The CFPB recently issued its Fall 2018 Semi-Annual Report to Congress covering the period April 1, 2018 through September 30, 2018.

The report represents the CFPB’s first semi-annual report under the leadership of Director Kathy Kraninger.  At 43 pages, the new report is only two pages longer than the last semi-annual report issued under the leadership of former Acting Director Mick Mulvaney and continues what appeared to be the goal under Mr. Mulvaney’s leadership of issuing semi-annual reports that were substantially shorter than those issued under the leadership of former Director Cordray.  Also like the semi-annual reports issued under Mr. Mulvaney’s leadership, and also in contrast to those issued under Mr. Cordray’s leadership, the new report does not contain any aggregate numbers for how much consumers obtained in consumer relief and how much was assessed in civil money penalties in supervisory and enforcement actions during the period covered by the report.

The new report indicates that the Bureau had 1,510 employees as of September 30, 2018, representing a decrease of 161 employees from the number of employees as of March 31, 2018 (which was 1,671 employees).

In addition to discussing ongoing or past developments that we have covered in previous blog posts, the report includes the following noteworthy information:

  • During the period October 1, 2017 through September 30, 2018 the Bureau received approximately 329,000 complaints.  The prior semi-annual report indicated that the number of complaints received during the period April 1, 2017 through March 31, 2018 was approximately 326,200.  This suggests there has been no spike in the number of complaints since former Director Cordray left the Bureau at the end of November 2017.
  • It appears that any pending federal court actions were filed under Mr. Cordray’s leadership, with no new enforcement actions having been filed by the Bureau in federal court since Mr. Cordray’s departure.
  • During the period covered by the report, the CFPB initiated a “higher number of fair lending supervisory events,” and issued a greater number of matters requiring attention or memoranda of understanding than in the prior period.  The Bureau also found that entities satisfied (i.e. resolved) a lower number of MRAs or MOU items from past supervisory events than in the prior period.
  • Over the past year (presumably from October 1, 2017 through September 30, 2018), the Bureau did not initiate any fair lending public enforcement actions and did not refer any matters to the DOJ with regard to discrimination.



The CFPB has published its 2019 final lists of Rural and Rural or Underserved Counties on its website. The CFPB has previously posted lists of such counties for calendar years 2011-2018. The CFPB has also updated the rural and underserved areas website tool for 2019.

The lists and tool are relevant to exemptions from certain regulatory requirements of the Truth in Lending Act, including the following CFPB mortgage rules:

  • Escrows Rule, which requires a creditor to establish an escrow account for certain first-lien higher-priced mortgage loans (HPMLs), but exempts HPMLs consummated during a calendar year (or next-to-last calendar year for loans where the application was received before April 1 of the current calendar year) if the creditor extended a first-lien covered transaction in the preceding calendar year secured by a property located in a rural-or-underserved area, and meets certain additional conditions.
  • Ability to Repay and Qualified Mortgage Standards Rule, which treats certain balloon-payment mortgages as qualified mortgages if they are originated and held in portfolio by small creditors that meet the rural-or-underserved test above and certain additional conditions
  • Home Ownership and Equity Protections Act of 1994 (HOEPA) rule, which generally bans balloon payments for mortgages that fall within HOEPA’s high-cost mortgage coverage test, unless they meet the rural-or-underserved test and certain additional conditions
  • Appraisals for HPMLs rule, which exempts HPMLs made in “rural” counties from its additional appraisal requirement

Note that if a creditor makes a first-lien mortgage loan secured by a property located in a rural or underserved area during 2019, the creditor will satisfy the rural and underserved test for the rules noted above during all of 2020 and for loan applications received before April 1, 2021.

“Disclosure Sandbox.”  In September 2018, the Bureau proposed significant revisions to its “Policy to Encourage Trial Disclosure Programs” which sets forth the Bureau’s standards and procedures for exempting individual companies, on a case-by-case basis, from applicable federal disclosure requirements to allow those companies to test trial disclosures.

Last week, the CFPB added the following update to its blog post about the proposal:

The original headline [which referred to “companies”] suggested that the proposed Disclosure Sandbox would be open only to “fintech companies.”  In fact, as the body of the post indicates, any covered entity, regardless of its categorization as“FinTech, “bank,” “credit union” or otherwise, could apply to test a trial disclosure with the Sandbox.

