[jholzknecht]

Single premium credit insurance has a few restrictions under federal laws, and some states prohibit the product. While it is not generally prohibited, it is considered to be a higher risk product. The sale of the product is not automatically considered an UDAAP practice, but it is higher risk. That is the point made in the risk assessment and the point I was making in the CMG session – it is not generally prohibited, but it is higher risk.

[CRAzy_Lady]

During Friday’s (August 13, 2021) Compliance Master’s Group session, you mentioned the up-front collection of single-premium credit insurance. I just wanted to clarify this issue to make sure I understand correctly.

On the risk assessment sample you provided, it states, “Institution does not utilize aggressive marketing tactics, promote loan flipping (frequent refinancing) or collect up-front single-premium credit insurance for life, disability, or unemployment when the consumer does not receive a net tangible financial benefit.”

Is this to say that credit insurance may NEVER be collected up front as a single premium? Or is it to caution against using aggressive tactics to promote the purchase? Would it be considered a UDAAP/predatory lending if a bank collects single-premium credit insurance premiums up front?

[rcooper]

I’ll throw out some question that will hopefully help you make a determination… Are all of the statements you’re making true? Are you legally permitted to take the actions against the consumer that you’ve indiated?( Have you consulted with an attorney to ensure all statements reflect actual actions you can take.)

Similar to doing a marketing review, I would put any collection communication through a UDAAP review. The CFPB or your regulator’s exam procedures would be a good place to start.

Finally, we have a list of lending enforcement actions on the resources page of our website under “Enforcement/Lending Compliance Enforcement Actions Chart” https://mycomplianceresource.com/ultimate-compliance-resource/#toggleInfoSection. There are cased in those where UDAAP is cited for collection practices. There should be links to the enforcement action so you can dig in to find what some of their specific issues were. Generally speaking, many of them including harrasing behaviour, threatening actions that were permitted/legal, taking possession of personal items that belong to the consumer, disclosing the debt to third parties, etc, but reviewing these would give you an idea of what has caused others problems.

[susan costonis]

I agree with Robin’s comments about that a banner qualifies as outdoor media, and is exempted from additional advertising requirements under 1030.8. Since overdraft rules have become under more regulatory scrutiny in recent years, I would strongly encourage you to ask YOUR primary regulator for additional guidance. In addition to the Reg DD rules, there is always a concern about potential UDAAP challenges. At a minimum you may want to include a statement on the banner that “fees may apply and that consumers should contact an employee for further information about applicable fees and terms”. (NOTE: this is a direct quote from 1030.11 (2)(4) and exception for INDOOR signs.

As Robin noted, the specific requirements for overdraft advertising are in 1030.11. This is the exception for INDOOR signs (not for a banner outside of the branch):
1030.11 (b)(4)
(4) Exception for indoor signs. Paragraph (b)(1) of this section does not apply to advertisements for the payment of overdrafts on indoor signs as described by § 1030.8(e)(2) of this part, provided that the sign contains a clear and conspicuous statement that fees may apply and that consumers should contact an employee for further information about applicable fees and terms. For purposes of this paragraph (b)(4), an indoor sign does not include an ATM screen.

The 1030.8 rules for advertising DO have an exemption for outdoor media. However, it limits the additional information to these categories
(e) Exemption for certain advertisements. (1) Certain media. If an advertisement is made through one of the following media, it need not contain the information in paragraphs (c)(1), (c)(2), (c)(4), (c)(5), (c)(6)(ii),(d)(4), and (d)(5) of this section:

It does not specifically exempt 1030.8 (f) for the additional disclosures in connection with the payment of overdrafts.
It’s always best to ask permission, rather than forgiveness, from your regulator when advertising for overdraft plans.
HERE ARE THE REQUIREMENTS FOR ADVERTISING ODP:
1030.11 b – NOTE – This could be very challenging to include on an outside banner

(b) Advertising disclosures for overdraft services. (1) Disclosures. Except as provided in paragraphs (b)(2) through (4) of this section, any advertisement promoting the payment of overdrafts shall disclose in a clear and conspicuous manner:
(i) The fee or fees transactions for which a fee for paying an overdraft may be imposed;
(iii) The time period by which the consumer must repay or for the payment of each overdraft;
(ii) The categories of
cover any overdraft; and
(iv) The circumstances under which the institution will not pay an overdraft

[susan costonis]

I agree with Robin’s comments about that a banner qualifies as outdoor media, and is exempted from additional advertising requirements under 1030.8. Since overdraft rules have become under more regulatory scrutiny in recent years, I would strongly encourage you to ask YOUR primary regulator for additional guidance. In addition to the Reg DD rules, there is always a concern about potential UDAAP challenges. At a minimum you may want to include a statement on the banner that “fees may apply and that consumers should contact an employee for further information about applicable fees and terms”. (NOTE: this is a direct quote from 1030.11 (2)(4) and exception for INDOOR signs.

