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Financial Services Law Insights and Observations


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  • OCC announces enforcement actions for June 2024

    On June 17, the OCC released a list of recent enforcement actions against national banks, federal savings associations, and individuals affiliated with such entities (defined as institution-affiliated parties, or IAPs). In its enforcement actions against national banks, the OCC alleged that one bank had deficient anti-money laundering (AML) and BSA controls; another pertained to a bank’s alleged unsafe or unsound practices related to the bank’s board and management oversight, including strategic planning, liquidity and interest risk management, and audit management, among other issues identified.

    The announcement included two other enforcement actions against IAPs, which were generally used to “deter, encourage correction of, or prevent violations, unsafe or unsound practices, or breaches of fiduciary duty.” One was for accessing customer accounts improperly and providing information on those accounts to a third-party individual; the other was for embezzlement. Lastly, the release reported the termination of an enforcement action against a bank for unsafe or unsound practices since the bank demonstrated compliance with “all articles of an enforcement action.” More information on the OCC’s enforcement action types can be found here.

    Bank Regulatory OCC Enforcement Federal Issues Cease and Desist

  • CFPB proposes order against co-trustees for concealing assets to avoid fine

    Federal Issues

    On June 17, the CFPB filed a stipulated order and judgment, subject to court approval in the U.S. District Court for the District of Kansas, in an action against two individuals to resolve a lawsuit accusing them of concealing assets. The CFPB averred the defendants engaged in multiple fraudulent transfers over two years to avoid paying a fine owed to the Bureau. As previously covered by InfoBytes, the CFPB filed a complaint last year accusing the individuals of concealing assets to avoid paying $38 million in restitution and $12.5 million in civil penalties owed by the company and an individual defendant related to their payday lending practices. The Bureau will be seeking recovery of the transferred funds by declaring the transactions fraudulent and imposing liens on properties, as well as pursuing monetary judgment against the wife of one of the individual defendants and her trust.

    The stipulated order and judgment would release freezes and holds on defendants’ accounts and require defendants to pay about $7.3 million of an imposed $12.3 million judgment, with the remainder suspended due to a demonstrated inability to pay more. The payment will apply toward satisfying one defendant’s existing $43 million judgment, which included consumer redress and civil money penalties. That defendant must also share their filed federal and state income taxes with the Bureau until the fine is paid. If any additional financial information is found or if defendants made any financial misrepresentations, then defendants would be required to pay the fine in full. 

    Federal Issues Courts CFPB Enforcement Trust Fund Payday Lending Online Lending FDCPA

  • CFPB releases semi-annual report on mid-year 2023

    Federal Issues

    On June 4, the CFPB released its semi-annual report to Congress, for the period beginning April 1, 2023, and ending September 30, 2023. The report highlighted rules and orders, complaints, supervisory and enforcement actions, and fair lending initiatives from the Bureau. The Bureau provided an overview of three final rules: a final rule on its authority over nonbanks in determining their risk, a final rule on small business lending under the ECOA, and an interim final rule in helping transition the LIBOR changes to reflect the LIBOR Act. Additionally, the report included a compilation of reports, guidance and spotlights on different consumer finance issues. Looking ahead, the Bureau noted its upcoming rules following September 2023 with four proposed rules. One on personal financial data rights, another on defining the participants for digital consumer payment applications, another on overdraft lending, one on fees for instantaneously declined transactions, and a final rule on credit card penalty fees.

    During the period from October 2022 to September 2023, the Bureau received 1.55 million consumer complaints. Of these, around 1.2 million complaints were sent to the relevant companies for review. When broken out by category, 79 percent of all consumer complaints were related to credit or other consumer reporting, with 7 percent on debt collection, 4 percent on credit cards, 4 percent on checking or savings, and 2 percent on mortgages; the remaining 4 percent was spread among a variety of consumer finance products.

    During the semi-annual reporting period, the CFPB executed a total of 55 public supervisory and enforcement actions. On state consumer financial law, the Bureau noted its ongoing complaint against an education firm accused of engaging in deceptive marketing and unfair debt collection practices with ten state attorneys general (as covered by InfoBytes here). Additionally, there were three lawsuits submitted along with the New York State Attorney General. Finally, for fair lending, the Bureau discussed its enforcement and rulemaking, with the issuance of a proposed rule on quality for Automated Valuation Models for real estate collateral securing mortgage loans. 

