FALL 2016 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(3) Outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens;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, 2016, to October 31, 2017, 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 also maintains a long-term agenda listing areas of potential rulemaking interest, as 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. Many of these projects build on prior research efforts by the Bureau.
For example, the Bureau has begun 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 disputes 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. The Bureau has issued a proposed rule that would prohibit covered providers of certain consumer financial products and services from using an arbitration agreement to bar the consumer from filing or participating in a class action. Under the proposal, companies would still be able to include arbitration clauses in their contracts. However, for contracts subject to the proposal, the clauses would have to say explicitly that they cannot be used to stop consumers from being part of a class action in court. The proposal would also require a covered provider that has an arbitration agreement and that is involved in arbitration pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the Bureau. The Bureau has received several thousand comments on the proposal and is considering development of a final rule for spring 2017.
The Bureau is also engaged in a rulemaking concerning underwriting and certain other practices in connection with payday, vehicle title, and similar credit products. The rulemaking follows on multiple reports that the Bureau has issued on its research into these markets, including a white paper in April 2013, a data point in March 2014, and several publications earlier this year. The Bureau has issued a proposed rule that, among other things, would require lenders to make a reasonable determination that the consumer has the ability to repay a covered loan before extending credit. It would also require lenders to make certain disclosures before attempting to collect payments from consumers' accounts and restrict lenders from making additional payment collection attempts after two consecutive attempts have failed. The Bureau has already received more than 100,000 comments in response to the proposal; the comment period closed on October 7, 2016.
In addition, the Bureau also engaged in policy analysis and research initiatives in preparation for a proposed 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 Bureau released materials in July 2016 in advance of convening a panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA) 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. This SBREFA process focuses on companies that are considered "debt collectors" under the Fair Debt Collection Practices Act; the Bureau expects to convene a separate SBREFA proceeding focusing on companies that collect their own debts in 2017. The CFPB is also in the process of analyzing the results of a survey to obtain information from consumers about their experiences with debt collection and 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.
Building on Bureau research and other sources, the Bureau is also engaged in policy analysis and further research initiatives in preparation for a proposed 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 qualitative consumer testing initiatives relating to the opt-in process.
The Bureau is also working on a final rule to create a comprehensive set of protections for prepaid financial products, such as 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 final rule will build off a proposal that the Bureau issued in November 2014 to 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 also included provisions to amend Regulation E and Regulation Z (which implements the Truth in Lending Act) to regulate prepaid accounts with overdraft services or certain other 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, section 1071 of the Dodd-Frank Act 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 is in its early stages with respect to implementing section 1071 and is currently focused on outreach and research to develop its understanding of the players, products, and practices in the business lending markets and of the potential ways to implement section 1071. The Bureau then expects to begin developing proposed regulations concerning the data to be collected and determining appropriate procedures and privacy protections needed for information-gathering and public disclosure 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.
In October 2015, the Bureau issued a final rule implementing 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. Certain elements of the rule take effect in January 2017, and most new data collection requirements begin in January 2018. The Bureau is conducting outreach with industry and coordinating with other agencies to monitor and facilitate implementation of the rule. The Bureau has already released a small entity compliance guide. In addition, the Bureau is planning a rulemaking to make technical corrections and to clarify certain requirements under the new provisions of Regulation C. The Bureau expects the follow up HMDA rulemaking to occur in 2017.
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 and the Real Estate Settlement Procedures Act. 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 help consumers better understand their options, choose the deal that is best for them, and avoid costly surprises at the closing table. The Bureau has worked intensively to support implementation efforts, including consumer education initiatives, both before and after the rule's October 2015 effective date. To facilitate implementation, the Bureau has released and provided applicable updates for a small entity compliance guide, a guide to forms, a readiness guide, sample forms, and additional materials. In July 2016, the Bureau proposed revisions to address a number of questions about the final rule that have been identified by interested parties in the course of these implementation efforts. The comment period on the proposal closed October 18, 2016. The Bureau anticipates finalizing the proposal in 2017.
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 (including several amendments issued since that time) to strengthen consumer protections involving the origination and servicing of mortgages. In general, 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, the Bureau issued a final rule in August 2016 that amends various provisions of its mortgage servicing rules in both Regulation X, which implements RESPA, and Regulation Z, which implements TILA. The final rule clarifies the applicability of certain provisions when a borrower is in bankruptcy or has invoked cease communication rights under the Fair Debt Collection Practices Act, enhances loss mitigation requirements, and extends the protections of the mortgage servicing rules to confirmed successors in interest, among other amendments. Most of the final rule will be effective in 2017, one year from publication in the Federal Register, while certain provisions regarding borrowers in bankruptcy and successors in interest will be effective in 2018, 18 months from publication. In developing the final rule, the Bureau reviewed and considered public comments on the proposed rule, consulted with other agencies, and conducted consumer testing of certain disclosures. The Bureau will continue supporting implementation and consumer education efforts in connection with the mortgage-related final rules issued by the Bureau in January 2014, including the amendments issued since that time.
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 relating to the use of automated valuation models.
Bureau Long-Term Planning Efforts
The Bureau also maintains a long-term agenda to reflect its expectations beyond the current fiscal year. As noted in these items, the Bureau intends to explore potential rulemakings to address important issues related to consumer reporting and student loan servicing.
With regard to consumer reporting, the Bureau continues to oversee the credit reporting market through its supervisory and enforcement efforts, monitor the market through research 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, the Department of Education, and the Department of Treasury also published a Joint Statement of Principles on student loan servicing. In May 2016, the CFPB issued a request for information, seeking comment from the public about potential borrower communications regarding alternative repayment options. In July 2016, the CFPB and Department of Treasury joined the Department of Education as it announced new policy guidance regarding servicing standards for Federal student loans, which it developed in consultation with the Bureau and the Department of Treasury. 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 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.