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CFPB sues student loan debt-relief operation
On March 16, the CFPB sued a California-based student loan debt relief company, its owner, and manager (collectively, “defendants”) for allegedly charging borrowers more than $3.5 million in unlawful advance fees. The complaint alleged that between 2015 and 2019, the defendants violated the Telemarketing Sales Rule (TSR) and the CFPA by unlawfully marketing and enrolling borrowers in the company’s purported debt relief services. Defendants allegedly charged and collected advance fees from borrowers with federal student loans to file paperwork on their behalf in order to access free Department of Education debt-relief programs. According to the Bureau, the defendants violated the TSR by requesting and receiving payment of fees before renegotiating, settling, reducing, or altering the terms of at least one debt pursuant to an agreement, and before the consumer made at least one payment pursuant to that agreement. The Bureau also alleged that the owner defendant formed a California limited liability company (relief defendant) and unlawfully transferred a portion of the funds received from the advance fees into the relief defendant’s bank account. The complaint seeks injunctive relief, as well as restitution and civil money penalties. The complaint also seeks to have the relief defendant disgorge or compensate consumers for the funds it received.
FDIC encourages banks to submit diversity self-assessments
On March 15, the FDIC’s Office of Minority and Women Inclusion (OMWI) encouraged FDIC-supervised financial institutions with 100 or more employees to submit voluntary self-assessments of their diversity policies and practices. OMWI’s diversity program will assess a financial institution’s diversity policies in the following areas: (i) organizational commitment; (ii) workforce profile and employment practices; (iii) procurement and business practices/supplier diversity; (iv) transparency of organizational diversity and inclusion; and (v) an entities’ self-assessment. OMWI noted that the self-assessment is not an examination requirement, and therefore will not impact a financial institution’s safety and soundness, consumer compliance, or Community Reinvestment Act examination ratings.
FTC permanently bans debt collectors
On March 15, the FTC announced that defendants in two cases will be permanently banned from the debt collection industry. As previously covered by InfoBytes, the FTC filed complaints against the defendants last year alleging the defendants used deceptive tactics to threaten false legal action through the use of robocalls to collect debts consumers did not owe or the operation did not have the right to collect. The actions were taken as part of the FTC’s “Operation Corrupt Collector”—a nationwide enforcement and outreach effort established by the FTC, CFPB, and more than 50 federal and state law enforcement partners to target illegal debt collection practices (covered by InfoBytes here).
Under the terms of the settlements (see here, here, and here), in addition to being permanently banned from participating in debt collection and debt brokering activities, the defendants are also prohibited from making misrepresentations to consumers, including (i) whether consumers are legally obligated to pay defendants; (ii) whether defendants are attorneys or affiliated with a law firm; (iii) the terms of any refund policy; and (iv) any material facts concerning products or services. The settlements also include monetary judgments of approximately $16.4 million and $11.2 million, which are both partially suspended due to the defendants’ inability to pay.
CFPB declines to stay $51 million order for online payday lender
On March 9, the CFPB denied a request made by a Delaware online payday lender and its CEO (collectively, “respondents”) to stay a January 2021 final decision and order requiring the payment of approximately $51 million in restitution and civil money penalties, pending appellate review. As previously covered by InfoBytes, in 2015, the Bureau filed a notice of charges alleging the respondents (i) continued to debit borrowers’ accounts using remotely created checks after consumers revoked the lender’s authorization to do so; (ii) required consumers to repay loans via pre-authorized electronic fund transfers; and (iii) deceived consumers about the cost of short-term loans by providing them with contracts that contained disclosures based on repaying the loan in one payment, while the default terms called for multiple rollovers and additional finance charges. Former Director Kathy Kraninger issued the final decision and order in January, affirming an administrative law judge’s recommendation that the respondents’ actions violated TILA, EFTA, and the CFPA’s prohibition on unfair or deceptive acts or practices by, among other things, deceiving consumers about the costs of their online short-term loans.
The Bureau’s March 9 administrative order determined that respondents (i) failed to show they have a substantial case on the merits with respect to their argument regarding ratification as an appropriate remedy for the respondents’ alleged constitutional violation; (ii) failed to show they “suffered irreparable harm” because the Bureau’s final decision does not infringe on the respondents’ constitutional rights and merely requires them to pay money into an escrow account; and (iii) failed to demonstrate that staying the final decision would not harm other parties and the public interest because the respondents might “dissipate assets during the pendency of further proceedings,” potentially impacting future consumer redress. The administrative order, however, granted a 30-day stay to allow respondents to seek a stay from the U.S. Court of Appeals for the Tenth Circuit.
FDIC announces Louisiana disaster relief
On March 15, the FDIC issued FIL-18-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Louisiana affected by winter storms. The FDIC acknowledged the unusual circumstances faced by institutions affected by the winter storms and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery,” and that the FDIC will consider institutional relief from certain filing and publishing requirements.
