5 ways the CFPB has eased industry’s coronavirus burden

The Consumer Financial Protection Bureau’s response to the coronavirus pandemic has included relaxing or eliminating rules so financial institutions can focus on aiding consumers.

Continuing a regulatory relief focus for the agency that preceded the crisis, CFPB Director Kathy Kraninger said in March that the agency planned to deliver “temporary and targeted regulatory flexibility” to financial firms.

“We recognize that many institutions are facing operational challenges due to COVID-19, and the priority must be responding to consumers facing nearer-term issues,” Kraninger said March 22 at a Financial Stability Oversight Council meeting. “We will continue to provide further relief as needed to ensure that resources can be focused on consumers.”

Banks had lobbied for relief — which the CFPB delivered — in two recent rulemakings already in linefor rollbacks before the crisis hit.

One of Kraninger’s first actions was to postpone quarterly HMDA reporting indefinitely. Yet some of the agency’s actions since the onset of the pandemic were permanent rulemakings that had been begun beforehand, such as a rule easing disclosure requirements for remittances.

Kraninger also has made clear in policy statements that financial institutions will not face enforcement actions or be cited in supervisory exams if they make good-faith efforts to help consumers on a number of different fronts.

At the same time, Kraninger has repeatedly said that the CFPB will vigorously enforce consumer finance laws, including protecting consumers from unfair, deceptive or abusive acts or practices. She also has encouraged consumers and whistleblowers to file complaints.

Here are five ways the bureau is attempting to help institutions deal with the crisis by relaxing regulatory expectations.

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More relief from HMDA reporting
The CFPB moved quickly to postpone quarterly reporting under the Home Mortgage Disclosure Act. The law requires companies to submit loan data to regulators that can be used among other things to refer possible fair-lending violations to the Department of Justice.

The agency said March 26 it would not bring enforcement actions against firms for failing to report HMDA data as well as data on prepaid and credit cards.

“As consumers seek temporary relief from lenders, the pandemic is impacting the operations of financial companies that are eager to help their customers during this unprecedented time,” Kraninger said in a press release announcing the relief. “Our actions today are temporary and targeted to support consumers by allowing financial companies to focus their resources on assisting consumers."

The agency has not yet stated how and when quarterly submissions will resume.

Some larger lenders are expected to collect data regardless in order to fulfill annual HMDA requirements.

The break from quarterly reporting comes as the CFPB has generally moved to cut the industry some slack on HMDA requirements.

In addition to the quarterly suspension, an HMDA rule issued in April says firms can skip collecting and reporting HMDA data if they originate fewer than 100 closed-end home loans, up up from the previous threshold of 25 loans.

“The CFPB has tried to walk a fine line between imposing undue data collection and reporting requirements on smaller players and providing enough mortgage lending information for the public to have meaningful insight into the market,” said Warren Traiger, senior counsel at the Buckley law firm.

The CFPB went further by extending a temporary two-year exemption from HMDA reporting to institutions that originate 500 open-end lines of credit. That exemption expires on Jan. 1, 2022.

Last year, the CFPB referred three matters involving discrimination to the Department of Justice, according to a report to Congress last month. The bureau also said it has a number of ongoing and newly opened fair-lending investigations focused on redlining.
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Flexibility on exams, enforcement
Also on March 26, the CFPB told financial institutions that because of the coronavirus and the fact that its own employees were working remotely, it would try to “minimize disruption and burden” when scheduling exams while “enforcement activities will take into account current staffing and related resource challenges confronting financial institutions.”

Bryan Schneider, the CFPB’s associate director of supervision, enforcement and fair lending, said that examiners are still conducting supervisory work remotely, which may continue for a longer period.

“We are appropriately adapting how we conduct our supervisory work through regulator communication with our supervised entities, he wrote in a blog post in April. “We will be sensitive to good-faith efforts demonstrably designed to assist consumers.”

Schneider said the CFPB is coordinating with federal and state regulators to ensure consumers are protected.

“When conducting examinations and other supervisory activities and in determining whether to take enforcement action, the Bureau will consider the circumstances that entities may face as a result of the COVID-19 pandemic and will be sensitive to good-faith efforts demonstrably designed to assist consumers,” Schneider said.

