On May 18, 2016, the Consumer Financial Protection Bureau (CFPB) announced its Spring 2016 Rulemaking Agenda, setting forth its current initiatives. In its latest installment of the semi-annual update, the Bureau highlighted its recent (or imminent) activity in several high-profile areas, including arbitration and payday lending. Below are highlights of the most significant initiatives so far this spring, and upcoming through the summer.
- Arbitration: On May 5, 2016, the CFPB issued its long-expected Notice of Proposed Rulemaking (NPR) on arbitration clauses. The proposed rule would prohibit pre-dispute arbitration agreements that contain a class action waiver and would require companies that engage in arbitration to submit certain records to the Bureau. Under the proposal, the prohibition on arbitration clauses that limit a consumer’s right to be part of a class action will only apply to new products and services, and not existing agreements. Comments to the rule must be submitted by August 22, 2016.
- Payday, Auto Title, and Similar Lending Products: On June 2, 2016, the CFPB will release its long-awaited NPR to restrict payday loans and similar products. The rule is expected to introduce ability to repay options and non-ability to repay options that impose loan structure limitations and additional verification requirements. The anticipated rule, which is the first national rulemaking in this space, is expected to have a significant impact on providers of small, short-term loans. LenderlawWatch covered the rulemaking effort multiple times, including here and here.
- Prepaid Accounts: The Bureau expects to issue a final rule this summer for prepaid financial products, such as general purpose reloadable cards. The expected final rule stems from the NPR issued in November 2014, which as we discussed in prior posts. Among other provisions, the NPR suggested establishing specific disclosure requirements related to prepaid accounts and requiring that prepaid cards with overdraft service and credit features follow many of the rules governing credit cards.
- Mortgage Servicing Rules: The Bureau expects to issue a final rule this summer amending its mortgage servicing rules that first took effect in 2013. The proposed amendments were first published in 2014, and includes an expansion of the servicing rules to cover successors in interest, additional requirements for borrowers in bankruptcy, and additional loss mitigation application and evaluation requirements.
- Know Before You Owe Amendments: The Bureau has placed on an expedited track an NPR to address various issues raised by the industry related to the Know Before You Owe mortgage disclosure forms. On April 28, 2016, the CFPB issued a letter to banking and industry groups that it had begun drafting the NPR and anticipates it will be issued in late July. The NPR will incorporate some of the CFPB’s existing informal guidance and make adjustments to the text and commentary for additional certainty and clarity.
Looking ahead, the Bureau reports that it is continuing pre-rule activities related to overdraft services on checking accounts and debt collection practices. The Bureau’s reported activities in these areas are largely unchanged from the Fall 2015 report, and include continued research, analyzing survey responses (debt collection), and consumer testing initiatives. Given the current status of these rules and the other activities slated for the summer, it is unlikely that any proposals in these areas will be issued this year. Finally, the Bureau reaffirmed its commitment – first announced in the Fall 2015 agenda – to consider rulemaking related to credit reporting and student loan servicing. While industry participants should continue to monitor enforcement actions and agency guidance in these areas, rulemaking is likely a good ways off.