Remember to update the Ohio Homebuyers’ Protection Act form for 2017

Residential Mortgage lenders should be mindful to not forget to update their Ohio Homebuyers’ Protection Act Informational Document with the 2017 prepayment penalty adjustment. Beginning January 1, 2017, no mortgage broker, loan officer or nonbank mortgage lender may charge a penalty for the prepayment or refinancing of a residential mortgage obligation secured by a first lien if the loan amount is less than $88,503. See Ohio Revised Code 1343.011(C)(2).

The Ohio Homebuyers’ Protection Act Informational Document is required by Ohio Revised Code 1345.05(G). An acknowledgement of the consumer’s receipt must be retained by the lender, mortgage broker and loan officer, as applicable. The Ohio Attorney General and the Department of Commerce may examine your records to ensure that you are providing the most current version of this document to consumers with the 2017 adjusted amount.

Also, don’t forget that Nationwide Multistate Licensing System & Registry (NMLS) renewal season started November 1.

Consumer Lending and Services, Fair Lending, Legal Developments, State Regulatory

Texas OCCC issues advisory bulletin regarding amended MLA rule

Starting today, October 3, 2016, pawnshops nationwide will be obligated to follow the recently updated Military Lending Act (MLA) rule. In response to the release of the amended MLA and updated exam procedures by the Consumer Financial Protection Bureau, the Texas Office of Consumer Credit Commissioner (OCCC) issued an advisory bulletin summarizing the MLA’s requirements for Texas pawnbrokers. The guidance contains 20 questions and answers regarding the new regulations on loans involving military personnel.

Two noteworthy points for Texas pawnbrokers are addressed in the bulletin. First, Texas pawnshops are now required to have a written policy detailing how a person’s covered borrower status is determined. Additionally, an existing pawn loan that is extended in accordance with Texas law by having the borrower sign a memorandum of extension will not be considered to be a new loan or renewal that triggers the disclosure requirements of the MLA. However, the OCCC may modify its guidance if the Department of Defense decides otherwise.

Pawnbrokers make up a segment of the financial services industry that will be affected by these new rules under the Military Lending Act. Attorney, Jackie Mallett recently hosted a webinar discussing the amended rules and how they will affect the pawn industry. View the webinar in its entirety here

Consumer Lending and Services, Fair Lending, Federal Regulatory, Non-Depository Institutions

Amended Military Lending Act goes into effect on October 3; CFPB releases updated exam procedures

Today, September 30, 2016, the Consumer Financial Protection Bureau (CFPB) identified the updated exam procedures it will use to audit lenders who do business with military personnel. According to CFPB Director Richard Cordray, “[t]he updated exam procedures…will help ensure that servicemembers and their families are dealt with in a fair and safe manner when attempting to access credit.” Specifically, the requirements prohibit interest rates above 36 percent MAPR, mandatory waivers of consumer protection laws and mandatory allotments.

In its press release, the CFPB vows to strictly monitor financial institutions, their compliance programs and their “overall efforts to follow the rule’s requirements.” Evaluating everything from staff training to loan implementation, the CFPB will use the new rules to prevent substantial consumer harm. The updated Military Lending Act rules go into effect on October 3 for creditors. Credit card companies must be prepared to comply with the new rules by October 3, 2017.

Pawnbrokers make up a segment of the financial services industry that will be affected by these new rules under the Military Lending Act. Attorney, Jackie Mallett recently hosted a webinar discussing the amended rules and how they will affect the pawn industry. View the webinar in its entirety here

Compliance Management, Consumer Lending and Services, Depository Institutions, Fair Lending, Federal Regulatory, Non-Depository Institutions

Mallett to speak on military lending at NACCA event in Tulsa

Spotlighting the importance of compliance with the Military Lending Act and other unique regulations associated with lending to members of the armed forces, Bricker & Eckler attorney Jackie Mallett will be presenting “Military Lending Boot Camp” at the National Association of Consumer Credit Administrators (NACCA) 29th Annual Consumer Services and Examiners’ School. The event takes place September 26-30, 2016, in Tulsa, Oklahoma. For information, visit the event webpage.

Consumer Lending and Services, Fair Lending

Announcing our Cybersecurity Law blog

Readers of the Financial Services Law blog are invited to visit our newly-launched Cybersecurity Law blog, an online resource featuring news, information and legal analysis on current cybersecurity and data breach issues. Articles and posts, authored by Bricker & Eckler attorneys, share in-depth insights and legal implications on topics that have both local and global significance.  

