Remittance Transfers under the EFT Act

Regulatory Alert 20-RA-05 Remittance Transfers under the EFT Act

June 2020

NCUA’s Regulatory Alert provides credit unions information regarding changes to the CFPB’s Remittance Rule (Regulation E) which implements the Electronic Fund Transfer Act (EFT Act). The changes take effect July 21, 2020.

The CFPB’s new rule makes the following changes:

• The new rule increases the safe harbor threshold, and removes from coverage of the rule, credit unions and banks that provide 500 or fewer transfers annually. This is an increase from the current threshold of 100 or fewer transfers.
• Establishes 2 new permanent exceptions to the rule which allow credit unions and banks to disclose estimates of the exchange rate and covered third-party fees instead of exact amounts:
• Entities may provide an estimate of the exchange rate for transfers to a particular country if the credit union or bank made 1,000 or fewer transfers in the prior calendar year to the particular country in which the transfer recipients received funds in that country’s local currency and the credit union or bank cannot determine the exact exchange rate for that transaction.
• Credit unions and banks may estimate the 3^rd-party fee for a transfer to a designated recipient’s institution if 1) the financial institution made 500 or fewer transfers to the designated recipient’s institution in the prior calendar year; 2) at the time the disclosure must be given the credit union or bank cannot determine the exact amount of the 3^rd-party fee; and 3) the remittance is sent from the sender’s credit union account (not including pre-paid accounts).

Additional Changes

• The final rule includes a transition period for credit unions and banks that exceed the new exception thresholds.
• The final rule also adds an exception to allow a credit union or bank to estimate 3^rd-party fees when another federal statute or regulation prohibits the institution from determining the exact amount of the fee.
• The CFPB will develop improved procedures to consider requests to make changes to the exchange rate countries list.

NCUA’s Office of Consumer Financial Protection may be contacted by phone (703.518.1140) or e-mail ([email protected]).

Federal Reserve Interim Final Rule

 Regulation D                                  

Part 204: Reserve Requirements of Depository Institutions

 Summary

Prepared by NASCUS Legislative & Regulatory Affairs Department

June 2020

The Board of Governors of the Federal Reserve System (Federal Reserve Board or ‘‘FRB’’) is amending its 12 CFR Part 204, Regulation D, to delete the numeric limits on certain kinds of transfers and withdrawals that may be made each month from ‘‘savings deposits.’’ The amendments are intended to allow consumers more convenience in accessing their funds and to ease administrative burdens for depository institutions.

The Interim Final Rule may be read here. The rule became effective April 24, 2020.

Comments are due to the Federal Reserve June 29, 2020.

Summary

Section 19(b)(2) of the Federal Reserve Act (FRA) authorizes the FRB to impose reserve requirements on certain types of deposits and other liabilities of depository institutions for the purpose of implementing monetary policy. Specifically, the FRA requires depository institutions to maintain reserves against its certain accounts, including transaction accounts, as prescribed by the FRB’s regulations. On March 26, 2020, the FRB set that reserve ratio for transaction accounts to zero percent.

Regulation D distinguishes between reservable ‘‘transaction accounts’’ and non-reservable ‘‘savings deposits’’ based on the ease with which the depositor may make transfers or withdrawals. Prior to issuing the Interim Final Rule (IFR) the FRB’s Regulation D limited the number of certain transfers or withdrawals that an account holder may make from a ‘‘savings deposit’’ to no more than six/month. Prior to the IFR, Regulation D also required depository institutions:

• to prevent transactions in excess of the regulatory limit (6/month)
• to monitor accounts for violations of the limit

When the FRB responded to the economic disruption of the pandemic by eliminating the reserve requirement on transaction accounts, the need to distinguish between reservable ‘‘transaction accounts’’ and non-reservable ‘‘savings deposits’’ became superfluous.

