Seeking Clearance to Fund Disclosure Research

On September 26, 2011, the Consumer Financial Protection Bureau (CFPB) published its September 20, 2011 Generic Information Collection Request (Generic ICR) to the Office of Management and Budget (OMB). This Generic ICR requests OMB's review and clearance under the Paperwork Reduction Act of 1995.

The title of the Generic ICR is Generic Clearance for Research in Development of Disclosure Forms.

This issuance commences a Comment Period to the OMB, which will conclude on or before October 26, 2011.

Synopsis

 

The Dodd-Frank Act (Title X) requires the CFPB to develop model forms that integrate separate disclosures concerning residential mortgage loans that are required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).

For more information, please visit our newsletters or the CFPB section in our Library.

Development of these integrated disclosures will involve qualitative testing of the disclosures given in connection with consummation of the transaction and may involve testing of additional disclosures required by TILA and RESPA during the shopping, application, and origination process.

The CFPB may perform qualitative testing of other model disclosures or materials related to the integrated mortgage loan disclosures, such as instructions for loan originators, tools to assist consumers in understanding the disclosures and certain loan products and features, other mortgage loan-related disclosures, and of industry usability.

Also, the CFPB anticipates engaging the public to obtain feedback about the draft integrated mortgage loan disclosures and related materials before formal notice and comment of proposed rules.

Data Collection and Disclosures

 

The CFPB plans to collect qualitative data through a variety of collection methods, which may include interviews, focus groups and the Internet, in order to inform its design and development of the mandated integrated disclosures and their implementation.

The information collected through qualitative evaluation methods is being gathered in order to inform the disclosure form's design and content, using an "iterative process" to improve the draft form, presumably to make it easier for consumers to use the document to (1) identify the terms of the loan, (2) compare among different loan products, and (3) understand the final terms and costs of the loan transaction.

The research is expect to result in recommendations for development of and revisions to disclosure forms and related materials that would be provided to consumers in connection with obtaining mortgage loans.

Research activities will be conducted primarily by external contractors employing various cognitive psychological testing methods. The CFPB claims that "this approach has been demonstrated to be feasible and valuable by other agencies in developing disclosures and other forms."

The planned research activities will be conducted during FY 2012 through FY 2014 with the goal of creating effective disclosures and related materials for consumers.

LIBRARY

 

Consumer Financial Protection Bureau 

Proposed Information Collection: Comment Request 

Generic Clearance for Research 

in Development of Disclosure Forms

 

September 26, 2011

Consumer Financial Protection: Bureau or Bureaucracy?

Part III of a Three-Part Series on Financial Reform Legislation
Dodd-Frank: Legislation - Reactive or Proactive
Author: Jonathan Foxx
Published in National Mortgage Professional Magazine
First Published: October 2010

Although Elizabeth Warren has left the Consumer Financial Protection Bureau, her views continue to provide inspiration to its management and staff. Perhaps it would be wise to read the article I wrote last October, outlining the CFPB, its mandates, and its prospects.

__________________________________________

Society is founded not on the ideals but on the nature of man

and the constitution of man rewrites the constitutions of states.

But what is the constitution of man?[i]

Will and Ariel Durant

In the first two parts of this 3-part series,[ii] we have explored the basic structure of the new financial reform law, known as the Dodd-Frank Act (“Act”), as it affects residential mortgage loan originations.[iii] We have already given consideration to the many mortgage loan regulatory provisions that the Act covers[iv] and especially to the Mortgage Reform and Predatory Lending Act, a primary component of this landmark financial legislation.[v]

Now, we will turn our attention to the very core of the Act itself vis-à-vis the mortgage industry and consumer financial protection: the Bureau of Consumer Financial Protection (known also as the “Consumer Financial Protection Bureau,” or “CFPB,” and hereinafter as “Bureau”).[vi]

But first, a Thought Experiment.[vii]

A vast, entangled array of very small and sleek wires, super strong magnets, and very wide and long cables extend out omnidirectionally – all of which lines and circuits are laid throughout a network of interlocking, electrically generated devices that are held in place in their respective positions on a shaky iron scaffold by fraying, single-knotted ropes. The devices are needed to power vital and critical services to a community. But, due to wear and tear on their bindings, some devices are about to break free, threatening to pull down with them the entire array of wires, magnets, cables, and other devices. Any device can plummet at any time. Before it is too late, all the lines must be disentangled, traced to each of the devices, and rerouted to a new and more stable grid; plus, the devices themselves must be transferred, one by one, to the new grid without damaging them, and then reconnected to their lines. But the collapse can take place at any time. A “crisis” looms!

So, how are you going to accomplish this heroic task quickly and effectively?

Now let’s consider this analogue: the energy source is Constitutional authority; the grid is the financial regulatory framework; wires and cables are the ways and means that implementing regulations affect one another; magnets are the legal foundations (i.e., case law precedents (stare decisis), statutes (federal and state), Constitutional laws or rights) on which all subject enumerated laws (see below) rest; devices are the existing regulations; and ropes are the various governmental agencies that are charged with enforcement of and monitoring compliance with specific implementing regulations.