We encourage you to subscribe to the blog via FeedBurner to have frequent updates sent directly to your inbox. Additionally, be sure to visit the blog and bookmark the site for easy reference. 

Compliance Management, Consumer Lending and Services, Depository Institutions, Fair Lending, Federal Regulatory, Federal Regulatory, Legal Developments, Non-Depository Institutions, State Regulatory

When a logo is a “no go” on the new Home Loan Toolkit

There is a right way and a wrong way to customize the new Home Loan Toolkit, according to a Consumer Financial Protection Bureau (CFPB) representative who spoke at Bricker & Eckler’s Midwest Financial Services Regulatory and Compliance Conference in Columbus, Ohio, on August 20, 2015. The right way complies with Section 8 of the Real Estate Settlement Procedures Act (RESPA). But beware: the wrong way is considered a RESPA kickback.

Beginning October 3, the Home Loan Toolkit replaces the Special Information Booklet currently given to loan applicants who apply for a mortgage. The new toolkit is required by the Dodd-Frank Act and its regulations — 12 U.S.C. § 2604, 12 C.F.R. §1024.6 and 12 C.F.R. § 1026.19(g).

Companies will be allowed to place their logo on the front cover of the new toolkit. The CFPB’s instructions for adding a logo are available here. Of course, real estate professionals and title companies want to capitalize on this marketing opportunity by emblazoning the toolkit cover with logos galore — title company logos, real estate agent logos, lender logos and mortgage broker logos, to name a few. Suddenly, a seemingly lawful marketing opportunity created by the CFPB itself becomes a major compliance risk. Luckily, the CFPB has provided some rare written guidance on the issue.

The CFPB says that a title company may lawfully place its own logo on the front cover of the toolkit and provide copies to a real estate professional or mortgage broker who, in turn, gives them to consumers shopping for a home. This marketing is not a Section 8 RESPA violation as long as the title company provides its branded toolkit at no cost to the real estate professional or mortgage broker, without any conditions requiring the referral of business, and without retaining any control over whether or how the toolkit will be distributed.

A title company crosses the line, however, and violates Section 8 of RESPA when it places another company’s logo on the front cover of the toolkit and provides free copies to the other company to give to consumers shopping for a home. The title company is essentially paying for the other company’s marketing materials.

In both scenarios, the title company is providing the toolkit to another company free of charge. But, in the first scenario, the title company is putting its own logo on the toolkit, which the CFPB considers “normal promotional and educational activities” permitted under 12 C.F.R. 1024.14(g)(vi). The CFPB considers it a kickback for the title company to put another company’s logo on the toolkit, because it defrays an expense that would otherwise be incurred by the other company.

This is a fine line indeed. To see the CFPB’s written guidance on when the use of a company logo crosses that line and becomes an illegal kickback, see slides 40 and 41 of the CFPB representative’s “Know Before You Owe: The real estate professional’s guide” presentation.

Consumer Financial Protection Bureau, Fair Lending, Federal Regulatory

Long live fair lending…it never really died

Over the past year, many have speculated that the concept of fair lending would be weakened by the U.S. Supreme Court as they considered the "disparate-impact theory of discrimination" in the case of Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc. Today, the Court settled the issue. Lenders of all sizes must continue to consider and closely analyze the impact of their pricing and lending policies, as the Court has upheld the use of disparate-impact claims under the Fair Housing Act of 1968.

The focus of today's ruling was whether disparate-impact claims are allowable where a plaintiff alleges discrimination based a defendant’s “facially neutral” practice — and not on specific discriminatory intent or actions. In other words, the Court considered whether a company could be held liable for a neutral policy that has a negative effect on members of a group classified by race, ethnicity or gender. The answer is a resounding "yes".

Fair lending guidelines were, in fact, never "dead," even had the ruling gone the other way. However, expectations are now heightened on lenders of all sizes. Careful review of lending trends and analysis of a company's data must be made a priority. It IS all in the data. Regulators and litigators will be looking at this data to establish evidence of unfair impact on minority groups, and will look to use this publicly available data to establish new claims and significant liability.

There are very efficient and cost-effective tactics on which to build a compliance plan around this issue. The winning solution is to be proactive.

Fair Lending, Federal News