CFPB Opens Inquiry into "Buy Now, Pay Later" Credit Plans Posted by AVCU on 3:54 PM

 Rebecca Tetreau, Regulatory Compliance Counsel, NAFCU reports, that the CFPB  began a new project at the end of 2021, when it issued orders in December to various companies offering “buy now, pay later” (BNPL) credit programs to collect information on the risks and benefits of the loans.  The orders went to Affirm, Afterpay, Klarna, PayPal, and Zip.  CFPB Director Rohit Chopra likened the BNPL model as “the new version of the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but gets the debt immediately, too.”

The press release on the inquiry notes that “the law requires that the CFPB monitor consumer financial markets and enables the agency to require market players to submit information to inform this monitoring.”  It is expected that the bureau will publish its findings from the BNPL inquiries to “illuminate the range of these consumer credit products and their underlying business practices.”

The CFPB is specifically looking for information about the following:

Accumulation of Debt

The bureau appears concerned with how easily consumers may utilize BNPL for more than just the “occasional big purchase,” which could lead to consumers spending more than they can afford.  BNPL providers have user-friendly mobile apps and web browser plug-ins, potentially making it easier to give in to shopping temptations even if the consumer already has “multiple purchases. . . with multiple companies,” making it more difficult to keep track of when payments are scheduled and to ensure that there is enough money to cover all the payments.  In the event of a consumer not having enough money in his/her account, the consumer may then be subject to additional fees/charges by not only the BNPL provider, but also the member’s credit union.  Questions on this topic can be found in Sections A and B of the sample order.

Regulatory Applicability

The CFPB is also concerned that some BNPL companies may not be adequately aware of which consumer protection laws apply to their loans.  Questions in Section C of the sample order seeks information about user disclosures and state licensing requirements.  Question 15 asks BNPL providers to describe and provide all of their agreements and disclosures, describe and provide all payment reminders, and to describe the user checkout process, including screenshots.  Question 16 asks BNPL providers about any state licenses, registrations, notifications, or certifications for all types of lending, retail installment contracts, money transmission, or remittances, and requests copies of any that apply.

The press release notes that “many BNPL companies do not provide dispute resolution protections available to users of other forms of credit, like credit cards,” and also notes that different late fees and policies may apply, depending on the particular rule(s) the lender is following.  Questions in Section D of the sample order asks about user contacts and demographics, including questions regarding certain user contacts about potential complaint issues.

Data Harvesting and Monetization

Lastly, the bureau is concerned that BNPL providers have access to their customers’ payment histories, and how that information will be used and/or monetized.  Questions in Sections E and F seek to gather information on these topics, including the kinds of data generated from product use and how the companies combine and use that data along with externally-sourced data. 

On the same day the bureau issued the press release and sample order regarding the BNPL inquiry, it also published a blog post for consumers with information on what to know before they buy (now, pay later) over the holiday season.  The blog discusses potential BNPL fees they wouldn’t otherwise be obligated to pay, potentially complicated returns, fewer consumer protections than credit cards, and the credit score impact of BNPL loans.

CFPB Issues New Specifications for its Collect Website Relating to Credit Card Data Submission Posted by AVCU on 10:38 AM

On August 20, 2021, the Consumer Financial Protection Bureau (CFPB) issued new technical specifications for complying with credit card agreement and data submission requirements under the Truth in Lending Act and the Credit Card Accountability Responsibility and Disclosure Act of 2009.1 To comply with these two laws, credit unions with applicable credit card portfolios will make the required submissions through the CFPB’s Collect website. Credit unions can begin submitting the following data to the CFPB using Collect, starting with listed submission dates:

• Terms of Credit Card Plans (TCCP) Survey data (for the February 14, 2022, deadline),
• Quarterly credit card agreement submissions (for the January 31, 2022, deadline), and
• Annual reports related to college credit card marketing agreements and data (for the March 31, 2022, deadline).
  

To use the Collect website, credit unions must complete the Collect registration form and send it to Collect_Support@cfpb.gov. Credit unions that have registered for Collect in the past do not need to register again.

