An important part of the CFPB’s mandate from Congress is to make rules governing consumer finance markets more effective and to create new rules when warranted. Today, we’re posting a semiannual update of our rulemaking agenda as part of the federal government’s Unified Agenda of Regulatory and Deregulatory Actions.
Under the Regulatory Flexibility Act, federal agencies must publish regulatory agendas twice a year. We’ve been voluntarily participating in the Unified Agenda. The Office of Management and Budget leads this effort. The Unified Agenda is available in full online, and portions will also be published in the Federal Register. The agenda includes rulemaking actions in pre-rule, proposed rule, final rule, long-term, and completed stages.
Here’s an overview of our major current and long-term initiatives.
Arbitration clauses in many contracts for consumer financial products and services require consumers and financial institutions to resolve any disputes that may arise between them through a private arbitration process, instead of going to court. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) banned such arbitration clauses in contracts for mortgage loans and directed the Bureau to study the use of agreements providing for arbitration in connection with consumer financial products or services. This past March, we sent Congress the report summarizing our three-year study, which was the most comprehensive analysis of consumer finance arbitration ever performed and expanded on preliminary results that we had released in December 2013.
We’re now beginning a rulemaking process to address concerns related to the use of arbitration agreements in connection with credit cards, deposit accounts, payday loans and various other consumer financial products or services. In particular, we are considering whether to propose rules that would prevent companies from using these agreements to foreclose consumers’ ability to bring class action lawsuits, which can provide consumers with substantial relief and create the leverage to bring about changes in business practices. To help monitor the fairness of arbitration proceedings, we are also considering whether to propose requiring that arbitration filings and awards be submitted to the Bureau. These ideas are summarized in an outline that we recently released for purposes of consulting with representatives of small businesses that might be affected by the rulemaking, using a process outlined in the Small Business Regulatory Enforcement Fairness Act.
Payday, auto title, and similar lending products
The Bureau is in the process of developing a Notice of Proposed Rulemaking to address concerns in markets for payday, auto title, and similar lending products. The Bureau is particularly concerned that lenders are offering these products without assessing the consumer’s ability to repay, thereby forcing consumers to choose between reborrowing, defaulting, or falling behind on other obligations. We are also concerned about certain payment collection practices that can subject consumers to substantial fees and increase risk of account closure.
The Notice of Proposed Rulemaking will build on feedback we have received from small businesses and other stakeholders after releasing an outline of proposals under consideration last spring for purposes of the Small Business Regulatory Enforcement Fairness Act process. The Bureau will also publish results of further research it has been conducting into these markets in connection with the rulemaking proposal. The Bureau previously released a white paper and a report summarizing some of its research on some of these products. We expect to release the rulemaking proposal in first quarter 2016.
General purpose reloadable cards and other similar prepaid products are increasingly being used by consumers in place of traditional checking accounts or credit cards, but they do not always carry important consumer protections. To address this issue, we’re finalizing a proposed rule that we published in the Federal Register in December 2014. We proposed that prepaid accounts receive certain protections that are similar to those that exist now for debit and payroll cards. We also proposed general credit card protections to prepaid accounts that access overdraft services or offer certain credit features. We expect to issue the final rule in spring 2016.
The Bureau is preparing for a rulemaking concerning overdraft programs on checking accounts. A prior white paper and report by the Bureau highlighted a number of possible consumer protection concerns, including how consumers consent (or “opt in”) to overdraft coverage for certain electronic transactions, overdraft coverage limits, transaction posting order practices, overdraft and insufficient funds fee structures, and involuntary account closures. Regulations that took effect in 2010 require that consumers opt in before banks can charge overdraft fees for ATM and one-time debit card transactions, but opt in rates vary widely. In preparation for the rulemaking, the Bureau is conducting additional research and has begun consumer testing initiatives related to the opt in process.
The Bureau is also conducting research for a rulemaking on debt collection activities, which are the single largest source of complaints to the federal government of any industry. Building on a previous Advance Notice of Proposed Rulemaking, the Bureau is now analyzing the results of a groundbreaking nationwide survey related to consumers’ experiences with debt collection. We’re also engaged in consumer testing initiatives to determine what information would be useful for consumers to have about debt collection and their debts and how that information should be provided to them.
