CFPB publishes annual CARD Act, HOEPA and QM adjustments, corrects 2016 error

The Consumer Financial Protection Bureau has published a final rule regarding various annual adjustments it is required to make under provisions of Regulation Z (TILA) that implement the CARD Act, HOEPA, and the ability to repay/qualified mortgage provisions of Dodd-Frank. The adjustments reflect changes in the Consumer Price Index in effect on June 1, 2016, and will take effect January 1, 2017.

The CARD Act requires the CFPB to calculate annual adjustments of the minimum interest charge threshold that triggers disclosure of the minimum interest charge in credit card applications, solicitations and account opening disclosures, and the fee thresholds for the penalty fees safe harbor. The calculation did not result in a change to the current $1 minimum interest charge threshold. The first violation penalty and subsequent violation penalty fees will also remain unchanged at $27 and $38, respectively. However, the latter figure remains “unchanged” because the CFPB corrected its 2016 fee notice, which had erroneously calculated the subsequent violation penalty safe harbor fee as $37. The CFPB is amending the provision to preserve a list of historical thresholds and the corrected figure is effective immediately upon publication in the Federal Register.

Pursuant to its ability to repay/QM rule, the CFPB must annually adjust the points and fees limits that a loan must not exceed to satisfy the requirements for a QM. The CFPB must also annually adjust the related loan amount limits. In the final rule, the CFPB increased these limits to the following:

  • For a loan amount greater than or equal to $102,894 (currently $101,749), points and fees may not exceed 3 percent of the total loan amount
  • For a loan amount greater than or equal to $61,737 (currently $61,050) but less than $102,894, points and fees may not exceed $3,087
  • For a loan amount greater than or equal to $20,579 (currently $20,350) but less than $61,737, points and fees may not exceed 5 percent of the total loan amount
  • For a loan amount greater than or equal to $12,862 (currently $12,719) but less than $20,579, points and fees may not exceed $1,029
  • For a loan amount less than $12,862 (currently $12,719), points and fees may not exceed 8 percent of the total loan amount
- Brian Slagle

FTC Backs FCC’s Proposed Rule on TCPA Amendments for Calls Collecting Government Debt

The Federal Trade Commission's (FTC) Bureau of Consumer Protection issued a Staff Comment on June 16, 2016, supporting several of the Federal Communication Commission's (FCC) proposed regulations implementing amendments to the Telephone Consumer Protection Act (TCPA) for calls made to collect debts owed to or guaranteed by the federal government. The FTC’s support is troubling because, as we have previously reported, the FCC’s proposed regulations undermine Congress's clear intent to exempt such calls from the TCPA.

Last month the FCC released a Notice of Proposed Rulemaking (NPRM) regarding recent congressional amendments to the TCPA. Those amendments exclude calls "made solely to collect a debt owed to or guaranteed by the United States" from the TCPA's prior express consent requirement and required the FCC to draft regulations implementing the amendments. Rather than implementing Congress's amendments, the FCC's NPRM actually contravened Congress's intent by undermining the exception for debts owed or guaranteed by the United States.

Unfortunately, rather than addressing the shortcomings of the FCC's proposed regulations, the Staff Comment issued by the FTC embraces them, and in some cases suggests even more onerous regulation:

  • While the FCC proposed that the exception applies only when the borrower is "delinquent" on a payment, the FTC goes further by suggesting the exception only applies when the borrower is in "default." As we mentioned previously, however, there is no such limitation in the amendments to the TCPA for calls to delinquent borrowers or otherwise.
  • The FTC fully supports the FCC’s proposed limitation of the exception to calls to the intended recipient. As we have explained, this would expose callers to TCPA liability for reassigned numbers or for calls received by anyone but the intended recipient. This position is contrary to the language of the amendments, which clearly permits calls to the "called party" rather than an intended recipient.
  • Though the amendments to the TCPA removed the requirement that call recipients must give consent to be called, the FTC approves of the FCC's proposed regulation allowing consumers to stop future calls (in other words, revoke consent) and requiring that consumers be informed of their right to opt out from receiving calls.
  • The FTC fully endorses the FCC’s proposed limitation on the time of day in which collection calls can be made.
  • In its NPRM, the FCC stated that it was considering allowing calls "concerning other debts or matters about which the caller may want to speak with the debtor." The FTC argues that this extension is unwarranted.
  • To the extent the FCC is considering permitting calls for the purpose of "debt servicing," the FTC proposes disallowing any calls which "solicit any fees or consideration for the goods or services offered and limit the definition to government debts," explaining that the absence of such a rule would be a "Trojan Horse" allowing callers to discuss sales of additional products or services, or would allow collection of non-government debts.

