Congress is back in session and this Thursday, September 7, the House Subcommittee on Financial Institutions and Consumer Credit will hold a one-panel hearing entitled “Legislative Proposals for a More Efficient Federal Financial Regulatory Regime.”  The hearing will take place at 10:00 a.m. in room 2128 of the Rayburn House Office Building, and will involve the following witnesses:

  • Anne Fortney, Partner Emerita, Hudson Cook LLP
  • Charles Tuggle, Executive Vice President and General Counsel, First Horizon National Corporation
  • Thomas Quaadman, Executive Vice President, Center for Capital Markets Competitiveness, U.S. Chamber of Commerce
  • Chi Chi Wu, Staff Attorney, National Consumer Law Center

The witnesses will testify on the following six bills:

H.R. 1849 (Rep. Trott), the “Practice of Law Technical Clarification Act of 2017

This bill seeks to protect attorney debt collectors by amending the Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Act of 2010.  A “debt collector” is currently defined under the FDCPA as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.”  Courts have interpreted this definition to cover attorneys who collect debts as a matter of course for their clients, or who collect debts as a principal part of their law practice.  Moreover, some courts have held that representations made by an attorney in court filings during the course of debt-collection litigation are actionable under the FDCPA, even when they are addressed to a consumer’s attorney and not the consumer himself.  Under the proposal, the FDCPA’s definition of “debt collector” would exclude law firms and licensed attorneys who (1) serve, file, or convey formal legal pleadings, discovery requests, or other documents pursuant to the applicable rules of civil procedure; or who (2) communicate in, or at the direction of, a court of law or in depositions or settlement conferences, in connection with a pending legal action to collect a debt on behalf of a client.

The bill would also provide that the Consumer Financial Protections Bureau (CFPB) cannot exercise supervisory or enforcement authority over attorneys engaged in the practice of law who do not offer or provide consumer financial products or services.  The CFPB has brought a number of enforcement actions against attorneys and law firms engaged in allegedly illegal debt collection practices.

H.R. 2359 (Rep. Loudermilk), the “FCRA Liability Harmonization Act

This bill would amend the Fair Credit Reporting Act (FCRA) to limit statutory damages in FCRA class actions to the lesser of $500,000 or one percent of the net worth of the defendant. This proposal would also eliminate punitive damages that can be awarded under the FCRA.  The FCRA currently permits an award of punitive damages, and has no cap on statutory damages for individual or class actions.

H.R. 3312 (Rep. Luetkemeyer), the “Systemic Risk Designation Improvement Act of 2017

This bill seeks to amend the definition of “systemically important financial institutions” that are subject to enhanced regulatory standards under Title I of The Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).  Currently, Dodd-Frank requires each bank holding company deemed “too big to fail” by virtue of total consolidated assets of $50 billion or more to, among other things, prepare and provide to the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve a resolution plan, or “living will,” for its rapid and orderly resolution under the U.S. bankruptcy code. The bill would remove the $50 billion asset threshold from Dodd-Frank and instead add a measurement approach based on “systemic indicator scores.”  Under this approach, only bank holding companies that are identified as global systemically important banks (G-SIB) would be subject to the Federal Reserve Board’s enhanced supervision and prudential standards.

H.R. ____ (Rep. Royce), the “Facilitating Access to Credit Act

This proposal seeks to exempt an Authorized Credit Services Provider (ACSP) from the Credit Repair Organizations Act (CROA) to the extent it provides credit and identity protection or credit education services, as defined in the bill.  The CROA currently covers a “credit repair organization,” which is defined to include anyone who provides a service, “in return for the payment of money or other valuable consideration, for the express or implied purpose of— (i) improving any consumer’s credit record, credit history, or credit rating; or (ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (i).” While originally aimed at credit repair scams, this broad definition has been read to cover credit monitoring products offered by consumer reporting agencies.

The bill seeks to narrow this definition by setting forth a process to apply to become an ACSP with the Federal Trade Commission (FTC), which if approved by the FTC, would allow the ACSP to provide the defined services without being subject to the CROA and without being subject to state laws and regulations concerning a credit repair organization.  State laws and regulations related to unfair or deceptive acts or practices in marketing products or services would still apply.  ACSPs that violate any of the eligibility criteria provided in the bill would be subject to retroactive revocation of status to the time of the conduct, thereby allowing the FTC to then enforce violations of the CROA.

