Mortgage Banking Update - October 24, 2019
In this issue:
- U.S. Supreme Court to Decide CFPB’s Constitutionality; Ballard Spahr Held Webinar
- House of Representatives Seeks Leave From SCOTUS to File Amicus Brief in Seila Law; Seila Law Files Reply Brief with SCOTUS
- CBA Urges House Leadership to Enact Legislation to Change CFPB Leadership Structure to Bipartisan Commission
- Can All American Check Cashing Pass the Fifth Circuit and Go Straight to SCOTUS in Its Challenge to the CFPB’s Constitutionality?
- All American Check Cashing and CFPB Submit Letter Briefs to Fifth Circuit
- Paul Watkins, Director of the CFPB’s Office of Innovation, Discusses Final Innovation Policies in Ballard Spahr Webinar
- California AG Releases Proposed CCPA Regulations
- Podcast: a Discussion of the California Consumer Privacy Act for Financial Institutions
- Trade Groups Challenge Nevada Law Allowing Applicant’s Reliance on Spouse’s or Former Spouse’s Credit Report
- CFPB Issues Final HMDA Rule
- CFPB to Establish Task Force on Federal Consumer Financial Law
- Director Kraninger Testifies at House and Senate Hearings
- Ballard Spahr Attorneys to Moderate and Speak at PBI Consumer Financial Services and Banking Law Update on Oct. 29
- Did You Know?
- Looking Ahead
Last week, the U.S. Supreme Court announced that it has agreed to decide whether the CFPB’s single-director-removable-only-for-cause structure is constitutional. The Court granted Seila Law’s petition for a writ of certiorari seeking review of the Ninth Circuit’s decision that held the CFPB’s structure is constitutional.
Ballard Spahr recently held a webinar, “The Battle Over the CFPB’s Constitutionality Moves to the U.S. Supreme Court: What It Means for You.” In the webinar, Ballard attorneys were joined by Professor Kent Barnett of the University of Georgia School of Law. Professor Barnett specializes in administrative law and consumer law and is an expert on constitutional separation of powers.
The question presented in Seila Law’s petition is:
Whether the vesting of substantial executive authority in the Consumer Financial Protection Bureau, an independent agency led by a single director, violate the separation of powers.
In its Order granting the petition, the Supreme Court directed the parties, in addition to the question presented by the petition, to brief and argue the following question:
If the Consumer Financial Protection Bureau is found unconstitutional on the basis of the separation of powers, can 12 U.S.C. §5491(c)(3) [the for-cause removal provision] be severed from the Dodd-Frank Act?
Seila Law asserts that the proper remedy for a constitutional violation would be to invalidate the CFPB as a whole or, at a minimum, to hold that the civil investigative demand (CID) issued by the CFPB to Seila Law is unenforceable. Although the Department of Justice (DOJ) agrees with Seila Law that the CFPB’s structure is unconstitutional, it takes the position that the appropriate remedy is to sever the for-cause removal provision and hold that the CID is enforceable. With the CFPB having announced that it agrees with the DOJ’s position on both its constitutionality and the appropriate remedy, the Supreme Court is expected to appoint an amicus curiae to defend the Ninth Circuit’s judgment.
In addition to granting the motion of the U.S. House of Representatives to file an amicus brief out of time, the Supreme Court granted the motion of Alan B. Morrison, Associate Dean at George Washington Law School, to file an amicus brief out of time. In his brief, Mr. Morrison argued that there were significant jurisdictional issues that precluded the Supreme Court from deciding the merits, including that there was no case or controversy under Article III because the parties agree that the Dodd-Frank provision at issue is unconstitutional. He also urged the Supreme Court to appoint an amicus to address the jurisdictional issues.
The Supreme Court still has before it the Petition for a Writ of Certiorari Before Judgment filed by All American Check Cashing that asks the Court to rule on All American’s interlocutory appeal from the district court’s ruling upholding the CFPB’s constitutionality rather than wait for a decision from the Fifth Circuit panel. Also still pending is the petition for a writ of certiorari filed by the plaintiffs in Collins v. Mnuchin that seeks review of the en banc Fifth Circuit’s decision that held the Federal Housing Finance Agency’s (FHFA) structure is unconstitutional. Briefing on both petitions should be completed by mid-November. It is possible either or both cases could become a companion case to Seila Law should the Supreme Court grant either or both petitions. Alternatively, the Court might grant one or both petitions but hold the case(s) pending the outcome in Seila Law.