Industry members should continue to monitor this situation carefully.

- Consumer Financial Services and Privacy and Data Security Groups

Regulators Raise Marketplace Lending Concerns at FTC FinTech Forum

The Federal Trade Commission (FTC) recently held a FinTech forum addressing marketplace lending. The forum was promoted by the FTC as the first in a series it plans to hold exploring emerging financial technology and its implications for consumers.

The forum consisted of:

  • Panel 1: "The Current State of Marketplace Lending and Its Implications for Consumers." Panelists were asked to respond to a series of questions from FTC representatives (some of which were provided by audience members) regarding how marketplace lending operates. Topics included the process and timeframe for obtaining a loan, how creditworthiness is determined and the accuracy of information used in such determinations, how loans are funded, what marketing channels are used by lenders, who are the parties involved in making loans and after funding, how are consumer disputes handled, and who do lenders share consumer information with and what types of information is collected or shared, what are typical interest rates, fees, and repayment terms, and what disclosures do borrowers receive.
  • Panel 2: "Looking Forward: Protecting Consumers as the Market Evolves." Panelists were asked to respond to a series of questions from FTC representatives focusing largely on access issues, such as the use of marketplace lending to make small-dollar loans and expand access to underserved and non-prime consumers, including the role of alternative data.
  • Presentation by FTC Office of Technology Research and Investigation. An FTC technologist presented the results of an FTC survey that identified the "top 15" online marketplace lenders marketing personal loans to consumers with the goal of learning what consumers experience when they interact online with such lenders. The survey compiled information about the loan terms, fees, and loan issuers displayed on the lenders' websites, how the lenders advertised, the types of data tracking present when consumers visited such websites, and the types of data collected from consumers. The technologist stated that the survey's findings were not an official pronouncement and were offered solely for descriptive and research purposes.

In addition to industry representatives, consumer advocates and researchers, the first panel included a Treasury Department representative, the second panel included a representative of the California Department of Business Oversight (DBO), and both panels included FTC representatives. The Treasury Department representative responded to questions using information from the Department’s April 2016 white paper on the online marketplace lending industry.

The FTC representatives on the panels acted solely as facilitators. However, the questions asked of the second panel suggest that access will be an issue of future FTC inquiry. In addition, several issues were highlighted by Jessica Rich, the director of the FTC's Bureau of Consumer Protection, in her closing remarks, thereby providing a potential preview of additional issues on which the FTC is likely to focus. While noting the potential benefits of marketplace lending discussed in the forum (lower rates, better terms, expanding access, faster service), Ms. Rich reviewed several of the consumer risks that were discussed.

In particular, she noted the possible mandatory use by lenders of preauthorized electronic fund transfers to repay loans, a potential lack of transparency as to loan terms, and concerns about the privacy, data security, accuracy of information, and potential for discrimination arising from lenders' collection of traditional and non-traditional data for credit decisions. She also stressed the application of existing federal consumer protection laws to marketplace lending and such laws’ importance in creating a level playing field and fostering consumer trust in a growing marketplace.

Ms. Rich also appeared to signal that the adoption of self-regulatory codes is unlikely to insulate the industry from FTC scrutiny. She commented that merely having such codes is not enough to be meaningful and that there must be robust monitoring for compliance and tangible consequences for non-compliance.

Thomas Dresslar, who represented the DBO on the second panel, discussed the DBO’s follow-up to its survey that was sent to 14 marketplace lenders engaged in online consumer and/or small business lending (or other types of financing such as merchant cash advances). In April 2016, the DBO issued a summary report of aggregate data provided by the companies that responded to the survey. Mr. Dresslar indicated that the DBO has sent follow-up questions intended to allow the DBO to learn more about the types of information marketplace lenders are using to make credit decisions and how their policies and procedures ensure compliance with federal laws such as the Equal Credit Opportunity Act and Fair Credit Reporting Act. He also discussed the DBO's desire to increase the volume of non-payday loans under $2,500 being made in California and suggested there is a greater role for marketplace lenders to play in small-dollar lending.

- Marketplace Lending Task Force

Ballard Spahr Attorneys Author ABA's Beginner's Guide to the Fair Housing Act

Fair housing is an important right that applies to housing rentals, purchases, and financings in the United States. Several recent developments related to the Fair Housing Act (FHA) impact the operation, sale, and financing of affordable and market rate housing. Significant among these recent happenings is the U.S. Supreme Court’s ruling that, in addition to banning overt or intentional discrimination, the FHA prohibits disparate impact—policies, practices, rules, or other systems that, despite the appearance of neutrality, result in a disproportionate impact on protected groups.

