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On September 20, twenty-four state attorneys general sent a letter to the CEOs of three credit card companies opposing the International Organization for Standardization’s (ISO) recommendation to create a merchant category code (MCC) for gun stores to use when processing credit and debit card transactions. According to the AGs, the MCC “will not protect public safety,” and tracking gun purchase information “can only result in its misuse, either unintentional or deliberate.” The AGs also expressed their concern “that financial institutions that place their desired public policy outcomes ahead of the well-being of their investors do so in derogation of their fiduciary obligations.”
The same week, in a separate letter, twelve Republican U.S. Senators sent a letter to the CEOs also requesting the reversal of their decision to comply with the ISO standard to create a separate MCC for the sale of firearms in the U.S. According to the letter, the CEOs “are choosing the side of gun control advocates over the privacy and Second Amendment rights of millions of law abiding Americans,” and consider the decision to comply with the MCC “the first step towards backdoor gun control on law abiding Americans.” The Senators asked the CEOs to respond to a series of ISO-related questions.
As previously covered by InfoBytes, on September 2, the California and New York AGs sent a letter to the CEOs asking for the establishment of a unique MCC for gun store purchases, writing that a specially-designated MCC would help companies flag suspicious activity. The letter followed recent requests sent by several congressional Democrats to the same companies urging them to establish an MCC code for guns.
On September 21, CFPB Director Rohit Chopra discussed Bureau efforts to ensure markets for consumer financial products and services are “fair, transparent, and competitive.” Speaking during the Exchequer Club Fireside Chat, Chopra explained that the agency’s authorizing statute specifically directs the Bureau to promote competition by consistently enforcing the law regardless of whether an entity takes deposits. He clarified that there should not be different standards for assessing when a firm violates the law, and highlighted several ways that the Bureau is working to fulfill its mandate to ensure competitive markets. One example Chopra provided relates to reshaping the Bureau’s approach to promoting new products and offerings, especially as they relate to refinancing options. He pointed to Bureau efforts to ensure both banks and nonbanks could launch products to save private student loan borrowers money as an example of making sure all potential market entrants could benefit. Chopra stated that the Bureau is also requesting feedback from investors, lenders, and the public on topics related to improving mortgage refinancing options (covered by InfoBytes here), and is working on ways to stimulate more credit card and auto loan refinancing. Additionally, Chopra touched on other areas of focus, including consumer finance offerings that rely on emerging technologies such as banking in augmented reality and the metaverse, nonbank supervision and oversight, bright-line regulatory approaches, competitive pricing and back-end fees, regulatory arbitrage, and personal financial data rights.
On September 19, the U.S. District Court for the District of Southern Florida granted final judgment against an individual to resolve SEC allegations regarding her involvement in a company that allegedly fraudulently misappropriated funds from investors. As previously covered by InfoBytes, the SEC’s complaint claimed that the individual was employed by the company and was the wife of a chief executive officer who falsely represented to many Venezuelan-American investors that the company would use their funds to finance payday loans through the offer and sale of “safe and secured or guaranteed” promissory notes. The complaint noted that the defendant “received at least $1.2 million of [the company’s] investor funds for no apparent legitimate business purpose,” in violation of the federal securities laws or any regulation or order issued under such laws, as set forth in the Bankruptcy Code. According to the order, the defendant must pay $994,000 in disgorgement and $83,000 in interest.
On September 15, the FTC released a report, Bringing Dark Patterns to Light, examining how “dark patterns” can effect consumer choice and decision-making and could violate the law. The report stems from an April 2021 workshop that the Commission held to explore dark patterns. According to the FTC, the dark pattern tactics detailed in the report include disguising ads to appear like independent content, which makes “it difficult for consumers to cancel subscriptions or charges, burying key terms or junk fees, and tricking consumers into sharing their data.” The report highlighted the FTC’s efforts to combat the use of dark patterns in the marketplace and reiterated the Commission’s commitment to taking action against tactics designed to trick and trap consumers. Among other things, the report noted four common dark pattern tactics, which include design elements that: (i) induce false beliefs; (ii) hide or delay disclosure of material information; (iii) lead to unauthorized charges; and (iv) obscure or subvert privacy choices. The report also cited a 2017 case brought against a company as an example of past enforcement work, in which FTC fined the company $2.2 million for enabling default settings that allowed its smart TVs to collect and share consumers’ viewing activity with third parties, providing a brief notice to some consumers that the agency said could easily be missed.
