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Fed establishes Financial Stability Climate Committee
On March 23, Federal Reserve Governor Lael Brainard spoke at the “Transform Tomorrow Today” Ceres 2021 Conference to discuss the challenges and risks climate change poses to financial institutions. To strengthen the Fed’s capacity to identify and assess these financial risks, Brainard announced the establishment of the Financial Stability Climate Committee, which will complement the work of the Fed’s Supervision Climate Committee, and is “charged with developing and implementing a program to assess and address climate-related risks to financial stability.” The new committee will coordinate with the Financial Stability Oversight Council and its member agencies, as well as with the Fed’s community development, payments, international coordination, and economic research and data areas, in order to develop a coordinated approach. Brainard emphasized that the Fed is committed to increasing its capacity “to understand and address the risks, complexities, and challenges related to climate change within the Federal Reserve's responsibilities,” and noted that “climate change can be seen as similar to other financial stability shocks emanating from outside the financial system, such as COVID-19, which are difficult to predict with precision.”
HUD approves settlement resolving alleged lending discrimination
On March 19, HUD released a Conciliation Agreement between an individual consumer and a mortgage lender to resolve allegations that the lender violated the Fair Housing Act by denying the consumer’s loan for a group home for persons with disabilities. The lender denied any discriminatory behavior, and agreed to resolve the complaint by (i) paying the consumer $125,000; (ii) implementing additional training for employees, including home mortgage consultants, managers, and underwriters; and (iii) ensuring its policies comply with the Fair Housing Act.
Fed targets flood insurance violations
On March 18, the Federal Reserve Board announced an enforcement action against a Pennsylvania-based bank for alleged violations of the National Flood Insurance Act (NFIA) and its implementing Regulation H. The consent order assesses a $105,000 penalty against the bank for an alleged pattern or practice of violations of Regulation H but does not specify the number or the precise nature of the alleged violations. The maximum civil money penalty under the NFIA for a pattern or practice of violations is $2,000 per violation.
Department of Education streamlines borrower defense relief process
On March 18, the Department of Education announced a new, streamlined approach for ensuring federal borrowers who attended institutions that engaged in certain misconduct are able to receive full discharges of their William D. Ford Direct Loan Program loans. The new approach—which rescinds a methodology announced in December 2019 that relied “on publicly available earnings data and a scientifically robust statistical methodology to determine harm”—will immediately create a path for borrowers with approved borrower defense claims to date to receive full loan discharges, including borrowers who already had their claims approved and received only partial relief. In addition, the Department said full relief under the new approach will also include requests to credit bureaus to remove any negative ratings tied to the loans, and reinstatement of a borrower’s federal student aid eligibility, where applicable.
SBA increases lending limit for Covid-19 EIDL program
On March 24, the Small Business Administration (SBA) announced that the maximum amount small businesses and non-profit organizations can borrow through its Covid-19 Economic Injury Disaster Loan (EIDL) program will increase beginning the week of April 6. According to the announcement, SBA will raise the loan limit for Covid-19 disaster loans “from 6-months of economic injury with a maximum loan amount of $150,000 to up to 24-months of economic injury with a maximum loan amount of $500,000.” New loan applications, as well as loans-in-process when the increase takes effect “will automatically be considered” for the new maximum loan limit. This change follows SBA’s announcement earlier this month, which extended the deferment period for all disaster loans, including Covid-19 EIDLs, until 2022 (covered by InfoBytes here).
CFPB: 54 percent increase in consumer complaints from 2019
On March 24, the CFPB published its Consumer Response Annual Report for 2020, providing a review of the Bureau’s complaint process and a description of complaints received from consumers in all 50 states and the District of Columbia between January 1 and December 31, 2020. According to the report, the Bureau handled approximately 542,300 consumer complaints—an almost 54 percent increase from 2019. Of these complaints, the Bureau noted that roughly 32,100 complaints referenced the Covid-19 pandemic or related keywords, but emphasized that complaints that did not include Covid-19 as a keyword were not necessarily an indication that the complaint was not related to the financial impact of the pandemic. Additionally, roughly 84 percent of the complaints were submitted to companies for review and response, nine percent were referred to other regulatory agencies, and seven percent were determined to be incomplete. Report data showed that more than 3,300 companies responded to complaints received by the Bureau, with roughly 11,100 complaints receiving administrative responses. In addition, as of February 1, 2021, approximately 3,900 complaints were still being reviewed by companies, the report stated. The top products and services—representing approximately 92 percent of all complaints—were credit or consumer reporting, debt collection, credit cards, checking or savings accounts, and mortgages. The Bureau also received complaints related to: (i) money transfers and virtual currency; (ii) vehicle finance; (iii) prepaid cards; (iv) student, personal, and payday loans; (v) credit repair; and (vi) title loans. The CFPB also reported that 89 percent of consumers who submitted complaints indicated that they first tried to resolve their issues with the companies.
FHA: Temporary endorsement of mortgages under forbearance will expire March 31
On March 23, FHA issued a reminder regarding the upcoming expiration of the temporary guidance concerning endorsement processes for mortgages where a borrower was granted a forbearance related to the Covid-19 pandemic prior to the loan being endorsed for FHA insurance. As previously covered by InfoBytes, the temporary guidance—announced last June in Mortgagee Letter (ML) 2020-16—granted mortgagees the ability to submit a mortgage for insurance endorsement involving a borrower who is experiencing financial hardships due to the Covid-19 pandemic, provided the mortgagee “executes a two-year partial indemnification agreement.” The temporary guidance was last extended in ML 2020-45, and is set to expire March 31.
