Democratic leaders call for investigation into Mulvaney following ‘pay-to-play’ admission

By Stephanie K. Mann, J.D.

In the wake of Mick Mulvaney’s comments about the “pay-to-play” culture that he maintained in his congressional office, two Democratic leaders have called for an investigation into the Acting Director of the Consumer Financial Protection Bureau and Director of Management and Budget. Sen. Sherrod Brown (D-Ohio) previously called for Mulvaney’s resignation.

Call to resign. Representative Keith Ellison (D-Minn) called for Mulvaney to resign and for the Department of Justice to investigate whether he violated federal laws after he claimed in an address to the American Bankers Association, according to Ellison, to have received bribes as a member of Congress.

“This week, in front of a room full of banking lobbyists, Mick Mulvaney confirmed what many Americans already knew: government works great if you are a rich donor or a bank lobbyist, but not so great for everyone else,” Ellison said. “According to reports, Director Mulvaney said ‘If you’re a lobbyist who never gave us money, I didn’t talk to you. If you’re a lobbyist who gave us money, I might talk to you.’”

According to Ellison, these comments should disqualify Mulvaney from holding any public office. “To the public, it looks like a bribe. Plain old graft. The DOJ should investigate.”

Ethics inquiry. Senator Elizabeth Warren (D-Mass) is seeking information from the CFPB Designated Agency Ethics Official about the safeguards that were put into place to ensure that Mulvaney was excluded from decisions that affected the financial institutions that had given him campaign contributions. For instance, he received more than $92,000 from the American Bankers Association, Credit Union National Association, National Auto Dealers Associations, and National Association of Realtors, who according to Warren, have all directly benefited from recent CFPB actions.

“For American families to trust the CFPB, they have to know that lobbyists' payments to Mr. Mulvaney's campaign are not putting in play CFPB policies that favor those same lobbyists,” said Warren. In order to understand what, if any, precautions were taken, the senator is seeking answers to the following questions:

1. What, if any, advice did you give Mulvaney about working on matters related to his political donors when he arrived at the CFPB? 
2. Is Mulvaney recused from working on matters related to any company or industry? If so, please list them. 
3. Given Mulvaney's admission that companies received access in exchange for political contributions during his time as a Congressman, do you intend to take any additional action to prevent him from engaging in matters involving his donors? 
4. Some of the political appointees Mulvaney has installed at the CFPB previously worked at entities affected by the Bureau's actions. Please provide the list of recusals for all political appointees currently working at CFPB, including those who are detailed to the agency.

For more information about CFPB Acting Director Mick Mulvaney, subscribe to the Banking and Finance Law Daily.

New York regulator warns consumers about alternative forms of home-purchase financing

By Thomas G. Wolfe, J.D.

 

The New York State Department of Financial Services (NYDFS) has issued a “consumer alert,” warning consumers about the pitfalls of using alternative forms of home-purchase finance agreements—especially rent-to-own contracts and land installment contracts. In an April 16, 2018, release, NYDFS Superintendent Maria Vullo emphasized that alternative home purchase agreements “often are being marketed to financially distressed consumers, promising a path to home ownership, but putting consumers at risk without the protections of a mortgage.” In keeping with the state regulator’s investigation of lease-to-own programs in the central and upstate regions of New York, the consumer alert seeks to raise awareness about the potential risks of “predatory lending” and to notify New York residents that these lease-to-own, rent-to-own, and land installment contracts “may violate applicable New York laws and regulations regarding fair lending, mortgage protections, interest rates, habitability, property condition and/or real property disclosures.”

 

Concerned that consumers may be vulnerable to signing “onerous and illegal home finance agreements” that often do not lead to home ownership, the NYDFS is urging consumers to use caution before entering into any alternative home-purchase finance agreement. Underscoring that consumers should consider their options, investigate the property, and seek legal counsel before executing an alternative home-purchase finance agreement, the consumer alert notes that:

 

• frequently, the agreements contain harsh terms and do not provide standard consumer safeguards;
• many lease-to-own and rent-to-own contracts involve properties requiring a substantial amount of work, and the obligation to repair the properties—and the accompanying expense—typically falls on the consumer;
• while an offered “property tour” may give a consumer the impression of a company’s transparency, the tour may not reveal problems and hazards lurking beneath the surface of the property, and tours are often conducted when utility services are not turned on; and
• consumers may have certain legal rights and protections, including the New York common-law doctrine of an “equitable mortgage,” and may be entitled to free legal representation in eviction, foreclosure, or other state legal proceedings.

