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Monday, October 20, 2014

Senator Crapo Calls for Community Bank Regulatory Relief

Senate Banking Committee Ranking Member Mike Crapo (R-Idaho) on Friday argued for community bank regulatory relief in an American Banker op-ed. “If regulators and Congress miss this opportunity to lift unnecessary regulatory burdens, many more small banks will disappear,” he said.

Crapo specifically called for eliminating the annual privacy notice requirement when nothing has changed and ensuring a more aggressive effort by regulators to pare back unnecessary rules during the ongoing Economic Growth and Regulatory Paperwork Reduction Act process. “We cannot afford another tepid review process,” he explained.

Crapo cited ABA Chairman Jeff Plagge’s September testimony before the Senate panel, in which he warned that excessive regulation “could threaten the model of community banking that is so important to strong communities, strong job growth and a better standard of living.” Added Crapo: “I could not agree more.”
Read the op-ed.

ABIA holds regular Best Practices Panels on Community Banking.  For more information about upcoming Best Practices Panels or to view past webinars, please go to the ABIA network or contact Sarah Ferman.

ABIA Opposes New York Finalizes Lender-Placed Insurance Rules

The New York Department of Financial Services last week finalized several restrictions on lender-placed insurance. These restrictions will prevent insurers from issuing policies on mortgaged properties serviced by banks affiliated with the insurer and paying commissions contingent on underwriting profitability or loss ratios.

The American Bankers Insurance Association (ABIA) opposed the new rules, noting that they fail to recognize the cost to servicers of using licensed insurance agencies. “It is important here to distinguish between valid insurance commissions and the pejorative term ‘kickback,’ which consumer advocates often use to refer to commissions paid in connection with the force placement of insurance,” ABIA said in its comment letter.

ABIA also warned that the rules will shift the costs of LPI from defaulting borrowers to all the borrowers in a servicer’s portfolio.

Read the final rules.

For more information, please join the ABIA Lender-Placed Insurance Task Force. The purpose of this Task Force is to work with regulators and government entities, such as the CFPB and FHFA, on the regulation of lender-placed insurance to either maintain the current regime or influence reform proposals to accommodate our members’ interests. For more information or to join this task force, please contact Sarah Ferman.

Friday, October 17, 2014

Summary of CFPB No-Action Letter Proposal

By ABIA Outside Counsel, Barnett, Sivon & Natter, P.C.

On Friday, October 10, 2014, the CFPB issued a proposed Policy on No-Action Letters (Policy) with a request for comments.
The focus of the Policy is on new financial products or services where there may be uncertainty about how existing statutes and regulations apply. These new products or services must promise substantial consumer benefit. A No-Action Letter (NAL) would state that, subject to certain conditions at the CFPB staff’s discretion, the staff has "no present intention to recommend initiation of an enforcement or supervisory action against the requester with respect to particular aspects of its product, under specified identified provisions of statutes or regulations."
The Policy outlines the process for NALs including the factors the CFPB staff will consider in determining whether to issue a NAL.

Submitting Requests for NALs
An entity must submit several pieces of information in requesting a NAL, including the following:
  1. The name of the entity requesting the NAL, as anonymous requests will not be accepted;
  2. A description of the product, the timetable on which the product is expected to be offered, and whether the request is limited to a particular time period, volume of transactions or other limitations;
  3. How the product is likely to provide substantial benefit to consumers and metrics for evaluating such benefit;
  4. Explanation of potential consumer risks, ways the requester will address and minimize such risks, and the consumer safeguards the requester will employ, although those safeguards may not be required by law;
  5. A showing of why the NAL is necessary and appropriate to remove substantial regulatory uncertainty, including showing: how the application of specific statutes or regulations is substantially uncertain, the product’s compliance with other relevant regulatory requirements, and why the uncertainty cannot be addressed through other means;
  6. A description of data that the requester possesses and intends to develop and share with the CFPB; and
  7. Certain disclosures related to any supervisory or enforcement actions and ongoing, imminent or threatened governmental investigations.
The proposed Policy expressly states that NALs "are not intended for either well-established products or purely hypothetical products that are not close to being able to be offered."
To learn more about the CFPB's NAL proposal, including UDAAP, read the full summary. 

Indicates ABIA members-only material. Not an ABIA member? Contact Jennifer Hatten to learn about the benefits of membership and ways to join here. Visit our membership page to learn more.

Are you an ABIA member but not yet on our ABIA Network? Contact Deanne Marino for an invitation.

ABIA will comment. Comments are due to the CFPB on December 15, 2014.

DoD’s Proposed Expansion of the Military Lending Act

By ABIA Outside Counsel, Barnett, Sivon & Natter, P.C.

The Department of Defense (“DoD”) is proposing to expand the application of the Military Lending Act (“MLA”) to many other consumer credit products (“Proposal”). The MLA: (1) limits the amount of interest that a creditor may charge; (2) requires creditors to make certain disclosures; (3) prohibits mandatory arbitration; and (4) prohibits a penalty fee if the borrower prepays all or part of the consumer credit.

Currently the MLA only applies to payday loans, vehicle title loans and refund anticipation loans.

Under the Proposal, the MLA would apply to consumer credit that is subject to the Truth in Lending Act, namely, credit offered or extended to a covered borrower primarily for personal, family or household purposes and that is subject to a finance charge or payable by a written agreement in more than four installments. Notably, residential mortgage loans and auto loans would be excluded from MLA coverage.

To learn more about the Dod proposal to expand the MLA, read the full summary. 

Indicates ABIA members-only material. Not an ABIA member? Contact Jennifer Hatten to learn about the benefits of membership and ways to join here. Visit our membership page to learn more.

Are you an ABIA member but not yet on our ABIA Network? Contact Deanne Marino for an invitation.

ABIA will comment. Comments are due to the DoD on November 28, 2014.

HUD/FHA Lender-Placed Insurance Proposal and Request for Comment

The US Department of Housing and Urban Development (HUD) has issued draft changes to the Servicing section of the future Federal Housing Administration (FHA) Single Family Housing Policy Handbook (SF Handbook).

Included in the proposed changes is a rule restricting the ability of a servicer to place coverage in amounts sufficient to guarantee full repair of a consumer’s collateral after total loss, opting instead to require coverage sufficient only to satisfy the consumer’s debt obligation against collateral.

From the HUD proposal: 
The mortgagee may force place insurance where consistent with federal regulations, including RESPA regulations on force place insurance, if Borrowers fail to renew hazard insurance coverage when required. The mortgagee may not obtain more coverage than is necessary to protect the mortgagee’s interest.”

ABIA is concerned that this new standard will not adequately protect consumer interests after a loss event, and will include in our comment letter that we believe a more consumer-focused standard would protect a consumer’s home, equity and future. Comments are due November 14, 2014.

Learn more from HUD.

See a summary of proposed changes.