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Fintech in Brief: CFPB problems No-Action Letter Templates for Affordable Small Dollar Lending and Mortgage Loss Mitigation

The other day, the customer Financial Protection Bureau (the “CFPB”) released two “no action” letter templates that address the affordable dollar that is small and mortgage payment relief for customers whenever many may need it many. Both templates had been given included in the CFPB’s Policy on No-Action Letters (the “Policy”), that was revised www.speedyloan.net/payday-loans-md/ in 2019. Depository organizations CFPB that is seeking approval tiny dollar installment loans and home loan servicers seeking CFPB approval for usage of certain loss mitigation solutions may use these templates due to the fact foundation due to their no-action letter applications. The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency issued the “Interagency Lending Principles for Offering Responsible Small-Dollar Loans” that outline important risk management considerations for regulated financial institutions to consider when making small dollar loans to individuals and small businesses in a related May action.

Small Dollar Lending

The template that is small-dollar released as a result to a software through the Bank Policy Institute (“BPI”) and offers a path for BPI bank users along with other deposit taking institutions trying to provide small-dollar credit products. A job candidate can make use of this template to request a CFPB no-action page assurance that is providing its small-dollar credit services and products will perhaps not trigger a CFPB supervisory or enforcement action.

The template requires a job candidate to deliver different types of information, like the following: (1) those items placed in part an of this Policy, including a description of this applicant’s proposed credit item and a conclusion for the product’s potential consumer benefits and dangers; (2) particular certifications, including that the applicant is, or perhaps is connected to, an insured depository institution or insured credit union with total assets in excess of ten dollars billion, that the small-dollar credit item is structured as either a set term, amortizing installment loan or an open-end credit line, and that the mortgage quantity will not surpass $2,500; and (3) information regarding product features and financing methods, such as the anticipated APR range, extra charges, a description for the payment framework and a description of this lender’s underwriting criteria. A list that is complete of things needed within the template can be acquired here. The BPI no-action letter demand would not specify an interest that is maximum but anticipated that such loans could be less than the 400% to 500per cent rates of interest charged by nonbank pay day loan companies.

As referenced above, installment loans or personal lines of credit cannot exceed $2,500 to get this NAL relief. The payment term for installment loans and every draw on a credit line needs to be significantly more than 45 times but lower than 12 months, and payments needs to be amortized for a basis that is straight-line one or more payment. One exclusion is for credit lines with payment terms of 45 days or less that allow a payment that is single the place where a draw is not any more than ten percent for the maximum dollar amount founded for this product.

Digitizing Mortgage Loss Mitigation Solutions

The loss mitigation template ended up being given as a result to a software by Brace computer Software, Inc. (“Brace”), and offers home loan servicers and borrowers each having an interface that is online digital loss mitigation solutions. The working platform, that is aimed toward borrowers, permits borrowers to more effortlessly connect to their home loan servicers remotely and offers a version that is digitized of Fannie Mae/Freddie Mac Form 710 Borrower Solicitation Package. The working platform permits borrowers to, on top of other things, upload loss mitigation documents straight to the working platform for receipt and review by their home loan servicers. The template also includes a platform for mortgage servicers, that will be inaccessible to borrowers. The mortgage servicers’ template permits servicers to process and handle the loss mitigation papers uploaded by borrowers. This platform enables home loan servicers to personalize the screen so that you can suit that is best their processing requirements.

A of the Policy referenced above, the loss mitigation template requires the applicant to provide the following information: (1) statements that the letter is specific to the applicant and the specific platform being described by the applicant in the letter, is based on the factual representations made in the applicant’s application, does not purport to provide any legal conclusions regarding various statutory sections, and does not constitute an endorsement by the CFPB of any described uses of the platform; (2) commitments by the applicant to apprise the CFPB of any material changes to the information submitted in the application, or material changes to the performance quality of the platform described in the application; (3) statements pertaining to the CFPB’s commitment not to take certain regulatory action, and conditions surrounding potential termination of the letter; and (4) other statements and assurances regarding transparency of information in addition to the items required in section. A complete range of products needed for this template can be obtained here.

The loss mitigation template also calls for a job candidate to give you the next certifications: (1) the applicant intends to make use of the working platform for processing loss mitigation applications; (2) the applicant will consider loss mitigation applications from borrowers to be received pursuant to Regulation X, 12 C.F.R. § 1024.41(b)(2) whenever a borrow clicks “Submit” in the borrower’s online application form presented through the working platform; (3) the applicant will process and effectuate demands to stop communication aided by the borrower in much the same as those requests that have been submitted and gotten on paper.

Summary

These two templates offer assurances that when the CFPB issues letters that are no-action reaction to candidates utilizing these templates that it’ll maybe maybe not make supervisory findings or bring a supervisory or enforcement action under its authority to stop unfair, misleading, or abusive functions or techniques against candidates for services and products described inside their application. Notably, even as we have actually emphasized before, this relief that is NAL restricted to CFPB action just, and depository institutions and Fintechs must think about the risks that other agencies with jurisdiction of these products and services, including although not limited by financial regulators and state police agencies, may still do something whenever appropriate.

This upgrade is for information purposes just and may not be construed as legal services on any facts that are specific circumstances. This material may be considered as advertising under the rules of the Supreme Judicial Court of Massachusetts.

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