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Fall 2014 rulemaking agenda

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Today, we’re posting a semi-annual update of our rulemaking agenda in conjunction with a broader initiative led by the Office of Management and Budget (OMB) to publish a Unified Agenda of Regulatory and Deregulatory Actions across the federal government. Portions of the Unified Agenda will be published in the Federal Register, and the full set of materials is now available online.

Under the Regulatory Flexibility Act, federal agencies are required to publish regulatory agendas twice a year. We’ve been doing this for a couple of years now by voluntarily participating in the Unified Agenda. Our regulatory agenda includes rulemaking actions in the following stages: pre-rule, proposed rule, final rule, long term actions, and completed actions.

Mortgages

Our agenda includes certain mortgage rulemakings mandated by the Dodd-Frank Act. For example, in July 2014 we released a proposal to amend Regulation C, which implements the Home Mortgage Disclosure Act (HMDA) in accordance with the Dodd-Frank Act’s amendments to HMDA, and to help align the law with existing industry standards for collecting data on mortgage loans and applications. Additionally, the proposal would revise Regulation C to improve the effectiveness of HMDA, including changes to institutional and transactional coverage, modifications of reporting requirements, and clarifications of existing regulatory provisions.

We’re also focused intensely on supporting the implementation process for our recent rulemaking (TRID Final Rule) to implement a Dodd-Frank Act directive to consolidate and streamline federal mortgage disclosures required under the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act. For example, in October 2014 we released a proposal to provide for technical corrections to the rule text and commentary in the TRID Final Rule; allow for the placement of certain language related to new construction loans to be added to the Loan Estimate form; and relax the timing requirement that creditors provide revised disclosures on the same day that a consumer’s rate is locked. We’re also continuing work with stakeholders to address questions that have arisen with regard to the 2013 mortgage rules, including issuing additional clarifications and amendments as warranted. For example, we just released a proposal this week that would amend various aspects of the 2013 mortgage servicing rules, including disclosures, early intervention, and loss mitigation. The proposal also addresses proper compliance with the rules when a consumer is a potential or confirmed successor in interest, is in bankruptcy, or sends a cease communication request under the Fair Debt Collection Practices Act (FDCPA).

Prepaid cards

We released a proposal last week to create comprehensive consumer protections for prepaid financial products such as general purpose reloadable prepaid cards (GPR cards) and certain digital and mobile wallets. Under the proposal, consumers acquiring such products would receive a number of Regulation E protections, such as getting disclosures about fees before they acquire a prepaid cards and error resolution rights. Their liability would also be capped for unauthorized use of their prepaid card under certain conditions.

Additionally, prepaid products that access overdraft services or credit features for a fee would generally be credit cards subject to TILA and Regulation Z, including Regulation Z’s credit card rules. These rules include ability-to-repay requirements and fee limits during the first year of account opening. Consumers that choose to access overdraft services or credit features would be given at least 21 days to repay the debt incurred in connection with using such services or features. Incoming funds would not automatically be debited to pay the debt whenever the funds are loaded.

Payday loans

The Bureau is considering what rules may be appropriate for addressing the sustained use of short-term, high-cost credit products. We published research on payday lending and so-called deposit advance products in an April 2013 white paper and a March 2014 data point. In addition to conducting additional research, we are evaluating what types of rules would be appropriate and warranted under CFPB authorities. Rulemaking might include disclosures or address acts or practices in connection with these products.

Defining larger participants

We’re continuing rulemakings to implement our supervisory program for certain nonbank entities by defining “larger participants” in various markets for consumer financial products and services. For example, we released a proposal to identify “larger participants” in the market for auto lending and defining certain automobile leasing activity as a financial product or service. We also finalized a rule defining larger participants in the international money transfer market. So far, we’ve defined larger participants in the consumer debt collection, credit reporting, and student loan servicing markets.

Debt collection

We received more than 23,000 comments earlier this year in response to our advanced notice of proposed rulemaking released in November 2013. We are considering whether rules governing the collection of debts are warranted under the FDCPA or other CFPB authorities, and, if so, what types of rules would be appropriate. Rulemaking might include disclosures or address acts or practices in connection with debt collection activities. We are developing a survey to obtain information from consumers about their experiences with debt collectors and are engaged in qualitative testing to determine what information would be useful for consumers to have about debt collection and how that information should be provided to them.

