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NYDFS updates criteria for virtual currency regulation
Adrienne Harris, Superintendent of the New York State Department of Financial Services (“DFS”) issued an update on the VOLT initiative, an ongoing project to enhance DFS’s role as a virtual currency regulator. Superintendent Harris published proposed guidance adopting enhanced criteria for procedures to list and de-list virtual currencies as well as updated guidance for designating virtual currencies to the DFS “Greenlist.”
The new General Framework for Greenlisted Coins sets (i) heightened risk assessment standards for coin-listing policies and enhances requirements for consumer-facing products; and (ii) new requirements associated with coin-delisting policies. Under the new guidance, a virtual currency entity that seeks to self-certify coins must create a coin-listing policy and may not self-certify any coins until such possibly has a written approval from DFS. A coin-listing policy must contain and be based on a robust governance structure; comprehensive risk assessment; consideration of factors to identify and mitigate risks involved in each coin and its uses; and policies and procedures to conduct continued monitoring of the coin to ensure consistent safety and soundness compliance.
The new framework does not require prior approval from the DFS to list coins included on the Greenlist, but does require virtual currency entities that choose to list such coins to (i) provide advance notification to DFS and (ii) have a DFS-approved coin-delisting policy.
California AG advocates for medical payment reforms
California Attorney General Rob Bonta submitted a letter to federal agencies urging the federal government to adopt regulations and statutory protections to help protect patients who may need to use medical credit cards and installment loans to pay for healthcare-related bills.
The letter notes that medical payment products exacerbate health disparities, that patients seeking medical care may not be in an appropriate position to make complex financial decisions, and offers California’s protections against medical payment products as a model framework.
In the letter, which is addressed to the U.S. Department of Health and Human Services, Centers for Medicare & Medicaid Services, the CFPB, and the Treasury, Bonta recommends (i) designating medical credit card debt as medical debt and not consumer debt; (ii) ensuring providers properly screen patients for financial aid and charity care before offering a medical payment product; (iii) limiting enrollment when patients may be distressed or under the influence of medication; (iv) providing written notice of financial assistance and potential eligibility for charity care; (v) making reasonable efforts to notify patients about the level of insurance coverage of medical expenses; and (vi) reducing patient cost-sharing responsibilities.
CFPB adjusts annual dollar amount thresholds under TILA, HMDA regulations
On September 18, the CFPB released a final rule revising the dollar amounts for provisions implementing TILA and its amendments that impact loans under the Home Ownership and Equity Protection Act of 1994 (HOEPA) and qualified mortgages (QM). The Bureau is required to make annual adjustments to dollar amounts in certain provisions in Regulation Z, and has based the adjustments on the annual percentage change reflected in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in effect on June 1, 2023. The following thresholds are effective January 1, 2024:
- For HOEPA loans the adjusted total loan amount threshold for high-cost mortgages will be $26,092, and the adjusted points-and-fees dollar trigger for high-cost mortgages will be $1,305;
- For qualified mortgages under the General QM loan definition, the thresholds for the spread between the annual percentage rate and the average prime offer rate will be: “2.25 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $130,461; 3.5 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $78,277 but less than $130,461; 6.5 or more percentage points for a first-lien covered transaction with a loan amount less than $78,277; 6.5 or more percentage points for a first-lien covered transaction secured by a manufactured home with a loan amount less than $130,461; 3.5 or more percentage points for a subordinate-lien covered transaction with a loan amount greater than or equal to $78,277; or 6.5 or more percentage points for a subordinate-lien covered transaction with a loan amount less than $78,277”; and
- For all QM categories, the adjusted thresholds for total points and fees will be “3 percent of the total loan amount for a loan greater than or equal to $130,461; $3,914 for a loan amount greater than or equal to $78,277 but less than $130,461; 5 percent of the total loan amount for a loan greater than or equal to $26,092 but less than $78,277; $1,305 for a loan amount greater than or equal to $16,308 but less than $26,092; and 8 percent of the total loan amount for a loan amount less than $16,308.”
