FALL 2015 STATEMENT OF REGULATORY PRIORITIES
CFPB Purposes And Functions
The Bureau of Consumer Financial Protection (CFPB or Bureau) was established in 2010 as an independent bureau of the Federal Reserve System by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203, 124 Stat. 1376) (Dodd-Frank Act). Pursuant to the Dodd-Frank Act, the CFPB has rulemaking, supervisory, enforcement, and other authorities relating to consumer financial products and services. Among these are the consumer financial protection authorities that transferred to the CFPB from seven Federal agencies on the designated transfer date, July 21, 2011. These authorities include the ability to issue regulations under more than a dozen Federal consumer financial laws.
As provided in section 1021 of the Dodd-Frank Act, the purpose of the CFPB is to implement and enforce Federal consumer financial laws consistently for the purpose of ensuring that all consumers have access to markets for consumer financial products and services and that such markets are fair, transparent, and competitive. The CFPB is authorized to exercise its authorities for the purpose of ensuring that, with respect to consumer financial products and services:
(1) Consumers are provided with timely and understandable information to make responsible decisions about financial transactions;
(2) Consumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination;
(3) Outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens;
(4) Federal consumer financial law is enforced consistently, without regard to status of a person as a depository institution, in order to promote fair competition; and
(5) Markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.
CFPB Regulatory Priorities
The CFPB's regulatory priorities for the period from November 1, 2015, to October 31, 2016, include continuing rulemaking activities to address critical issues in various markets for consumer financial products and services and implementing Dodd-Frank Act mortgage protections. The Bureau has also made changes to its long-term agenda, which are discussed below.
Bureau Regulatory Efforts in Various Consumer Markets
The Bureau is working on a number of rulemakings to address important consumer protection issues in a wide variety of markets for consumer financial products and services.
For example, the Bureau is beginning a rulemaking process to follow up on a report it issued to Congress in March 2015, concerning the use of agreements providing for arbitration of any future dispute between covered persons and consumers in connection with the offering or providing of consumer financial products or services. The report, which was required by the Dodd-Frank Act, expanded on preliminary results of arbitration research that had been released by the Bureau in December 2013. Following release of the report, the CFPB analyzed whether rules governing pre-dispute arbitration agreements are warranted, and, if so, what types of rules would be appropriate. The Bureau has preliminarily determined that it should proceed with a rulemaking regarding pre-dispute arbitration agreements. To begin the rulemaking process, the Bureau intends to convene a panel in fall 2015, under the Small Business Regulatory Enforcement Fairness Act and in conjunction with the Office of Management and Budget and the Small Business Administration's Chief Counsel for Advocacy, to consult with small businesses that may be affected by the policy proposals under consideration.
The Bureau is also analyzing consumer protection concerns associated with the use of payday, auto title, and similar lending products in anticipation of the release of a notice of proposed rulemaking to address acts or practices in connection with these products. In March 2015, as part of the Small Business Regulatory Enforcement Fairness Act process, the Bureau released an outline of proposals under consideration concerning the failure to determine whether consumers have the ability to repay without default or reborrowing and certain payment collection practices. The Bureau completed the Small Business Regulatory Enforcement Fairness Act process in June 2015. The Bureau had previously released substantial research on certain of these products, issuing a white paper in April 2013, and a data point in March 2014, and is continuing to conduct additional research that it expects to release in conjunction with the rulemaking proposal.
Building on Bureau research and other sources, the Bureau is also engaged in policy analysis and further research initiatives in preparation for a rulemaking on overdraft programs on checking accounts. The CFPB issued a white paper in June 2013, and a report in July 2014, based on supervisory data from several large banks that highlighted a number of possible consumer protection concerns, including how consumers opt in to overdraft coverage for ATM and one-time debit card transactions, overdraft coverage limits, transaction posting order practices, overdraft and insufficient funds fee structures, and involuntary account closures. The CFPB is continuing to engage in additional research and has begun consumer testing initiatives relating to the opt-in process.
In addition, the Bureau also engaged in policy analysis and research initiatives in preparation for a rulemaking on debt collection activities, which are the single largest source of complaints to the federal government of any industry. Building on the Bureau's November 2013, Advance Notice of Proposed Rulemaking, the CFPB is in the process of analyzing the results of a survey to obtain information from consumers about their experiences with debt collection. The Bureau is also undertaking 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.
The Bureau is also working on a final rule to create a comprehensive set of protections for general purpose reloadable cards and other similar products, which are increasingly being used by consumers in place of traditional checking accounts or credit cards. The Bureau issued a proposed rule in November 2014, seeking to expressly bring prepaid products within the ambit of Regulation E (which implements the Electronic Fund Transfer Act) as prepaid accounts and to create new provisions specific to such accounts. The proposal would also amend Regulation E and Regulation Z (which implements the Truth in Lending Act) to regulate prepaid accounts with overdraft services or credit features.
