The document summarizes how the new Consumer Financial Protection Bureau (CFPB) will affect credit unions. It establishes the CFPB as an independent agency overseen by a single director. It will require simplified and standardized disclosures for financial products and services to make them easier for consumers to understand and compare. Credit unions will have to comply with new rules around disclosures, consumer rights to financial information, use of consumer reports, and mortgage lending practices. The CFPB aims to make consumer financial transactions more transparent.
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CFPB Simplified Disclosures and How Credit Unions Will Be Affected
1. The New CFPB, New
Simplified Disclosures and
How Your Credit Union Will
Be Affected
Presented by
Ted Dreyer, Wolters Kluwer
Financial Services
Insert Your
Logo Here
National Association of Federal Credit Unions l www.nafcu.org
2. Establishment of New BCFP
Independent agency of the Executive Branch
housed within the Federal Reserve but not
subject to the Federal Reserve
Single director appointed by the president
for a 5 year term.
Funding from earnings of the Federal
Reserve.
Council of regulators, the Financial Stability
Oversight Council, that can set aside Bureau
regulations
National Association of Federal Credit Unions l www.nafcu.org
3. Key Definition
Consumer Financial Product or Service
Included are consumer purpose products and
services like extending credit, servicing loans,
leasing real or personal property, real estate
settlement services, deposit-taking activities,
transmitting or exchanging funds, stored value
transactions, check cashing, check collection or
check guaranty services, payment processing,
financial advisory services, collecting, analyzing
maintaining or providing consumer report
information, and debt collection.
National Association of Federal Credit Unions l www.nafcu.org
4. The Bureau begins July 21, 2011.
An ombudsman for the Bureau must be
established by January 17, 2012
Will act as a liaison between the Bureau and
any person that has a problem with regulatory
activities of the Bureau.
The ombudsman is also supposed to make
sure that complainants are encouraged to
come forward and to preserve their
confidentiality.
National Association of Federal Credit Unions l www.nafcu.org
5. General Rule on Disclosures
Bureau can issue rules so that:
the features of a consumer financial product
or service,
both initially and over the term of the product
or service,
are fully, accurately, and effectively disclosed
to consumers in a manner that permits
consumers to understand the associated costs,
benefits, and risks
National Association of Federal Credit Unions l www.nafcu.org
6. Power to produce model disclosures
Format must be Clear and Conspicuous,
use plain language comprehensible to
consumers;
contain a clear format and design, such as
an easily readable type font; and
succinctly explain the information that must
be communicated
National Association of Federal Credit Unions l www.nafcu.org
7. Simplified Disclosures
The term “simplified” refers to disclosures
being simplified for the benefit of consumers,
not for the institutions that give them
More rigid content and format requirements
Change always requires effort
Errors may be more visible
More separate versions of forms may to
required to accommodate choices
National Association of Federal Credit Unions l www.nafcu.org
8. How Did We Get Here?
Gramm-Leach-Bliley Privacy Disclosures
The existing privacy disclosures were often being
discarded by consumers, and they were not easily
understood when consumers did read them.
So, it was believed that a new model form might
help in those areas.
In addition, Congress believed that standardizing
them would make it easier to compare privacy
practices.
Consumer testing done
National Association of Federal Credit Unions l www.nafcu.org
9. The new form was required to have the
following characteristics:
to be comprehensible to consumers, with a clear
format and design;
to provide clear and conspicuous disclosures;
to enable consumers easily to identify the sharing
practices of a financial institution so that they can
compare privacy practices among financial
institutions; and
to be succinct, and use an easily readable type font.
National Association of Federal Credit Unions l www.nafcu.org
11. Combined TIL/RESPA form
Required by Dodd-Frank
New form required by July 21, 2012
“Know Before You Owe”
Prototype forms released
Comments solicited
National Association of Federal Credit Unions l www.nafcu.org
16. “What should we drive toward? Short agreements that
can be read in very little time with very high levels of
understanding. Certain basic information would have
to be made available and each lender would set the
terms of its deal: the interest rate, the penalty terms,
the free gifts or rewards that come with the card,
and any other terms. For consumers, this would
mean products that are easy to understand and easy
to compare. For lenders, this means regulatory
compliance costs could be reduced.”
-Elizabeth Warren,
Speech to Financial Services Roundtable
September 29, 2010
National Association of Federal Credit Unions l www.nafcu.org
17. Consumer Rights to Information
Consumer customers will have legal rights to
get information regarding financial products
and services they have obtained.
Information must be available in standard
formats prescribed by the Bureau including an
electronic form usable by consumers.
National Association of Federal Credit Unions l www.nafcu.org
18. Use of consumer reports
Institutions will have to provide the
consumer’s credit score on adverse action
notices and risk-based pricing notices based
in whole or in part on a consumer report.
They will also have to provide the
information now given on credit score
disclosures, that is, the range of scores, key
factors, date of the score, and person
creating the score
National Association of Federal Credit Unions l www.nafcu.org
19. Unlawful to provide non-compliant product
or service, engage in unfair, deceptive or
abusive act or practice or provide records –
includes service providers who provide
substantial assistance
Enforcement potential
National Association of Federal Credit Unions l www.nafcu.org
20. Funds Availability amendments
Next day availability amount increased from
$100 to $200 and dollar amounts adjusted
for inflation every five years
Truth in Lending Exemption
Increases the TILA dollar amount for
exempting credit transactions or leases
from $25,000 to $50,000 and
Future indexing for inflation
National Association of Federal Credit Unions l www.nafcu.org
21. Small business data collection
Information Gathering
Record of Responses
Customer Right to Refuse
No Access to Data by Underwriters
Itemization of information required
Personally Identifiable Information not included
Data to be Submitted to Bureau
Definition of Terms
National Association of Federal Credit Unions l www.nafcu.org
22. Duty of Care
Regulations required for procedures to assure and
monitor compliance with Title XIV and SAFE Act,
Includes Identifier
Prohibition on Steering Incentives
Regulations issued required to keep mortgage
originators from steering consumers to loans they
can’t repay or have predatory characteristics or
other abusive practices Effective April 1, 2011
http://edocket.access.gpo.gov/2010/pdf/2010-
22161.pdf
National Association of Federal Credit Unions l www.nafcu.org
23. Regulations for Abusive Practices
Regulations are authorized to prohibit or condition
terms, acts or practices if they are abusive, unfair,
deceptive, predatory or to prevent evasion.
Ability to Repay
Documentation will be required for ability to repay,
including verification of income. Proposed rule
issued with comments accepted until 7/22/11.
http://www.federalreserve.gov/newsevents/press/
bcreg/bcreg20110419b1.pdf
National Association of Federal Credit Unions l www.nafcu.org
24. Consumer Disclosures
Adds additional disclosures for TILA including
maximum initial payments, initial escrow amount,
aggregate settlement charges, various fees, and
total interest that will be paid over life of loan
Monthly Statements
Establishes new requirements and model form for
monthly statements on consumer mortgages
National Association of Federal Credit Unions l www.nafcu.org
25. Escrows
Requires escrows in certain cases and establishes
new disclosure requirements
Final rules at
http://edocket.access.gpo.gov/2011/pdf/2011-
4384.pdf
Proposed rules:
http://edocket.access.gpo.gov/2011/pdf/2011-4385.pdf
Disclosures for non-escrowed loans
Requires new disclosures when no escrow
established
National Association of Federal Credit Unions l www.nafcu.org