With respect to credit card annual adjustments, the Bureau noted that its 2024 annual adjustment analysis on the CPI-W in effect on June 1, did not result in an increase to the current minimum interest charge threshold (which requires “creditors to disclose any minimum interest charge exceeding $1.00 that could be imposed during a billing cycle”).
NY credit union gets final approval on $2.2M overdraft fee deal
On September 7, the U.S. District Court for the Northern District of New York issued a Final Order approving a more than $2.2 million settlement deal to end a class action over a credit union’s overdraft and insufficient funds fee practices.
The deal includes a $2.1 million settlement fund. After payment of attorneys’ fees to customers’ counsel, 80% of the settlement fund will go to customers who were allegedly charged overdraft fees on debit card transactions that did not overdraw their accounts when the transactions were authorized, and 20% will go to customers who were allegedly hit with multiple insufficient funds fees on a single transaction. In addition, the credit union will forgive, waive and not collect nearly $165,000 in uncollected fees.
On December 7, 2022, plaintiffs filed a putative class action complaint in the United States District Court for the Northern District of New York that consolidated two putative class action cases in which the plaintiffs alleged the credit union’s assessment of more than one insufficient funds fee on a single transaction and assessment of overdraft fees on debit card transactions that did not overdraw the customers’ accounts was a breach of contract, breach of the covenant of good faith and fair dealing, and violative of New York General Business § 349, et seq. Shortly after the actions were consolidated, the parties notified the court that they were working towards a settlement.
Ginnie Mae released the Social Impact and Sustainability Framework and supports broader access to mortgage financing
On September 14, Ginnie Mae announced the launch of its “Social Bond” label to indicate underlying collateral that is designed to support a positive social and affordable housing outcome, and released the Social Impact and Sustainability Framework.
The “Social Bonds” revision to Ginnie Mae’s standard forms of prospectus details attributes of Ginnie Mae MBS to provide transparency to investors. The insurance or guaranties extended under certain government programs reduce borrower credit risk, which promotes broader access to mortgage credit and/or less costly credit for borrowers, thereby expanding homeownership access and affordability among targeted populations (low-to-moderate income borrowers, veterans, senior citizens, rural communities, and/or tribal, Alaska Native, and Native Hawaiian communities).
The Social Impact and Sustainability Framework highlighted Ginnie Mae’s role in connecting the global capital markets to America’s housing financial system and providing liquidity to support access to affordable housing and lending for first first-time homebuyers, low-to-moderate income households, veterans, seniors, and members of urban, rural, and tribal communities from inception.
FTC fines two companies $6M for inaccurate background reports
The FTC fined two companies that sell consumer background reports through subscriptions for violations of the FTC Act and Fair Credit Reporting Act (“FCRA”). In addition to allegedly claiming, without substantiation, to have the most accurate reports available to the public, the complaint says two companies deceptively claimed individuals had criminal or arrest records when the individual did not; deceptively claimed consumers can remove information or flag it as inaccurate, and deceptively failed to disclose that third-party reviews were incentivized and biased.
The companies also furnished consumer reports to subscribers “without reason to believe those subscribers have permissible purposes to obtain such reports.”
The stipulated order requires the companies to pay a civil penalty of $5.8 million, prohibits them from advertising, marketing, promoting, or offering for sale certain reports including arrest records, bankruptcy records, and eviction records until the establish and implement a comprehensive monitoring program, and prohibits them from continuing any of the deceptive practices set forth in the complaint.
Risks in college tuition payment plans revealed in CFPB report
On September 14, the CFPB released a report highlighting risks associated with college tuition payment plans. Analyzing nearly 450 college websites, the report found that many plans lack clear disclosures and have confusing repayment terms, potentially causing students to miss payments and accumulate debt. Additionally, the CFPB noted that some institutions use transcript withholding as a debt collection tool, a practice deemed illegal and detrimental to students' career prospects.
Key findings include:
- Inconsistent and confusing disclosures in tuition payment plans.
- Substantial fees, including enrollment fees, returned payment fees, and late fees, leading to high costs for students.
