May 2024 Regulatory Brief: Final Rules and More

April showers bring May flowers – and a new CFPB interpretation of junk fees, a few enforcement actions, and several final rules. 

Miss any of the news? Don’t worry! The Ncontracts’ team of regulatory compliance professionals is here to break it all down for you in this month’s Regulatory Update podcast.  Here’s a quick rundown of the highlights. Listen to the podcast for a full breakdown.

CFPB is focusing on mortgage lending and servicing

If the number of notices and reports on mortgage lending and servicing coming from the CFPB is any indication, it looks like the CFPB is looking to regulate this space similar to how it recently regulated certain overdraft and account fees. The CFPB’s actions suggest it’s seeking ways to simplify and streamline mortgage servicing rules to improve the experience for borrowers facing financial difficulties.

CFPB Supervisory highlights

The CFPB’s Supervisory Highlights focused on illegal mortgage practices, linking them to junk fees. This includes charges for property inspections, late fee overcharges, failing to waive fees as part of COVID-19 loan modifications, and not adequately disclosing fees in billing statements. Pay close attention to this report and consider conducting compliance testing to determine if your institution is charging illegal fees or accidentally failing to comply with lending regs like Reg X and Reg Z, or investor guidelines. 

CFPB eyes mortgage discount points

Mortgage discount points are on the CFPB’s radar, according to an April report based on HMDA data. High interest rates are motivating borrowers to pay mortgage discount points to lower their mortgage rates. These fees are often paid by consumers with weaker credit. Make sure your institution is analyzing demographic data related to which borrowers are paying points and be sure to document that you’ve educated borrowers on the tradeoffs. Discount points are not appropriate for all borrowers. Also, make sure any marketing related to discount points is transparent about loan costs.

Enforcement central 

Philadelphia-based Republic First Bank was the first bank failure of 2024. Another Pennsylvania bank assumed the deposits of the $6 billion asset bank.  

The FDIC fined a Washington bank $500,000 for violating Section 5 of the Federal Trade Commission (FTC) Act and Real Estate Settlement Procedures Act (RESPA). The FDIC says the bank misrepresented debt cancellation products and paid referrals for mortgage business.  

In a settlement with the New York attorney general, a South Dakota bank must refund customers $80,000 and pay $627,000 in penalties for allowing the third parties it works with to regularly collect customer funds that were government benefits or protected wages.

Final rules from the FTC and SBA 

• The Federal Trade Commission approved a final rule banning noncompete agreements in the U.S.  
• The Small Business Administration issued its final rule to remove barriers to eligibility based on criminal history records for its 7 (a), Microloan, 504, and disaster loan programs. 
• The CFPB issued a procedural rule updating how the agency designates a nonbank for supervision. The updates will streamline the designation proceedings for both the CFPB and nonbanks. 
• The SEC has stayed new climate-related disclosure requirements pending judicial review after challenges were filed against the final rule. 

NCUA issues ANPR on records retention

The NCUA announced plans to revisit the document retention requirements of Part 749 because it has led to excessive and expensive storage because it’s unclear what must be kept and for how long. The goal for the rule is to clarify the requirements. Comments must be in by June 24. 

For more insights, including a FinCEN’s warning that U.S. Passport Cards are being used for identity fraud at financial institutions, proposed Department of Homeland Security’s (DHS) Cybersecurity and Infrastructure Security Agency (CISA) rulemaking on cyber incident reporting, listen to the podcast.