Oral argument in Seila Law is expected to take place early next year, with a decision to be issued by the Supreme Court by the end of its term in June 2020. Pending a decision from the Supreme Court, companies targeted by the CFPB in investigations or enforcement actions are likely to urge the CFPB and courts to stay any further activity until the Supreme Court issues a decision in Seila Law.
- Alan S. Kaplinsky
House amicus brief: The House of Representatives has filed a motion seeking leave to file an amicus brief in support of the Ninth Circuit’s decision in Seila Law. While acknowledging that the deadline for filing amicus briefs has passed, the House notes that a timely amicus brief would have been due the day after the House received the CFPB’s letter announcing that it would no longer defend its constitutionality in the appellate courts or before the Supreme Court.
In the amicus brief it seeks to file, the House argues that Seila Law’s cert petition should be denied because there is no circuit split and the Ninth Circuit’s decision upholding the CFPB’s constitutionality is correct. It further states that if the court were to grant the petition and rule that the CFPB’s structure is unconstitutional, the proper remedy would be to sever the Consumer Financial Protection Act’s (CFPA) for-cause removal provision. Since the DOJ and CFPB are not defending the CFPB’s constitutionality, the House also asks the Supreme Court to consider appointing the House as amicus curiae, represented by the House General Counsel as counsel of record, to defend the CFPA and the judgment below.
The motion indicates in a footnote that the filing of the amicus brief was authorized by a vote of the Bipartisan Legal Advisory Group and that the Republican Leader and Republican Whip dissented from the filing. In addition to House Republican Leader Kevin McCarthy and House Republican Whip Steve Scalise, the other House members of the Advisory Group are Speaker Nancy Pelosi, Majority Leader Steny Hoyer, and Majority Whip James Clyburn. In arguing for the CFPB’s constitutionality, the Democratic members appear to be acting against their own political interest. If the Supreme Court rules that the CFPB’s structure is unconstitutional and severs the for-cause removal provision, a Democratic President could replace the current CFPB Director without cause.
Seila Law reply: Seila Law has filed a reply to the Petition for a Writ of Certiorari Before Judgment filed by All American Check Cashing as well as the Petition for a Writ of Certiorari filed by the plaintiffs in Collins v. Mnuchin seeking review of the en banc Fifth Circuit’s decision that held the FHFA’s structure is unconstitutional. In each of those petitions, the petitioners argue that their case is a better vehicle than Seila Law to decide the constitutionality question presented in Seila Law.
All American’s primary argument for why its case is a better vehicle is that, unlike Seila Law, its case “squarely presents” the question of whether, even if the agency’s structure is unconstitutional, former Acting Director Mulvaney’s ratification of the CFPB’s challenged action cured any constitutional defect. While their case involves the FHFA rather than the CFPB, the petitioners in Collins assert that their case is nevertheless “the best vehicle for ruling on the constitutionality of independent agencies headed by a single director.” Among the reasons offered by the Collins petitioners is that their case “concerns an agency that is currently defending its constitutional structure.”
In its response, Seila Law argues that All American’s presentation of the ratification issue “is not a virtue, but a vice” because “there is no circuit conflict on the validity of ratification” and the Fifth Circuit has not had an opportunity to consider the ratification question. With regard to the Collins petition, Seila Law states that the Supreme Court “routinely appoints amici in similar circumstances” and points to the willingness of the House to defend the judgment below.
The briefs on Seila Law’s cert petition were distributed for the Supreme Court’s October 11 conference.
- Alan S. Kaplinsky
The Consumer Bankers Association has sent a letter to the leadership of the House of Representatives urging the House to enact legislation that replaces the CFPB’s single director leadership structure with a five-person, bipartisan commission.
The CBA advocates for such legislation as a way to avoid the adverse consequences that it believes would result if the Supreme Court were to rule in Seila Law that the CFPB’s current structure is unconstitutional and the appropriate remedy is to sever the Dodd-Frank Act’s provision that only allows the President to remove the CFPB Director “for cause.” The CBA expresses the view that a ruling that “install[s] a removable at-will director would leave financial institutions with few assurances that the rules they are complying with today would remain in place.”
