CFPB Issues Final Rule Requiring Standard Mortgage Disclosures for PACE Loans and Certain Other Home Improvement Financing

Regulatory Developments

CFPB Issues Final Rule Requiring Standard Mortgage Disclosures for PACE Loans and Certain Other Home Improvement Financing
On December 17, the CFPB issued a final rule requiring that consumers seeking PACE loans, or other home improvement financing that results in a tax assessment on the consumer’s home, receive the same standard mortgage disclosures as consumers applying for traditional mortgages. The rule is intended to help consumers compare PACE loan terms to other financing options, make consumers aware of the costs involved, and protect consumers from false promises of energy savings or other subprime-style lending practices that could push consumers into loans they cannot afford or put them at risk of losing their homes. The final rule is scheduled to go into effect on March 1, 2026.

“Today’s rule stops unscrupulous companies and salespeople from luring homeowners into unaffordable loans based on false promises of energy savings. Homeowners deserve to know just how much they are paying when they put their home and financial future on the line.”
— Rohit Chopra, CFPB Director

SEC Modernizes the Submission of Certain Forms, Filings, and Materials Under the Exchange Act 
On December 16, the SEC adopted amendments to require electronic filing or submission of certain forms and other filings or submissions that are required to be filed with or submitted to the SEC under the Exchange Act. The filings are for those made by national securities exchanges and associations, clearing agencies, broker-dealers, security-based swap dealers, and major security-based swap participants. The amendments aim to streamline regulatory compliance and enhance accessibility and transparency. Registrants will now use the EDGAR system for electronic submissions, with structured data formats applied where relevant, reducing reliance on paper-based processes. In addition, the SEC revised the Financial and Operational Combined Uniform Single (FOCUS) Report so it aligns with other regulations and to address technical issues. Compliance dates for these amendments vary depending on the applicable form or rule but range from 60 days after the release is published in the Federal Register to on or after June 30, 2028.

CFPB Issues Guidance on UDAAP Risk Involving Credit Card Rewards Programs
On December 18, the CFPB issued a Consumer Financial Protection Circular warning that persons who offer, provide, or operate credit card rewards programs, and their service providers, may violate the Consumer Financial Protection Act’s prohibition against UDAAP if they (1) devalue a consumer’s accrued rewards; (2) hide, bury, or obfuscate terms or conditions relied upon to revoke, cancel, or prevent the use or earning of rewards; or (3) prevent or inhibit consumers from redeeming accrued rewards, including through third-parties. The CFPB expressed its commitment to continuing to monitor and take any action necessary or appropriate with respect to UDAAPs involving credit card rewards programs.

CFPB Releases Supervisory Highlights Special Edition Focused on Student Lending
On December 16, the CFPB released a special edition of its Supervisory Highlights (Issue 36) detailing violations of law identified by CFPB examiners in student loan markets related to refinancing, private lending and servicing, debt collection, and federal loan servicing. The Supervisory Highlights include reports of lenders: misleading borrowers about the consequences of refinancing federal loans, resulting in borrowers losing certain federal protections; unfairly denying discharge applications for borrowers with Total and Permanent Disability status; inaccurately informing borrowers they were not eligible for autopay discounts; and falsely advertising the ability to suspend loan payments in the event of job loss. Student loan servicers misled borrowers about their rights to challenge private student loans due to school misconduct, failed to properly consider borrower’s challenges, and included loan contract language that could enable schools to unlawfully withhold students’ transcripts or deny access to classes and other educational services. Federal loan servicers failed to provide adequate phone support for borrowers, issued deceptive billing statements, debited unauthorized amounts, and improperly denied applications for income-drive repayment or excessively delayed processing such applications. This issue of Supervisory Highlights continues the CFPB’s efforts to oversee risks to consumers in the student loan market.

OCC Reports on Key Risks in Federal Banking System
On December 16, the OCC released its Semiannual Risk Perspective Report (Report) for Fall 2024. The Report covers risks facing banks based on data as of June 30, 2024. In the Report, the OCC stated that the federal banking system is sound and stable, commercial credit risk remains moderate, retail credit and Community Reinvestment Act risks are stable, operational risk is elevated, and compliance and market risk vary based on many factors. In particular, banks have needed to be more dynamic in their compliance processes to respond to changes in law and the economy. The Report focuses on these risks and other issues that pose threats to financial institutions.

CFPB Launches New Tool for Consumers to Explore Credit Card Options
On December 18, the CFPB launched a new tool using open data, Explore Credit Cards, to help consumers compare more than 500 credit cards to find the best credit card rates among rewards cards and traditional cards. The CFPB expects the tool to provide unbiased data and give smaller providers and companies a better chance to compete. The CFPB invites credit card companies, especially smaller issuers, to submit data in order to be included in this opportunity to promote their credit products. The CFPB’s next publication of credit card data will be in Spring 2025.

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