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FIO joins global green initiative
On February 17, the U.S. Treasury Department’s Federal Insurance Office (FIO) announced that it joined the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). As previously covered by InfoBytes, Treasury announced in August 2021 a request for information seeking public comments on the FIO’s future work related to the insurance sector and climate-related financial risks. This was in response to an executive order issued by President Biden instructing financial regulators to mitigate climate-related risk related to the financial system (covered by InfoBytes here). According to the recent announcement, the FIO “intends to publish a climate report by the year’s end focusing on insurance supervision and regulation, with an assessment of climate-related issues or gaps in the supervision and regulation of insurers, including their potential impacts on U.S. financial stability.” The same day, the Federal Advisory Committee on Insurance (FACI), which provides advice and recommendations to assist the FIO in carrying out its statutory authorities, launched the Climate Related Financial Risk Subcommittee to support the FACI provision of information relevant to the FIO’s work on climate-related risks in the insurance sector.
Education Dept. to forgive $72 million of student loans after FTC action
On February 16, the FTC announced that the Department of Education (Department) will forgive $71.7 million in federal loans for approximately 1,800 former students deceived by a for-profit university. In 2016, the FTC sued university operators for allegedly advertising that 90 percent of graduates found jobs in their fields within six months of graduation, and that graduates had a 15 percent higher income on average than graduates of all other colleges or universities one year after graduation. The announcement expands on a prior FTC settlement, which required the university to pay $49.4 million in partial refunds to qualifying students and $50.6 million in debt relief. The forgiven debt included the full balance owned on all private unpaid student loans issued by the university to students as well as debts for items such as tuition, books, and lab fees. According to the Department’s announcement, these are the first approved borrower defense claims associated with a currently operating institution. The Department noted that it intends to recoup discharge costs from the university and anticipates an increase in the number of approved claims related to the university as it continues to review pending applications.
The Department stated in total it is cancelling $415 million in student loan debt under the borrower defense to repayment program, noting that several other actions will provide borrower defense discharges to nearly 14,000 borrowers attending other colleges and universities. “The Department remains committed to giving borrowers discharges when the evidence shows their college violated the law and standards,” said U.S. Secretary of Education Miguel Cardona. The Department further noted that it is working on new regulations to improve the borrower defense to repayment program, as well as other discharge programs to provide more protections for students and taxpayers. “This includes writing a new borrower defense regulation, proposing to re-establish a gainful employment regulation to hold career training programs accountable for unaffordable debt, and proposing to create financial triggers so that the Department has monetary protection against potential losses, including borrower defense liabilities,” the Department said in its announcement.
FTC hits investment scheme with $111 million judgment
On February 16, the FTC and the Utah Division of Consumer Protection reached a settlement in an action taken against a Utah-based company and its affiliates (collectively, “defendants”) for allegedly using deceptive marketing to persuade consumers to attend real estate events costing thousands of dollars. As previously covered by InfoBytes, the FTC and the Utah Division of Consumer Protection claimed that the defendants violated the FTC Act, the Consumer Review Fairness Act (CRFA), and Utah state law by marketing real estate events with false claims and using celebrity endorsements. The defendants allegedly promised consumers they would (i) earn thousands of dollars in profits from real estate investment “flips” by using the defendants’ products; (ii) receive 100 percent funding for their real estate investments, regardless of credit history; and (iii) receive a full refund if they do not make “a minimum of three times” the price of the workshop within six months. Additionally, consumers who received refunds were allegedly required to sign agreements preventing them from speaking with the FTC, state attorneys general, and other regulators; submitting complaints to the Better Business Bureau; or posting negative reviews. Under the terms of the settlement, the defendants are, among other things, permanently banned from marketing or selling any real estate or business coaching programs, and are restrained from making misleading earnings claims or misrepresenting any material aspect of the performance or nature of goods or services that are the subject of a sales offer. Additionally, the defendants are permanently banned from using contract terms to suppress customers’ ability to review their products or speak to law enforcement agencies, and may not release customer information in connection with any activity related to the subject matter of the order. The settlement also includes monetary judgments totaling more than $111 million.
FTC sues weight-loss companies alleging COPPA and FTC Act violations
On February 16, the FTC filed a complaint for permanent injunction in the U.S. District Court for the Northern District of California against an international weight loss service organization and its subsidy (collectively, “defendants”) for allegedly using unfair and deceptive practices to obtain personal information of underage users without parental consent. According to the complaint, the defendants violated the Children’s Online Privacy Protection Act and Section 5 of the FTC Act by collecting and keeping personal information from children under 13 without providing notice to or obtaining consent from their parents. The complaint alleges that the defendants, among other things, failed to: (i) “provide through the App and website a clear, understandable, and complete direct notice to parents of [the] Defendants’ practices”; (ii) “make reasonable efforts, taking into account available technology, to ensure that parents receive the direct notice”; and (iii) “obtain verifiable parental consent before any collection, use, or disclosure of personal information from children.” The proposed settlement is pending court approval.
HUD announces Hawaii and Kansas disaster relief
On February 16, HUD announced disaster assistance for certain areas in Hawaii impacted by severe storms, flooding, and landslides. The disaster assistance supplements state 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 February 15. 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. Furthermore, HUD is allowing applications for administrative flexibility and waivers for community planning and development grantees and public housing authorities.
On February 18, HUD announced disaster assistance for certain areas in Kansas impacted by severe storms and straight-line winds. The disaster assistance supplements state 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 February 17. 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. Furthermore, HUD is allowing applications for administrative flexibility and waivers for community planning and development grantees and public housing authorities.
