Top Story Lending Related

The first 2024 issue of Consumer Compliance Outlook has been released, and is available on the Federal Reserve System’s Consumer Compliance Outlook webpage. Included in this issue are articles on:

• Overview of Private Flood Insurance Compliance Requirements
• Consumer Compliance Requirements for Commercial Products and Services
• Compliance Spotlight: Resources to Combat Increased Check Fraud
• Recent Supervisory Data for Institutions the Federal Reserve Supervises
• and more

The CFPB on Tuesday published research that suggests consumers tend to pay more for products that have more complex pricing structures. The report is based on experiments with multiple rounds of buyers and sellers interacting in simple markets, and found that participants tended to pay more when prices were broken into sub-parts and were harder to understand. The research, said the CFPB, has implications for understanding how junk fees impede fair and competitive pricing in markets like auto loans or mortgages, where consumers have to evaluate extended warranties, add-ons, closing costs, and a wide variety of other fees instead of an all-inclusive price.

While not expected to exactly mirror real-world transactions, the CFPB found in these experiments that more complex pricing generally led to more detrimental outcomes for consumers:

• Higher total prices: Sellers' total asking prices were 60 percent higher in markets with 16 sub-prices than in those with one price.
• Comparing prices was more difficult: Buyers were 15 times more likely to select a higher-priced option in markets with 16 sub-prices than in those with one price.
• Consumers paid more overall: Transaction prices were 70 percent higher in markets with 16 sub-prices than in those with one price, on average.

The CFPB has previously highlighted how the use of complex terms and pricing can pose challenges for consumers. In many instances, consumers face complex pricing when shopping for financial products and services including credit cards, checking and savings accounts, mortgages, and auto loans.

• Price Complexity in Laboratory Markets

The Federal Housing Finance Agency reports that U.S. house prices rose in February, up 1.2 percent from January, according to the FHFA's seasonally adjusted monthly House Price Index. House prices rose 7.0 percent from February 2023 to February 2024. The previously reported 0.1 percent price decrease in January remained unchanged.

For the nine census divisions, seasonally adjusted monthly price changes from January 2024 to February 2024 ranged from +0.4 percent in the West South Central division to +3.0 percent in the New England division. The 12-month changes were all positive, ranging from +3.7 percent in the West South Central division to +10.8 percent in the Middle Atlantic division.

“U.S. house prices rebounded with an increase in February, after declining slightly in January” said Dr. Anju Vajja, Deputy Director for FHFA’s Division of Research and Statistics. “All nine census divisions experienced price appreciation over the last 12 months, with New England and Middle Atlantic divisions posting double digit growth.”

The Federal Housing Finance Agency has announced the creation of a new Division of Public Interest Examination (DPIE), which will be responsible for supervisory oversight of the Agency’s regulated entities in the areas of affordable housing, community development, diversity and inclusion, consumer protection, and fair lending. FHFA serves as regulator and conservator of Fannie Mae and Freddie Mac (the Enterprises) and regulator of the Federal Home Loan Bank System.

Establishment of the new division will highlight the Agency’s focus on public interest examinations and increase synergy and collaboration between existing public interest examination programs. James Wylie will serve as the Deputy Director for DPIE. He has led FHFA’s Office of Fair Lending Oversight since 2018.

The Federal Housing Finance Agency on Monday announced it has released its Fair Lending, Fair Housing, and Equitable Housing Finance Plans Final Rule, together with Fannie Mae's and Freddie Mac’s (the Enterprises) Equitable Housing Finance Plan updates for 2024 and Performance Reports for 2023.

The final rule codifies in regulations FHFA’s fair lending oversight requirements for the Enterprises and the Federal Home Loan Banks; the Enterprises’ Equitable Housing Finance Plans (Plans); collection of homeownership education, housing counseling, and language preference information from the Supplemental Consumer Information Form (SCIF); and new Federal Home Loan Bank reporting requirements. The rule will become effective 60 days after it is published in the Federal Register, except for subpart D of the regulation, which becomes effective February 15, 2026.

The FHFA will seek public feedback to inform the next three-year Plans through a Request for Input and listening session. FHFA expects to hold a public listening session in June 2024, and anticipates releasing the next Plans in January 2025.

