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CFPB accepting comment on Reg Z change

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WASHINGTON (4/16/12)--The Consumer Financial Protection Bureau (CFPB) is considering revising Regulation Z so that a current 25%-of-available-credit limit would apply only to fees that are charged at account opening.

The Fed last year adopted language that would apply the 25% of credit-limit restriction to fees that are charged before an account is opened, such as application fees. That rule was scheduled to go into effect last October, but was blocked by a successful challenge. The CFPB became rule writer of the Reg Z provision under a transfer of responsibilities required by the Dodd-Frank Wall Street Reform Act.  

First Premier Bank and Premier Bankcard LLC last year filed a lawsuit against the CFPB arguing that the regulator was exceeding its authority by seeking to regulate fees that are paid before account opening, and U.S. District Court for South Dakota Chief Judge Karen Schreier granted a motion for preliminary injunction.

The CFPB is considering amending Reg Z to Prompted by this recent litigation, the CFPB said it has proposed amending Reg Z to apply the 25% only to by only applying the 25% limitation to the first year following account opening. The potential amendment will remain open for public comment until June 11.

For a full CFPB release, use the resource link.

FIs could be responsible for third-party actions CFPB

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WASHINGTON (4/16/12)--The Consumer Financial Protection Bureau (CFPB) last week reminded its supervised financial institutions that they could be held responsible for the actions of third-party service providers they contract with, and said it would "take a close look at service providers' interactions with consumers."

The CFPB said it expects the financial institutions that it supervises to maintain effective processes for coping with some of the risks that working with third party vendors can pose. The agency suggested that financial institutions:

  • Conduct adequate due diligence;
  • Review vendor policies, procedures, internal controls, and training materials to ensure they meet high standards;
  • Inform third party vendors of their expectations regarding compliance, and  of the consequences of noncompliance;
  • Establish internal controls and monitoring methods to determine vendor compliance; and
  • Quickly address any consumer issues that may arise due to vendor actions.
For the full CFPB release, use the resource link.

Inside Washington (04/13/2012)

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  • WASHINGTON (4/16/12)--The U.S. Treasury Department's Hardest Hit Fund, which distributes money to state housing agencies to assist troubled borrowers, has been hampered by delays and disagreements with mortgage companies that must participate for the program to succeed, according to a report released last week by the Special Inspector General for the financial bailouts (American Banker April 13). The fund is part of the Troubled Asset Relief Program--known as TARP, a $700 billion bailout package released during the 2008 financial crisis. It was created to shore up Treasury's earlier effort to prevent foreclosures and provide assistance to underwater and unemployed borrowers in some of the country's weakest housing markets. The Treasury Department should have done more to facilitate participation by larger servicers and the government-sponsored enterprises, said Christy Romero, the special inspector general. As of Dec. 31, the fund had spent $217.4 million, or 3%, of the $7.6 billion that it was allocated …
  • WASHINGTON (4/16/12)--Charles Plosser, the president of the Federal Reserve Bank of Philadelphia, said last week that  regulators are unlikely to meet the summer deadline for completion of a rule barring banks from proprietary trading and limiting their investments in private-equity and hedge funds (American Banker April 13).  Plosser said the complexities involving the rule may prevent regulators from meeting the July deadline. Both Federal Reserve Board Chairman Ben Bernanke and Fed Gov. Daniel Tarullo have also indicated that regulators would be late in delivering a final version of the so-called Volcker Rule to Congress. The Fed has received close to 17,500 comments on the rule, which is opposed by many banks and some foreign governments. Much of the criticism is focused on the exceptions allowed by the rule …