The Consumer Financial Protection Bureau (“CFPB”) recently issued guidance regarding its expectations for when residential mortgage loans are transferred to mortgage servicers and subservicers (the “Guidance”). Servicing transfers of mortgages and mortgage portfolios are a common practice, with mortgage lenders outsourcing servicing duties (such as loan payment collection and processing) to a third-party vendor.
Entries in Unfair and Deceptive Trade Practices (6)
Examinations of High-Yield Accounts by FDIC Gives Insight into Compliance Issues in New Product Development
An article in the winter edition of the FDIC’s Supervisory Insights Journal discusses a number of common regulatory violations found in advertising, website, and disclosure materials used with high-yield checking accounts. In addition, the article provides insight into how and why compliance issues arise in the development of new financial products, such as potential violations of Truth-in-Savings and Section 5 of the FTC Act (Unfair or Deceptive Trade Practices).
The Federal Trade Commission (“FTC”) recently issued an interim final rule amending its “Red Flags Rule,” 16 C.F.R. Part 681. The amendment, which affects “creditors” under the FTC’s jurisdiction, limits the applicability of the Rule by making reference to a new definition of “creditor” in Section 1681m(e)(4) of the Fair Credit Reporting Act (“FCRA”). Section 1681m(e)(4) was part of the “Red Flag Program Clarification Act” enacted by Congress in December of 2010. The FTC’s interim rule directly references this new definition, discussed below...
The Financial Crimes Enforcement Network (FinCEN) recently issued an advisory bulletin warning financial institutions on the risks associated with maintaining deposit accounts for third-party payment processors (“Payment Processors”). Payment Processors are companies that initiate payment transactions on behalf of their own customers, typically merchants and other businesses, where these customers lack a direct relationship with the financial institution. Payment processors may service domestic or foreign businesses that are conventional bricks-and-mortar establishments or internet-based.
The Consumer Financial Protection Bureau entered into a Consent Order with Capital One Bank on July 18, 2012. The order is the CFPB’s first ever enforcement action and was coordinated with the Office of the Comptroller of the Currency. The enforcement action resulted from an examination of allegedly deceptive marketing practices by call-centers (third-party vendors) that sold credit card add-on products such as credit protection and credit monitoring services on behalf of Capital One. One important aspect of the Consent Order is that it resulted from the practices of a third-party vendor, and not actions directly by Capital One itself. Also on July 18th, the CFPB issued a compliance bulletin providing guidance on the marketing of credit card add-on products. The Bulletin states that institutions should also consider the guidance when offering add-on products in connection with other credit and deposit services.