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House Bill Focuses on Collection of Debts Owed to Federal Agencies
In February, Rep. Mia Love (R-Utah) introduced the Stop Debt Collection Abuse Act of 2017 (H.R. 864)—legislation seeking to extend the scope of the Fair Debt Collection Practices Act (“FDCPA”) to cover the activities of private debt collectors working on behalf of federal government agencies. Specifically, the proposed bill expands the definition of debt subject to the FDCPA to cover obligations—including loans, overpayments, fines, past-due penalties, and late fees—owed to a federal agency. Under the proposed new law, a debt collector includes any person who regularly collects debts currently or originally owed or allegedly owed to a federal agency. Moreover, the bill also requires that any fees charged by private debt collectors seeking to collect debt owed to a federal agency are limited to: (i) reasonable amounts in relation to the actual costs of the collection; (ii) fees authorized by a contract between the debt collector and the federal agency; and (iii) amounts not greater than 10 percent of the amount collected by the debt collector. H.R. 864, which is currently pending before the House committee on Financial Services, is co-sponsored by Keith Ellison (D-Minn.), French Hill (R-Ark.), and Emanuel Cleaver II (D-Mo.).
House Democrat Wants CFPB to Probe Discrimination in Small Business Loans
In a March 15 letter to CFPB Director Richard Cordray, Rep. