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CFPB UPDATE:Credit Union Expectations for 2013

Jonathan L. Pompanjlpompan@venable.com

202.344.4383

National Association of Federal Credit Unions(NAFCU)December 12, 2012, 2:00-3:30 pm ETWebcast

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Agenda

What does the CFPB mean to CUs in

terms of:

Supervision

Regulations

Enforcement

Other Notable CFPB Developments

and Outlook

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SUPERVISION

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How does the CFPB obtainsupervision?

• Asset Size

• Industry

• Larger Participants

• “Risky” NonBanks

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Supervision – Asset Size

• $10 Billion or Greater

• Asset Size Calculations Prescribed by

CFPB

• Some Large CUs fall within supervision

of NCUA and CFPB

• NCUA retains safety and soundness authority

• CFPB has authority regarding consumer protectionlaw compliance

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Supervision – Nondepositories

• Relevant for Non-Depository Entities:

• Industry• Mortgage• Private Education Loans• Small Dollar Loans

• Larger Participant

• Credit Bureaus• Debt Collectors

• Risky NonBanks

• Complaints• “Other Information”

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Supervision – Relevance?

Does the CFPB matter to CUs even if they do not

have direct supervision?

– Yes! For several reasons:

• Guidance documents are binding on all

• CFPB retains jurisdiction over regulations

• CFPB retains enforcement authority

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Supervision – Key Guidance

If your CU doesn’t read anything else, read

these:

•Disparate Impact – April 18, 2012– http://files.consumerfinance.gov/f/201404_cfpb_bulletin_lending

_discrimination.pdf

• Service Providers – April 12, 2012– http://files.consumerfinance.gov/f/201204_cfpb_bulletin_service

-providers.pdf

• “Add On” Products – July 18, 2012– http://files.consumerfinance.gov/f/201207_cfpb_bulletin_marketi

ng_of_credit_card_addon_products.pdf

• Supervisory Appeals – October 31, 2012– http://files.consumerfinance.gov/f/201210_cfpb_bulletin_supervi

sory-appeals-process.pdf

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Supervision – Examination Process

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REGULATIONS

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Regulatory Highlights

• Remittances

• Mortgage Proposals

• Next Year’s Agenda?

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Regulations - Remittances

• Remittance rule in a state of flux

• Helpful links available here containing:

• http://www.consumerfinance.gov/regulations/final-remittance-rule-amendment-regulation-e/

• Copies of final rules

• Webinar

• Bulletin

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Regulations - Remittances

• Three Remittance Rules:• General Remittance Rule

• Technical Corrections

• Normal Course of Business Safe Harbor/TransfersScheduled in Advance

• All Scheduled to be Effective

February 7, 2013

• Effective Date will be delayed

following rule proposal this month

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Regulations: Remittances

• “Remittance Transfer:”

Electronic transfer of funds requested by a sender to a

designated recipient that is sent by a remittance

transfer provider.

• Covered:

• Consumer to consumer transfers

• Consumer to business transfers

• Not Covered:

• Business to consumer transfers

• Business to business transfers

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Regulations: Remittances

• Are all CUs remittance providers?• Maybe not, depends on volume.

• If your CU provides:• 100 or fewer remittance transfers in prior calendar

year, and• 100 or fewer remittance transfers in current

calendar year,

• Then your CU is not providing remittance

transfers in the normal course of business

• Transition period if you exceed the safe

harbor

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REGULATIONS: REMITTANCES

What are the obligations for CUs that

are remittance providers?

• Disclosure

• Prior to Payment

• Payment Made

• Foreign Language

• Cancellation

• Error Resolution

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Regulations: Remittances

• Bulletin 2012-08: Remittance Rule

Implementation

• Proposed Rule to refine:

• Errors resulting from incorrect account numbersprovided by senders of remittance transfers

• Disclosure of certain foreign taxes and third partyfees;

• Disclosure of sub-national foreign taxes

• Delay effective date to Spring 2013

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Regulations: Mortgage

• What did the CFPB accomplish in

2012?

• What should we expect for CUs in

2013?

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Regulations: Mortgage

• CFBP 2012 Accomplishments:

• Proposed TILA/RESPA integration

• Delay for certain Title XIV disclosures:

• Final Rule

• http://www.consumerfinance.gov/pressreleases/consumer-financial-protection-bureau-extends-effective-date-for-new-mortgage-disclosures/

• Other proposals

• LO Comp

• High Cost Mortgages

• Appraisals

• Re-Codification of CFR

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Regulations: Mortgage

• CFPB 2013 Mortgage Agenda:

• HMDA (April 2013)

• Escrow Accounts (December 2012)

• Ability to Repay (January 2013)

• Qualified Mortgage

• Qualified Residential Mortgage

• Alternative Mortgage Transaction Parity Act (June2013)

• TILA Mortgage (Miscellaneous) (2013)

Rescission

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Regulations: Next Year

• What Will 2013 Look Like for CFPB

Rulemakings?