Our 2014 Report on the FDCPA reported that we received more than 30,000 consumer complaints in this area from July 2013 through December 2013. Since January 2014 to now, we have received more than 79,000 consumer complaints.

Overdraft

We’re continuing to research overdraft services and considering whether rules governing overdraft and related services are warranted and what such rules may be. A possible rulemaking might include disclosures or address specific acts or practices. In July 2014, we released a report, based on data from sources we used in our June 2013 white paper of our initial analysis of overdraft practices. The July 2014 report provided additional information about the outcomes of consumers who do and do not opt in to overdraft coverage for ATM and one-time debit card transactions. The report also explored the transactions that overdraw consumer accounts.

Privacy disclosures

In the Spring 2014 Unified Agenda, we stated that we expected to issue a proposal regarding the notices that consumers receive each year from their financial institutions to explain the companies’ information sharing practices, as part of our regulatory streamlining efforts. We released the final rule in October 2014. It provides that financial institutions that restrict their information sharing practices and meet other requirements may post their annual privacy notices to customers under the Gramm-Leach-Bliley Act online, rather than delivering them individually.

We’re continuing research, analysis, and outreach on a number of other consumer financial services markets, and will update our next semi-annual agenda to reflect the results of further prioritization and planning.

Proposed changes to our Mortgage Servicing Rules: New protections for surviving family members and other homeowners

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Today, we’re proposing changes to our Mortgage Servicing Rules, which took effect on January 10, 2014. These rules provide important protections for consumers with mortgages, including:

  • Requiring mortgage servicers (people who manage your mortgage loan account) to provide you with periodic mortgage statements or coupon books that give you important information about your mortgage.
  • Requiring servicers to respond quickly to written inquiries seeking information or requesting that they resolve potential errors about your mortgage.
  • Requiring servicers to reach out to you and send written information describing how to avoid foreclosure if you fall behind on your mortgage payments.
  • Requiring servicers to respond quickly to help you complete your application for loss mitigation options to avoid foreclosure. (Here’s more information about loss mitigation options.)

Since the Mortgage Servicing Rules went into effect, we’ve spent a lot of time talking to consumer advocacy groups, housing counselors, mortgage servicers, and trade associations, to better understand how the rules are working and whether we should make any changes to them. As a result, we’re now proposing some changes to the Mortgage Servicing Rules. The changes are intended to smooth the path for companies to better protect consumers and comply with the CFPB’s rules.

Expanded Protections for Surviving Family Members and Other Homeowners

Some of the most significant proposed changes would expand protections for people who inherit or otherwise receive property from a spouse, parent, or other relative when the mortgage has not been paid off. These homeowners include people who get the property after a loved one dies or in a divorce. They are often called “successors in interest.”

Our proposals regarding these homeowners would:

  • Provide a process for these homeowners to have their interest in the property reviewed and confirmed by the servicer; and
  • Give them the same rights to get information and correct mistakes about the mortgage loan and apply for loss mitigation options as other borrowers have under our rules, once the servicer reviews and confirms their interest in the property.

Loss mitigation applications

We’re proposing several changes to how servicers handle loss mitigation applications (that is, applications for loss mitigation options), including making your mortgage servicer tell you in writing when your loss mitigation application is complete, requiring servicers to gather information from third parties promptly to avoid delays, and clarifying protections for borrowers during servicing transfers and in the face of a foreclosure sale. We are also proposing that servicers would have to give you another opportunity to apply for a loan modification if, for example, you get a loan modification and bring the loan current, but then you fall behind again.

Get involved

Check out the proposed rule and send us your comments. We’ll update this post soon with a link to submit formal comments.

Social Security disability income shouldn’t mean you don’t qualify for a mortgage

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More than 15 million people receive Social Security disability income every year. For those relying on this income, qualifying for a mortgage can unfortunately become a challenge when lenders ask for proof of how long they will receive their benefits.

Today, we’re reminding lenders that placing unnecessary documentation requirements on recipients of Social Security disability income, including disabled veterans, may raise fair lending concerns. Following the guidelines and standards noted in the bulletin may help lenders comply with fair lending laws.

Difficult to prove your income

Generally, when you apply for a mortgage, you must show to mortgage lenders that you have a stable income. However, those who depend on Social Security disability income usually don’t have any documentation saying how long this income will continue. The Social Security Administration (SSA) normally only provides proof that consumers are currently receiving benefits.

