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Financial Services Law Insights and Observations

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  • DOJ settles with Minnesota community bank to resolve fair lending violations

    Lending

    On May 8, the Department of Justice announced a settlement with a Minnesota community bank to resolve allegations that the lender excluded predominantly minority neighborhoods from its mortgage lending service in violation of the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA). According to the complaint filed in 2017, between 2010 and 2015, the bank engaged in unlawful redlining in and around Minneapolis-St. Paul, Minnesota by meeting the residential credit needs of individuals in majority-white census tracts, but avoided serving similar needs in majority-minority census tracts. The settlement requires the bank to expand its banking services in predominantly minority neighborhoods, including opening one full service branch within the specified census tract. In addition to compliance monitoring and reporting requirements, the bank is also required to (i) employ a Community Development Officer and an Executive leader; (ii) spend a minimum of $300,000 on advertising, outreach, and education and credit repair initiatives; (iii) invest a minimum of $300,000 in a program for special purpose loan subsidies; and (iv) continue to provide fair lending training to all employees.

     

    Lending DOJ Fair Lending Redlining ECOA Fair Housing Mortgage Lenders Mortgage Origination

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  • Illinois Attorney General sues online “pension sale” installment lender

    Lending

    On April 19, the Illinois Attorney General announced a lawsuit against a Nevada-based installment loan company alleging the company made illegal installment loans without a license. According to the press release, the Illinois Attorney General alleges that the company markets high rate installment loans in exchange for payments from a consumer’s pension benefits in violation of Illinois law. In addition, the Attorney General claims that the company illegally advertised its loans and concealed high finance charges from consumers and, in some instances, continued to withdraw money from accounts after consumers attempted to cancel the agreement. The Attorney General is seeking the contracts to be voided, an injunction against the behavior, restitution for consumers, and civil money penalties.

    Lending State Issues Installment Loans Pension Benefits Interest Rate State Attorney General

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  • Department of Education, Veterans Affairs team up to simplify student loan discharge process for disabled veterans

    Lending

    On April 16, the U.S. Department of Education announced a partnership with the U.S. Department of Veterans Affairs (VA) to identify disabled student loan borrowers who qualify for debt forgiveness. Eligible veterans with federal student loans or aid through the Teacher Education Assistance for College and Higher Education Grant Program that are identified as a match on the National Student Loan Data System and the VA database will be notified of their potential eligibility in the mail and will receive a Total and Permanent Disability Discharge application.

    Lending Student Lending Department of Education Department of Veterans Affairs Debt Cancellation

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  • NYDFS announces investigation into rent-to-own as predatory lending

    Lending

    On April 16, the New York Department of Financial Services (NYDFS) announced an investigation into whether rent-to-own and land installment home purchase agreements constitute unlicensed, predatory mortgage lending in New York. NYDFS acknowledged the ongoing investigation while releasing a consumer alert to New Yorkers about rent-to-own and land installment contract pitfalls. The alert notifies consumers that the agreements may violate certain New York laws and regulations governing fair lending, mortgage protection, interest rates, habitability, and property condition. NYDFS encourages consumers to consider a traditional leasing option and be aware of the state of disrepair the property may be in before signing the agreement.

    Lending State Issues NYDFS Rent-to-Own Predatory Lending Fair Lending Mortgages

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  • Washington governor enacts bill to provide student loan debt relief

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    On March 22, the Washington governor signed HB 1169, which establishes the student opportunity, assistance, and relief act to address student loan debt. Among other things, HB 1169 (i) repeals certain statutes allowing the suspension of a professional license or certificate due to student loan default; (ii) changes the judgment interest rate for unpaid private student loan debt to two percentage points above the prime rate, unless the judgment interest rate is specified in the contract; (iii) defines “private student loan,” and outlines exclusions, such as “an extension of credit made under an open-end consumer credit plan, a reverse mortgage transaction, a residential mortgage transaction, or any other loan that is secured by real property or a dwelling”; and (iv) outlines provisions and exemptions for bank account and wage garnishment. The act takes effect June 7.

    As previously covered in InfoBytes, earlier in March the Washington governor established the “Washington student education loan bill of rights” to outline licensing requirements and responsibilities for student loan servicers.

    Lending State Issues State Legislation Student Lending Debt Relief

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  • West Virginia passes bill amending licensing requirements for mortgage loan originators

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    On March 22, the West Virginia governor signed HB 4285, which amends provisions under the West Virginia Safe Mortgage Licensing Act (Act) related to licensing requirements for mortgage loan originators, including those related to continuing education. HB 4285, among other things, (i) updates requirements for applicants registering for mortgage loan originator licenses; (ii) requires nonresident mortgage loan originators licensed under the Act to “acknowledge that they are subject to the jurisdiction of the courts of West Virginia”; (iii) outlines provisional license exceptions for loan originators; and (iv) specifies prelicensing and relicensing education requirements. The amendments take effect May 31.