• Fannie Mae​ 2​024 Equitable Housing Finance Plan
• Fannie Mae 2023 Equitable Housing Performance Report
• Freddie Mac 2024 Equitable Housing Finance Plan
• Freddie Mac 2023 Equitable Housing Performance Report
  ​

The FDIC has released a list of enforcement orders issued against FDIC-supervised institutions and institution-affiliated individuals that were issued in March 2024.

• First Fed Bank, Port Angeles, Washington, was assessed a $500,000 civil money penalty for UDAP and RESPA violations
• The Pitney Bowes Bank, Inc., Salt Lake City, Utah, was assessed a $6,098 penalty for failing to take the steps needed to allow the FDIC to debit an account at the bank to pay an FDIC assessment for the last quarter of 2023
• Danielle M. Desrosiers, former EVP of Independence Bank, East Greenwich, Rhode Island, was issued an order of prohibition after determining that she engaged or participated in violations of regulations, unsafe or unsound practices, and breaches of her fiduciary duties owed to the Bank in connection with loan applications submitted by one of the bank’s referral agents and breached her fiduciary duty by failing to document or disclose to the Bank her conflicts of interest with the referral agent.
• Carlene Bartley, formerly an operations specialist at Flushing Bank, Uniondale, New York, was issued an order of prohibition after determining that she embezzled $74,937 from three deceased customers' accounts
• River Bank & Trust, Prattville, Alabama, received a consent order from the FDIC and the State of Alabama Banking Department after the agencies concluded that the bank violated certain provisions of the Bank Secrecy Act and related federal and state regulations
• The Exchange Bank, Skiatook, Oklahoma, was issued a consent order by the FDIC and the Oklahoma State Banking Department for unspecified alleged unsafe or unsound banking practices and violations of law and/or regulations. The order directs the bank to take specific actions to improve its BSA/AML/CFT compliance program.

The CFPB has announced it will join the Department of Transportation at 10:00 a.m. ET, May 9, 2024, to host a hearing on airline and credit card rewards programs. Members of the public will hear from CFPB Director Rohit Chopra and Secretary of Transportation Pete Buttigieg, who will moderate a discussion with industry representatives, labor leaders, and consumer advocates about competition issues and challenges that consumers are experiencing with airline and credit card rewards programs.

A livestream of the event will be available on the day of the hearing.

The CFPB has releases issue 33 of its Supervisory Highlights report. The findings in this report cover select examinations regarding mortgage servicing completed from April 1 through December 31, 2023.

The report indicates that examiners continue to find supervised mortgage servicers assessing junk fees, including unnecessary property inspection fees and improper late fees. Additionally, examiners found that mortgage servicers engaged in other unfair, deceptive, and abusive acts or practices (UDAAP) such as sending deceptive loss mitigation eligibility notices to consumers. Mortgage servicers also violated several of Regulation X’s loss mitigation provisions.

The Labor Department announced yesterday that it has issued a final rule that expands overtime pay protections by increasing the salary thresholds required to exempt a salaried bona fide executive, administrative or professional employee from federal overtime pay requirements.

Effective July 1, 2024, the salary threshold will increase to the equivalent of an annual salary of $43,888 and increase to $58,656 on Jan. 1, 2025. The July 1 increase updates the present annual salary threshold of $35,568 based on the methodology used by the prior administration in the 2019 overtime rule update. On January 1, 2025, the rule’s new methodology takes effect, resulting in the additional increase. In addition, the rule will adjust the threshold for highly compensated employees. Starting July 1, 2027, salary thresholds will update every three years, by applying up-to-date wage data to determine new salary levels.

HUD has announced it has published [89 FR 30850] in this morning's Federal Register a final rule with a Federal Flood Risk Management Standard (FFRMS) to help communities prepare for and reduce flood damage. This rule aims to protect communities from flood risk, heavy storms, increased frequency of severe weather events and disasters, changes in development patterns, and erosion.

The final rule implements the FFRMS required by Executive Order 13690 (1/30/2015) by updating two of HUD’s regulations: Part 55, Floodplain Management and Protection of Wetlands and Part 200, Minimum Property Standards. This rule strengthens standards by increasing elevations and flood proofing requirements of properties in areas at risk of flooding, where federal funds are used to develop or provide financing for new construction within the now defined FFRMS floodplain. It also applies to substantial improvement to structures financed through HUD grants, subsidy programs, and applicable multifamily programs. The update to Minimum Property Standards only applies to FHA-insured new construction within the 100-year floodplain.