InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
CFPB launches inquiry into employer-driven debt practices
On June 9, the CFPB issued a request for information (RFI) seeking public input on practices and financial products that may cause an employee to owe a debt to their employer. The Bureau’s focus is on debt obligations incurred by consumers in the context of an employment or independent contractor arrangement, including training repayment agreements where employees are required to repay the costs of job training should they voluntarily or involuntarily leave a job within a set time period. Other employer-driven debt products include up-front purchases of equipment or other supplies that are not paid for by the employer—a common occurrence when workers are outsourced or classified as independent contractors. Among other things, the RFI seeks information on “prevalence, pricing and other terms of the obligations, disclosures, dispute resolution, and the servicing and collection of these debts.” The Bureau is particularly interested in whether consumers “have a meaningful choice” in agreeing to these products, what these agreements’ terms and conditions are, and whether they might prevent individuals from seeking alternative employment. “The labor market operates at its best when workers are able to move freely within it,” CFPB Director Rohit Chopra said in the announcement, noting that the inquiry will study “the effects of an emerging form of debt that may have the potential to trap employees in place.”
CFPB releases HAF flyers in multiple languages
On June 9, the CFPB released Homeowner Assistance Fund (HAF) informational flyers in English, Spanish, Chinese, Vietnamese, Korean, Tagalog, and Arabic. As previously covered by InfoBytes, the HAF program was created to provide direct assistance to consumers for mortgage payments, property insurance, utilities, and other housing-related costs to help prevent delinquencies, defaults, and foreclosures after January 21, 2020 related to the Covid-19 pandemic. Mortgage servicers may voluntarily provide these flyers to their borrowers and are advised that the flyer is not required by regulation. Additional HAF program information is available in multiple languages on the Bureau’s website.
CFPB settles with student-loan debt relief company
On June 9, the CFPB filed a stipulated final judgment and order in the U.S. District Court for the Southern District of California resolving allegations that the operator of a student-loan debt relief company engaged in unfair debiting of consumer accounts, in violation of the CFPA. According to the complaint, in 2016, the defendant founded a student debt relief company, which “did not solicit new consumers, but instead obtained student-loan account and billing information for hundreds of former [student debt relief operation] consumers without the knowledge or consent of those consumers.” As previously covered by InfoBytes, in 2016, the CFPB filed a consent order against a San Diego-based student debt relief operation for alleged violations of the CFPA, the TSR, and Regulation P by deceiving borrowers into paying fees for federal loan benefits and misrepresenting to consumers that it was affiliated with the Department of Education. The CFPB alleged that the defendant led a debt collection scheme by withdrawing $39 per month, and collecting hundreds of thousands of dollars in total fees from student borrowers’ bank accounts, without authorization, after previously obtaining their names and account information from the former student loan debt relief business. According to the CFPB, “under this scheme, [the defendant’s] company had unlawfully debited more than $240,000 from hundreds of student borrowers’ accounts.” Under the terms of the settlement, the defendant is permanently banned from engaging in debt relief services and must pay a $175,000 penalty to the CFPB.
Special Alert: Congress releases draft privacy bill
A comprehensive federal privacy law drew one step closer to reality earlier this month when a bipartisan group of representatives and senators released a draft of the proposed American Data Privacy and Protection Act.
Passage of the ADPPA, which combines elements of prior proposals in an effort to reach a legislative compromise, is still far from assured. But it represents a meaningful starting point for further discussions, and is already shaping the long-running debate on national privacy standards. This alert looks closely at the proposed statutory text that seeks to define the breadth and scope of a federal privacy regime that policymakers have contemplated for years.
Greater clarity about bill text and its overall prospects for passage are likely to emerge at the House Energy and Commerce Committee’s hearing scheduled for tomorrow at 10:30 a.m. ET.
CFPB grants financial services company’s request to end no action letter
On June 8, the CFPB announced an order to end a “no-action letter” (NAL) issued to a consumer lending platform in 2020 in response to the NAL recipient’s request to shorten the term of the letter, which the company noted was necessary in order to be able to keep its underwriting models accurate and up-to-date during a period of significant economic change. As previously covered by InfoBytes, the Bureau first issued a NAL to the company in 2017, as part of the CFPB’s Project Catalyst initiative, relating to the Equal Credit Opportunity Act and the company’s loan underwriting and pricing model. Under the NAL, the company was immunized “from being charged with fair lending law violations with respect to its underwriting algorithm, while the ‘no-action letter’ remained in force.” In November 2020, the Bureau issued a second NAL after the first one expired (covered by InfoBytes here).
CFPB reports on consumer financial well-being
On June 7, the CFPB published a “Data Spotlight” report regarding financial well-being of consumers between 2017 and 2020. In September 2017, the CFPB published its first report on Financial Well-Being in America, which found a wide variation in how people feel about their financial well-being. The recently released report shows that Americans experienced an average increase in their financial well-being between 2017 and 2020, which was likely due to the government response to the Covid-19 pandemic. Using respondent-level public use data from the Fed’s November 2017 and November 2020 Survey of Household Economics and Decision-making, the Bureau’s report found that despite a national average increase, 36 percent of U.S. adults reported having lower financial well-being in 2020 than in 2017. In analyzing the specific characteristics, including income, education, gender, race/ethnicity, and age, nearly “40 percent of respondents that reported a decline in financial well-being were individuals with incomes of less than $25,000, individuals without a bachelor’s degree or greater, women, and Black/non-Hispanic adults.” The report also found that “five percent of adults with low and very low financial well-being reported moving out of their homes due to immediate or future foreclosure or eviction, compared to only one percent of the general population.” Additionally, the report noted that “between 2017 and 2020, U.S. adults of color, younger adults, and women had smaller increases in financial well-being than white adults, older adults, and men.”
