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On January 19, the FDIC issued FIL-06-2022 to provide regulatory relief to financial institutions and facilitate recovery in areas of Tennessee affected by severe storms, straight-line winds, and tornadoes. The FDIC acknowledged the unusual circumstances faced by institutions and their customers affected by the weather and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans, so long as these measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.
On January 19, HUD announced disaster assistance for certain areas in Alaska and Tennessee impacted by severe storms, straight-line winds, flooding, landslides, mudslides, and tornados. (See here and here.) The disaster assistance follows President Biden’s major disaster declarations on January 14 and 15. According to the announcements, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program allows individuals who have lost homes to finance the purchase of a house or refinance an existing house along with the costs of repair, through a single mortgage. The program also allows homeowners with damaged property to finance the rehabilitation of existing single-family homes. Furthermore, HUD is allowing applications for administrative flexibilities and waivers for community planning and development grantees and public housing authorities. For Alaska specifically, flexibilities and waivers are extended to tribes and tribally designated housing entities.
On January 20, the CFPB announced its plans to examine the operations of post-secondary schools that extend private loans directly to students and update its exam procedures, including a new section on institutional student loans. The Bureau noted that it is “concerned about the borrower experience with institutional loans because of past abuses at schools,” high interest rates, and strong-arm debt collection practices. When examining institutions offering private education loans, in addition to examining general lending issues, the Bureau noted that examiners will review certain actions only schools can take against their students, which include, among other things: (i) placing enrollment restrictions; (ii) withholding transcripts; (iii) improperly accelerating payments; (iv) failing to issue refunds; and (v) maintaining improper lending relationships. The education loan exam procedures manual is intended for use by Bureau examiners, and is available as a resource to those subject to its exams. These procedures will be incorporated into the Bureau’s general supervision and examination manual.
On January 14, the U.S. District Court for the Central District of California granted final approval to a $1.8 million class action settlement to resolve allegations that a credit union (defendant) improperly charged members overdraft and insufficient fund fees (NSF). The class members alleged they had wrongfully incurred more than one NSF fee on the same transaction when it was reprocessed again after initially being returned for insufficient funds. The class also alleged that the defendant’s contracts did not authorize such charges. The settlement allocated $715,500 to class members who were charged certain fees between May 2016 and October 2020, and $874,500 to class members who were charged certain fees between May 2016 and February 2020. The amount allocated to each class member is based on the former fees assessed against them. As part of the nearly $1.8 million settlement, the defendant must pay $1.59 million in cash, and must waive roughly $176,000 in uncollected at-issue fees.
On January 18, the CFPB filed a proposed stipulated judgment and order to resolve a complaint filed last year against an Illinois-based third-party payment processor and its founder and former CEO (collectively, “defendants”) for allegedly engaging in unfair practices in violation of the CFPA and deceptive telemarketing practices in violation of the Telemarketing Act and its implementing rule, the Telemarketing Sales Rule. As previously covered by InfoBytes, the CFPB alleged that the defendants knowingly processed remotely created check (RCC) payments totaling millions of dollars for over 100 merchant-clients claiming to offer technical-support services and products, but that actually deceived consumers—mostly older Americans—into purchasing expensive and unnecessary antivirus software or services. The tech-support clients allegedly used telemarketing to sell their products and services and received payment through RCCs, the Bureau claimed, stating that the defendants continued to process the clients’ RCC payments despite being “aware of nearly a thousand consumer complaints” about the tech-support clients. According to the Bureau, roughly 25 percent of the complaints specifically alleged that the transactions were fraudulent or unauthorized.
If approved by the court, the defendants would be required to pay a $500,000 civil penalty, and would be permanently banned from participating in or assisting others engaging in payment processing, consumer lending, deposit-taking, debt collection, telemarketing, and financial-advisory services. The proposed order also imposes $54 million in redress (representing the total amount of payments processed by the defendants that have not yet been refunded). However, full payment of this amount is suspended due to the defendants’ inability to pay.
On January 11, the FDIC’s technology lab, FDiTech, and FinCEN announced the launch of a Tech Sprint challenging participants “to develop solutions for financial institutions and regulators to help measure the effectiveness of digital identity proofing—the process used to collect, validate, and verify information about a person.” According to the Tech Sprint program, Measuring the Effectiveness of Digital Identity Proofing for Digital Financial Services, solutions developed from this Tech Sprint will inform future FDIC, FinCEN, and industry-led efforts, plans, and programs to: (i) increase efficiency and account security; (ii) decrease fraud and other forms of identity-related crime, money laundering and terrorist financing; and (iii) foster customer confidence in the digital banking environment. According to the agencies, digital identity proofing is “challenged by the proliferation of compromised personally identifiable information, the increasing use of synthetic identities, and the presence of multiple, varied approaches for identity proofing.” The FDIC and FinCEN will open registration in the coming weeks, and stakeholders interested in participating will have approximately two weeks to submit applications.
On January 12, the U.S. Court of Appeals for the Third Circuit vacated an order granting summary judgment in favor of a mortgage lender (defendant) for alleged violations of TILA and RESPA, among other claims. The plaintiff, a retired disabled military veteran, contracted with a home builder to purchase a home and used the defendant to obtain mortgage financing, which was later transferred to a servicing company. The plaintiff contended that the defendant allegedly (i) provided outdated TILA and RESPA disclosures; (ii) misrepresented that the plaintiff would not have to pay property taxes; (iii) failed to make a reasonable and good faith determination of the plaintiff’s ability to pay; and (iv) failed to provide notice of the transfer of servicing rights. On appeal, the 3rd Circuit determined that the defendant did not meet the initial burden to show no genuine dispute as to any material fact related to the plaintiff’s claims, and remanded the action. Without assessing the evidentiary value of the testimonies and materials submitted by each party in support of their own version of events, the appellate court reasoned that “these materials do not foreclose a reasonable jury from crediting [the plaintiff’s] testimony over [the defendant’s] account and finding [the defendant] liable.”