- Intrusive debt collection practices, such as withholding transcripts, negatively impacting students' futures.
- High costs for missed payments and potential conversion of no-interest plans into interest-bearing loans.
- Contracts that may force students to waive legal rights and protections.
- Lack of standardized disclosure requirements, leading to inconsistency in how plans are presented on school websites.
The CFPB plans to continue monitoring tuition payment plans and school-based lending practices to protect consumers from potential violations of federal consumer financial laws.
CFPB announces consent order against leasing company
On September 11, the CFPB issued a consent order against an Ohio-based nonbank consumer finance company (respondent), for deceptive practices related to consumer leasing agreements. The CFPB, along with 41 states and the District of Columbia, addressed respondent’s conduct in a parallel multi-state settlement. According to the consent order, respondent, operating through major retailers, allegedly concealed contract terms and costs from consumers, leading them to unknowingly enter into costly leasing agreements. The Bureau claims that deceptive practices left consumers unable to return products and burdened with unexpectedly high payments, violating the CFPA and Regulation M, implementing the Consumer Leasing Act.
The consent order states that respondent concealed lease agreement terms, often providing consumers with copies of the agreements after transactions or relying on verbal descriptions from store employees. Consumers were also allegedly trapped by unreasonable return practices, as respondent did not accept returns for many items, forcing consumers to pay excessively high prices. Additionally, the CFPB claimed respondent failed to provide legally required disclosures, leading to revenues of approximately $192 million from around 325,000 consumers.
As a result of the consent order, respondent is permanently prohibited from offering consumer leases and is required to close all outstanding consumer accounts. Consumers will be allowed to keep leased merchandise without further payment, amounting to approximately $33.6 million in released payments. Respondent must also pay a $2 million penalty, with $1 million going to the CFPB's victims’ relief fund and the remaining $1 million allocated to the participating states.
The CFPB's director, Rohit Chopra, emphasized the significance of the order, stating that it permanently bans respondent from engaging in such agreements. The alleged deceptive practices, which occurred from January 1, 2015 to the present, and allegedly affected over 1.8 million consumers who entered into financial agreements with the company covering a wide range of items, from auto parts to furniture and jewelry. Respondent neither admitted nor denied the CFPB’s claims.
Biden announces nomination for FDIC Inspector General
On September 15, President Joe Biden announced his intention to nominate Jennifer L. Fain as Inspector General of the FDIC. Fain brings over 22 years of experience in the inspector general community, most recently serving as Deputy Inspector General for the Export-Import Bank of the United States (EXIM). She has extensive oversight experience in financial services and consumer protection and has held leadership positions in various audit, inspection, and evaluation offices within federal agencies. Fain holds an M.S. in Finance from Johns Hopkins University and a B.S.B.A. in Accounting from the University of Colorado.
Chopra shares prepared remarks about the lessons from 2008
In his recent address at the Better Markets Conference and his address at the Mortgage Collaborative National Conference, CFPB Director Rohit Chopra reflected on lessons from the 2008 financial crisis, discussing the regulatory failures exemplified by mortgage entities’ risky practices and emphasized the post-crisis reforms, including the creation of the CFPB. Chopra highlighted the CFPB's role in implementing crucial mortgage industry standards and its positive impact on borrower protections. He also mentioned the challenges facing the mortgage market today and the legal battles over CFPB rules, touching upon an upcoming Supreme Court case challenging the CFPB's constitutionality and its potential consequences for financial stability, underlining the importance of regulatory rules for financial markets and household finances. Chopra highlighted the CFPB's role in implementing standards for ensuring borrowers' ability to repay through the qualified mortgage and ability-to-repay rule, which granted legal immunity to compliant lenders. As a result of the financial crisis, Congress set requirements related to mortgage data, mortgage servicing, and mortgage lender compensation. Much of the authority that had been held by the OCC, the Fed, and the Office of Thrift Supervision were transferred to the nascent CFPB. In his remarks, Chopra also outlined areas where further action is needed, including open banking, financial data rights, bank mergers, the effectiveness of "living wills" for large financial firms, and the regulation of shadow banks.