    Lending State Issues State Legislation Mortgage Origination Mortgages Licensing

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  • Florida enacts legislation prohibiting the misrepresentation of a residential mortgage loan as a business purpose loan

    Lending

    On March 21, the Florida governor signed HB 935, which prohibits the misrepresentation of a residential mortgage loan as a business purpose loan. HB 935 defines “business purpose loan” and requires that “a person must refer to the official interpretation” of the CFPB under 12 C.F. R. Section 1026.3(a) to determine if a loan is for a “business purpose.”  It also provides penalties for knowingly or willfully misrepresenting a residential mortgage loan as a business purpose loan. Additionally, HB 935 defines the phrase “hold himself or herself out to the public as being in the mortgage lending business” to include representing to the public through advertisements or solicitations that the individual or business is a licensed mortgage lender. The law is effective July 1.

    Lending State Issues State Legislation Mortgages

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  • Tennessee amends interest rate legislation

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    On March 23, the Governor of Tennessee signed HB 1944, which amends lending provisions of the Tennessee Code Annotated to change the application of interest rates to the amount financed instead of the total amount of the loan with regard to certain loans made by Tennessee industrial loan and thrift companies. The following interest rate requirements under present Tennessee law now apply to the amount financed: (i) under $100, no interest shall be charged on the principal or on the unpaid balance due after maturity in excess of a maximum effective rate of 18 percent per annum; (ii) between $100 and $5,000, no interest shall be charged on the principal or on the unpaid balance due after maturity in excess of a maximum effective rate of 30 percent per annum; (iii) greater than $5,000, no interest shall be charged on the principal or on the unpaid balance due after maturity in excess of a maximum effective rate of 24 percent per annum; and (iv) for open-end credit plans, a maximum effective rate of 24 percent per annum applies to the principal or on the unpaid balance due after maturity. HB 1944 is effective immediately and applies to loans made on or after March 23.

    Lending State Issues Interest Rate Consumer Finance Usury State Legislation

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  • Florida allows 60 - 90 day payday loan

    Lending

    On March 19, the Florida governor signed legislation, SB 920, which authorizes the lending of an additional type of payday loan (referred to as, “deferred presentment installment transaction”). The legislation now allows loans under $1,000 that have a repayment term between 60 and 90 days with maximum fees of 8 percent of the outstanding transaction balance charged on a biweekly basis. Fees must be calculated using a simple interest calculation. Previously, Florida only authorized small-dollar loans under $500 that had repayment terms between seven and 30 days (referred to as, “deferred presentment transaction[s]”).

    The expansion of the allowable small-dollar loans, appears to be in response to the CFPB’s final rule addressing payday loans, vehicle titles loans, and certain other extensions of credit (previously covered in a Buckley Sandler Special Alert), which covers most transactions with repayment terms of less than 45 days. While the CFPB’s rule became effective on January 16, compliance for most of the rule’s provisions is not required until August 2019. Moreover, in January, the CFPB announced its plan to reconsider the final rule (covered by InfoBytes here).

    Lending State Issues State Legislation Payday Lending

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  • Washington state enacts student education loan bill of rights, outlines servicer requirements

    Lending

    On March 15, the Washington governor signed Senate Bill 6029, which establishes the “Washington student education loan bill of rights” and outlines licensing requirements and responsibilities for student loan servicers. The act, among other things, requires that the council designate a “student loan advocate” whose responsibilities include providing timely assistance to borrowers, reviewing borrower complaints, referring servicing-related complaints to the state’s Department of Financial Institutions (DFI) or the Attorney General’s office, compiling and disseminating data regarding borrower complaints, and establishing a student education loan borrower education course by October 1, 2020. The act also requires that student loan servicers be licensed through the state (certain entities that are exempt from the licensing requirement must still comply with the act’s other requirements). Under the act, student loan servicers—in addition to complying with applicable federal program requirements—must also (i) provide information to borrowers concerning repayment options, account history, and assessed fees; (ii) notify borrowers when acquiring or transferring servicing rights; and (iii) provide disclosures concerning the possible effects of refinancing student loans. The act further provides that third-parties offering student education loan modification services may not charge or receive money “prior to full and complete performance of the [agreed upon] services,” may not charge fees that are in excess of what is customary or reasonable, and must immediately inform a borrower in writing if the owner or servicer of a loan requires additional documentation or if “modification, refinancing, consolidation, or change in repayment plans . . . is not possible.”

    Furthermore, the act exempts from the outlined requirements “any person doing business under, and as permitted by, any law of this state or of the United States relating to banks, savings banks, trust companies, savings and loan or building and loan associations, or credit unions.” 

    Lending Student Lending Licensing State Issues Servicer State Attorney General

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