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  • California Attorney General warns small banks and credit unions on fees

    State Issues

    On February 22, California State Attorney General, Rob Bonta, issued a letter to small banks and credit unions cautioning that overdraft and returned deposited item fees may infringe upon California’s Unfair Competition Law (UCL) and the CFPA. The letter, directed at institutions in California with assets under $10 billion, highlighted concerns that such fees disproportionately burden low-income and minority consumers. Bonta emphasized that these fees often catch consumers off guard, leading to significant financial strain, and urged the financial institutions in California to comply with state and federal laws by eliminating such practices.

    The letter underscores how overdraft and returned deposited item fees can harm consumers, and potentially constitute unfair acts against them. Bonta also pointed out how overdraft fees cannot be reasonably anticipated due to the complexities of transaction processing, making it challenging for consumers to make informed financial decisions. Furthermore, the letter warned that imposition of returned deposited item fees, which are charges by financial institutions when a consumer deposits a check that bounces (due to an issue with the check originator such as insufficient funds or a stop payment order), is likely an unfair business practice in violation of the UCL and CFPA because consumers are usually unable to reasonably avoid the fee. 

    This action by the California Attorney General is notable for its focus on smaller financial institutions that were expressly excluded from the CFPB’s proposed rule last month on overdraft fees (previously covered by InfoBytes here); however, the action is broadly consistent with the CFPB’s guidance on returned deposited item fees (also covered by InfoBytes here).

    State Issues California State Attorney General Overdraft CFPA Unfair

  • Minnesota Attorney General settles with tribal company over high interest rates

    State Issues

    On February 21, the Minnesota Attorney General announced a settlement with a tribal economic development entity to resolve a 2023 federal lawsuit that alleged the entity’s lending subsidiaries were engaged in predatory lending and illegal interest rates, in violation of Minnesota and federal consumer lending laws. As previously covered by InfoBytes, the complaint claimed that the entity’s lending subsidiaries charged interest rates of up to 800 percent in violation of state statutory caps of eight percent, and led state residents to believe that the entity was exempt from state laws that protect against predatory lending.

    Under the terms of the settlement, the entity and its subsidiaries can no longer lend to Minnesota residents nor advertise or market those loans. The settlement also required any loan issued to consumers in Minnesota before the settlement is canceled, except to recover the original principal balance with all past payments to be attributed towards paying down the principal balance.

    State Issues Courts Minnesota Interest Rate Consumer Finance State Attorney General Settlement Enforcement Consumer Protection

  • District Court decides in favor of bank despite alleged FDCPA and RESPA violations

    Courts

    On February 15, the U.S. District Court for the Central District of California granted a bank defendant’s motion to dismiss certain claims presented in the plaintiff’s complaint alleging violations of the Fair Debt Collection Practices Act (FDCPA) and Real Estate Settlement Practices Act (RESPA).

    With respect to the FDCPA claim, the court found that the defendant did not qualify as a “debt collector” within the meaning of the statute because the defendant acquired the loan through its merger with the original creditor of the plaintiff’s mortgage. The court noted that several other district courts have held that an entity that acquires a debt through its merger with another creditor is not a “debt collector” under the FDCPA even if the merger occurred following the borrower’s default on the debt.

    With respect to the plaintiff’s RESPA claim, the court found that the plaintiff failed to allege a violation of the statute because the plaintiff’s letter to the defendant, which requested a copy of the original promissory note underlying the deed of trust as well as a loan payoff amount, did not constitute a “qualified written request” triggering the defendant’s obligations under RESPA to respond.  

    Courts RESPA FDCPA California Mortgages

  • OCC names Ted Dowd as Acting Senior Deputy Comptroller and Chief Counsel

    On February 23, the OCC announced that Ted Dowd will serve as the Acting Senior Deputy Comptroller and Chief Counsel for the agency while the OCC searches for a successor to Ben McDonough. Dowd is currently the Deputy Chief Counsel, a position he has fulfilled since 2018 where he oversaw the operations of all OCC district counsel offices. Under the new position, Dowd will oversee all legal aspects of the OCC, as well as support the agency’s activities in bank chartering, supervision, enforcement, and rulemaking, among others. This positional change will go into effect on April 8 when the current OCC Chief Counsel Ben McDonough begins a new position at another agency.

    Bank Regulatory OCC Bank Supervision Enforcement

  • FTC takes action against tax prep company for alleged unfair and deceptive practices

    Federal Issues

    On February 23, the FTC announced an action against a tax preparation company for alleged unfair and deceptive acts and practices related to the sale of tax preparation products and services. The FTC alleged in its redacted administrative complaint that the defendant unfairly pushed consumers into paying for more expensive tax preparation products. The FTC further alleged the company made it unnecessarily difficult to downgrade the consumer’s tax preparation plan, both by requiring the consumer to first speak with a representative and by requiring the consumer to re-input the data if the consumer chooses to downgrade to the lower-priced product. The FTC also stated that the company’s upgrade policy, in contrast, is notably simple compared to its downgrade policy, and consumers’ “data seamlessly moves to the more expensive product instantly.” The FTC also claimed that the company’s “file for free” advertisements are deceptive because not all consumers’ tax situations are eligible for the free service.

    This action follows the FTC’s action against another tax preparation software provider last month (covered by InfoBytes here).

    Federal Issues FTC Enforcement Unfair Deceptive FTC Act Consumer Protection

  • FTC alleges a common enterprise’s software misrepresented consumers’ sensitive browsing data

    Federal Issues

    On February 22, the FTC released a complaint and decision against multiple software companies operating as a common enterprise for allegedly violating three counts of Section 5 of the FTC Act for (1) unfairly collecting consumers’ browsing information; (2) deceptively failing to disclose tracking of consumers; and (3) stating false representations on data aggregation and anonymization. From 2014 to 2020, the FTC alleged that the companies distributed software with several privacy claims including that the software would block cookies and prevent browser tracking without obtaining consumers’ consent and deceiving consumers about the true nature of their actions.