For more information about alerts issued by federal and state regulators that impact the financial services industry, subscribe to the Banking and Finance Law Daily.

9th Cir.: Debt collector did enough work to avoid flat-rating liability

By Richard A. Roth, J.D.

A company that sent collection letters on behalf of a medical facility did not create a false impression that it was participating in collecting the debt, according to the U.S. Court of Appeals for the Ninth Circuit. The company did more than just mail letters, the court said—it screened accounts for collection problems, handled debt verification requests, fielded consumers’ telephone calls, and maintained a website where consumers could get more information and make payments. That was sufficient to constitute participating in collecting the debt under the Fair Debt Collection Practices Act (Echlin v. PeaceHealth, April 17, 2018, O’Scannlain, D.).

The consumer brought her principal claim under 15 U.S.C. §1692j, which bans what often is referred to as flat-rating. Flat-rating is the name commonly used for charging a flat fee to send consumers collection letters before those consumers’ debts actually are placed for collection. The FDCPA specifically bans the creation and use of any form that would mislead a consumer into believing that someone other than the creditor was participating in collecting the debt. The practice is of concern because of its perceived potential to intimidate consumers into abandoning a defense to a claimed debt, the court explained.

Debts and collection demands. According to the opinion, the consumer received medical care at PeaceHealth twice, but failed to pay either bill. PeaceHealth referred the delinquent accounts to Computer Credit Inc., which followed its routine collection practices. These consisted of first reviewing the account for possible collection problems and second, sending the consumer two demand letters, approximately two weeks apart. If the consumer took no action or rejected the payment demand, CCI then would refer the account back to PeaceHealth.

In this case, the consumer apparently ignored the two letters that resulted from her first visit to PeaceHealth. When she received the letter that related to her second visit, she contacted CCI and disputed the charge. CCI returned both accounts to PeaceHealth for further action.

The consumer claimed that CCI was engaged in flat-rating because it did nothing but send letters. Since CCI had no authority to take any other action, its letters created the misimpression that it was participating in collecting the debt, and that violated the FDCPA, she asserted.

Sufficient participation. CCI’s form collection letter clearly was a form, the court pointed out, and that form said explicitly that the company was engaged in debt collection. The question under the FDCPA was whether the company’s claim of participation was misleading. In other words, was CCI doing enough to constitute participating in collecting the debt?

Simply mailing form letters probably would not be enough, the court suggested. On the other hand, CCI did not need to have the authority to negotiate settlements. Screening accounts, drafting and mailing demand letters, dealing with consumers, and providing information by direct contact and the website were enough to constitute participating in collecting the debts. It was unimportant that the company was paid a flat fee rather than a portion of its collections or that it did not engage in collection steps beyond the two demand letters, the court added.

Other claims, that CCI misrepresented its activities in violation of the FDCPA’s general ban on misrepresentations and that PeaceHealth was liable for CCI’s flat-rating, were rejected in a footnote because there was no misrepresentation or misimpression.

Impermissible threats. The consumer also argued on appeal that by saying in its collection letters that payment needed to be made in order to "prevent further collection activity" by the company, CCI threatened to take action it could not, or did not intend, to take. CCI, after all, had no authority to take any collection steps beyond sending the two letters, she pointed out.

However, the complaint had never clearly asserted a violation of 15 U.S.C. §1692e(5), the FDCPA provision that bans such threats, the court said. Moreover, the consumer had asserted that CCI was not engaged in collecting the debt, which amounted to disavowing any claim relating to debt collector misbehavior.

There would be no point in allowing the consumer to amend her complaint to add the claim, the court then said, because the statute of limitations had run out. Also, since the impermissible threat claim would rely on facts in addition to those that were relevant to the flat-rating claim, it would not avoid the statute of limitations by relating back to the flat-rating claim.

The case is No. 15-35324.

