Feb. 4, 2022 — The phrase “overdraft protection” does not appear in the “semiannual regulatory agenda” published this week by the CFPB in the Federal Register. But there may be more to come on that, in future, on that and other issues.
According to the agenda filed by the bureau, it expects that its new director – Rohit Chopra, confirmed last fall by the Senate – “will assess what regulatory actions the Bureau should prioritize to best further its consumer protection mission and that the Spring 2022 Agenda will reflect his priorities.”
Recently, Chopra has signaled that the agency is looking closely at overdraft programs. In December, the agency released a statement that three of the nation’s largest banks brought in more than two of every five dollars charged in overdraft fees in 2019, while smaller financial institutions – which charged less on average – were also heavily reliant on the fee income from the programs. In a statement, Chopra said then the bureau would be taking action “to restore meaningful competition to this market.”
However, he gave no timing for the action.
In the meantime, apparently, the bureau is continuing to work on other issues that may emerge in 2022 as rulemakings. Among them, according to the semiannual regulatory agenda published by the agency:
- Public availability from financial institutions of certain information from credit applications made by women-owned, minority-owned, and small businesses.
- Addressing the availability of consumer financial account data in electronic form.
- Certain regulations relating to “Property Assessed Clean Energy” (PACE) financing (a tool for consumers to finance certain improvements to residential real property).
- Quality controls for automated valuation models (AVMs), with other federal financial institution regulators
- Closing out its rulemaking over the discontinuation of LIBOR, in particular by helping “to ensure that any changes to an index underlying [certain] loans (including home equity, student, reserve mortgages and others) as a result of the transition to a different index due to the discontinuation of LIBOR are done by industry in an orderly, transparent, and fair manner.”
LINK:
CFPB Semiannual Regulatory Agenda
(Jan. 28, 2022) A list of “dozens of specialty reporting companies that collect and sell access to people’s data” was released Thursday by the CFPB. The data collected, the agency said, includes individuals’ finances, check-writing histories, or rental history records “often without their knowledge.”
The CFPB said that – unlike the three nationwide consumer reporting agencies (Equifax, TransUnion, and Experian), which allow consumers to check their credit reports for free once a week (at least through December) – many of the specialty companies charge consumers a fee to access the data.
According to the bureau, its list allows people to see which companies provide this information for free, as well as search for those that provide specialized reporting by specific markets, including employment, tenant, insurance, and medical. If a consumer uses the list, accesses their credit history, and finds information that appears to be inaccurate, the agency indicated, that person has “the right to file a dispute and the consumer reporting company is required to conduct a reasonable investigation,” the agency said.
LINK:
CFPB Identifies Consumer Reporting Companies the Public Can Hold Accountable
(Jan. 21, 2022) Federal credit union (FCU) operating fees will decrease by an average of 23.7% in 2022, NCUA told the FCUs in a letter Thursday (letter to FCUs 22-FCU-01). About half of the 2022 operating fee reduction results from the NCUA Board applying a $15 million credit to amounts that would otherwise be due to support the approved 2022 operating and capital budgets, which came from previously collected operating fees that were unspent at year-end 2021, NCUA said. The remainder of the fee reduction, the agency said, came from budget surplus, growth in credit union assets – and “a slight increase to the share of the Operating Budget funded from the Share Insurance Fund through the Overhead Transfer Rate (OTR) methodology.” … NCUA and the federal banking agencies were all dinged in a congressional watchdog’s report on privacy protection for not fully implementing key practices. The report from the Governmental Accountability Office (GAO) notes that the agencies, among other things, have not maintained a full “personally identifiable information” (PII) inventory for all agency-owned applications. The agencies also did not document steps taken to minimize the collection and use of PII, the report asserts … A 2019 CFPB taskforce, ostensibly focusing on federal consumer financial law, did not comply with federal “sunshine” law requirements and the report of the group, issued about a year ago, will say so under a settlement announced late last week by the agency. Under that settlement, all taskforce records that would have been made public if the CFPB had complied with FACA’s requirements will be released publicly March 22. The records will also be made publicly available on the CFPB’s website, the agency said.
LINKS:
NCUA Letter 22-FCU-01: Operating Fee Schedule Adjusted for 2022
CFPB Announces Settlement Regarding the 2019 Taskforce on Federal Consumer Financial Law
(Jan. 14, 2022) A reminder to debt collectors of their obligations when collecting medical debts to comply with federal prohibitions on misrepresentations and unfair practices was issued Thursday by the CFPB.