    The FTC alleged the companies collected browser information through browser extensions and antivirus software. While the companies claimed that these extensions provided security and privacy services, the companies used the extensions to collect browser information from users including URLs of visited webpages, URLs of background resources (e.g., cookies or images pulled from other domains), consumers’ search queries, and cookie values. While the companies made claims about the privacy and security of their products, they failed to disclose to consumers that their browsing information was sold to third parties and misrepresented how the data was shared. This browsing information can comprise sensitive data, possibly revealing a consumer’s religious beliefs, health information, political ideology, location, finances, and “interests in prurient content.” The FTC noted that when the companies in 2019 asked software users to opt-in to collect browser information, less than 50% of consumers agreed.

    Under the FTC’s Decision, the companies must pay $16.5 million in monetary relief. Additionally, the FTC enjoined the companies from licensing or selling any browsing data from branded products to third parties for advertising purposes, and the companies are required to (a) obtain consent from consumers before selling consumers’ browsing data from non-branded products for advertising; (b) delete consumer web browsing information and certain products or algorithms derived from that data; (c) notify consumers whose information was previously sold without their consent; and (d) implement a privacy program.

    Federal Issues Data Consumer Data Privacy, Cyber Risk & Data Security

  • CFPB claims special, risk-based oversight over lender

    Federal Issues

    On February 23, the CFPB released a supervisory designation over a nonbank, small-loan consumer finance company (the Company). This is the first time the CFPB has used its authority under Section 1024(a)(1)(C) of the Consumer Financial Protection Act (CFPA) to designate a company for supervision based on a determination that the company’s conduct poses “risk to consumers” after a contested proceeding. This provision of the CFPA only required the CFPB to have “reasonable cause to determine” that a covered person’s conduct posed risks to consumers––which the CFPB stated is a “less demanding” legal standard than the preponderance-of-the-evidence standard generally used in civil proceedings.

    The CFPB described the relevant statutory framework of the proceeding with particularity since this proceeding was “one of the first” under Section 1024(a)(1)(C). The CFPB found the company to be a covered person and stated that the CFPB had reasonable cause to determine that the Company’s conduct poses risks to consumers, including its alleged bundling of loans with insurance coverage, harmful collection practices, inaccurate credit reporting, and serial refinancing. The CFPB alleged that consumer complaints are sufficient to establish reasonable cause that the Company’s actions put consumers at risk. 

     

    Federal Issues CFPB CFPA Investigations

  • FCC’s Rosenworcel relaunches Consumer Advisory Committee; focuses on AI consumer issues

    Privacy, Cyber Risk & Data Security

    On February 20, the Chairwoman of the FCC, Jessica Rosenworcel, announced that the FCC will relaunch the Consumer Advisory Committee (CAC). The CAC will focus on how emerging artificial intelligence (AI) technologies implicate consumers’ privacies and protections, such as how the FCC can better protect consumers against “unwanted and illegal” calls, among other things. The CAC is a committee with 28 members comprising companies, non-profit entities, trade organizations, and individuals; a full list of members is found here. The first meeting is on April 4, at 10:30 a.m., Eastern Time, and will be open to the public via a live broadcast.

    Privacy, Cyber Risk & Data Security FCC Advisory Committee Artificial Intelligence Privacy

  • FFIEC highlights the importance of property valuation practices

    On February 12, the Federal Financial Institutions Examination Council (FFIEC) released a statement on examination principles related to ensuring fair and creditable residential property valuation practices among supervised institutions. The FFIEC underscored the necessity for institutions to comply with anti-discrimination laws and regulations, such as the ECOA and the Fair Housing Act, while also adhering to safety and soundness regulations outlined in statutes like the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. According to the statement, effective valuation review programs are essential for identifying and addressing deficiencies, ensuring compliance with appraisal regulations, and promoting fair lending practices. Through examination processes, both in consumer compliance and safety and soundness assessments, the FFIEC aimed to mitigate risks associated with valuation discrimination or bias.

    Bank Regulatory FFIEC Fair Housing ECOA OCC Fair Housing Act

  • FTC provides its 2023 ECOA activities to CFPB

    Federal Issues

    On February 12, the FTC provided the CFPB with an annual summary of its 2023 enforcement, research and policy development, and educational-related initiatives on ECOA, as Dodd-Frank allows the Commission to enforce ECOA and any CFPB rules applicable to entities within the FTC’s jurisdiction. The letter emphasized the commitment of each agency to enforce laws protecting civil rights, fair competition, consumer protection, and equal opportunity in the development and use of automated systems and artificial intelligence. Additionally, the letter stated the FTC continued its involvement in initiatives such as military outreach and participation in interagency task forces on fair lending. Its initiatives focused on consumer and business education regarding issues related to Regulation B and guiding fair lending practices. The Commission also highlighted (1) an enforcement action against a group of auto dealerships alleging ECOA and its implementing Regulation B violations in connection with the sale of add-on products; (2) refund checks sent as a result of the settlement of two enforcement actions against auto dealerships in which it was alleged that the dealerships violated ECOA and Regulation B by discrimination against Black and Latino consumers by charging them higher financing costs; and (3) an amicus brief submitted to an appeals court in support of the CFPB’s appeal to the U.S. Court of Appeals for the Seventh Circuit of the lower court’s decision regarding the applicability of ECOA to individuals other than “applicants.” 

    Federal Issues FTC CFPB ECOA Dodd-Frank Enforcement

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