    Federal Issues CFPB Fair Lending Enforcement Rulemaking Agenda

  • Colorado extends its money transmitter regulations

    State Issues

    On June 3, Colorado enacted HB 1328, (the “Act”), which will extend the state’s regulation of money transmitters until September 2030. The law had previously been scheduled to sunset on September 1. The Act will implement the recommendations of the Department of Regulatory Agencies, as specified in the Department's sunset review of the regulation of money transmitters. Specifically, the Act will (i) authorize the State Banking Board to suspend a money transmitter’s license and issue cease and desist orders; (ii) expand the requirement to furnish surety bond coverage to include all money transmission, rather than any exchange; (iii) increase the maximum penalty for failure to allow an examination from $100 to $1,000 per day the refusal continues and for failure to report up to $750 per day; and (iv) expand the licensing exemption to cover out-of-state banks. The Act will go into effect 90 days following the adjournment of the General Assembly, assuming a referendum petition will not be filed. 

    State Issues State Legislation Colorado Money Service / Money Transmitters Licensing Fintech Enforcement

  • CFPB sues student loan servicer over discharged student loan collections

    Federal Issues

    On May 31, the CFPB announced its lawsuit against a Pennsylvania-based student loan servicer (the defendant) for allegedly collecting on discharged loans. According to the complaint, the defendant lacked policies and procedures for identifying serviced loans that were discharged by bankruptcy courts. The CFPB alleged that the defendant continued to collect on discharged non-qualified education loans by making misrepresentations to consumers through repayment schedule letters and billing statements. Furthermore, the Bureau alleged that the defendant’s failure to establish policies for private student loans that were discharged resulted in its furnishing inaccurate information to consumer reporting agencies. The Bureau added that even if consumers did not continue to pay on their discharged loans, they were not reasonably able to avoid the defendant’s collection attempts and the credit information it furnished. The CFPB also claimed that consumers were unable to protect their interests because they could not choose their loan servicer and had no control over its collection practices. The defendant’s actions were in violation of the CFPA based on several violation of Regulation V. The defendant allegedly violated the FCRA, too. The Bureau sought injunctive relief, consumer redress, a civil money penalty, and other relief. 

    Federal Issues Enforcement CFPB CFPA FCRA Student Loan Servicer Student Loans

  • OCC releases enforcement actions for May 2024

    On May 23, the OCC released a list of recent enforcement actions against national banks, federal savings associations, and individuals affiliated with such entities (defined as institution-affiliated parties, or IAPs). The actions against two individual banks include two formal agreements in which the OCC alleged that the banks engaged in unsafe or unsound practices related to risk governance and internal controls for one bank; and capital planning, strategic and succession planning, and liquidity risk management for the other bank. The announcement also included five enforcement actions against IAPs to “deter, encourage correction of, or prevent violations, unsafe or unsound practices, or breaches of fiduciary duty.” Specifically, the announcement included four prohibition orders and one notice of charges against IAPs, mainly individuals, for criminal activity. More information on the OCC’s enforcement action types can be found here.

    Bank Regulatory Federal Issues OCC Enforcement Cease and Desist

  • CFPB sues online lending platform for alleged CFPA, FCRA violations

    Federal Issues

    On May 17, the CFPB announced a lawsuit against an online lending platform through which consumers could obtain small-dollar, short-term loans through a brokering arrangement with lenders. The CFPB alleged the platform violated the CFPA through its deceptive advertisements to consumers on the platform’s alleged promotion of financing terms which included “no interest,” “0% APR,” or “0% interest” but instead invited consumers to provide “tips” and “donations” to lenders, which, would increase the likelihood of a loan being funded. The CFPB further alleged that while the platform marketed zero-interest loans, the platform did not provide users an option for a $0 donation fee or to skip the fee altogether. The Bureau claimed, “almost all of [the platform’s] loans carry an equivalent annual percentage rate of over 36% APR, and many loans carry an APR in excess of 300%, with some over 1,000%.” The Bureau also claimed the platform violated the CFPA by providing misleading TILA disclosures that did not contain the cost of the additional fees and tips in the quoted total payments.

    The complaint alleged further violations of the CFPA where the platform (i) obscured whether and how borrowers can select the option for no donation or tip; (ii) stated or implied through its practices that consumers were obligated to repay loan amounts although the loans violated the applicable states’ lender-licensing or usury laws that declared such loans void ab initio or limited consumers’ obligation to repay; (iii) requested to collect and collects on void loans consumers were not obligated to repay for the aforementioned reason; (iv) misleadingly implied that it will furnish negative information to the credit bureaus unless the consumer makes a payment, without actually intending to do so; and (v) violated the FCRA.