In the letter, the CBA notes that legislation to establish a commission has passed the House Financial Services Committee six times and has passed the House four times. It asserts that replacing the sole director model with a bipartisan commission “would depoliticize the CFPB while increasing stability, accountability and transparency for all consumers and industry stakeholders.” CBA observes that “as we saw after the departure of Director Cordray, the CFPB’s current governance structure is subject to dramatic political shifts and strains with each change in presidential administration. Unpredictable political shifts make it difficult for the financial services industry to plan for the future, which ultimately stifles innovation, limits access to credit, and hurts consumers.”
We agree with the CBA’s views on this issue.
- Barbara S. Mishkin
Rather than wait for a decision from the Fifth Circuit in its interlocutory appeal from the district court’s ruling upholding the CFPB’s constitutionality, All American Check Cashing has filed a Petition for a Writ of Certiorari Before Judgment with SCOTUS. (The Fifth Circuit heard oral argument in March 2019 and last month directed the parties to file letter briefs regarding what action the court should take in light of the en banc Fifth Circuit’s decision in Collins v. Mnuchin that held the FHFA’s structure is unconstitutional.)
All American argues that “there is nothing to be gained by waiting [for the Fifth Circuit’s decision]: The case for the constitutionality of the agency, pro and con, has already been exhaustively explored in the circuit courts in numerous thoughtful opinions, beginning with [the D.C. Circuit’s en banc PHH decision].” It also argues that its case is a better vehicle than Seila Law to resolve the questions of the CFPB’s constitutionality and the appropriate remedy for actions taken by an unconstitutional agency. (The briefs on Seila Law’s petition for certiorari were distributed for the Supreme Court’s October 11 conference.)
All American’s primary argument for why its case is a better vehicle is that, unlike Seila Law, its case “squarely presents” the question of whether, even if the agency’s structure is unconstitutional, former Acting Director Mulvaney’s ratification of the CFPB’s challenged action cured any constitutional defect. Although the CFPB made the ratification argument in Seila Law, it was not addressed by either the district court or the Ninth Circuit (which both held that the CFPB’s structure is constitutional). Accordingly, All American contends that if the Supreme Court were to grant certiorari in Seila Law and reverse the Ninth Circuit on the CFPB’s constitutionality, the CFPB could argue on remand that the ruling had no effect on the Ninth Circuit’s judgment (which affirmed the district court’s refusal to set aside the CID) because it was supported by the alternative grounds of ratification. In addition, All American argues that the Supreme Court “could not cleanly reach the ratification issue in Seila Law even if it wanted to address that question without the benefit of either lower court’s consideration of the matter.”
According to All American, its case would thus allow the Supreme Court to decide not only the CFPB’s constitutionality but also “the equally important question of what remedy follows from a structural separation-of-powers violation.” It argues that severance of the CFPA’s “for cause” removal provision is not an adequate remedy because “the Director’s removal provision cannot be severed without inflating the President’s power relative to Congress and transforming the CFPB into something Congress never would have created.” More specifically, it asserts that “there is no reason to think that Congress would have given up its own appropriations and oversight powers while granting the President increased power over 18 preexisting federal consumer-protection statutes. But that is exactly what severing the statute would do” (emphasis included).
In addition, All American asserts that even assuming the removal provision was severable, that would address the constitutional problem going forward but “would do nothing to ameliorate All American’s past injury from being subject to an enforcement action initiated and prosecuted against it by an unconstitutional agency” (emphasis included). All American claims that such injury requires dismissal of the CFPB’s action. It further argues that actions by an agency that is structured unconstitutionally, as distinguished from “defects in a particular officer’s title,” are null and cannot be ratified.
Finally, All American makes the alternative argument that the Supreme Court should, at a minimum, grant its petition as a companion case to Seila Law in the event it grants that petition. It states that the Supreme Court “has repeatedly granted certiorari before judgment when, as here, a complementary companion case offers the opportunity to decide all aspects of an important question of constitutional law.” All American argues that the Supreme Court “should grant both petitions in order to consider the merits and remedies questions together if the Court is not inclined to review All American’s case alone.”