Therefore, the FRB subsequently is issuing the IFR to amend Regulation D by deleting the six transfer limit from the ‘‘savings deposit’’ definition as well as the provisions that require depository institutions to prevent transfers and withdrawals in excess of the limit or to monitor the accounts for violations when excess transactions were inadvertently allowed. The IFR makes conforming changes to other definitions in Regulation D that refer to ‘‘savings deposit’’ as necessary.

As a result, depository institutions are permitted, but not required, to suspend enforcement of the 6/month transfer limit. Furthermore, the IFR does not mandate any change to how depository institutions report deposits.

The IFR includes a series of FAQs to help explain the implications of the changes.

• FAQ #1 – Reiterates that the IFR permits depository institutions to suspend enforcement of the 6-transfer limit, but it does not require them to do so.
• FAQ #2 & #3 – Clarifies that depository institutions may continue to report accounts as ‘‘savings deposits’’ on their FR 2900 deposit reports even after they suspend enforcement of the limit on those accounts (#2) or may report that account as a ‘‘transaction account’’ on the FR 2900 reports (#3).
• FAQ #4 – Addresses Regulation D’s §204.2(d)(1) ‘‘reservation of right,’’ and confirms that the ‘‘reservation of right’’ continues to be a part of the definition of ‘‘savings deposit.’’
• FAQ #5 – The IFR interim final rule does not require a depository institution to change the way it calculates or reports interest on an account where the depository institution has suspended enforcement of the transfer limit.
• FAQ #6 – Notes that a depository institution with account agreements with its ‘‘savings deposit’’ customers requiring the depository institution to enforce the 6-transfer limit may, if it chooses, amend those agreements in any manner.
• FAQ #7 – Notes that the IFR does not require depository institutions to change the names of accounts if a depository institution chooses to suspend regardless of whether the 6-transfer limit is suspended.
• FAQ #8 – **The Federal Register notice is missing FAQ #8.
• FAQ #9 – Clarifies that depository institutions may suspend enforcement of the 6-transfer limit on a temporary basis, such as for six months.
• FAQ #10 – Noting that some depository institutions charges fees to savings deposit customers for transfers and withdrawals that exceed the Regulation D limit, the FRB clarifies that the IFR does not require or prohibit depository institutions from charging their customers fees for transfers and withdrawals in excess of the limit.

-End-

 

 

Interagency Lending Principles for Offering Responsible Small-Dollar Loans

May 2020

NCUA and the federal banking agencies (Federal Reserve System, FDIC, and OCC) have published “principles” to encourage banks and credit unions to offer responsible small-dollar loans to both consumers and small businesses. The agencies noted the role small-dollar loans can play in helping borrowers manage short term credit needs during the pandemic, and suggest lenders

The agencies advise lenders they should:

• Offer “thoughtfully structured” loans
• Design repayment structures that work for borrowers
• Implement lending programs that are equitable reflections of the lender’s costs
• Utilize automation and other new technologies to lower lending costs

The agencies characterize responsible small-dollar loan programs as generally having the following characteristics:

• High percentage of customers repay loans pursuant to the original terms, indicating loans were affordable and appropriately underwritten
• Loan terms and pricing minimize debt cycles and debt rollovers
• Program design enhances a borrower’s financial capabilities

The guidance characterizes well managed programs as:

• In alignment with the financial institution’s overall business plans and strategies
• Including innovative technology or processes for customers who may not meet traditional underwriting standards
• Offering fair access to financial services and fair treatment of borrowers
• In compliance with applicable fair lending and consumer protection laws.

With respect to credit unions, NCUA notes that FCUs may offer PALs I and PALs II loans pursuant to § 701.21(c)(7)(iii) and (iv).

