The CFPB has published its Spring 2020 rulemaking agenda as part of the Spring 2020 Unified Agenda of Federal Regulatory and Deregulatory Actions. It represents the CFPB’s third rulemaking agenda under Director Kraninger’s leadership. The agenda’s preamble indicates that the information in the agenda is current as of March 5, 2020 and identifies the regulatory matters that the Bureau “reasonably anticipates having under consideration during the period from May 1, 2020 to April 30, 2021.”
The Bureau issued a proposed debt collection rule in May 2019. In the preamble to the rulemaking agenda, the Bureau states that it expects to issue a final debt collection rule in October 2020. In February 2020, the Bureau issued a supplemental proposal that would require debt collectors to make specified disclosures when collecting time-barred debts and has extended the proposal’s comment deadline until August 4, 2020. The Bureau indicates in the preamble that it plans to finalize the supplemental proposal “at a later date” (thus ending conjecture as to whether the Bureau intends to finalize the two proposals at the same time).
The new agenda provides outdated information regarding when the Bureau can be expected to finalize its February 2019 proposal to rescind the ability to repay provisions of its final payday/auto title/high-rate installment loan rule. The proposal is not mentioned in the Bureau’s blog post about the new agenda and the agenda estimates a June 2020 date for issuing a final rule. In the preamble to the new agenda, the Bureau states that in response to stakeholder input, it “is now evaluating what, if any, other actions to take with respect to the application of the payments provisions of the [final rule] to the short-term, longer-term balloon-payment, and certain high cost installment loans covered by those provisions. These actions could include, but are not limited to, updated compliance aids, policy statements, or other guidance.”
The Bureau recently took action on the following items listed in the agenda:
- Higher-Priced Mortgage Loan Escrow Exemption. The Economic Growth, Regulatory Relief, and Consumer Protection Act directs the CFPB to implement an exemption from the mandatory escrow account requirement for higher-priced mortgage loans under the Truth in Lending Act and Regulation Z for certain insured credit unions and insured depository institutions. The CFPB recently proposed amendments to Regulation Z pursuant to this directive.
- Qualified Mortgage Definition under the Truth in Lending Act (Regulation Z). The CFPB recently proposed a temporary extension of the qualified mortgage (QM) criteria that is based on a loan being eligible for sale to Fannie Mae or Freddie Mac (often referred to as the “GSE Patch”). The CFPB also proposed to replace the strict 43% debt-to-income (DTI) ratio basis for the general QM with an approach tied to the loan’s annual percentage rate that would still require the consideration of the DTI ratio or residual income.
- Amendments to Regulation Z to Facilitate Transition from LIBOR. The CFPB recently proposed amendments to Regulation Z to address the discontinuation of the London Inter-Bank Offered Rate (LIBOR) that is currently used by many creditors as the index for calculating the interest rate on credit cards and other variable-rate consumer credit products. (On July 14, 2020, from 12:00 p.m. to 1 p.m. ET, Ballard Spahr will hold a webinar, “The CFPB’s LIBOR Transition Proposal and Guidance: What You Need To Know.” Click here for more information and to register.)
Other items listed in the agenda on which the CFPB expects to take action this year include:
- Business Lending Data (Regulation B). Section 1071 amended the ECOA, subject to rules adopted by the Bureau, to require financial institutions to collect and report certain data in connection with credit applications made by women- or minority-owned businesses and small businesses. The agenda estimates that in anticipation of convening a SBREFA panel, the Bureau will issue a SBREFA outline in September 2020. (Pursuant to the Stipulated Settlement Agreement in the lawsuit filed against the Bureau in May 2019 alleging wrongful delay in adopting regulations to implement Section 1071, the Bureau is required to release the outline by September 15 and convene a panel by October 15. However, in its first status report filed with the California federal district court, the Bureau stated that while it believes it is on track to meet the September 15 and October 15 deadlines, the COVID-19 pandemic may “introduce uncertainty with respect to the Bureau’s future ability to meet these deadlines.”)
- Role of Supervisory Guidance. In September 2018, the CFPB, together with the Federal Reserve, FDIC, NCUA, and OCC, issued an Interagency Statement Clarifying the Role of Supervisory Guidance. The agenda estimates issuance of a proposed rule to codify the guidance in June 2020.
