Top Story Compliance Related

The Office of Servicemember Affairs of the CFPB has issued a notice that it plans to retire its Misadventures in Money Management (MiMM.gov) interactive financial education course for young servicemembers on January 3, 2025.

The Consumer Financial Protection Bureau has announced a final rule mandated by Congress (section 307 of the Economic Regulatory Relief and Consumer Protection Act (EGRRCPA)) that applies existing residential mortgage protections to Property Assessed Clean Energy (PACE) loans.

PACE loans are used by homeowners for clean energy upgrades and disaster readiness that are paid back through their property tax bills. Because of concerns about subprime-style lending that puts homeowners at risk of losing their home, Congress required the CFPB to enhance protections. The rule will ensure that PACE borrowers have the right to receive standard mortgage disclosures that allow them to compare the cost of the PACE loan with other forms of financing, and the lender will be responsible for ensuring that the borrower is not set up to fail with an unaffordable loan.

While PACE financing can provide quick cash for home improvements, CFPB research shows that:

• Most PACE borrowers are eligible for other forms of financing, often at much cheaper rates than PACE loans.
• PACE loans caused borrowers’ property taxes to increase by about $2,700 per year or an 88 percent increase.
• PACE borrowers were more likely to fall behind on their first mortgage than people who chose not to finance home improvements with PACE.
• PACE loans tend to be more expensive – around five percentage points higher -- than first mortgages, even though PACE loans get paid at a foreclosure sale before first mortgages.

The rule amends Regulation Z to make PACE loans subject to the regulation and its TRID disclosure and ability-to-repay requirements. The amendments will become effective March 1, 2026.

• Federal Register document
• Executive Summary
• CFPB Report: "Property Assessed Clean Energy (PACE) Financing and Consumer Financial Outcomes"

The NCUA has announced that its Board has approved a final rule that will require federally insured credit union boards of directors to establish succession planning processes for key positions.

The rule requires the board of a federally insured credit union to establish a written succession plan that addresses the specified positions that are vital to the operation and management of the credit union, and regularly review these plans to ensure they are current. The rule also requires newly appointed members of the board to be familiar with those plans within six months after their appointment. For federally insured, state-chartered credit unions in states that have established succession planning requirements, the NCUA will defer to the state’s requirements if no conflict exists between the final rule and the state’s rules.

The rule will become effective January 1, 2026, to help ensure that affected credit unions have the time needed to develop their plans.

The Treasury Department yesterday reported that OFAC has sanctioned two individuals and one entity involved in a network that launders millions of dollars of illicit funds generated by the Democratic People’s Republic of Korea (DPRK) information technology (IT) workers and cybercrime to support the DPRK Government. Based in the United Arab Emirates (UAE), Lu Huaying and Zhang Jian worked through a UAE-based front company to facilitate money laundering and cryptocurrency conversion services that funneled the illicit proceeds back to Pyongyang. This network is led by OFAC-sanctioned Sim Hyon Sop (Sim), a PRC-based banking representative for the DPRK who orchestrates money laundering schemes to fund the regime.

Treasury also reported OFAC action against 12 individuals and eight entities, located across seven countries, who are linked to the global illicit drug trade. These sanctions are the result of strong collaboration with the Drug Enforcement Administration and a range of international law enforcement partners, including in Colombia, Lithuania, and New Zealand. This action was also enabled with support from Treasury’s Financial Crimes Enforcement Network and reporting from financial institutions under the Bank Secrecy Act, and was coordinated closely with various foreign Financial Intelligence Units.

For the names and identification information of the designated parties, see yesterday's BankersOnline OFAC Update.

The CFPB yesterday issued a report on the experiences of homeowners dealing with their mortgage company after divorce or the death of an original borrower.

The report indicates that many homeowners report that their servicers push them to take on new, higher-interest loans instead of keeping their existing mortgage. Homeowners also report recurring requests from servicers for the same or updated documents extending over months and sometimes years, at the same time they are dealing with the death of a loved one or a divorce. Domestic violence survivors face additional challenges, including mortgage companies continuing to send critical mortgage information to the abuser and thus putting the survivor’s safety at risk. Servicers generally blame investor requirements, processing volumes, or “systems issues,” rather than taking responsibility for their shoddy customer service.

Based on its review of consumer complaints, the CFPB has identified multiple areas of concern, including:

• Pressure to take out higher-interest loans: Homeowners report servicers telling them they must refinance their mortgages at today's higher interest rates even though federal mortgage guidelines allow them to maintain the existing loan terms.
• Repeated delays and paperwork requests: Many homeowners report waiting months or even years for servicers to process their paperwork, with some reporting that servicers repeatedly request the same documentation or fail to respond to inquiries.
• Refusals to release the original borrower from liability: Some homeowners report that servicers are denying their requests to remove the original borrower from the mortgage, even when the successor homeowner has been making all payments on the mortgage for years.
• Risks to domestic violence survivors: Survivors of domestic violence have reported that servicers continue sending account information to their abusers and require their abusers' consent for account changes, potentially creating safety threats.