On September 22, the CFPB issued a request for information (RFI) regarding ways to improve mortgage refinances for homeowners and how to support automatic short-term and long-term loss mitigation assistance for homeowners who experience financial disruptions. According to the Bureau, refinancing volume has decreased almost 70 percent from last year as interest rates have risen. Additionally, periods of economic turmoil, such as the Covid-19 pandemic, can pose significant challenges for mortgage borrowers, the Bureau noted. Throughout the pandemic, 8.2 million borrowers entered a forbearance program, and as of July 2022, 93 percent have exited. Of those who have exited forbearance, five percent are delinquent or in active foreclosure. The Bureau is interested in the features of pandemic-related forbearance programs that should be made more generally available to borrowers. Specifically, the RFI requests information regarding, among other things: (i) targeted and streamlined refinance programs; (ii) innovative refinancing products; and (iii) automatic forbearance and long-term loss mitigation assistance. Comments are due 60 days after publication in the Federal Register.
On September 20, President Biden announced his intention to nominate two members of the FDIC Board of Directors. The nominees, if confirmed, would fill the two vacant seats on the five-member Board. Travis Hill was nominated as a Board member and as vice chair. During his tenure at the FDIC, Hill previously served as senior advisor to the chairman and deputy to the chairman for policy. Prior to that, Hill served as senior counsel at the Senate Committee on Banking, Housing, and Urban Affairs. Biden also nominated Jonathan McKernan as a Board member. McKernan is a senior counsel at the FHFA and currently is on detail from the agency to the Senate Committee on Banking, Housing, and Urban Affairs where he is counsel on the minority staff. Previously, McKernan served as a senior policy advisor at the U.S. Treasury Department.
On September 20, Assistant Secretary for Terrorist Financing and Financial Crimes Elizabeth Rosenberg delivered prepared remarks before a Senate Committee on Banking, Housing, and Urban Affairs hearing, in which she provided an overview of recent efforts taken by the U.S. Treasury Department to hold Russia accountable for its invasion of Ukraine. Rosenberg explained that these measures are intended to “squeeze Russia’s access to finance and technology for strategic sectors of its economy and degrade its industrial capacity for years to come” and highlighted sanctions imposed against hundreds of Russian individuals and entities, including Russia’s largest financial institutions and key nodes in the country’s military-industrial supply chains, to cut them off from the U.S. financial system. She noted that Treasury has also implemented restrictions on dealings in Russian sovereign debt and has “prohibited economic dealings with the so-called Donetsk People’s Republic and Luhansk People’s Republic regions of Ukraine” as well as new investments in the Russian Federation. Rosenberg added that Treasury has “also imposed prohibitions on importing certain commodities from Russia into the United States, including oil and natural gas, and similarly imposed prohibitions on exporting certain items like luxury goods and dollar-denominated banknotes.” Additionally, Rosenberg discussed international efforts, including “implementing the largest sanctions regime in modern history[,]” and working with allies to facilitate information sharing, law enforcement data, and relevant financial records. She emphasized that “Treasury has mounted an aggressive campaign to close the global financial policy and regulatory loopholes across jurisdictions that Russian aiders and abettors of this war, and other criminals, use to perpetuate their illicit activity[,]” and stated that Treasury remains focused on denying funds to Russia through its oil exports.
Find continuing InfoBytes coverage on the U.S. sanctions response to Russia’s invasion of Ukraine here.
On September 15, the CFPB released a Data Point report titled 2021 Mortgage Market Activity and Trends, which analyzes residential mortgage lending activity and trends for 2021. The 2021 HMDA data encompasses the fourth year of data that incorporates amendments to HMDA by Dodd-Frank. The changes include new data points, revisions to some existing data points, and authorizes the CFPB to require new data points. As covered by a Buckley Special Alert, the CFPB issued a final rule that implemented significant changes that reflected the needs of homeowners and the evolution in the mortgage market.