H.R. ____ (Rep. Tenney), the “Community Institution Mortgage Relief Act of 2017

This bill would amend the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act of 1974 (RESPA) and would direct the CFPB to reduce loan servicing and escrow account administration requirements imposed on certain loan servicers.  First, the proposal would require the CFPB to exempt from certain escrow or impound requirements a loan that is secured by a first lien on a consumer’s principal dwelling if the loan is held by a creditor with assets of $50 billion or less.  The statute does not currently provide an exemption for “smaller creditors” based on asset size.  Second, the CFPB would need to provide either exemptions to, or adjustments from, certain RESPA requirements for servicers of 30,000 or fewer mortgage loans.  The current statute provides no such threshold or exemption for “small servicers of mortgage loans.”

H.R. ____ (Rep. Hill), the “TRID Improvement Act of 2017

This bill would expand the period under RESPA and TILA in which a creditor is allowed to cure a good-faith violation on a loan estimate or closing disclosure from 60 to 210 days after consummation.  The proposal would also amend RESPA to allow for the calculation of a simultaneous issue discount when disclosing title insurance premiums.  Presently under RESPA, a lender may disclose a simultaneous issue discount by disclosing the full premium rate and by taking the full owner’s title insurance premium, adding the simultaneous issuance premium for the lender’s coverage, and then deducting the full premium for lender’s coverage.  This calculation method renders inaccurate disclosures of the lender’s and owner’s individual title insurance premiums even though the sum will equal the amount actually charged to the consumer when paying for both policies.

Congress is also currently considering government funding legislation, raising the debt ceiling, and tax reform so these bills may not receive close attention.  We will report back on the hearing and provide updates.

In July, the CFPB finalized amendments to the TILA/RESPA Integrated Disclosure (TRID) rule.   Published in the Federal Register earlier this month, the amendments will become effective on October 10, 2017, with a mandatory compliance date of October 1, 2018.

The CFPB has just released a 24-page summary of the amendments, with citations to the sections of the rule that were amended.

 

As we reported previously, on July 7, 2017 the Consumer Financial Protection Bureau (CFPB) posted on its website long awaited amendments to the TILA/RESPA Integrated Disclosure (TRID) rule, and a proposal to address the so-called “black hole” issue (regarding limits on the ability of a credit to reset tolerances with a Closing Disclosure).

Both the amendments and the proposal were published in Federal Register on August 11, 2017.  As a result, the amendments become effective on October 10, 2017, with a mandatory compliance date of October 1, 2018, and the comment deadline for the proposal is also October 10, 2017.

On October 7, 2015, the U.S. House of Representatives passed a bill that would provide a safe harbor from the new TILA/RESPA Integrated Disclosure (TRID) rule for a period of five months. By a vote of 303 to 121 the House passed the “Homebuyers Assistance Act” (H.R. 3192), which would provide a hold harmless period until February 1, 2016 for good-faith efforts to comply with the TRID rule, which went into effect October 3, 2015. The CFPB had previously delayed the effective date of the TRID rule from August 1, 2015 until October 3. The CFPB declined to adopt a formal hold harmless period despite industry requests for such a period based on the considerable difficulty of implementing the TRID rule, which was compounded by the lack of formal guidance on compliance issues posed by the rule. However, the CFPB has indicated it would take into account good-faith efforts to comply with the new requirements. The bill now heads to the Senate where its prospects remain unclear. The House passed the bill by a substantial bipartisan majority, despite a White House threat that it would veto any hold harmless bill.

The CFPB has updated the TILA-RESPA implementation materials and resources to make them consistent with the new October 3 effective date for the TILA-RESPA final rule. Specifically, updates have been made to the TILA-RESPA Integrated Disclosures Guide to the Loan Estimate and Closing Disclosure forms, the TILA-RESPA Integrated Disclosure Small Entity Compliance Guide, and the TILA-RESPA Integrated Disclosures timeline example. The TILA-RESPA implementation materials may be found on the CFPB’s website here.