ARRC releases recommendations for LIBOR ICE contracts
On June 8, the Alternative Reference Rates Committee (ARRC) issued recommendations for contracts linked to U.S. dollar LIBOR Intercontinental Exchange Swap Rates. According to the ARRC, the recommendations recognize that such contracts are not covered by federal LIBOR legislation and that counterparties may have to take proactive steps to address the end of the USD LIBOR ISR. The recommendations include a suggested fallback formula that may be used for USD LIBOR ISR fixings after three-month USD LIBOR has been discontinued or becomes non-representative. The ARRC also noted that if a legacy position cannot be proactively converted or amended, “the ARRC believes that, once three-month USD LIBOR has ceased to be published as a representative rate, the fallback formula suggested would accurately represent the at-the-money rates of standard interest rate swaps which are tied to it and which incorporate the fallback provisions introduced in the ISDA 2020 IBOR Fallbacks Protocol.”
GSEs issue Equitable Housing Finance Plans
On June 8, Fannie Mae and Freddie Mac (GSEs) released their Equitable Housing Finance Plans for 2022-2024 (available here and here), affirming their commitment to addressing racial and ethnic disparities in homeownership and wealth. The plans were developed following FHFA’s September 2021 request for public input, which invited comments to help the GSEs prepare their first plans and to aid FHFA in overseeing the plans (covered by InfoBytes here). Among other things, the plans (which will be updated annually) include activities to (i) address future consumer education initiatives for renters and homeowners; (ii) help tenants build credit profiles and enable better access to financial services; (iii) expand counseling services to support housing stability; (iv) launch technology to increase access to sustainable credit and fair home appraisals; and (v) deploy Special Purpose Credit Programs to address barriers to sustainable homeownership, focusing particularly on consumers living in formerly redlined and underserved areas with majority Black populations. FHFA’s press release also announced the establishment of a new pilot transparency framework for the GSEs, which will require Fannie and Freddie to publish and maintain a list of pilot programs and “test-and-learn activities” on their public websites to help FHFA determine whether such activities address disparities identified in the plans.
Earlier in the week, FHFA released its inaugural Mission Report describing housing finance activities taken in 2021 by the GSEs and Federal Home Loan Banks related to targeted economic development and affordable, equitable, and sustainable housing. The report highlighted, among other things, that the gap between mortgage acceptance rates for minority and white borrowers “remains persistent,” with Black and Latino borrowers representing 6.3 percent and 14.2 percent of all mortgages purchased by the GSEs, respectively, in the fourth quarter of 2021. The report also discussed fair lending geographical trends as well as data on multifamily and single-family loan acquisitions.
CFTC requests feedback on climate-related financial risk
On June 8, the CFTC published a request for information (RFI) in the Federal Register seeking public responses on climate-related financial risks related to the derivatives markets and underlying commodities markets. Among other things, the Commission is seeking input on the types of data that could help the CFTC evaluate climate-related financial risk exposures, scenario analysis and stress testing, risk management, disclosures, product innovation, digital assets, financially vulnerable communities, mechanisms for public-private partnerships/engagement, and coordination with other regulatory bodies. The CFTC emphasized that the responses “will help to inform the Commission’s next steps in furtherance of its purpose to, among other things, promote responsible innovation, ensure the financial integrity of all transactions subject to the Commodity Exchange Act, and avoid systemic risk.” Additionally, the Commission noted that it “may use this information to inform potential future actions including, but not limited to, issuing new or amended guidance, interpretations, policy statements, regulations or other potential commission action within its authority under the Commodity Exchange Act, as well as its participation in any domestic or international fora.”
Comments on the RFI are due August 8.
District Court grants defendant’s summary judgment in TCPA case
On June 6, the U.S. District Court for the Northern District of Ohio granted a national bank’s (defendant) motion for summary judgment in a case alleging it violated the TCPA by placing unwanted telephone calls and text messages. According to the order, the plaintiff filed suit in April 2021, alleging the defendant called him 88 times without his consent regarding a debt using an automated dialing system in violation of the TCPA. The court found that the plaintiff had given his consent to be contacted when he signed a signature card for his account that included his number. The court noted that his consent permitted the defendant “to use text messaging, artificial or prerecorded voice messages and automatic dialing technology for informational and account service calls, but not for telemarketing or sales calls.” The court further concluded that “prior express consent permits a creditor to contact a debtor by any telephonic means,” and emphasized that the “TCPA is not intended to stop a bank from calling its customers, but rather to stop telemarketers from making random, sequentially generated ‘robocalls’ to consumers who do not wish to receive them.”