Unfortunately, some consumers have reported that loan officers have asked them for a specific description of their disabilities or a statement from a doctor to prove that their Social Security disability income is likely to continue.

What our rules require

To verify income for Qualified Mortgage debt-to-income ratios, our rules require lenders to look at whether the SSA benefit verification letter or equivalent document includes a defined expiration date for payments. Unless the SSA letter specifically states that benefits will expire within three years of loan origination, lenders should treat the benefits as likely to continue.

Similar standards

The Department of Housing and Urban Development (HUD) has a similar standard for documenting income for FHA-insured mortgages, and emphasizes that a lender shouldn’t ask a consumer for documentation or about the nature of his or her disability under any circumstances.

The Department of Veterans Affairs (VA) allows lenders to use Social Security disability income as qualifying income for VA-guaranteed mortgages and emphasizes that it’s not necessary to obtain a statement from the consumer’s physician about how long a medical condition will last.

Fannie Mae and Freddie Mac have issued similar guidelines for loans that are eligible for their purchase, allowing consumers to use Social Security disability benefits as qualifying income for a mortgage.

Everyone deserves to qualify based on their income

Persons with disabilities should be able to qualify for mortgages they can afford based on their stable income, including from Social Security disability income. And anyone with disabilities, including disabled servicemembers, should not be prevented or hindered from buying a home by unnecessary barriers or requirements.

Together, these standards and guidelines should help lenders avoid unnecessary documentation requests and help individuals who receive Social Security disability income receive fair and equal access to credit.

Submit a complaint

If you are having an issue with a financial product or service, you can submit a complaint online or call (855) 411-CFPB. We can assist people in over 180 languages. We’ll forward your issue to the company, give you a tracking number, and keep you updated on the status of your complaint.

Veterans: Take advantage of student loan forgiveness, but don’t let it damage your credit

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For some veterans, their time in uniform caused a severe service-connected disability. This dramatically impacts their life after transition out of the military.

For 100-percent service-disabled veterans who have student debt, the Department of Education offers a valuable benefit to help them avoid financial distress – the chance to have their loans discharged (forgiven). Under federal law, veterans can seek federal student loan forgiveness if they receive a 100 percent disability rating by the Department of Veterans Affairs (VA). Private student lenders are not required to offer this benefit, but some do on a case-by-case basis, so be sure to ask.

We encourage all consumers to check their credit report regularly, but we want to especially encourage veterans who use this benefit to be sure that their student loan servicer (the company that collects payments) is providing correct information about their loan discharge to credit bureaus (the companies that compile and sell credit reports).

We continue to hear from veterans and servicemembers about the unique servicing obstacles they face as they seek to pay off student loan debt. We are concerned that, in some circumstances, when veterans are able to discharge their student loans due to their disability, they may experience damage to their credit report if their student loan servicer provides incorrect information to the credit bureaus. These mistakes, if uncorrected, can result in a negative entry on their credit report that makes it harder and more expensive for these disabled veterans to get credit, buy a car or take out a mortgage.

For example, one service-disabled veteran submitted a complaint to us describing how his credit score fell by 150 points as a result of this type of error. His score went from a nearly perfect “super prime” credit score to a much lower score simply because he received loan forgiveness.

I can’t get anyone to listen to me! I am a 100 percent disabled Veteran who has had his credit score ruined by a broken credit scoring system. I had my student loans…discharged…in August 2013…I went from 800 to 650 in less than 2 months. I am fighting to survive because a company from my own country is killing me.

Consumers are harmed when companies furnish inaccurate information to credit reporting agencies. An error in a credit report could make a big difference in whether someone receives a loan, qualifies for a low interest rate, or even gets offered a job. These credit-reporting problems, if uncorrected, can hurt veterans in this situation for decades.

For example, here’s what could happen if a veteran tried to buy a home after a credit reporting error caused similar damage to her credit profile and score and this damage went uncorrected. If she used a VA home loan to buy a $216,000 home, she could pay more than $45,000 in additional interest charges over the life of her mortgage (depending on the length and terms of the mortgage), since this error would cause her to qualify for a much more expensive loan.