- Alan S. Kaplinsky
All American Check Cashing and the CFPB have submitted letter briefs to the Fifth Circuit regarding what action the court should take in light of the en banc Fifth Circuit’s decision in Collins v. Mnuchin that held the FHFA’s structure is unconstitutional.
In March 2019, a Fifth Circuit panel heard oral arguments in All American’s interlocutory appeal from the district court’s ruling upholding the CFPB’s constitutionality. Last month, the panel directed the parties to file the letter briefs (rather than wait for a decision from the Fifth Circuit panel). All American has also filed a Petition for a Writ of Certiorari Before Judgment with the U.S. Supreme Court.
Having announced that it will not defend the CFPB’s constitutionality in the appellate courts or the Supreme Court, the CFPB concedes in its letter brief that its structure is unconstitutional. But, it argues that, following the en banc Fifth Circuit’s approach in Collins, the proper remedy is to sever the CFPA for-cause removal provision but not grant All American’s motion for judgment on the pleadings. It also argues that the panel should allow the enforcement action to proceed because it was ratified by Acting Director Mulvaney and Director Kraninger does not support dismissal of the enforcement action.
In its letter brief (as it did in its cert petition), All American argues that the en banc Fifth Circuit’s conclusion that the FHFA is unconstitutionally structured supports the same conclusion to the Bureau’s constitutionality. But, because the CFPA for-cause removal provision cannot be severed, the proper remedy is to reverse the district court’s denial of All American’s motion for judgment on the pleadings and not allow the CFPB’s enforcement action to proceed. It also argues that any purported ratification of the enforcement action was ineffective.
The Supreme Court could issue a decision soon on the petition for a writ of certiorari filed by Seila Law seeking review of the Ninth Circuit’s ruling that the CFPB’s structure is constitutional. The briefs on Seila Law’s petition were distributed for the Supreme Court’s October 11 conference.
- Alan S. Kaplinsky
Paul Watkins, Director of the CFPB’s Office of Innovation, joined Ballard Spahr partners Alan Kaplinsky and James Kim for a discussion of the CFPB’s final innovation policies. Alan leads the firm’s Consumer Financial Services Group and James is a co-leader of the firm’s inter-disciplinary Fintech Team.
Last month, the CFPB finalized its proposed revisions to its trial disclosures and no-action letter (NAL) policies and also finalized its proposal to create a new Fintech sandbox policy. It also announced the creation of the American Financial Innovation Network (AFIN), a network of federal and state regulators to facilitate innovation, and issued its first NAL under the final revised policy.
The sandbox policy only offers approvals under the provisions of the TILA, ECOA, and EFTA as applicable that provide a safe harbor from liability under such laws in federal or state enforcement actions and private lawsuits for actions taken or omitted in good faith in conformity with Bureau approvals. However, a NAL can cover the full panoply of consumer financial protection statutes (including the Dodd-Frank UDAAP prohibition) within the CFPB’s jurisdiction. In some circumstances, it may be advisable to submit applications under more than one policy. While the innovation policies are particularly suitable for products and services that raise only federal law issues, they clearly do not provide a preemption of state laws, such as those dealing with licensing or usury.
Paul reviewed the elements of each policy, including the protection from liability available under each. Notable comments made by Paul include the following:
- The Bureau views innovation as an important component of consumer protection because of its role in making better financial products available to consumers and is committed to advancing innovation. Both Alan and James praised the Bureau’s efforts under its new leadership, with Alan referring to them as “refreshing.”
- Companies are encouraged to informally contact the Office of Innovation to discuss potential applications. Pre-application discussions between the Bureau and an applicant can play a major role in an application’s success, including determining which of the policies would be most beneficial or suited to an applicant.
- The Bureau is committed to engaging in outreach to other federal and state regulators to maximize the value of an approval under one of the policies and will take the initiative to coordinate with other regulators, including to address challenges raised by other regulators to actions taken by an applicant pursuant to a Bureau approval. Companies with an approval can contact the Bureau to try to resolve potential issues with other regulators.
- In addition to the CFPB, the initial members of the AFIN announced by the Bureau were the Attorneys General of Alabama, Arizona, Georgia, Indiana, South Carolina, Tennessee, and Utah, and the Florida Office of Financial Protection. The Colorado Attorney General and the Missouri Division of Finance Commissioner have now also joined the AFIN.
