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Financial Services Law Insights and Observations

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  • CFPB reports on NCRA’s complaint responsiveness

    Federal Issues

    On January 5, the CFPB released a report, pursuant to Section 611(e)(5) of the FCRA, on information gathered by the Bureau on certain consumer complaints transmitted by the Bureau to the three largest nationwide consumer reporting agencies (NCRAs). According to the report, the CFPB received over 800,000 credit or consumer reporting complaints between January 2020 to September 2021, and of the complaints, over 700,000 were submitted about the same three NCRAs discussed in the report. According to the Bureau, complaints submitted about the NCRAs accounted for over 50 percent of all complaints received by the Bureau in 2020 and over 60 percent in 2021. The Bureau’s analysis revealed that consumers submitted more complaints in each complaint session and are increasingly returning to the Bureau’s complaint process, with a significant amount of complaints regarding inaccurate information on their credit and consumer reports. The CFPB found that the NCRAs reported relief in less than 2 percent of complaints, which is down from approximately 25 percent of complaints in 2019. Additionally, consumers most frequently complained that the inaccurate information belongs to other individuals, and consumers often described being victims of identity theft. The Bureau, in addition to pointing out how the NCRAs are “fail[ing] to meet [their] statutory obligations” under the FCRA, also noted that medical debts are an “unnavigable quagmire” and needs to be addressed. It reported that the NCRAs “do not take available steps to distinguish between complaints authorized by the consumer and those not authorized by the consumer.” The Bureau also mentioned issues that consumers face when attempting to dispute information on their credit reports, such as, among other things: (i) unsuccessfully disputing information in a timely manner; (ii) frequently expending resources to correct inaccuracies; and (iii) and finding themselves caught between furnishers and NCRAs when attempting to resolve disputes. Other highlights of the report include noting that the NCRA rely “heavily” on utilizing template responses to complaints, despite having 60 days to respond, and that two of the NCRAs mentioned in the report do not give “substantive responses to consumers’ complaints if they suspected that a third-party was involved in submitting a complaint.”

    Federal Issues CFPB Consumer Finance Consumer Reporting Agency Credit Furnishing FCRA

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  • HUD announces disaster relief for homeowners in several states

    Federal Issues

    On January 12, HUD announced disaster assistance for certain areas in Missouri impacted by severe storms, straight-line winds, and tornadoes in December 2021. The disaster assistance supplements state, tribal, and local recovery efforts in specific counties, and provides foreclosure relief and other assistance to affected homeowners following President Biden’s major disaster declaration on January 11. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program allows individuals who have lost homes to finance the purchase of a house or refinance an existing house along with the costs of repair, through a single mortgage. The program also allows homeowners with damaged property to finance the rehabilitation of existing single-family homes. HUD also announced it is allowing applications for administrative flexibility waivers for Community Planning and Development Grantees and public housing authorities. Recently, HUD announced it will provide the same foreclosure relief and assistance to Alabama, Arkansas, Kansas, and Washington state homeowners affected by severe storms, flooding, tornados, and wildfires in those states. (See press releases here, here, here, and here).

    Federal Issues HUD Disaster Relief Mortgages Consumer Finance Arkansas Washington Alabama Kansas Missouri

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  • CFPB sues debt collectors

    Federal Issues

    On January 10, the CFPB filed a complaint against three debt collection companies and their owners (collectively, “defendants”) for allegedly engaging in illegal debt-collection practices. According to the Bureau, the defendants purchase debt portfolios and place them with other collection companies or sell them. The complaint states that from September 2017 through April 2020, the defendants placed debts valued at more than $8 billion and asserts that the defendants knew or should have known that these third-party collection companies were engaging in unlawful and deceptive debt collection measures. The Bureau alleges the defendants were aware of the companies’ false statements to consumers because they received hundreds of complaints from consumers claiming the companies were threating to arrest or file lawsuits if the consumers’ debts were not paid imminently, and the defendants received recorded phone calls alerting them to the companies’ threats and false statements regarding credit reporting. Further, the Bureau claims that the defendants continued to place debts with and sold debts to these companies even after an internal review found major violations of federal law. The Bureau’s complaint, which alleges violations of the CFPA and the FDCPA, seeks consumer restitution, disgorgement, injunctive relief, and civil money penalties.

    Federal Issues CFPB Enforcement Debt Collection UDAAP Deceptive CFPA FDCPA Third-Party Consumer Finance

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  • FDIC announces Washington, Arkansas, and Colorado disaster relief

    On January 12, the FDIC issued FIL-05-2022 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Washington state affected by flooding and mudslides. The FDIC acknowledged the unusual circumstances faced by institutions and their customers affected by the severe weather events in certain counties of Washington 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.” The FDIC noted that it will consider the unusual circumstances when examining efforts to work with borrowers in affected communities and that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements. Earlier on January 5, the FDIC also issued FIL-01-2022 and FIL-02-2022 to provide the same regulatory relief to financial institutions and help facilitate recovery in areas of Arkansas and Colorado affected by severe storms, tornados, winds, and wildfires.

    Bank Regulatory Federal Issues Disaster Relief FDIC Consumer Finance Arkansas Colorado CRA Washington

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  • FHFA sets targeted fee increases for certain loans

    Federal Issues

    On January 5, FHFA announced targeted increases to the upfront fees for certain high-balance loans and second home loans sold to Fannie Mae and Freddie Mac (GSEs). Upfront fees for high-balance loans will increase between 0.25 percent and 0.75 percent, tiered by loan-to-value ratio. Upfront fees for second home loans will increase between 1.125 percent and 3.875 percent, also tiered by loan-to-value ratio. In order to continue to provide support for affordable housing, certain loans, including HomeReady, Home Possible, HFA Preferred and HFA Advantage, will not be subject to the increased fees. Additionally, “loans to first time homebuyers in high cost areas with incomes at or below 100 percent of area median income will have no specific high balance upfront fees.” The new fees will take effect April 1, to “minimize market and pipeline disruption,” FHFA stated. Acting Director Sandra Thompson said the fee increases are another step FHFA is taking to strengthen the GSEs’ safety and soundness, while also ensuring access to credit for first-time homebuyers and low- and moderate-income borrowers. “These targeted pricing changes will allow the [GSEs] to better achieve their mission of facilitating equitable and sustainable access to homeownership, while improving their regulatory capital position over time,” Thompson said.

    Federal Issues FHFA Fannie Mae Freddie Mac GSEs Mortgages

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  • FTC says robocall violations top consumers’ do-not-call complaints

    Federal Issues

    On January 5, the FTC issued its National Do Not Call (DNC) Registry biennial report to Congress. According to the report, more than 244 million consumers have now placed their telephone numbers on the DNC Registry over the past two years. The report also highlighted that in FY 2021, the Commission received more than five million DNC complaints, the majority of which reported robocalls violations as opposed to live telemarketing. The FTC reported that the increased number of illegal telemarketing calls correlates with advancements in technology that make it easier for telemarketers to “spoof” the caller ID information accompanying a call. “[M]any telemarketers use automated dialing technology to make calls that deliver prerecorded messages (commonly referred to as ‘robocalls’), which allow violators to make very high volumes of illegal calls without significant expense,” the FTC said. Imposters posing as government representatives or legitimate business entities topped the complaint list, followed by calls related to warranties and protection plans, debt-reduction offers, and medical and prescription issues. Last month, in response to the consistently high level of impersonator scam complaints, the FTC issued an advanced notice of proposed rulemaking seeking comments on a wide-range of questions related to government and business impersonation fraud (covered by InfoBytes here). The FTC noted that these scammers are looking for information that can be used to commit identity theft or seek monetary payment and often request that funds be paid through wire transfer, gift cards, or cryptocurrency. Additionally, the FTC stated that since the beginning of the Covid-19 pandemic, it has received more than 18,000 Covid-related DNC complaints.

    Federal Issues FTC Robocalls Spoofing Covid-19 Consumer Protection Do Not Call Registry

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  • FTC permanently bans merchant cash advance providers

    Federal Issues

    On January 5, the FTC announced that two defendants who allegedly participated in small business financing scheme are permanently banned from participating in the merchant cash advance and debt collection industries. As previously covered by InfoBytes, the FTC filed a complaint against two New York-based small-business financing companies and a related entity and individuals (including the settling defendants), claiming the defendants engaged in deceptive and unfair practices by, among other things, misrepresenting the terms of their merchant cash advances, using unfair collection practices, and making unauthorized withdrawals from consumers’ accounts. The defendants also allegedly violated the Gramm-Leach-Bliley Act’s prohibition on using false statements to obtain consumers’ financial information, including bank account numbers, log-in credentials, and the identity of authorized signers, in order “to withdraw more than the specified amount from consumers’ bank accounts.” Additionally, the defendants allegedly “engaged in wanton and egregious behavior, including laughing at consumer requests for refunds from [the defendants’] unauthorized withdrawals from customer bank accounts; abusing the legal system to seize the business and personal assets of their customers; and threatening to break their customers’ jaws or falsely accusing them of child molestation during collection calls.” Under the terms of the stipulated order, the settling defendants are required to pay a $675,000 monetary judgment, and must vacate any judgments against their former customers and release any liens against their customers’ property.