CFPB asks industry to aid consumers in getting stimulus funds
On March 17, CFPB acting Director Dave Uejio issued a statement encouraging financial institutions and debt collectors to allow Economic Impact Payment (EIP) funds to reach consumers. Uejio expressed concerns that EIP funds—distributed through the recently enacted American Rescue Plan Act of 2021 (covered by InfoBytes here)—may be intercepted to cover consumers’ overdraft fees, past-due debts, or other financial liabilities. Uejio applauded proactive measures taken by industry members to ensure consumers have the ability to access the full value of their EIP funds, noting that “many financial institutions have pledged to promptly restore the funds to the people who should receive them.”
FHA removes LIBOR benchmark for adjustable-rate HECMs
On March 11, FHA issued Mortgagee Letter (ML) 2021-08 announcing changes for adjustable interest rate home equity conversion mortgages (HECMs) as the market transitions away from LIBOR. Among other things, ML 2021-08 (i) removes approval for using the LIBOR index for adjustable interest rate HECMs; and (ii) approves the use of the Secured Overnight Financing Rate (SOFR) index, permitting “mortgagees to commingle index types for newly originated annual adjustable interest rate HECMs when establishing the expected average mortgage interest rate using the U.S. Constant Maturity Treasury” and SOFR index. ML 2021-08 also states that LIBOR-based HECMs must close on or before May 3 to be eligible for FHA insurance.
Find continuing InfoBytes coverage on LIBOR here.
Agencies propose new flood insurance Q&As
On March 11, the FDIC, OCC, Federal Reserve Board, NCUA, and the Farm Credit Administration issued a notice and request for public comment on 24 proposed interagency questions and answers regarding the 2019 private flood insurance rule (covered by InfoBytes here). The new Q&As supplement interagency questions and answers proposed last year (covered by InfoBytes here), which were intended to reduce compliance burdens for lenders related to flood insurance laws. The new Q&As are designed to help lenders comply with private flood insurance provisions found in the Biggert-Waters Flood Insurance Reform Act of 2012, and address mandatory and discretionary acceptance of private flood insurance policies by lenders if such insurance is required. Comments on the proposed additions to the interagency Q&As are due 60 days after publication in the Federal Register.
SBA defers all disaster and EIDL loans until 2022
On March 12, the Small Business Administration (SBA) extended the deferment period for all disaster loans, including the Covid-19 Economic Injury Disaster Loan (EIDL) program, until 2022. Specifically, the first payment due date for SBA disaster loans made in calendar year 2020 is extended from 12-months to 24-months from the date of the note. SBA disaster loans made in calendar year 2021 will have their first payment due date extended from 12-months to 18-months from the date of the note. SBA notes that existing SBA disaster loans approved before 2020 that were in regular servicing status of March 1, 2020 (and that previously had received an extended initial deferment period through March 31), will automatically be granted an additional 12-month deferment of principal and interest payments. SBA stresses, however, that interest will continue to accrue on outstanding loan balances through the duration of the deferment.
Biden extends Covid-19 regulatory relief
On March 11, President Biden signed the American Rescue Plan Act of 2021 (the Act), which will, among other things, extend certain emergency authorities and temporary regulatory relief contained in the CARES Act to address the continued impact of the Covid-19 pandemic. Under a section titled, “Committee on Small Business and Entrepreneurship,” the Act will provide an additional $7.25 billion for the Paycheck Protection Program (PPP), extend the eligibility of certain nonprofit entities for covered loans under the PPP, and amend certain aspects of the program allowing for certain businesses to take second loans. However, the Act does not actually extend the PPP, which is currently set to expire on March 31 (covered by InfoBytes here). The Act also allocates nearly $10 billion through the Homeowner Assistance Fund to allow eligible entities to provide direct assistance for mortgage payments, property insurance, utilities, and other housing-related costs to help prevent delinquencies, defaults, and foreclosures. Moreover, a provision related to fair housing activities provides $20 million “to ensure fair housing organizations have additional resources to address fair housing inquiries, complaints, investigations, and education and outreach activities, and costs of delivering or adapting services, during or relating to the coronavirus pandemic.” Additionally, the Act provides $15 billion for Economic Injury Disaster Loan (EIDL) advance payments, including $5 billion for supplemental targeted EIDL advance payments for the hardest hit.
In addition to providing Covid-19 relief, the Act also includes, among other things, a section that modifies the treatment of student loan forgiveness. Specifically, Section 9675 will exclude from gross income any amount of student loan debt that is modified or discharged (in whole or in part) after December 31, 2020, and before January 1, 2026. The tax exemption will include federal, private, and institutional loans. According to a press release issued by Senators Bob Menendez (D-NJ) and Elizabeth Warren (D-MA), the provision is intended to “ensur[e] borrowers whose debt is fully or partially forgiven are not saddled with thousands of dollars in surprise taxes.”