The agencies’ core lending principles for small-dollar loan products include:

• Loan products are consistent with safe and sound banking, treat customers fairly, and comply with applicable laws and regulations
• Financial institutions effectively manage the credit, compliance and operational risks associated with the products they offer
• Loan products are underwritten based on prudent policies and practices

-End-

 

 

 

Letter to Credit Unions 20-CU-16 Low-Income Designations: Qualification of Military Personnel

May 2020

NCUA has announced it is changing the agency’s approach to determining whether a credit union qualifies for designation as a low income credit union (LICU) pursuant the

Federal Credit Union Act (FCUA) and Part 701.34 (applicable to FISCUs by reference in Part 741.204). The regulation generally defines a low-income member as a member whose family income is 80% or less than the median family income.

Prior to this change, NCUA’s determined LICU status by assigning incomes based on geocoding of members’ addresses. However, NCUA asserts that this methodology cannot account for military personnel with Army/Air Post Office (APO) or Fleet Post Office (FPO) mailing addresses and therefore excluded them from the analysis. The change of methodology announced by NCUA seeks to address that issue.

Based on a determination by NCUA’s Office of Chief Economist that a majority of military personnel would qualify as low-income members, NCUA is changing its methodology to include APO/FPO addresses in the LICU analysis with a percentage (designated by NCUA) included as low-income members.

NCUA’s geocoding approach is a assumption based methodology. However, some credit unions may have members that don’t adhere to the methodology’s models and assumptions. For those credit union, NCUA also provides an option to submit additional information to NCUA to demonstrate the credit union qualifies for a LICU designation. Credit unions may submit to NCUA’s CURE office the following:

• a list identifying members who are active-duty military personnel (no additional information is necessary) for NCUA to factor into their military methodology formulation discussed above; or
• granular data for military members, including active-duty and members of the Reserve and the National Guard. Data could include actual income, paygrade, years of service, or rank of its military members.

Credit unions also have the option of conducting their own analysis to demonstrate that all or some portion of military membership qualify as low-income.

Letter to Credit Unions 20-CU-15 Principles for Making Responsible Small-Dollar Loans

May 2020

NCUA issued LTCU 20-CU-15 to discuss interagency guidance issued together with the Federal Reserve System, FDIC, and OCC related to small dollar lending programs: Interagency Lending Principles for Offering Responsible Small-Dollar Loans. The interagency guidance (principles) follows NCUA’s issuance in March 2020 of LTCU 20-CU-04 Responsible Small-Dollar Lending in Response to COVID-19 and a March 2020 joint statement from the federal bank regulators: Joint Statement Encouraging Responsible Small-Dollar Lending in Response to COVID-19.

The principles described in the new interagency guidance apply to all credit unions that make small-dollar loans. NCUA, emphasizing that effectively managing the credit, operational, and compliance risks associated with small dollar loans is important for credit unions, identifies 4 essential elements:

• Credit unions should underwrite small-dollar loans based on prudent policies
• Credit unions should offer small dollar loans in a manner consistent with safe and sound practices
• Credit unions must comply with all applicable consumer protection and other laws and regulations
• Credit unions should treat members fairly

NCUA notes that FCUs have the option of providing PALs under § 701.21(c)(7)(iii) and

• 701.21(c)(7)(iv).

PALs I	PALs II
$1,000 maximum loan	$2,000 maximum loan
6-month maturity	12-month maturity

 

Regulatory Alert 20-RA-03 CFPB Issues Interpretive Rule on Waiver of TRID and TILA Waiting Periods

May 2020

NCUA’s Regulatory Alert discussed the CFPB’s interpretive rule clarifying when consumers can elect to modify or waive certain required waiting periods for some mortgage loans under the TILA-RESPA Integrated Disclosure (TRID) rule and the Regulation Z right of rescission rule (See 12 CFR 1026.15 and 1026.23). 

Under the interpretive rule, a borrower’s need to obtain funds and not delay closing for reasons related to the COVID-19 pandemic may be a “changed circumstance” or “bona fide personal emergency” which would permit borrowers to waive waiting periods under both rules, or permit a credit union to amend some TRID documents.

NCUA encourages credit unions to inform borrowers of their ability to forego the waiting periods.

