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CFPB reverses pandemic flexibilities, vowing enforcement

Bureau to exercise "full scope of its supervisory and enforcement authority" on HMDA, appraisals and more

The Consumer Financial Protection Bureau announced Wednesday it is rescinding seven of its temporary policies put in place to protect consumers during the pandemic. The seven rescissions will be effective Thursday, April 1, with the government agency noting that it intends to exercise the full scope of its supervisory and enforcement authority provided under the Dodd-Frank Act.

In one of its key decisions, the CFPB said it will roll back its leniency on reporting Home Mortgage Disclosure Act data. In March 2020, the CFPB announced it would no longer require certain lenders to report quarterly information under HMDA, however, now the agency is instructing all financial institutions to do so beginning with their 2021 first-quarter data due by May 31.

The CFPB also said it is withdrawing its signature from several statements that allowed for flexibilities for lenders to work with consumers who were affected by the pandemic.

In its withdrawal from the Statement on Bureau Supervisory and Enforcement Response to COVID-19 Pandemic, the CFPB said, “it believes that companies should have had sufficient time to adapt to the pandemic and should now be able adequately to comply with the law and respond to enforcement actions or supervisory activities without the flexibility afforded under the statement.”

The CFPB also withdrew its signature from an interagency statement that allowed for leniency on loan modifications and reporting for financial institutions that was signed by the agency in April 2020, alongside the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration and the Office of the Comptroller of the Currency.

How servicers can stay ahead of Biden’s potential regulatory changes

Among the unknowns servicers face in 2021 are changes that could affect lender-placed insurance (LPI). Servicers must have the flexibilities in place to keep up with the latest changes to remain compliant and efficient while still providing an optimal borrower experience.

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The statement provided clarification on the discrepancies for certain standards under section 4013 in the CARES Act (titled Temporary Relief from Troubled Debt Restructurings).

The above agencies also signed a statement outlining flexibilities on industry appraisal standards and then addressed appraisal regulations for Fannie and Freddie a week later. The CFPB said it will also be removing its signature from this letter. The flexible standards allowed for more appraisal options on certain qualifying primary residence loans, including desktop appraisals and exterior-only appraisals.

“As consumers seek temporary relief from lenders, the pandemic is impacting the operations of financial companies that are eager to help their customers during this unprecedented time,” former CFPB Director Kathleen Kraninger said at the time several of these policies were released. “Our actions today are temporary and targeted to support consumers by allowing financial companies to focus their resources on assisting consumers.”

The CFPB also rolled back leniency on reporting of certain information related to credit card and prepaid accounts under the Truth in Lending Act, Regulation Z, and Regulation E. These includes the annual submissions concerning agreements between credit card issuers and institutions of higher education; quarterly submission of consumer credit card agreements; collection of certain credit card price and availability information; and submission of prepaid account agreements and related information.

The bureau will also be enforcing the Fair Credit Reporting Act and Regulation V, which protects consumer privacy, after stating it intends to rescind flexibilities given to companies that report credit data. The information from these consumer reports are used to make many kinds of decisions, including whether a consumer can borrow money or how much he or she will pay in interest to finance a home or large purchase. How this will affect the reporting of delinquent loans, is yet to be delineated.

The CFPB also now intends to take enforcement action against land developers subject to the Interstate Land Sales Full Disclosure Act under Regulation J. Originally, flexibilities allowed for delays in filing annual reports of activity in an effort to “reduce administrative burden.” However, the bureau will not take any supervisory action against those who did not file between April 27, 2020 and April 30, 2021.

It’s final two rescissions included enforcement flexibilities on Regulation Z billing error timeframes and electronic credit card disclosures.

“Providing regulatory flexibility to companies should not come at the expense of consumers. Because many financial institutions have developed more robust remote capabilities and demonstrated improved operations, it is no longer prudent to maintain these flexibilities. The CFPB’s first priority, today and always, is protecting consumers from harm,” said CFPB Acting Director Dave Uejio.

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