This article previously appeared in the Banking and Finance Law Daily.

CFPB seeks feedback on changing consumer complaint and inquiry handling processes

By Andrew A. Turner, J.D.

The Consumer Financial Protection Bureau has asked for comments on its consumer complaint and inquiry handling processes. The public is being asked to suggest best practices for responding to complaints and providing information to help consumers make decisions.

 

The request for information (RFI) also asks if criteria is needed to differentiate consumer complaints from consumer inquiries. The comment period closes on July 16. The request for information is the final in a series of RFIs described as seeking evidence to ensure the Bureau is properly carrying out its duties.

 

To date, the CFPB has received more than 1.5 million consumer complaints about financial products or services. The Bureau accepts complaints through its website; by referral from the White House, congressional offices, federal agencies, and state agencies; and by telephone, mail, email, and fax. The Bureau routes complaints directly to financial companies and works with them to get consumers a timely response from the company, generally within 15 days.

 

Consumer requests for information about financial products or services, the status of a complaint, or an action taken by the CFPB, are typically proffered by telephone. When consumers call with an inquiry, a Bureau representative collects basic information about the consumer, listens to the consumer describe their situation and question, and provides educational information about financial products and services.

 

The CFPB is asking whether it should:

• require consumers to classify their submission as a complaint or inquiry;
• develop a process for companies to reclassify consumers’ submissions;
• add or discontinue any channels for accepting comments or inquiries;
• expand, limit, or maintain the ability of authorized third parties to submit complaints;
• develop a process for companies to provide timely responses to consumer inquires sent to them by the Bureau; and
• publish data about consumer inquiries.

Consumer complaint reporting. The Bureau previously asked for information on the Bureau’s consumer complaint analysis and reporting practices. The comment period for consideration of changes to those practices expires on June 4, 2018.

 

According to the earlier RFI, the Dodd-Frank Act assigns the Bureau several specific consumer complaint-related tasks. In fact, “collecting, investigating, and responding to consumer complaints” is one of the Bureau’s primary functions. The Bureau is directed to make an annual report to Congress, and it publishes monthly and special reports on consumer complaint trends. It also maintains a public consumer complaint database.

 

The Bureau specifically wants comments on four broad areas:

1. consumer complaint reporting frequency;
2. consumer complaint reporting content;
3. consumer complaint reporting methodology; and
4. consumer complaint information publication.

For more information about possible changes in the way that the CFPB operates, subscribe to the Banking and Finance Law Daily.

Brown rebukes Mulvaney for undermining Bureau mission

By J. Preston Carter, J.D., LL.M.

Senator Sherrod Brown (D-Ohio), Ranking Member of the Senate Banking Committee, criticized Consumer Financial Protection Bureau Acting Director Mick Mulvaney for "his efforts to roll back the agency’s mission to protect consumers." Mulvaney appeared before the committee at a recent hearing to testify about the Bureau’s semi-annual report to Congress for the period of April 1 to Sept. 30, 2017. At the hearing, Brown stressed that since Mulvaney took the helm, the Bureau "has not initiated a single enforcement action to put money back in the pockets of service members, veterans, seniors, or students."

"Mr. Mulvaney is trying to convince us that protecting families and prosecuting shady lenders is, ‘pushing the envelope.’ That is a lie. That is the CFPB’s entire mission," Brown said.

Undermining the Bureau. The lawmaker noted that Mulvaney supported eliminating the CFPB when he was a member of Congress. His actions since being named acting director show “he is determined to undermine the CFPB so Congress will take away its ability to protect consumers.” To support his statement, Brown listed several examples of Mulvaney’s actions to weaken the CFPB. Mulvaney has:

• halted payments to victims of financial crimes;
• directed Bureau staff to reconsider current investigations and litigation;
• prevented the CFPB from hiring investigators to "hunt down shady lenders";
• changed the CFPB’s mission statement, claiming the Bureau should also work for payday lenders and credit card issuers; and
• put a moratorium on new rulemaking.

Brown added that on the 50-year anniversary of the Fair Housing Act, the CFPB under Mulvaney observed the anniversary by weakening the Office of Fair Lending and Equal Opportunity.

For more information about the Consumer Financial Protection Bureau, subscribe to the Banking and Finance Law Daily.

