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Nebraska Dept. of Banking and Finance updates guidance on temporary branch relocations
The Nebraska Department of Banking and Finance recently updated its March 12, 2020 guidance regarding temporary branch relocations (previously discussed here). The Department will continue to temporarily allow licensed and sponsored mortgage loan originators (MLOs), loan processors, underwriters, and other staff to work from an unlicensed branch upon notification by the sponsor, and approval by the department. Licensed mortgage bankers who have staff working from unlicensed locations must submit an updated list of those employees to the Department through the NMLS on, or before, March 1, June 1, September 1, and at renewal, in 2021. In addition, licensed MLOs must take certain data security measures and not allow customers to come to the unlicensed location. The guidance is effective January 1, 2021.
California DFPI issues MCA enforcement action covering future receivables
On November 12, the California Department of Financial Protection and Innovation (DFPI) issued a consent order with a commercial financing company, resolving allegations that the company’s merchant cash advance (MCA) product was structured as a lending transaction and offered to California merchants without first obtaining a license as required by the California Financing Law (CFL). According to the DFPI, the MCA agreements in question provide the company with “broad authority to declare ‘default’ on its merchants and when doing so may use extensive recourse allowed under its [a]greement,” including in the event of insufficient funds requiring the full funding amount to be repaid, which DFPI argues, “does not put the risk of the ‘purchase’ of receivables on [the financing company]’s shoulders, but rather the risk of repayment on the merchant’s shoulders, just like a loan.” Moreover, the agreements provide for an indefinite repayment period, placing the “risk of repayment on the merchant by leaving the repayment period open until fully repaid (with fees and interest).” The consent order distinguishes between outstanding and future receivables, noting that under California law, commercial financiers purchasing a share of a merchant’s outstanding receivables without recourse (e.g., factoring), is generally not considered lending, but there is no similar recognition by the legislature or courts with respect to future receivables.
The consent order requires the company to (i) desist from lending in California unless and until licensed under the CFL; (ii) refund fees or payments collected from California merchants in excess of the 10 percent state interest rate cap for non-CFL licensees; and (iii) pay $20,000 to the DFPI to cover the cost of the investigation.
Texas regulators update emergency-related home equity lending guidance
On November 30, the Texas Department of Banking, Department of Savings and Mortgage Lending, Office of Consumer Credit Commissioner, and Credit Union Department issued updated guidance on emergency measures for home equity lenders to consider in response to the COVID-19 pandemic. The guidance covers emergency measures in relation to the refinance and modification of home equity loans. The guidance also indicates that lenders are permitted to close loans in any area located at the permanent physical address of the lender, attorney, or title company, including outdoor settings such as parking lots.
Texas agencies issue revised emergency guidance for home equity lenders
On November 30, the Texas joint financial regulatory agencies (Department of Banking, Department of Savings and Mortgage Lending, Office of Consumer Credit Commissioner, and Credit Union Department) issued guidance to replace its April 22, 2020 guidance (previously discussed here) regarding emergency measures for home equity lenders to consider in response to the COVID-19 pandemic. The agencies encouraged lenders to work with borrowers to help borrowers recover and provide an opportunity to repay their debt. However, lenders must ensure that they comply with Texas law to have a valid home equity lien. The agencies reiterated guidance regarding authorized closing locations and noted that lenders should consider ways to close loans in accordance with social distancing recommendations.
Washington governor extends suspension of consumer garnishment
On November 20, the Washington governor issued a proclamation extending a previous moratorium on garnishment for consumer debts until the earlier of December 7, 2020 or the termination of Washington’s Covid-19 State of Emergency. See here, here and here for previous coverage. The suspension applies to garnishment of consumer bank accounts, wages and income to satisfy consumer debt judgments.
