On September 6, 2017, the CFPB announced that it has taken action against an online lead aggregator. The allegations revolved around the company’s selling personal information of consumers who were interested in small-dollar or installment loans to online lenders. It was alleged that the loans ultimately offered to consumers were, or were likely to be, void in a consumer’s state of residence, meaning that the lender had no legal right to collect the loans. According to the CFPB’s consent order, the loans were void in whole or in part because of licensing requirements or interest rate limitations in the consumer’s state.
Read our client alert.
The CFPB announced on Wednesday, September 20th, 2017, proposed guidance to limit the Home Mortgage Disclosure Act (HMDA) data it shares publicly. The Bureau’s 2015 HMDA amendments (discussed in our alerts here and here) revamped HMDA’s coverage and processes, including requiring lenders to report vast swaths of new data about mortgage applicants and their loans. At the time, the Bureau said that it was still considering what portion of that data it would share with the public. It expressed sensitivity to the privacy and data security concerns implicated by gathering and maintaining such large amounts of personal data, which include applicant and borrower addresses, loan amounts, and credit scores, and sought public comment. In response, many consumer advocates and lenders expressed concern with sharing such sensitive information and urged the CFPB to limit the public sharing of that data.
Now, almost two years later, the CFPB has made its proposal. The Bureau would eliminate more than a dozen data and text fields—including the applicant or borrower’s property address, credit score(s), and race and ethnicity—from the HMDA data it publicly discloses. It is proposing a compromise on other data fields by making them less precise. For example, rather than publishing a borrower’s loan amount and property value, it would “disclose the midpoint for the $10,000 interval into which the reported value falls.” And rather than disclosing the borrower’s age, the Bureau would publish a range (under 25, 25 to 34, 35 to 44, etc…).
The comment period ends 60 days after the proposal is published in the Federal Register, and the update will take effect on January 1, 2018.
The CFPB recently announced the issuance of its first no-action letter (“NAL”) to Upstart Network, Inc., an online lending platform that uses alternative data to model consumer credit decisioning and pricing. The letter signifies that the CFPB has no present intention to recommend an enforcement or supervisory action against Upstart for violation of the Equal Credit Opportunity Act. This NAL comes as the Bureau “continues to explore the use of alternative data to help make credit more accessible and affordable for consumers who are credit invisible or lack sufficient credit history.” In addition, the NAL is issued in the midst of heightened regulatory interest in and scrutiny of alternative credit data and modeling techniques. The Bureau issued two related requests for information, one in November 2016 on data aggregation services and the other in February 2017 on the use of alternative data, modeling techniques, and machine learning techniques in consumer lending. The NAL tends to suggest that companies may have some flexibility in the use of alternative underwriting modeling to offer consumer credit; however, as noted in this alert, the practical utility of such NALs may be limited.
Read our client alert.
Through hurricanes, wild fires, the publication of Hillary Clinton’s book, the birth of Amal and George Clooney’s twins, and the Dodgers’ historic losing streak, Director Richard Cordray and the CFPB’s Final Arbitration Rule are still standing. As my colleague Ollie Ireland explained, these days, it’s easier to predict the weather than it is to predict what will happen in Congress. So we wait.
To provide some distraction, focus on this: September is National Mortgage Professional Month. So say hello to your friendly neighborhood mortgage professional. For further distraction, we’ve packed this Report with all the blockbusters from the last quarter — read on for the latest in Privacy, Preemption, Arbitration, Mortgage, the CFPB, etc.
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September 17-19, 2017
Grand Hyatt Washington
1000 H St., NW
Washington, DC 20001
Join Morrison & Foerster at the Mortgage Bankers Association’s Regulatory Compliance Conference. Partner Don Lampe will speak on the “Preparing for Exams and Enforcement” panel.
Click here to register.
October 19-20, 2017
Waterview Conference Center
1919 N Lynn St.
Arlington, VA 22209
This educational institute is designed to expose practitioners to key areas of consumer financial services law. Key topics covered at the conference will include:
- History and development of federal and state consumer financial services laws
- Truth in lending and disclosure requirements
- Fair lending
- Financial privacy and credit reporting
- Data security, fraud prevention, and identity theft protection
- Consumer communications: FDCPA, TCPA, TSR, Can-Spam, and others
- Asset account regulation
- Mortgage origination and servicing
- Litigation and enforcement actions
Senior Partner Rick Fischer will speak on the “Financial Privacy, Data Security and Cybersecurity” panel on Thursday, October 19.
Click here for more information and to register.
October 25-26, 2017
400 New Jersey Ave., NW
Washington, D.C. 20001
This day and a half conference is a valuable forum for banking and securities attorneys, senior compliance officers and regulators providing for an exchange of information, ideas and experiences on current hot topic regulatory and legislative/agency initiatives. The focus is on high-level banking and securities law, enforcement proceedings, financial holding company issues, securities underwriting and distribution, capital markets regulation and public finance. Key industry leaders, regulatory professionals and legislative participants share information about changes in the regulation landscape and current hot topic areas of regulatory and legislative initiatives, including panels of general counsels from the banking, securities and commodities regulatory agencies.
Morrison & Foerster partner Barbara Mendelson is on the conference planning committee and will be moderating the “Banking General Counsel” panel.
Click here to register.
FMA will be providing CLE/CPE credit.
Long a mainstay of the financial world, the floating “IBOR” rates, based on the rates of actual or purported interbank offered loans, are now being swept slowly into the dustbin of history. The quantity, in both number and size, of existing financial products based on these floating rates is enormous, with the outstanding principal amount of such transactions globally estimated to be in the hundreds of trillions of dollars. IBORs are used extensively in numerous currencies as bases for floating rates in a wide range of transactions including derivatives, structured products, mortgages, floating rate securities and other consumer and commercial loans. A phase-out of the use of familiar benchmarks will therefore be a massive undertaking that will take many years to accomplish. In this article we review, primarily in relation to derivatives, the state of play regarding the IBORs, their possible replacements, prospects for a transition to new floating rates and some of the issues that parties to existing and new IBOR-based transactions should consider.
Read our user guide.
On August 23, 2017, the CFPB announced the resolution of an administrative action under the Equal Credit Opportunity Act and its implementing regulation, Regulation B, against American Express Centurion Bank and American Express Bank, FSB. In the proceeding, the CFPB alleged the Issuers violated ECOA by (i) offering credit and charge card products and services to consumers and small businesses in Puerto Rico and other U.S. territories on less favorable terms than it offered similar products and services to consumers and small businesses in U.S. states, and (ii) conducting collection activities with consumer cardholders with Spanish language preferences without making available to such cardholders collection offers and programs comparable to the offers and programs that it made available to cardholders without Spanish language preferences.
Read our client alert.
In another significant litigation setback for the CFPB, a U.S. District Court in Atlanta imposed discovery sanctions against the Bureau and dismissed all claims against payment processors alleged to have aided and abetted an unlawful debt collection scheme. Cases brought by the CFPB’s Division of Enforcement have seen the imposition of significant levels of damages as well as the imposition of severe penalties. More recently, however, some litigants have pushed back with success against the CFPB, demanding that the Bureau be held to its burden of proving the factual and legal bases of its claims.
Read our client alert.