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On October 26, the CFPB announced a settlement with a ninth mortgage lender for mailing consumers advertisements for Department of Veterans Affairs (VA) mortgages that allegedly contained misleading statements or lacked required disclosures. According to the Bureau, the lender allegedly sent false, misleading, and inaccurate direct-mail advertisements for VA guaranteed mortgage loans to servicemembers and veterans in violation of the CFPA, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. Among other things, the Bureau alleged the advertisements (i) stated credit terms that the lender was not actually prepared to offer, such as the interest rate and annual percentage rate applicable to the advertised mortgage; (ii) made misrepresentations about “the existence, nature, or amount of cash or credit available to the consumer in connection with the mortgage”; (iii) failed to include required disclosures; (iv) gave the false impression that the mortgage products would help eliminate or reduce debt; and (v) made misleading comparisons in advertisements involving actual or hypothetical loan terms.
The settlement imposes a civil money penalty of $1.8 million and bans the lender from future advertising misrepresentations similar to those identified by the Bureau. Additionally, the settlement requires the lender to use a compliance official to review mortgage advertisements for compliance with consumer protection laws, and to comply with certain enhanced disclosure requirements.
The latest enforcement action is part of the Bureau’s “sweep of investigations” related to deceptive VA-mortgage advertisements. Previously, the Bureau issued consent orders against eight other mortgage lenders for similar violations, covered by InfoBytes here, here, here, and here.
On October 27, the CFPB announced a settlement with a national bank, resolving allegations that the bank reported inaccurate HMDA data for 2016 and 2017 mortgage transactions. According to the consent order, the bank allegedly violated HMDA, Regulation C, and the Consumer Financial Protection Act by failing to report accurate data among the 7,000 mortgage applications reported in 2016 and 2017. Specifically, the Bureau alleged that the submissions contained “significant errors,” with an internal audit of the 2016 filing identifying a 40 percent error rate and the Bureau’s review of the 2017 filing identifying a 16 percent error rate. The Bureau asserted that the 2016 errors were caused by “a lack of appropriate staff, insufficient staff training, and ineffective quality control,” while the 2017 errors were “directly related to weaknesses in [the bank]’s compliance-management system (CMS).” In 2013, the bank entered into a consent order with the Bureau for similar issues; thus, the Bureau concluded the 2016 and 2017 errors were “intentional and not bona fide” as the bank allegedly failed to maintain a “CMS with procedures reasonably adapted to avoid” the errors since the previous order.
The consent order requires the bank to, among other things, pay a $200,000 civil money penalty and develop a HMDA compliance-management system that includes policies, procedures, and an internal audit program that regularly tests the HMDA data integrity.
On October 23, a Chicago-based nonbank mortgage company moved to dismiss a CFPB redlining action on the grounds that the Bureau’s complaint “improperly seek[s]” to expand ECOA to “prospective applicants.” As previously covered by a Buckley Special Alert, in July, the Bureau filed a complaint against the mortgage company alleging the mortgage company engaged in redlining in violation of ECOA and the Consumer Financial Protection Act. The Bureau argued, among other things, that the company redlined African American neighborhoods in the Chicago area by discouraging their residents from applying for mortgage loans from the company and by discouraging nonresidents from applying for loans from the company for homes in these neighborhoods. To support its arguments, the Bureau cited to (i) a number of racially disparaging comments allegedly made by the owner and employees on the company’s broadcasts; (ii) the company’s comparatively low application volume from African American neighborhoods and applicants; (iii) its lack of specific marketing targeting the African American community in Chicago; (iv) and its failure to employ African American mortgage loan officers.
In support of its motion to dismiss, the mortgage company argued that the Bureau’s complaint is “flawed” by seeking to expand the reach of ECOA to “prospective applicants” and regulate the company’s behavior before a credit transaction begins. In addition to expanding the application of ECOA, the company argued that the Bureau is attempting to impose—through Regulation B’s “discouragement” definition—(i) “affirmative requirements to target advertising to specific racial or ethnic groups”; (ii) “a demographic hiring quota”; and (iii) “a requirement to have business success with specific racial or ethnic groups.” Moreover, the company argued the Bureau’s interpretation of ECOA and Regulation B violates the company’s First Amendment rights by attempting to regulate “the content and viewpoint of protected speech . . . in a way that is unconstitutionally overbroad and vague.” Lastly, the company argued the Bureau similarly violated the Fifth Amendment’s due process clause by seeking to enforce Regulation B’s definition of “discouragement,” because it is unconstitutionally vague.
