The Consumer Financial Protection Bureau (CFPB), Recent Developments: October 21, 2013 - October 25, 2013
CFPB Publishes Remittance Transfer Examination Procedures
On October 22nd, the CFPB published its examination procedures for remittance transfers.1 The CFPB will use these procedures when it examines whether supervised depository and non-depository institutions comply with recently amended Federal consumer financial laws, including the Electronic Fund Transfer Act and Regulation E, when they make remittance transfers for consumers. Remittance transfers are electronic transfers of money abroad. Among other things, the examination procedures state that the CFPB will examine whether such an institution does the following:
Properly calculates and discloses to consumers, at designated times, the costs, fees, and exchange rates associated with remittance transfers, as well as the amounts that will be received by the recipients of the transfers and the dates when funds will be available to such recipients, in accordance with Regulation E;
Properly informs consumers of their right to cancel remittance transfers and of the institutions’ error resolution and complaint procedures;
Addresses complaints and errors and processes cancellations and refunds appropriately and in a timely manner;
Adequately oversees the activities of agents that institutions utilize for remittance transfers;
Engages in privacy and information sharing practices that are consistent with the Gramm-Leach-Bliley Act and Regulation P;
Has in place an appropriate compliance management program to ensure that its remittance transfer acts and practices comply with Federal consumer financial laws; and
Does not engage in remittance transfer acts or practices that are unfair, deceptive, or abusive.
CFPB Unveils eRegulations Tool to Aid Public Understanding of its Regulations
On October 22nd, the CFPB released its new online tool, eRegulations, 2 which seeks to aid public access to and understanding of the CFPB’s regulations. Recognizing that it can be difficult for the public to compile and sift through all the amendments, cross-references, and agency interpretations that comprise its regulations, the CFPB established the eRegulations tool to compile all this information centrally in a hyperlinked version of its regulations. While the CFPB asserts that this tool will eventually be available for all of the CFPB’s regulations, the initial release only covers Regulation E.
Federal Financial Regulators Issue Fair Lending Guidance on QM Rule
Five federal regulatory agencies – the Federal Reserve, the CFPB, the FDIC, the NCUA, and the OCC – issued guidance on October 22nd regarding fair lending risks associated with the Qualified Mortgage (QM) rule. 3 The agencies issued their statement in response to industry concerns that a creditor’s decision to strictly offer only QM loans could subject such a creditor to liability under the Equal Credit Opportunity Act based on the disparate impact doctrine. In the statement, the agencies seek to assure creditors that, absent other factors, their choice to offer only QM loans would not put them at risk for fair lending violations. The agencies advise creditors to continue to monitor their QM loan products as they would any other product for fair lending risks.
Notably absent from the roster of agencies issuing the guidance was HUD, which is the federal regulator responsible for enforcing fair lending violations under the Fair Housing Act.
Federal Financial Regulators Issue Diversity Policy Statement
On October 23rd, the OCC, the Federal Reserve Board, the FDIC, the NCUA, the SEC, and the CFPB issued a proposal for joint standards to assess the diversity policies and practices of their respective regulated entities.4 Section 342 of the Dodd-Frank Act requires each of these agencies to develop such standards through their Offices of Minority and Women Inclusion. The proposed joint standards address:
Organizational commitment to diversity and inclusion;
Workforce profile and employment practices;
Procurement and business practices and supplier diversity; and
Practices to promote transparency of organizational diversity and inclusion.
After it is published in the Federal Register, the proposal will be available for public comment for 60 days.
CFPB Sues Law Firm for Alleged RESPA Violations
On October 24th, the CFPB filed a complaint against Borders & Borders, PLC, a law firm, and its principals, alleging that they violated the Real Estate Settlement Procedures Act (RESPA) by engaging in a kickback scheme for referrals of real estate settlement service business.5 The alleged illegal kickbacks were paid through a series of affiliated entities. RESPA prohibits kickbacks for referring real estate settlement service business when the business involves a federally related mortgage.
The CFPB is alleging that the defendants used several joint ventures through which to funnel referral fees and disguise the kickbacks as a legal profit sharing. The various joint ventures were not “bona fide” entities according to the CFPB, because they did not have their own addresses or other contact information. Rather the entities shared the same independent contractor, which was an employee of Borders & Borders. The CFPB is seeking an injunction and disgorgement of all illegal proceeds from the referral arrangement.
1 The CFPB’s remittance transfer examination procedures are available here.
2 CFPB’s eRegulations tool is available here.
3 The Interagency Statement on Fair Lending Compliance is available here.
4 The Interagency Policy is available here.
5 A copy of the CFPB’s complaint is available here.