The Smart Compliance Blog

The Consumer Financial Protection Board continues to provide a transparent view into their priorities by updating and sharing their strategic plan. After reading the strategic plan for fiscal years 2013-2017 it is clear that the CFPB is moving towards a data-centric world.  Is your compliance management program ready to embrace this new world?

It has been estimated that there were 15.7 million consumer auto loans originations in 2012.  Auto loans are the third largest source of outstanding household debt (after mortgages and student loans) with over $783 billion in outstanding loans in 2012.  It was simply a matter of time before the CFPB would focus on this huge market.  Accordingly, on March 21st, the Consumer Financial Protection Bureau (CFPB) issued guidance on fair lending practices to indirect auto lenders (e.g. Banks and Credit Unions).  The CFPB’s bulletin explains that certain lenders that offer auto loans through dealerships are responsible for unlawful, discriminatory pricing.  The CFPB’s bulletin provides guidance to indirect auto lenders on how to address fair lending risk.

The board of directors and senior management are responsible for managing activities conducted through third-party relationships, and identifying and controlling the risks arising from such relationships, to the same extent as if the activity were handled within the institution. Financial Institutions are expected to have clearly defined systems of risk management controls built into the management system including controls over activities conducted by affiliates and third-parties. The more significant the third-party service relationship (i.e. performs critical functions, material impact on revenues, large number of consumers, etc.), the more important it is that the institution conduct regular reviews of the adequacy of its oversight and controls over third-party relationships. Examiners will evaluate all applicable third-party relationships as though the activities were performed by the institution itself.

The Consumer Advisory Board to the Consumer Financial Protection Bureau is responsible for identifying the “impact of emerging products, practices or services on consumers and other market participants.”  At the February board meeting, Richard Cordray, Director of the CFPB, presented the Bureau’s areas of focus for the future. 

This is the third and final post in this series addressing the new CFPB mortgage loan rules.
As we all know by now, since 1/1/2013 there have been seven (7) new rule additions or changes that compliance officers and bank leadership must be aware of.

The 7 new rules include:

In our last post, “7 New Rules from the CFPB – Are You Ready?”, we provided a summary and break-down of the most recent onslaught of changes and new rules that have been pushed out to the financial community. Bank leadership and compliance professionals are struggling to stay abreast of and implement these changes. That post covered the first three rules. This post will summarize rule four and five.  

As we celebrate the start of 2013, financial institutions and their compliance departments have been crushed under a deluge of new regulations and amendments, and it’s still January.

This morning, the Consumer Financial Protection Bureau (CFPB) issued its long-awaited final “Rule to Protect Consumers from Irresponsible Mortgage Lending.” The new Ability-to-Pay rule also defines a segment of loans called “qualified mortgages” that are “safe” to originate.

The CFPB released their first Supervisory Highlights last week that reveals the issues  and risky practices their examiners have found between July and September of 2012. The CFPB states that it is committed to periodically issuing perspectives on their examination program, found concerns, and the suggested remedies. To facilitate financial institutions’ compliance with Federal consumer financial law, the CFPB intends to be transparent about the goals of its supervision program and the steps being taken to achieve those goals, while protecting the confidentiality of the underlying financial institution-specific information. While most banks do not fall under the direct supervision of the CFPB, the report provides us with insights regarding the focus of Washington and the regulators. More specifically, they have provided us a solid road map for a successful Fair Lending Compliance Management Program in 2013. 

Through the years, HMDA has been one of the primary tools used to detect predatory lending and fair lending violations. HMDA data is the starting point in examinations with the regulators.  This reliance upon the data (combined with the limitations associated with the current data set) has led to efforts to significantly expand the data fields included in HMDA.