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President Obama on 21 July 2010 ratified the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and thus the Financial Protection Act (CFPA), which established a new Bureau of Consumer Protection (the "Bureau" or "CFPB"). One of its tasks is to ensure that the CFPB directly or indirectly supervises most suppliers of retail finance goods and solutions and is authorised to classify certain actions or practice as "unfair, misleading or abusive".
" Thus, any company operating in the field of consumption financing - a wide group of companies that range from banking to credit advisory services, credit planning companies, credit clearing companies, mortgages isolation advisors, residential property advisors and many others - will be affected by the new Act and the office's transactions and decision-making.
In order to help our customers and buddies navigate through this new regulated environment, we are providing you with this executive summaries of the main Dodd-Frank Act regulations relating to the CFPA, which includes a debate on the CFPB's organisation and organisation, the CFPB's main agencies, its main object, venue, enforcement authority and likely execution procedure, as well as important legislative questions for the credit advisory sector and other credit discharge service provider.
Given that the Dodd-Frank and CFPA rules will largely affect credit advisory and other credit discharge firms, the emphasis will be on a wide variety of related sector players. Act I on the Protection of Consumer Finances. Among the most important elements of the CFPA, which relate to credit advice centres and other credit recovery organisations, are but are not restricted to:
It will be an autonomous office, hosted by the FRB (Federal Reserve Board) and financed by FRB revenue. The CFPB, as an autonomous office within a government body that consists outside the executive, can be isolated from many of the common policy impacts associated with the functioning of the government administration.
Unlike other proxy voter based organisations, which have been mandated to supervise key elements of our industry, the Director is entirely in charge of the issuing of rules by the CFPB, as well as enforcing and developing policies. As the CFPB will have a body to directly audit and supervise all non-exempted (or partly exempted) suppliers of retail finance goods and related retail service - so called'covered persons' - the Director will be in charge of the recruitment and organisation of audit, oversight and execution personnel, which may eventually overshadow the scale of similar employees of the Bundesbank and the FTC.
The CFPB has been granted exceptional powers in the following priority areas in an attempt to centralise and co-ordinate the endeavours of fiscal consumers protection: The CFPB will have interpretive and regulatory powers over 17 federal acts relating to consumers protections, such as the Fair Debt Collection Practices Act, portions of the Omnibus Appropriations Act 2009 relating to mortgages, the Truth-in-Lending Act ("TILA"), the Real Estate Settlement Procedures Act ("RESPA") and the Safe and Fair Enforcement for Mortgages Licensing Act ("SAFE Act").
Also, in cases where other state or federally owned entities retain the role of principal audit authorities, the GFPB is now responsible for enacting rules and interpreting almost all federally legislated finance consumption. Reinforced Disclosure and Registration Body for Consumers - In complement to the above listed personal protective rights legislation, the CFPB has been granted a special power to request new disclosure for all CCPs.
For example, this agency would allow the development of disclosure for credit risk managers, credit rating agencies and home loan advice. Explosive "unfair, misleading or abusive" laws or practice - To dispel concern about improper handling of customers by suppliers of finance goods and solutions, CFPB has been given extensive powers to designate actions or practice related to the supply of a finance good or solution as "unfair, misleading or abusive".
" Whilst this remit is similar to the FTC's adverse and misleading actions or practises under the Federal Trade Commission Act ("FTC Act"), the implementation of the new "abusive" item is a less mapped area. And in 2009, the FTC suggested changing the TSR to ban the levying or collection of charges before telemarketer service of remission is provided as a policy they consider improper - an example of the kind of regulation that could emanate from the new office when it comes to consumers' finance goods and service, as well as debit regulation service.
Audit, Supervision and Enforcement - With the exception of exempt physical services firms, CFPB was given the power to audit and implement consumers' legislation against large depositories and their holdings and associates, as well as virtually 1,000 businesses that had not previously been directly controlled by the state. Whilst the Bureau will adopt certain sets of rules and other FTC agencies under certain Verbraucherschutzgesetze (Consumer Rights Acts) delegated to the Bureau, the FTC will retain its powers under the FTC Act and is obliged to be heard on certain sets of rules.
Furthermore, the Agents are obliged to enter into an arrangement to avoid double work or conflict between the Bureau's and the Federal Trade Commission's regulations applicable to any individual or entity providing coverage in relation to the supply or performance of retail finance product orervice.
Implement fiscal awareness programmes; collect, investigate and respond to customer claims; collect, investigate, monitor and publish information of relevance to the operation of retail finance product and market information in order to assess risk to and the orderly operation of those product and market information systems; monitor, without prejudice to established principles,'covered persons' or'service providers' - households, credit advice centres and other credit discharge institutions - for adherence to fiscal legislation and take appropriate enforcement measures to combat breaches of fiscal legislation against fiscal customers.
In particular, the notion of ' funded person' covers a wide variety of organisations and operations from banking and conventional finance institutes to'financial advice services' such as'credit advice','services to help a customer manage or settle a customer's debts, change the conditions for extending credit or avoid foreclosure' and'participation in the collection, transfer or exchange of money or otherwise as a depositary of money or finance instruments for use by or on account of a customer'.