English gets grilled during oral argument in CFPB leadership dispute

By Katalina M. Bianco, J.D.

Oral arguments were heard by the U.S. Court of Appeals for the District of Columbia Circuit on April 12, 2018, in the battle over the legitimate acting director of the Consumer Financial Protection Bureau. The court grilled counsel for English for close to twice his allotted 20 minutes of argument (English v. Trump, D.C. Cir. Docket No. 18-5007).

English v. Trump. Before resigning on Nov. 24. 2017, CFPB Director Richard Cordray appointed Leandra English deputy director of the CFPB and announced that she would be acting director until a permanent director would be appointed by President Trump and confirmed by the Senate. Trump subsequently named Mick Mulvaney, head of the Office of Management and Budget, as acting director, and English sued Trump and Mulvaney in response.

English contends that the Dodd-Frank Act (12 U.S.C. §5491(b)(5)(b)) provides that the Deputy Director
"shall … serve as the Acting Director in the absence or unavailability of the Director." The Trump administration and Mulvaney claim the Federal Vacancies Reform Act (FVRA) supports Mulvaney’s leadership of the Bureau until a permanent director is appointed.

English lost on her motion for a preliminary injunction, and the case now is being appealed.

Issue of redress contested. During argument, the court questioned counsel for English about whether a preliminary injunction would provide relief to English. The redress has to be that English gets the job, but if the President can name a permanent director, then English loses that job again, the court noted, stating that English might only remain in place for two hours. The court stated that to prevail in a bid for a preliminary injunction, English would have to show that the President can be enjoined from naming someone else as director.

Further, there is the issue of “at will” vs. “for cause” removal of a Bureau director. While the director can be removed only “for cause,” does that apply to an acting director? The court asked English to consider a hypothetical question: If Cordray had remained in his position as director until the end of his term, then stayed on until a permanent director was appointed, could he still only be removed for cause or could he be removed by the President “at will”? English and Trump were in agreement that he could be removed “at will.” Therefore, English as acting director could be removed “at will” as well.

Vacancy vs. unavailability. English contended that the Dodd-Frank Act provision (§5491(b)(5)(b)) is controlling when there is no permanent director in place. The court noted that the provision uses the term “absence or unavailability” rather than vacancy. This seems to imply a more temporary situation. If Congress had intended the terms to mean vacancy, then why doesn’t the provision state so?

Mandatory. English argued that the use of the word “shall” in the provision makes the provision mandatory. The deputy director “shall” serve as acting director until a director is appointed. The court replied that the word “shall” is a “semantic mess” and does not always mean mandatory. Further, the court said, the Dodd-Frank Act is “ambiguous.”

Trump’s counsel argued that the word “shall” simply is not enough to displace the FVRA. Even with the word “shall” in the statute, the Dodd-Frank Act can co-exist with the FVRA. Further, he contended that if the Act is ambiguous as to successors, there is no way it can displace the FVRA. Trump stated that if Congress intended to displace the FVRA, it could have said so in many ways, such as “exclusive acting director.” The court retorted that Congress “doesn’t talk like that.” Asked by the court why “shall” is not enough to mean mandatory, Trump answered that the FVRA expressly addresses vacancies while the Dodd-Frank Act does not.

Independence. English asserted that Congress sought to insulate the Bureau from the Office of Management and Budget by providing that the CFPB is independent (12 U.S.C. §5491(a)). The President selected the director of the OMB to serve as acting director of the Bureau. He selected the wrong person for the position. The court questioned whether it would be acceptable to name “any person in the world but Mulvaney,” and, if so, how would that help English?

The issue of Bureau independence also came into play during Trump’s arguments. Trump contended that the Social Security Administration is independent but subject to the FVRA. He also stated that English was “drastically over-reading the statute” as to the issue of the Bureau being independent of the OMB.

The court stated it was “troubled” by Mulvaney “wearing two hats,” as OMB director and acting director of the CFPB. Further, if the acting director can be removed “at will” it could cripple the agency. If the President just keeps removing acting directors who do not adhere to his wishes, how can anything be accomplished by the Bureau, the court inquired of Trump. “I hear you saying you’re not concerned with this,” the court stated.

