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CFPB aims to protect consumers at the local level
On November 18, the CFPB released a blog describing how CFPB complaint data can help cities and counties protect the public. According to the Bureau, one of the major ways it regulates consumer financial products and services and protects consumers from unfair, deceptive, or abusive acts or practices is through collecting, monitoring, and responding to consumer complaints. The complaints the Bureau receives help inform its policy and regulatory priorities and enforcement activities, according to the blog. The Bureau further noted that consumer complaints “can shine a light on trends and practices that could cause another financial calamity and once again inflict long-term havoc on consumers’ financial wellbeing.” The Bureau said it intends to increase the impact of its complaint data by sharing it with cities and counties to protect consumers at the local level, which will be "a win-win for consumers and the CFPB” because it “helps protect as many consumers as possible from predatory lending, barriers to credit, and other consumer harms.” For its initial engagement, the Bureau chose cities and counties that were best positioned to benefit from the CFPB’s complaint data, including “[l]ocal governments with civil or criminal prosecutorial authority to monitor and enforce their own consumer protection laws as well as force-multiply enforcement of federal consumer financial protection laws such as those available under the Consumer Financial Protection Act”; and “[l]ocal governments with, or that are working to create, financial empowerment offices and developing financial empowerment strategies to improve financial stability for low- and moderate-income households.”
The Bureau explained that after completing the review process, it onboarded the local governments to the CFPB’s Government Portal, which provides local, state, and federal government agencies access to more granular information about consumers’ complaints and companies’ responses through a secure interface. Onboarding to the Government Portal, which required the cities and counties to sign a confidentiality and data access agreement with strict personal data protection requirements, enables the cities and counties to, among other things: (i) view in real-time what consumers are experiencing in the financial marketplace and how companies are responding; (ii) download complaints to examine and enforce rules protecting consumers; and (iii) compare problems constituents are facing to other localities and nationwide. Through the Government Portal, local governments can directly submit constituents’ complaints and get responses from the companies. The Bureau noted that the complaint data can also help local government officials identify what gaps exist, and what fixes are needed, which therefore helps in its mission to foster increased consumer awareness and eventual empowerment.
OFAC issues guidance on the Russian price cap policy for crude oil; issues Russia-related general licenses
On November 22, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) published a Determination Pursuant to Executive Order (E.O.) 14071 concerning the implementation of a price cap policy for crude oil of Russian Federation origin. The determination states that the prohibitions of E.O. 14071 apply to U.S. persons providing covered services (including (i) trading/commodities brokering; (ii) financing; (iii) shipping; (iv) insurance, including reinsurance and protection and indemnity; (v) flagging; and (vi) customs brokering) as they relate to the maritime transport of Russian Federation crude oil, provided, however, that such covered services are authorized if the Russian oil is purchased at or below the price cap. Additionally, OFAC published guidance on the implementation of a policy for crude oil of Russian Federation origin to provide an overview of the determination and the price cap. OFAC also issued Russia-related General License (GL) 55, GL 56, and GL 57. GL 55 authorizes certain services related to Sakhalin-2; GL 56 authorizes certain services with respect to the European Union; and GL 57 authorizes certain services related to vessel emergencies.
Supreme Court to fast-track review of student debt relief program
On December 1, the U.S. Supreme Court agreed to hear the Biden administration’s appeal of an injunction entered by the U.S. Court of Appeals for the Eighth Circuit that temporarily prohibits the Secretary of Education from discharging any federal loans under the agency’s student debt relief plan (announced in August and covered by InfoBytes here). In a brief unsigned order, the Supreme Court deferred the Biden administration’s application to vacate, pending oral argument. The Supreme Court said it will treat the Biden administration’s application as a “petition for a writ of certiorari before judgment,” and announced a briefing schedule will be established to allow the case to be argued in the February 2023 argument session to resolve the legality of the program.
The Biden administration filed its application last month asking the Supreme Court to vacate, or at minimum narrow, the 8th Circuit’s injunction. Among other things, the Biden administration claimed that the 8th Circuit failed to “analyze the merits of the respondents’ claims, much less determine they are likely to succeed” when it granted an emergency motion for injunction pending appeal filed by state attorney generals from Nebraska, Missouri, Arkansas, Iowa, Kansas, and South Carolina. As previously covered by InfoBytes, the 8th Circuit determined that “the equities strongly favor an injunction considering the irreversible impact the Secretary’s debt forgiveness action would have as compared to the lack of harm an injunction would presently impose,” and pointed to the fact that the collection of student loan payments and the accrual of interest have both been suspended.
The appellate court’s “erroneous injunction leaves millions of economically vulnerable borrowers in limbo, uncertain about the size of their debt and unable to make financial decisions with an accurate understanding of their future repayment obligations,” the Biden administration said, adding that if the Supreme Court “declines to vacate the injunction, it may wish to construe this application as a petition for a writ of certiorari before judgment, grant the petition, and set the case for expedited briefing and argument this Term to avoid prolonging this uncertainty for the millions of affected borrowers.”
