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Maryland Department of Labor issues financial relief guide for Marylanders
On June 19, the Maryland Department of Labor’s Office of the Commissioner of Financial Regulation issued the Covid-19 Health Crisis: Financial Relief Guide for Marylanders. Among other things, the guide contains information and resources regarding relief programs for consumers relating to economic impact payments, mortgage payments and foreclosure, rental evictions, student loans, automobile and personal loans, collections and garnishment, credit reporting, and insurance coverage and payments.
Texas Office of Consumer Credit updates guidance for regulated lenders
On June 12, the Texas Office of the Consumer Credit Commissioner issued updated guidance for regulated lenders navigating the Covid-19 crisis. The guidance: (1) addresses the June 1 due date for filing annual reports; (2) encourages lenders to work with consumers, including by working out modifications to assist with payments, waiving fees and charges, suspending charged-off accounts, and suspending repossessions of collateral or foreclosure of real property, among other things; (3) reminds lenders of legal requirements for using electronic signatures; and (4) permits lenders to conduct regulated lending activity from unlicensed locations, subject to certain conditions. The guidance is in effect through July 31, 2020, unless withdrawn or revised
Texas Office of Consumer Credit updates guidance urging motor vehicle sales finance licensees to work with borrowers
On June 12, the Texas Office of the Consumer Credit Commissioner issued an updated advisory bulletin urging motor vehicle sales finance licenses to work with consumers during the Covid-19 crisis (previously covered here and here). Among other measures, the regulator urged licensees to increase consumer communication, work out modifications, waive certain charges, and suspend repossessions. The guidance is in effect through July 31, 2020, unless withdrawn or revised
North Carolina Attorney General announces joint relief effort for North Carolinians facing Covid-19 financial hardship
On June 4, the North Carolina attorney general announced the Carolina Relief Plan, a voluntary agreement whereby participating financial institutions will offer certain financial relief to customers facing Covid-19 financial hardships. Relief includes, among other things, allowing eligible customers to request a forbearance on residential mortgage payments not otherwise covered by the CARES Act, assistance for payment extensions of auto loan accounts, and relief from monthly maintenance fees, overdraft fees, and CD early withdrawal penalties. Under the agreement, any participating financial institution also must: (1) offer to place a moratorium on residential mortgage foreclosures and consumer auto repossessions through at least June 30, 2020; (2) refrain from reporting loans subject to Covid-19 accommodations; and (3) inform customers about the assistance they are being offered and of the heightened risk of scams. One financial institution has signed onto the relief plan as of the time of the announcement.
South Carolina regulator issues interim guidance to businesses regarding payment or performance deferrals and modifications
On June 1, the South Carolina Department of Consumer Affairs issued interim guidance regarding business activities during Covid-19, including payment or performance deferrals and modifications. The department strongly encourages persons and entities engaging in consumer credit transactions or other activities governed by the South Carolina Consumer Protection Code and subject to the department’s oversight to work with borrowers during the Covid-19 crisis and to “be practical, flexible, and empathetic.” The department also encourages businesses to adopt a number of measures related to modifications, workout strategies, waiving late fees, deferment charges, NSF fees, and certain ACH withdrawals, suspending charging off accounts, and suspending repossessions of collateral and foreclosure of real property. The interim guidance also addresses escrow accounts and electronic signatures, and sets forth additional resources for businesses and consumers.
Auto financing company settles multistate subprime lending action for $550 million
On May 19, the California attorney general, along with 33 other attorneys general, announced a multistate $550 million settlement with an auto sales financing company for allegedly placing subprime borrowers in auto loans that carried a high risk of default, in violation of state consumer protection laws. Specifically, California’s complaint alleges that the company violated the state’s Unfair Competition Law by, among other things, (i) extending auto loan credit to borrowers the company knew or should have known were likely to result in default and repossession; (ii) failing to disclose to borrowers the high risk of failure associated with the loans; (iii) requiring borrowers to make payments through methods that resulted in third-party fees; and (iv) misrepresenting borrowers’ ability to acquire repossessed vehicles already sent to auction. Additionally, the attorney general alleges that the company “turned a blind eye” to dealer abuse, resulting in higher origination prices for borrowers.
