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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 small buck loans and homeloan payment relief for customers whenever numerous might need it many. Both templates had been issued within the CFPB’s Policy on No-Action Letters (the “Policy”), that was revised in 2019. Depository institutions CFPB that is seeking approval little buck installment loans and home loan servicers looking for CFPB approval to be used of certain loss mitigation solutions may use these templates whilst the foundation with regards 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 small-dollar template ended up being given in reaction to a credit card applicatoin through the Bank Policy Institute (“BPI”) and offers a course for BPI bank users as well as other deposit using organizations trying to provide small-dollar credit services and products. A job candidate may use this template to request a CFPB no-action page assurance that is providing its small-dollar credit services and products will likely not trigger a CFPB supervisory or enforcement action.

The template requires a job candidate to give various types of information, like the following: (1) those items placed in part an of this Policy, including a description associated with the applicant’s proposed credit product and an explanation of this product’s consumer that is potential and risks; (2) specific 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 loan quantity will not surpass $2,500; and (3) details about item features and financing methods, such as the anticipated APR range, extra costs, a description regarding the repayment framework and a description of this lender’s underwriting criteria. A complete set of the things needed when you look at the template is present right here. The BPI no-action page demand would not specify a maximum interest rate but expected that such loans could be less than the 400% to 500per cent interest levels charged by nonbank pay day loan firms.

As referenced above, installment loans or personal lines of credit cannot exceed $2,500 to get this relief that is NAL. The payment term for installment loans and every draw on a personal credit line must be a lot more than 45 times but not as much as 12 months, and re payments needs to be amortized for a basis that is straight-line one or more re payment. One exclusion is actually for personal lines of credit with repayment regards to 45 times or less that permit a single repayment and where a draw is not any a lot more than ten percent of this maximum dollar quantity founded for the merchandise.

Digitizing Mortgage Loss Mitigation Services

The loss mitigation template ended up being given in response to a credit card applicatoin 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 platform, that is aimed toward borrowers, enables 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 platform permits borrowers to, among other things, upload loss mitigation documents right to the working platform for receipt and review by their mortgage servicers. The template also incorporates a platform for home loan 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 mortgage servicers to modify the user interface in purchase to best suit their processing needs.

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 selection of things necessary for this template can be acquired right right here.

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


These two templates offer assurances that if the CFPB issues letters that are no-action a reaction to candidates making use of these templates so it will perhaps maybe not make supervisory findings or bring a supervisory or enforcement action under its authority to stop unjust, misleading, or abusive acts or methods against candidates for services and products described inside their application. Significantly, even as we have emphasized before, this relief that is NAL limited by CFPB action just, and depository organizations and Fintechs must look at the dangers that other agencies with jurisdiction during these services and products, including not restricted to financial regulators and state police force agencies, may still do something whenever appropriate.

This upgrade is actually for information purposes just and really should not be construed as legal counsel 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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