The interpretive rule also designates COVID-19 to be a permissible “changed circumstance” under the TRID rule for revising fee disclosures to reflect higher costs for the transaction (such as increased appraisal fees).

NASCUS Note:

The CFPB also issued a FAQ regarding the waiving of the timing requirement under the ECOA Valuations Rule.

Regulatory Alert 20-RA-04 CFPB Increases Reporting Thresholds Under HMDA

May 2020

NCUA’s Regulatory Alert discusses the May 12, 2020 CFPB final rule amending parts of Regulation C which implement the Home Mortgage Disclosure Act (HMDA). The final rule:

• Effective July 1, 2020 the threshold for collecting and reporting data about closed-end mortgage loans is increased from 25 to 100, for calendar year 2020. It also increases the threshold for collecting and reporting
• Effective January 2, 2022 the threshold for collecting data about open-end lines of credit is increased from 100 to 200.
• The asset size foe collection of data remains unchanged: credit unions with total assets of $47m or less of December 31, 2019, are not subject to HMDA in 2020.

 What this means for credit unions:

NOTE: This rule change only applies to HMDA. Other regulations, such as  Regulation B (requiring collection of  information regarding ethnicity, race, sex, marital status, and age when credit is sought for purchase/refinancing of a primary residence dwelling that also secures the credit.

For calendar year 2021, a credit union is not required to collect HMDA data for closed-end mortgage loans if it originated fewer than 100 closed-end mortgage loans in 2019 or 2020.

The HMDA provisions may be found in Regulation C. CFPB will not update the current version of Regulation C until the effective dates of the amendments.

NCUA Final Rule: Part 722 Appraisals

Prepared by NASCUS Legislative & Regulatory Affairs Department
May 2020

NCUA has published a final rule amending Part 772 regarding appraisals for certain residential real estate related transactions. The final rule increases the threshold level below which appraisals are not required for residential real estate related transactions from $250,000 to $400,000. In transactions below the threshold, federally insured credit unions have the option of obtaining either an appraisal, or a written estimate of market value of the real estate collateral. In addition, the final rule explicitly incorporates the existing statutory requirement that appraisals be subject to appropriate review for compliance with the Uniform Standards of Professional Appraisal Practice (USPAP).

The Final Rule proposed rule may be read here. The rule became effective April 30, 2020.  

NCUA’s appraisal rules in § 722 apply to federally insured state credit unions by reference in § 741.203(b).

Summary

NCUA’s appraisal rule, Part 722, is promulgated pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (Title XI). The last time NCUA adjusted its appraisal threshold was in 2001 when the limit was raised to $250,ooo. NCUA notes that the $400,000 threshold for residential real estate related transactions would exempt about the same number of transactions as the $250,000 threshold when it was established in 2001.

• 722.3(b)(2) Appraisal Threshold

The final rule amended the appraisal threshold in § 722.3(b)(2) to raise the limit below which an appraisal is not required for a residential real estate transaction to $400,000. For residential real estate transactions less than $400,ooo, credit unions have the choice of obtaining either a waiver, or a written estimate of market value.

• 722.4(c) Uniform Standards of Professional Appraisal Practice

Part 722.4(c) will be amended to incorporate the existing statutory requirement that appraisals be subject to appropriate review for compliance with the Uniform Standards of professional Appraisal Practice (USPAP). The revisions also delete as unnecessary the additional requirements for the appraisal exemption for certain transactions in rural areas.

-End-

Summary: CFPB Debt Collection Practices (Regulation F)

12 CFR Part 1006

The Consumer Financial Protection Bureau (CFPB)

Prepared by the Legislative and Regulatory Affairs Department

May 2020

The Consumer Financial Protection Bureau issued a supplemental notice of proposed rulemaking to amend Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA).  In May 2019, the Bureau issued a proposed rule that would prescribe Federal rules governing the activities of debt collectors as defined under the FDCPA.  This proposal supplements the May 201 proposed rule by proposing to require debt collection to make certain disclosures when collecting time-barred debts.

