In a big week for the Consumer Financial Protection Bureau (CFPB or Bureau), it recently issued its proposed debt collection rules plus updates to the Prepaid Small Entity Compliance Guide, a notice of proposed rulemaking (NPRM) and an advanced notice of proposed rulemaking (ANPR) for the Home Mortgage Disclosure Act (HMDA), a fact sheet discussing whether loan estimates and closing disclosures are required for assumption transactions under the TILA-RESPA Integrated Disclosure (TRID) Rule, a request for information (RFI) on the Remittance Rule, and an announcement about an upcoming symposia series.
What happened
The CFPB has been busy with a host of compliance updates and potential rule revisions:
- Debt Collection. Although enacted in 1977, the FDCPA has never had a detailed set of rules to illuminate how best to comply. CFPB director Kraninger echoed this idea in recent remarks, noting that when the FDCPA was enacted in 1977, phone booths remained on almost every corner and cellphones were unimaginable. “And though there have been many advances in communications technologies since 1977, the FDCPA has not been updated to reflect our use of such technologies,” she said.
That all changed on May 7 when the CFPB issued its long-awaited proposed Regulation F containing detailed, substantive regulations under the FDCPA—rules that will have a major impact on the industry. The proposed rules “clarify” the application of the four-decades-old FDCPA to modern forms of communication such as text messages. One highlight: safe harbor rules for a whole host of communications and “limited content” messages that will not constitute prohibited communications. In brief, the proposed rules would:
i. Create a bright-line rule limiting call attempts and telephone conversations: no more than seven attempts by telephone per week to reach a consumer about a specific debt. Once a telephone conversation between the debt collector and consumer takes place, the debt collector must wait at least a week before calling the consumer again.
ii. Clarify consumer protection requirements for certain consumer-facing debt collection disclosures by requiring debt collectors to send consumers a disclosure with certain information about the debt and related consumer protections. Included in the communication: an itemization of the debt, plus plain-language information about how a consumer may respond to a collection attempt, including by disputing the debt, and a disclosure to include a “tear-off” that consumers could send back to the debt collector to respond to the collection attempt.
iii. Clarify how debt collectors can communicate with consumers, providing instruction how debt collectors may lawfully use newer communication technologies, such as voicemails, emails and text messages, to communicate with consumers and would protect consumers who do not wish to receive such communications by, among other things, allowing them to unsubscribe to future communications through these methods, and creating a safe harm limited-content communication that would allow consumers to be informed of the communication without unlawful disclosure to third persons. The proposed rule would also clarify how collectors may provide required disclosures electronically. In addition, if consumers want to limit ways debt collectors contact them, for example at a specific telephone number, while they are at work, or during certain hours, the rule clarifies how consumers may easily do so.
iv. Prohibit suits and threats of suit on time-barred debts and require certain enumerated communication before credit reporting of such debts.
- Prepaid Small Entity Compliance Guide. The Bureau released a new update to this existing resource in an effort to provide guidance for prepaid account issuers with regard to their compliance requirements under the Prepaid Rule.
Beginning May 1, issuers must submit prepaid account agreements and other information to the CFPB on a rolling basis (as updates are issued to existing agreements, for example, as well as new prepaid account agreements as they are issued and notices when prior agreements are withdrawn).
Submissions must be made within 30 days of the effective date of a change via Collect, the Bureau’s online portal. Version 3.1 of the Compliance Guide provides details on submission requirements and materials to achieve compliance with the Rule’s requirements.
- HMDA. In an NPRM, the CFPB proposed to raise the coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under the HMDA rules. The proposal would provide relief to smaller lenders from HMDA’s reporting requirements, the Bureau explained, and clarify partial exemptions from certain HMDA requirements that were added as part of the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA).
The NPRM proposed two alternatives for closed-end mortgage loans, with both alternatives permanently increasing the coverage threshold from 25 to either 50 or 100 closed-end mortgage loans. For open-end lines of credit, the proposal would extend the current temporary coverage threshold of 500 open-end lines of credit for two more years. Once the temporary extension expires, the NPRM would permanently establish the open-end threshold at 200 open-end lines of credit.
In addition, the Bureau released an ANPR requesting input on the costs and benefits of collecting and reporting the data points the 2015 HMDA Rule added to Regulation C and certain pre-existing data points that the 2015 HMDA Rule revised. Interested parties are also encouraged to weigh in on the costs and benefits of requiring that institutions report certain commercial-purpose loans made to a non-natural person and secured by a multifamily dwelling.