The CFPB has issued a final rule postponing the effective date for all provisions of the TILA-RESPA Final Rule and Amendments to October 3, 2015.  The final rule also includes certain technical amendments to reflect the new effective date.  The provisions of the final rule related to the delay in the effective date, are effective immediately upon publication in the Federal Register in order to move the effective date for TILA-RESPA Final Rule and Amendments from Saturday, August 1, 2015 to Saturday, October 3, 2015.  The Federal Register that contains the finalized rule is scheduled to be published on July 24, 2015.

The final rule also makes two technical changes to the TILA-RESPA Final Rule that were not in the proposed rule.  Specifically, the final rule amends § 1026.38(i)(8)(ii) and (iii)(A) to include, in the amount disclosed as “Final” for Adjustments and Other Credits, the amount disclosed under § 1026.38(j)(1)(iii) for certain personal property sales in order to conform the calculation of Adjustments and Other Credits on the Closing Disclosure and Loan Estimate.  The final rule also attempts to conform the disclosure of the borrower’s cash to close in the Calculating Cash to Close and the Summaries of Transactions tables on the Closing Disclosure by amending § 1026.38(j)(1)(iv) to include, in the amount disclosed as Closing Costs Paid at Closing, lender credits disclosed under § 1026.38(h)(3).  According to the preamble, these “technical corrections are in line with existing industry expectations and informal Bureau guidance.”

As we previously reported, due to an administrative error the CFPB committed under the Congressional Review Act, the TILA-RESPA Final Rule would have been delayed by two weeks until August 15, 2015.  According to Director Cordray, the CFPB believes that the additional time provided by the new October 3, 2015 effective date will “better accommodate the interests of the many consumers and providers whose families will be busy with the transition to the new school year.”  In addition, the preamble also notes that the CFPB noticed “delays in the delivery of system had left some creditors with limited time to fully test all of their systems and system components to ensure that each system works with the others in an effective manner.”

Finally, the preamble to the final rule repeats the CFPB’s vow that it will not institute either a formal grace period or a dual compliance period as requested by many in the industry and Congress. However, the preamble states that, as expressed in Director Cordray’s letter to members of Congress on June 3, 2015, the CFPB’s “oversight of the implementation of the Rule will be sensitive to the progress made by those entities that have squarely focused on making good-faith efforts to come into compliance with the rule on time.”

The CFPB has posted a video of its May 26th webinar that addressed questions about the final TILA-RESPA Integrated Disclosure Rule. The webinar was the fifth in a series to address specific questions related to rule interpretation and implementation challenges that have been raised by creditors, mortgage brokers, settlement agents software developers, and other industry stakeholders. Although currently the rule is scheduled to become effective for applications received by creditors or mortgage brokers on or after August 1, 205, the CFPB has proposed to delay the effective date until October 3, 2015.

A detailed discussion of the webinar prepared by Rich Andreano, a member of Ballard Spahr’s Mortgage Banking Group, can be found here.

The CFPB has issued its formal proposal to delay the effective date of the TILA-RESPA Integrated Disclosures (TRID) rule until Saturday, October 3, 2015.  The new effective date comes only a week after the CFPB announced it would delay the effective date until October 1, 2015 due to an administrative error that was made in the rules disclosure and review process.  Specifically, under the Congressional Review Act, Congress and the Government Accountability Office must receive any new rule at least 60 days prior to the rule taking effect.  However, the CFPB failed to submit its notice until after the 60 day deadline had passed and was forced to delay the effective date of the TRID rule as a result.

Although based on when the CFPB completed the required filing, the effective date of the TRID rule would have been delayed until August 15, 2015, the CFPB decided to propose a longer delay.  In the CFPB’s press release, the agency says it believes pushing back the effective date to the first Saturday of October “may facilitate implementation by giving industry time over the weekend to launch new systems configurations and to test systems.”  The Saturday launch date is also consistent with original industry plans to transition to the new TRID rule on Saturday, August 1, 2015.  According to the CFPB, “moving the effective date may benefit both industry and consumers with a smoother transition to the new rules.”  As we noted previously, concerns with the finalization of the necessary software to comply with the TRID rule may have been a factor in the CFPB’s decision.

The proposal will be published in the Federal Register on June 26, and comments are due by July 7.