CFPB opens rulemaking petition to public
On February 16, the CFPB announced the launch of a new process for the public to submit petitions for rulemaking directly to the Bureau. According to the announcement, the public will have the ability to request that the Bureau pursue a new rule, amend an existing one, or repeal a rule. By allowing the public to make rulemaking suggestions, the Bureau is hoping to “identify consumer protection issues worthy of reform, rulemaking, or in need of further clarification.” The Bureau also noted that “[f]ormer government employees and other individuals who are paid to influence the agency’s rulemaking agenda behind the scenes will be asked to submit their petition for public inspection instead.” The initiative “is part of a series of steps the CFPB is taking to ensure high standards of transparency and ethics, particularly when it comes to addressing the corrosive effects of the ‘revolving door.’” According to CFPB Director Rohit Chopra, the program “will broaden access to the agency’s rulemaking process.”
CFPB compares banks’ overdraft practices
On February 10, the CFPB published a blog post providing research on banks’ overdraft fees, which highlighted the Bureau’s “ongoing and growing concern about the impact of bank overdraft fees on families.” The Bureau noted that in 2019, overdraft and non-sufficient fund fees (NSF) fees cost Americans approximately $15.5 billion, and though these fees decreased during the Covid-19 pandemic, “they’ve still cost people billions during this crisis—and were climbing through the third quarter of 2021.” According to the blog post, banks have been announcing changes to their overdraft programs, which include, among other things: (i) eliminating NSF fees charged when transactions bounce; (ii) decreasing overdraft fees; (iii) reducing the daily number of overdraft/NSF fees the bank can charge; (iv) providing or increasing the amount that an account can go negative prior to charging an overdraft fee; and (v) providing a grace period for bringing an account back to positive prior to charging an overdraft fee. The Bureau noted in an earlier blog post that “these changes represent an encouraging step by some banks in the right direction.” Additionally, the Bureau released a table giving a “snapshot” of large banks’ overdraft and NSF practices. The Bureau’s work on overdraft/NSF fees is part of a CFPB initiative, in which the Bureau says it “will strive to strengthen competition in consumer finance by using its authorities to reduce these kinds of junk fees.” The Bureau has issued a request for comment from the public on fees that are associated with consumers’ bank accounts, prepaid or credit card accounts, mortgages, loans, payment transfers, and other financial products, which the Bureau has characterized as being “exploitative” and not being subject to competitive processes that ensure fair pricing. Bureau research found that certain fees often hide a product’s true cost and can undermine a competitive market. (Covered by InfoBytes here). The comment period opened February 4 and closes on March 31.
Courts order VoIP providers to give information to FTC
On February 14, the FTC announced that two federal courts in California ordered two Voice-over-Internet Protocol (VoIP) service providers to produce information that the agency is seeking as part of a continuing investigation into possible illegal robocalls. According to the first order, the VoIP service provider is required to comply with a CID as part of an FTC investigation. According to the FTC, “[a]lthough the CID directed [the respondent] to produce selected information and documents by the end of February 2021, the company produced only a small fraction of the required information, even after receiving an extension of the response deadline from Commission staff.” The FTC filed a petition in federal court seeking to compel compliance with the CID when further efforts to cooperate with the respondent were “unsuccessful.” The assigned magistrate judge issued a report and recommendation in December 2021, finding “that the FTC is entitled to enforcement of the remainder of the CID,” and recommending that the district judge enter an order requiring the respondent to comply. The court accepted that recommendation, and issued an order compelling the respondent’s compliance with the CID. The second VoIP service provider was likewise ordered to turn over information required under an FTC CID, issued to in January 2021. After failing to respond to the CID, the FTC filed suit to enforce compliance and claimed that “neither the company nor its principals had responded to the CID, which ‘materially impeded the FTC’s investigation.’” According to the FTC, the court granted the FTC’s petition, and in response, the respondent turned over the required information.
CFPB releases EFTA bulletin
On February 15, the CFPB released a bulletin reiterating that the EFTA and its implementing regulation, Regulation E, apply to government benefit accounts with the exception of certain state and local electronic benefit transfer programs. The EFTA establishes, among other things, that “no person may require a consumer to establish an account for receipt of electronic fund transfers with a particular financial institution as a condition of employment or receipt of government benefits.” According to the Bulletin, this “compulsory use prohibition ensures that consumers receiving the government benefits” are provided “a choice with respect to how they receive their funds.” The bulletin also summarized the regulation’s disclosure requirements for government benefit accounts, which includes disclosing that the consumer: (i) “has several options to receive benefit payments, followed by a list of the options available to the consumer, and a statement directing the consumer to tell the agency which option the consumer chooses”; or (ii) “does not have to accept the government benefit account and directing the consumer to ask about other ways to receive government benefit payments.”
OCC launches financial inclusion initiative in Detroit
On February 15, the OCC announced the launch of Detroit REACh, marking the agency’s third expansion of Project REACh (Roundtable for Economic Access and Change). As previously covered by InfoBytes, the OCC launched the initiative in 2020 to promote greater financial inclusion of underserved populations and bring together leaders from the banking industry, national civil rights organizations, and various businesses and technology organizations to identify and reduce barriers to accessing capital and credit. The OCC further noted that “Detroit REACh will organize and initiate formal efforts to promote greater access to affordable homeownership, enhance small business financing, and expand access to credit for economically disadvantaged and underserved communities in Detroit.”