A&B ABstract: On March 26, the Consumer Financial Protection Bureau (“CFPB”) issued three separate policy statements in response to the COVID-19 pandemic. These announcements recognize the operational and resource challenges companies are facing as a result of the pandemic, and provide some regulatory flexibility. Separately, the CFPB and four prudential banking regulators issued a statement encouraging the responsible financing of small-dollar loans to individuals and businesses. These statements follow a joint statement issued by the CFPB with the Federal Reserve Board (“FRB”), Federal Deposit Insurance Corporation (“FDIC”), and Office of the Comptroller of the Currency (“OCC”) (collectively, the “Agencies”) giving CRA credit for activities in response to COVID-19.
On March 26, the Agencies issued a Joint Statement specifically encouraging financial institutions to offer responsible small-dollar loans to both consumers and small businesses in response to COVID-19. The Agencies recognized the important role that responsibly offered small-dollar loans can play in helping customers meet their needs for credit due to temporary cash-flow imbalances, unexpected expenses, or income short-falls during periods of economic stress or disaster recoveries.
The Agencies indicated that loans can be offered through a variety of loan structures, including open-end lines of credit, closed-end installment loans, or structured single payment loans, provided they are offered in a manner that is consistent with safe and sound practices, provides fair treatment of consumers, and complies with applicable statutes and regulations, including consumer protection laws.
On March 26, CFPB issued three separate policy statements intending to provide needed flexibility to enable financial companies to work with customers in need as they respond to the COVID-19 pandemic. The CFPB also postponed two data collections associated with its 1071 (small business data collection) and Property Assessed Clean Energy (PACE) rulemakings.
First Policy Statement
The first Policy Statement suspended until further notice the requirement to report quarterly HMDA data. Financial institutions normally required to make such quarterly reports are those that reported for the preceding calendar year at least 60,000 covered loans and applications (excluding purchased loans). Institutions may voluntarily continue making quarterly HMDA data submissions, and should continue to collect and record HMDA data in anticipation of making annual data submissions.
Second Policy Statement
The second Policy Statement suspended until further notice the submission of the following information relating to credit card and prepaid accounts:
- annual submission of certain information concerning agreements between credit card issuers and institutions of higher education;
- quarterly submission of consumer credit card agreements;
- collection of certain credit card price and availability information from a sample of credit card issuers; and
- submission of prepaid account agreements and related information.
Institutions may voluntarily continue to make such submissions, and should maintain records sufficient to allow them to make such delayed submissions pursuant to future CFPB guidance.
Third Policy Statement
The third Policy Statement sought to encourage financial institutions undertaking prudent efforts in good faith to work constructively with borrowers and other customers to meet their financial needs. To that end, the CFPB committed to: (1) take into account current and resource challenges affecting financial institutions when scheduling supervisory and enforcement activity; and (2) consider the circumstances that financial institutions face as a result of COVID-19 when conducting exams or other supervisory activities and in determining whether to take enforcement action.
The Agencies’ measured guidance is welcomed by the industry. In particular, the CFPB’s commitment to work with affected financial institutions in scheduling examinations and other supervisory activities provides needed flexibility, allowing institutions to best address the immediate and resource-intensive needs of its customers during these challenging times. Companies should be mindful to document their efforts as inevitable issues will arise when all the dust settles.