Comments must be received by August 4, 2020.  The proposed rule can be accessed here and here (date extension).

Summary:

The Bureau proposes to amend Regulation F, which implements the FDCPA, to require debt collectors to make certain disclosures when collecting time-barred debts.  Time barred debts are debts for which the applicable statute of limitations has expired.  The Bureau proposes to require a debt collector collecting a debt that the debt collector knows or should know is time barred to disclose:

• That the law limits how long the consumer can be sued for a debt and that, because of the age of the debt, the debt collector will not sue the consumer to collect it; and
• If the debt collector’s right to bring a legal action against the consumer to collect the debt can be revived under applicable law, the fact that revival can occur and the circumstances in which it can occur.

The Bureau proposes model language and forms that debt collectors could use to comply with the proposed disclosure requirements.

The Bureau proposes that the effective date of the final rule would be one year after the final rule is published in the Federal Register.

Comments Requested:

The Bureau is requesting comments on the following (among other things):

• The merits of using a “know or should know” standard versus a “strict liability” standard for determining when debt collectors must provide time-barred debt and revival disclosures.
• The merits of using, as an alternative, a “strict liability” standard with safe harbor for debt collectors who provide the disclosures when neither knew nor should have known the debt was time-barred.
• Whether knowing if a debt is time-barred affects or is likely to affect a consumer’s conduct relating to the debt
• The frequency with which debt collectors should be required to provide required disclosures, including the basis for requiring more or less frequent disclosures;
• Whether additional guidance is needed to address situations in which a validation notice might be reissued voluntarily because, for example, the consumer requests a copy or a translation;
• Debt collectors’ current practices with respect to disclosing whether a debt is time barred and the circumstances, if any, in which revival can occur;
• Debt collectors’ current practices with respect to revival, including whether and how frequently they sue to collect debts when the right to do so has been revived.
• The burden of making a time-barred debt determination for the debt collectors who do not sue to collect debts
• The burden of requiring all debt collectors to determine, when collecting debt that they know or should know is time barred, which State’s law applies and the circumstances, if any, under which the law would permit revival.
• The burden of making these determinations under a strict liability standard
• The knowledge standard that should apply for determining when disclosures would be required under the proposed rule
• Whether, if the first communication after a debt becomes time barred (or after the debt collector knows or should know that the debt is time barred) is oral, the debt collector should also be required to provide the disclosures in the first subsequent written communication.
• The conflict that might arise between the Bureau’s proposed model forms and other disclosures required by applicable law.
• Whether proposed model forms B-4 through B-7 would allow debt collectors to comply with other applicable law, including whether any jurisdictions require time-barred debt or revival disclosures to be included on the front of the validation notice and
• Whether, if so, it is possible for a debt collector to comply with both the Bureau’s proposal and any such State laws.
• Whether consumers who receive both Federal and State time-barred debt (and if applicable, revival) disclosures on a validation notice may be confused by the dual disclosures.
• Whether the two conditions described on the model forms – payment and written acknowledgement-capture all circumstances in which State law permits revival

NCUA Interim Final Rule: Parts 702 & 723 PPP Loans & PCA and MBL

Prepared by NASCUS Legislative & Regulatory Affairs Department
May 2020

NCUA issued this interim final rule (IFR) to make conforming amendments to Part 702, Prompt Corrective Action (PCA) and Part 723, Commercial Loans, following the enactment of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and subsequent implementation of the Paycheck Protection Program (PPP).

The IFR makes the following changes to NCUA’s rules:

• Part 702.2 is amended to allow credit unions to exclude from the calculation of total assets when calculating net worth ratio any loans pledged as collateral for a non-recourse loan that is provided as part of the Federal Reserve Board’s Paycheck Protection Program Lending Facility
• Part 702.104 is amended to included PPP loans as low risk assets for the purposes of risk weighting under PCA
• Part 723.2 is amended to excluded PPP loans from accredit unions MBL cap calculation

The Interim Final Rule proposed rule may be read here. The rule became effective upon publication on April 27, 2020.