In its application, the Biden administration argued that the universal injunction was overbroad. The application further argued that the states lack standing because the debt relief plan “does not require respondents to do anything, forbid them from doing anything, or harm them in any other way.” Moreover, the Secretary of Education was acting within the bounds of the HEROES Act when he put together the debt relief plan, the application contended. “The COVID-19 pandemic is a ‘national emergency declared by the President of the United States,’” the application said. “Both the Trump and Biden Administrations previously invoked the HEROES Act to categorically suspend payments and interest accrual on all Department-held loans in light of the pandemic.” The application further argued that the states “have not disputed that those actions were lawful,” and that the Secretary of Education “reasonably ‘deem[ed]’ relief ‘necessary to ensure’ that a subset of these affected individuals—namely, those with lower incomes—‘are not placed in a worse position’ in relation to their student-loan obligations ‘because of their status as affected individuals.’”
Meanwhile, on December 1, the 5th Circuit denied the Department of Education’s (DOE) opposed motion for stay pending appeal, following a ruling issued by the U.S. District Court for the Northern District of Texas related to whether the agency’s student debt relief plan violated the Administrative Procedure Act’s (APA) notice-and-comment rulemaking procedures. As previously covered by InfoBytes, the district court determined that while the HEROES Act expressly exempts the APA’s notice-and-comment obligations, the court stressed that the HEROES Act “does not provide the executive branch clear congressional authorization to create a $400 billion student loan forgiveness program,” and, moreover, does not mention loan forgiveness.
Earlier, on November 22, the Department of Education (DOE) extended the pause on student loan repayments, interest, and collections in an effort to alleviate uncertainty for borrowers. Saying “it would be deeply unfair to ask borrowers to pay a debt that they wouldn’t have to pay,” the DOE stated that payments will resume 60 days after it is allowed to implement the debt relief plan or the litigation is resolved, explaining that this will give the Supreme Court time to resolve the case during its current term. However, if the debt relief plan has not been implemented and litigation has not been resolved by June 30, 2023, borrowers’ payments will resume 60 days after that, the DOE explained.
District Court sends overdraft fee suit to arbitration
On November 16, the U.S. District Court for the District of Massachusetts granted a defendant’s motion to compel arbitration regarding claims that consumers are charged significant overdraft or non-sufficient funds fees on bank accounts linked to discount cards issued by the gas-discount company. According to the plaintiff’s putative class action suit, the defendant advertises fuel discounts through a mobile app and payment card system while claiming that its service acts “like a debit card” by “‘effortlessly deduct[ing]’ funds from linked checking accounts at the time of purchase[.].” While these payments and discounts are represented as being “automatically applied,” the plaintiff alleged that paying with the discount card results in significant processing delays. These delays, the plaintiff contended, cause users to run the risk of having insufficient fees in their checking accounts before the payment is processed, thus resulting in overdraft fees. Additionally, the plaintiff claimed that the defendant does not verify whether a consumer has sufficient funds in the checking account before payments are withdrawn. The defendant moved to compel arbitration, or in the alternative, moved to dismiss the complaint, claiming that during the sign-up process, the plaintiff was presented with terms and conditions that explicitly require users to arbitrate any disputes, claims, or controversies. Moreover, the defendant argued that users cannot sign up for the program unless they first check a button that says “I agree” with the terms of use. While the parties agreed that the plaintiff was presented at a minimum a hyperlink to the terms and conditions, they disputed whether the sign-up process required the plaintiff to affirmatively assent to them. According to the plaintiff, there was no such checkbox button when he signed up for the program.
The court disagreed, ruling that the plaintiff had notice of and agreed to terms and conditions that included an arbitration clause and class action waiver. According to the court, the defendant adequately showed that the checkbox button was part of the process when the plaintiff signed up and that the defendant obtained his affirmative asset to the agreement. Further, the plaintiff failed to support his claim with any specific evidence that the checkbox button may not have been there during the sign-up process, the court maintained.
FHA to accept private flood insurance for FHA-insured mortgages
On November 21, FHA published a final rule in the Federal Register to allow homeowners with FHA-insured mortgages to obtain flood insurance policies that meet FHA requirements from private insurance providers. Specifically, the Acceptance of Private Flood Insurance for FHA-Insured Mortgages final rule updates agency regulations to give borrowers the option to purchase a comparable private insurance policy that conforms to FHA requirements in lieu of a National Flood Insurance Program (NFIP) policy for FHA-insured mortgages secured by properties located in FEMA-designated special flood hazard areas (SFHAs). Previously, only flood insurance obtained through the NFIP was accepted. The final rule applies to all FHA-insured single family Title II mortgages, including home equity conversion mortgages, and loans insured under FHA Title I programs. Lenders should refer to Mortgagee Letter 2022-18 for guidance on implementing the final rule’s requirements, which are effective December 21.