For more information about English v. Trump, subscribe to the Banking and Finance Law Daily.

Fed proposes large bank capital rule simplification

By Katalina M. Bianco, J.D.

The Federal Reserve Board is proposing amendments to its capital, capital plan, and stress test rules that it believes will simplify large banks’ capital planning processes without reducing the industry’s current strong capital levels. The proposal would create two new concepts, the stress capital buffer and the stress leverage buffer. It also would integrate each bank’s Comprehensive Capital Analysis and Review results with the capital rule requirements in a way that would reduce the number of capital-related requirements a bank must meet from the current 24 down to 14.

According to the Fed, smaller banks that are subject to the CCAR and stress test rules might see reductions in their required capital levels due to the changes. Required capital levels for global systemically important banks generally would remain the same, but a few GSIBs might see slight increases.

Stress capital buffer. A staff memo released by the Fed says that each bank would calculate a stress capital buffer (SCB) based on its CCAR results. The decrease in the firm’s common equity tier 1 capital ratio under the severely adverse scenario would be added to four quarters of planned common stock dividends, and that total would be the bank’s required SCB. However, the SCB would never be less than 2.5 percent of the bank’s risk-weighted assets.

The SCB then would be added to any applicable GSIB surcharge and countercyclical capital buffer to yield the firm’s standardized approach capital conservation buffer. The memo says this would make the standardized approach capital conservation buffer sensitive to both the bank’s vulnerability to stress—through the SCB—and its potential to harm the financial system—through the GSIB surcharge.

Stress leverage buffer. The stress leverage buffer (SLB) would be the difference between the bank’s starting and minimum projected tier 1 leverage ratio under the severely adverse scenario, added to the same four quarters of planned dividends. According to the memo, this would maintain the current relationship between the risk-based and leverage capital requirements in normal and stress conditions.

The SLB would replace the CCAR requirement that the bank show that it can maintain a capital level that is higher than the minimum leverage requirement post-stress.

Test, CCAR assumption changes. The proposal also would change some of the assumptions made by the supervisory stress test and CCAR.

First, it currently is assumed that a bank will carry out all of its planned dividends, share repurchases, and regulatory capital instrument issuances. However, the introduction of the SCB would make the bank’s ongoing capital distributions dependent on its performance under stress. For that reason, the CCAR no longer would assume that any capital instruments will be repurchased or redeemed.

According to the memo, history shows that, under stress, repurchases will be reduced or stopped before the payment of common share dividends. For this reason, the payment of four planned quarterly dividends would be assumed.

Second, the supervisory stress test rule would change the assumption it uses to approach balance sheet projections. Currently, the test assumes that loan supplies will remain constant under stress, while loan demand will change to reflect the scenario’s economic conditions. This generally brings about growth in a bank’s projected total assets and is intended to look at whether the firm has enough capital to handle stress without reducing the availability of credit.

This assumption has come under question, as firms have given examples of situations in which it is unrealistic, the Fed says. As a result, the proposal would change the stress test to assume that banks will take appropriate actions to maintain a constant asset level, as opposed to projecting asset growth.

Third, the Fed no longer would object to a bank’s capital plan based on a quantitative assessment of the bank’s capital adequacy. Since the SCB will impose appropriate capital distribution limits, a quantitative adequacy objection would be unnecessary.

However, objections based on qualitative assessments would remain possible.
For more information about Fed capital planning and stress tesging, subscribe to the Banking and Finance Law Daily.

Bank subject to some, not all, ‘overdraft fee’ claims in proposed class action

By Thomas G. Wolfe, J.D.

Reviewing the respective one-year limitation period contained in an underlying checking account agreement as well as set forth in the federal Electronic Fund Transfers Act (EFTA), the federal district court in Hawaii reached a split decision in connection with Bank of Hawaii’s request for summary judgment concerning a bank customer’s claims that the bank violated the EFTA and Hawaii law by imposing unauthorized overdraft fees on his checking account. Distinguishing between claims based on preauthorized recurring transfers and claims based on unauthorized overdraft fees, which arguably fell outside the scope of the agreement between the bank and its customer, the court determined that the customer could advance his EFTA claim on the bank’s overdraft fees occurring within one year of filing his complaint. Overdraft fees charged outside the one-year limit were barred. Similarly, in connection with the state-law claims, the court denied summary judgment on overdraft fees charged after a September 2015 cutoff date, but granted summary judgment in favor of the bank on overdraft fees charged before that cutoff date.