The CFPB said its supervisory staff will work with institutions to determine when supervisory exams “can be appropriately scheduled.”
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Credit card issuers given break on resolving billing disputes
Many merchants have been flooded with billing disputes during the pandemic and some of them are temporarily out of business. Without the ability to verify disputes from consumers, card issuers cannot always meet the required time frame for resolving a claim.

As a result, the CFPB said earlier this month it will not issue an enforcement action or cite in a supervisory exam credit card companies that make a good-faith effort to resolve billing disputes.

In normal times, credit card issuers have to acknowledge a merchant billing error notice from a consumer within 30 days. They generally must investigate and resolve billing errors within 90 days, according to Regulation Z, which implements the Truth in Lending Act.

The bureau’s new guidance means issuers failing to meet those deadlines will not be cited by the CFPB.

The CFPB had already provided temporary relief in March by suspending certain reporting requirements for credit card and prepaid accounts under the Truth in Lending Act, Regulation Z and Regulation E. That essentially freed companies from quarterly reporting of consumer credit card agreements, annual submissions of agreements between card issuers and institutions of higher education, certain credit card price and availability information, and submissions of prepaid account agreements.
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Broader relief from remittance disclosures
On May 11, the CFPB issued a final rule on remittances that will allow more institutions to avoid exact disclosures of pricing on transfers, including third-party fees and exchange rates.

The bureau expanded and made permanent a temporary safe harbor that means banks providing 500 or fewer transfers a year only need to give consumers estimates on pricing. The new threshold is up from the previous 100 transfers a year.

The rule will result in a lighter disclosure burden for over 400 banks and almost 250 credit unions.

Because of the coronavirus pandemic, the CFPB also gave financial institutions a further reprieve from enforcement actions related to remittance issues until January.

The CFPB rule, issued this month, essentially rolled back a 2013 regulation that required banks and financial firms to disclose the exact prices for a remittance transfer, the exchange rate, the amount to be delivered and the date funds are available.

The change was a big win for banks that claimed they have no control over foreign banks that they rely on for information about third-party fees.

The final remittance rule gave further relief by allowing banks to estimate the exchange rate if funds are received in the local currency and the bank remits 1,000 or fewer transfers to that specific country the prior year.
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Kathy Kraninger, director of the Consumer Financial Protection Bureau (CFPB), speaks during a Senate Banking Committee hearing in Washington, D.C., U.S., on Tuesday, March 10, 2020. After hearing arguments this month, the Supreme Court seemed inclined to give the president more power over the Consumer Financial Protection Bureau as the justices considered whether Congress went too far in trying to insulate the agency from political pressure. Photographer: Andrew Harrer/Bloomberg
Waiver from TRID waiting periods
In a narrow rule aimed at helping consumers, the CFPB said April 29 it would relax disclosure requirements if a borrower needs to close a loan quickly to obtain funds in an emergency.

The bureau issued an interpretive rule clarifying that consumers can modify or waive waiting periods required by the Truth in Lending Act and the Real Estate Settlement Procedures Act, known as TRID.

The CFPB told mortgage lenders that they should voluntarily alert consumers of their rights to obtain waivers for certain required waiting periods under TRID, which is codified in Regulation Z.

Relaxing disclosures would help consumers facing a financial emergency obtain access to mortgage credit faster, Kraninger said.

“The pandemic is resulting in consumers facing various challenges, and our temporary and targeted solutions are intended to ensure that consumers receive the credit they need in a timely manner,” she said.

Under TRID, creditors generally must deliver a loan estimate to a consumer no later than seven business days before the loan’s closing, and consumers must receive a closing disclosure no later than three business days before the loan closes.

The new guidance allows a consumer to waive the disclosure waiting periods if the extension of credit is needed for a financial emergency; the consumer provides a brief statement saying the need was due to COVID-19; and the emergency necessitates the closing of a loan before the end of TRID's waiting period.

The integrated TRID loan disclosures took effect in 2015. They were designed to eliminate the sticker shock that borrowers often faced when charges and fees were significantly higher at the closing table compared to original disclosures.
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