QUESTION
Last
week you discussed the tier-based penalties for violations of the FCRA. Your
FAQ was in response to a question posed by counsel to a retail mortgage lender.
I am also a lawyer and the compliance officer of a multi-platform mortgage
lender. You mentioned that the tiered-based penalties apply to “Federal
consumer financial law.” I have two questions. First, what laws are designated
as a Federal consumer financial law? Second, you gave the 2018 adjustments for
civil money penalties. What are the 2019 penalty amounts?
ANSWER
Thank
you for your valuable question. Last week we published our FAQ, entitled FCRA: Penalties for Non-Compliance. The response to the article was high. Obviously,
there is some concern about such matters. However, as I’ve said many times, a strong
compliance management system can substantially reduce and mitigate regulatory hazards.
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To
your first question regarding “Federal consumer financial law,” this term includes:
- Alternative Mortgage Transaction Parity Act (AMTPA),
- Consumer Leasing Act (CLA and Regulation M),
- Electronic Fund Transfer Act (EFTA and Regulation E),
- Equal Credit Opportunity Act (ECOA and Regulation B),
- Fair Credit Billing Act (FCBA, addressed in Regulation Z),
- Fair Credit Reporting Act (FCRA),
- Home Owners Protection Act (HOPA, primarily regarding mortgage insurance),
- Fair Debt Collection Practices Act (FDCPA),
- Parts of the FDIC Act and Gramm-Leach-Bliley Act,
- Home Mortgage Disclosure Act (HMDA and Regulation C),
- Home Ownership and Equity Protection Act (HOEPA, addressed in Regulation Z),
- Real Estate Settlement Procedures Act (RESPA and Regulation X),
- S.A.F.E. Mortgage Licensing Act (SAFE Act),
- Truth-in-Lending Act (TILA and Regulation Z),
- Truth-in-Savings Act (TISA),
- Section 626 of the Omnibus Appropriations Act of 2009 (addressed in the MAP and MARS rule, CFPB Regulations N and O, respectively), and
- Interstate Land Sales Full Disclosure Act.
To
your second question about the 2019 adjustments to civil monetary penalties, on January 1, 2019 the
Consumer Financial Protection Bureau (CFPB) increased the maximum civil money
penalties for violating a Federal consumer financial law to $5,781 per day for
a Tier 1 penalty; $28,906 for a Tier 2 penalty (“reckless” engagement); and
$1,156,242 for a Tier 3 penalty (“knowing violation”).
Just
to provide some additional information, for 2019 the CFPB also adjusted several
of the civil monetary penalty amounts, pursuant to the Federal Civil Penalties
Inflation Adjustment Act, as follows:
- Increased the maximum appraiser independence penalties to $11,563 per day for a first violation (up from $11,279 in 2018) and $23,125 per day for subsequent violations (up from $22,556 in 2018);
- Increased the RESPA escrow statement maximum penalty to $94 per failure with the annual cap adjusted to $189,427, and raised the maximum penalty for “intentional disregard” to $190 per failure with no annual cap;
- Increased the maximum penalties for violation of the Interstate Land Sales Full Disclosure Act to $2,014 per violation, with a $2,013,399 annual cap; and
- Increased the maximum penalty for a loan originator violating the SAFE Act to $29,192 per violation.
The Federal Civil Penalties Inflation Adjustment
Act requires federal agencies to annually adjust for inflation the civil monetary
penalties within their jurisdiction according to a statutorily prescribed
formula. The agencies apply a cost-of-living adjustment multiplier determined
by the Director of the Office of Management and Budget (OMB) to the current
penalty amount.
Jonathan Foxx, PhD, MBA
Managing Director
Lenders Compliance Group