As Robin noted, the specific requirements for overdraft advertising are in 1030.11. This is the exception for INDOOR signs (not for a banner outside of the branch):
1030.11 (b)(4)
(4) Exception for indoor signs. Paragraph (b)(1) of this section does not apply to advertisements for the payment of overdrafts on indoor signs as described by § 1030.8(e)(2) of this part, provided that the sign contains a clear and conspicuous statement that fees may apply and that consumers should contact an employee for further information about applicable fees and terms. For purposes of this paragraph (b)(4), an indoor sign does not include an ATM screen.

The 1030.8 rules for advertising DO have an exemption for outdoor media. However, it limits the additional information to these categories
(e) Exemption for certain advertisements. (1) Certain media. If an advertisement is made through one of the following media, it need not contain the information in paragraphs (c)(1), (c)(2), (c)(4), (c)(5), (c)(6)(ii),(d)(4), and (d)(5) of this section:

It does not specifically exempt 1030.8 (f) for the additional disclosures in connection with the payment of overdrafts.
It’s always best to ask permission, rather than forgiveness, from your regulator when advertising for overdraft plans.

[Annmichele]

We are planning to mail a collection letter to a customer with the following verbiage. “The bank now intends to pursue whatever legal action is available to collect your debt. In addition, your failure to provide the vehicle transfer documents as agreed in your loan covenants and purchase of an alternate vehicle without notifying the bank might possibly result in a criminal action against you.” I know in our recent webinar over Fair Debit Collection practices it states we cannot threaten to take any action that cannot legally be taken or that is not intended to be taken. We plan to take legal action but we want to make sure this verbiage would be in compliance. Thank you!

[Brent V]

Since it is a part of the application and includes information about them and their specific loan request, it should be provided to them and probably explained as well. It’s not spelled out anywhere, but some of the info overlaps with TRID info and needs to match in order to avoid any UDAP/UDAAP concerns.

[parkerweb]

(Note: In an effort to bring the most timely topics top the CMG, Compliance Resource does not schedule CMG topics more than a few weeks in advance. Exceptions may be made for topics that have extended implementation dates or for review topics. If you would like to suggest a topic for the CMG or M2M Peer Session, please post your suggestion in this form or send us an email.)

CMG Date	Topic
1/11-12/2021	Compliance Expectations for the New Administration – Recording
1/14 -15/2021	Understanding and Implementing Qualified Mortgage Revisions
1/28-29/2021	CMS for Revised Qualified Mortgage Rules
2/11-12/2021	Regulation E and Visa/Mastercard Rules for Debit Cards
2/25-26/2021	Revisions to the HPML Escrow Exemption Rule
3/11-12/2021	The Fair Debt Collection Practices Act and Regulation F
3/25-26/2021	Discrimination Based on Gender Identity or Sexual Orientation
4/8-9/2021	Lessons Learned: Recent Lending Compliance Enforcement Actions
4/22-23/2021	BSA Reform
5/6-7/2021	Overdraft Risks, Requirements, and Best Practices (SC)
5/20-21/2021	UDAAP
6/3-4/2021	Proposed FAQs – Flood Insurance including Private Flood Insurance
6/17-18/2021	Effectively Banking Hemp, CBD Oil, Marijuana, and Medical Marijuana Merchants
7/1-2/2021	Implementing a FDCPA and Reg F CMS
7/15-16/2021
7/29-30/2021
8/12-13/2021
8/26-27/2021	Chad Knutson: Top Five Cyber Threats 2 hour webinar for all CMG Groups and public @ 1-3 ET – Send recording of news to CMG
9/9-10/2021
9/23-24/2021
10/7-8/2021
10/21-22/2021
11/4-5/2021
11/18-19/2021
12/2-3/2021
12/16-17/2021
12/29-30/2021

 

Date of M2M Peer Session	Topic
1/22/2021	New URLA – are 3rd party vendors fully prepared/ What are the HMDA Data implications
2/19/2021	Virtual Peer Group
3/19/2021	Recent Exam Hot Topics
4/16/2021	Reg E Error Resolution Process (Manual v. 3rd Party)
5/28/2021	Virtual Peer Group
6/25/2021
7/23/2021	Regulatory Compliance Conference
8/20/2021	Virtual Peer Group
9/17/2021	Recent Exam Hot Topics
10/15/2021	Performing Risk Assessments
11/12/2021	Virtual Peer Group
12/10/2021

 

[jholzknecht]

We continue to see violations of both UDAP and UDAAP. No guidance since the clarification of the abusiveness standard in January 2020.

[Send2k1]

What, if any, notice is required for a Small Servicer to change practices regarding treatment of Partial Payments and start using a suspense account instead of applying when received?

1026 Official interpretation of Paragraph 36(c)(1)(ii) says, in part,
1. Handling of partial payments. If a servicer receives a partial payment from a consumer, to the extent not prohibited by applicable law or the legal obligation between the parties, the servicer may take any of the following actions:
iii. Hold the payment in a suspense or unapplied funds account. If the payment is held in a suspense or unapplied funds account, this fact must be reflected on future periodic statements, in accordance with § 1026.41(d)(3).
The Bank however does not send Statements as exempt under the Small Servicer standards.
I’m told vendor does not allow to add verbiage to the payment coupon.

