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  • CFPB comments on California DFPI licensing provisions, income-based advances

    Agency Rule-Making & Guidance

    On December 1, the CFPB posted a blog entry sharing its comment letter responding to the California DFPI’s notice of proposed rulemaking for “income-based advances” from earlier this year. As previously covered by InfoBytes, the DFPI’s proposed regulations would, among other things, clarify licensing provisions and the applicability of the CFL to certain activities. Within the CFPB’s comment letter, it stressed the importance of regulatory consistency of consumer financial products and services across federal and state law. The letter noted the CFPB’s view that companies offering “income-based advances” (also marketed as “earned wage access”) are subject to federal oversight, and the CFPB supports state oversight of such companies as well. Moreover, the CFPB said that DFPI’s particular treatment of income-based advances takes a similar approach to TILA and Regulation Z and that the CFPB plans to issue further guidance regarding the applicability of TILA to these products. 

    Agency Rule-Making & Guidance CFPB DFPI Consumer Finance California State Regulators CCFPL

  • OCC Acting Deputy Comptroller Murphy testifies on OCC’s Office of Financial Technology

    Federal Issues

    On December 5, the Acting Deputy Comptroller of the OCC’s Office of Financial Technology, Donna Murphy, testified before the U.S. House Subcommittee on Digital Assets, Financial Technology and Inclusion. Her testimony focused on the OCC’s supervision and regulation of new and emerging fintech products.

    Created in October 2022, the Office of Financial Technology regulates and supervises all aspects of fintech innovation in the federal banking system, including bank-fintech partnerships, artificial intelligence, and digital assets. Murphy testified that a strong risk management plan against third parties is essential. She referenced the joint guidance issued earlier this year by the OCC, Federal Reserve, and FDIC (previously covered by InfoBytes, here).

    Murphy also discussed the use of artificial intelligence and algorithms in banking, highlighting the many ways they can strengthen safety and soundness, enhance consumer protection, improve compliance, address financial crime, and increase fairness and access to the banking system. However, Murphy highlighted the need for banks to focus on software design, testing, security, and data management when implementing artificial intelligence. Lastly, Murphy iterated the OCC’s commitment to reducing inequality in banking and increasing access to financial services for all. 

    Federal Issues OCC Testimony House Financial Services Committee Digital Assets Fintech

  • CFPB’s report on Americans’ financial health, post-pandemic.

    Federal Issues

    On December 1, the CFPB released a report titled: “Making Ends Meet in 2023: Insights from the Making Ends Meet Survey” that discussed Americans’ financial health in 2023 in comparison to 2019 – before the Covid-19 pandemic. From June 2019 to February 2021, consumers benefited from increased savings and expanded unemployment benefits; however, beginning in 2022 and carrying into 2023, consumers experienced an increased strain on their finances. When comparing the last two years to 2019, the CFPB found that: (i) more families are facing greater difficulty paying their bills; (ii) more families are unprepared for a short interruption of income; (iii) access to credit remains difficult; (iv) liquidity remains available to households; and (v) large disparities in financial stability continue.

    Federal Issues CFPB Consumer Finance

  • CFPB releases 2023 Ombudsman report

    Federal Issues

    On November 30, the CFPB Ombudsman’s Office published its annual report, which detailed inquiries handled by the office, included a new FAQ section, and described the second year of the Ombudsman’s post-examination survey of supervised entities. The Ombudsman reviewed some pertinent topics the CFPB faced in the past year, including recognizing imposter scams, distinguishing between new and duplicate consumer complaints, assisting consumers with diminished capacity, and helping the public contact the CFPB.

    In detail, and on recognizing imposter frauds, the Ombudsman provided CFPB resources and posted a blog on scam awareness in English and Spanish. On distinguishing between new and existing complaints, consumers expressed concern that the CFPB closed their cases without providing a reason or that the CFPB mistakenly identified complaints as duplicative. The report described the CFPB’s process for identifying duplicate complaints, noted consumers’ concerns, and indicated that the CFPB continues to review this issue. On assisting consumers with diminished capacity, the Ombudsman discussed challenges with third-party entities assisting with a case, as well as offering resources on power of attorney questions. And on helping the public contact the CFPB, the Ombudsman identified contact points that could improve, such as the CFPB’s website and telephone switchboard, and asked the CFPB to update the contact points. 

    Federal Issues CFPB FAQs Consumer Finance Ombudsman

  • FHFA announces increases in 2024 conforming loan limits

    Federal Issues

    On November 28, FHFA announced that it will raise the maximum conforming loan limits (CLL) for mortgages purchased in 2024 by Fannie Mae and Freddie Mac from $726,200 to $776,550 (the 2023 CLLs were covered by InfoBytes here) for most of the United States. In Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the maximum loan limit for one-unit properties will be 1,149,825. According to the FHFA, due to rising home values (up 5.56 percent since 2022), CLLs will be higher for all but five U.S. counties.

