In This Issue

• Free Article Focuses on Innovation in Ag Lending
• Court Tightens Reins on CFPB Director's Authority
• CFPB Fines Navy Federal $28.5M for Debt Collection Practices
• Agencies Update Exam Procedures to Incorporate MLA Updates
• CFPB Releases Financial Education Resources for Native Communities

• ABA: Moratorium on Animal Facilities Lending Must Be Lifted

Free Article Focuses on Innovation in Ag Lending 

As commodity prices remain depressed and agricultural economies face difficult times, a new article in the ABA Banking Journal focuses on innovative approaches banks are using to meet customers’ needs and keep rural economies moving.

“It’s no secret that the ag economy is in tougher times right now,” says Minnwest Bank’s Dan Koster. “What we’re doing is educating our borrowers and customers about proper debt structures, proper performance matrices, and really trying to help them to structure their businesses and finances so that they can withstand any downturns in the economy.”

The article also explores ways that ag bankers provide customers with long-term fixed rates through ABA-endorsed Farmer Mac programs to position them well for after the hard times pass. Read the article.

Court Tightens Reins on CFPB Director's Authority

 
The Consumer Financial Protection Bureau’s leadership structure--a single powerful director who cannot be removed at will by the president--is unconstitutional, according to a ruling by a panel of judges on the D.C. Circuit Court of Appeals on Tuesday. Under the ruling, the bureau may continue to operate, but its director may be removed not just “for cause” but at the president’s discretion.

“The CFPB’s concentration of enormous executive power in a single, unaccountable, unchecked Director not only departs from settled historical practice, but also poses a far greater risk of arbitrary decision-making and abuse of power, and a far greater threat to individual liberty, than does a multi-member independent agency,” the court said in PHH Mortgage v. CFPB.

The case arose in 2015, when CFPB Director Richard Cordray overruled an administrative law judge’s recommendation for a $6.5 million fine against mortgage lender PHH for allegedly requiring unlawful kickbacks from mortgage insurers in violation of the Real Estate Settlement Procedures Act. Cordray demanded that PHH pay 18 times more--or $109 million--for each time it accepted a kickback on or after July 21, 2008.

In addition to its constitutional claims about the bureau’s structure, the court ruled in favor of PHH on all its statutory claims. PHH argued that the CFPB misinterpreted Section 8 of RESPA in forbidding the kind of captive reinsurance arrangement that PHH used and that the bureau changed prior RESPA interpretations issued by the Department of Housing and Urban Development and applied them retroactively--even though the mortgage industry had relied on them for decades. The court thus rejected the bureau’s expansive application of a criminal provision.

The court held that retroactive applying of a new RESPA interpretation violated PHH’s due process rights and that the bureau is bound by the three-year statute of limitations for RESPA violations, even in administrative actions. The case is expected to be appealed, however, and may be heard by the full D.C. Circuit and appealed to the Supreme Court. ABA will continue to monitor the case as it progresses.

“We’ve long believed that a five-member, bipartisan commission, as originally proposed, would strike a reasonable balance between independence and accountability,” said ABA President and CEO Rob Nichols. “A commission would broaden the perspective on any rulemaking and promote fair enforcement activity at the bureau, and it would provide necessary and appropriate checks and balances in the exercise of the CFPB’s authority.”

• Read the decision.
• Read previous ABA analysis.
• For more information, contact ABA's Rod Alba, Thomas Pinder or Jonathan Thessin.

CFPB Fines Navy Federal $28.5M for Debt Collection Practices

 
The Consumer Financial Protection Bureau on Tuesday ordered Navy Federal Credit Union--the nation’s largest credit union--to pay $28.5 million in restitution and penalties for making undue threats to delinquent customers and cutting off electronic access to accounts and bank cards for customers that failed to pay delinquent loans.

The bureau found that the credit union--which serves current and retired military servicemembers and their families as well as Department of Defense employees--threatened customers with legal action and wage garnishment for failing to make payments, despite the fact that in the vast majority of cases, it had neither the intention nor the authority to do so.

Thousands of Navy Federal customers also received misleading letters warning of severe credit consequences for falling behind on their loans, the bureau said, and some service members received threats from the credit union to contact their commanding officers if prompt payments were not received. A total of 700,000 accounts were frozen as a result of delinquency, leaving consumers without access to their checking accounts and debit cards.

In addition to the monetary enforcement action, the bureau also directed Navy Federal to create a comprehensive plan to address how it communicates to members about debt collection. Read more.

Agencies Update Exam Procedures to Incorporate MLA Updates

 
The federal banking agencies last Friday issued updated interagency examination procedures for the amendments to the Military Lending Act rule, which extend MLA restrictions to cover credit cards, lines of credit, installment loans and deposit advances offered to service members and their dependents. The new restrictions are now in effect (with a later compliance date for credit cards of Oct. 3, 2017).

The revised examination procedures are based on those developed jointly by other banking agencies. Early MLA compliance examinations will focus on financial institutions’ compliance management systems and overall efforts to comply, including implementation plans, actions to update policies and procedures, staff training and handling of early implementation hurdles. The OCC said it will incorporate the revised procedures in its Comptroller’s Handbook as a supplement to the interagency procedures.

• View the updated exam procedures.
• View ABA’s MLA resource page.
• For more information, contact ABA's Nessa Feddis or Rob Rowe.

CFPB Releases Financial Education Resources for Native Communities

The CFPB on Wednesday issued a companion guide to its Your Money, Your Goals financial education curriculum specifically focused on Native American communities. The companion guide includes tools to offer the Your Money, Your Goals training in the context of Native American values, as well as a set of tools focused on elder financial protection. Read more.

ABA: Moratorium on Animal Facilities Lending Must Be Lifted

 
ABA wrote to members of Congress and the heads of the Farm Service Agency and the U.S. Small Business Administration last week urging them to end a moratorium on loans to farmers and ranchers for financing animal facilities.

The agencies put the moratorium in place in response to pending litigation over lapses in environmental due diligence on those types of loans--specifically, the Environmental Protection Agency’s interpretation of the Waters of the United States Rule. ABA warned that if this interpretation is not re-examined, it could lead to a permanent ban on animal facilities lending, cutting off vital funding sources for farmers and ranchers. Read the letter.