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Maryland implements updates to shared appreciation agreements
On November 25, new regulations in Maryland addressing shared appreciation agreements became effective. This action implements Ch. 568 (H.B. 1150) from 2023, which codified that shared appreciation agreements are mortgage loans subject to the Maryland Mortgage Lender Law (covered by InfoBytes here). The new regulations add key definitions, require certain disclosures, including a financing agreement and a commitment to borrowers (which includes a specified disclosure form) within 10 business days of a completed application. The new regulations also establish procedures for property value calculations and add a description of the ability to repay standard with respect to shared appreciation agreements.
Additionally, the regulations require that lenders must use a specified method for calculating property values, actual appreciation, and final payment amount. They also establish that a lender is deemed to have considered a borrower’s ability to repay (assuming all required disclosures have been provided) if (i) the agreement does not require periodic payments before termination; and (ii) has a term of at least five years.
Minnesota Attorney General settles with real estate broker over undisclosed payments
On November 19, the Minnesota Attorney General (AG) announced his recent settlement with a real estate broker (the defendant) over allegations related to the defendant’s advertising of home warranty service contracts with a third-party provider. The AG alleged the defendant did not disclose payments it received from a third-party home warranty provider and that its activities caused confusion among consumers about the value of the warranties, leading to potential violations of Minnesota’s consumer protection statutes. The AG also found that a third party’s home warranty service contracts confused consumers into believing that the third party’s home warranty was a valuable product and contained benefits that the warranty did not actually have. The defendant disputed these allegations, asserting that it provided written disclosures to customers, which were signed, indicating that the defendant advertised the warranties in exchange for a fixed service fee.
The defendant must pay $3.5 million to the AG. The settlement also included several injunctive relief measures. The defendant agreed to discontinue its existing contractual relationships with warranty service providers and refrain from entering new contracts for promoting third-party products or services. Minnesota consumers who purchased the home warranties on or after July 1, 2018, may be eligible for refunds if they meet certain criteria, such as having claims denied or not filing claims within the first year of purchase.
District of Columbia Attorney General releases complaint against earned wage access company
On November 19, the Attorney General for the District of Columbia (D.C. AG) released a complaint against a financial technology company for alleged violations of the District’s Consumer Protection Procedures Act (CPPA). The D.C. AG’s complaint asserted the company’s earned wage access product, marketed as a way for consumers to access their paycheck early without loans, mandatory fees or interest, actually constituted a loan with interest rates exceeding the district’s 24 percent usury cap. The AG contended the company’s practices misled consumers and that it operated as an unlicensed lender in the district.
The lawsuit outlined three counts against the company: for violating the CPPA; violating Title 16 of the District of Columbia Municipal Regulations; and violating the District’s interest rate cap. The complaint detailed how the company’s business model involved charging “Lightning Speed” fees that were required for instant access to funds, which the D.C. AG claimed effectively resulted in high-interest loans with an average interest rate of over 300 percent. Additionally, the D.C. AG argued the lack of a money lending license further exacerbated the company’s non-compliance with local regulations. The district sought several forms of relief, including a permanent injunction to stop the company from continuing its alleged unlawful activities, restitution for affected consumers, and civil penalties, among others.
Attorneys general from 47 states support a robocall proposed rule
On November 12, attorneys general from 47 states (AGs) filed reply comments in response to a public notice seeking comment on the FCC’s proposals to increase accountability and accuracy among filings in the Robocall Mitigation Database (RMD). The AGs expressed their support for the FCC’s proposed rulemaking to enhance the accuracy and accountability of RMD entries, which are used to help combat illegal robocalls. They highlighted issues such as false or incomplete information submitted by providers, which the letter explained undermines enforcement efforts.
The AGs recommended additional procedural measures, including embedding clarifying information in the RMD certification process, requiring timely updates to the Commission Registration System (CORES), and implementing multi-factor authentication and PIN requirements for submissions. They also signaled support for imposing filing fees to discourage bad actors and suggested periodic renewals to maintain current information. Additionally, the AGs advocated for the use of data validation tools to prevent false and inaccurate filings and supported serious penalties for false information. They agreed with the FCC’s proposal for permissive blocking of facially non-compliant providers and emphasized the importance of the RMD as a consumer protection tool.
California’s privacy agency adopts new data broker regulations
On November 8, the California Privacy Protection Agency (CPPA) Board voted to adopt new regulations concerning data broker registration requirements and to advance a proposed rulemaking package for insurance, cybersecurity audits, risk assessments, automated decision-making technology (ADMT), and updates to existing regulations. The data broker regulations, which clarify provisions in the Delete Act, will be submitted to the Office of Administrative Law for review and approval, potentially becoming effective by January 1, 2025. According to the CPPA, these regulations would refine procedures for data brokers and increase public awareness, including clarifying registration requirements and defining terms.
The proposed rulemaking package will be subject to a 45-day formal public comment period. It includes updates to existing CPPA regulations, specifies compliance requirements for insurance companies, mandates annual cybersecurity audits and risk assessments for certain businesses, and establishes consumer rights regarding ADMT.
NYDFS releases its 2024 report on minority mortgage lending
Recently, NYDFS released its 2024 Annual Minority Mortgage Lending Report which provided an analysis of mortgage lending activities in the State of New York, with a focus on minorities’ access to mortgage loans and marking potential redlining. The report, which was the second in an annual series, analyzed HMDA data from 2023 and ranked lenders based on the percentage of mortgage originations made to minorities and in majority-minority census tracts (MMTs) by examining 23 geographies, covering both “New York State as a whole” and all metropolitan statistical areas. The report provided detailed charts and data on lenders’ performances, illustrating the state of mortgage lending to minority populations and in MMTs across various areas in New York. The report highlighted changes in lending patterns and identified lenders with significant activities in minority and MMTs. NYDFS also noted that while it uses this analysis to support fair lending inquiries and legislative changes, it is not in and of itself dispositive of discriminatory intent.