Comments are due to NCUA May 27, 2020.

Summary

Part 702 of the NCUA’s rules implements the risk-based net worth requirement for complex credit unions. Under § 702.103, a complex credit union is a credit union with   $50 million in assets and a RBNW requirement exceeding 6%. A credit union’s

RBNW is calculated by weighing 8 risk portfolios:

• long-term real estate loans
• member business loans (MBL) outstanding
• investments
• low-risk assets
• average- risk assets
• loans sold with recourse
• unused MBL commitments
• allowance

The NCUA’s MBL and Commercial Lending Rule limits the aggregate amount of MBLs that a credit union may make to the lesser of 1.75 times the net worth of the credit union or 1.75 times the minimum net worth required to be well capitalized under the Federal Credit Union Act (FCUA). The rule defines MBLs and commercial loans and distinguishes between the two with only MBLs counting toward the regulatory and statutory cap on loans. Note that while all MBLs are commercial loans, not all commercial loans are MBLs.

As part of the federal government’s response to the COVID-19 impact on the economy, the FRB authorized each of the Federal Reserve Banks to participate in the Paycheck Protection Program Lending Facility (PPPL Facility). Under the PPPL Facility, each of the Federal Reserve Banks will extend non-recourse loans to eligible financial institutions to fund PPP loans with the SBA guaranteed PPP loans pledged as collateral for the PPL Facility loans.

The Interim Final Rule

• PPP loans will risk weighted zero percent – The IFR amends the NCUA’s risk-based net worth rules as discussed above to include the PPP loans in the definition of low-risk assets (#4 above in the RBNW categories). Other low-risk assets include cash on hand, the NCUSIF deposit, and debt instruments guaranteed by the NCUA. Under §702.106(d), low-risk assets receive a 0% risk weight.
• PPP loans excluded from calculation of total assets – In order to participate in the PPPL Facility, credit unions will have to originate and hold PPP loans on the credit union’s balance sheet. This in turn could potentially subject credit unions to increased regulatory capital requirements. To facilitate use of the PPPL Facility, the IFR excludes PPP loans pledged as collateral to the PPPL Facility from the definition of total assets in §702.2 for purposes of calculating a credit union’s net worth ratio.
• PPP loans are not “commercial loans” – The interim final rule excludes PPP loans from the definition of “commercial loans” under § 723. Because the PPL loans would not be defined as “commercial loans” they would not be counted for purposes of calculating a credit union’s aggregate MBL cap.

Summary: CFPB Bulletin 2020-02 “Compliance Bulletin and Policy Guidance: Handling of Information and Documents During Mortgage Servicing Transfers”

12 CFR Part 1024

The Consumer Financial Protection Bureau (CFPB)

Prepared by the Legislative and Regulatory Affairs Department

May 2020

The Consumer Financial Protection Bureau (CFPB) is issued this compliance bulletin and policy to provide guidance to residential mortgage servicers regarding the transfer of mortgage loans.

The bulletin became effective on May 1, 2020 and can be access here.

Summary:

The Bureau issued the bulletin to provide guidance to mortgage servicers and sub-servicers considering potential risks to consumers that may arise in connection with transfers of residential mortgage servicing rights.  The bulletin covers (i) transfer-related policies and procedures and (ii) loan information and documents for ensuring accuracy.

In 2014, the Bureau issued CFPB Bulletin 2014-01 that highlighted the Regulation X mortgage servicing rule requirements.  In addition, the bulletin also addressed frequently asked questions; focus areas of Bureau examinations; and other Federal consumer financial laws applicable to servicing transfers. However, the Bureau has noted that it continues to find weaknesses in compliance management systems and violations of Regulation X related to mortgage servicing transfers. The bulletin highlights a number of examples of servicer practices that the Bureau may consider as policies/procedures that are reasonably designed to achieve the objectives of the transfer requirements such as general transfer-related polices/procedures and loan information and documents to be transferred/received.  Additionally, the bulletin’s “Appendix A” provides examples of information and documents grouped by subject area which the Bureau intends to use to assess compliance with Regulation X.