On January 10, the U.S. Supreme Court issued a short summary disposition granting a petition for a writ of certiorari filed by a lender and an appraisal management company. Rather than hearing arguments in the case, the Court immediately vacated the judgment against the defendants and ordered the U.S. Court of Appeals for the Fourth Circuit to reexamine its decision in light of the Court’s ruling in TransUnion v. Ramirez (which clarified the type of concrete injury necessary to establish Article III standing, and was covered by InfoBytes here).
As previously covered by InfoBytes, in March 2021, a divided 4th Circuit affirmed a district court’s award of over $10 million in penalties and damages based on a summary judgment that an appraisal practice common before 2009 was unconscionable under the West Virginia Consumer Credit and Protection Act. During the appeal, the defendants argued that summary judgment was wrongfully granted and that the class should not have been certified since individual issues predominated over common ones, but the appellate court majority determined, among other things, that there was not a large number of uninjured members within the plaintiffs’ class because plaintiffs paid for independent appraisals and “received appraisals that were tainted.”
The defendants argued in their petition to the Court that the 4th Circuit’s “fundamentally unjust” holding could not stand in the wake of TransUnion, which ruled that every class member must be concretely harmed by an alleged statutory violation in order to have Article III standing. According to the defendants, the divided panel “affirmed the class certification and the class-wide statutory-damages award, because the class members all faced the same risk of harm: the appraisers had been ‘exposed’ to the supposed procedural error, and the class members paid for the appraisals, even though the court ‘cannot evaluate whether’ any harm ever materialized.”
On January 5, the CFPB released a report, pursuant to Section 611(e)(5) of the FCRA, on information gathered by the Bureau on certain consumer complaints transmitted by the Bureau to the three largest nationwide consumer reporting agencies (NCRAs). According to the report, the CFPB received over 800,000 credit or consumer reporting complaints between January 2020 to September 2021, and of the complaints, over 700,000 were submitted about the same three NCRAs discussed in the report. According to the Bureau, complaints submitted about the NCRAs accounted for over 50 percent of all complaints received by the Bureau in 2020 and over 60 percent in 2021. The Bureau’s analysis revealed that consumers submitted more complaints in each complaint session and are increasingly returning to the Bureau’s complaint process, with a significant amount of complaints regarding inaccurate information on their credit and consumer reports. The CFPB found that the NCRAs reported relief in less than 2 percent of complaints, which is down from approximately 25 percent of complaints in 2019. Additionally, consumers most frequently complained that the inaccurate information belongs to other individuals, and consumers often described being victims of identity theft. The Bureau, in addition to pointing out how the NCRAs are “fail[ing] to meet [their] statutory obligations” under the FCRA, also noted that medical debts are an “unnavigable quagmire” and needs to be addressed. It reported that the NCRAs “do not take available steps to distinguish between complaints authorized by the consumer and those not authorized by the consumer.” The Bureau also mentioned issues that consumers face when attempting to dispute information on their credit reports, such as, among other things: (i) unsuccessfully disputing information in a timely manner; (ii) frequently expending resources to correct inaccuracies; and (iii) and finding themselves caught between furnishers and NCRAs when attempting to resolve disputes. Other highlights of the report include noting that the NCRA rely “heavily” on utilizing template responses to complaints, despite having 60 days to respond, and that two of the NCRAs mentioned in the report do not give “substantive responses to consumers’ complaints if they suspected that a third-party was involved in submitting a complaint.”
On January 12, HUD announced disaster assistance for certain areas in Missouri impacted by severe storms, straight-line winds, and tornadoes in December 2021. The disaster assistance supplements state, tribal, and local recovery efforts in specific counties, and provides foreclosure relief and other assistance to affected homeowners following President Biden’s major disaster declaration on January 11. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program allows individuals who have lost homes to finance the purchase of a house or refinance an existing house along with the costs of repair, through a single mortgage. The program also allows homeowners with damaged property to finance the rehabilitation of existing single-family homes. HUD also announced it is allowing applications for administrative flexibility waivers for Community Planning and Development Grantees and public housing authorities. Recently, HUD announced it will provide the same foreclosure relief and assistance to Alabama, Arkansas, Kansas, and Washington state homeowners affected by severe storms, flooding, tornados, and wildfires in those states. (See press releases here, here, here, and here).
- Jonice Gray Tucker to discuss “Be Your Compliance Best in 2022” at the California Mortgage Bankers Association webinar
- Lauren R. Randell to discuss “Significant legal developments in the Northeast” at the 37th Annual National Institute on White Collar Crime
- Jonice Gray Tucker to discuss “Small business & regulation: How fair lending has evolved & where it is heading?” at the Consumer Bankers Association Live program
- Jonice Gray Tucker to discuss “Regulators always ring twice: Responding to a government request” at ALM Legalweek
- Jonice Gray Tucker and Kari Hall to discuss “Equity, equality, regulation and enforcement – The evolving regulatory landscape of fair lending, redlining, and UDAAP” at the ABA Business Law Committee Hybrid Spring Meeting