" No exception is made for good faith charitable credit consulting firms. It is also worth noting that unlike many other federated regulation systems which rely on the nature of the CFPB chart (e.g. banks), CFPB's competence encompasses all persons and company types and concentrates on the fact that a finance item or a finance services is provided to consumers.
Although the definitions of "persons covered" and "service providers" are very wide, it is still to be seen whether the CFPB will be able to exercise oversight over each type of subject, particularly in the early phase of the CFPB's organisational work. Whilst the vast majority were unable to obtain exceptions from the CFPB case law, several industrial groups were successfully (or partly successfully) involved in their attempts to obtain an exemption.
In particular, the linen lists of exempted professionals include lawyers who, under certain conditions, work in legal practices, which may make it challenging for lawyers dealing with credit advice, credit administration, credit regulation and credit amendment to claim exemptions from the rules adopted by the Bureau under the CFPA.
However, this block exemption does not cover the supply or supply of other retail financing product or service under the CFPA. Please be aware that the above exceptions generally refer to the bank's main activity and are unlikely to cover secondary transactions involving consumers' retail banking goods andervices.
There is also a likelihood that many "covered persons" and "service providers" under the scheme will try to obtain exceptions for certain product and commercial activity. The Bureau, like the FTC, has two different ways of enforcement: administering (but with the possibility of issuing injunctions) and conducting proceedings in Germany.
It shall have the powers to seek a truly comprehensive remedy, involving cancellation or reform of treaties, reimbursement of funds, reimbursement and diversion, compensation for damage or other financial facilities, and forbearance, and it may claim reimbursement of its expenses in relation to the prosecution of such acts. In particular, the FTC shall also be empowered to impose any rule imposed by the Bureau in contravention of the FTC Act with regard to "Covered Persons" or "Service Providers", provided, however, that jurisdiction under the FTC Act is restricted.
This would allow the FTC to file an execution suit for breach of a rules published by the office against a for-profit liability remission services company. The FTC would not, however, be in a position to file a claim for breach of a Bureau regulation against a good -believing charitable credit advisory agency because good -believing charitable organisations are excluded from the competence of the FTC.
Particularly important for credit bureaux and other suppliers of credit discharge outsourcing is the fact that the Bureau is empowered to impose (in relation to an act or conduct that is dishonest or misleading) regulations adopted by the FTC to the extend that such regulations are applicable to a regulated individual or supplier in relation to the offer or supply of a retail financing instrument or retail customer servicing activity.
Consequently, for example, the Office would be able to impose the FTC's changes to the TSR in respect of forgiveness payments against charitable credit rating agents in good faith, even though the FTC itself has no competence over such credit rating agents. It is potentially of extreme importance and carries the scrutiny of the non-profit credit advisory sector.
With the exception of employees of the Office of the Auditor of Currency, there is no mandatory hand-over of employees from government departments to the CFPB. Therefore, the Director will be obliged to enter into negotiations with other government authorities in order to hire people. Since CFPB's responsibility is rooted in the role rather than the chart, efficient audit procedures must be able to take into account the different industries and their different approach to complying with consumers' regulations.
Lastly, and above all, practically every facet of the CFPB's establishment and functioning will be dependent on the regulatory processes, which include the transposition of federated laws on consumers to the CFPB, the issuing by the CFPB of guidelines for the CFPB's interpretations of essential laws and regulations, and the negotiating of relations with other federated and governmental regulatory bodies.
The Minister of Finance must set a "handover date" of 6 to 12 month within 60 working days of adoption, on which the CFPB will start its work (with the option of extending the handover date for another year). These rules may include built-in reporting requirements and modelling requirements for reverse mortgages which incorporate the information requirements of RESPA with the Home Equity Conversion Mortgages section of the National Housing Act.
By July 21, 2012, the Director of the Office and the Secretary of State of Education, in coordination with the FTC Commissioners and the United States Attorney General, must present a personal loan and personal loan reporting to the United States Attorney General, the Senate Committee on Banking, Housing and Urban Development, the Senate Committee on Health, Education, Labor and Pensions, the House Committee on Financial Services and the House Committee on Education and Labor.
Credit Score and Report - By 21 July 2011, the Office must carry out a survey on the type, scope and magnitude of discrepancies between credit checks selling to lenders and those selling by retail report providers to customers. Important CFPA legal issues for the credit advisory industry and other debt relief providers.
Whilst the area does not allow for a full assessment of all regulatory issues that need to be addressed by retail finance products and services suppliers, some of the more important issues and issues for anyone involved in the provision of Debt Waiver Services, Credit Advice included, and their services suppliers are as follows:
Is the CFPBB going to step in the FTC's shoes and consider levying charges before offering credit discharge service to non-profit organisations, an abuse that will require a ban? Is CFPB going to distinguish between credit advice, credit risk managers, credit regulation service provider, mortgages isolation consultant and others engaged in the provision of credit waiver service?