On October 13, the CFPB announced a settlement with the Texas-based auto-financing subsidiary of a Japanese automobile manufacturer to resolve allegations that the servicer violated the Consumer Financial Protection Act by engaging in illegal repossession and collection practices. The CFPB alleged that the servicer engaged in unfair and deceptive practices by (i) wrongfully repossessing vehicles even though customers made payments to decrease their delinquency to less than 60 days past due or kept a promise to pay; (ii) limiting the ability of borrowers who pay over the phone to select payment options with significantly lower fees; (iii) making false statements in loan extension agreements, which “created the net impression that consumers could not file for bankruptcy”; and (iv) knowing its repossession agents were charging customers upfront storage fees before returning personal property left inside repossessed cars.
Under the terms of the consent order, the servicer must pay a $4 million civil money penalty, as well as up to $1 million in consumer redress. The servicer must also credit any outstanding fees stemming from the repossession and pay consumers redress for each day it wrongfully held their vehicles. The servicer is also ordered to, among other things, (i) cease using language that creates the impression that customers may not file for bankruptcy; (ii) conduct a quarterly review to identify and remediate any future wrongful repossessions; (iii) adopt policies and procedures to correct its repossession practices; (iv) prohibit its repossession agents from charging fees to get personal property returned; and (v) clearly disclose phone payment fees to consumers.
On October 15, the CFPB announced a proposed settlement with the largest U.S. debt collector and debt buyer and its subsidiaries (collectively, “defendants”), resolving allegations that the defendants violated the terms of a 2015 consent order related to their debt collection practices. As previously covered by InfoBytes, the Bureau filed an action against the defendants in September alleging that they collected more than $300 million from consumers by violating the terms of the 2015 consent order—and again violating the FDCPA and CFPA—by, among other things, (i) filing lawsuits without possessing certain original account-level documentation (OALD) or first providing the required disclosures; (ii) failing to provide debtors with OALD within 30 days of the debtor’s request; (iii) filing lawsuits to collect on time-barred debt; and (iv) failing to disclose that debtors may incur international-transaction fees when making payments to foreign countries, which “effectively den[ied] consumers the opportunity to make informed choices of their preferred payment methods.”
The stipulated final judgment, if entered by the court, would require the defendants to pay nearly $80,000 in consumer redress and a $15 million civil money penalty. Moreover, among other things, the defendants are subject to a five-year extension of certain conduct provisions of the 2015 consent order and must disclose to consumers the potential for international-transaction fees and that the fees can be avoided by using alternative payment methods.
On August 27, the CFPB denied a petition by an auto financing company to set aside a civil investigative demand (CID) issued by the Bureau in June. The CID requested information from the company to determine, among other things, “whether auto lenders or associated persons, in connection with originating auto loans (including marketing and selling products ancillary to such loans), servicing loans, collecting debts (including through repossessing vehicles), or consumer reporting” may have violated the Consumer Financial Protection Act’s UDAAP provisions, as well as the FCRA and TILA. The company petitioned the Bureau to set aside the CID. Among other things, the company argued that because certain aspects of the CID do not fall within a “reasonable construction of the CID’s notification of purpose,” and thus failed to provide fair notice as to what the Bureau is investigating, the CID should be “modified to strike each of these requests or clearly confine them to the enumerated topics.”
The Bureau rejected the company’s request to set aside or modify the CID, countering that (i) the particular requests that the company objects to are “all reasonably relevant to the Bureau’s inquiry as described in the notification of purpose,” and that the company cannot rewrite the CID’s notification of purpose to describe only four specific topics and then argue that the Bureau is asking for irrelevant information; and (ii) the Bureau has broad authority to seek information that may be “reasonably relevant” to an investigation, and that the Bureau’s “own appraisal of relevancy must be accepted so long as it is not obviously wrong.” According to the Bureau, the company failed to overcome this “high hurdle established in the judicial precedent.” However, the Bureau granted the company’s request for confidential treatment of its petition and attached exhibits by agreeing to redact certain proprietary business information and confidential supervisory information.
