All posts by collectionind723

OCC Plans To Rescind 2020 CRA Rule

Source: site

On September 8, 2021, the Office of the Comptroller of Currency (OCC) formally issued a proposal to rescind a controversial rule within the Community Reinvestment Act (CRA) that the OCC published in June 2020. The CRA, enacted in 1977, requires the Federal Reserve along with other banking regulators to encourage financial institutions to meet the credit needs of communities they do business with, including low- to middle-income neighborhoods.

Instead, the agency is proposing to replace the anti-redlining rule with rules adopted jointly by the OCC, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) in 1995. The proposed rules are meant to collate CRA rules with the current Board of Governors of the Federal Reserve System and FDIC rules. According to the OCC, this rule will “facilitate the on-going interagency work to modernize the CRA regulatory framework and create consistency for all insured depository institutions.”

The OCC’s final rule issued in 2020 was intended to modernize the regulatory framework implementing the CRA. It was also meant to update deposit-based assessment areas; mandate the inclusion of consumer loans in CRA evaluations; include quantitative metric-based benchmarks for determining a bank’s CRA rating; and include a non-exhaustive illustrative list of activities that qualify for CRA consideration.

Earlier this summer, Acting Comptroller of the Currency Michael Hsu signaled that he would rescind the 2020 changes and pursue a joint rulemaking to modernize the CRA with the other national banks.

“To ensure fairness in the face of persistent and rising inequality and changes in banking, the CRA must be strengthened and modernized,” said Acting Comptroller Hsu. “The disproportionate impacts of the pandemic on low and moderate income communities, the comments provided on the Board’s Advanced Notice of Proposed Rulemaking, and our experience with implementation of the 2020 rule have highlighted the criticality of strengthening the CRA jointly with the Board and FDIC.”

Hsu also admitted that the 2020 rescinded rule was a “false start” on modernizing the CRA. “This is why we will propose rescinding it and facilitating an orderly transition to a new rule,” Hsu said. “I look forward to working with the other agencies to develop a joint Notice of Proposed Rulemaking and building on the ANPR proposed by the Board in September 2020.”

The newly proposed rule(s) will apply to all national banks as well as all federal and state savings associations. The OCC is soliciting public commentary, due by Oct. 29.

FTC Approves Changes to Five FCRA Rules

Source: site

WASHINGTON, D.C. — The Federal Trade Commission this week approved final revisions that would bring several rules that implement parts of the Fair Credit Reporting Act (FCRA) in line with the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

In separate notices, which will be published in the Federal Register shortly, the FTC approved largely technical changes that would clarify that five FCRA rules enforced by the FTC apply only to motor vehicle dealers. The Dodd-Frank Act, enacted in 2010, transferred rulemaking authority related to parts of the FCRA to the Consumer Financial Protection Bureau, narrowing the FTC’s FCRA rulemaking authority. The final revisions do not make substantive changes to the rules. The FTC sought comment on the proposed rule changes last year.

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The changes affect these rules:

  • Address Discrepancy Rule, which outlines the obligations of users of consumer reports when they receive a notice of address discrepancy from a nationwide consumer reporting agency (CRA);
  • Affiliate Marketing Rule, which gives consumers the right to restrict a person from using certain information obtained from an affiliate to make solicitations to the consumer;
  • Furnisher Rule, which requires entities that furnish information to CRAs to establish and implement reasonable written policies and procedures regarding the accuracy and integrity of the information relating to consumers provided to a CRA;
  • Pre-screen Opt-Out Notice Rule, which outlines requirements for those who use consumer report information to make unsolicited credit or insurance offers to consumers; and
  • Risk-Based Pricing Rule, which requires those who use information from a consumer report to offer less favorable terms to consumers to provide them with a notice about the use of such data.

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In addition to the technical changes to the five rules, the Pre-Screen Opt-Out Rule also added the web address where consumers can opt-out of credit offers to the model notices that motor vehicle dealers can use. The Risk-Based Pricing Rule also was updated to include examples that reflect its narrower scope to just motor vehicle dealers. The FTC states it has created a web page with tips for consumers with poor credit.

The Commission voted 5-0 to publish the notices in the Federal Register.

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CFPB Finds That Income Share Agreements Are Credit Products

Source: site

On September 7, 2021, the CFPB announced that it had entered into a consent order with an education finance nonprofit (“nonprofit”) in connection with the nonprofit’s offering of income share agreements (“ISAs”). In the consent order, the CFPB asserted that ISAs are extensions of credit covered by the Consumer Financial Protection Act and the Truth in Lending Act (“TILA”) as well as TILA’s requirements with respect to “private education loans.” Because the CFPB asserts in the consent order that it views the nonprofit’s ISAs as credit, the CFPB takes the position that they are also subject to numerous other federal consumer financial protection laws that impose requirements and restrictions on student loan products. This consent order has significant implications for those in the ISA market, as it indicates how the CFPB views re-characterization for ISAs and similar products.

Most ISAs are agreements under which students are provided education funding on the condition that the student pay an agreed-upon percentage of the student’s future income over a defined, post-graduation timeframe. Many ISAs do not require customers to pay anything until their income exceeds a contractually defined floor. A percentage of income exceeding that floor is paid to the ISA provider as an investment return—potentially subject to a cap on overall payments depending on the terms of the specific ISA at issue. Under many common ISA structures, it is conceivable that some customers ultimately will pay nothing in the defined, post-graduation timeframe and, therefore, will see the ISA expire without any payment obligation; other customers will pay an amount less than the funding originally provided; and a final set of customers will pay amounts exceeding the original funding (though, as noted, frequently subject to a total payment cap). While most ISAs provide educational funding, similar products exist to provide funding to consumers, small businesses, and even professional athletes.