According to the court’s April 5, 2018, opinion in Smith v. Bank of Hawaii, the Bank of Hawaii (BOH) described its checking account offerings as providing three different types of balances: a ledger balance, a current balance, and an available balance. Referencing a Consumer Financial Protection Bureau Supervisory Highlights issue, the court noted that a transaction that would not have resulted in an overdraft fee under a ledger-balance method still could result in an overdraft fee under an available-balance method.

The bank customer opened multiple BOH checking accounts between July 2010 and December 2014. Previously, in rejecting BOH’s motion to dismiss the customer’s lawsuit, the court determined that the bank’s underlying checking account agreement and opt-in form, construed together, were “ambiguous as to BOH’s choice of balance method.” Accordingly, the court refused to recognize that BOH adequately disclosed that it was using an “available-balance method” to determine overdrafts on the customer’s applicable checking account.

EFTA limitation period. BOH argued that, as a matter of law, the customer’s EFTA claim was barred in its entirety under EFTA’s one-year statute of limitations because a claim accrues “when the first unauthorized transfer occurs.” In contrast, the customer argued that “each wrongly imposed overdraft charge constitutes a separate violation, involving its own statutory period.” Noting that no federal appellate court has squarely resolved the issue in the context of preauthorized recurring transfers, the trial court determined that the case before it presented a different set of factual circumstances—one involving “allegedly unauthorized overdraft fees.”

The court stressed that EFTA’s implementing regulation, Regulation E, accounted for these differing factual circumstances. The bank customer maintained that BOH did not disclose its use of an available-balance method for determining overdrafts and corresponding fees and that he thought he was opting in to an overdraft service that used a ledger-balance instead. In the court’s view, given the nature of the customer’s claim that the fees were outside the scope of the underlying agreement, “it makes sense in the overdraft context to view each fee separately—as an allegedly unauthorized charge—whereas it might not make sense to view preauthorized recurring transfers separately.”

Consequently, using this framework, the court decided that BOH was not entitled to summary judgment concerning overdraft fees the bank charged within one year of the customer’s complaint. However, claims based on overdraft fees imposed by the bank outside that one-year limit were barred.

Contractual limitation period. Next, in connection with the customer’s state-law claims against BOH for breach of the implied covenant of good faith and fair dealing, unjust enrichment, and the violation of other Hawaii laws, the court focused on the one-year limitation period contained in the agreement governing the checking account. The court ultimately determined that the one-year limitation period in the contract was not unreasonable or unconscionable under the circumstances.

Generally, the court agreed with BOH that the customer had the tools, including his own bank statements, to discover the facts supporting his state claims “within approximately a month of each challenged fee.” Moreover, the customer contacted BOH five or six times about the overdraft fees. Against this backdrop, the court determined that at least one overdraft fee was charged within one year of the filing of the original complaint. As a result, the court denied the bank’s request for summary judgment as to any overdraft fees charged on or after Sept. 9, 2015, but granted summary judgment in favor of BOH as to any fees charged before that date.

No waiver of jury trial. Also, in reviewing the applicable checking account agreement and related documentation, despite the inclusion of a “jury trial waiver” provision in the middle of a 36-page agreement, the court concluded that the bank customer had not knowingly and voluntarily waived his right to a jury trial.

For more information about court decisions affecting the banking industry, subscribe to the Banking and Finance Law Daily.

Appraisal-requirement threshold doubled

By Andrew A. Turner, J.D.

The Office of the Comptroller of the Currency, Federal Reserve Board, and Federal Deposit Insurance Corporation have increased the threshold for commercial real estate transactions requiring an appraisal from $250,000 to $500,000. The amendments will take effect immediately upon publication in the Federal Register.