On September 14, the CFPB announced a settlement with an eighth mortgage lender for mailing consumers advertisements for Department of Veterans Affairs (VA) mortgages that allegedly contained misleading statements or lacked required disclosures. According to the Bureau, the lender offers and provides VA guaranteed mortgage loans, and allegedly sent false, misleading, and inaccurate direct-mail advertisements to servicemembers and veterans in violation of the CFPA, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. Among other things, the Bureau alleged the advertisements (i) failed to include required disclosures; (ii) stated credit terms that the lenders were not actually prepared to offer; (iii) made “misrepresentations about the existence, nature, or amount of cash available to the consumer in connection with the mortgage credit product”; (iv) gave the false impression the lenders were affiliated with the government; and (v) used the name of the consumer’s current lender in a misleading way.
The settlement imposes a civil money penalty of $625,000 and bans the lender from future advertising misrepresentations similar to those identified by the Bureau. Additionally, the settlement requires the lender to use a compliance official to review mortgage advertisements for compliance with consumer protection laws.
The latest enforcement action is part of the Bureau’s “sweep of investigations” related to deceptive VA-mortgage advertisements. Previously, the Bureau issued consent orders against seven other mortgage lenders for similar violations, covered by InfoBytes here, here and here.
On September 8, the U.S. District Court for the Central District of California entered a stipulated final judgment against two additional defendants in an action brought by the CFPB, the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney alleging a student loan debt relief operation deceived thousands of student-loan borrowers and charged more than $71 million in unlawful advance fees. As previously covered by InfoBytes, the complaint alleged that the defendants violated the Consumer Financial Protection Act, the Telemarketing Sales Rule, and various state laws by charging and collecting improper advance fees from student loan borrowers prior to providing assistance and receiving payments on the adjusted loans. Four defendants settled in August, with a total suspended judgment of over $95 million due to the defendants’ inability to pay and total payments of $90,000 to Minnesota, North Carolina, and California, and $1 each to the CFPB, in civil money penalties.
The new final judgment holds the two relief defendants liable for nearly $7 million in redress; however, the judgment is suspended based on an inability to pay. The defendants are not subject to any civil money penalties, but are required to relinquish certain assets and submit to certain reporting requirements.
On September 8, the CFPB filed a complaint against the largest U.S. debt collector and debt buyer and its subsidiaries (collectively, “defendants”) for allegedly violating the terms of a 2015 consent order related to their debt collection practices. As previously covered by InfoBytes, the defendants allegedly engaged in robo-signing, sued (or threatened to sue) on stale debt, made inaccurate statements to consumers, and engaged in other illegal collection practices in violation of the Consumer Financial Protection Act (CFPA), FDCPA, and FCRA. According to the complaint, filed in the U.S. District Court for the Southern District of California, the defendants have collected more than $300 million from consumers using practices that did not comply with the 2015 consent order. Among other things, the complaint alleges that the defendants violated the terms of the consent order—and again violated the FDCPA and CFPA—by (i) filing lawsuits without possessing certain original account-level documentation (OALD) or first providing required disclosures; (ii) failing to provide consumers with OALD within 30 days of the consumer’s request; (iii) filing lawsuits to collect on time-barred debt; and (iv) failing to disclose that consumers may incur international-transaction fees when making payments to foreign countries, which “effectively den[ied] consumers the opportunity to make informed choices of their preferred payment methods.” The Bureau seeks injunctive relief, damages, consumer redress, disgorgement, and civil money penalties. In addition, the Bureau asks the court to permanently enjoin the defendants from committing future violations of the CFPA or FDCPA.
On September 8, the CFPB and the New York attorney general jointly filed a lawsuit against a debt collection operation based near Buffalo, New York. The defendants include five companies, two of their owners, and two of their managers (collectively, “defendants”). According to the complaint, filed in the U.S. District Court for the Western District of New York, the defendants violated the Consumer Financial Protection Act, FDCPA, and various New York laws by using illegal tactics to induce consumer payments, such as (i) threatening arrest and imprisonment; (ii) claiming consumers owed more debt than they actually did; (iii) threatening to contact employers about the existence of the debt; (iv) harassing consumers and third parties by using “intimidating, menacing, or belittling language”; and (v) failing to provide debt verification notices.
The lawsuit seeks consumer redress, disgorgement, civil money penalties, and injunctive relief against the defendants.
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