The Bureau does note that during the duration of the National Emergency and (120 days thereafter), it will consider the challenges entities may face as a result of the pandemic, including operational and time constraints related to the transfer, as well as being sensitive to good faith efforts designed to transfer the servicing without adverse impact to consumers. As such, the Bureau intends to focus supervisory feedback for institutions, if needed, on identifying issues, correcting deficiencies, and ensuring appropriate remediation to consumers.

 

 

 

 

 

CFPB Bulletin 2020-01

March 2020

Responsible Business Conduct: Self-Assessing, Self-Reporting, Remediating and Cooperating

In 2013, the Bureau issued a Bulletin that identified several activities that individuals/businesses could engage in that could prevent and minimize harm to consumers, referring to these activities as “responsible conduct.” The Bureau is issuing this updated Bulletin to clarify its approach to responsible conduct and to reiterate the importance of such conduct.

The Bureau’s focus is on building a culture of compliance among entities, in order to minimize the likelihood of a violation of Federal consumer financial law and thereby prevent harm to consumers.  When a violation of law does occur, swift and effective actions taken by an entity to address the violation can minimize resulting harm to consumers.  Specifically, an entity may self-assess its compliance with Federal consumer financial law, self-report to the Bureau when it identifies likely violations, remediate the harm resulting from these likely violations, and cooperate above and beyond what is required by law with any Bureau review or investigation.

The Bureau seeks to encourage responsible conduct.  Accordingly, if an entity meaningfully engages in responsible conduct, the Bureau intends to favorably consider such conduct, along with other relevant factors, in addressing violations of Federal consumer financial law in supervisory and enforcement matters.  The Bureau principally considers four categories of conduct when evaluating whether some form of credit is warranted in an enforcement investigation or supervisory matter: self-assessing, self-reporting, remediating and cooperating.  These categories are discussed in more detail below.

Additionally, other factors the Bureau considers in determining how to resolve violations of Federal consumer financial law include, without limitation, (i) the nature, extent, and severity of the violations identified and any associated consumer harm; (ii) an entity’s demonstrated effectiveness and willingness to address the violations; and (iii) the importance of deterrence, considering the significance and pervasiveness of the potential consumer harm.

Self-Assessing:

This factor, also described as self-monitoring or self-auditing, reflects a proactive commitment by an entity to use resources for the prevention and early detection of violations of Federal consumer financial law. Below is a list of questions the Bureau intends to consider in determining whether to provide favorable consideration for self-assessing activity including:

• What resources does the entity devote to compliance? How robust/effective is its compliance management system? Is it appropriate for the size and complexity of the entity’s business?
• Has the entity taken steps to improve its compliance management system when deficiencies have been identified either by itself or external regulators? Did the entity ignore obvious deficiencies in compliance procedures? Does the entity have a culture of compliance?
• Considering the nature of the violation, did the entity identify the issue? What is the nature of the violation or likely violation and how did it arise? Was the conduct pervasive or an isolated act? How long did it last? Did senior personnel participate in, or turn a blind eye toward, obvious indicia of misconduct?
• How was the violation detected and who uncovered it? If identified by the entity, how did the entity identify the issue (e.g. from customer complaints, audits or monitoring based on routine risk assessments or whistle blower activity?) Was the identification the result of a robust and effective compliance management system including adequate internal audit, monitoring and compliant review processes? Was identification prompted by an impending exam or an investigation by a regulator?
• What self-assessment mechanisms were in place to effectively prevent, identify or limit the conduct that occurred, elevate it appropriately, and preserve relevant information? In what ways, if any, were the entity’s self-assessing mechanisms particularly noteworthy and effective?