The bureau said its Compliance Bulletin noted the Fair Debt Collection Practices Act’s (FDCPA) prohibition on misrepresentations and unfair practices, including when collecting medical debts covered by the No Surprises Act (NSA). The bulletin also reminds consumer reporting agencies and information furnishers to comply with the Fair Credit Reporting Act’s (FCRA) accuracy and dispute resolution requirements, including when furnishing information about or reporting medical debts covered by the NSA.
Enacted last year, the NSA is aimed at protecting people covered under group and individual health plans from facing surprise medical bills when they receive most emergency services, non-emergency services from out-of-network providers at in-network facilities and services from out-of-network air ambulance service providers, among others.
The bulletin advises credit bureaus that the accuracy and dispute obligations imposed by the FCRA apply with respect to debts stemming from charges that exceed the amount permitted by the NSA.
“The CFPB will investigate claims and take action against companies that attempt to collect or report or furnish consumer information about debts stemming from charges that exceed the amounts permitted under the NSA,” the bulletin states.
The bulletin also includes several other reminders to debt collectors, information furnishers and credit bureaus:
- Consumer financial protection law prohibits debt collectors from misrepresenting the character, amount, or legal status of any debt.
- Furnishers of information to debt collectors must have reasonable written policies and procedures regarding the accuracy and integrity of consumer information provided to credit bureaus.
- The accuracy and dispute obligations imposed by federal consumer financial protection law apply with respect to debts stemming from charges that exceed the amount permitted by the NSA.
LINK:
CFPB Issues Bulletin to Prevent Unlawful Medical Debt Collection and Credit Reporting
(Jan. 7, 2022) A regulatory alert calling attention to threshold and fee adjustments – which are increasing for the new year — under truth in lending, consumer leasing and fair credit reporting regulations by the CFPB was distributed last week by NCUA.
The alert, sent to all federally insured credit unions, notes that last month the bureau issued final annual adjustments for the exemption thresholds outlined under the Truth in Lending Act (TILA or Regulation Z) and the Consumer Leasing Act (CLA or Regulation M). The alert also points out that CFPB issued an annual adjustment to the maximum amount credit bureaus may charge consumers for making a file disclosure to a consumer under the Fair Credit Reporting Act (FCRA or Regulation V).
More specifically:
- The Reg Z threshold (for appraisals for higher-priced mortgage loan exemptions) will increase to $28,500 from $27,200.
- The Reg M threshold (for consumer credit and consumer lease exemptions) will increase to $61,000 from $58,300.
- The Reg V ceiling (for credit bureau consumer report fees) will increase to $13.50 from $13.
The Reg Z and Reg M threshold changes are based on the annual increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in effect as of June 1, 2021. The Reg V ceiling is based on the CPI for all urban consumers.
LINK:
(Jan. 7, 2022) Sarah Bloom Raskin, a former Maryland financial institution regulator who also served as a deputy Treasury secretary and member of the Federal Reserve Board, is under consideration for another stint at the central bank: as Federal Reserve Board vice chair for supervision. Washington news outlets this week were reporting that Raskin is under consideration for the post by President Biden. If confirmed, Raskin would be only the second occupant in post, succeed Randal Quarles (the first), who resigned late last year after his term in that role ended … Reports this week indicated that the Nebraska Department of Banking and Finance rejected the purchase of a Nebraska bank by an Iowa credit union. The agency said that GreenState Credit Union of North Liberty, Iowa, could not purchase the assets of Premier Bank, based on Omaha. According to the agency’s ruling, the bank did not carry its burden of proof to show “that there is express power under federal law for a national bank to sell substantially all of its assets,” at least in this case. Premier Bank is reportedly appealing the decision … The three big credit bureaus “failed to fully respond to consumers with errors,” a report released this week by the CFPB charged. The bureau said its report, which represented a new analysis, showed that in 2021, Equifax, Experian, and TransUnion together reported relief in response to less than 2% of covered complaints, down from nearly 25% of covered complaints in 2019. The report looks at errors in credit reports as recounted by consumers to the credit reporting agencies. According to CFPB, consumers submitted more than 700,000 complaints to the bureau regarding Equifax, Experian and TransUnion from January 2020 through September 2021. Those complaints, the bureau said, represented more than 50% of all complaints received by the agency for that period.
LINK:
(Dec. 23, 2021) Concern about accumulating debt, regulatory arbitrage, data harvesting, and other components associated with “buy now, pay later” (BNPL) plans has led the CFPB to open an inquiry into the quickly expanding market, the agency said late last week.
Meanwhile, the credit-reporting agency Equifax announced over the weekend that it intends to add elements of BNPL plans (such as installment repayments) to its credit statements, filling what has become a blind spot for lenders.
