The CFPB’s Payday Lending rule. This is one of those rules
that doesn’t have a tremendous impact on what most banks typically
do, however for some time the CFPB has told the industry that
changes were coming to its proposed rule. The ability-to-repay
provisions of the rule will likely be significantly changed, if not
scrapped altogether. Banks that offer short-term lending products
that will be covered by this rule should pay close attention to what
the Bureau does here.
Speaking of the CFPB, it was good to see the Bureau announce
they wish to continue to—or once again—be known as the CFPB,
rather than BCFP or another name we’d all have to get used to all
over again. That makes it easier on all of us!]
Debt Collection. The Dodd-Frank Act gave the CFPB authority
to regulate debt collectors (including banks) and write an implementing regulation for the Fair Debt Collection Practices Act,
or FDCPA. The Bureau has announced potential plans, to issue
a proposal early in 2019. There continue to be many questions
around what such a regulation might look like, but at present it
does not appear the CFPB will remove the exception from FDCPA
coverage when banks (or other similar parties) collect their own
debts. But the rules do need to be updated to cover issues like
emails, texts, and other newer forms of communication.
Community Reinvestment Act (CRA) modernization.
This promises to be one of the more well-publicized compliance news stories of 2019, just as it was last year. Of course,
the primary issue to be resolved before we see any meaningful reform is whether the regulatory agencies (OCC, Federal
Reserve, and FDIC) can and will agree on what exactly to do.
But some of the more pressing issues to be addressed in any
■ ■ ■ How much emphasis should branch location (or branches in
general) be given in evaluating a bank’s assessment area and
CRA performance? There are many banks that have only one
branch, or no branches at all. What is their assessment area?
How should they be evaluated?
■ ■ ■ Banking in the 21st century is in many ways different from
when the rules were written in the 1970s: telephone and inter-
net banking, and banking on smart phone apps is ubiquitous,
for example. How should these new forms of interaction with
customers be treated?
■ ■ ■ Should the “primary purpose” test for community development
loans and investments be modified or eliminated?
■ ■ ■ Should the regulation move to a more metrics-centric approach
as a means to evaluate performance, or is that too strict and
narrow an approach?
■ ■ ■ How should inconsistencies between regulators be dealt with?
CRA has always been a regulation with many gray areas and
vagaries; see the number of Frequently Asked Questions the
agencies have issued over the years. As well, inconsistencies
between regulators have been problematic at times. Any clarity
would be welcome.
Expect some sort of movement toward an interagency proposal
sometime in 2019.
Appraisal regulations. There are several proposals and final
rules that will change the thresholds as to when an appraisal is
needed on real estate-secured loans.
■ ■ ■ The prudential regulators have proposed increasing the threshold for a required appraisal on residential home loans from
$250,000 to $400,000;
■■ ■ The Economic Growth, Regulatory Relief and Consumer
Protection Act (the Dodd-Frank Reform bill signed into law
in May of 2018) contained a provision that would provide
an exemption from obtaining an appraisal in rural areas of
$400,000, provided certain conditions are met; and
■ ■ ■ A final rule from the regulators raised the threshold for commercial loans (meaning a loan not secured by a single 1- to
4-family residential structure) requiring an appraisal from
$250,000 to $500,000.
Make sure your bank’s appraisal compliance program (which,
by the way, is required by rule) reflects the new threshold amounts,
including additional changes when they occur.
Mortgage Lending. The Dodd-Frank reform legislation contained several provisions affecting consumer mortgage lending,
some of which have already been finalized, including removal
of the renewed three-day waiting period if a second offer of
credit with a lower rate is presented to the applicant. But several
others must still be finalized, including a provision allowing for
Qualified Mortgage (QM) status for loans held in portfolio by
banks with less than $10 billion in assets, and modifications
to the exclusion from maintain an escrow account for similar
small banks. Clarification of a few issues in both provisions is
needed in a final rule.
The CFPB also recently issued their required report on the
impact of the ability-to-repay rules in Regulation Z, which may
influence some future rulemaking. And the TILA-RESPA Integrated Disclosure (TRID) rules are also subject to further interpretation by the Bureau.
Also worthy of attention is the emphasis the CFPB is placing on
Section 8 of RESPA (prohibition against kickbacks and unearned
fees). The CFPB has issued several enforcement actions on this
over the past few years, so it’s a hot topic. There is increasing
pressure for the Bureau to issue rules or guidance on banks’ use
In addition, the CFPB has finally opined
on what data elements will be made public
as opposed to what data elements
are for the regulators’ eyes only.
This will have a critical impact
on the types of fair lending analyses
that the press, community groups, and
banks’ competitors can perform.