Compliance Update with Amy K
by Amy Kleinschmit
Chief Compliance Officer
6/12/2020

COVID-19 Scams in the Dakotas

Yesterday the FTC released state-specific data on COVID-19 related issues. According to the FTC, since January 1, people across the U.S. have made 91,808 COVID-19-related reports to the FTC. Most of these reports involve online shopping, with travel and vacations coming in second. The online shopping reports are mostly about people ordering products that never arrive, while most of the travel and vacation reports relate to refunds and cancellations. So far, people have reported losing $59.27 million on these and other COVID-related fraud reports.

You can find this state specific data here.

Educate, then tell your members, family, friends, and community what to look out for, and how to protect themselves. Also, be sure to visit ftc.gov/coronavirus/scams for alerts, infographics, videos, and more information about COVID-19 scams.

 

CFPB – Electronic Credit Card Disclosures

The Consumer Financial Protection Bureau (CFPB) recently issued this statement regarding supervisory and enforcement practices regarding electronic credit card disclosures in light of the COVID-19 pandemic.

The statement focuses on the interplay between requiring electronic consent in compliance with E-SIGN prior to delivery of Reg Z required disclosures for credit cards.

In this Statement, the CFPB provides that it “will take a flexible supervisory and enforcement approach during this pandemic regarding card issuers’ electronic provision of disclosures required to be in writing for account opening disclosures and temporary rate or fee reduction disclosures mandated under the provisions governing non-home secured, open-end credit in Regulation Z.”

However, there is a very narrow focus of this flexibility. It only applies to “oral telephone interactions where a card issuer may seek to open a new credit card account for a consumer, to provide certain temporary reductions in APRs or fees applicable to an existing account, or to offer a low-rate balance transfer.” The CFPB does not intend to apply this flexibility to other requirements of Regulation Z. 

In these instances, the CFPB does not intend to cite a violation in an examination or bring an enforcement action against an issuer that during a phone call does not obtain a consumer’s E-Sign consent to electronic provision of the written disclosures required by Regulation Z, so long as the issuer during the phone call obtains both the consumer’s oral consent to electronic delivery of the written disclosures and oral affirmation of his or her ability to access and review the electronic written disclosures.

Card issues are expected to take reasonable steps during the phone call to verify consumers’ electronic contact information. 

 

CHARM Booklet Updated

The CFPB has updated the “Consumer Handbook on Adjustable Rate Mortgages” (CHARM) booklet as required under the Regulation X and Z.

As discussed in the Federal Register, the CFPB “is updating the CHARM booklet so that it aligns with the Bureau’s educational efforts, to be more concise, and to improve readability and usability.  New features include a comparison table that describes adjustable rate mortgages and their differences in relation to fixed-rate loan products; an explanation of how an adjustable rate mortgage works; a tutorial on how to review an ARM Loan Estimate and a lender’s ARM program disclosure; a comparison table for the various adjustable and fixed-rate loan offers that reader has received or will receive; and a description of the risks that come with different types of adjustable rate mortgages.  This version of the CHARM booklet eliminates references to LIBOR due to the forecasted cessation of LIBOR.”

Find the updated booklet here.

 

CFPB – LIBOR Transition Proposed Rule

The CFPB has issued a proposed rule to amend Regulation Z generally to address the sunset of LIBOR, expected to be discontinued after 2021. This change will affect some adjustable (or variable) rate loans and lines of credit, such as adjustable-rate mortgages (ARMs), reverse mortgages, home equity lines of credit (HELOCs), credit cards, student loans, and any other consumer loans that use LIBOR as the index.  For consumer financial products and services, financial entities are developing their approach to the LIBOR transition, including how to transition existing accounts from LIBOR to another index and selecting new indices for new originations going forward.

