CFPB Finalizes Amendments to an Exemption to Providing Periodic Statements to Borrowers in Bankruptcy

The CFPB recently finalized changes to its requirement to send modified or unmodified periodic statements and coupon books to borrowers who transition in and out of bankruptcy.  The final rule adopted the proposed rule issued on October 4, 2017 without revisions.  The final rule will become effective on April 19, 2018, which is the same date the provisions of the 2016 Mortgage Servicing Rules relating to bankruptcy periodic statements and coupon books it is amending become effective.

Currently, the CFPB’s Mortgage Servicing Rules provide a blanket exemption from the requirement to send periodic statements and coupon books to borrowers in bankruptcy.  However, the 2016 Mortgage Servicing Rules eliminate this broad exemption and require servicers to provide borrowers in bankruptcy a modified periodic statement or coupon book unless a limited exemption applies.

In general, the final rule provides for a single-statement exemption that applies to the next periodic statement or coupon book that otherwise would be required after a triggering event occurs (e.g., borrower enters bankruptcy, exits bankruptcy, or discharges personal liability for the loan), regardless of when in the billing cycle the triggering event occurs.  For example, as of the date that a borrower becomes a debtor in bankruptcy, a servicer is exempt from providing a modified periodic statement or coupon book with respect to the next statement or book that would otherwise have been required, but thereafter must provide the modified statement or book.

The final rule replaces the original single-billing-cycle exemption from the 2016 Mortgage Servicing Rules requirement to provide a periodic statement or coupon book to consumers, which applied only if the payment due date for the ensuing billing cycle was 14 days or less after a triggering event occurs.  The CFPB believes that the changes made by the final rule will alleviate certain technical challenges posed by the 2016 Mortgage Servicing Rules’ single-billing-cycle exemption and associated timing parameters.

The final rule is available here: https://www.gpo.gov/fdsys/pkg/FR-2018-03-12/pdf/2018-04823.pdf.