Maryland AG obtains $2.6 million in student debt relief
On November 16, the Maryland attorney general announced that it obtained over $2.6 million in debt relief from a third-party debt buyer for approximately 1,200 former students of a defunct Maryland-based for-profit college. In its press release, the AG alleged that the for-profit college offered “low-quality programs at a price significantly higher than comparable programs at Maryland’s public institutions.” According to the AG, due to the college’s high tuition, students had little choice but to take out loans issued by the college itself. After the college permanently closed, a court-appointed receiver sold the rights to collect the loans to a third-party debt buyer. The AG took the position that, because the college abruptly closed and failed to provide its students with the services promised, the loans should have been canceled rather than sold. To resolve the dispute, the AG and the third-party debt buyer entered into a settlement. Under the terms of the settlement, the third-party debt buyer agreed to cease collection on any of the outstanding loans and to refund approximately 75 percent of the payments collected from the students after it bought the loan portfolio. Furthermore, the debt buyer agreed to remove trade lines relating to the loans from the student’s credit reports.
New York requires clear and conspicuous consumer notice prior to auto-renewal of contracts
On November 11, the New York governor signed S01475, which requires clear and conspicuous consumer notice and consent prior to an auto-renewal of any contract of any term for any subsequent term. Specifically, the act provides that a business will be deemed to have engaged in unlawful practices if it (i) fails to present the renewal offer terms or continuous service offer terms in a clear and conspicuous manner before the subscription or purchasing agreement is fulfilled; (ii) charges a consumer’s credit or debit card, or uses a third party to charge a consumer’s account, without first obtaining a consumer’s affirmative consent to the auto-renewal of a contract; (iii) fails to provide an acknowledgement to the consumer that includes the auto-renewal terms and cancellation policy; or (iv) fails to provide a disclosure following the offer of a free gift or service that allows the consumer to cancel before paying for the goods or services. Among other things, the act also provides that consumers who accept an auto-renewal “shall be allowed to terminate the automatic renewal or continuous service exclusively online.” The act further stipulates that a “knowing violation” will be punishable by a civil penalty of not more than $500 for a single violation and not more than $1,000 for multiple violations as a result of a single act or incident. The act also outlines exempt entities, which include entities regulated by NYDFS, and “banks, bank holding companies, or the subsidiary or affiliate of either, or credit unions or other financial institutions, licensed under state or federal law.” The act will take effect 90 days after it was signed.
Texas Office of Consumer Credit updates guidance urging property tax lenders to work with borrowers
On November 16, the Texas Office of the Consumer Credit Commissioner updated its advisory bulletin urging property tax lenders to work with consumers during the Covid-19 crisis (previously discussed here, here, and here) Among other measures, the regulator urges licensees to increase consumer communication regarding the effects of Covid-19 for licensees, work out modifications for payment difficulties, and review policies for fees, late charges, delinquency practices, and repossessions. The guidance also: (i) reminds licensees of legal requirements for using electronic signatures, and (ii) continues to permit licensees to conduct activity from unlicensed locations, subject to certain conditions. The guidance is in effect through December 31, 2020, unless withdrawn or revised.
Texas Office of Consumer Credit updates guidance urging credit access businesses to work with borrowers
On November 16, the Texas Office of the Consumer Credit Commissioner updated its advisory bulletin urging credit access businesses to work with consumers during the Covid-19 crisis (previously covered here, here, here, and here). Among other measures, the regulator urges licensees to increase consumer communication regarding the effects of Covid-19 for licensees, work out modifications for payment difficulties, and review policies for fees, late charges, delinquency practices, and repossessions. The guidance also: (i) reminds licensees of legal requirements for using electronic signatures, and (ii) continues to permit licensees to conduct activity from unlicensed locations, subject to certain conditions. The guidance is in effect through December 31, 2020, unless withdrawn or revised.
Texas Office of Consumer Credit updates guidance urging motor vehicle sales finance licensees to work with borrowers
On November 16, the Texas Office of the Consumer Credit Commissioner updated its advisory bulletin urging motor vehicle sales finance licensees to work with consumers during the Covid-19 crisis (previously covered here, here, here, here, here, and here). Among other measures, the regulator urges licensees to increase consumer communication regarding the effects of Covid-19 for licensees, work out modifications for payment difficulties, and review policies for fees, late charges, delinquency practices, and repossessions. The guidance also: (i) reminds licensees of legal requirements for using electronic signatures and (ii) continues to permit licensees to conduct activity from unlicensed locations, subject to certain conditions. The guidance is in effect through December 31, 2020, unless withdrawn or revised.