Nov 30

Recent Compliance Issues: 11/14/14 – 11/27/14


1. The Consumer Financial Protection Bureau (CFPB) released a bulletin to help lenders avoid discrimination against consumers receiving disability income. The bulletin is meant to remind lenders that requiring unnecessary documentation from consumers who receive Social Security disability income may raise fair lending risk. The bulletin discusses verification standards and guidelines for Social Security disability income, including under the CFPB’s Ability-to-Repay (ATR) rule, the HUD standards for FHA-insured loans, the Department of Veterans Affairs (VA) standards for VA-guaranteed loans and guidelines from Fannie Mae and Freddie Mac.

To verify income for Qualified Mortgage debt-to-income ratios under the ATR rule, lenders are required to look at whether the Social Security Administration benefit verification letter includes a defined expiration date. Unless the Social Security Administration letter specifically states that benefits will expire within three years of loan origination, lenders should treat the benefits as likely to continue.

Allow our former, Federal, compliance personnel to review your lending and underwriting practices to ensure that your institution’s policies and practices are in line with fair lending laws and regulations.

2. With more Americans using prepaid cards and products, the CFPB will be proposing rules on prepaid products that would formalize many consumer protections already offered by banks that provide these products. Many people choose prepaid products as a useful alternative to a traditional checking account. These rules formalize the protections that banks’ prepaid customers already enjoy.

The disclosure requirements appear consistent with many of the banking industry’s recommendations, and the consumer protections regarding unauthorized transactions and billing disputes seem to reflect current best practices. ABA will review the proposed rules closely to ensure they protect bankers’ ability to offer the convenient, affordable prepaid products customers want.

Our former, Federal, compliance examiners can review your practices to see that they are in compliance with the proposed rulemaking for these products when finalized.