Among the issues raised by the proposal that we noted was whether waivers would only be granted in connection with financial products or services that involve technological or other innovations and will not be granted in connection with conventional products or services.  While the CFPB’s update indicates that non-fintech companies would be eligible for a waiver, it continues to be uncertain whether waivers would be granted in connection with conventional products or services.

NAL Policy and New “Product Sandbox.”  In December 2018, the CFPB issued proposed revisions to its 2016 final policy on issuing “no-action” letters (NAL), together with a proposal to create a new “product sandbox.”  The comment period on the proposals ended earlier this week.  As might be expected, like its “disclosure sandbox” proposal, the CFPB’s proposed revisions to the NAL policy and proposal to create a new “product sandbox” has drawn criticism from consumer and public interest groups.

Among the arguments made in a comment letter from 77 “consumer, civil rights, legal services, labor and community groups” are claims that the proposals could violate the Administrative Procedure Act, exceed the Bureau’s authority, and would expose consumers to risk of harm.  The objections to the proposals set forth in another comment letter filed by 9 consumer and public interest groups that include the Center for Responsible Lending and the National Consumer Law Center also include claims that the creation of a “product sandbox” exceeds the CFPB’s authority and the proposals violate rulemaking requirements.  In addition, the letter includes suggestions for how the proposals might be modified.




Last month, after more than three years of urging by the industry to provide written guidance, the CFPB issued four FAQs on its TILA/RESPA Integrated Disclosure (TRID) Rule.  In this week’s podcast, we take a close look at the FAQs and what they tell creditors, particularly its guidance on when a corrected Closing Disclosure and new three-day waiting period are required (with a caution for those selling to investors) and the safe harbor for using a model form.

Click here to listen to the podcast.

A new executive order signed by President Trump on February 11, 2019 is intended to maintain American leadership in artificial intelligence (AI) research and development (R &D).  The order directs certain federal agencies to pursue various strategic objectives to promote and protect American advancement in AI.  Those agencies are to be identified by the National Science and Technology Council Select Committee on Artificial Intelligence Select Committee.  In addition, any of such agencies that perform R&D are directed to make AI an R&D priority.

Among other things, the executive order also:

  • directs the heads of all federal agencies to “review their Federal data and models to identify opportunities to increase access and use by the greater non-Federal AI research community in a manner that benefits that community, while protecting safety, security, privacy, and confidentiality.”  More specifically, the agencies are directed to “improve data and model inventory documentation to enable discovery and usability, and [to] prioritize improvements to access and quality of AI data and models based on the AI research community’s user feedback.”
  • directs the OMB Director, in coordination with other officials, to issue a memorandum to the heads of all agencies that (1) informs the development of regulatory and non-regulatory approaches by such agencies regarding technologies and industrial sectors that are either empowered or enabled by AI and advance American innovation, and (2) considers ways to reduce barriers to the use of AI.  A draft of the memorandum is to be issued for public comment before it is finalized.
  • directs the Secretary of Commerce, through the Director of the National Institute of Standards and Technology, to issue a plan for federal engagement in the development of technical standard and related tools in support of reliable, robust, and trustworthy systems that use AI technologies.

Last summer, the U.S. Treasury Department issued a report that recommended sweeping regulatory changes intended to promote innovation in the consumer financial services market, reduce regulatory burdens on consumer financial services providers, and update regulations applicable to various types of consumer lending and related consumer financial products and services.  That report included a section focused on big data, machine learning, and AI in which the Treasury stated that it recognized the significant benefits that the increased application of AI and machine learning technologies can provide.  It urged regulators not to impose unnecessary burdens or obstacles to the use of AI and to provide greater regulatory clarity that would enable further testing and responsible deployment of such technology.

Members of Ballard Spahr’s Consumer Financial Services Group have counseled clients on issues arising from applications of AI in the consumer finance space.  In July 2018, the Group conducted a webinar, “Artificial Intelligence in the Consumer Financial Services Industry,” in which the topics included (1) applications of AI to marketing, underwriting, servicing, and collections, and (2) compliance issues arising from the use of AI, including managing fair lending and discrimination risks, delivering adverse action notices, handling of data sharing and data security risks.


