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Friday, October 9, 2015

The Week Ahead: October 12 - 16

  • Comments Due CFPB: PRA: Regulation F: Fair Debt Collection Practices Act Read more.
  • Comments Due CFTC: Registration Deficient List Read more.

All times in Eastern Standard Time. See future events on the Dodd-Frank Calendar.

CFPB Guidance Reiterates Changed Approach to RESPA Section 8

The CFPB issued a bulletin describing its findings that marketing services agreements are often used as a means to circumvent prohibitions on kickbacks and referral fees under the Real Estate Settlement Procedures Act’s Section 8 provisions. The bulletin describes the federal anti-kickback provisions and sets forth examples from the bureau’s enforcement experience as well as risks faced by lenders entering into these agreements.

The bureau said that it has seen “numerous examples of MSAs from industry whistleblowers that, upon initial review, appear to use MSAs to disguise kickbacks and referral fees.” In response, it added, “certain lenders have dissolved existing agreements and decided that they will no longer enter into MSAs. The Bureau encourages all mortgage industry participants to consider carefully RESPA’s requirements and restrictions and the adverse consequences that can follow from non-compliance.” The bulletin follows several CFPB administrative enforcement actions that have altered the application and reach of the criminal Section 8 provisions under RESPA.

The CFPB described the bulletin as a “non-binding general statement of policy” but insisted that “a more careful consideration of legal and compliance risk arising from MSAs would be in order for mortgage industry participants generally.” ABA is watching the bureau’s activity on RESPA closely given its significant market and compliance repercussions.

Read the bulletin.

Nichols Emphasizes Industry Unity, Reg Relief on CNBC

Incoming ABA President and CEO Rob Nichols appeared on CNBC’s “Squawk Box” to discuss the importance of regulatory relief for banks and industry unity in confronting challenges to bankers. During the in-studio discussion in New York City, Nichols said:

Our banking sector is the envy of the world, in part because it has community banks, mid-sized banks and large and regional banks and they each play a really important role in our financial ecosystem. We want to improve the policy circumstances for all of these banks.

He emphasized that ABA is currently pursuing fixes to the Dodd-Frank Act to ensure regulations are right-sized for all banks. He said:

There’s regulatory reform to get legislation tailored — to get it right — that we would like to achieve. I've talked to CEOs of banks of all sizes, and there’s definitely an understanding that some of the smaller banks have been caught up in the policy response in a way that they were not intended to.

Nichols also addressed big challenges to the banking industry, including the convergence of banking and technology and the need for a level playing field for bank and nonbank providers of financial products and services, and the growing importance of millennials — who bank in different ways — as a customer base.

Watch the interview.

Thursday, October 8, 2015

Fannie, Freddie Issue Guidance on TRID Compliance, Putbacks

Fannie Mae and Freddie Mac issued letters to the mortgage lenders they work with explaining their posture toward compliance with the TILA-RESPA integrated disclosures, which went into effect for new mortgage applications on Saturday.

Fannie and Freddie said they are “aware that some lenders continue to address the implementation of TRID’s technical requirements. In recognition of this, until further notice, [the GSEs] will not conduct routine post-purchase loan file reviews for technical compliance with TRID.” After this “transitional period,” the GSEs said, they will revisit “whether to begin such reviews for technical compliance.”

Instead, Fannie and Freddie will “evaluate whether the correct forms were used in connection with the origination of a mortgage loan,” which they identified with a good-faith effort to comply. “[F]ailure to use a TRID-required form will be deemed a violation of the good faith efforts standard and will render the mortgage loan subject to all contractual remedies, including repurchase,” they said.

Read Fannie’s guidance.
Read Freddie’s guidance.

House Passes TRID Grace Period Through Feb. 1

By a bipartisan 303-121 vote, the House passed H.R. 3192, which would provide a safe harbor from enforcement actions and private civil actions for lenders making good-faith efforts to implement the new TILA-RESPA integrated disclosures. The safe harbor would extend to Feb. 1. ABA EVP James Ballentine said:

Borrowers in all parts of the nation will benefit from this legislation, ensuring that the transition to new rules proceeds without concerns over technical difficulties constraining credit or slowing the settlement process.

Although the bill passed on a bipartisan basis, President Obama has threatened to veto the bill in part because it would “remov[e] the private right of action for violations.” In a memo to House members, ABA rebutted this claim, noting that “to gain the safe harbor for either regulatory or private rights of action, there must be a showing of good faith efforts at compliance.”

Read ABA’s memo.

Wednesday, October 7, 2015

CFPB Considers Proposal to Ban Arbitration Clauses

The CFPB announced it is considering proposing rules that would ban consumer financial companies from including arbitration clauses that block class action lawsuits in their consumer contracts. Through the Dodd-Frank Act, Congress required the CFPB to study the use of arbitration clauses in consumer financial markets and gave the Bureau the power to issue regulations that are in the public interest.

The study — released in March of this year — showed that more than 75% of consumers surveyed in the credit card market did not know they were subject to an arbitration clause, and fewer than 7% of those consumers covered by arbitration clauses realized that the clauses restricted their ability to sue in court.

The Bureau is publishing an outline of the proposals under consideration in preparation for convening a Small Business Review Panel to gather feedback, the first step in the process of a potential rulemaking. The public is invited to submit written comments when the proposed regulation is issued.

Read more.