Among other things, findings from the report showed the overall volume of mortgage originations in 2023 decreased to about two-thirds of the 2022 volume. Despite this larger decrease, the percentage of mortgage originations in MMTs decreased only slightly from 20.69 percent in 2022 to 19.74 percent in 2023. The percentage of mortgage applications for properties in MMTs remained relatively consistent. Additionally, the percentage of originations to minorities remained stable, with a minor decrease from 28.08 percent in 2022 to 27.94 percent in 2023.
New York Fed announces modifications to Secured Overnight Financing Rate calculation methodology
On October 23, the New York Fed announced two modifications to the Secured Overnight Financing Rate (SOFR) calculation methodology, which serves as a broad measure of the cost of financing Treasury securities on an overnight basis. Both modifications involved the treatment of transactions within the delivery-versus-payment (DVP) segment of the repossession market, whereby investors and collateral providers exchange money and securities bilaterally and without the use of a clearing bank. These changes, which are aimed to make SOFR more accurate and reliable, will start on November 25.
On the first of the changes, transactions between affiliated entities will be excluded from the DVP segment, which is the largest of the three market segments incorporated into the calculation of SOFR. The New York Fed typically excluded transactions between affiliated entities when relevant and when data about affiliated transactions was available, which is now possible since the DVP segment switched on January 24, 2022, to higher resolution data sourced directly by the Treasury’s Office of Financial Research. Affiliated-party transactions will be excluded on a “best efforts” basis when neither of the affiliated entities appear to be acting in a fiduciary capacity.
Second, to reduce the impact of “specials” transactions, 20 percent of the lowest-rate transaction volume will also be removed from the DVP segment. “Specials” are trades where cash providers are willing to accept a lesser return to obtain a particular security, executing trades at rates below those for general collateral repos. The New York Fed is making the change to mitigate the influence of “specials” on the entire segment, eliminate related day-to-day variability, balance the risk of including specials with removing activity that is occurring at rates similar to general collateral repossessions, and ensure that SOFR remains a robust benchmark.
New Jersey Attorney General investigation reveals bank’s mortgage redlining
On October 29, the New Jersey Office of the Attorney General and Division on Civil Rights released investigatory findings concluding that a bank engaged in a pattern of redlining Black, Hispanic and Asian communities in New Jersey — allegedly violating the New Jersey Law Against Discrimination. The findings revealed that the bank’s peer lenders originated loans to Black borrowers at over one-and-a-half times the rate the bank did, to Asian borrowers at about two-and-a-half times the rate, and to Hispanic borrowers at over three times the rate. Overall, just 6 percent of the bank’s home loans were originated to residents of color. Despite being aware of these disparities, the bank took little corrective action, and the lending disparities worsened between 2018 and 2022.
In response to these findings, New Jersey filed a claim with the FDIC, the receiver for the bank following its failure, seeking monetary relief for New Jersey residents harmed by Republic’s practices. Additionally, New Jersey shared its findings with another bank that acquired the failed bank’s assets following its closure in April of this year, urging proactive steps to mitigate redlining risks.
New York City dept. announces enforcement delay of debt collection rules after litigation
Recently, the New York City Department of Consumer and Worker Protection (DCWP) announced a delay enforcing Title 6 of the Rules of the City of New York which impact debt collectors. Although the new rules will still take effect on December 1, as planned, the DCWP announced it will not enforce the new rules until April 1, 2025.
On its website, the DCWP posted the following notice: “In response to industry requests, DCWP will not be enforcing the new Debt Collector Rules until April 1, 2025. We will address this grace period for compliance during our DCWP 101: Free Webinar on New Rules for Debt Collectors on Thursday, November 7, 2024[,] at 2:00 p.m.”
As previously covered by InfoBytes, the new debt collection rules require debt collectors to provide specific disclosures when collecting on time-barred debt, maintain comprehensive records of communications, consumer complaints, and other relevant documents, and obtain consumer consent for electronic communications with clear opt-out options.
The DCWP’s announcement came one day after the agency received a lawsuit from two stakeholders (an industry association and a debt-collection agency). The stakeholders filed a complaint for declaratory and injunctive relief against the DCWP, arguing that the debt collection rules violate the First, Fifth and Fourteenth Amendments and are preempted by federal and state law. The stakeholders seek a declaratory judgment invalidating several sections of the rule and a permanent injunction preventing its enactment or enforcement.
Minnesota Attorney General shuts down debt settlement companies
On October 18, the Minnesota Attorney General (AG) secured an Assurance of Discontinuance (AOD) between the State of Minnesota and two debt settlement companies (the respondents) regarding allegations that the companies engaged in unlawful debt settlement practices in Minnesota, including operating without the required registration, failing to execute compliant written agreements, and misrepresenting their services to consumers.
The AG alleged respondents marketed, sold and provided debt settlement services to Minnesota consumers without first registering with the Minnesota Department of Commerce. Furthermore, the companies allegedly imposed charges or received payments without executing written agreements and without performing all agreed-upon services. Additionally, the companies are accused of misrepresenting their services leading to “consumer confusion or misunderstanding.”
To resolve these allegations, the AOD stipulated respondents must cease all business operations in Minnesota unless they become properly registered. They are also required to pay over $1 million to the Attorney General, representing the total amount of payments received from consumers minus refunds and chargebacks. Respondents must also provide a complete and accurate list of all Minnesota consumers they contracted, including payment, chargeback, and refund amounts. Additionally, the companies face a stayed civil money penalty of over $500,000, which will be enforced if they violate the terms of the AOD.