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FDIC releases June enforcement actions
On July 29, the FDIC released a list of administrative enforcement actions taken against banks and individuals in June. During the month, the FDIC made public twelve orders consisting of “three consent orders, one order to pay civil money penalty, four orders of prohibition, one section 19 order, one order terminating consent order, two orders of termination of insurance, one Notice of Intention to Prohibit from Further Participation, Notice of Assessment of Civil Money Penalties, Findings of Fact and Conclusions of Law, Order to Pay, Notice of Hearing, and Prayer for Relief.” The FDIC imposed a civil money penalty against a Missouri-based bank for alleged violations of the Flood Disaster Protection Act. Among other things, the FDIC claimed that the bank “made, increased, extended or renewed a loan secured by a building or mobile home located or to be located in a special flood hazard area without providing timely notice to the borrower and/or the servicer as to whether flood insurance was available for the collateral.” The bank must pay a $7,000 civil money penalty.
The actions also include a consent order with a Georgia-based bank, which alleged that the bank violated “law or regulation related to weaknesses in the Bank’s compliance with the Bank Secrecy Act.” According to the consent order, the bank must, among other things: (i) “enhance its oversight of the Bank’s BSA/AML Compliance Program and assume full responsibility for the approval of sound BSA/AML policies, procedures, and processes”; (ii) “revise, adopt, and implement a written BSA/AML Compliance Program, including policies and procedures”; and (iii) “review and revise as appropriate its written policies, procedures, and processes for assessing the money laundering, terrorist financing, and other illicit financial activities risk profile of the Bank.”
FTC brings action against payment processor for misleading small businesses
On July 29, the FTC announced a settlement with a payment processing company and two of its sales affiliates (collectively, “defendants”) to resolve claims that they “trapp[ed] small businesses with hidden terms, surprise exit fees, and zombie charges.” The FTC alleged that the defendants made false claims about fees and cost savings, including “false and baseless claims about their processing services” to lure merchants, many of whom had limited English proficiency. According to the complaint, once merchants were enrolled, the defendants allegedly withdrew funds from their accounts without their consent and made it difficult and expensive for them to cancel the service. The complaint also alleged that the defendants violated the Restore Online Shoppers’ Confidence Act (ROSCA) by failing to disclose material terms, by charging consumers without their express informed consent, and by failing to provide a simple mechanism for consumers to cancel the agreements.
Under the terms of the proposed settlement, the defendants are, among other things, prohibited from making misrepresentations, making unsubstantiated claims, and using unfair debiting practices. The defendants will also be prohibited from making withdrawals from any of their customers’ bank accounts without authorization. The defendants must pay $4.9 million to the FTC, which will be used to provide refunds to affected businesses.
Republicans allege CFPB “collusion” with states
On July 28, House Financial Services Committee Ranking Member Patrick McHenry (R-NC) and two other Republican members sent a letter to CFPB Director Rohit Chopra, expressing their concerns that the Bureau has been “colluding” with states to “intimidate companies by conspiring with state agencies to pursue duplicative enforcement actions” in the financial services industry. The letter recognizes that state AGs “may enforce the CFPA in cases where the CFPB has not,” but argues that “the statute does not allow for a state attorney general to become a party to an existing CFPB enforcement action.” As previously covered by InfoBytes, the Bureau issued an interpretive rule in May addressing states’ authority to bring enforcement actions for violations of federal consumer financial protection laws, including the CFPA. The representatives argue that although the CFPB has a duty to enforce the CFPA and protect consumers from predatory and discriminatory practices, the Bureau’s interpretive rule is “akin to deputizing state attorneys general to enforce the CFPA on behalf of the CFPB – something Congress did not authorize.” The letter concludes with a request for documents and information from the Bureau by August 12, including (i) the legal authority that allows the CFPB to “recruit state attorneys general to join existing CFPB actions"; (ii) any “safeguards” the CFPB has in place to avoid “redundant and duplicative state actions”; and (iii) “all documents and communications between offices of state attorneys general and the CFPB since October 12, 2021” and “all information regarding complaints filed in a judicial court received by the CFPB pursuant to 12 USC § 5552.”
Treasury establishes data hub to assist with climate-risk assessments
On July 28, the U.S. Department of Treasury’s Office of Financial Research (OFR) announced the establishment of the Climate Data and Analytics Hub pilot, which will be used to help financial regulators assess risks to financial stability due to climate change. According to the announcement, the Climate Data and Analytics Hub permits participants to integrate data from across the federal government, including wildfire, crop condition, precipitation, and other climate-related data, with their public supervisory data for a more precise view of the relationship between climate change and financial stability risk. Additionally, it is “equipped with statistical and visualization applications that will allow deeper insight into climate-related financial risks and vulnerabilities.” Access to the pilot is initially limited to the Federal Reserve Board of Governors and the Federal Reserve Bank of New York, with the goal of expanding access to all of the Financial Stability Oversight Council member agencies. The OFR also released a Fact Sheet, which provides more information on the Climate Data and Analytics Hub.
