Top Story Compliance Related

The Consumer Financial Protection Bureau has announced the filing of an administration consent order against a former Wells Fargo employee for an illegal mortgage fee-shifting scheme. The CFPB found that David Eghbali referred a substantial number of loan closings to a single escrow company, which shifted its fees from some customers to others at Eghbali’s request. Eghbali could then manipulate loan costs and ultimately increase the number of loans he closed, increasing his commissions. The consent order requires Eghbali to pay an $85,000 civil money penalty and bans him from working in the mortgage industry for one year.

A Save the Date has been posted on the Bureau Blog for a meeting of the CFPB’s Consumer Advisory Board in Little Rock, Arkansas, on June 9 from 10 a.m. to 4:30 p.m. CDT. The meeting will discuss an auto lending education initiative, trends and themes, and payday lending.

The Federal Trade Commission and the State of Florida have announced actions taken against two operations charged with running phony student loan debt relief schemes, and defendants in a similar FTC action brought earlier this year have agreed to a ban on participating in any debt relief business, as part of a consumer protection crackdown to combat such frauds.

In the first case, the operators of Consumer Assistance Project lured borrowers with promises such as “GET RID OF YOUR DEBT TODAY!” and charge illegal up-front fees for their purported services, typically $250, plus monthly fees of up to $303 for as long as 36 months. In the second case. an operation called Student Aid Center Inc. enticed people with promises such as “Get Your Student Loans Forgiven Now!” and “$17,500 in Up Front Forgiveness."

The operators of another student debt relief scheme have agreed to a settlement with the FTC that will permanently ban them from the debt relief business. The FTC alleged that Tobias West and his wife, Komal West, the owners of Good EBusiness, Select Student Loan Help LLC, and Select Document Preparation Inc., charged consumers up-front fees of $500 to $800 based on phony claims that they could renegotiate, settle, or alter payment terms on student loan debt. In addition, the FTC charged that two of the defendants deceptively marketed home loan and student modification services under the name “AAP Firm,” and illegally charged advance fees ranging from $1,000 to $5,000.

OFAC has announced the designation of two terrorist groups. See our OFAC Update for details.

The OCC will hold a workshop for directors of national community banks and federal savings associations in Santa Ana, California., at the DoubleTree Santa Ana-Orange County Airport Hotel, July 11–13. The "Building Blocks for Directors" workshop combines lectures, discussion, and exercises to provide practical information on the roles and responsibilities of board participation for both new and experienced directors.

The May issue of the CFPB's Monthly Complaint Report focuses on credit reporting complaints. The Bureau reports that consumers continue to complain about incorrect information on their credit reports as well as difficulty having errors resolved. This month’s report also highlights trends seen in complaints coming from New Mexico.

The Federal Reserve Board has released the semiannual update of its Commercial Bank Examination Manual. Changes are described in Supplement 45, dated April 2016,

ICE has announced the arrest of a retired New York Police Department Officer for conspiring to launder the proceeds of a multi-million dollar prostitution ring. The complaint alleges that between June 2012 and May 2016, Michael Rizzi, 44, of Brooklyn, New York, owned and operated BJM/Manhattan Stakes and Entertainment, a company that provided high-end prostitution services to customers in the New York metropolitan area. There has not yet been a trial of the case If convicted of money laundering conspiracy, Rizzi faces a maximum sentence of 20 years’ imprisonment.

The Consumer Financial Protection Bureau has posted an article on its Spring 2016 rulemaking agenda, a semi-annual status report on the agency's plans for adding or amending consumer protection rules assigned to the agency for implementation.

• Arbitration. The Bureau today published a proposed rule that would restrict the use of mandatory arbitration agreements in contracts for consumer financial products or services. Comments are due August 22, 2016.
• Payday, auto title, and similar lending products. The CFPB plans to release a Notice of Proposed Rulemaking addressing consumer protections for these small consumer loans "in the next several weeks." Industry observers have suggested that the proposed rule is likely to be announced June 2, at a small dollar lending field hearing in Kansas City, Missouri.
• Prepaid accounts. The Bureau expects to issue a final rule this summer to create a comprehensive set of consumer protections for prepaid financial products. A proposed rule was issued in November 2014.
• Mortgage servicing. The Bureau reports that a final rule can be expected this summer to amend a proposal published in December 2014. The proposal addressed enhanced loss mitigation requirements and compliance with certain servicing rules when a successor in interest or bankruptcy may be involved.
• TRID Rule. Also expected this summer is a proposed rule to "make small clarifications and provide further regulatory guidance" on the TRID Rule.
• Pre-rule stage. The Bureau reports it is still in the "pre-rule stage" in any potential rulemaking related to overdraft services on consumer checking accounts; debt collection practices; and data gathering and reporting for women-owned, minority-owned and small business lending.

Aside from the status of the proposed Arbitration Rule, none of the dates in the Bureau's regulatory agenda are commitments. This update reflects later target dates for most of the agenda items than seen on the Bureau's Fall 2015 agenda. Nonetheless, this summer promises to be one of active regulatory change.

The CFPB has published in today's Federal Register its previously-announced proposal (see our May 5 Top Story) to establish a new part 1040 in Chapter X in title 12 of the Code of Federal Regulations, which would contain regulations governing two aspects of consumer finance dispute resolution. First, the proposed rule would prohibit covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action with respect to the covered consumer financial product or service. Second, the proposal would require a covered provider that is involved in an arbitration pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the Bureau. The Bureau proposes that the rulemaking would apply to certain consumer financial products and services. The Bureau is also proposing to adopt official interpretations to the proposed regulation. Comments on the proposal are due by August 22, 2016.