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  • Department of Education forgives roughly $150 million in student loans eligible for automatic closed school discharge

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    On December 13, the Department of Education announced it will automatically discharge approximately $150 million in student loans for roughly 15,000 eligible borrowers as part of implementing the Department’s Final Regulations (81 FR 75926) (also known as the “Borrower Defense Regulations” or “regulations”), which took effect in October following a decision by the U.S. District Court for the District of Columbia that the Department’s move to delay the regulations—finalized in 2016 and originally set to take effect July 1, 2017—was procedurally invalid (see InfoBytes coverage on the ruling here.) The Borrower Defense Regulations are designed to protect student borrowers against misleading and predatory practices by postsecondary institutions and clarify a process for loan forgiveness in cases of institutional misconduct. Of the $150 million, approximately $80 million of the amount is attributable to loans taken out by students who attended now bankrupt, for-profit Corinthian schools. (See InfoBytes coverage on matters related to Corinthian schools here.) The announcement also provides information for loan holders, guaranty agencies in the Federal Family Education Loan program, and schools concerning new closed school discharge requirements.

    Lending Department of Education Student Lending Debt Relief

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  • House Democrats urge Kraninger to resume MLA examinations

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    On December 14, Maxine Waters (D-CA) and 22 other House Democrats issued a letter urging the new CFPB Director, Kathy Kraninger, to resume supervisory examinations of the Military Lending Act (MLA). As previously covered by InfoBytes, according to reports citing “internal agency documents,” the Bureau ceased supervisory examinations of the MLA, contending the law does not authorize the Bureau to examine financial institutions for compliance with the MLA. In response, a bipartisan coalition of 33 state Attorneys General sent a letter to then acting Director, Mick Mulvaney, expressing concern over the decision (covered by InfoBytes here).

    The letter from Waters, who is expected to be the next chair of the House Financial Services Committee, and the other 22 Democratic members of the Committee, argues that “there is no question the [CFPB] has the authority and the responsibility to supervise its regulated entities for compliance with the MLA.” As support, the letter cites to the Bureau’s authority to oversee a “wide range of regulated entities,” the establishment of the Bureau’s Office of Servicemember Affairs, and the 2013 amendments to the MLA, which gave the Bureau the authority to enforce the act. The letter also points to the Bureau’s work obtaining $130 million in relief for servicemembers, veterans, and their families through enforcement actions, as well as the 109 complaints the Bureau has received from military consumers since 2011.

    Lending Military Lending Supervision Military Lending Act Compliance U.S. House House Financial Services Committee CFPB State Attorney General Servicemembers

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  • FTC reaches settlements with two student loan debt relief operators

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    On December 7, as part of Operation Game of Loans—a coordinated effort between the FTC and state law enforcement—the FTC announced settlements with operators of two student loan debt relief operations to resolve allegations that the defendants violated the FTC Act and the Telemarketing Sales Rule by, among others (i) charging consumers who purchased the debt relief services illegal upfront fees; and (ii) falsely promising to assist consumers in enrolling in government programs that would reduce or forgive their student loan debt.

    Under the terms of the settlement, the defendants are permanently banned from advertising, marketing, promoting, offering for sale, or selling any type of debt relief product or service—or from assisting others in doing the same. Combined, the settlements total more than $36 million, though judgments have been partially suspended due to the defendants’ inability to pay.

    Lending FTC Student Lending Debt Relief Settlement FTC Act Telemarketing Sales Rule

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  • U.S. hits law firm with FHA violations; loan modifications discriminated against Hispanic borrowers

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    On October 30, the U.S. Attorney for the Middle District of Florida filed a lawsuit against a Florida legal services provider and two of its officers (defendants) for allegedly violating the Fair Housing Act by “intentionally discriminating against Hispanic homeowners by targeting them with a predatory mortgage loan modification and foreclosure rescue services scheme.” Specifically, the complaint alleges that the defendants, among other things, (i) targeted borrowers through the use of Spanish-language advertisements that allegedly promised to cut mortgage payments in half; (ii) promised payments would be lowered “in a specific timeframe in exchange for thousands of dollars of upfront fees and continuing monthly fees of as much as $550,” without delivering the promised loan modifications; (iii) instructed borrowers to stop making monthly mortgage payments and to stop communicating with their lenders; and (iv) had borrowers sign English-language contracts while only translating the provisions regarding payment. The complaint seeks to enjoin the defendants from participating in discriminatory activities on the basis of national origin, and requests monetary damages and civil penalties.

    Lending Predatory Lending FHA DOJ Mortgages

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  • FTC settles with online student loan refinance lender for allegedly deceptive marketing

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    On October 29, the FTC announced a settlement with an online student loan refinance lender resolving allegations the lender violated the FTC Act by misrepresenting in television, print, and internet advertisements how much money student loan borrowers can save from refinancing their loans with the company. The complaint alleges that the lender inflated the average savings consumers have achieved refinancing through the lender, in some instances doubling the average savings by selectively excluding certain groups of consumers from the data. The complaint also alleges that in some instances, the lender’s webpage misrepresented instances where a loan option would result in the consumer paying more on a monthly basis or over the lifetime of the loan, simply stating the savings would be “0.00.” Although the lender did not admit or deny any of the allegations, it agreed to a consent order that requires it to cease the alleged misrepresentations and agree to certain compliance monitoring and recordkeeping requirements.