CFPB reports on potential impacts of medical debt
On July 27, the CFPB issued a report analyzing how actions announced by three national consumer reporting companies affect people who have allegedly unpaid medical debt on their credit reports. The report is a part of a CFPB series that examines consumer credit trends using a longitudinal sample of approximately five million de-identified credit records maintained by one of the three nationwide consumer reporting agencies. According to the report, in March, the credit reporting companies announced voluntarily that they would no longer report certain medical collections. Specifically, starting July 1, 2022, the time before unpaid medical collections can appear on a consumer’s report will increase from 180 days to one year and paid medical collections will no longer appear at all. In addition, sometime in 2023, medical collections with balances below a threshold of “at least” $500 will not appear on a consumer’s report. The Bureau’s report stated that “[t]hese changes have the potential to reduce the amount of medical debt reported on consumer credit reports and to benefit some consumers.” The report describes the characteristics of consumers with reported medical collections currently and provides a state-by-state breakout of how the credit reporting changes will impact consumers’ credit reports. Highlights of the report include: (i) consumers in Northern and Eastern states have higher concentrations of medical debt that are likely to be removed; (ii) consumers with medical debt are significantly more likely to reside in neighborhoods that majority Black or Hispanic and have lower median income, but consumers likely to have all their medical debt removed by the change are slightly more likely to live in neighborhoods that are majority white and higher income; and (iii) eliminating paid collections is less likely to have a substantial effect, as very few medical collection tradelines are ever marked paid. The CFPB also noted that, due to the nature of the data, the report does not examine the impact of the extension of the time between referral of the medical bill for collections and the reporting of the bill from 180 days to one year.”
11th Circuit reverses class action settlement in TCPA case
On July 27, the U.S. Court of Appeals for the Eleventh Circuit vacated and remanded a district court’s approval of a class action certification and settlement agreement in an TCPA action after determining that the plaintiff lacked Article III standing in light of the U.S. Supreme Court’s decision in TransUnion LLC v. Ramirez (covered by InfoBytes here). According to the opinion, the plaintiff sued the defendant, alleging it violated the TCPA by calling and texting her “solely to market its services and products through a prohibited automatic telephone dialing system.” After the case was consolidated, and after negotiating with the defendant, the plaintiffs submitted a proposed class settlement agreement that established a settlement fund of $35 million to the 1.26 million settlement class members, who would receive either a $35 cash payment or a $150 voucher for the defendant’s services. The district court had noted Salcedo v. Hanna, in which the 11th Circuit held “that receipt of a single unwanted text message was not a sufficiently concrete injury to give rise to Article III standing,” and that “the proposed class definition included individuals who received only one text message from [the defendant].” The district court determined that “even though some of the included class members would not have a viable claim in the Eleventh Circuit, they do have a viable claim in their respective Circuit [because of a circuit split]. Thus, [the defendant] is entitled to settle those claims in this class action although this Court would find them meritless had they been brought individually in the Eleventh Circuit”
On appeal, the 11th Circuit noted that TransUnion LLC v. Ramirez held that “every class member must have Article III standing in order to recover individual damages.” The appellate court further noted that “TransUnion says that we can’t award damages to plaintiffs who do not have Article III standing. And Article III standing goes to the heart of our jurisdiction to hear cases in the first place. It further stated that the court “cannot … check [its] Article III requirements at the door of the class action. Any class definition that includes members who would never have standing under our precedent is a class definition that cannot stand.”
OCC updates statement on MDIs
On July 27, the OCC announced the revision of its 2013 policy statement for minority depository institutions (MDI) to update and streamline descriptions of its policies, procedures, and programs. According to the announcement, the OCC observed an increase in interest from banks and other stakeholders in working with MDIs and the MDI designation process after Project REACh was formed in 2020, and after the Emergency Capital Investment Program was established by Congress for Covid-19 relief. These events prompted the OCC to review its 2013 policy statement on MDIs, and the revised policy statement is a result of that review. The OCC also released a Fact Sheet regarding the agency’s support for MDIs.
FSOC releases fact sheet on climate-related progress
On July 28, the Financial Stability Oversight Council (FSOC) released a Fact Sheet detailing the progress made to-date by the FSOC’s members in implementing the climate-related financial risk report’s recommendations. As previously covered by InfoBytes, in October 2021 the FSOC released a report, Report on Climate Related Financial Risk, identifying climate change as an emerging threat to financial stability and issued over 30 related recommendations to financial regulators. According to the Fact Sheet, the FSOC has made substantial progress since the October 2021 report by: (i) enhancing public climate-related disclosure; (ii) assessing and mitigating climate-related risks that could threaten U.S. financial stability; (iii) building capacity and expanding efforts to address climate-related financial risks; and (iv) filling climate-related data and methodological gaps.
CDFI Fund seeks comment on criteria for MDIs
On July 28, the Community Development Financial Institutions (CDFI) Fund published a notice in the Federal Register soliciting public comment to refine the criteria it should use to designate “minority lending institutions” (MDIs) as a subset of CDFIs. According to the notice, CDFI Fund “seeks to implement the designation for those CDFIs that wish to be recognized for their high levels of service and accountability to Minority populations, as well as to identify barriers such CDFIs experience in providing access to capital.” Among other things, the CDFI Fund is soliciting information on topics that include: (i) majority-minority Census tracts and the time period used to assess service in these tracts; (ii) CDFI status; (iii) financial products delivered to non-minority-owned customers that serve individuals from racial and ethnic minorities; (iv) methods MLIs may use to demonstrate accountability to minority populations; and (v) standards for accountability to minority populations, as determined by the CDFI Fund. Comments are due by November 25.
CFPB updates debt collection FAQs
On July 27 the CFPB added a new section to the Debt Collection Rule Frequently Asked Questions (FAQs), which address questions related to the electronic communication and unusual or inconvenient time and place provisions in the Debt Collection Rule.