Concurrently, HUD issued a press release stating that beginning December 21, “FHA will require lenders to provide detailed flood insurance coverage information when electronically submitting mortgages for FHA insurance on properties in SFHAs.” According to HUD, “[t]his data collection is an objective included in HUD’s Climate Action Plan and will allow FHA to capture and analyze flood insurance information on mortgages in its portfolio at a more granular level than has been possible previously.”
FINRA requests information on crypto asset retail communications
Recently, FINRA announced that it is conducting a targeted exam of firm practices regarding retail communications on crypto asset products and services for the time period of July 1, 2022 through September 30, 2022. In the targeted exam letters, FINRA requested, among other things, that firms or their affiliates provide: (i) all retail communications on the firm’s behalf that refer to, relate to, or concern a crypto asset or service involving the transaction or holding of a crypto asset; (ii) written supervisory procedures concerning the review, approval, record keeping, and dissemination of communications; and (iii) any compliance policies, manuals, training materials, compliance bulletins, and any other written guidance.
CFPB seeks to enhance public data on auto lending
On November 17, the CFPB announced it is seeking public comment on its proposal to develop a new data set to monitor the auto loan market. According to the Bureau, more than 100 million Americans have an auto loan, and currently there is approximately $1.5 trillion in outstanding auto loan debt, making it the third-largest consumer credit category. The Bureau explained that financial markets and policymakers have access to mortgage data that has given insight into patterns in lending and risk. But, despite its size, there is less known about the auto lending market. Over the past two years, car prices have risen significantly, which has resulted in higher loan amounts and monthly payments. The Bureau noted that these loan size increases are “beginning to have an impact on consumers and households. Recent data show an increase in auto loan delinquencies, particularly for low-income consumers and those with subprime credit scores.” According to the Bureau, the available data permits market participants to identify and measure certain trends but is insufficiently granular to fully explore the cause of those trends. The Bureau also noted that many auto loans are made to consumers with subprime or deep subprime credit scores from lenders that do not furnish data on those loans to credit reporting agencies. Specifically, for its request, the Bureau is “seeking to build a new data set that will allow for a more robust understanding of market trends,” which may include, among other things, “collecting retrospective data from a sample of lenders that represent a cross-section of the auto lending market.” Comments are due by December 19.
FTC seeks feedback on possible changes to Business Opportunity Rule
On November 17, the FTC announced it is soliciting public comments on possible modifications to the Business Opportunity Rule. According to the FTC’s advance notice of proposed rulemaking (ANPR), the Commission is seeking feedback on the rule’s effectiveness, whether it is necessary, and whether it should be expanded to cover other types of money-making opportunities, such as coaching or mentoring programs, e-commerce opportunities, or investment opportunities. The Business Opportunity Rule prohibits the use of deceptive statements when selling business opportunities, and requires sellers to make several key disclosures to potential buyers, including: (i) the seller’s identifying information; (ii) information supporting claims about possible earnings or profits; (iii) disclosures about whether the seller, its affiliates, or key personnel have been included in certain legal actions; (iv) information on whether the seller has a cancellation or refund policy and any applicable policy terms; and (v) a list covering the past three years of consumers who have purchased the business opportunity. The FTC will also require sellers who conduct business in languages other than English to provide disclosures in the language in which the sale is conducted.
The ANPR also asks commenters to address whether business opportunity practices “disproportionately target or affect certain communities or groups, including but not limited to people living in lower-income communities, communities of color, or other historically underserved communities,” and requests feedback on suggested amendments to address any negative effects. Comments on the ANPR are due 60 days after publication in the Federal Register.
DFPI announces investigation into crypto platform
On November 10, the California Department of Financial Protection and Innovation (DFPI) announced that it is investigating “the apparent failure” of a crypto asset platform, which recently announced that it filed for bankruptcy. According to DFPI, it takes “oversight responsibility very seriously,” and expects “any person offering securities, lender, or other financial services provider that operates in California to comply with our financial laws.”
OFAC sanctions Iranian media corporation
On November 16, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13846 against six senior employees of the Iranian state-run media corporation that has broadcast hundreds of forced confessions of Iranian, dual national, and international detainees in Iran. According to OFAC, the corporation was designated in 2013 and does not act “as objective media outlet but rather as a critical tool in the Iranian government’s mass suppression and censorship campaign against its own people.” OFAC also noted that the corporation has “recently broadcast televised interviews of individuals being forced to confess that their relatives were not killed by Iranian authorities during nationwide protests but died due to accidental, unrelated causes.” As a result of the sanctions, all property and interests in property belonging to the sanctioned persons subject to U.S. jurisdiction are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons. Persons that engage in certain transactions with the individuals or entities designated today may themselves be exposed to designation. Additionally, OFAC warned that “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals designated today could be subject to U.S. sanctions.”