Saturday, October 1, 2016

The CFPB TRAIN is rolling -- Are Notary Signing Agents on the Track?

Happy October! 

During the months of August and September, compliance issues got my attention.  I was particularly interested to read a list of the Consumer Protection Financial Bureau’s (CFPB’s) actions  taken in 2015 and more recently, its concerns over mortgage servicers that are non-lenders.  

How much longer will notary signing agents escape the long arm of the CFPB?

So far, notary signing agents haven’t been a huge pressure point on the radar of the CFPB.  
However, based on what I have been reading about the CFPB’s increasing desire to see vendor management compliance policies and proof of vendor oversight, I don’t know how much longer we’ll be allowed to handle mortgage documents without the government ensuring that we are on the list of “covered persons” or that we are officially tied to a vendor compliance management system.  I guess I am thinking in terms of being registered in a database, being required to meet compliance standards, or both.

The CFPB wants an Online Registration System

I am not making this up!  I just don’t know if the spotlight will shine on notary signing agents.  From the Consumer Financial Review: “… CFPB’s expressed intent to determine the availability and cost associated with a web-based registration system and to solicit vendor comments on the CFPB’s potential requirements suggest that the CFPB is seriously considering a nationwide registration system for nonbank financial services providers.”

Please read the article in its entirety when you have a minute. 

Under the Radar Since 2013 - GET YOUR LISTING
We have been left alone by the CFPB and I think that is because the NNA created a compliance path for notary signing agents to follow that was endorsed at the time by lenders and settlement services. 

I hate to pick at a scab, but for those who don’t know, notaries detested being required to get a background check and being told they must be certified annually. They also found it insufferable that many of their clients said that only the NNA’s program would be accepted.  In response, a group formed and mounted a full rebellion against these uncomfortable pronouncements of how they (independent notary signing agents) must do business. 

Based on what notaries posted on various online forums, it seemed as if hundreds of them wrote to the CFPB to complain about the NNA, lenders, and settlement service providers (collectively in a group known as the Signing Professionals' Workgroup [SPW]).   As best as I can tell, their complaints didn’t bring down the wrath of the CFPB onto the NNA or the SPW, but the CFPB must have been paying attention.

Perhaps the CFPB recognized that the NNA was leading notaries, lenders, and settlement service providers to resolve notary-vendor compliance upfront and sighed with relief that we were low on the priority list since we were on our way to some form of compliance.

Notaries aren’t “Covered Persons” (Correct me if I am wrong.)

I’m not a lawyer, so please correct me if I am wrong.

Right now, a notary signing agent isn’t what’s referred to as a “covered person” and the CFPB doesn’t seem to have a straight line of authority to oversee the activities of notary signing agents, but they can make rules to make that happen.  

Please take a look at the article "In the CFPB's Crosshairs… 2016 and Beyond" which provides an overview of the CFPB’s 2015 activities and it also explains better than I can what “covered person” means.  

These kinds of activities lead me to believe that notary signing agents may be asked to take their places in the CFPB online database along with other nonbank financial services providers.  My reasoning is that a notary signing agent can be in a position to violate federal consumer laws and it’s the CFPB’s job to see that such crimes are stopped.

Enjoy your day!

Under section 1002(6) of the Dodd-Frank Act, a “covered person” means

“(A) any person that engages in offering or providing a consumer financial product or service; and
(B) any affiliate of a person described in [(A)] if such affiliate acts as a service provider to such person.” 12 U.S.C. § 5481(6).

For example, under the CFPB’s enforcement authority, the CFPB may investigate any covered person whose conduct may constitute a violation of any provision of federal consumer law (generally, Title X of the Dodd-Frank Act and the eighteen enumerated consumer laws). In contrast, under the agency’s supervisory authority, the CFPB may only supervise certain covered persons such as very large depository institutions and participants of certain markets for consumer financial products or services. Section 1025 of the Dodd-Frank Act gives the CFPB supervisory authority over depository institutions with over US$10 billion in net assets and their affiliates and section 1024 gives the agency supervisory authority over only certain nondepository or nonbank institutions. The CFPB has supervisory authority over all nonbank covered persons, regardless of size, that offer or provide three types of consumer financial products or services:

(1) origination, brokerage or servicing of consumer loans secured by real estate and related mortgage loan modification or foreclosure relief services;

(2) private education loans; and

(3) payday loans.

However, for all other consumer financial products or services, the CFPB must first engage in rulemaking under section 1024(a)(1)(B). To date, the agency has finalized only five such larger participant rules: credit reporting, debt collection, student loan servicing, international money transfers and automobile financing.

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