The Bureau is also continuing rulemaking activities that will further establish the Bureau's nonbank supervisory authority by defining larger participants of certain markets for consumer financial products and services. Larger participants of such markets, as the Bureau defines by rule, are subject to the Bureau's supervisory authority. The Bureau expects that its next larger participant rulemaking will focus on the markets for consumer installment loans and vehicle title loans for purposes of supervision. The Bureau is also considering whether rules to require registration of these or other non-depository lenders would facilitate supervision, as has been suggested to the Bureau by both consumer advocates and industry groups.
The Bureau is also continuing to develop research on other critical markets to help implement statutory directives and to assess whether regulation of other consumer financial products and services may be warranted. For example, the Bureau is starting its work to implement section 1071 of the Dodd-Frank Act, which amends the Equal Credit Opportunity Act to require financial institutions to report information concerning credit applications made by women-owned, minority-owned, and small businesses. The Bureau will focus on outreach and research to develop its understanding of the players, products, and practices in the small business lending market and of the potential ways to implement section 1071. The CFPB then expects to begin developing proposed regulations concerning the data to be collected and appropriate procedures, information safeguards, and privacy protections for information-gathering under this section.
Implementing Dodd-Frank Act Mortgage Protections
The Bureau is also continuing its efforts to implement critical consumer protections under the Dodd-Frank Act to guard against mortgage market practices that contributed to the nation's most significant financial crisis in several decades. The Bureau has already issued regulations implementing Dodd-Frank Act protections for mortgage originations and servicing and integrating various federal mortgage disclosures as discussed further below.
The Bureau is also working to implement Dodd-Frank amendments to the Home Mortgage Disclosure Act (HMDA), which augment existing data reporting requirements regarding housing-related loans and applications for such loans. In addition to obtaining data that is critical to the purposes of HMDA-which include providing the public and public officials with information that can be used to help determine whether financial institutions are serving the housing needs of their communities, assisting public officials in the distribution of public sector investments, and assisting in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes-the Bureau views this rulemaking as an opportunity to streamline and modernize HMDA data collection and reporting, in furtherance of its mission under the Dodd-Frank Act to reduce unwarranted regulatory burden. The Bureau published a proposed HMDA rule in the Federal Register in August 2014, to add several new reporting requirements and to clarify several existing requirements. Publication of the proposal followed initial outreach efforts and the convening of a panel under the Small Business Regulatory Enforcement Fairness Act in conjunction with the Office of Management and Budget and the Small Business Administration's Chief Counsel for Advocacy, to consult with small lenders who may be affected by the rulemaking. As part of the process for developing the HMDA final rule, the Bureau is reviewing and considering public comments on the proposed rule, consulting and coordinating with other agencies, conducting additional outreach to build and refine operational capacity, and preparing to assist financial institutions in their compliance efforts. The Bureau expects to issue a final rule in fall 2015.
Another major effort of the Bureau is the implementation of its final rule combining several federal mortgage disclosures that consumers receive in connection with applying for and closing on a mortgage loan under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). The integrated forms are the cornerstone of the Bureau's broader "Know Before You Owe" mortgage initiative. The rule, in most cases, requires that two forms, the Loan Estimate and the Closing Disclosure, replace four different federal disclosures. These new forms will help consumers better understand their options, choose the deal that is best for them, and avoid costly surprises at the closing table. The Bureau conducted extensive qualitative testing of the new forms prior to issuing a proposal, and also conducted a post-proposal quantitative study to validate the results of the new forms. The results of the quantitative testing showed that consumers of all different experience levels, with loans of different characteristics-whether focused on buying a home or refinancing-were able to understand the Bureau's new forms better than the current forms.
The final rule combining the federal mortgage disclosures under TILA and RESPA was issued in November 2013, and takes effect October 3, 2015. The Bureau has worked intensively to support implementation efforts, including consumer education initiatives. To facilitate implementation, the Bureau has released a small entity compliance guide, a guide to forms, a readiness guide, sample forms, and additional materials. The Bureau has conducted six free, publicly available webinars to answer common questions and hosted an additional webinar targeted at housing counselors. In January 2015, after extensive outreach to stakeholders, the Bureau adopted two minor modifications and technical amendments to the rule to smooth compliance for industry.[1] After discovering an administrative error in June 2015, the Bureau issued a proposal to extend the effective date from August 1, 2015 to October 3, 2015, and finalized the extension of the effective date on July 24, 2015. The Bureau expects to continue working to support implementation of the rule, monitor the market, and make clarifications and adjustments to the rule where warranted.
