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California DBO Reaches Settlement with Mortgage Lender regarding Affiliate Settlement Service Fees
On November 19, the California DBO announced a settlement with a residential retail mortgage lender to resolve allegations that, from September 30, 2009 through January 21, 2014, it overcharged consumers for a settlement service fee to cover third-party services, and also failed to disclose that the third-party servicer was an affiliated business and that some of its services were performed by the lender’s employees. Additionally, the DBO alleged that the company did not provide examiners with the necessary documentation to account for the full third-party settlement service fee. To resolve Federal and State compliance violations, the company will pay an estimated $2.8 million of combined restitution to more than 70,000 borrowers across the country, and $7.4 million in administrative penalties to participating states where the company is licensed. The settlement requires the company to revise its policies and procedures and, by December 31, 2015, provide adequate training on those revisions to management, mortgage loan originators, and support staff.
Massachusetts Consumer Affairs Regulator Publishes Prepaid Cards Fees Survey
On February 25, the Massachusetts Office of Consumer Affairs and Business Regulation (OCABR) published the results of its survey of prepaid cards. The OCBAR examined 16 different purchasing and use-related fees for 11 randomly-selected prepaid cards, using the fee schedule from each card’s website, which the OCABR stated “were not always easy to find and were quite confusing at times.” The survey identified as the most common fees charged by the prepaid cards surveyed as (i) monthly fees, (ii) ATM withdrawal fees, and (iii) balance inquiry fees, which were each charged by nine of the 11 cards surveyed. The OCABR researchers claim to have discovered “additional types of fees associated with the products”, including fees associated with alternative card payment plans. The OCABR believes such alternative options make it more difficult for consumers to anticipate the cost of having and using a prepaid card.
Texas Finance Commission Increases Allowable Administrative Fees, Acquisition Charges; Sets Maximum Allowable Documentary Fees
On August 27, the Texas Finance Commission, Office of Consumer Credit Commissioner, issued a bulletin on recently adopted rules to increase certain allowable fees and charges on consumer loans and cash advances. The Commission exercised authority recently granted by the state legislature to set maximum amounts for administrative fees charged on consumer loans and acquisition charges on cash advances. The rules allow, respectively, authorized lenders to (i) collect on consumer loans an administrative fee that does not exceed $100 and (ii) collect on cash advances an acquisition charge that does not exceed the lesser of 10% of the cash advance of the loan or $100. The Commission also issued a second bulletin on a new rule setting the maximum documentary fees chargeable by Chapter 345 retail creditors in retail installment transactions, including a maximum fee of $125 on transactions for the purchase of covered land vehicles or watercrafts. For transactions involving both the purchase of a land vehicle and a watercraft, the maximum amount chargeable is $175. All of the changes take effect on September 5, 2013.