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What the CFPB Has in Store for 2014

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Forget fashion week or the spring draft pick. The Consumer Financial Protection Bureau (CFPB) has some exciting new plans in the works for 2014, including possible changes to debt collection practices, overdraft practices and payday loan disclosures. We think you should know what’s on the agenda and put in your two cents if you’re feeling plucky.

Life cycle of a rule

You can find out everything you need to know about the CFPB at its website, but there’s a lot of information to wade through over there, so here’s the boiled down version of the rulemaking process: There are many steps to rulemaking, and sometimes they vary, but each rule, like a butterfly, goes through stages, a few of which include: pre-rule, proposed rule, and final rule. There are opportunities for public comment within or between these stages.

Here’s the pre-rule and proposed rule lineup for the first half of 2014. Feel free to head over to the CFPB agenda if you want to weigh in on the rulemaking.

Pre-rules

Home Mortgage Disclosure Act (HMDA)

The HMDA was created in 1975 to allow the government to collect data about home loans to determine whether or not housing needs are being met, public-sector investments are attracting private investments, and to ferret out bad lending practices. The Dodd-Frank Wall Street Reform and Consumer Protection Act gave CFPB the authority to require new information from lenders; including, identifiers for loans, parcels, and loan originators, so the CFPB plans to develop new regulations about the data to be collected, the appropriate format for collecting data, as well as procedures, information safeguards and privacy protections.

Annual Privacy Notices

Financial Institutions are required to send out annual statements regarding client privacy policies. The rule under consideration would make it so that a company would not have to send out an annual statement if there were no changes to its privacy policy. The rule is intended to take a burden off of financial institutions and save a bundle of paper.

Payday Loans and Deposit Advance Products

After reviewing data, the CFPB is concerned about consumer overuse of these expensive products, which often have an interest rate of 400 percent. The bureau is looking into whether or not rules around these products are necessary or appropriate.

Debt Collection

Because the government receives more consumer complaints about debt collectors than about any other industry, the CFPB is considering whether rules governing the collection of debts are necessary or appropriate. Regulations may include required disclosures, or changes to debt collector practices. For example, regulations under consideration may restrict debt collectors from using a blocked phone number or calling consumers’ friends and family.

Overdraft

After reviewing data from nine banks, the agency has concerns about how consumers opt in to overdraft coverage for ATM and one-time debit card transactions, overdraft limits, transaction posting order, overdraft and insufficient funds fees, and involuntary account closures. The CFPB is considering whether rules governing overdraft and related services are necessary or appropriate. They may require disclosures or changes in overdraft practices.

Amendments to 2013 Mortgage Rules

There’s a lot of hubbub right now about CFPB’s recent changes to mortgage lending guidelines. Now that those new regulations have hit the streets, the agency will consider possible amendments, which would allow some exemptions. These would also offer additional guidance that would help create automated underwriting systems to calculate debt-to-income ratios and determine qualified mortgages.

Proposed rules

Requirements for Prepaid Cards

In its data-gathering phase, the CFPB asked consumers 10 questions about prepaid card use and invited public comments about the products. Now the agency is reviewing that data to better understand product costs, benefits, and risks to consumers. The CFPB expects to issue a proposed rule and is currently testing model disclosure forms with consumers, so it’s likely the new rule will include guidelines for lender disclosure.

Supervision of Certain Nonbank Covered Persons– Defining Larger Participants in Certain Consumer Financial Product and Service Markets

You’ve probably heard that the CFPB now oversees “nonbank covered persons,” also known as companies not backed by banks that offer financial services or products to consumers, such as prepaid cards, credit reports, money wires, or check cashing. This proposed rule allows CFPB to define the big players in field so that the government can keep an eye on them.

Amendments to FIRREA Concerning Appraisals

The CFPB is working with several other agencies to create new guidelines for the home appraisal industry. New regulations include quality control standards for automated valuation models to ensure accuracy in appraisal estimates and protect against data manipulation. Random appraisal sample testing and reviews will also be required.

Extension of the Temporary Exception for Certain Disclosures Under the Remittance Transfer Rule

This is the extension of a rule that exempts some institutions from providing consumers with an exact disclosure when wiring money to other countries. In other words, some service providers are allowed to estimate exchange rates, rather than disclosing the exact exchange rate prior to a transaction. This exemption is set to expire in July, 2015, but may be extended again this year.

Other miscellaneous tidbits

If all that wasn’t enough for you, the CFPB is also:

  • Collecting data to measure consumers’ financial well being
  • Planning to improve consumer education in the mortgage closing process
  • Revising the exception list for countries required to provide a transaction fee disclosure
  • Researching ways to help student loan borrowers

If leaving comments on the CFPB website isn’t enough involvement for you, the agency is accepting applications to fill seats on its advisory board. Applications are due by Feb. 28, 2014. Go get ‘em.

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