SBA implements newest PPP changes
On March 22, the SBA published an interim final rule (IFR) implementing recent changes to the Paycheck Protection Program (PPP) that were included in the American Rescue Plan Act of 2021, enacted on March 11 (covered by InfoBytes here). These changes include “expanding the eligibility for First- and Second-Draw PPP loans, revising the exclusions from payroll costs for purposes of loan forgiveness, and providing that a PPP borrower that receives a PPP loan after December 27, 2020 can be approved for a Shuttered Venue Operator Grant [(SVOG)] under certain conditions.” Specifically, if a borrower received a First- or Second-Draw PPP loan after December 27, 2020, the amount of the subsequently approved SVOG will be reduced by the amount of the PPP loan. However, if a PPP applicant is approved for an SVOG before SBA issues a PPP loan number, the applicant will be ineligible for the PPP loan and “acceptance of any PPP loan proceeds will be considered an unauthorized use.” The IFR also provides several other clarifications and changes, which will apply to PPP loans approved, as well as loan forgiveness applications submitted, on or after March 11, 2021. The IFR took effect March 18. To assist SVOG applicants, SBA announced the launch of a splash page for the SVOG application portal, which will begin accepting applications April 8.
Earlier on March 18, SBA also released the following updated forms: (i) PPP loan guaranty application for lenders; (ii) Second-Draw loan guaranty lender application; (iii) First-Draw and Second-Draw PPP loan application forms; and (iv) First-Draw and Second-Draw PPP borrower applications for Schedule C filers using gross income.
CFPB and FTC release 2020 FDCPA report
On March 22, the CFPB and the FTC released their 2020 annual report to Congress on the administration of the FDCPA. Under a memorandum of understanding, the agencies are provided joint FDCPA enforcement responsibility and may share supervisory and consumer complaint information, as well as collaborate on education efforts. Among other things, the report provides a broad overview of the debt collection industry during the Covid-19 pandemic and highlights enforcement actions, education efforts, policy initiatives, and supervisory findings. The report also notes that the Bureau handled roughly 82,700 complaints filed by consumers about first- and third-party debt collectors in 2020, up from the 75,000 complaints it received in 2019, and engaged in four public enforcement actions arising from alleged FDCPA violations. Judgments resulting from these actions yielded nearly $15.2 million in consumer redress and $80,000 in civil money penalties. Additionally, the report discusses the Bureau’s FDCPA-rulemaking actions taken last year, including the issuance of two final rules amending Regulation F, which implements the FDCPA (covered by InfoBytes here and here). The report notes that both final rules are scheduled to take effect on November 30, but also refers to a February statement released by acting Director Dave Uejio, in which he “directed staff to ‘explore options for preserving the status quo’” with respect to the debt collection rules.
Earlier in the week, the FTC announced it provided the CFPB last month with its annual summary of debt collection-related activities taken in 2020. While the FTC’s debt collection program primarily focuses on enforcement investigations and litigation with respect to violations of the FDCPA and the FTC Act, the summary also highlights Commission efforts to engage in public outreach, as well as partnerships with the Bureau and other government agencies to combat unlawful debt collection practices. Highlights of the summary include:
- The creation of Operation Corrupt Collector, a nationwide enforcement and outreach effort led by the FTC in coordination with the CFPB and more than 50 federal and state law enforcement partners to target illegal debt collection practices (covered by InfoBytes here).
- The FTC filed or resolved seven cases against 39 defendants, obtaining $26 million in judgments.
- The FTC accused a company and three of its officers of allegedly engaging in passive debt collection—a practice known as “debt parking”—in which the defendants placed debts that consumers did not owe or the defendants were not authorized to collect on consumers’ credit reports without first attempting to communicate with the consumers about the debts (covered by InfoBytes here).
- The FTC and the New York attorney general permanently banned an individual defendant accused of engaging in “serious and repeated violations of law” from participating in debt collection activities (covered by InfoBytes here).
- The FTC produced educational materials for both consumers and debt collectors covering rights and responsibilities under the FDCPA and FTC Act, including resources specifically for Spanish speakers.
FCC issues record $225 million fine for spoofed robocalls
On March 17, the FCC issued a record $225 million fine against two Texas-based telemarketers and their associated companies for allegedly transmitting roughly one billion illegally spoofed robocalls falsely claiming to offer plans issued by well known-health insurance companies. The Truth in Caller ID Act prohibits telemarketers from manipulating caller ID information with the intent to harm, defraud or wrongfully obtain anything of value. According to the FCC’s investigation, one of the companies’ allegedly spoofed robocalls “caused at least one company whose caller IDs were spoofed to become overwhelmed with angry call-backs from aggrieved consumers.” One of the telemarketers also apparently admitted that he placed millions of spoofed calls each day, including to numbers on the Do Not Call list. FCC acting Chairwoman Jessica Rosenworcel issued a statement commenting on the agency’s “largest fine ever,” in which she noted that the “individuals involved didn’t just lie about who they were when they made their calls—they said they were calling on behalf of well-known health insurance companies on more than a billion calls. That’s fraud on an enormous scale.”