After considering more than 200 comments from appraisers, appraiser trade organizations, financial institutions, financial institutions trade organizations, and individuals, the agencies decided to increase the commercial real estate appraisal threshold to $500,000, rather than $400,000 as proposed. The rulemaking initiative responded to financial industry concerns that the current threshold level had not kept pace with price appreciation in the commercial real estate market in the 24 years since the threshold was established. The agencies’ action is intended to reduce the regulatory burden for real estate-related financial transactions.

The change allows a financial institution to use an evaluation rather than an appraisal for commercial real estate transactions exempted by the $500,000 threshold. Evaluations provide a market value estimate of the real estate pledged as collateral, but do not have to comply with the Uniform Standards of Professional Appraiser Practices and do not require completion by a state licensed or certified appraiser.

Definition of commercial real estate transaction. The final rule defines commercial real estate transaction as a real estate-related financial transaction that is not secured by a single 1-to-4 family residential property. It excludes all transactions secured by a single 1-to-4 family residential property, and thus construction loans secured by a single 1-to-4 family residential property are excluded, and remain subject to the $250,000 threshold.

For more information about federal regulatory requirements for real estate transactions, subscribe to the Banking and Finance Law Daily.

New York further updates cybersecurity reg FAQs

By J. Preston Carter, J.D., LL.M.

The New York Department of Financial Services has provided another update to its answers to frequently asked questions regarding its cybersecurity regulation—23 NYCRR Part 500. The regulation, establishing cybersecurity requirements for financial services companies, became effective March 1, 2017. The original FAQs were published last December. The first set of revised FAQs was published in February.

The NYDFS’s second set of revised FAQs added the following guidance:

• In the cyber portal, an Entity ID is an entity’s unique license or charter number issued by the State of New York. Further information is provided in the FAQs for insurance companies and insurance producers. Required filings may be made electronically via the DFS Web Portal.
• Individuals, with no Board of Directors, filing a Certificate of Compliance for their own individual license are acting as a Senior Officer, as defined in the Regulation, and should complete the filing process in that manner. The Senior Officer is the individual or individuals responsible for the compliance of a Covered Entity.

Here are upcoming key dates to keep in mind under New York’s cybersecurity regulation:

• Sept. 3, 2018—Eighteen-month transitional period ends. Covered Entities are required to be in compliance with the requirements of sections 500.06, 500.08, 500.13, 500.14(a), and 500.15 of 23 NYCRR Part 500.
• March 1, 2019—Two-year transitional period ends. Covered Entities are required to be in compliance with the requirements of 23 NYCRR 500.11.

For more information about financial services cybersecurity, subscribe to the Banking and Finance Law Daily.

CFPB guidance, implementation support subject of latest request for information

By Katalina M. Bianco, J.D.

In its tenth Request for Information (RFI), the Consumer Financial Protection Bureau is seeking feedback on the effectiveness and accessibility of its guidance materials and activities, including implementation support. The CFPB is considering whether it should revise the formats, processes, and delivery methods for providing the guidance as well as the disclaimers used in certain guidance. The Bureau also requests comments on potential new forms of guidance. The comment period for the RFI is 90 days.

Guidance. While interpretive rules and general statements of policy are frequently referred to as “guidance,” the Bureau noted that it also uses the term more broadly to refer to compliance guides and other materials and activities that are not rules. CFPB non-rule guidance materials generally reiterate requirements, positions, or priorities that previously have been announced in a regulation or elsewhere and include documents such as rule summaries, compliance guides, checklists, and webinars, among other forms of guidance.

These materials do not require notice and a comment period and are not binding under the Administrative Procedure Act (5 U.S.C. § 551 et seq.), according to the CFPB. However, the materials can have legal and practical significance under certain federal consumer financial laws that provide the industry with a safe harbor for good-faith reliance on legislative rules and certain interpretations issued by the Bureau.

Topics not covered. The Bureau’s notice states that the current RFI does not include:

• educational materials on its regulations developed for consumers or in response to consumer inquiries;
• the substance of any particular proposed or final rule, for both adopted and inherited rules, including a proposed or final rule’s Official Interpretations; or
• guidance provided in the Bureau’s Supervision and Examination Manuals or Supervisory Highlights.

RFIs coming up. The next RFI in the series will address consumer education, the Bureau said. The agency also is planning an RFI on consumer inquiries in the near future.

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