- Barbara S. Mishkin
The California Attorney General’s Office released its long-awaited proposed California Consumer Privacy Act (CCPA) regulations last week. The proposed regulations are 24 pages long and address a number of important technical compliance issues, including how businesses should:
- Provide just-in-time notice to consumers of personal information collected;
- Provide notice to consumers of the right to opt out of the sale of personal information;
- Provide notice to consumers of financial incentives;
- Provide methods for consumers to submit requests to know and requests to delete their personal information;
- Respond to consumer requests to know and/or requests to delete their personal information;
- Respond to consumer requests to access or delete household information;
- Respond to requests to opt out;
- Respond to requests to opt in after consumers exercise their right to opt out of the sale of personal information; and
- Verify consumer requests.
The AG’s office also released a 47-page Initial Statement of Reasons.
Ballard’s Privacy & Data Security lawyers are carefully reviewing the proposed regulations and will be providing thoughts on the effect of the proposed regulations, what they mean from a compliance standpoint, what issues the proposed regulations fail to address, and what’s next for the CCPA.
- Kim Phan & Philip N. Yannella
The CCPA takes effect on Jan. 1, 2020. In this podcast, we take a close look at the CCPA’s coverage and unique features, the scope of its “GLBA exemption,” third party issues, private actions and enforcement remedies, federal privacy law initiatives and the CCPA’s influence on state initiatives, and steps for companies facing CCPA compliance.
Presented by Alan S. Kaplinsky, Christopher J. Willis, and Kim Phan
To listen to the podcast, click here.
- Barbara S. Mishkin
On October 1, three trade groups filed a lawsuit in Nevada federal court challenging an amendment to Nevada law that allows an applicant for credit with no credit history to request that the creditor deem the credit history to be identical to that of the spouse during the marriage. The amendment is contained in Senate Bill (SB) 311 which was signed into law by the Nevada Governor on July 1, 2019 and became effective on October 1.
Like the Federal Equal Credit Opportunity Act, Nevada law prohibits discrimination based on marital status in credit transactions. SB 311 amends Nevada law to allow an applicant for credit who has no credit history, but who is or was married, to request that the creditor deem the applicant’s credit history to be identical to that of the applicant’s spouse during the marriage. The amendment provides that if the creditor requests, and the applicant provides, evidence of the marriage and the date of the marriage (and, if applicable, the date the marriage ended), “then the creditor must deem the credit history of the applicant to be identical to the credit history of the applicant’s spouse which was established during the [applicant’s marriage].” A creditor’s failure to comply with this requirement is deemed discrimination based on marital status in violation of Nevada law. The requirement applies to anyone defined as a “creditor” under Nevada law, which is an expansive definition that includes virtually every form of lending and lending practice (see NRS 598B.060).
The lawsuit, which was filed by the American Financial Services Association, the Nevada Credit Union League, and the Nevada Bankers Association, names as defendants the Commissioner of the Financial Institutions Division of the Nevada Department of Business and Industry and the Nevada Attorney General. The trade groups allege that the new requirement:
- Is preempted by the Fair Credit Reporting Act (FCRA) and the Equal Credit Opportunity Act. The trade groups claim that (1) because creditors are not permitted to access a credit report where there is no permissible purpose or consent from the non-applicant, the requirement violates the FCRA and (2) because creditors are not permitted to obtain information about a non-applicant spouse or former spouse based solely on the applicant’s request, it violates the ECOA/Regulation B prohibition on requesting information on an applicant’s spouse or former spouse.
- Violates privacy rights and data security rules by requiring creditors to obtain and disseminate private financial information about an applicant’s spouse or former spouse without that person’s knowledge or consent.
- Is “hopelessly unworkable, and impossible to comply with in practice—especially in the context of ex-spouses” because the information in the former spouse’s credit report would be accurate as to the former spouse as of the date the report is obtained but would not be accurate as to the applicant since the report would reflect account activity that occurred after the termination of the marriage. The trade groups claim that, as a result, creditors are required to make credit decisions based on information they know to be inaccurate with regard to the applicant.
The trade groups seek to block the defendants from enforcing the new requirement. They also seek a declaration that the requirement is preempted by federal law, invalid, and void.
We expect a motion for a temporary restraining order, motion for preliminary injunction, and/or a motion for summary judgment to be filed quickly by the trade groups.