    Notably, Commissioner Rohit Chopra issued a concurring statement in this matter suggesting that in instances where the FTC is unable to obtain monetary remedies, it should seek to partner with other enforcement agencies that have the additional legal authority to obtain monetary settlements from the targets of the FTC enforcement action.

    Lending Student Lending FTC Enforcement FTC Act Settlement Consent Order

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  • New York City Department of Consumer Affairs sues for-profit college for deceptive and predatory lending practices

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    On October 19, New York City Department of Consumer Affairs (DCA) announced that it filed suit in New York County Supreme Court against a for-profit college alleging deceptive and predatory lending practices that violate NYC Consumer Protection Law and local debt collection rules. The DCA alleges that college recruiters engaged in deceptive practices such as (i) masquerading federal loan applications as scholarships; (ii) steering students towards college loans and referring to them as “payment plans”; and (iii) deceiving students about institutional grants by failing to disclose that they require students to obtain the maximum amount of federal loans available before a grant can be awarded. DCA also alleges that the for-profit college violated debt collection laws by concealing its identity on invoices when collecting debt, and seeking payments from graduates for debts not owed.

    Lending State Issues Student Lending Predatory Lending Debt Collection

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  • FHFA launches clearinghouse for mortgage industry to assist borrowers with limited English proficiency

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    On October 15, the Federal Housing Finance Agency (FHFA), Freddie Mac, and Fannie Mae announced the joint launch of the Mortgage Translations clearinghouse, a collection of online resources designed to help lenders and servicers assist borrowers with limited English proficiency. The clearinghouse currently provides Spanish-language resources, and will add resources in Chinese, Vietnamese, Korean, and Tagalog in the coming years. Mortgage Translations also includes a Spanish-English glossary developed in collaboration with the CFPB to help standardize translations across the mortgage industry.

    Lending FHFA Freddie Mac Fannie Mae Mortgages

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  • NYDFS issues best practices guidance for state-chartered institutions issuing loans to multi-family residential owners and landlords

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    On September 25, NYDFS released new guidance to assist regulated, state-chartered institutions when engaging in permissible lending activities involving New York rent-stabilized or rent-regulated multifamily residential buildings. According to the press release, the department received complaints concerning certain owners/landlords of rent-stabilized multifamily residential buildings who allegedly engaged in “inappropriate practices including tenant harassment and unsafe living conditions” and may have obtained loans to purchase or renovate buildings directly or indirectly from regulated institutions. The guidance is intended to ensure that regulated institutions apply best practices, including pre-loan and post-loan due diligence, to prevent the possibility of knowingly or unknowingly facilitating these types of practices. Among other things, pre-loan due diligence best practices include (i) conducting due diligence on property owners, including when the bank’s role is to provide indirect financing to the property owner; (ii) conducting due diligence on properties and property owners, including enhanced diligence on properties with a high number of violations; (iii) ensuring “realistic and sound underwriting terms” for loans involving multifamily residential buildings; and (iv) establishing a debt service coverage ratio subject to documentation based on the specific facts of each loan as well as realistic assumptions, consistent with safe and sound underwriting standards and practices. The best practices for post-loan monitoring should include (i) establishing covenants or procedures to ensure emergency and hazard repairs are completed within six months of a loan’s closing; and (ii) considering the property owner’s level of responsiveness and willingness to address building code violation when factoring future loans to the property owner.

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  • FDIC releases report on small business lending activity

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    On October 1, the FDIC released a report, which covers the findings of its Small Business Lending Survey. The survey studied the responses of approximately 1,200 banks to analyze the small business lending practices of each institution. The survey included topics such as, overall small business lending volume, types of borrowers, market areas and competitive environments, competitive practices and advantages, and underwriting practices. Among other things, the report concludes that (i) banks lend more to small businesses than is currently measured as many banks lend over the $1 million commercial and industrial lending limit used; (ii) small and large banks cite to personal relationships as their top competitive advantage in the market and many are willing to grant exceptions to underwriting policies based on their relationships; and (iii) small business lending typically occurs locally as very few banks accept small business loan applications online.

    Lending FDIC Small Business Lending

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  • Conference of State Bank Supervisors announces single, national exam for mortgage loan originator licensing

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    On August 8, the Conference of State Bank Supervisors announced that all states and U.S. territories now use a single, common exam to assess mortgage loan originators (MLOs) in order to simplify the licensing process and streamline the mortgage industry. MLSs who pass the National SAFE MLO Test with Uniform State Content (National Test) will no longer be required to take additional state-specific tests in order to be licensed within any state or U.S. territory. The National Test is part of CSBS’ Vision 2020, which is geared towards streamlining the state regulatory system to support business innovation and harmonize licensing and supervisory practices, while still protecting the rights of consumers. 

    Find continuing InfoBytes coverage on CSBS’ Vision 2020 here.

    Lending CSBS Mortgage Origination Licensing Vision 2020

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