According to the press release, the company will pay approximately $433 million in forgiveness of loans still owned by the company across the U.S. and will waive deficiency balances for borrower loans that the company no longer owns. Notably, certain borrowers who had defaulted as of December 31, 2019 but were still in possession of their vehicle will be allowed to keep the vehicle and have the deficiency balance on the loan waived. California’s settlement also requires injunctive measures such as (i) requiring the company to consider the borrower’s ability to repay the loan; (ii) barring the company from purchasing loans where the borrower’s residual income is zero or negative; (iii) setting reasonable debt to income ratios; and (iv) no longer requiring dealers to sell ancillary products.
In addition to California, the multistate settlement includes: Illinois, Maryland, New Jersey, Oregon and Washington, who together with Attorney General Becerra comprise the executive committee; as well as the attorneys general of Arizona, Arkansas, Connecticut, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Minnesota, Nebraska, New Hampshire, New Mexico, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, West Virginia, Wyoming, and the District of Columbia.
State attorneys general send letter to auto manufacturers regarding Covid-19 practices
On May 20, a coalition of state attorneys general sent a letter to ten major auto manufacturers relating to reports that dealerships have been engaging in predatory and harmful practices in connection with the return of leased vehicles during the Covid-19 pandemic. The coalition calls upon auto manufacturers to ensure that their financing arms and affiliated dealerships have appropriate controls to timely accept the return of leased vehicles during the pandemic. Further, car dealerships are urged to take certain steps, such as reviewing their lease-return policies for compliance with applicable law, assisting consumers with convenient lease returns, and refunding harmed consumers for certain costs arising from refused lease returns.
Texas regulator urges motor vehicle sales finance licensees to work with borrowers
The Texas Office of the Consumer Credit Commissioner revised an advisory bulletin urging motor vehicle sales finance licenses to work with consumers during the Covid-19 crisis (previously covered here). Among other measures, the regulator urged licensees to increase consumer communication, work out modifications, waive certain charges, and suspend repossessions.
New Jersey Department of Banking extends filing deadlines for certain annual reports
On May 12, the New Jersey Department of Banking Insurance issued a bulletin regarding the extension of deadlines for certain entities and individual regulated by the Division of Banking to file annual reports. Certain enumerated licensees, including check cashers, insurance premium finance companies, motor vehicle installment sellers, and money transmitters, are granted an extension until June 1 to file annual reports. However, licensees must file their subsequent annual report by April 1, 2021. Mortgage lenders and mortgage brokers who are required to file an annual report on or before May 1, are also granted an extension to June 1. The next annual report must be filed by May 1, 2021.
Special Alert: California Assembly to introduce legislation for Covid-19-related relief for mortgage loans, vehicle-secured credit, PACE financing, and deferred deposit transactions
We understand that the California State Assembly will shortly propose amendments to Assembly Bill No. 2501 to create the “COVID-19 Homeowner, Tenant, and Consumer Relief Law of 2020.” As of posting of this Alert, the proposed legislation is not available on California’s legislative service website. The proposed law would provide relief to homeowners, tenants, and vehicle owners by prohibiting creditors and loan servicers from taking specified actions, including initiating foreclosures or repossessions, during the period from the date of enactment of the proposed law through the 180-day period following the date that California Governor Gavin Newsom declares the emergency related to Covid-19 has ended. Additionally, the proposed law would require servicers to place certain loans that become delinquent into automatic forbearance for a period of at least six months.
The proposed law appears similar to portions of an appropriations bill, “Take Responsibility for Workers and Families Act,” which was introduced in the U.S. House of Representatives on March 23, 2020, prior to the enactment of the federal Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and failed to pass. We understand that the proposed law is scheduled to be heard before the California State Assembly Banking Committee on May 19.