The New CFPB, New Simplified Disclosures & How Your Credit Union Will Be Affected (Credit Union Conference Presentation)
 

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The New CFPB, New Simplified Disclosures & How Your Credit Union Will Be Affected (Credit Union Conference Presentation)

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On July 21, 2011, the Dodd-Frank Act’s Consumer Financial Protection Bureau assumed its oversight and enforcement powers over the nation’s financial institutions. Changes include new and revised ...

On July 21, 2011, the Dodd-Frank Act’s Consumer Financial Protection Bureau assumed its oversight and enforcement powers over the nation’s financial institutions. Changes include new and revised compliance disclosures, which will have a significant impact on credit unions. In this 2011 NAFCU Annual Conference session discover how your credit union can overcome these and other challenges, including those related to the new Privacy and Risk-based pricing notice requirements that took effect on January 1, 2011. Plus, be prepared for the new trend of simplified disclosure requirements that is likely to follow.
Presented by Ted Dreyer, Senior Attorney, Wolters Kluwer Financial Services

More info at http://www.nafcu.org/wkfs

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The New CFPB, New Simplified Disclosures & How Your Credit Union Will Be Affected (Credit Union Conference Presentation) Presentation Transcript

  • 1. The New CFPB, NewSimplified Disclosures andHow 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
  • 10. 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
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  • 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
  • 26. Questions?National Association of Federal Credit Unions l www.nafcu.org