    The CFPB’s complaint stated that because the platform was a consumer reporting agency under the FCRA and therefore would be required to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” The CFPB will seek, among other things, injunctions against the platform to prevent future violations, monetary relief for borrowers, forfeiture of ill-gotten gains, and a civil money penalty.

    Federal Issues Peer-to-Peer Enforcement CFPB Consumer Finance CFPA FCRA

  • HUD and mortgage lender reach agreement on Montana fair lending complaint

    Federal Issues

    On May 13, HUD announced an agreement with a mortgage lender to resolve allegations of Fair Housing Act violations. According to the redacted agreement, a complaint was filed with HUD last August accusing the mortgage company of engaging in housing discrimination based on race, in violation of the Fair Housing Act. The complainants claim they faced discriminatory housing terms, were denied housing, and were subject to racially discriminatory notices and advertisements. The mortgage company denied all allegations of discrimination, asserted its commitment to fair housing and equal opportunity, and agreed to a Conciliation Agreement to resolve the matter without admitting any wrongdoing or liability.

    The mortgage company agreed to a $65,000 settlement and will commit to upholding its fair lending policies, ensuring applicants on Native American reservations are able to obtain residential mortgage loans without fear of discrimination based on race, color or national origin. Respondent will also contribute at least $30,000 towards initiatives designed to enhance housing conditions, financial literacy, and homeownership education for Native Americans near reservations. During the three-year term of the agreement, HUD may review compliance and conduct fair housing tests, among other oversight methods. The terms of the agreement also required the mortgage company to submit a training curriculum on its fair lending training courses for new employees and perform annual trainings with current employees; additionally, the mortgage company must submit an annual report on the mortgage company’s progress and performance in complying with the public interest provisions of the agreement. The agreement has been approved by the regional director of the Office of Fair Housing and Equal Opportunity.

    Federal Issues HUD Enforcement Settlement Montana Consumer Finance Fair Lending Mortgages

  • Maryland enacts new powers for regulators to examine third parties

    State Issues

    On May 9, the Governor of Maryland approved HB 250 (the “Act”) which will authorize the Commissioner of Financial Regulation to examine third parties that service entities under the supervision of the state’s Office of Financial Regulation (OFR). Such licensed entities include both depository and non-depository financial institutions. Currently, the OFR lacks the authority to examine third parties until the Act goes into effect. The Act will define third-party service providers as a “person who performs activities relating to financial services on behalf of a regulated entity for that regulated entity’s customers,” and include data processing centers, activities that support financial services, and internet-related services. On enforcement, the Act will authorize the OFR to enforce the law against any third party that refuses to submit to an examination, refuses to pay a fee, or engages in “unsafe or unsound” behaviors as determined by the OFR. The Act will outline several authorities of the OFR, including notifying the licensed person, which information the OFR can access, and levying fees. Following a notice and hearing, the Commissioner may issue a cease-and-desist order, suspend or revoke a violator’s license, or issue a penalty of up to $10,000 for the first violation and up to $25,000 for each subsequent violation. The Act takes effect on October 1.

    State Issues State Legislation Maryland Enforcement Fees

  • District Court denies mortgage lender’s motion to dismiss against CFPB


    On May 2, the U.S. District Court for the Southern District of Florida denied a mortgage lender’s motion to dismiss. The CFPB sued the lender in October 2023 for violating HMDA and Regulation C by intentionally misreporting data regarding borrower race, ethnicity, and sex pursuant to a data reporting requirement from a prior consent order. In a sample of the defendant’s data reporting submission, the CFPB allegedly found 51 data errors across seven data fields. The court sided with the CFPB on all four grounds raised in the lender’s motion to dismiss. First, the court found that the CFPB pleaded a plausible violation of the HMDA, sufficient to survive a motion to dismiss. Second, the court rejected the lender’s arguments that HMDA and Regulation C are “unconstitutionally vague” because they established a standard for covered loan data that meets a constitutional standard. Third, the court sided again with the CFPB in finding that the injunctive relief at issue did not qualify as an “obey the law” injunction since it provided reasonable clarity of what was required of the lender. And fourth, the court upheld the funding structure of the CFPB as constitutional, therein following guidance from the Second Circuit in upholding the structure as constitutional.

    Courts CFPB HDMA Regulation C Enforcement


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