In a release, the CFPB said it has issued a series of orders to firms – including Affirm, Afterpay, Klarna, PayPal, and Zip – that are using the BNPL plans to collect information about the risks and benefits of the BNPL plans which the bureau referred to as loans.
The bureau described BNPL as a type of deferred payment option that generally allows the consumer to split a purchase into smaller installments, typically four or fewer, often with a down payment of 25% due at checkout.
Bureau Director Rohit Chopra described BNPL as a new version of old layaway plans, with the twist that where the consumer gets the product immediately, but gets the debt right away too.
The bureau contended that merchants are adopting BNPL programs and are willing to typically pay 3% to 6% of the purchase price to the companies. The agency said that’s similar to credit card interchange fees, because consumers often buy more and spend more with BNPL.
Equifax said it will begin recording installment plans that allow shoppers to make four biweekly payments instead of covering the full cost at checkout, often from online sources. Those particular plans have become very popular with shoppers, as they require a low down payment followed by three additional plans over time (known as “pay in four” plans).
But the payment plans do not typically show up on credit reports, which means financial institutions do not receive a clear picture of the risk the consumer has accumulated.
The credit reporting agency said that more than 45 million people in the U.S. are expected to use BNPL services in 2021.
LINK:
Consumer Financial Protection Bureau Opens Inquiry Into “Buy Now, Pay Later” Credit
(Dec. 17, 2021) Six regulatory activities in 2022 by CFPB have been identified by the agency as “key” actions, according to a rulemaking agency released Monday – but action on overdraft fees was not one of them.
The bureau said the list of matters the agency plans to pursue from now through Oct. 31 of next year “reflects the continuation of significant rulemakings that further our consumer financial protection mission and help to advance the country’s economic recovery from the financial crisis related to the COVID-19 pandemic.”
The key actions, the agency said are:
- Small Business Lending Data Collection
- Availability of electronic consumer financial account data
- Property Assessed Clean Energy (PACE) Financing
- Standards for Automated Valuation Models (AVMs)
- Facilitating transition away from LIBOR Index
- Reviewing existing regulations and market monitoring
Conspicuously missing from the list of “key actions” is anything new on regulating overdraft fees at banks and credit unions. Two weeks ago, the agency signaled it would be acting on the fees with the aim, it said, of restoring “meaningful competition.” The bureau also said it would be enhancing its supervisory and enforcement scrutiny of banks that are heavily dependent on overdraft fees. “In recent years, the CFPB ordered TD Bank to pay $122 million in penalties and customer restitution, and ordered TCF Bank to pay $30 million in penalties and restitution,” the agency noted.
LINK:
(Dec. 3, 2021) Action to “restore meaningful competition” to the overdraft fee market was vowed this week by the CFPB, which noted that both small and large financial institutions “heavily rely” on the fees for revenue.
No details of what that action would be, however, were cited by the agency. However, the agency’s press release stated that CFPB will be “enhancing its supervisory and enforcement scrutiny of banks that are heavily dependent on overdraft fees. “In recent years, the CFPB ordered TD Bank to pay $122 million in penalties and customer restitution, and ordered TCF Bank to pay $30 million in penalties and restitution,” the press release recalled, perhaps as an indication of what the bureau has in mind.
Bureau Director Rohit Chopra criticized financial institutions for their reliance on the fees. “Rather than competing on quality service and attractive interest rates, many banks have become hooked on overdraft fees to feed their profit model,” he said.
The bureau reported on research it conducted that asserted banks continue to “rely heavily” on overdraft and non-sufficient funds (NSF) revenue. The bureau said the total revenue collected from those sources in 2019 was $15.47 billion – 44% of which came from customers for the banks JP Morgan Chase, Wells Fargo and Bank of America. Overall, the bureau said, revenue from the fees made up nearly two out of every three dollars generated in fees at the institutions.
“The CFPB also found that while small institutions with overdraft programs charged lower fees on average, consumer outcomes were similar to those found at larger banks,” the bureau stated. “The research also notes that, despite a drop in fees collected, many of the fee harvesting practices persisted during the COVID-19 pandemic.”
Additionally, the agency said, its research shows that aggregate overdraft and NSF fee revenues reported in Call Reports for banks with assets of more than $1 billion saw a small but steady annual increase of around 1.7% per year to $11.97 billion in 2019.
“Reliance on such fees varied considerably among institutions in the Call Reports, but was generally stable over time for any given institution,” the bureau said. “While aggregate overdraft and NSF fee revenues declined by 26.2% in 2020, increased checking account balances resulting from federal stimulus payments likely contributed to this decline.”
