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Friday, October 9, 2015

2015 ABIA Annual Conference, Thank You Corporate Partners

Special thanks to our 2015 ABIA Annual Conference Corporate Partners; Affinion, AIG, American Modern Insurance Company, American National Insurance Company Direct Marketing, AON Integramark, Assurant, Beazley, Chubb, Coverdell, DRIASI, ExamFX, MetLife, Mintel, Mutual of Omaha, National Risk Brokerage, Securian, The Plateau Group, Reagan Consulting, SDBIC, SourceLink, Stillwater Insurance Group, and Transamerica.

We are gearing up for an exciting conference next week in Orlando, Florida. Make plans next year to join us September 2016 at the Fairmont Princess Resort in Scottsdale, Arizona.

Stay tuned next week for conference updates and breaking news on our Twitter feed @theABIA, follow #ABIAConf

Thursday, October 8, 2015

CFPB Outlines Initial Plans to Curtail Arbitration Agreements

The Consumer Financial Protection Bureau yesterday unveiled a plan that would prohibit customers from waiving their ability to participate in class action suits and limits drastically the use of mandatory arbitration agreements for financial products and services. Many banks include mandatory arbitration clauses in their credit card and deposit account agreements.

While the bureau says its proposal would not ban mandatory arbitration clauses, it would sharply curtail their usefulness. In addition to prohibiting waivers of participation in class actions, it would also require companies that use arbitration agreements to submit consumer claim filings and written awards to the bureau, which may publish them publicly.

The bureau said it envisions the proposals would apply to all extensions of credit under the Truth in Lending Act and Equal Credit Opportunity Act, automobile leases, depository services under the Truth in Savings Act, payments products and services subject to the Electronic Funds Transfer Act, credit reports and debt collection. The proposal would cover depository institutions and nonbank lenders.

“Arbitration has significant, demonstrable benefits over litigation in general and class action litigation in particular,” said ABA SVP Nessa Feddis, who is following the rulemaking closely. “When needed, arbitration is an efficient, fair and low-cost method of resolving disputes in a fraction of the time -- and at a fraction of the cost -- of expensive litigation, which helps keep costs down for all consumers.”

The bureau said it will next send its proposals to a small business review panel, which may recommend changes before the bureau formally proposes a rule. First Community Bank of Corpus Christi, Texas, was nominated by ABA and selected to be on that panel. The bureau acknowledged that reducing the use of arbitration would increase legal costs and reputational risks for businesses subject to the rule and could increase the cost of credit for smaller businesses if credit is priced to include the risk of class litigation. It is seeking input from the small business review panel on these increased risks and costs.

Read the proposals.

House Passes TRID Grace Period Through Feb. 1

By a bipartisan 303-121 vote, the House last night passed H.R. 3192, which would provide a safe harbor from enforcement actions and private civil actions for lenders making good-faith efforts to implement the new TILA-RESPA integrated disclosures. The safe harbor would extend to Feb. 1.

“Borrowers in all parts of the nation will benefit from this legislation, ensuring that the transition to new rules proceeds without concerns over technical difficulties constraining credit or slowing the settlement process,” said ABA EVP James Ballentine.

Although the bill passed on a bipartisan basis, President Obama has threatened to veto the bill in part because it would “remov[e] the private right of action for violations.” In a memo to House members, ABA rebutted this claim, noting that “to gain the safe harbor for either regulatory or private rights of action, there must be a showing of good faith efforts at compliance.”

Read ABA's memo.

Tuesday, October 6, 2015

CFPB Advises Industry on Mortgage Disclosure Rule Compliance

By ABIA Outside Counsel, McIntyre & Lemon, PLLC

The CFPB sent a letter to mortgage industry trade groups regarding the Know Before You Owe mortgage disclosure rule

The rule, also known as the TILA-RESPA Disclosure rule—which requires disclosure forms that are easier to use and clearly present terms of mortgage to a borrower— went into effect on October 3.

The letter notes that in preparation to adjust to the requirements of the rule, the mortgage industry has had to make significant systems and operational changes involving coordination with third parties for implementation. The mortgage industry has allocated resources for these purposes and toward understanding the requirements, training affected personnel and addressing technical issues and other questions that will arise when the new forms are in use.

According to the CFPB’s press release, initial compliance examinations will evaluate an institution’s compliance management system and efforts to come into compliance in a timely manner, taking into consideration the scope and scale of changes essential to achieving effective compliance. Examiners will consider the institution’s implementation plan including policy, procedure and process updates, training relevant staff, and its ability to resolve early technical problems and other challenges related to implementation.

The Bureau took a similar approach in initial examinations for compliance with the mortgage rules that became effective at the beginning of January 2014 and found that institutions made good faith efforts to comply and were typically successful in their implementation.

Read CFPB Press Release.

Cybersecurity Remains Top Challenge for CFPB, Fed

Maintaining effective information security programs -- and overseeing cybersecurity at supervised institutions, in the case of the Fed -- remain top management challenges for the Consumer Financial Protection Bureau and the Federal Reserve Board, according to reports released yesterday by the agencies’ inspector general.

The CFPB should focus on overseeing the security of systems operated by contractors and ensuring that personally identifiable information in its possession is protected, the report said. The report cited a Government Accountability Office audit in 2014 that found that “the CFPB has collected consumer financial data on credit card accounts, mortgage loans, and other products” but “that the CFPB lacks written procedures and comprehensive documentation for a number of processes, including data intake and information security risk assessments.”

Both agencies were also urged to address workforce development and retention issues, strengthen their controls over management operations and maintain physical infrastructure properly.

Read the report on the CFPB.

Read the report on the FED.