Credit unions that are selected to participate in the TCCP Survey or are required to submit an annual report of college student credit card agreements pursuant to 12 CFR 1026.57(d) may register now. Any credit union with 10,000 or more credit card accounts as of any quarter-end is required to make quarterly credit card submissions to the CFPB pursuant to 12 CFR 1026.58(c) and must register for Collect by November 1, 2021.2 Once a credit union receives its login credentials, it will be able to review its current submissions and make the required submissions for the fourth quarter of calendar year 2021 starting on December 1, 2021. For more details, view the technical specifications for the system on the CFPB’s website.

The CFPB is in the process of updating and publishing resources to help card issuers use Collect. Existing TCCP Collect resources can be accessed on the CFPB’s website. The CFPB will continue to publish resources for the quarterly credit card agreement submissions and annual reports related to college credit card marketing agreements and data online.

Additional Information

If you have questions about the information in this Regulatory Alert, please contact the NCUA’s Office of Consumer Financial Protection at 703.518.1140 or ComplianceMail@ncua.gov. You can also contact your NCUA regional office or state supervisory authority.

CFPB mortgage rules do not include proposed foreclosure moratorium Posted by AVCU on 4:22 PM

 The Consumer Financial Protection Bureau (CFPB) finalized its mortgage servicing protections rule Monday designed to facilitate a smooth transition as federal foreclosure moratoriums expire. CUNA expressed several concerns about the CFPB’s original proposal which included a foreclosure moratorium, and the final rule acknowledges CUNA’s comments about the proposal’s insufficient tailoring and its potential to do more harm than good.

“We thank the CFPB for listening to CUNA and other concerns about the overbroad and potentially-harmful proposed moratorium,” said CUNA President/CEO Jim Nussle. “We share the bureau’s goal of getting consumers through the pandemic and its effects, and credit unions will continue their efforts to work with credit union members.”

Under the CFPB’s rule, credit unions will retain the discretion and ability to initiate foreclosure if the borrower:

• Has abandoned the property;
• Is more than 120 days behind on their mortgage payments and has not responded to specific required outreach from the mortgage servicer for 90 days; or
• Has submitted a complete loss mitigation application and been evaluated for options other than foreclosure and there are none available.

These protections only apply to loans that became more than 120 days delinquent after March 1, 2020 and where the statute of limitations expires on or after Jan. 1, 2022.

These procedural protections only apply to first notice or first filings to initiate foreclosures between the effective date of August 31, 2021 and the sunset date of January 1, 2022.

The rule also finalized other mortgage servicing protections related to borrowers exiting forbearance including CUNA-sought clarity regarding live contact. The rule becomes effective August 31, but a servicer may voluntarily take certain actions discussed in the 2021 Rule before this date for certain provisions.

Additionally, the Bureau does not intend to take supervisory or enforcement action against servicers that offer a borrower a streamlined loan modification based on an incomplete application prior to that date, so long as the modification meets the criteria outlined in the 2021 rule.

CUNA sends recommendations to incoming Biden administration Posted by AVCU on 8:22 AM

•  The incoming Biden administration should consider the impact any policy changes will have on credit unions’ ability to serve their members, CUNA wrote to the Biden transition team Tuesday. CUNA’s recommendations include continued actions from NCUA and the Consumer Financial Protection Bureau (CFPB), as well as recommendations in the housing and diversity, equity, and inclusion arena.

“CUNA strongly encourages this new administration to support and implement further COVID-recovery legislation and policies in 2021 and beyond to ensure credit unions remain in a position to serve their members throughout and after the COVID-19 pandemic,” the letter reads.

CUNA continues to encourage the NCUA to:

• Refrain from National Credit Union Share Insurance Fund (NCUSIF) premium assessments;
• Temporarily exclude certain low-risk assets from the net worth ratio;
• Remove obstacles to consumers accessing the Payday Alternative Loans I Program;
• Allow the use of temporary asset thresholds; and
• Quickly review pending rulemakings.