To help housing owners and developers and their legal counsel stay current, Amy M. Glassman and Nydia M. Pouyes, attorneys in Ballard Spahr’s nationally acclaimed Real Estate Department and Housing Group, have written the Beginner's Guide to the Fair Housing Act. Published by the American Bar Association (ABA), the new guide provides an overview of the FHA and other housing laws, and discusses recent developments that will impact housing providers in the coming years.

Passed into law by Congress in 1968, the FHA prohibits housing discrimination based on race, color, religion, sex, national origin, family status (presence of children under the age of 18), or disability. Since that time, a number of other federal, state, and local laws, as well as U.S. Department of Housing and Urban Development rules and regulations, have been established to protect the rights of certain groups to fairly access housing.

Ms. Glassman and Ms. Pouyes represent housing developers and owners nationwide, including public housing authorities, and draw on their firsthand experience to provide timely information, analysis, and guidance.

Ballard Spahr's Housing Group regularly represents and advises clients, including rental property owners, on a range of issues under the FHA and related laws, including Section 504 and the Americans with Disabilities Act, and defends a variety of fair housing claims.

We invite you to read an overview and excerpt of Beginner’s Guide to the Fair Housing Act on the ABA publications website, where the guide can also be purchased.

- Amy M. Glassman and Nydia M. Pouyes

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by Wendy Tran

NMLS 2016.3 Release Portfolio Posted

The Portfolio for the 2016.3 Release was posted to the NMLS Resource Center on June 9, 2016. The Portfolio communicates system enhancements targeted for the 2016.3 Release, including the following: Biennial Licensing Form Changes, Individual Document Upload, Criminal Background Check for MU2 Individuals, and Surety Bond Tracking.

The Portfolio is scheduled for release on September 12, 2016. For more information on the updates, click here.

NMLS Q1 Reports Released

The NMLS Mortgage Industry Report for the first quarter of 2016 was released on June 13, 2016. This report focuses on data regarding companies, branches, and mortgage loan originators who are licensed or registered through NMLS in order to conduct mortgage activities.

In addition, updates to the following have been posted: Money Services Business Fact Sheet, Debt Collection Fact Sheet, and Payday Fact Sheet.

Response to Comments and Final Report Format for Money Services Businesses Call Report Posted on NMLS

In October 2015, the State Regulatory Registry LLC (SRR) invited public comments on the proposed NMLS Money Services Businesses Call Report (MSBCR). The Response to Comments and Final Report Format for MSBCR was posted to the NMLS Resource Center on June 22, 2016. The Response summarizes the comments received and includes SRR responses.

A final report will be posted by July 1, 2016 and there will be an industry webinar in July to discuss it.

Mississippi Amends Safe Mortgage Act Provisions

The state of Mississippi updated its provisions regarding its SAFE Mortgage Act including, but not limited to, the following:

  •  Re-enact provisions that were set to be repealed as of July 1, 2016. For example, this includes the provisions on the mortgage company licensing requirement, local ordinances, license application requirements, and surety bond requirements
  • Revise the qualifications for licensure
  • Revise the number of hours of annual continuing education required for a mortgage loan originator to eight hours
  • Revise maintenance requirements and investigation authority of business records. For instance, the books, accounts, and records for individual consumer mortgage files shall be maintained apart and separate from any other personal loan files made by the same consumer
  • Revise the annual written reporting requirements by licensees
  • Revise signage requirements for principal place of business and branch offices
  • Provide for the required contents of individual consumer servicer files. The individual servicer files of a licensee shall contain at least the following:
    • A copy of the original initial loan application signed and dated by the licensee;
    • A copy of the final loan application signed and dated by the licensee;
    • A copy of the signed closing statement as required by HUD or documentation of denial or cancellation of the loan application;
    • Modification agreements;
    • Collection/default letters and related documentation;
    • Addendums, riders, assigned note, if applicable;
    • Complete pay history from the time the loan was transferred or boarded;
    • Complete comment/note history from the time the loan was transferred or boarded; and
    • Additional information as required per the rules and regulations of this chapter as deemed by the commissioner according to Section 81–18–29.

These provisions are effective on July 1, 2016.

Vermont, Wisconsin Adding New Industry Licenses to NMLS

Starting July 1, 2016, NMLS will begin receiving new application filings for the Vermont Department of Financial Regulation Litigation Funding Registration and the Wisconsin Department of Financial Institutions Adjustment Service Company License.

Copyright © 2016 by Ballard Spahr LLP.
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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.