- Abran Vigil & Anthony C. Kaye
The CFPB recently issued, in final form, two elements of a May 2019 Home Mortgage Disclosure Act (HMDA) proposed rule.
As previously reported, the May 2019 proposal would:
- Increase the volume threshold that triggers reporting of closed-end mortgage loans from at least 25 originated loans in each of the prior two calendar years to at least 50 originated loans in each of the prior two calendar years. The CFPB also requested comment on a 100 loan threshold.
- Increase the volume threshold that triggers reporting of open-end, dwelling-secured lines of credit to at least 200 originated lines of credit in each of the prior two calendar years.
- Continue, until January 1, 2022, the temporary volume threshold that triggers reporting of open-end, dwelling-secured lines of credit of at least 500 originated lines of credit in each of the prior two calendar years.
- Incorporate into Regulation C the interpretative and procedural rule previously issued by the CFPB to implement the partial exemption from HMDA reporting for smaller volume bank and credit union lenders adopted in the Economic Recovery, Regulatory Relief, and Consumer Protection Act (Growth Act).
The final rule includes the last two elements of the May 2019 proposal. As reported previously, during the summer, the CFPB extended the comment period for the first two elements of the proposal until October 15, 2019 in order to allow interested parties to examine the 2018 HMDA data before submitting comments. The 2018 HMDA data was released at the end of August 2019. The CFPB advises that it intends to issue a separate final rule in 2020 to address the threshold for closed-end loans and permanent threshold for open-end lines of credit.
- Richard J. Andreano, Jr.
The CFPB announced that it will establish a taskforce, the Taskforce on Federal Consumer Financial Law to examine ways to harmonize and modernize federal consumer financial laws.
The taskforce will examine the existing legal and regulatory environment facing consumers and financial services providers and make recommendations to the Bureau’s leadership for improving consumer financial laws and regulations. The taskforce will produce new research and legal analysis of U.S. consumer financial laws, with a focus on harmonizing, modernizing, and updating the enumerated consumer credit laws and their implementing regulations; identifying gaps in knowledge that should be addressed through research; improving consumer understanding of markets and products; and identifying potential conflicts or inconsistencies in existing regulations and guidance.
The taskforce is inspired by an earlier commission established by the Consumer Credit Protection Act in 1968. In addition to various changes to consumer law, generally, the Act established a national commission to conduct original research and provide Congress with recommendations relating to the regulation of consumer credit. The commission’s report led to significant legislative and regulatory developments in consumer finance.
The taskforce will have a Chair and approximately six members. It will also bring on individuals detailed from across the Bureau and federal government. The Bureau is now accepting applications for members. Members must have demonstrated records of senior public service and expertise in consumer finance, including:
- Expertise in consumer protection and consumer financial products or services.
- Significant experience researching and analyzing consumer financial markets, laws, and regulations.
- Past record of senior public or academic service.
- Recognition for professional achievements and objectivity in economics, econometrics, or law.
We applaud the Bureau for this very welcome announcement which demonstrates the commitment of current Bureau leadership to improve the current consumer, finance legal, and regulatory environment for the benefit of both consumers and industry.
- Alan S. Kaplinsky
CFPB Director Kraninger was the sole witness at a House Financial Services Committee hearing on the Bureau’s spring 2019 semi-annual report and at a Senate Banking Committee hearing on the report.
At the House hearing, Director Kraninger came under harsh criticism from Democratic members, with one member reportedly calling Ms. Kraninger “absolutely worthless.” A primary focus of Democratic members was the CFPB’s settlements earlier this year, such as those with Sterling Jewelers and NDG Financial, in which the companies were not required to pay any redress to consumers. The Democrats’ perspective is perhaps best summarized by the title of a 333-page report issued by the Committee’s majority staff to coincide with the hearing—“Settling for Nothing: How Kraninger’s CFPB Leaves Consumers High and Dry.” The report discusses what it describes as appointments made by the Trump administration “to accomplish its goal of reining in the Consumer Bureau” and the handling of the settlements by such appointees.