I am pleased to announce that Judy Mok, an attorney with extensive experience negotiating complex payments transactions for some of the world’s largest retailers and financial institutions, has joined Ballard Spahr as Of Counsel in the firm’s Consumer Financial Services Group.  She will be based in the firm’s New York office.

Judy has a wealth of experience in negotiating and drafting commercial agreements, with a focus on strategic partnership arrangements.  Her substantial experience includes negotiating and drafting co-branded and private-label credit card agreements, payment network agreements, merchant agreements, servicing agreements, processing agreements, and portfolio purchase and sale agreements.

Judy’s arrival further bolsters Ballard’s offerings in the consumer payment systems space, as she reunites with two former colleagues who joined the firm last year: Chris Ford, a noted Fintech attorney who has led some of the country’s largest and most innovative payment systems transactions, and David Medlar, who has negotiated intricate deals involving payment systems, merchant acquisition, and gateway payment services.

To learn more about our new colleague, read our firm’s announcement.


The CFPB’s proposal to revise its final payday/auto title/high-rate installment loan rule to rescind the rule’s ability-to-repay (ATR) provisions in their entirety and its proposal to delay the compliance date for the ATR provisions until November 19, 2020 were published in today’s Federal Register.  The CFPB’s proposals would leave unchanged the rule’s troublesome payment provisions and continue to require compliance by August 19 with those provisions.

The publication of the proposals starts the clock running on the comment periods.  Comments on the proposal to rescind the ATR provisions are due on or before May 15, 2019.  Comments on the proposal to delay the compliance date for the ATR provisions are due on or before March 18, 2019.

On February 21, 2019, from 12 p.m. to 1 p.m. ET, Ballard Spahr attorneys will hold a webinar, “CFPB Payday Lending Rule: Status and Prospects.”  The webinar registration form is available here.



Federal financial institution regulators recently issued a joint final rule to implement provisions of the Biggert-Waters Flood Insurance Reform Act of 2012 (the “Act”) that require regulated financial institutions to accept private flood insurance policies. The regulators are the Farm Credit Administration, Federal Deposit Insurance Corporation, Federal Reserve Board, National Credit Union Administration, and Comptroller of the Currency. The final rule takes effect on July 1, 2019.

To qualify as private flood insurance under the final rule, a policy must be issued by an insurance company that meets certain conditions, and the policy must provide flood insurance coverage that is at least as broad as the coverage provided under a standard flood insurance policy (SFIP) issued under the National Flood Insurance Program (NFIP) for the same type of property, including when considering deductibles, exclusions, and conditions offered by the insurer. The final rule sets forth specific requirements that a policy must meet to be considered to provide coverage at least as broad as an SFIP.

The final rule requires that a regulated financial institution accept a private flood insurance policy that provides coverage at least as broad as an SFIP in satisfaction of the requirement for flood insurance under the applicable regulator’s flood insurance rules. The final rule allows a financial institution to determine that a private policy provides the necessary coverage if the following statement is included within the policy or as an endorsement to the policy: “This policy meets the definition of private flood insurance contained in 42 U.S.C. 4012a(b)(7) and the corresponding regulation.” A financial institution can simply rely on the statement, without independently assessing the policy. However, the final rule does not require insurance companies to include such a statement in a private policy, and a financial institution cannot reject a private policy simply because the statement is not provided.

The final rule also allows a financial institution to accept a private flood insurance policy that does not provide coverage at least as broad as an SFIP, if the private policy meets a more limited set of requirements, and the financial institution documents in writing its determination that the policy provides sufficient protection of the applicable loan, consistent with general safety and soundness principles.

Additionally, the final rule permits a financial institution to accept a plan issued by a mutual aid society in satisfaction of the requirement for flood insurance under the applicable regulator’s flood insurance rules, subject to conditions. The conditions are that the applicable regulator has determined that the plan qualifies as flood insurance for purposes of the Act, the plan provides specified coverage for the mortgagor and mortgagee as loss payees, and the financial institution documents in writing its determination that the plan provides sufficient protection of the applicable loan, consistent with general safety and soundness principles. For purposes of the final rule, a “mutual aid society” is defined as an organization (1) whose members share a common religious, charitable, educational, or fraternal bond, (2) that covers losses caused by damage to members’ property pursuant to an agreement, including damage caused by flooding, in accordance with this common bond, and (3) that has a demonstrated history of fulfilling the terms of agreements to cover losses to members’ property caused by flooding.

