CFPB’s Rulemaking Agenda Provides Glimpse into 2020

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The CFPB’s 2020 Rulemaking Agenda provides a preview of the Bureau’s intended rulemaking activities for 2020.  Here are the highlights of what we can look forward to in 2020:


Business Lending Data (Pre-rule Stage):  Under Dodd Frank and the Equal Credit Opportunity Act, the CFPB has rulemaking authority to require lenders to collect and submit data concerning credit applications made by women-owned, minority-owned and small businesses.  The Bureau intends to hold a symposium on small business data collection in 2020. 


Higher-Priced Mortgage Loan Escrow Exemption (Pre-rule Stage): The Bureau is conducting preliminary analysis for rulemaking which would exempt certain lenders and higher priced mortgage loans from the FRB rule requiring the establishment of escrow accounts for payment of property taxes and insurance payments.


Debt Collection Rule (Proposed Rule Stage): The Agenda does not provide any further hints as to when a final rule will be published but does acknowledge that the Bureau is conducting consumer testing of disclosures related to time-barred debt.  Proposed Section 1006.26(c) was reserved for that purpose.  The Agenda indicates that, after testing, the Bureau will assess whether to publish a supplemental Notice of Proposed Rulemaking related to time-barred debt disclosures.  No anticipated date for a final rule is included in the Agenda which may suggest a delay to allow the Bureau to include the time-barred debt provisions before publication of the final rule.


Home Mortgage Disclosure Act Data (Proposed Rule Stage):  The Bureau has indicated new proposed rules will be forthcoming as to the publication of HMDA data, as well as the collection and reporting of data points.  The anticipated date for the NPRM is mid-summer.


Payday Lending (Final Rule):  As many recall, the CFPB rolled back the final rule issued in 2017 after a change in leadership.  The CFPB now anticipates publishing its new rule in the Spring of 2020.

CFPB Issues Annual Fair Lending Report

The CFPB has issued its annual Report summarizing its fair lending activities in 2015. The Report is comprehensive and lays out not only the activities of the Bureau but also its methodology in reviewing fair lending issues. For those not familiar, the Dodd Frank Act established an Office of Fair Lending and Equal Opportunity within the CFPB and charged it with “providing oversight and enforcement of Federal laws intended to ensure the fair, equal, and nondiscriminatory access to credit for both individuals and communities.” In doing so, the Office’s two primary tools are the Equal Credit Opportunity Act (“ECOA”) and the Home Mortgage Disclosure Act (“HMDA”).

 

While much of the Report has been previously discussed in prior blog entries, the key takeaways for lenders are as follows:

 

• The Bureau uses a risk based prioritization process to focus their enforcement and regulatory efforts on markets or products that represent the greatest risk for consumers. The Report confirms the Bureau is currently honed in on four products:
•  Mortgage Lending. Mortgage lending is a priority for the Office and they continue to focus on the HMDA data to identify risks in the areas of redlining, underwriting and pricing. In 2015, the Bureau resolved two public enforcement actions involving mortgage lending. 
• Indirect Auto Lending. The Report confirms that the Office remains focused on indirect auto lending and is conducting auto finance targeted ECOA reviews which generally include examination of three areas: credit approvals and denials, interest rates quoted by the lender to the dealer (“Buy Rates”) and any discretionary markup or adjustments to the Buy Rate. In 2015, the Bureau resolved two public enforcement actions involving discriminatory pricing and compensation.  
• Credit Cards. The Report suggests that this is a product which is receiving increased fair lending scrutiny. The Report indicates that the Bureau is “focused in particular on the quality of fair lending compliance management systems and on fair lending risks in underwriting, line assignment, and servicing,” including the treatment of consumers who indicate a preference to speak Spanish. 
• Small Business Lending. The Report indicates that the Bureau has begun targeted ECOA reviews of small-business lending and is focused on the quality of fair lending compliance management systems and on fair lending risks in underwriting, pricing and redlining.
• The Bureau is conducting three types of fair lending reviews:
• ECOA Baseline Reviews. The CFPB uses ECOA Baseline Reviews to evaluate how well an institution’s compliance management system identifies and manages fair lending risks. To this end, the Bureau updated their Baseline Review Modules in the CFPB Supervision and Enforcement Manual.
• ECOA Targeted Reviews. The CFPB uses Targeted Reviews to evaluate areas of heightened fair lending risks and generally focus on a specific line of business, including those identified above.
• HMDA Data Integrity Reviews. The CFPB makes no bones about it. HMDA data is a primary tool used to identify redlining issues.
•  The Report also summarizes the Bureau’s pending investigations:
• Mortgage Lending. The Report makes it abundantly clear that mortgage lending is among the Bureau’s top priorities and has focused its fair lending enforcement efforts on redlining practices. Currently, the Report indicates that it has a number of authorized enforcement actions in settlement negotiations and pending investigations.
•  Indirect Auto Finance. Similarly, the Bureau has prioritized discrimination resulting from discretionary loan pricing. The Report indicates the Bureau currently has a number of pending enforcement actions and several authorized enforcement actions in settlement negotiations.
• The Report also summarizes the new HMDA rule and indicates that the Bureau is in the pre rulemaking stage with respect to developing rules as to the collection of small business lending data as required by the Dodd Frank Act.

CFPB Adopts Final HMDA Rules: What You Need to Know

Last week, the CFPB issued its final rule modifying and significantly expanding the data collection reporting requirements under the Home Mortgage Disclosure Act (“HMDA”).  Adopted in 1975, HMDA requires certain lenders to report information about home loans for which they receive applications or which they originate or purchase.  The Dodd Frank Act directed the CFPB to expand the data reported under HMDA and provided the CFPB with rulemaking authority.  HMDA data is an integral focus for the Department of Justice and the CFPB in identifying red lining and other fair lending violations.  The new rule is lengthy (approximately 800 pages).  Here is a very cursory review:

•  Data fields are significantly expanded.

The finalized rule significantly expands the data fields required by HMDA and exceed the data fields  required by the Dodd Frank Act.  The final rule includes twenty five new data fields, including: age, credit score, total loan costs or total points and fees, interest rates, loan term, mortgage loan originator identity and property value.  The rule additionally modifies several existing data fields. The new data collection rules take effect in 2018.

• The scope of institutions covered decreases.

The final rules narrows the number of depository institutions subject to the reporting requirements. Beginning in 2018, institutions will only be required to report HMDA data if they originated at least 25 covered closed-end mortgage loans or at least 100 covered open end lines of credit in each of the two preceding calendar years and satisfy the location requirements (providing loans in identified metropolitan statistical areas (“MSA”)).  The CFPB estimates that the new threshold will reduce the number of banks and credit unions reporting by 22%.

• Frequency of Reporting and Manner of Reporting.

Additionally, the final rule will require quarterly reporting beginning in 2020 for lenders reporting a combined total of 60,000 applications and covered loans in the preceding year.  The CFPB also announced that they are developing a new web-based submission tool for reporting HMDA data.

As these changes have been in the works for over a year, they should not catch anyone by surprise.  The good news is that the rule’s implementation will be gradual over the next few years.  However, banks and credit unions should immediately:

• Identify their current data collection abilities;
• Identify where they need to increase their data capture; and
• Identify their affected lines of business.