Effective Oct. 17, 2014, MasterCard is revising its rule on zero ($0.00) cardholder liability for unauthorized transfers. The primary change is an expansion of coverage of the zero liability rule. Under the revised rule, a cardholder will not be liable for an unauthorized transaction, as long as the cardholder has exercised reasonable care in safeguarding the card from risk of loss or theft, and, upon becoming aware, promptly reporting the loss or theft to the issuer. This rule will continue to apply to cards issued for small business programs, but not to other commercial cards. In the case of a prepaid card, the rule applies once the cardholder's identity has been registered with the issuer.

Under the revised rule, if the conditions for zero liability are not met (for instance, because the cardholder did not promptly report the loss) the Reg E limitations will apply. Under Reg E, the cardholder could have up to $500 liability if the loss is not reported within two days of discovery, or unlimited liability if the unauthorized transaction is not reported within 60 days of when the unauthorized transaction was reported on a periodic statement.

To comply with this rule change, community banks that issue MasterCard debit and prepaid cards must update their Regulation E account opening disclosure and send notice of this change to existing customers/members. Reg E account opening disclosures will need to be updated to address the MasterCard change. The revised rule imposes a new reporting duty on the cardholder. To be covered by the zero liability limitation under the revised rule, the cardholder must promptly report the loss or theft after becoming aware of it. The Reg E two-business-day notification provision may be a benchmark to consider in your community bank's MasterCard policies and procedures regarding prompt notice. 

QM Holds Lenders at Bay

Eighty percent of lenders surveyed by Fannie Mae said they were not yet planning to offer loans outside of the safest standards set by the Consumer Financial Protection Bureau this year, known as qualified mortgages. Lenders, on net, expect to tighten credit standards as a result of QM rules; with 36 percent of lenders reporting expected tightening and 6 percent of lenders reporting expected easing.

Lenders are given certain legal protections on loans that meet the QM rules that prevent the borrower from challenging future foreclosure actions with claims that the mortgage was written without following broader requirements to ensure they had the ability to repay it. Roughly 74 percent of lenders who participated in the survey said their operational costs have increased since the rules went into effect in January.

Yesterday, the Consumer Financial Protection Bureau (CFPB) released a bulletin outlining expectations for mortgage servicers that transfer loans. The bulletin includes information on how mortgage servicers should pay special attention to new rules protecting consumers applying for loss mitigation help or trial modifications.

Today's bulletin gives examples of some things CFPB examiners will look for when loans are transferred. In particular, CFPB examiners will carefully scrutinize transfers of loans with pending loss mitigation applications or approved trial and permanent modification plans. Examples of good practices by servicers include flagging those loans and taking special care to ensure that all relevant documents are transferred in a timely manner.
The Bulletin is available here.

Resources to help you comply with all CFPB reulations, in a single table, HERE.

Thursday, August 21, 2014                                

Risk Management Series: The Importance of Developing a Capital & Contingency Plan
 

Monday, August 25, 2014                                

GFE & HUD-1 Now: Dealing With Current Forms, Current Challenges & Regulator Hot Buttons
 

Tuesday, August 26, 2014                             

Health Care Reform 2014-2015: Overview, Status & Impact
 

Tuesday, August 26, 2014              Free Webinar!               

Q2 Enforcement Actions: What we can learn and how to avoid being the next victim.