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Joseph Reilly

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Financial services companies depend on Joe for all aspects of their regulatory and compliance needs. Drawing from two decades of experience in the sector, he provides actionable guidance in a complex and evolving landscape.

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This week, the Consumer Financial Protection Bureau (CFPB or Bureau) issued an advisory opinion and a research report addressing contract-for-deed home financing, also known as a “land contract,” “land installment contract,” “land sales contract,” “bond for deed,” “agreement for deed,” or “buying on contract.” The advisory opinion concludes that form of seller financing, where the seller retains the deed until the buyer completes the payments, generally is “consumer credit” under the Truth-in-Lending Act and Regulation Z and, therefore, that many providers of the financing must comply with the Ability to Repay and other rules in Regulation Z governing consumer mortgages. The CFPB also asserts that contract-for-deed home financing can trap buyers in unlivable homes and financial hardship.

As we predicted here, the Consumer Financial Protection Bureau (CFPB or Bureau) last week proposed new and, in some cases, streamlined rules governing what mortgage servicers must do after a borrower becomes delinquent. The proposed rules incorporate some pandemic-era practices, such as allowing servicers to offer assistance without a comprehensive review of the borrower’s financial situation. According to the CFPB, the new rules would require mortgage servicers to prioritize loss mitigation over foreclosing, reduce paperwork requirements, improve communication with borrowers, and ensure critical information is provided in the borrowers’ preferred language.

On July 1, amendments to Florida’s Consumer Finance Act took effect. Among other things, the amendments raise the maximum tiered interest rates on consumer finance loans, increase the grace period before late fees can be imposed from 10 to 12 days, require licensees to offer free credit education courses to borrowers at the time a loan is made, provide for the suspension of certain collection activities in the event of a disaster, and require branches of businesses making consumer finance loans to obtain a license.

As discussed here, following the U.S. Supreme Court’s decision in Community Financial Services Association of America, Limited v. Consumer Financial Protection Bureau (CFPB or Bureau), which upheld the CFPB’s funding structure, the Bureau announced updated compliance dates for its Section 1071 Final Rule concerning small business data collection and reporting under the Dodd-Frank Act.

On June 20, six federal financial services regulators issued the final automated valuation model (AVM) rule. The AVM rule, initially proposed in June 2023 and discussed here, aims to implement the quality control standards mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act). The final AVM rule is largely identical to the proposed rule and is set to take effect on the first day of the calendar quarter following 12 months after its publication in the Federal Register.

On May 30, the U.S. Supreme Court unanimously decided Cantero, reaffirming and elaborating on the Barnett Bank preemption standard, and remanding the case to the Second Circuit for further proceedings. Cantero addressed whether a New York law requiring the payment of at least 2% per annum interest on mortgage escrow deposits was preempted by federal law as to national banks. The Supreme Court held that the Second Circuit erred when it failed to apply the preemption standard articulated in Barnett Bank of Marion County, N.A. v. Nelson, which was incorporated by Congress into the Dodd-Frank Act. The Court rejected the lower court’s holding “that federal law preempts any state law that ‘purports to exercise control over a federally granted banking power,’ regardless of ‘the magnitude of its effects.’” The Court also rejected the approach argued by the petitioners, explaining it would “yank the preemption standard to the opposite extreme, and would preempt virtually no non-discriminatory state laws that apply to both state and national banks.”

On May 30, the Consumer Financial Protection Bureau (CFPB or Bureau) issued a request for information (Request) regarding alleged “junk fees” in closing costs charged by mortgage lenders and related settlement service providers. The Bureau is accepting public comments until August 2, 2024.

Kansas Governor Laura Kelly signed House Bill (HB) 2247 into law, bringing significant changes to the Kansas Mortgage Business Act and the Uniform Consumer Credit Code (UCCC). The changes brought about by HB 2247 will largely become effective on January 1, 2025. However, those changes standardizing threshold amounts consistent with federal law will become effective on July 1, 2024.

As discussed here, yesterday the U.S. Supreme Court issued its long-awaited decision in Community Financial Services Association of America, Limited (CFSA) v. Consumer Financial Protection Bureau (CFPB or Bureau) holding that the CFPB’s special funding structure does not violate the appropriations clause of the Constitution. Wasting no time, today the CFPB filed notices of the CFSA decision in cases nationwide, including in the case where several trade associations are challenging the CFPB’s final rule under § 1071 of the Dodd-Frank Act (Final Rule), Texas Bankers Association, et al. v. CFPB.