Self-reporting:

This factor substantially advances the Bureau’s protection of consumers and enhances its mission by reducing the resources it must expend to identify violations and making those resources available for significant matters.  Prompt self-reporting of likely violations also represents concrete evidence of an entity’s commitment to responsibly address the conduct at issue.  Below is a list of questions the Bureau intends to examine in determining whether to provide favorable consideration for self-reporting of likely violations of Federal consumer financial law including:

• Did the entity completely and effectively disclose the existence of the conduct to the Bureau, to other regulators, and, if applicable, to self-regulatory organizations? Did the entity report any additional related misconduct likely to have occurred?
• Did the entity report the conduct to the Bureau without unreasonable delay? If it delayed, what justification, if any, existed for the delay? How did the delay affect the preservation of relevant information, the ability of the Bureau to conduct its review or investigation, or the interests of affected consumers?
• Did the entity proactively self-report, or wait until discovery or disclosure was likely to happen anyway, for example due to impending supervisory activity, public company reporting requirements, the emergence of a whistleblower, consumer complaints or actions, or the conduct of a Bureau investigation?

Remediating:

 When violations of Federal consumer financial law have occurred, the Bureau’s remedial priorities include obtaining full redress for those injured by the violations, ensuring that the entity who violated the law implements measures designed to prevent the violations from recurring, and when appropriate, effectuating changes in the entity’s future conduct for the protection and/or benefit of consumers. Below is a list of questions the Bureau intends to examine in determining whether to provide favorable consideration for remediation activity regarding likely violations of Federal consumer financial law including:

• What steps did the entity take upon learning of the violation? Did it immediately stop the violation? How long after the violation was uncovered did it take to implement an effective response?
• What steps did the entity take to discipline the individuals responsible for the violation and to prevent the individuals from repeating the same or similar conduct?
• Did the entity conduct an analysis to determine the number of affected consumers and the extent to which they were harmed? Were consumers made whole through compensation and other appropriate relief, as applicable? Did affected consumers receive appropriate information related to the violations within a reasonable period of time?
• What assurances are there that the violation (or a similar violation) is unlikely to recur? Did the entity take measures, such as a root-cause analysis, to ensure that the issues were addressed and resolved in a manner likely to prevent and minimize future violations? Similarly, have the entity’s business practices, policies and procedures changed to remove harmful incentives and encourage proper compliance?

Cooperating:

Cooperating relates to the quality of an entity’s interactions with the Bureau after the Bureau becomes aware of a likely violation of Federal consumer financial law, either through an entity’s self-reporting or the Bureau’s own efforts. Below is a list of questions the Bureau intends to examine in determining whether to provide favorable consideration for cooperating in a Bureau matter including:

• Did the entity cooperate promptly and completely with the Bureau and other appropriate regulatory and law enforcement bodies? Was that cooperation present throughout the course of the review and/or investigation?
• Did the entity take proper steps to develop the facts quickly and completely and to fully share its findings with the Bureau? Did it undertake a thorough review of the nature, extent, origins, and consequences of the violation and related behavior? Who conducted the review and did they have a vested interest or bias in the outcome? Were scope limitations placed on the review? If so, why and what were they?
• Did the entity promptly make available to the Bureau the results of its review and provide sufficient documentation reflecting its response to the situation? Did it provide evidence with sufficient precision and completeness to facilitate, among other things, appropriate actions against others who violated the law? Did the entity produce a complete and thorough written report detailing the findings of its review? Did it voluntarily disclose material information not directly requested by the Bureau or that otherwise might not have been uncovered? Did the entity provide all relevant, non-privileged information and make assertions of privilege in good faith?
• Did the entity direct its employees to cooperate with the Bureau and make reasonable efforts to secure such cooperation? Did it make the most appropriate person(s) available for interviews, consultation, and/or sworn statements?

The Bureau notes that it intends for this guidance to encourage entities subject to the Bureau’s supervisory and enforcement authority to engage in more “responsible conduct” as defined within the guidance. The bulletin can be found here.