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OCC releases recent enforcement actions
On April 15, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such entities. Included among the actions is a March consent order against a Colorado-based bank, which requires the bank to waive any and all rights to the issuance of a Notice of Charges. According to the order, the Bank entered into a Formal Agreement in May 2016 for engaging in “certain unsafe and unsound practices related to the Bank’s capital, strategic planning, corporate governance, credit administration, trust administration, and Bank Secrecy Act/Anti-Money Laundering compliance program.” In addition, as a result of this order, the Bank is in “troubled condition,” as set forth in 12 C.F.R. § 5.51(c)(7)(ii), unless otherwise informed in writing by the OCC.
Senate Democrats’ minority report criticizes the CFPB
On March 10, Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) released a minority staff report titled “Consumers Under Attack: The Consumer Financial Protection Bureau under Director Kraninger.” Specifically, the report faulted the Bureau for, among other allegations, purportedly protecting payday lenders, failing to properly scrutinize student loan servicers, and failing to enforce civil rights protections. The report was released the same day Kraninger testified before the Senate Banking Committee (covered by InfoBytes here). Among other things, the report argues that the CFPB’s proposed debt collection rule and supplemental notice of proposed rulemaking (covered by InfoBytes here and a Buckley Special Alert) “does more to provide safe harbors for debt collectors than protect consumers” by not banning the collection of time-barred debt. The report also reiterates concerns over Kraninger’s decision to no longer defend the CFPB’s constitutionality (covered by InfoBytes here), as well as her decision last year to delay certain ability-to-repay provisions of the agency’s 2017 final rule covering “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (covered by InfoBytes here), which has led to stays of enforcement actions.
National bank to challenge CFPB on cards suit
On January 30, the CFPB announced that it filed suit in the U.S. District Court for the District of Rhode Island against a national bank (defendant) based upon alleged violations of the Truth in Lending Act (TILA) and its implementing Regulation Z, the Fair Credit Billing Act (FCBA), and the Credit Card Accountability Responsibility and Disclosure Act (CARD Act). The CFPB claims that among other things, when servicing credit card accounts, the defendant did not properly manage consumer billing disputes for unauthorized card use and billing errors, and did not properly credit refunds to consumer accounts resulting from such disputes. Specifically, the complaint alleges that violations included the defendant’s (i) “practice of automatically denying billing error claims or claims of unauthorized use for failure of the consumers to provide Fraud Affidavits, including agreeing to testify as witnesses”; (ii) “failure to refund related finance charges and fees when it resolved billing error notices or claims of unauthorized use in consumers’ favor”; (iii) failure “to provide written notices of acknowledgement or denial in response to billing error notices”; and (iv) failure “to provide credit counseling referrals.” The CFPB is seeking injunctive relief, monetary relief, disgorgement of defendant’s ill-gotten gains, civil money penalties, and costs of the action.
The defendant issued a response to the suit on January 31, stating that it self-identified the issues to the Bureau five years ago while simultaneously correcting any flawed processes. According to the defendant’s statement, “the CFPB’s action is misguided” and “well beyond the expiration of the statute of limitations. The defendant vows to “vigorously challenge” the suit.
1st Circuit rejects dismissal of a Massachusetts foreclosure notice action
On February 8, the U.S. Court of Appeals for the 1st Circuit reversed the district court’s dismissal of a Massachusetts homeowners’ action alleging that the mortgage holder failed to comply with the notice requirement in their mortgage before foreclosing on their property. The district court dismissed the action after concluding that the mortgage holder’s notice satisfied the notice requirements by including the default amount, a cure date, and the fact that failure to cure could result in acceleration. The homeowners appealed, arguing that the mortgage holder failed to strictly comply with the provision’s requirements because the notice provided did not include the conditions and time limitations associated with reinstatement after acceleration that were required by a separate provision in the mortgage.
On appeal, the 1st Circuit reviewed the notice under Massachusetts law, which requires mortgage holders to strictly comply with two types of mortgage terms: (i) ones “directly concerned with the foreclosure sale. . .” and (ii) ones “prescribing actions the mortgagee must take in connection with the foreclosure sale—whether before or after the sale takes place.” In overturning the District Court’s dismissal, the 1st Circuit noted that, because the notice did not contain the additional conditions and time limitations associated with reinstatement from the separate provision, dismissal was inappropriate.