This proposed rule is issued by the CFPB to facilitate creditors’ transition away from using LIBOR as an index for variable-rate consumer credit products. The CFPB is proposing changes to certain open-end and closed-end provisions to provide examples of replacement indices for LIBOR indices that meet certain Regulation Z standards. The CFPB also is proposing changes to certain open-end provisions restricting index changes, requiring change-in-terms notices, and addressing how credit card rate reevaluation requirements apply.

The proposed rule, Fast Facts for 2020 LIBOR Transition Rule, LIBOR Transition FAQs and the unofficial redline version of the proposed changes can all be found here. Comments are due August 4, 2020.

 

CFPB Forbearance Guidance

The CFPB recently issued this additional guidance on CARES Act Forbearance & Foreclosure, which can be found here. As you will recall, the CARES Act provides protections for borrowers with federally-backed mortgages, which are mortgage loans purchased or securitized by Fannie Mae or Freddie Mac and loans made, insured, or guaranteed by the Department of Housing and Urban Development, Department of Veterans Affairs, or Department of Agriculture.

This recent guidance includes a number of Q&As to assist with clarifying the CARES Act requirements on this subject. Such as, “May servicers request information supporting the need for forbearance?” Answer – NO, forbearance must be granted if requested and the borrower attests to a COVID related hardship. “Do borrowers need to prove hardship?” Answer - No. Attestation of hardship due to COVID-19 is the exclusive requirement established by the CARES Act for forbearance.

 

North Dakota DFI Orders.

At its recent ND State Credit Union Board Meeting two orders were signed by the DFI Commissioner Lise Kruse.

The ND State Credit Union Board issued an order authorizing state-chartered credit unions which are not low income designated credit unions to engage in certain activities which are permitted for a federally chartered credit union pursuant to its parity authority. This order can be found here. The order provides that a state-chartered credit union may receive payments on shares, (regular shares, share certificates, and share draft accounts) from public units and political subdivisions thereof (as those terms are defined in 12 CFR 745.1) and nonmember credit unions subject to a number of limitations that are also listed in the Order.

The DFI Commissioner also signed a Third Amended Order authorizing state-chartered credit unions who have received a low income designation from the National Credit Union Administration, to engage in certain activities which are permitted for a federally chartered credit union with a low income designation pursuant to its parity authority. This order can be found here. This Order provides that a ND state-chartered credit union which has a low income designation from the National Credit Union Administration, pursuant to 12 CFR 701.34,may receive payments on shares, (regular shares, share certificates, and share draft accounts) from public units and political subdivisions thereof (as those terms are defined in 12 CFR 745.1) and nonmember credit unions, and to the extent permitted in this ORDER, receive payments on shares (regular shares, share certificates, and share draft accounts) from other nonmembers. Similar to above there are a number of limitations listed in the Order that need to be followed.

 

CU Policy Pro Updates

The following model policies have recently been updated in CU Policy Pro:

Model Policy 2400 (Funds Availability) was revised to include the new monetary thresholds/limits for funds availability that become effective on July 1, 2020. Please see below for a summary of those changes.

Model Policy 7362 (Temporary Policy for Loan Modifications and Reporting – COVID-19) was revised to include the additional repayment option for borrowers who have federally-backed mortgage loans, when their forbearance period ends. This guidance was issued by the Federal Housing Finance Agency on May 13, 2020 and begins on July 1, 2020.

Model Policy 7436 (CARES Act – Small Business Administration Loans) was revised based on their recent publication of two interim final rules (Requirements for Loan Forgiveness and Review Procedures and Related Borrower and Lender Responsibilities) that were issued to provide more clarity on processing loan forgiveness applications for borrowers.

Model Policy 9200 (Home Mortgage Disclosure Act – Regulation C) was revised to include the threshold change for reporting HMDA data on closed-end mortgage loans, which increases to 100 from 25. Credit unions that originated fewer than 100 closed-end loans in either of the two preceding calendar years will not have to report that data, effective on July 1, 2020.

 

As always, CUAD members may contact Amy Kleinschmit with any compliance related questions.

 

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