LINK
CFPB Research Shows Banks’ Deep Dependence on Overdraft Fees
(Dec. 3, 2021) Mountain West Credit Union Association President and CEO Scott Earl announced his retirement this week, saying he will step down at the end of June next year. He has been leader of the association, which represents Arizona, Colorado and Wyoming, since 2011 … While inflation is expected to ease off, a chance of persistently high inflation could lead Federal Reserve policymakers to increase interest rates, placing credit unions in the position of paying closer attention to interest-rate risk, NCUA Board Chairman Todd Harper said this week. Speaking to state association/league leaders via a remote broadcast, Harper said that – although the yield curve is expected to steepen — a flat yield curve would put downward pressure on credit union net interest margins. “The ability to manage interest rate risk will remain a crucial determinant of credit union performance going forward,” Harper said. “To remain on a sound footing, credit unions will also need to continue to pay careful attention to capital, asset quality, earnings, and liquidity” … New debt collection rules adopted by CFPB earlier this year went into effect this week, the agency noted in a blog entry, laying out key points to know about the regulation. According to bureau, the new rules clarify how debt collectors can communicate with borrowers, including what information they’re required to provide at the outset of collection about the debt. The agency said the rules also outline rights of borrowers in debt collection, and how they can exercise those rights … Don’t forget next week’s (Dec. 9 at 2 p.m. ET) NASCUS 101 — a free, short webinar where participants learn from the NASCUS team how to make the most of an association membership. Among the topics addressed: What NASCUS is, how NASCUS contributes to the entire credit union industry, how to engage in the regulatory and legislative processes, collaboration with peers, committee and working group involvement, customized communications and more. The webinar is open to all members and prospective members. While it is free to participate, registration is required … Welcome to NASCUS membership Michigan State University Federal Credit Union of East Lansing; led by president & CEO April Clobes; the credit union holds $6.5 billion in assets.
LINK:
Understand how the CFPB’s Debt Collection Rule impacts you
Register here for NASCUS 101, Dec. 9, 2 p.m. ET.
(Dec. 3, 2021) Fees – both mandatory and maximum allowable — are on the increase for 2022 under actions taken this week by the CFPB and the Federal Reserve.
A 50-cent increase in the maximum allowable fee that a nationwide consumer reporting agency or nationwide specialty consumer reporting agency can charge consumers for their credit reports will raise next year’s fee maximum to $13.50, according to CFPB.
The Fair Credit Reporting Act (FCRA) requires that a nationwide consumer reporting agency provide one file disclosure to a consumer, upon request, every 12 months; it provides for other no-cost disclosures under certain circumstances, the bureau noted. Where a fee is permitted, however, and under the recent adjustment, it may not be greater than $13.50, according to the CFPB’s notice in Monday’s Federal Register.
Also this week: the Federal Reserve announced its priced services fees will increase an average 3.7% in the new year. The Fed said increases in the fee schedule for 2022 are generally like previous years, except 2021 where fees other than the Check Services Participation Fee remained flat.
The priced services are categorized within check services, FedACH, Fedwire® Funds and NSS, and Fedwire Securities, the agency said. The 2022 fee schedule for each of the priced services is available on the Federal Reserve Banks’ financial services website at FRBservices.org®. Specific fee changes are detailed more fully in the Fed’s draft notice for the Federal Register, which also details the Fed-approved $19.4 million “private sector adjustment factor” (PSAF) for 2022.
LINKS
Federal Register notice on consumer credit report fees
Federal Reserve Board approves fee schedule for Federal Reserve Bank priced services
(Dec. 3, 2021) CFPB’s inquiry into “big tech” payment platforms is the topic of the latest summary to be published by NASCUS, just this week. Like all summaries, it is available to members only.
In October, the bureau issued a request for comments (due on Monday, Dec. 6) into the business practices of six large technology firms operating payments systems in the United States. In issuing the comment request, the bureau said it wants to better understand how the firms use personal payments data and manage data access to users so the bureau can ensure adequate consumer protection.
On Oct. 21, the bureau had announced it had ordered the six tech firms – Google, Apple, Facebook, Amazon, Square, and PayPal – to provide information about their payments-related products, plans and practices in the period from Jan. 1, 2019, through Sept. 30, 2021. The bureau said it will also study the practices of the Chinese tech giants that offer payments services, such as WeChat Pay and Alipay.
CFPB Director Chopra, in a statement Oct. 21, said the inquiry will help inform regulators and policymakers about the future of the payments system. “Importantly, it will also yield insights that may help the CFPB to implement other statutory responsibilities, including any potential rulemaking under Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act,” he said. Section 1033 addresses consumer access to financial records.
Dec. 15 is the deadline for the six tech firms to respond to the orders, according to an “example” of the order the agency provided with its Oct. 21 announcement.
LINK: