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On April 16, the Maryland Attorney General announced a settlement with a reverse mortgage servicer for allegedly charging homeowners illegal inspection fees. According to the Attorney General, from 2010 through 2016, the servicer passed the cost of inspecting properties in default on to homeowners, which Maryland law does not allow. In 2013, the Maryland Commissioner of Financial Regulation put the servicer on notice that it was charging prohibited inspection fees, but the servicer did not cease the activity until January 1, 2017. The servicer has since refunded or reversed nearly $44,000 in property inspection fees charged to consumers. The settlement agreement requires the servicer to (i) refund inspection fees that have not yet been refunded; (ii) provide notice to any sub-servicer that the inspection fees should be refunded or not collected; (iii) pay $5,000 to the state for costs associated with the investigation; and (iv) pay $50,000 in civil money penalties.
On April 15, the California Attorney General announced a $4.6 million settlement with a rental car company and affiliate resolving a joint investigation with the district attorneys into the company’s violation of state consumer protection laws. According to the AG, the companies, among other things, overcharged customers for rental vehicle repairs and failed to disclose material damage to the rental cars at the time of sale or disposal. Under state law, rental car companies are prohibited from charging customers more than the actual cost of repair, which includes any discounts the company receives according to the complaint. However, the companies frequently billed customers charges that were higher than the actual cost of the repair through the use of third-party repair estimates. Under the terms of the stipulated judgment, which also include comprehensive injunctive terms to prevent future misconduct, the companies—which did not admit liability—have agreed to comply with California laws and are required to pay (i) $1 million in restitution to affected customers; (ii) $3.3 million in civil penalties; and (iii) $300,000 in investigative costs.
On April 15, the Iowa governor signed HF 260, which amends the maximum interest rate and charges permitted under Iowa Code 2019. Specifically, for interest-bearing consumer credit transactions up to $30,000 (increased from $10,000), the interest rate may not exceed the lesser of $30 or ten percent of the financed amount. The amendments also specify the minimum charge creditors are allowed to collect or retain when prepayments are made in full, and stipulate that if a service charge has been collected on an interest-bearing consumer credit transaction then a “creditor shall not collect or retain a minimum charge upon prepayment.” HF 260 takes effect July 1.
On April 10, NYDFS announced that it denied a company’s applications to engage in virtual currency business and money transmission activity in New York due to the company’s alleged deficiencies in BSA/AML and Office of Foreign Assets Control (OFAC) compliance requirements, capital requirements, and token and product launches. According to the denial letter, the company applied for a virtual currency business activity license in August 2015, and had been operating under NYDFS’ virtual currency “safe harbor” ever since. Additionally, in July 2018, the company applied to engage in money transmission activity with the state. According to NYDFS, the state’s licensing law requires an applicant to demonstrate the ability to comply with the provisions of the licensing requirements, including “implementing an effective BSA/AML/OFAC compliance program as well as other measures to protect customers and the integrity of the virtual currency markets.” Based on NYDFS’ four-week on-site review of the company’s operations, NYDFS concluded, among other things, that the company’s BSA/AML/OFAC compliance program lacked (i) adequate internal policies, procedures and controls; (ii) a qualified, effective compliance officer; (iii) adequate employee training; (iv) adequate independent program testing; and (v) adequate customer due diligence. The company is required to immediately cease operating in New York State and doing business with New York residents and has 60 days to wind down or transfer its positions and transactions.
On April 8, the Ohio Court of Appeals affirmed summary judgment for a bank, its employees, and the plaintiff’s former husband (collectively, “defendants”), concluding, among other things, that under the Ohio Consumer Sales Practices Act (OCSPA) the defendants could not be considered “suppliers,” transactions with national banks are not covered, and bank employees were not considered “loan officers.” According to the opinion, a homeowner filed a lawsuit alleging the defendants fraudulently opened a home equity line of credit by allowing the plaintiff’s former husband to sign the homeowner’s name with the bank employees’ assistance in notarizing the signature. The homeowner alleged various claims, including that the defendants violated the OCSPA’s provision prohibiting a “supplier” from committing “an unfair or deceptive act or practice in connection with a consumer transaction.” The lower court granted summary judgment in favor of the defendants. The homeowner appealed, arguing that the bank employees were acting as “loan officers” and therefore, they qualified as “suppliers” under the OCSPA. The appellate court noted that while the term “supplier” does include “loan officer,” the statute explicitly states that “loan officer” does not include “an employee of a bank…organized under the laws of this state, another state, or the United States.” Moreover, the OCSPA provides that consumer transactions do not include transactions with financial institutions, except in certain circumstances, which are not applicable to the action. Therefore, the lower court did not err in its summary judgment ruling.
On April 8, the Arkansas governor signed HB 1672, which provides a framework within which guaranteed asset protection (GAP) waivers may be offered in the state. Among other provisions, the act (i) clarifies that GAP waivers are not insurance and are exempt from the state’s insurance laws; (ii) states that persons who market, sell, or offer GAP waivers are exempt from Arkansas’ licensing requirements, provided they comply with the act; (iii) establishes requirements for offering GAP waivers and clarifies that any cost to the borrower for the sale of a GAP waiver, in compliance with TILA, should not be considered a finance charge or interest; (iv) states that neither the extension of credit, nor the sale or lease terms of a motor vehicle, “may be conditioned upon the purchase of a [GAP] waiver;” and (v) clarifies contractual liability coverage, disclosure requirements, and requirements and restrictions for GAP waiver cancellations, including refund provisions. HB 1672 further stipulates that the state’s insurance commissioner may enforce the act’s provisions and impose penalties. The act takes effect 90 days after adjournment of the legislature.
On April 4, the New Mexico governor signed SB 350, which amends the state’s Service Contract Regulation Act to prevent providers from including automatic renewal provisions within service contracts unless they are clearly disclosed. The Act defines a service contract as a contract in which a provider is obligated for a specific period to repair, replace, or perform maintenance on property described in the contract, or to reimburse or indemnify the holder for costs to repair, replace, or perform maintenance on that property. Under SB 350, in addition to the automatic renewal requirements, the bill allows a service contract holder to provide notice, at least 30 days in advance, of its intent not to review a service contract. If a holder cancels a service contract, subject to the bill’s timing restrictions, the provider is required to refund the contract holder one hundred percent of the unearned pro rata provider fee, less any claims paid, and the provider may charge an administrative fee of up to 10 percent of the purchase price of the contract. The bill is effective June 14.
On April 2, the New Mexico governor signed HB 584, which amends the Collection Agency Regulatory Act and the Motor Vehicle Sales Finance Act to, among other things, require sales finance companies obtain a license to conduct business in the state. The bill outlines licensing requirements for such companies. State and national banks authorized to do business in the state are not required to obtain a license under the Motor Vehicle Sales Finance Act, “but shall comply with all of its other provisions.” Under HB 584, the Director of the Financial Institutions Division of the Regulation and Licensing Department may utilize the Nationwide Multistate Licensing System and Registry (NMLS) or other entities designated by the NMLS in order to receive and process licensing applications. The Director is also granted the authority to issue and deny licenses.
HB 584 also amends definitions used within the state’s Mortgage Loan Originator Licensing Act, and outlines provisions related to (i) licensing, registration, renewal, and testing requirements; (ii) certain exemptions; (iii) the issuance of temporary licenses to out-of-state mortgage loan originators who are both licensed through the NMLS and complete the mandatory education and testing requirements; and (iv) continuing education requirements. HB 584 also grants the Director the authority to establish rules for licensing challenges; “deny, suspend, revoke or decline to renew a licenses for a violation of the New Mexico Mortgage Loan Originator Licensing Act”; and impose civil penalties for violations.
Furthermore, HB 584 also amends the definitions used within the state’s Uniform Money Services Act and the Collection Agency Regulatory Act by listing licensing application requirements, and granting the Director the same authorities provided above.
The amendments take effect July 1, 2019.
On April 3, the New Mexico governor signed HB 150, which amends the New Mexico Bank Installment Loan Act of 1959 and the New Mexico Small Loan Act of 1955 to, among other things, change provisions relating to financial institutions and (i) clarify that unfair or deceptive trade practices, or unconscionable trade practices, are considered violations of the Unfair Practices Act; (ii) expand annual lender reporting requirements, including identifying secured and unsecured loan products, fees and interests paid by the borrowers, loan terms, and default rates; (iii) clarify allowable loan insurance, including provisions related to licensing requirements for lenders; and (iv) expand state and federal disclosure requirements. The amendments also limit interest and other charges (permitted finance charges cannot exceed the lesser of $200 or 10 percent of the principal with outlined exceptions); grant rights of rescission within specified time frames to allow borrowers to return the full amount of funds advanced by the lender without being charged fees; and provide for penalties for lenders who willfully violate any of the provisions. Specifically, the act applies to installment loans covered by the Installment Loan Act and the Small Loan Act, and does not apply to federally insured depository institutions. The act takes effect January 1, 2020, and is applicable to loans subject to the aforementioned acts that are executed on or after the effective date.
On March 31, the New York governor announced the passage of the state’s FY 2020 Budget, which includes an amendment (known as “Article 14-A” or “the Act”) to the state’s banking law with respect to the licensing of private student loan servicers. Article 14-A requires student loan servicers to be licensed by the New York Department of Financial Services (NYDFS) in order to service student loans owned by residents of New York. The licensing provisions do not apply to the servicers of federal student loans—defined as, “(a) any student loan issued pursuant William D. Ford Federal Direct Loan Program; (b) any student loan issued pursuant to the Federal Family Education Loan Program, which was purchased by the government of the United States pursuant to the federal Ensuring Continued Access to Student Loans Act and is presently owned by government of the United States; and (c) any other student loan issued pursuant to a federal program that is identified by the superintendent as a ‘federal student loan’ in a regulation”—as the Act treats federal servicers as though they are a licensed student loan servicer. Banking organizations, foreign banking organizations, national banks, federal savings associations, federal credit unions, or any bank or credit union organized under the laws of any other state, are also considered exempt from the new state licensing requirements.
In addition to the licensing requirements, Article 14-A also prohibits any student loan servicer—including those exempt from licensing requirements or deemed automatically licensed—from, among other things, (i) engaging in any unfair, deceptive, or predatory act or practice with regard to the servicing of student loans, including making any material misrepresentations about loan terms; (ii) misapplying payments to the balance of any student loan; (iii) providing inaccurate information to a consumer credit reporting agency; and (iv) making false representations or failing to respond to communications from NYDFS within fifteen calendar days. Article 14-A requires student loan servicers (not including exempt organizations) to accurately report a borrower’s payment performance to at least one credit reporting agency if the organization regularly reports information to a credit reporting agency. Additionally, the Act specifies that a student loan servicer shall inquire on how a borrower would like nonconforming payments to be applied and continue that application until the borrower provides different directions. Article 14-A also outlines examination and recordkeeping requirements and allows for the NYDFS Superintendent to penalize servicers the greater of (i) up to $10,000 for each offense; (ii) a multiple of two times the violation’s aggregate damages; or (iii) a multiple of two times the violation’s aggregate economic gain. Article 14-A takes effect 180 days after becoming law.
- Buckley Webcast: Maintaining privilege in cross-border internal investigations
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Daniel P. Stipano to discuss "The state of the BSA 2019: What’s working, what’s not, and how to improve it" at the West Coast Anti Money-Laundering Forum
- Buckley Webcast: The future of the Community Reinvestment Act
- Hank Asbill to discuss "Creative character evidence in criminal and civil trials" at the Litigation Counsel of America Spring Conference & Celebration of Fellows
- Buckley Webcast: Amendments to the CFPB's proposed debt collection
- Brandy A. Hood to discuss "Flood NFIP in the age of extreme weather events" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "UDAAP compliance" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Major state law developments" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Leveraging big data responsibly" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "State examination/enforcement trends" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Benjamin K. Olson to discuss "LO compensation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- APPROVED Webcast: State and SAFE Act licensing requirements for banks
- John C. Redding to discuss "TCPA compliance in the era of mobile" at the Auto Finance Risk Summit
- Buckley Webcast: The next consumer litigation frontier? Assessing the consumer privacy litigation and enforcement landscape in 2019 and beyond
- Buckley Webcast: Data breach litigation and biometric legislation
- Buckley Webcast: Trends in e-discovery technology and case law
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program