“Today’s proposed changes would provide much needed relief to smaller community banks and credit unions while still providing federal regulators and other stakeholders with the information we need under the [HMDA],” CFPB Director Kathy Kraninger said in a statement. “The public is encouraged to submit their comments on the proposals, which will be considered by the Bureau before the next step is taken.”
- TRID Rule. As part of the EGRRCPA, Congress stated that the Bureau should work to provide clearer guidance on several TRID issues, including the applicability of the TRID Rule to mortgage loan assumptions. The CFPB did just that with a new fact sheet specifically addressing whether a Loan Estimate and Closing Disclosure are required in connection with the assumption of a residential mortgage loan.
Once it is determined that the transaction is within the TRID Rule’s general scope of coverage (if it is a closed-end consumer credit transaction secured by real property or a cooperative unit and is not a reverse mortgage), then an analysis of whether the transaction is an “assumption” can begin.
As a general rule, to satisfy the Regulation Z, 12 CFR 1026.20(b) definition of “assumption,” three elements must be satisfied, the CFPB said: include the creditor’s express acceptance of the new consumer as a primary obligor, include the creditor’s express acceptance in a written agreement and be a “residential mortgage transaction” to the new consumer.
The fact sheet provides a flowchart to help demonstrate whether or not a Loan Estimate and Closing Disclosure are required for specific situations, such as when a new consumer is being added or substituted as an obligor on an existing consumer credit transaction.
- Remittance Rule. The Remittance Rule, added to the Electronic Fund Transfer Act by virtue of the Dodd-Frank Act, requires companies that send international money transfers—or remittance transfers—on behalf of consumers to provide various disclosures, including the exact exchange rate, the amount of certain fees and the amount expected to be delivered to the recipient.
- In a new RFI, the CFPB asked for public comment on two aspects of the Remittance Rule. First, the CFPB is seeking input on issues surrounding the July 2020 expiration of a temporary exception in the rule under which insured financial institutions are permitted to estimate the amount of currency that will be available to the recipient if they are unable to know the amount and the sender holds an account with the bank. Under these conditions, the financial institution is permitted to disclose a reasonably accurate estimate of the amount of currency to be received, as well as estimates of the fees and exchange rate. By statute, the Bureau has no authority to extend the temporary exception past July 21, 2020. As a result, they are asking for public comment on possible options to mitigate the impact of the expiration, particularly with regard to remittances to certain countries or geographic regions. They also are questioning why banks sending remittances to certain areas disproportionately rely on estimates, as permitted under the exception, rather than providing actual amounts, and why some banks report minimal use of the temporary exception while others do not.
Second, the Bureau asked about the number of remittance transfers a provider must make to be considered a provider “in the normal course of business,” and the possibility of incorporating a small financial institution exception into the Rule.
Stakeholders have 60 days to comment on the issues. Feedback shared through the RFI will help determine its next steps, according to the CFPB.
- Symposia Series. During recent remarks, Kraninger announced that the Bureau will host a symposia series “exploring consumer protections in today’s dynamic financial services marketplace.”
Aimed at stimulating dialogue to help the CFPB with its policy development process—including future rulemakings—each symposium will host a discussion panel of experts with varying perspectives on the topic.
Up first: a discussion around clarifying the meaning of abusive acts or practices under Section 1031 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Future topics will include behavioral law and economics, small business loan data collection and disparate impact, and the Equal Credit Opportunity Act.
“There are a number of outstanding, challenging issues the Bureau is facing – some of which Congress directed us to address,” Kraninger said. “I believe the best way to address these issues is with proactive dialogue. As the Bureau has an open mind on where the process will go, any appropriate next steps would come after the Bureau has had time to digest the discussion at the given symposium.”
To read the NPRM, click here.
To read the ANPR, click here.
To read the RFI on the Remittance Rule, click here.
To read the CFPB announcement on proposed Regulation F (debt collection), click here.
Why it matters
Industry members should pay close attention to all of the new proposals and possibilities for rules and rule changes. Comments are currently being accepted on the NPRM and ANPR for the HMDA Rule, as well as the RFI on the Remittance Rule. As the Bureau has taken into account feedback on previous RFIs to change its position (with the recent tweaks to the Civil Investigative Demands as an example), stakeholders would be well-advised to share their thoughts. And stay tuned for the expected release of rules on debt collection.