CUNA recommendations to the CFPB include broad ones, as well as recommendations for specific regulations:

• Avoid implementing new rules that would unnecessarily tie-up compliance resources or add to regulatory burden;
• Suspend unnecessary onsite examination activities and reduce the frequency of requests for examination-related information 
• Expand “good faith efforts to comply” supervision policies to additional areas where credit unions are acting swiftly to assist members in need; and
• Coordinate with other federal banking regulators, especially the NCUA, to issue up-to-date guidance on mortgage servicing; and
•  Effectively use its statutory authority to appropriately tailor regulations to reduce burden or exempt credit unions entirely, as appropriate;

CUNA also covers several specific regulations and actions the CFPB should take:

• Remittances
• Increase the “normal course of business” safe harbor threshold from 500, as finalized, to 1,000 remittance transfers; and
• Eliminate the 30-minute cancellation requirement or provide consumers the ability to opt-out of the mandated waiting period.
• Home Mortgage Disclosure Act (HMDA)
• Allow reporting for Home Equity Lines of Credit (HELOCs) to once again be voluntary;
• Reduce the HMDA data set for credit unions to only data points specifically required by current statute; 
• Increase further the open-end line of credit and closed-end mortgage loan reporting thresholds to exempt credit unions with smaller mortgage lending portfolios from HMDA reporting; and   
• Alter the approach to the privacy balancing test used to determine which HMDA data points will be made available to the public in favor of consumer privacy. 
• Unfair, Deceptive, or Abusive Acts or Practices (UDAAP)
• Solicit stakeholder feedback on an ongoing basis to determine whether the “abusiveness” standard being applied is clear and whether a rulemaking is necessary;
• Clarify that previous enforcement actions or consent orders that conflict with statutory or judicial precedent create no new expectations for compliance; and
• Clarify its authority under the Dodd-Frank Act in regulating the business of insurance and reaffirm that UDAAP is not a backdoor to regulate insurance activities.

The letter also notes credit unions’ critical role in the housing markets, and suggests the following priorities:

• Include mortgage payment assistance to borrowers impacted by the COVID-19 crisis in any stimulus package;
• Include temporary liquidity assistance for mortgage servicers in any stimulus package
• Ensure the Federal Housing Finance Agency’s (FHFA) recapitalization plans for Fannie Mae and Freddie Mac are phased in on a schedule that prevents disruption of the secondary mortgage market; and
• Any amendments to existing housing finance reform plans should ensure that the secondary market remains open to lenders of all sizes on an equitable basis, without allowing Fannie and Freddie to provide discounts based on volume or otherwise charge higher fees to smaller lenders such as credit unions.

CUNA also highlights its commitment, and that of its members, to ensure DEI plays a role in every aspect of the financial services sector.

“Credit unions and all in the financial services sector, including our regulators, must be intentional about increasing diversity and inclusion at leadership, board, and staff levels to continue to reach and better serve an increasingly diverse population and enhance financial inclusion for all,” the letter reads. “We look forward to working with the new administration, Congress and federal regulators as we continue to make diversity, equity, and inclusion an industry top priority.”

CFPB passes General, Seasoned QM final rules Posted by AVCU on 9:40 AM

 The Consumer Financial Protection Bureau (CFPB) issued final rules related to qualified mortgage (QM) loans, one on a General QM one on the new, “Seasoned” QM.

The General QM final rule replaces the current requirement for General QM loans that the consumer’s debt-to-income ratio (DTI) not exceed 43% with a limit based on the loan’s pricing.

The General QM final rule also:

• Provides higher pricing thresholds for loans with smaller loan amounts, for certain manufactured housing loans, and for subordinate-lien transactions.
• Retains the General QM loan definition’s existing product-feature and underwriting requirements and limits on points and fees.
• Requires lenders to consider a consumer’s DTI ratio or residual income, income or assets other than the value of the dwelling, and debts and removes appendix Q and provides more flexible options for creditors to verify the consumer’s income or assets other than the value of the dwelling and the consumer’s debts for QM loans.

CUNA supported the proposed General QM, believing it is an important step in turning the General QM into a viable option for credit union originations.

The second final rule issued creates a new category for QMs, Seasoned QMs, for first-lien, fixed-rate covered transactions that have met certain performance requirements, are held in portfolio by the originating creditor or first purchaser for a 36-month period, comply with general restrictions on product features and points and fees and meet certain underwriting requirements.

Specifically, the loan can have no more than two delinquencies of 30 or more days and no delinquencies of 60 or more days at the end of the seasoning period.

CUNA said in its comments on the proposed rule the Seasoned QM will aid residential mortgage expansion.

The rules will take effect 60 days after their publication in the Federal Register.

The General QM Final Rule will have a mandatory compliance date of July 1, 2021.  The Seasoned QM Final Rule will apply to covered transactions for which creditors receive an application on or after the effective date.