At the Senate hearing, Democratic members also leveled harsh (but more civil) criticism at Director Kraninger, focusing on the Bureau’s supervision of student loan servicers and its proposed revisions to its final payday/auto title/high-rate installment loan rule (Payday Rule). With regard to student loan servicers, several Democratic members voiced concerns about the number of borrowers seeking loan forgiveness under the federal public service forgiveness program that have been rejected by the Department of Education. These members called on the CFPB to respond more aggressively to the refusal of federal student loan servicers to provide information to CFPB examiners based on ED direction (including taking legal action against ED).
With regard to the Payday Rule, Democratic members raised questions about the Bureau’s evidentiary support for its proposed rescission of the Payday Rule’s ability-to-repay (ATR) provisions. One Democratic member pressed Director Kraninger as to why the CFPB has not, despite indicating in its court filings that the Bureau did not believe there was a reason to delay the effective date of the Payday Rule’s payment provisions, sought to lift the stay of the August 19, 2019 compliance date for the payment provisions entered by the Texas federal district court hearing the lawsuit filed by two trade groups challenging the Payday Rule. The court also stayed the lawsuit and the compliance date for the ATR provisions. Director Kraninger indicated the CFPB had not done so because the trade groups were also challenging the Bureau’s constitutionality in their lawsuit. She noted that the Bureau has yet to rule on a petition it has received to revisit the payment provisions and has one year to do so. (Presumably, Director Kraninger was referring to the rulemaking petition mentioned in the Supplementary Information to its proposal that seeks an exemption from the payment provisions for debit payments.)
With regard to the Bureau’s announcement that it would no longer defend its constitutionality in the appellate courts or the Supreme Court, Director Kraninger provided no insights into the rationale for the Bureau’s change in position other than to say that she believed there was a need for the Supreme Court to resolve the long-standing constitutional question.
Finally, in response to a question from a Republican member about the Bureau’s plans for providing clarity as to what is an abusive practice for purposes of the Dodd-Frank UDAAP prohibition, Director Kraninger stated that there would be news “in the not too distant future.”
Republican members of both committees were generally complimentary of Director Kraninger’s leadership, pointing to the Bureau’s innovation policies and Taskforce on Federal Consumer Financial Law as examples of praiseworthy initiatives.
- Barbara S. Mishkin
PBI’s Consumer Financial Services and Banking Law Update will take place on October 29, 2019 in Philadelphia (and by simulcast in Allentown, Bellefonte, Butler, Chambersburg, Easton, Mechanicsburg, Pittsburgh, West Chester, and York, Pennsylvania).
Alan Kaplinsky, Practice Leader of Ballard Spahr’s Consumer Financial Services Group, and Mark Furletti, Vice-Chair of the Group, will moderate an experienced panel of industry, banking bar, and government attorneys covering the latest important developments with respect to:
- PA Department of Banking and Securities
- Consumer Financial Protection Unit of the PA Attorney General’s Office
- The CFPB, FTC, FCC, DOJ, FRB, FDIC, and OCC
- Data Security and Privacy developments
- Fair Credit Reporting Act and Debt Collection
- The rapidly developing landscape for Fintech (artificial intelligence, big data)
- Consumer advocates
Ballard Spahr partners John Culhane, James Kim, and Kim Phan will be speaking at the program. The other speakers are Robin Wiessmann, Secretary of the PA Department of Banking and Securities; Nicholas Smyth, Assistant Director, Consumer Financial Protection, PA Office of the Attorney General; and James Francis, Francis & Mailman PC.
Attendees can receive up to five hours of substantive credit and one full hour of ethics credit.
We hope you can join us for this informative and valuable program. To register and view a complete description of PBI’s Consumer Financial Services and Banking Law Update, click here. For assistance with registration, contact PBI at 800.932.4637.
- Barbara S. Mishkin
Regulators Call for Industry to Integrate Data Standards with Loan Origination Systems
The Conference of State Bank Supervisors (CSBS) and American Association of Residential Mortgage Regulators (AARMR) recently issued a press release on behalf of their member state regulator agencies. This press release encourages the mortgage industry to adopt and integrate the Lending Examination Format (LEF) data standard with mortgage loan origination software in order to provide a simplified data transfer process during electronic regulatory exams. By having cleanly mapped data, the quality of loan reviews and examination processes would be enhanced, according to the regulators. Moving forward, state regulators are planning to assist vendors that incorporate LEF data export abilities into their individual systems.
- Aileen Ng
Newport Beach, CA | December 2-3, 2019
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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.