2013 Mortgage Loan Originator Final Rule to provide for the placement of the NMLSR ID on the Loan Estimate and Closing Disclosure and makes other various non-substantive corrections and updates to the regulatory text and commentary in the Final Rule.

- Marc D. Patterson


CFPB Updates Mortgage Rules Readiness Guide To Cover TILA-RESPA Integrated Mortgage Disclosure Rule

The CFPB has released Version 3.0 of its “2014 CFPB Dodd-Frank Mortgage Rules Readiness Guide.” The Guide, originally issued in July 2013, now contains changes to the final rules issued through August 1, 2014. The updated Guide includes the TILA-RESPA Integrated Mortgage Disclosures Rule that takes effect in August 2015.

According to the CFPB, the Guide provides guidelines to “help financial institutions come into and maintain compliance with the new mortgage rules.” Designed to help institutions of all sizes, the Guide consists of a summary of the rules, a readiness questionnaire, frequently asked questions, and tools.

- Marc D. Patterson


CFPB Issues Final Rule on Gramm-Leach-Bliley Act Annual Privacy Notices

The Consumer Financial Protection Bureau has issued a final rule that amends Regulation P to allow financial institutions that meet certain requirements to deliver annual privacy notices to their customers using an alternative online delivery method. The rule will be effective immediately upon its publication in the Federal Register.

Under the Gramm-Leach-Bliley Act (GLBA), which Regulation P implements, financial institutions must provide initial and annual privacy notices that inform customers about the sharing of their nonpublic personal information (NPPI) with third parties.

Financial institutions have typically mailed these notices. Under the CFPB’s final rule, a financial institution that meets the requirements described below will be able to save on mailing costs by posting its annual privacy notice on its website. While offering potential benefits to banks and nonbanks, the CFPB’s final rule does not amend separate GLBA regulations that have been issued by the Securities and Exchange Commission, the Commodities Futures Trading Commission, or the Federal Trade Commission (FTC).

This means the CFPB’s final rule will not apply to an entity that is subject to the GLBA regulations of these other agencies. For example, auto dealers for whom the FTC has GLBA rulewriting authority would not be able to take advantage of the final rule. (The CFPB indicated in the final rule’s supplementary information that as mandated by the GLBA, it conferred with these other agencies concerning the alternative delivery method.)

Under the final rule, a financial institution can use the alternative online delivery method for its annual privacy notice if it:

  • Does not share the customer’s NPPI with nonaffiliated third parties in a manner that triggers GLBA opt-out rights.
  • Does not include in its annual privacy notice the notice and opt-out right regarding the sharing of certain customer information with affiliates as described in Section 603(d)(2)(A)(iii) of the Fair Credit Reporting Act (FCRA).
  • Shares certain customer information with an affiliate and has previously provided the customer with the notice and opt-out right described in FCRA Section 624 regarding the affiliate’s use of such information for marketing purposes (affiliate marketing notice), or the annual privacy notice is not the only notice used by the institution to provide the affiliate marketing notice.
  • Had no change in the information in its annual privacy notice since it provided the most recent notice (whether initial, annual, or revised) to the customer, other than to eliminate categories of information the institution discloses or categories of third parties to whom it discloses information.
  • Provides an annual notice that follows the Regulation P model form.
  • Provides a clear and conspicuous annual statement “on any account statement, coupon book, or a notice or disclosure [it is] required or expressly permitted to issue to the customer under any other provision of law.” This statement must inform the customer that the annual privacy notice is available on the financial institution’s website, will be mailed at the customer’s request, and has not changed, and include a specific Web address that links directly to the page where the privacy notice is posted and a telephone number for the customer to request that the notice be mailed. The notice must be mailed within 10 days of receiving a telephone request. (The rule includes an example of a statement that satisfies these requirements.)
  • Posts its annual privacy notice continuously and in a clear and conspicuous manner on a page of its website where the notice is the only content and does not require the customer to provide a login name, password, or other information or agree to any conditions to access the page.

A financial institution that cannot satisfy these conditions must continue to send its annual privacy notices using the currently permitted delivery methods, either mailing written notices or sending notices electronically to customers who have agreed to receive electronic disclosures.

-Alan S. Kaplinsky, Barbara S. Mishkin


Debt Collector’s Automated Calls Did Not Fall within TCPA’s ‘Prior Express Consent’ Exception, Second Circuit Holds

The Second Circuit recently held that a plaintiff did not provide his “prior express consent” under the federal Telephone Consumer Protection Act (TCPA) to automated calls to his cell phone when he gave his cell phone number to a power company while seeking to discontinue service at his recently deceased mother-in-law’s apartment. The court adopted the position of the Federal Communications Commission (FCC), which at the court’s invitation submitted an amicus brief in the case. Our prior e-alert on the FCC’s amicus brief is available here.