Here are two important reminders for service-disabled veterans who have discharged their federal student loans:

    1. Check your credit report.

    If you received loan forgiveness due to your service-connected disability, your credit report should not state that you still owe the debt. Other borrowers who receive a disability discharge are monitored for three years by the Department of Education. But if you received a discharge based on VA documentation, you don’t have to worry about this step and your credit report should show that you no longer owe the loan, not that it was “assigned to government” for monitoring. And remember, you can check your credit report for free.

    If you have discharged older federal loans made by banks, pay even closer attention.

    Most federal loans taken out before 2010 – loans generally made by banks and other private entities but guaranteed by the federal government – require your lender to update the information on your credit report after your loan has been discharged. Even though no new loans are issued under this program, there are still millions of borrowers repaying this type of loan. Veterans who have discharged these loans should be sure to check their credit report regularly, since the rules regarding disability discharge changed in 2013.

    2. If something doesn’t seem right, contact the credit reporting company and dispute the error.

    Understanding how discharged loans show up on your credit report can be complicated. If you file a dispute and it still doesn’t get corrected, submit a complaint with us and we’ll work to get you a response from the company. You can call us at (855) 411-2372 or submit a complaint online.

Last year, we put companies on notice that they must investigate disputed information in a credit report, and that we will take appropriate action, as needed. We will also continue to closely monitor complaints from veterans and other disabled student loan borrowers to make sure student loan servicers are furnishing correct information to the credit bureaus about disability discharges. All financial services providers that serve veterans should redouble their efforts to ensure that veterans are not penalized for receiving the benefits they earned and deserve for their sacrifices.

Holly Petraeus is Assistant Director of the Office of Servicemember Affairs and Rohit Chopra is the CFPB’s Student Loan Ombudsman.

Prepaid products: New disclosures to help you compare options

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Last March, we asked you to comment on possible prepaid card disclosures. Thanks to your feedback and additional consumer testing, today we’re proposing new disclosure requirements that consumers would receive before deciding to open a prepaid account.

These new disclosure requirements are part of our larger prepaid accounts proposal to extend many federal consumer protections to prepaid products.

Currently, each prepaid card company’s retail package discloses different information in different ways. This can be confusing if you’re trying to compare costs between prepaid accounts. Below are a couple examples of the disclosures on the packaging of major prepaid cards we found in stores near our Washington headquarters in March:

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As you can see, each prepaid card varies in style, format, and content. Website disclosures have similar problems. As a result, it’s challenging for consumers to make sense of each product’s cost.

Proposed disclosures

We’re proposing to standardize these disclosures with a new requirement: that prepaid companies adopt model disclosure forms so that consumers can make better choices between prepaid options.

The disclosures would take two forms: (1) a short form that would highlight key information about the account’s fees and (2) a long form that would list all of the account’s fees.

Below is an example of the proposed short form disclosure that you would see in a retail store, which includes a link and a telephone number to access the long form disclosure on a smartphone or mobile device.

201411_cfpb_prepaid-cards_two-forms.jpg

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The short form disclosure lists four types of fees in large and bold font, that we think are most important to many consumers: the monthly fee, ATM withdrawal fees, per purchase fees, and cash reload fees. The design makes it easier for consumers to identify the best prepaid account for their needs.

For consumers that aren’t shopping for a prepaid account at a retail store or by phone, we’re proposing that they receive the short and long form disclosure before getting the account.

Tell us what you think

Now, we want to hear from you! Take a look, and tell us if you think this model form does a better job of disclosing fee information compared to other forms you’ve seen on prepaid card packaging. We’re eager to get feedback from consumers, industry, advocacy organizations, and anyone else who is interested in making prepaid account disclosures better.
While you’re looking at the form, some questions to consider might be:

  • Does the short form disclosure above make it clear how much the account would cost you to use?
  • What would you like to see added or changed? Is there some way to make the information clearer?
  • Is there anything you find confusing?

We want to get your feedback so that we can consider it as we develop a final rule.

If you want to influence the design of a new prepaid card fee disclosure, let us know what you think. You can send us an email with your comments. We will update this post soon with a link to submit a formal comment on Regulations.gov.

To learn more, check out the preamble, the proposed rule, and the official interpretations.

The CFPB blog aims to facilitate conversations about our work. We want your comments to drive this conversation. Please be courteous, constructive, and on-topic. To help make the conversation productive, we encourage you to read our comment policy before posting. Comments on any post remain open for seven days from the date it was posted.