The CFPB yesterday announced actions taken to protect consumers from illegal credit card practices and help people save money on interest and fees.

In a circular on "Design, marketing, and administration of credit card rewards programs" to other law enforcement agencies, the CFPB warned that some credit card companies operating rewards programs may be breaking the law, including by illegally devaluing rewards points and airline miles.

The CFPB also published new research finding that retail credit cards—which typically offer store-specific rewards and loyalty programs—charge significantly higher interest rates than traditional cards.

In addition, the CFPB launched a new tool, Explore Credit Cards, to help consumers find the best credit card rates across both rewards cards and traditional cards. This first-of-its-kind tool enables consumers to compare more than 500 credit cards using unbiased, comprehensive data.

The Federal Trade Commission today announced a final rule to prohibit bait-and-switch pricing involving unfair and deceptive fees used to hide total prices in the live-event ticketing and short-term lodging industries.

The final rule specifies that it is an unfair and deceptive practice for businesses to offer, display, or advertise any price of live-event tickets or short-term lodging without clearly, conspicuously and prominently disclosing the total price. The rule also requires businesses to clearly and conspicuously make certain disclosures before a consumer consents to pay. The rule further specifies that it is an unfair and deceptive practice for businesses to misrepresent any fee or charge in any offer, display, or advertisement for live-event tickets or short-term lodging.

The rule, which will add 16 C.F.R. part 464, is to become effective 120 days after its publication in the Federal Register.

The CFPB issued a "Data Spotlight" on a recent analysis of credit card cash advance fees and interest. The CFPB analyzed cash advance fees after the legalization of sports betting in Kansas and Ohio, as well as cardholder agreements, consumer complaints, and online sports betting platforms. The Bureau found that:

• Issuers that allow consumers to use their credit cards with sportsbooks are largely treating the transactions as cash advances
• Cash advances can incur high fees as a percentage of the transaction amount and start accruing interest from day one
• Credit card use data from Kansas and Ohio suggest that legalizing sports betting corresponded with an increase in cash advance fee incidence
• Disclosures made by credit card issuers about cash advance fees for online betting are not always clear or consistent

The CFPB on Monday released a special edition of Supervisory Highlights that focuses on significant unlawful activities identified by CFPB examiners across student loan markets. The report covers violations related to student loan refinancing, private lending and servicing, debt collection, and federal loan servicing.

Student loans represent the second-largest form of U.S. consumer debt at more than $1.7 trillion in total outstanding balances. Within the past year, many student borrowers faced challenges, including as 28 million federal student loan borrowers returned to repayment following the end of the COVID-19 payment pause. The report details illegal practices, including:

• Lenders misleading borrowers and failing to carry out their instructions for refinancing
• Private lenders deceiving borrowers or denying benefits
• Servicers failing to address claims related to school misconduct
• Servicers distributing contracts allowing illegal collection tactics
• Federal loan servicers harming borrowers during return to repayment

The Office of the Comptroller of the Currency has reported the key issues facing the federal banking system in its Semiannual Risk Perspective for Fall 2024.

The OCC highlighted credit, operational, compliance, and market risks, as the key risk themes in the report. Highlights from the report include:

• Commercial credit risk remains moderate and shows signs of stabilizing as risks are better identified, monitored, and controlled.
• Overall retail credit risk is stable. Delinquency and loss rates on residential real estate-secured loans held by banks remain historically low but are increasing. Delinquencies in other retail asset classes, namely credit cards and auto loans, reflect an increasing trend.
• Operational risk is elevated. Banks continue to respond to an evolving and increasingly complex operating environment. Evolving cyber threats by sophisticated malicious actors target the financial services industry and their key service providers.
• From a compliance risk perspective, banks continue to operate in a dynamic banking environment as customers’ needs and preferences related to products, services, and delivery channels evolve.
• Community Reinvestment Act (CRA) related risks remain stable as the OCC continues to assess banks’ CRA performance under the 1995/2021 regulatory framework.
• Regarding market risk, banks net interest margin (NIM) performance has varied across bank asset sizes.

A special topic in the report focuses on the increasing trend in external fraud activity targeting consumers and the federal banking system. The frequency of both traditional and novel, more sophisticated fraud activities targeting customers and banks continues to increase. Banks should maintain sound fraud risk management practices through prudent controls and appropriate fraud monitoring capabilities to identify, investigate, mitigate, and report fraudulent activity. Banks can also support their customers by providing educational information about trending fraud activities and ways to protect themselves.