The Bureau also continues to work in support of the full implementation of, and to facilitate compliance with, various mortgage-related final rules issued by the Bureau in January 2013, to strengthen consumer protections involving the origination and servicing of mortgages. These rules, implementing requirements under the Dodd-Frank Act, were all effective by January 2014. The Bureau is working diligently to monitor the market and continues to make clarifications and adjustments to the rules where warranted. For example, in order to promote access to credit, the Bureau engaged in further research to assess the impact of certain provisions implemented under the Dodd-Frank Act that modify general requirements for small creditors that operate predominantly in "rural or underserved" areas and published a notice of proposed rulemaking in the Federal Register in February 2015. The Bureau anticipates issuing a final rule in September 2015.
The Bureau also published a proposal in the Federal Register in December 2014, to amend various provisions of its mortgage servicing rules in both Regulation X, which implements RESPA, and Regulation Z. The proposal included further clarification of the applicability of certain provisions when the borrower is in bankruptcy, possible additional enhancements to loss mitigation requirements, proposed applicability of certain provisions to successors in interest, and other topics. As the Bureau develops a final rule, it is reviewing and considering public comments on the proposed rule, consulting with other agencies, conducting consumer testing of certain disclosures, and preparing to support implementation and consumer education efforts. The Bureau expects to issue a final rule in late spring 2016.
Further, the Bureau continues to participate in a series of interagency rulemakings to implement various Dodd-Frank Act amendments to TILA and the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) relating to mortgage appraisals. In April 2015, in conjunction with the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration Board, and the Federal Housing Finance Agency, the Bureau issued a final rule adopting certain minimum requirements for appraisal management companies. These joint agency efforts are continuing with further efforts to implement amendments to FIRREA concerning required quality control standards for the use of automated valuation models.
Bureau Long-Term Planning Efforts
The Bureau has also updated its long-term agenda to reflect its expectations beyond fiscal year 2016. As noted in these items, the Bureau intends to explore potential rulemakings to address important issues related to consumer reporting and student loan servicing. The Bureau has also eliminated a listing for certain mortgage-related rulemakings inherited from other agencies pursuant to the transfer of rulemaking authority under the Dodd-Frank Act in 2011. The Bureau remains interested in the subjects of these rulemakings but anticipates that it would develop new proposals rather than finalizing notices that are at least five years old.
With regard to consumer reporting, the Bureau continues to monitor the credit reporting market through its supervisory, enforcement, and research efforts, and to consider prior research, including a white paper the Bureau published on the largest consumer reporting agencies in December 2012, and reports on credit report accuracy produced by the Federal Trade Commission pursuant to the Fair and Accurate Credit Transactions Act. 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.
Further, in May 2015, the CFPB issued a request for information seeking comment from the public regarding student loan servicing practices, including those related to payment processing, servicing transfers, complaint resolution, co-signer release, and procedures regarding alternative repayment and refinancing options. In September 2015, the CFPB released a report regarding student loan servicing practices, based, in part, on comments submitted in response to the request for information. The CFPB will also continue to monitor the student loan servicing market for trends and developments. As this work continues, the Bureau will evaluate possible policy responses, including potential rulemaking. Possible topics for consideration might include specific acts or practices and consumer disclosures.
The Bureau has continued work to consider opportunities to modernize and streamline regulations that it inherited from other agencies pursuant to a transfer of rulemaking authority under the Dodd-Frank Act. This work includes implementing the consolidation and streamlining of federal mortgage disclosure forms discussed earlier, and exploring opportunities to reduce unwarranted regulatory burden as part of the HMDA rulemaking. While the Bureau considers the modernizing and streamlining effort to be important, it has determined that aspects of the inherited proposals to amend Regulation Z have become stale with the passage of several years since their issuance. At this point, the Bureau believes that any rulemaking it may undertake in the areas the proposals addressed would be best achieved through fresh initiatives that would begin with new proposals based on new reviews of the relevant markets and other appropriate outreach and fact gathering, followed by fresh analyses of any policy and legal issues or concerns presented. The CFPB has been evaluating further action regarding these pending proposals and, at this time, has determined that it will take no further action. The Bureau is continuing to assess the mortgage market on an ongoing basis and will revisit the need to initiate new proposals at a later date.
The Bureau also has begun planning to conduct assessments of significant rules it has adopted, pursuant to section 1022(d) of the Dodd-Frank Act. That section requires the Bureau to conduct such assessments to address, among other relevant factors, the effectiveness of the rules in meeting the purposes and objectives of Title X of the Dodd-Frank Act and the specific goals of the rules assessed, to publish a report of each assessment not later than five years after the effective date of the subject rule, and to invite public comment on recommendations for modifying, expanding, or eliminating the subject rule before publishing each report. The Bureau will provide further information about its expectations for the lookback process as its planning continues.
[1] 80 FR 8767 (Feb. 19, 2015).