How will there be acceptance in relation to the lifecycle of consumers' credit and debts and what will be the implications for the regulatory treatment of lenders, collection firms, credit advisory firms, suppliers of credit plans, credit regulators, mortgages sealing advisors and other suppliers of credit discharge service? Is the National Conference of Commissioners on Uniform State Laws Uniform-Debt Managment Service Act becoming the new norm?
If available, which are the preferred types of businesses, company types and service? How will the FTC's regulations amending the TSR look in the near term to tackle the sales of loan write-off service and mortgages support? Does the Bureau intend to impose the FTC's regulations, such as the TSR changes regarding the selling of credit release service, against trustworthy non-profit credit advisory firms that are excluded from the FTC's scope?
What will Prosecutors General and other government regulatory authorities do to take full benefit of the new instruments at their disposal to take legal action against suppliers of retail finance goods and solutions? Supplementary facilities for credit advice centres and other credit discharge service provider. Furthermore, credit bureaus and other suppliers of credit rating agency credit rating within the framework of the Dodd-Frank Act may find the following regulations relevant:
Under the Improving Access to Mainstream Financials Institutions Act of 2010, small loans to low to middle-income Americans are encouraged, provided that the creditor also fosters finance skills and credit advice backed by the Treasury. However, the Act establishes certain minimal requirements for credit institutions to demonstrate that a borrower has adequate repayment capacity at the point in borrowing.
A number of mortgages reform related to HUD-approved residential advice are emphasised below: Enlargement and Maintenance Act" changes residential property by means of advisory services in order to give a new focus to residential property advisory services through the establishment of the Office of Advisory Services in the Office of the Secretary of HUD, which is to carry out residential property and rented property advisory work.
Create an adviser's council of no more than 12 people, including HUD-approved accommodation counselling services. Instructs the Director of Home Counselling to design, carry out and execute multi-media government marketing initiatives aimed at people faced with mortgages being enforced, people considering a sub-prime home finance transaction, the older generation, people faced with linguistic difficulties, people on low incomes and other potentially sensitive users who are conscious of this:
1. It is prudent to seek home ownership advisory services from impartial and dependable resources before looking for or obtaining a private mortgages credit; and 2. 1. To provide guidance and provide support to States, LGOs and NPOs on the setting up and implementation of appropriate education programmes; and 2. to provide funding in this area.
Approves $45 million over the next 4 years to support residential advisory activities for HUD-approved residential advisory firms and government residential financing firms that comply with the qualifications and policies set by the HUD Secretary. Support for the support programme is directed at programmes in areas with traditional poor accessibility to advisory support, such as areas with inadequate levels of connectivity.
Needs home ownership advice or rented apartment advice that receives HUD support for advisory work in order to offer such advice only through organisations or consultants recognised by the Secretary as having competence for such advice. Modifies RESPA to review HUD brochure standards to help users seeking federal mortgages better understanding the type and cost of property transaction processing service.
Advice on accommodation necessary for certain first-time buyers. It is forbidden for a lender to grant credits that previously lead to a loss of amortisation: In the case of a first-time home buyer with regard to an unqualified hypothec (as provided by law), the first-time Mortgagor shall make available to the Lender adequate documents to prove that the Consumers have obtained home ownership advice from organisations or consultants who have been accredited by the Secretary of the HUD as having competence for such advice.
Disclosure for month-end closings/hybrid mortgage with adjustable interest notifications. The Dodd Frank Act contains several regulations that require house owners to be notified of the existence of HUD-approved home consultations. The Truth in Lending Act, for example, is modified by introducing a requirement that the name and address of any advice centre or programme reasonably available to the user and which has been certificated or authorised and made public by HUD or a government house financing agency be required on periodical account statement.
Requirements for advice before the credit. Creditors may not grant a credit to a borrower in the shape of a hypothec called a "high costs hypothecary loan" without prior confirmation from an adviser engaged by an advisory body authorised by the Secretary of the HUD or, at the Secretary's option, by the State Building Financing Service, that the borrower has obtained advice on the appropriateness of the hypothec.
No such consultant shall be engaged by the believer or any of the creditor's related undertakings or otherwise be connected with the same. Ambulance mortgages relief. Legislation allows $1 billion in HUD to be made available through the Emergency Homeowners' Relief Fund to provide funds for credits to skilled jobless house owners with sound chances of re-employment to help them meet mortgages until they are re-employed.
The GAO report on the Dodd-Frank Act and home advisory service. Until 21 July 2011, the GAO will be ordered to carry out a survey to assess the impact that the adoption of the law will have on the accessibility and affordable nature of credit to consumer, small business, home buyer and home mortgages. Part of this research is to instruct the GAO to examine the impact of residential advisory service provision governed by the HUD and the new Office of Housing Consulting, among other types cited.
Finally, the Dodd-Frank Act did not contain the text of the Act of p. 3264 (2010) titled the Dodd-Frank Consumer Protection Act, which gives the FTC wide regulatory and execution powers over credit regulation and redemption and significant limitations on credit regulation suppliers, as well as limitations on upfront fees (except for a moderate set-up fee) and reporting obligations.