    Federal Issues FHFA Mortgages Fannie Mae Freddie Mac Consumer Finance

  • FTC to send refunds to service providers implicated in false claims enforcement action

    Federal Issues

    On November 28, the FTC announced it is sending more than $3 million in refunds to businesses from an enforcement action against a Colorado-based digital marketplace company. In 2022, the FTC filed an administrative complaint alleging, among other things, that the defendant made false, misleading, or unsubstantiated claims regarding the quality and source of the leads it was selling to service providers, such as general contractors and small lawn care businesses (covered by InfoBytes here). As a result of its January proposed order, FTC will disperse 110,372 refunds to eligible home service providers, and is sending out 91,273 claims forms to businesses that paid for one of defendant’s services.

     

    Federal Issues FTC Enforcement Consumer Protection

  • CFPB obtains stipulated judgment ordering student financing company to pay over $30 million in damages

    Federal Issues

    On November 20, the United States Bankruptcy Court for the District of Delaware entered a stipulated judgment in favor of the CFPB and 11 other state enforcement agencies in connection with an adversary proceeding against a vocational training program. As previously covered by InfoBytes, the complaint alleged that the education firm (company) engaged in deceptive practices by misrepresenting its income share agreement as not a loan and not debt, and misleading borrowers into believing that no payments would need to be made until they received a job offer. According to the CFPB, the company trained consumers to become sales development representatives, an entry-level role that requires “little or no prior sales experience or training,” and made promises it could not deliver on, such as promising a “6-figure” career in software sales. The company also initially priced its services at $2,500 in 2018, and then increased it to $15,000 the following year without any value justification. The company would recoup its payment through income share agreements (ISA). The CFPB alleged multiple causes of action against the company, including violations of the CFPA, TILA, and the FDCPA, among others. The stipulated judgment includes orders requiring the company to refund student borrowers, cancel outstanding loans, and permanently shut down.

    Federal Issues CFPB Enforcement State Attorney General Consumer Protection CFPA TILA FDCPA Regulation Z

  • FDIC OIG makes recommendations based on material loss report

    On November 28, the OIG for the FDIC delivered a material loss review report. The report’s objectives were twofold: first, to determine why a bank’s issues led to a material loss to the deposit insurance fund; and second, to review the FDIC’s supervision of the bank and make recommendations to prevent similar losses in the future.

    The report outlined 11 recommendations for the FDIC to implement so it can improve its supervision process over the banking sector. The recommendations include: (i) to evaluate if and why banks may wait to issue CAMELS ratings downgrades until they issue a Report of Examination; (ii) to identify whether the training curriculum should be adjusted to emphasize why timely ratings changes are important; (iii) to review FDIC examination guidance to determine if enhancements are necessary to highlight when a bank’s practices do not align with its policies, and make recommendations; (iv) to evaluate and update examination guidance to require supervisory actions when it violates its risk-appetite statement metrics; (v) to comprehensively review the FDIC manual for any updates to the examination guidance pertinent to evaluating the stability of uninsured deposits; (vi) to comprehensively review the FDIC manual to determine if any updates are required to the examination guidance pertinent to banks’ deposit outflow assumptions for liquidity stress testing; (vii) to revisit examination guidance to determine if any updates are required for monitoring other banks, horizontally, for similar risk characteristics; (viii) to revisit examination guidance to determine if any updates are required regarding incorporating shared risk characteristics that lead to risk in the FDIC’s supervisory approach; (ix) to explore research methods to monitor large bank reputational risk; (x) to evaluate if Chief Risk Officers should place more consideration on unrealized losses and declines in fair value; and (xi) to work with other federal regulators on evaluating necessary rule changes, such as the adoption of noncapital triggers.

    Bank Regulatory Federal Issues OIG FDIC

  • FDIC issues QBP for 3Q 2023

    On November 29, the FDIC released the Third Quarter 2023 Quarterly Banking Profile for FDIC-insured community banks, reporting an aggregate net income of $68.4 billion in the third quarter of 2023, which is down $2.4 billion (3.4 percent) from the previous quarter. The FDIC said higher realized losses on securities and lower noninterest income were among the causes of the decreased net income for the quarter. The FDIC emphasized, among other things, that the banking industry is still facing significant effects from current economic conditions, especially regarding commercial real estate values and other downside risks. According to the remarks provided by FDIC Chairman Gruenberg, such issues will remain areas of attention by the FDIC.

    Bank Regulatory Federal Issues FDIC Community Banks

  • Massachusetts AG settles with household goods rental company for unfair debt collection practices

    State Issues

    On November 28, the State AG of Massachusetts filed an assurance of discontinuance with a household goods rental company for unfair and deceptive debt collection practices. The company offers household goods under a rent-to-own payment contract as part of its business model. According to the assurance, customers would rent a good and then pay it off over several months to several years to obtain ownership; however, the assurance of discontinuance alleges that, for customers who failed to make payment or never returned the item, the company resorted to aggressive tactics: sending employees out to collect payments by making house visits, “pounding on doors, turning doorknobs to see if they were unlocked, and demanding to be let in.”

    In addition to these collection tactics, the assurance of discontinuance states that the company would file criminal complaints. The AG of Massachusetts finds this to be an improper use of “the criminal process, [such as] the threat of arrest or prosecution, as a [d]ebt collection tool.” Additionally, if a customer failed to make timely payments or return the rented property, the company would file a criminal complaint alleging their customers were committing larceny. In the assurance, the company agrees to pay $8.75 million, and the company must cease filing criminal complaints against customers.

    State Issues Massachusetts State Attorney General Debt Collection

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