Larger participants and non-depository lender registration
The Dodd-Frank Act allows the Bureau to supervise nonbank financial services providers that are designated as “larger participants” in their particular markets for consumer financial products and services. We’ve already defined larger participants in several markets, including most recently the market for auto lending and leasing. The Bureau expects next to develop rules to define larger participants in markets for consumer installment loans and vehicle title loans. We also expect to consider whether rules to require registration of lenders in these markets or other non-depository lenders would facilitate the Bureau’s supervision of such entities.
Women-owned, minority-owned, and small businesses data collection
The Dodd-Frank Act requires the Bureau to develop rules to implement a requirement that financial institutions report information about lending to women-owned, minority-owned, and small businesses. The Bureau is beginning work on this project, building off a rule that it released this fall to revise a similar regime for reporting data about home mortgage lending. The first stage of our work will focus on outreach and research. We then plan to begin developing proposed rules concerning the data to be collected and appropriate procedures, information safeguards, and privacy protections for information-gathering.
The Bureau is working to finalize a proposal we published in December 2014 to amend certain aspects of the Bureau’s 2013 mortgage servicing rules. The proposal addressed, among other things, enhanced loss mitigation requirements and compliance with certain rules when the borrower is a potential or confirmed successor in interest or is in bankruptcy. We have been conducting testing of periodic statements for consumers in bankruptcy and are working to develop the final rule for issuance in mid-2016.
Implementation of the Home Mortgage Disclosure Act, Know Before You Owe disclosures, and other mortgage rules
The Bureau is working to support implementation of multiple mortgage rules required by the Dodd-Frank Act. Most recently, in October 2015, we issued a final rule amending Regulation C to implement amendments to the Home Mortgage Disclosure Act made by the Dodd-Frank Act, among other things. The final rule adds new reporting requirements, clarifies several existing requirements, modifies the institutional and transactional coverage of Regulation C and the processes for reporting and disclosing data, and provides extensive compliance guidance. The Bureau is preparing a compliance guide and other support materials and programs to prepare for implementation of various parts of the rule starting in 2017 and 2018.
We are also continuing to support implementation of new rules that took effect in October 2015 requiring provision of Know Before You Owe disclosures to applicants for mortgage loans. The disclosure forms streamline and integrate information that lenders are required to provide consumers under the Truth in Lending Act and Real Estate Settlement Procedures Act. We’ve provided guides and materials to help industry and consumers prepare for the changes.
The Bureau is also continuing to support the implementation of various other mortgage-related final rules we issued in January 2013 to implement Dodd-Frank Act reforms and strengthen consumer protections involving mortgage origination and servicing. Among other efforts, we’re monitoring the market and continuing to issue clarifications and amendments as warranted. Most recently, we issued a final rule in September 2015 modifying certain requirements for small creditors that operate predominantly in “rural or underserved” areas.
The Bureau has also updated a portion of the Unified Agenda focusing on long-term actions to reflect potential initiatives beyond November 2016. These include potential rulemakings to address important issues related to credit reporting and student loan servicing.
Information in credit reports can be critical to determine a consumer’s eligibility for credit, access to checking accounts, employment, rental housing, and more. The Bureau is monitoring the market through its supervisory, enforcement, and research efforts, including a white paper we published in December 2012 and other agency reports on credit report accuracy. As this work continues, the Bureau will evaluate possible policy responses to issues identified, including potential additional rules or amendments to existing rules governing consumer reporting. Potential topics for consideration might include the accuracy of credit reports, including the processes for resolving consumer disputes, or other issues.
Student loan servicing
Student loan servicers are a critical link between borrowers and lenders, yet there are no consistent, market-wide federal standards for student loan servicing. In September 2015, we released a report that identifies issues and suggests a framework to improve student loan servicing. The Bureau has made it a priority to take action against companies that are engaging in illegal servicing practices , and that ongoing work includes addressing many of the problems outlined in this report. Also in September, the Bureau, the Department of Education, and the Department of the Treasury issued a Joint Statement of Principles on Student Loan Servicing , proposing a framework similar to the recommendations included in this report. We will continue to monitor the market for trends and developments and evaluate possible policy responses, including potentially proposing rules. Possible topics for consideration might include specific acts or practices and consumer disclosures.
The Bureau is continuing research, analysis, and outreach on a number of other consumer financial services markets, and we’ll update our next semiannual agenda in the spring.