In Nigro v. Mercantile Adjustment Bureau, LLC, the plaintiff called his mother-in-law’s power company after she died, asked for the discontinuance of service, and provided his mobile phone number because the power company told him that a phone number was required for this request. Unbeknownst to the plaintiff, there was a balance on the account, the account then was referred to a collection agency, and the plaintiff proceeded to receive numerous automated calls to his cell phone from the debt collector. The plaintiff never received any bill for the account.

Following receipt of the automated calls, the plaintiff sued the debt collector under the TCPA, which prohibits automated telephone calls to a cellular phone number except when the call is made for emergency purposes, or was “made with the prior express consent of the called party.” The district court granted summary judgment in favor of the debt collector, reasoning that the plaintiff consented to the calls when he provided his cell phone number to the power company.

The Second Circuit reversed and remanded. The court explained that the crux of the issue was whether the plaintiff provided his “prior express consent” under the particular facts of the case. The court noted that FCC rulings arguably supported each side’s position. The court observed that the FCC has ruled that the existence of an “established business relationship” between the consumer and the creditor—which the debt collector claimed was formed when the plaintiff gave his cell phone number to the power company—obviates the need for the consumer’s specific consent to the automated calls.

However, the court explained that the FCC more recently has placed specific limits on automated calls by debt collectors. It cited an FCC ruling saying that a consumer’s provision of a cell phone number to a creditor may constitute the requisite consent to automated calls from a debt collector only when “the wireless number was provided by the consumer to the creditor,” and “such number was provided during the transaction that resulted in the debt owed.”

Relying on the FCC’s ruling applicable to calls by debt collectors, the Second Circuit held that the plaintiff plainly did not consent because he provided his cellular number to the power company long after the debt was incurred, and therefore not “during the transaction that resulted in the debt owed.” Also significant to the court was that the plaintiff was not himself responsible for—or even fully aware of—the debt, and the debt collector’s own messages acknowledged that the debt was solely that of the plaintiff’s mother-in-law. Therefore, the court held, the plaintiff also was not a “consumer” under the FCC’s ruling; he was a third party.

Finally, in a footnote, the court explained that it was not deciding what the outcome would be if a consumer were to open an account with a creditor and initially provide only his home phone number, then later provide his wireless number. The court stated that whether such subsequent provision of a wireless number is given as part of a continuing “transaction,” or a transaction subsequent to the initial one that “resulted in the debt owed,” was an issue for future courts.

- Joel E. Tasca


Welcome to Anne Sutherland

We are pleased to welcome Anne Sutherland, a consumer financial services and mortgage banking attorney with more than 20 years of experience advising mortgage loan origination and servicing clients, as the newest member of our Mortgage Banking Group.

Anne is of counsel in the firm's Washington, D.C., office and advises mortgage banking industry clients on the full range of federal mortgage banking and servicing-related statutes and regulations, particularly those related to the Consumer Financial Protection Bureau.

Anne is the former Executive Vice President, General Counsel, and Secretary at Nationstar Mortgage (previously Centex Home Equity Company), where she directed the legal and compliance departments for 15 years and played a key role in the company startup. Under her leadership, the company grew from $12 billion in mortgage servicing to $100+ billion in 18 months.

Anne has significant experience handling the purchase and sale of whole loans. She also advises on foreclosure look-back audits and assists auditors with state law foreclosure issues. At Nationstar, she oversaw the successful resolution of hundreds of litigated matters throughout the United States, including class actions and complex litigation for cases involving loan origination, loan servicing, and securitization. She holds a J.D. from the University of Oklahoma College of Law and a B.B.A. from the University of Oklahoma.


New York Issues Renewal of Exempt Loan Servicer Registration Requirements

The New York Department of Financial Services (DFS) has announced new procedures that require exempt mortgage loan servicers to renew their registration each year. All renewals for exempt mortgage servicers must be submitted through the NMLS between November 1 and December 31. The NMLS will collect a $100 processing fee for each registration renewal.

According to DFS’s press release, "On January 1, 2015, entities that failed to submit a renewal request through the NMLS will have their registration status changed to 'Failed to Renew.'" An entity will remain in "Failed to Renew" status until a reinstatement request is submitted through the NMLS by no later than February 28, 2015. Any registration renewal processed after such date will incur an additional $100 fee.

In addition to processing a renewal request through the NMLS, an exempt mortgage loan servicer must submit two forms directly to DFS by January 15, 2015. The required forms are the Exempt Mortgage Loan Servicer Renewal Affirmation form, which is available here, and the Net Worth Requirement worksheet, which can be accessed here. Note that the Net Worth Requirement worksheet must be based on servicing activity as of December 31, 2014. Further, the worksheet must be signed by the qualifying individual and notarized.

- Marc D. Patterson


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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.


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