    Federal Issues FTC Enforcement Merchant Cash Advance Small Business Lending Gramm-Leach-Bliley FTC Act UDAP Deceptive Unfair

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  • CFPB opens HMDA data filing period

    Federal Issues

    On January 4, the CFPB announced that the filing period for HMDA data collected in 2021 opened on January 1. According to the CFPB, submissions will be considered timely if received by March 1. As previously covered by InfoBytes, in September 2020, the CFPB released the Filing Instructions Guide for HMDA data collected in 2022 that must be reported in 2023. The guide states that there are no significant changes to the submission process and that the required data fields to be collected and reported have not changed. Instructions for quarterly reporting can be found in the Supplemental Quarterly Reporting Guide. According to the CFPB’s recent announcement, passwords are reset every 90 days and users will receive a confirmation email upon submission of their HMDA data. The CFPB also noted that the 2021 Beta Platform is available on an ongoing basis for filers intending to test their submissions, however, “[n]o data submitted on the Beta Platform will be considered for compliance with HMDA data reporting requirements.”

    Federal Issues CFPB HMDA Mortgages

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  • Fed updates legal interpretations related to several regulations

    On December 30, the Federal Reserve Board added several new frequently asked questions related to legal interpretations of the Board’s regulations, including Regulations H, O, W, and Y, as well as questions concerning covered savings associations. The Fed noted that, unless specified, the FAQs are staff interpretations and have not been approved by the Board. Future revisions or supplements may be released as necessary or appropriate.

    • Regulation H: Five new FAQs discuss (i) branch closing procedures and required notices; (ii) the ability to conduct branch activities should a bank relocate its main office; (iii) when a bank may acquire a debt obligation under its general powers to lend under state law; and (iv) public welfare investments made by state member banks involving housing projects with multiple residential buildings.
    • Regulation O: A revised FAQ states that banks may not offer discounts on loan origination fees to an insider if the discount is not available to members of the public with one exception: a bank is not prohibited from “extending credit to an insider as part of a benefit or compensation program that (i) is widely available to employees of the member bank and (ii) does not give preference to any insider of the member bank over other employees of the member bank.”
    • Regulation W: Thirty-four new FAQs address various topics related to (i) provisions concerning nonaffiliate and affiliate lending and extensions of credit under the attribution rule; (ii) valuation and timing principles; (iii) revolving credit facilities and loan commitments involving nonaffiliates; (iv) asset purchases from affiliates; (v) a bank’s acquisition of another company’s shares and liabilities; and (vi) exemptions.
    • Regulation Y: Nine new FAQs discuss (i) circumstances under the Bank Holding Company Act (BHC Act) where “a bank or company that holds bank shares in a fiduciary capacity [would] be considered to have sole discretionary authority to exercise voting rights”; (ii) tying restriction qualifications, exceptions, and safe harbor; (iii) factors considered in the acquisition of bank securities or assets; (iv) trustee powers; (v) filing requirements for persons acquiring ownership or control of shares; (vi) appraisal standards for federally-related transactions; and (vii) rules for engaging in an activity that is complementary to a financial activity. The Fed notes that while these FAQs refer at times to bank holding companies, the FAQs are also applicable to foreign banking organizations that are subject to the BHC Act in the same manner as a bank holding company under the International Banking Act of 1978.
    • Covered Savings Associations: Twenty-nine new FAQs address topics related to covered savings associations (CSAs) and companies that control a CSA pursuant to Section 5A of the Home Owners’ Loan Act. Among other things, the FAQs address (i) the scope of Section 5A; (ii) a CSA’s membership in the Federal Reserve System; (iii) filing requirements; (iv) requirements applicable to a CSA or a company controlling a CSA, as well as mutual CSAs and mutual holding companies controlling a CSA; (v) transactions involving a CSA or a company controlling a CSA; and (vi) the termination of an election to operate as a CSA.

    Bank Regulatory Federal Issues Federal Reserve Regulation H Regulation O Regulation W Regulation Y Covered Savings Association Of Interest to Non-US Persons Bank Holding Company Act Home Owners' Loan Act

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  • FDIC publishes new primary purpose exception to the brokered deposit rule

    On December 31, the FDIC published a notice in the Federal Register of a new business relationship that may now qualify for the primary purpose exception to the brokered deposits rule through a new designated exception. According to the notice, the following additional business arrangement meets the primary purpose exception: “[t]he agent or nominee is ‘engaged in the business of placing’ customer funds at IDIs [insured depository institutions], in a custodial capacity, based upon instructions received from a depositor or depositor’s agent specific to each IDI and deposit account, and the agent or nominee neither plays any role in determining at which IDI(s) to place any customers’ funds, nor negotiates or set rates, terms, fees, or conditions, for the deposit account.” Notice or application to the FDIC is not required to rely on this exception. The notice also pointed out “that a depositor or depositor’s agent that meets the deposit broker definition and uses the services of a custodial agent that meets this designated exception to place deposits would result in such deposits being classified as brokered deposits,” and that “[t]he involvement of the non-discretionary custodial agent does not change the classification of deposits placed by, or through the facilitation of, an entity that otherwise meets the deposit broker definition.” Full compliance with the new brokered deposit rule became required on January 1, 2022.

    Bank Regulatory Federal Issues FDIC Brokered Deposits

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