By the end of this article, I hope you will have decided how best to solve the above-described and admittedly convoluted “crisis.” This article and the preceding articles in this series outline how Congress decided!

Please keep in mind that this series on the Dodd-Frank Act is meant to provide an overview. However, the legislation itself is extremely detailed and extensive. Therefore, for guidance and risk management support, I strongly recommend that you consult a risk management firm, residential mortgage compliance professional, or regulatory counsel to develop policies and procedures to implement the Act’s requirements.

One Bureau, Many Bureaucrats

Nothing is more destructive of respect for the government

and the law of the land than passing laws

which cannot be enforced.[viii]

Albert Einstein

There are numerous existing consumer protection laws that will be included in the transfer to the Bureau by July 21, 2011, the Designated Transfer Date,[ix] thereby giving it exclusive rulemaking and examination authority.[x]

These “enumerated laws” include:[xi]

• Alternative Mortgage Transaction Parity Act (AMTPA)[xii]
• Community Reinvestment Act (CRA)[xiii]
• Consumer Leasing Act (CLA)[xiv]
• Electronic Funds Transfer Act (except the Durbin interchange amendment) (EFTA)[xv]
• Equal Credit Opportunity Act (ECOA)[xvi]
• Fair Credit Billing Act (FCBA)[xvii]
• Fair Credit Reporting Act (except with respect to sections 615(e), 624 and 628) (FCRA)[xviii]
• Fair Debt Collection Practices Act (FDCPA)[xix]
• Federal Deposit Insurance Act, subsections 43(c) through 43(f)(12) (FDIA)[xx]
• Gramm-Leach-Bliley Act, sections 502 through 509 (GLBA)[xxi]
• Home Mortgage Disclosure Act (HMDA)[xxii]
• Home Ownership and Equity Protection Act (HOEPA)[xxiii]
• Real Estate Settlement Procedures Act (RESPA)[xxiv]
• S.A.F.E. Mortgage Licensing Act (S.A.F.E. Act)[xxv]
• Truth in Lending Act (TILA)[xxvi]
• Truth in Savings Act (TISA)[xxvii]
• Omnibus Appropriations Act– Section 626 (OAA)[xxviii]
• Interstate Land Sales Full Disclosure Act (ILSFDA)[xxix]

As I have discussed elsewhere, the Bureau would be assigned primary authority to enforce the aforementioned laws, but other federal regulators, including the Department of Housing and Urban Development (“HUD”), the banking agencies, and the Federal Trade Commission, would retain overlapping, secondary enforcement authority over certain requirements. State Attorneys General would be empowered to enforce federal laws under the Bureau (subject to any existing limitations in the laws to be transferred to the Bureau's authority).[xxx] And state consumer financial protection laws would not be preempted, except to the extent that they are inconsistent with federal law (although such state laws could be stricter than the federal laws, in which case they would not be preempted by federal law).[xxxi]

CFPB: Monitors Financial Products to Servicemembers

The Consumer Financial Protection Bureau's Office of Servicemember Affairs (OSA) published today a request for comments from the public regarding information on consumer financial products and services that are currently being offered to or used by servicemembers and their families.

The authority for this request stems from Section 1013(e)(1) of the Consumer Financial Protection Act of 2010, which requires the Consumer Financial Protection Bureau (CFPB) to educate and empower servicemembers and their families to make better informed decisions regarding consumer financial products and services.

Among other things, the OSA is particularly interested in information on products and services (and associated programs and policies) that are tailored to the unique financial needs of servicemembers and their families.

The issuance is a Notice and Request for Information.

Comment Due Date: September 20, 2011

Office of Servicemember Affairs

The OSA is empowered to coordinate with CFPB's Consumer Response function in order to monitor consumer complaints by servicemembers and their families and further coordinate efforts among federal and state agencies, as appropriate, regarding consumer protection measures relating to consumer financial products and services offered to, or used by, servicemembers and their families.

According to the issuance, the purpose of this information to develop a knowledge base of consumer financial products and services utilized by servicemembers that will inform the OSA's planning with respect to education and outreach initiatives, the monitoring of consumer complaints, and other consumer protection measures.

SIX QUESTIONS FOR PUBLIC COMMENT

The CFPB seeks public comment on the following questions:

1. What consumer financial products and services are currently offered to or utilized by servicemembers and their families?

2. What consumer financial products and services (and associated programs, policies, and practices) are tailored to the unique financial needs of servicemembers and their families or are marketed specifically to servicemembers and their families?

The OSA is particularly interested in:

a. Information on consumer financial products or services that are designed to address:

deployments,
permanent-change-of-station moves,
overseas assignments,
relocations, 
and similar circumstances.

b. Information on short-term lending products that are tailored to the needs of servicemembers and their families.

c. Information on consumer financial products or services that are comparable to the Department of Defense (DOD) Savings Deposit Program.

3. What financial education opportunities are financial service providers offering to servicemembers and their families, both in person and online?