PLI’s 24th Annual Consumer Financial Services Institute will take place on March 25-26, 2019, in New York City (and by live webcast and groupcast in Philadelphia, Pittsburgh, and Mechanicsburg, Pennsylvania, and New Brunswick, New Jersey); on May 20-21, 2019, in Chicago; and on December 9-10, 2019, in San Francisco (and by live webcast).

The Institute is considered the country’s premier consumer financial services CLE program and this year’s Institute will once again explore in detail important developments in consumer financial services regulation and litigation.  I am again co-chairing the event, as I have for the past 23 years.

The leadership of the CFPB, OCC, FDIC and FTC is now firmly under Republican control.  While this has altered these agencies’ priorities, all continue to be very active in enforcing consumer financial laws and the CFPB’s supervisory activities remain substantially unchanged.  At the same time, state attorneys general and regulators are increasing their regulatory and enforcement activity to fill any void created at the federal level.  In addition, the improved economy, the deregulated federal environment, and the rapid increase in technological innovation has resulted in new entrants into the consumer financial services industry and the offering of new products and services by existing players.

The morning session on the first day will feature a panel discussion titled “Federal Regulators Speak,” that will be divided into two segments and focus on federal regulatory, enforcement, and supervisory developments.  I will moderate a discussion among CFPB, OCC, FTC and FDIC representatives.

My partner Chris Willis will participate as a panel member in two panel discussions featured in the afternoon session of the first day.  One of those panels is titled “Fair Credit Reporting Act/Debt Collection Issues” and will include a discussion of the CFPB’s debt collection rulemaking, FCRA litigation trends, and state activity. The other panel, which I will moderate, is titled “The Rapidly Evolving Landscape for FinTech” and will examine the intersection between new technologies and products and existing regulatory frameworks, such as the use of Artificial Intelligence (AI) and Blockchain (including virtual currency).

The Institute will also focus on a variety of other cutting-edge issues and developments, including:

  • Privacy and data security issues
  • TCPA developments
  • Class action and litigation developments
  • State regulatory and enforcement developments
  • Consumer advocates’/plaintiff lawyers’ perspectives on current regulatory and litigation issues

We hope you can join us for this informative and valuable program.  PLI has made a special 25 percent discounted registration fee available to those who register using the link that follows.  To register and view a complete description of PLI’s 24th Annual Consumer Financial Services Institute, click here.

For assistance with registration, contact PLI Customer Service at 800-260-4PLI

The Federal Trade Commission announced that a planned workshop in Washington, D.C. aimed at examining consumer protection issues related to the online event ticket marketplace has been rescheduled for June 11, 2019 due to the government shutdown.  (The workshop’s original date was March 27.)

The workshop will feature opening remarks by FTC Commissioner Rebecca Kelly Slaughter and will bring together a variety of stakeholders, including industry representatives, consumer advocates, trade associations, academics and government officials, to discuss certain practices in the online event ticket marketplace.  The FTC has indicated that the online event ticket industry has been a frequent topic of consumer and competitor complaints, with the issues arising in connection with online ticket sales frequently involving practices that prevent consumers from obtaining tickets, mislead consumers about price or availability, or mislead consumers about the entity from which they are purchasing.   (In April 2018, the U.S. Government Accountability Office issued a report titled “Event Ticket Sales: Market Characteristics and Consumer Protection Issues.”)

According to the FTC’s original announcement, the workshop will look at the current state of the online event ticket marketplace, shed light on industry-wide advertising and pricing issues, and explore ways to address deception beyond traditional law enforcement.  The topics that will be covered include:

  • Primary market ticketing: transparency and lack of ticket availability; ticket bots and the Better Online Ticket Sales Act (BOTS Act).
  • Resale ticket market: disclosures of pricing, fees, and speculative tickets; consumer confusion regarding search engine advertisements and websites of resellers versus official primary ticket sellers.

Ballard Spahr partner Scott Pearson will be participating in a panel addressing these and other ticketing issues at a Sports Lawyers Association event in Brooklyn, New York on February 25, 2019.  The panel will be followed by the Nets-Spurs game.  For information about the event, click here.