This change did not appear to trigger subsequent disclosures under 1026.20.
I understand there is UDAAP risk with a change in practice, but would appreciate any help in assessing that and/or identifying other considerations.

[rcooper]

I don’t have definitive information for you on this, but here are my thoughts… I don’t think it is outright prohibited, but there are concerns specifically related to UDAAP and fair lending that would need to be addressed. I would want to review the interagency overdraft guidance very carefully, especially related to ECOA and safety and soundness. Also, you should provide sufficient warning/notifications so the customer isn’t caught off guard and negatively impacted by funds being eliminated or reduced – I’d also suggest this be included in the initial disclosures like I’m sure you have language about the product being eliminated if used excessively. If you’re implementing this as a new policy, I’d suggest providing revised OD program disclosures. Also, you’d want to ensure consistent application (e.g. criteria for pgoram, recuction, etc. associated with the limits) and strictly adhere to is to ensure no fair lending concerns.

My main concern with the ones already lowered would be how/when were cusomters notified, did the action negatively affect the customer if sufficient notice wasn’t given, and could there be any fair lending issues? It’s a good idea to run a new policy, especially on a issue that regulators scrutinized so heavily, by examiners before implementing.

[Brent V]

No one knows if the fallout from the COVID-19 Pandemic will last for two or three weeks, or two or three years. Many experts expect the current surge in cases to last until summer, then drop off somewhat for the summer, with another surge in cases in the fall. Also uncertain is how long it will take the economy to rebound from the crisis. The historic recovery time for a pandemic is nine months.

When planning a response to customer and community needs:
• Develop a Pandemic Relief Task Force (senior management, loan staff, loan operations, deposit staff, deposit operations, compliance, risk, legal, audit, IT, operations, security, PR/marketing, etc.);
• Determine and document potential institution, customer and community needs;
• Determine and document assistance financial institution can offer, timeframes available, and exit strategies;
• Evaluate assistance programs/offerings for compliance and risk (UDAP/UDAAP, fair lending, violations of regulations, disclosures, system capabilities, etc.);
• Document all efforts;
• Inform and train applicable staff
• Inform customers/consumers of relief assistance options.

Other items to consider:

• Involve legal counsel
• Cash/Vault management
• Equitable treatment
• Criteria and documentation for assistance
• Interest rate risk and asset liability committee
• Negative rates
• Growing the loan portfolio

[rcooper]

Question from our recent webinar, Pandemic Relief – Managing Compliance Issues:
Can deposit fee waivers be based on individual circumstances or waived universally? Will the former method create UDAAP issues?

[Send2k1]

What formal requirements would apply when purchasing a HELOC note and servicing?

It does not appear the Mortgage Servicing Transfer Notice technically applies.
Reg. Z 1026.40 section for HELOCs doesn’t seem to address a specific requirement for communication to customer?
It appears in comment (f)3.v to view a change in the Payment address to qualify as an “insignificant change.”

Is a general notice of change in address/autopay information for payment, along with a Privacy notice, really all that is required when purchasing HELOCs? (We are exempt from reporting HELOCs for HMDA)
I keep trying to think if there is anything else that should be considered under broader UDAAP, but can’t seem to think of anything.

[jholzknecht]

Your question refers to the risk-based pricing (RBP)notice. That notice is required if any person both:
i. Uses a consumer report in connection with an application for, or a grant, extension, or other provision of, credit to a consumer that is primarily for personal, family, or household purposes; and
ii. Based in whole or in part on the consumer report, grants, extends, or otherwise provides credit to the consumer on material terms that are materially less favorable than the most favorable material terms available to a substantial proportion of consumers from or through that person.

The RBP notice is not provided for every application; it is only provided for applicants that have been approved with an APR that is materially less favorable. The notice is required to be delivered before consummation of the transaction, but not earlier than the time the decision to approve an application for, or a grant, extension, or other provision of, credit, is communicated to the consumer by the person required to provide the notice. That does not appear to be the timing used for the notices you describe.

I don’t believe you are actually using a RBP notice. One exception to providing a RPB notice is when the consumer receives a credit score (CS) notice. The CS notice is provided to the applicant as soon as reasonably practicable after the credit score has been obtained, but in any event at or before consummation.

I suspect that you and the auto dealer are using the exception that allows you to provide a CS notice in lieu of a RBP notice.

As long as the CS notice reflects the information from the report pulled by that entity there should be no UDAAP concern. Scores can differ from one credit bureau to another and from the same credit bureau from one day to another.

Since both the auto dealer and the bank pull credit reports with credit scores, both entities must provide the CS notice.

Let me know if I have misconstrued your question. There will be whole different set of issues, if that is the case.