Given their structure, ISA providers have generally taken the position that ISAs are not credit and, therefore, are not subject to the requirements of many federal consumer financial protection laws. With this settlement, the CFPB appears to reject that position. The consent order summarily states that the nonprofit’s “ISAs are credit under the CFPA because they grant consumers the right ‘to defer payment of a debt, incur debt and defer its payment, or purchase property or services and defer payment for such purchase.’” In a statement on the settlement, Acting CFPB Director Dave Uejio said, “[t]he ISA industry has tried to evade oversight by claiming that its products are not loans . . . [b]ut regardless of the name on the label, these products are credit and have to comply with federal consumer protections. The ISA industry cannot pretend that core consumer protection laws do not apply to their products.”

The consent order released by the Bureau included findings that the nonprofit:

  • Engaged in deceptive acts and practices by misrepresenting that ISAs are not loans and do not create debt;
  • Denied consumers information necessary to fully evaluate their financial options by failing to provide disclosures for private education loans as required under TILA and its implementing regulation, Regulation Z; and
  • Subjected student borrowers to fees or penalties for early repayment or prepayment in violation of the TILA, by calculating the total payment cap on certain ISAs by immediately adding 10% to the amount funded. The Bureau reasoned that if a student paid off the ISA earlier than scheduled, the student would potentially pay more than the amount funded plus the growth component.

Under the terms of the consent order, the nonprofit is required to:

  • Reform each of its outstanding Opportunity ISAs to eliminate the addition of 10% to the amount funded in calculating the total payment cap;
  • Stop stating that its ISAs are not loans or do not create debt for consumers;
  • Provide disclosures required by TILA and Regulation Z for private education loans;
  • Continue the practice of not objecting to any discharge of a student’s ISA in bankruptcy, including not contesting that repaying a student’s ISA would present an undue hardship; and
  • Not impose a prepayment penalty on a private education loan and, for certain ISAs, recalculate the payment caps to eliminate the prepayment penalty.

Notably, the CFPB did not impose any civil money penalty on the nonprofit in consideration for good faith and substantial cooperation with the Bureau.

The CFPB Looks to Increase Transparency for Small Business Loans

Source: site

The Consumer Financial Protection Bureau has recently come up with a rule that should help enhance transparency around loans for small businesses.

The proposed rule would require lenders to collect and report all the relevant information about credit applications, such as pricing and demographic data, as well as the reasons for loan denial.

During the COVID-19 pandemic, many entrepreneurs struggled to access relief funds, which is one of the reasons this rule was proposed. The bureau has also announced it would create a web portal where small businesses can share their experiences with the regulator related to applying for credit.

This rule would apply to a wide range of credit services, including lines of credit, credit cards, term loans, and merchant cash advances. It should help regulators see how entrepreneurs fare when trying to get financing and what barriers might prevent them from doing so. The rule was proposed on September 1, and the public has 90 days to submit comments on it.

“After homeownership, small business ownership is the primary means by which families and communities build wealth,” said CFPB’s acting director Dave Uejio, and added, “Yet too often, small business development is starved for want of access to responsible, fairly priced credit.”

The CFPB is a US government agency that ensures lenders, banks, and other financial institutions treat consumers fairly. It is committed to producing innovative tools and resources to help customers develop financial skills and make smart financial decisions.

The CFPB learns about customer’s needs through research and analyzing data and publishes the information collected about the consumer financial marketplace. It also implements and enforces federal consumer financial laws to preserve choices for consumers and ensure fairness and transparency for consumer financial products and services. Once a new regulation is in place, the CFPB provides support and resources to assist stakeholders in understanding and following the rule.

U.S. Lawmakers Seek $1 Bln To Fund FTC Privacy Probes

Source: site

WASHINGTON, Sept 9 (Reuters) – U.S. House Democratic lawmakers on Thursday proposed awarding the Federal Trade Commission (FTC) $1 billion to set up a bureau dedicated to improving data security and privacy and fighting identity theft.

The proposal, which Democrats plan to include in a $3.5 trillion spending measure, would fund a new bureau over 10 years to address “unfair or deceptive acts or practices relating to privacy, data security, identity theft, data abuses, and related matters,” according to a summary released by the House Energy and Commerce Committee.

The committee will meet on Monday to take up the wide-ranging spending proposal that includes $30 billion to remove lead pipes and $13.5 billion for zero emissions vehicle infrastructure buildout.

Senate Commerce Committee chair Maria Cantwell, a Democrat, said in a statement it was “long past time that the FTC have the tools it needs to keep pace with the online marketplace and those who would undermine it.”

“Creating a privacy bureau is an important step in protecting consumers,” she said, adding that a federal privacy and data security law that protects consumers and creates certainty for businesses is still needed.

The FTC, which enforces antitrust law, has picked up the job of pushing corporations to better protect consumer data and privacy as it enforces rules against deceptive practices.

For example, in 2020, it settled with Zoom over allegations that the company misled consumers about the level of security it provided. The company agreed to improve its security as part of a settlement.

The Energy and Commerce bill would also direct $3 billion for the costs of providing direct government loans to produce “zero-emission medium and heavy-duty vehicles, trains or locomotives, maritime vessels, aircraft, or hyperloop technology.”

It would direct $1 billion “for domestic manufacturing conversion grants relating to domestic production of zero-emission vehicles.”

The bill also would spend $10 billion on supply chain resilience projects including “demonstrating technological advances for critical manufacturing supply chains.”

Reporting by David Shepardson and Diane Bartz; Editing by Muralikumar Anantharaman, Robert Birsel

Our Standards: The Thomson Reuters Trust Principles.