- Property Assessed Clean Energy Financing. In March 2019, the CFPB issued an Advance Notice of Proposed Rulemaking to extend Truth in Lending Act ability-to-repay requirements to PACE transactions. The agenda estimates pre-rule activity in October 2020.
- Home Mortgage Disclosure Act (Regulation C). The HMDA amendments adopted by the CFPB in October 2015 revised certain pre-existing data points, added data points set forth in Dodd-Frank, and included additional data points based on discretionary authority in Dodd-Frank permitting the CFPB to mandate reporting of other information. The October 2015 amendments also expanded the scope of reportable loans by requiring the reporting of dwelling-secured business or commercial purpose loans that meet the definition of a home purchase, refinancing, or home improvement transaction. In May 2019, the Bureau issued an Advance Notice of Proposed Rulemaking seeking comment on whether to make changes to the revised or new data points, and the coverage of business or commercial-purpose loans that are made to a non-natural person and secured by a multi-family dwelling. The agenda estimates issuance of a Notice of Proposed Rulemaking in September 2020.
- Public Release of Home Mortgage Disclosure Act Data. In December 2018, the CFPB announced final policy guidance regarding the application-level HMDA data that will be made available to the public. The agenda estimates issuance of a Notice of Proposed Rulemaking on the public disclosure of HMDA data in September 2020.
- Amendments to FIRREA Concerning Appraisals (Automated Valuation Models). The Bureau is participating in interagency rulemaking with the Federal Reserve, OCC, FDIC, NCUA and FHFA to develop regulations to implement the amendments made by the Dodd-Frank Act to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) concerning appraisals. The FIRREA amendments require implementing regulations for quality control standards for automated valuation models. The agenda estimates that the agencies will issue a Notice of Proposed Rulemaking in December 2020.
The Bureau’s long-term regulatory agenda items, which have no estimated dates for further action, include the following:
- Abusive Acts and Practices. In January 2020, the CFPB issued a policy statement to clarify the Dodd-Frank Act’s abusiveness standard. The agenda indicates that in issuing the policy statement, “the Bureau did not foreclose the possibility of engaging in a future rulemaking to further define the abusiveness standard.”
- Artificial Intelligence. In February 2017, the CFPB issued a request for information concerning the use of alternative data and modeling techniques in the credit process. In the agenda, the Bureau states that as it “continues to monitor developments concerning AI, the Bureau will evaluate whether rulemaking, a policy statement, or other Bureau action may be appropriate.”
Other long-term items include changes to loan originator compensation requirements in Regulation Z, consumer access to financial records, and the application of E-Sign Act requirements in the context of certain Bureau regulations.
Finally, the preamble to the agenda indicates that pursuant to Dodd-Frank Section 1022(d), which requires the Bureau to conduct an assessment of each significant rule or order it adopts under a Federal consumer financial law and publish a report of each assessment not later than 5 years after the rule’s or order’s effective date, the Bureau is now conducting an assessment of its Integrated Mortgage Disclosures Rule. The Bureau states in its blog post about the agenda that it will issue its assessment report no later than October 2020.
The preamble also indicates that the Bureau conducted its first review pursuant to section 610 of the Regulatory Flexibility Act, which requires the Bureau to consider the effect on small entities of certain rules it promulgates. That review looked at the impact of the Bureau’s 2009 overdraft rule on small banks and credit unions. The preamble states that “after considering the statutory review factors, including a review of public comment, the Bureau has determined that the rule should continue without change. The Bureau believes that there is a continued need for this rule, which does not overlap with other Federal or State rules and which likely preserves a valuable consumer choice.”
Now that the U.S. Supreme Court has ruled in Seila Law that the Dodd-Frank Act provision allowing the President to remove the Bureau’s Director only “for cause” is unconstitutional and the appropriate remedy is to sever that provision, a Democratic President, if elected in 2020, will be able to remove Director Kraninger without cause. As a result, the Bureau’s rulemaking priorities could change significantly in 2021 from those reflected in the new agenda. (We also expect that Director Kraninger will soon ratify all existing CFPB regulations that the Bureau still supports.)