The Dodd-Frank Wall Street Reform and Consumer Protection Act grants to the U.S. Bureau of Consumer Financial Protection (the “CFPB”) the power to bring actions against “related persons” of non-depository institutions. A related person is defined to mean:
In Baker v. Bank of America, N.A., No. 5:13-CV-92-F, 2014 U.S. Dist. LEXIS 9578 (E.D.N.C. Jan. 27, 2014), the United States District Court for the Eastern District of North Carolina held that even if a consumer timely exercises his or her right to rescind a loan transaction under the Truth in Lending Act (TILA), 15 U.S.C. § 1601, et. seq. — i.e., during the three-day statutory “cooling-off” period — that exercise does not automatically cause the loan to be rescinded. Rather, the court held, if a consumer’s notice of rescission is met with silence by the lender, the consumer must also file a lawsuit in order to complete the rescission before the statute of limitations expires (in this case, the statute of limitations was determined to be four years). The Baker case provides a thorough interpretation of the effect of the statutory three-day “cooling-off” period, for which, it was noted in the decision, case law is “exceedingly sparse.”
The Bureau of Consumer Financial Protection (the “CFPB”) announced April 30 that it is proposing amendments to Regulation Z that will, among other things, permit a creditor that believes in good faith that it has made a qualified mortgage (“QM”) loan and learns afterwards that the loan exceeded the applicable limit on points and fees to refund to the consumer the amount by which the points and fees exceeded the limit, and have the loan retain its QM status. The proposal would require that the refund be made not later than 120 days following consummation of the loan. The proposal would also require the creditor to maintain and follow policies and procedures for post-consummation review of loans and refunding to consumers amounts that exceed the applicable limit.
A recent decision issued by the California Court of Appeal will make it more difficult for plaintiffs seeking to avoid foreclosure. In Rossberg v. Bank of America, N.A., 219 Cal.App.4th 1481 (4th Dist. 2013), the California Court of Appeal affirmed a trial court’s dismissal of plaintiffs’ claims of oral promises to modify a loan.
On January 9, 2014, the Securities and Exchange Commission released its examination priorities for 2014 (the “2014 Exam Priorities Release”), covering a wide range of issues at financial institutions, including investment advisers and investment companies, hedge funds and private equity funds. The 2014 Exam Priorities Release highlights a number of areas and key risks that the SEC will be monitoring and examining in 2014. The SEC has identified the following core risk areas for investment advisers:
A unit of Deutsche Bank won dismissal of a suit brought by mortgage bond investors after a New York state appeals court determined the claims for loan repurchase and indemnity were subject to a six-year statute of limitations that began to run when the deal to purchase the loans closed. This decision may limit new suits by investors who allege that their claims don’t accrue – and that therefore the statute of limitations does not begin to run – until the claim is discovered or the seller of the loan refuses to repurchase it or provide indemnification.
The Commissioner of the California Department of Business Oversight on November 22 issued an order directing all DBO licensees (which would include California Finance Lender licensees and residential mortgage lender licensees, among others) to designate a single standard email address for Department communications.
The U.S. Court of Appeals for the Sixth Circuit, which covers Michigan, Ohio, Kentucky and Tennessee, held late last month that real estate settlement service providers whose relationships satisfied the Real Estate Settlement Procedures Act ‘s (“RESPA’s”) statutory three-part test for affiliated business arrangements (“AfBAs”) were not also required to satisfy any tests set forth in HUD’s Statement of Policy 1996-2 Regarding Sham Controlled Business Arrangements (the “Policy Statement”). That three-part test provides a safe harbor from violation by the AfBA of the anti-kickback prohibition set forth in Section 8 of RESPA if (i) the party referring the AfBA to a consumer provides the consumer with an Affiliated Business Arrangement Disclosure Statement at the time of the referral, (ii) the person making the referral does not require the consumer to use any particular provider of settlement services or business incident thereto, and (iii) the only thing of value that is received from the arrangement (with certain exceptions) is a return on ownership interest or franchise arrangement.
The Office of the Comptroller of the Currency published on October 30, 2013 a new Guidance relating to risk management for third party relationships. This Guidance rescinds OCC Bulletin 2001-47, “Third-Party Relationships: Risk Management Principles” and OCC Advisory Letter 2000-9, “Third-Party Risk.” Prior to the formation of the Consumer Financial Protection Bureau, OCC-regulated institutions were subject to the rescinded Guidance and Advisory Letter, and OTS-regulated institutions were subject to Thrift Bulletin 83 (since rescinded), “Interagency Guidance on Weblinking: Identifying Risks and Risk Management Techniques,” but non-bank lenders were not subject to similar requirements with respect to their relationships with third party vendors. The CFPB then published its vendor management guidance last year. The OCC’s new Guidance is the first published by a bank regulator since the CFPB published its guidance, and is therefore the first view we have of current regulatory thinking since that time. This new Guidance, which is considerably more detailed than the CFPB’s guidance, may therefore be useful to both banks and non-bank lenders as to the types of things they should consider in building a robust vendor management policy. Among the highlights of the Guidance:
The Consumer Financial Protection Bureau is considering new rules to govern debt collection practices that could radically change the debt collection regulatory landscape and for the first time include creditors that are collecting their own debt. Third-party debt collectors are currently subject to the Fair Debt Collection Practices Act, but this law does not apply to creditors that originate and collect their own debt.