The Bureau previously reported a 66.8 percent increase in originations from 2019 to 2020, largely driven by refinances. However, most of the increase from 2020 to 2021 was a result of jumbo home purchase loans. Other highlighted trends in mortgage applications and originations found in the 2021 HMDA data point include, among other things:
- 4,332 financial institutions reported at least one closed-end record in 2021, down by 3.1 percent from 4,472 financial institutions who reported in 2020;
- At least one closed-end mortgage loan had been reported by 4,332 financial institutions, down by 3.1 percent from 4,472 financial institutions in 2020;
- Black borrowers’ share of home purchase loans increased from 7.3 percent in 2020 to 7.9 percent in 2021; and
- “The refinance boom, especially in non-cash-out refinance that dominated mortgage market activities in 2019 and 2020, peaked in March 2021.”
On September 19, the Department of Veterans Affairs issued a change to Circular 26-21-20 extending the rescission date to align with the end of Covid-19 pandemic, including conforming changes to VA’s expectation as to the completion of a forbearance period. As previously covered by InfoBytes, the VA issued Circular 26-21-20 in September 2021 to clarify timeline expectations for forbearance requests submitted by affected borrowers. The September 2021 Circular stated thar “[f]or borrowers who have not received a COVID-related forbearance as of the date of this Circular, servicers should approve requests from such borrowers provided that the borrower makes the request during the National Emergency Concerning the Novel Coronavirus Disease 2019 (COVID-19) Pandemic,” and that all Covid-19 related forbearances would end by September 30, 2022. However, Change 1 stated that “September 30, 2022” should be replaced with “six months after the end of the National Emergency Concerning the Novel COVID-19 Pandemic.” The circular is rescinded March 1, 2023.
On September 19, the FTC and the California Department of Financial Protection (DFPI) announced a lawsuit against several companies and owners for allegedly operating an illegal mortgage relief operation. (See also DFPI’s announcement here.) The filing marks the agencies’ first joint action, which alleges the defendants’ conduct violated the California Consumer Financial Protection Law, the FTC Act, the FTC’s Mortgage Assistance Relief Services Rule (the MARS Rule or Regulation O), the Telemarketing Sales Rule, and the Covid-19 Consumer Protection Act. The agencies claimed that the defendants preyed on distressed consumers with false promises of mortgage assistance relief. According to the complaint, the defendants made misleading claims during telemarketing calls to consumers, including those with numbers on the National Do Not Call Registry, as well as through text messages and in online ads. In certain cases, defendants represented they were affiliated with government agencies or were part of a Covid-19 pandemic assistance program. Among other things, defendants falsely claimed they were able to lower consumers’ interest rates or payments, and instructed consumers not to pay their mortgages, leading to late fees and significantly lower credit score. Defendants also allegedly told consumers not to communicate directly with their lenders, which caused consumers to miss default notices and face foreclosure. Additionally, defendants charged consumers illegal up-front fees ranging from $500 to $2,900 a month, and told consumers they were negotiating loan modifications that in most cases never happened.
The U.S. District Court for the Central District of California granted a restraining order temporarily shutting down the defendants’ operations. In freezing the defendants’ assets and ordering them to submit financial statements, the court noted that the agencies established a likelihood of success in showing that the defendants “have falsely, deceptively, and illegally marketed, advertised, and sold mortgage relief assistance services.”
- Benjamin W. Hutten to discuss “Ongoing CDD: Operational considerations” at NAFCU’s Regulatory Compliance & BSA Seminar
- James C. Chou to discuss ransomware at NAFCU’s Regulatory Compliance & BSA seminar
- Jedd R. Bellman to provide an “Attorney exemption/medical debt update” at the North American Collection Agency Regulatory Association annual conference
- Kathryn L. Ryan to discuss “What should crypto regulation look like: Legislation, regulation and consumer issues” at WCL's First Annual Virtual Currency Law Institute
- Elizabeth E. McGinn to discuss “How to mitigate and manage third-party risks: Leveraging tools and best practices” at The Knowledge Group’s webcast
- Elizabeth E. McGinn, Benjamin W. Hutten, and James C. Chou to discuss “The evolving regulatory landscape: Third-party and cyber risk management” at the 2022 mWISE Conference
- Sherry-Maria Safchuk to discuss “For your eyes only: Privacy updates for 2022-2023” at CCFL’s Annual Consumer Financial Services Conference
- James T. Parkinson to present a “Global anti-corruption update” at IBA’s annual conference