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ABA urges CFPB to drop all-in APR proposal

The American Bankers Association and several other groups urged the Consumer Financial Protection Bureau in a Monday letter to drop a proposal calling for the establishment of a collective APR calculation that includes additional fees.

The APR proposal is part of the CFPB’s ongoing efforts to simplify mortgage disclosure requirements under the Real Estate Settlement Procedures Act and Truth in Lending Act.

The ABA, along with 15 other trade groups, said that the CFPB’s own research revealed that the APR is of little value to consumers and that consumers often confuse the APR with the note rate.

“It neither enhances a borrower’s understanding of the obligation they are undertaking nor serves as an accurate shopping tool,” the groups said. “Simply adding additional fees to an unhelpful formulation that consumers do not use or understand will add significant costs and complications to the rule-making effort, with no measurable benefit to the borrower.”

The groups also noted the uncertainty that would be created by a reconfigured APR, as it is included in other mortgage finance rules and makes effective additional compliance requirements.

“…[I]t is entirely unclear how the reconfigured APR will impact or relate to these other rules, such as the yet to be finalized Ability to Repay/Qualified Mortgage rule and the HOEPA rule, to name two,” the groups said. “The CFPB has suggested the possibility of a separate transaction coverage rate, but that approach will require yet another new calculation and additional burdens for industry and costs that are passed on to consumers.”

Additionally, the groups said that the 2010 Dodd-Frank Act does not mandate sweeping changes to the APR.

“The sheer magnitude of regulatory changes coming forth has the potential to impose enormous confusion and cost to both industry and consumers,” the groups wrote. “For these reasons, we urge the CFPB to simplify its approach to forthcoming RESPA and TILA rule-makings by focusing only on those elements that are truly needed to implement Dodd-Frank requirements and will have maximum impact on promoting consumer understanding.”

The groups also urged the CFPB to issue a single version of Regulation Z that would detail how it would be amended by proposals that have yet to take effect.

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