• Specific Rules the Agency Will Address:• Registration of NonBanks (January 2013)

• Supervision of Larger Depositories (ongoing 2013)

• Prepaid Cards (June 2012)

• Business Lending Data (June 2013)

• General Efforts• Other lending channels:

• Auto

• Installment

• Small Dollar (PALs)

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Regulations

• Why should CUs care about CFPB regulatory

efforts?

• Need to remain compliant with the law

• CFPB’s rulemakings need to take intoconsideration size, capacity for compliance

• Compliance becoming increasingly burdensome,CUs need a voice re: systems and personnellimitations

• CUSO relationships will be a focus for CFPBbecause they are service providers

• Compliance will be a competitive selling point

• Few CFPB complaints will be competitive sellingpoint

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ENFORCEMENT

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Enforcement: Authority

CFPB may investigate, issue subpoenas and civil

investigative demands, and compel testimony

CFPB may conduct hearings and adjudications to enforce

compliance, including issuing cease-and-desist orders

CFPB may initiate actions for civil penalties or an

injunction

Penalties up to $1M per day for knowing violations

No exemplary or punitive damages

Criminal referrals to DOJ

Whistleblower protection

State attorneys general may also enforce the CFPA with

notice to the CFPB

May enforce rules issued by the FTC to the extent such

rules apply to a covered a person or service provider

No express private right of action under the CFPA

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Enforcement: Investigations

Since the CFPB’s launch, the Office of Enforcement

has been conducting research and investigations of

potential violations of federal consumer financial laws

identified by CFPB staff, transferred to the Bureau by

the prudential regulators and HUD, or referred to the

Bureau by consumers and others.

Enforcement has endeavored to focus its investigative

resources on the violations of law that cause the

greatest harm to consumers.

The investigations currently underway span the full

breadth of the Bureau’s enforcement jurisdiction.

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Enforcement: Highlights

July 18, 2012 - Capital One Bank (U.S.A.), N.A. –

CFPB required refund of approximately $140

million to two million customers and pay an

additional $25 million penalty.

– This action results from a CFPB examinationthat identified alleged “deceptive marketingtactics used by Capital One’s vendors topressure or mislead consumers into paying for“add-on products” such as paymentprotection and credit monitoring when theyactivated their credit cards.”

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Enforcement: Highlights (cont’d)

Sept 24, 2012 – FDIC and CFPB announced a

joint public enforcement action with an order

requiring Discover Bank to refund approximately

$200 million to more than 3.5 million consumers

and pay a $14 million civil money penalty.

– This action results from an investigationstarted by the FDIC which the CFPB joinedlast year. The joint investigation concernedalleged deceptive telemarketing and salestactics used by Discover to misleadconsumers into paying for various credit card“add-on products” – payment protection, creditscore tracking, identity theft protection, andwallet protection.

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October 1, 2012 - Three American Express

subsidiaries ordered to refund an estimated $85

million to approximately 250,000 customers for

alleged illegal card practices.

– This action is the result of a multi-part federalinvestigation which allegedly “found that atevery stage of the consumer experience, frommarketing to enrollment to payment to debtcollection, American Express violatedconsumer protection laws.”

– Areas covered include compliance plans,advertising and marketing, and debt collection

Enforcement: Highlights (cont’d)

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Nov. 17, 2012 – CFPB v. Gordon et al.

– Preliminary injunction against Gordon LawFirm PC and two loan processing companiesin a suit over an alleged loan modificationscam, barring them from misrepresentingservices or destroying records of theirbusiness practices.

– Defendants subject to asset freeze andreceivership since July

– Alleged violations of MARS Rule (RegulationO) and Consumer Financial Protection Act(UDAAP)

Enforcement: Highlights (cont’d)

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Other Notable CFPB Developmentsand Outlook

Supervisory

Highlights

Private Student Loan

Initiatives

Servicemember

Affairs Initiatives

Older American

Initiatives

Consumer Outreach

/ Financial

Empowerment

Consumer

Complaint

Databases

Reports to

Congress

Project Catalyst

Start-up Mentality

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QUESTIONS AND DISCUSSION

Jonathan L. Pompan, Esq.

jlpompan@Venable.com

(202) 344-4383

Venable LLP

575 7th Street, N.W.

Washington, DC 20004

www.Venable.com

1-888-Venable

To view Venable’s index of articles and PowerPoint presentations on

related legal topics, see www.Venable.com/cfpb/publications.

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IMPORTANT INFORMATION ABOUT THIS

PRESENTATION

This presentation is for general informational purposes only and

does not represent and is not intended to provide legal advice or

opinion and should not be relied on as such. Legal advice can

only be provided in response to specific fact situations.

This presentation does not represent any undertaking to keep

recipients advised as to all or any relevant legal developments.