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Volume 25 - Number 8

April 14, 2014

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CFPB Requires $747 Million from BofA Over Credit Card Practices

Bank of America will have to pay $727 million in restitution to consumers who were harmed by practices related to its credit card add-on products, under the terms of a consent order announced last week by the CFPB. That is the single largest amount of money yet returned to consumers in such an action by the bureau. BofA also agreed to pay a $20 million civil money penalty to the CFPB. The bureau went after BofA on two fronts: allegedly deceptive marketing practices as well as unfair billing practices. The marketing practices at issue had to do with two credit-card payment-protection products, “Credit Protection Plus” and “Credit Protection Deluxe.” “The bureau found that the telemarketing scripts Bank of America used...

Mortgage Lenders Call for Changes To CFPB’s Ability-to-Repay Rule

In a statement submitted for the record to the House Financial Services Committee last week, the Mortgage Bankers Association said it remains concerned that the CFPB’s ability-to-repay rule could unduly tighten mortgage credit for a significant number of creditworthy families who seek to buy or refinance a home. To improve the rule, the MBA rattled off a handful of suggestions, the first of which was to establish cure procedures. “The CFPB should adopt rules allowing lenders to cure calculation errors and other processing mistakes made while attempting to meet the qualified mortgage requirements,” the trade group said. “Without such procedures, lenders will be forced to avoid transactions at the boundaries of the points-and-fees cap, debt-to-income limits and the annual percentage...

QM Rules to Constrict Mortgage Credit, ABA Lending Survey Finds

More than 80 percent of bankers expect mortgage credit is going to be constricted because of the CFPB’s new mortgage rules, which took effect in January, according to the results of the latest Real Estate Lending Survey from the American Bankers Association. More specifically, in discussing the impact of the ability-to-repay/qualified mortgage rules on credit availability in the market generally, 41 percent said there will be a measurable reduction in credit availability across all mortgage lending segments. Forty percent said there will be a measurable reduction in credit availability in the non-QM lending segments only, and 20 percent said there will be no measurable impact on mortgage lending levels, regardless of QM or non-QM classification. When asked to characterize the...

Democrats Call for Full Hearing On Personnel Practices at CFPB

Democrats on the House Financial Services Committee have formally requested Chairman Jeb Hensarling, R-TX, conduct a full committee hearing into potential discriminatory policies and practices that affect employees not only at the CFPB but in other federal financial regulatory agencies as well. Ranking Member Maxine Waters, D-CA, announced the request at a hearing recently conducted by the House Financial Services Subcommittee on Oversight and Investigations, which looked into allegations of employee discrimination and retaliation at the CFPB. Waters echoed sentiments of fellow Democrats, who expressed concern earlier that the hearing was focused on discussing ongoing claims by a single employee instead of the larger issue of employee discrimination and the retaliation and harassment that whistleblowers experience. Dwelling on the employee’s...

Consumer Complaints About Credit Reporting Surging, Data Reveal

Consumer complaints filed with the CFPB jumped 29.1 percent in the first quarter of 2014, fueled mostly by a flood of gripes having to do with credit reporting, which leapt 79.5 percent during the period, according to a new analysis and ranking by Inside the CFPB. Year over year, the picture is even worse, with total complaints up 34.0 percent, driven by an eye-popping 125.8 percent jump in grievances with credit reporting. Such a noticeable rise in the sector is sure to capture the attention of the CFPB, which uses consumer complaints – rightly or wrongly – as a barometer for where it should dedicate its limited resources. There are economists who argue such self-reported data are inherently unreliable. The bureau has... [includes 2 exclusive charts]

CFPB Needs to Improve its Supervisory Activities, OIG Finds

The CFPB needs to up its game and improve the efficiency and effectiveness of its supervisory activities, according to a recent report from the Federal Reserve Office of Inspector General, the IG for the bureau. “Specifically, we found that the CFPB needs to improve its reporting timeliness and reduce the number of examination reports that have not been issued, adhere to its unequivocal standards concerning the use of standard compliance rating definitions in its examination reports, and update its policies and procedures to reflect current practices,” the OIG said. The report contains 12 recommendations designed to assist the CFPB in strengthening its supervision program, one of which is to monitor the timeliness of examination reporting against the requirements the agency...

CFPB’s First Criminal Referral Results in Guilty Pleas

Debt-settlement company Mission Settlement Agency and its principal, Michael Levitis, pleaded guilty in New York to conspiracy charges of mail and wire fraud, giving the CFPB a significant victory in its first criminal referral. As part of the plea deal struck with federal prosecutors, Levitis and Mission Settlement agreed to forfeit $2.2 million. Levitis faces as much as 10 years in prison, and his company could be fined as much as an additional $4.39 million. The defendants are scheduled to be sentenced by U.S. District Judge Paul Gardephe on Aug. 21, 2014. In addition to Levitis’ plea, four other former Mission employees, Denis Kurlyand, Boris Shulman, Felix Lemberskiy, and Zakhir Shirinov, previously pled guilty for their roles in the scheme...

Freedom of Information Act Ruling Goes in Favor of the CFPB

The issue of the recess appointment of Richard Cordray as director of the CFPB may finally have been put to rest now, after the U.S. District Court for the District of Columbia dismissed the last remnants of a case brought by the watchdog group, Judicial Watch, under the Freedom of Information Act. Back in September, the court ruled that the CFPB had properly discharged its FOIA obligations in the case for all the documents at issue except one, an e-mail from a White House staffer to a CFPB employee. At the time, “the court agreed with the CFPB’s position that it was entitled to rely on the deliberative process privilege, the attorney client/attorney work product privilege, or the presidential communications...

Financial Institutions Support Oversight of Nonbank Transmitters

Many banks and credit unions support the efforts of the CFPB to bring nonbank money-transfer operations within the scope of the bureau’s oversight. In January, the agency issued a proposed rulemaking that generally would amend the current regulation that defines larger participants of certain consumer financial products and services by adding a new section defining larger participants of the international money-transfer market. The proposal lays out the framework by which the CFPB would identify a nonbank market for international money transfers and define the “larger participants” of this market that would be subject to the CFPB’s supervisory authority. Namely, an entity would be a larger participant if it has at least one million aggregate annual international money transfers. This proposal...

Worth Noting/Snippets/Looking Ahead

CFPB Servicing Rules Having Intended Effect on Foreclosures. The data and analytics division of Black Knight Financial Services recently examined the impact of the implementation of the CFPB’s new mortgage servicing rules in January and observed a sharp shift in the timing of foreclosure starts. “As the CFPB rules dictate that foreclosure cannot begin until after 120 days of delinquency, the data showed foreclosure starts at the 90-day mark have all but ceased, while four-month delinquency starts have risen over 100 percent since December,” the firm said. At the same time, foreclosure sales hit the lowest levels since 2007. “With fewer loans in the foreclosure process, these numbers will continue to decline, but the result has been an increase in...


What do you think is the biggest hurdle to meeting the new QM standards in the CFPB’s ability-to-repay rule?

A debt-to-income (DTI) cap of 43%.


A 3% cap on points and fees.


An interest rate cap of the average prime offered rate (APOR) plus 1.5%.


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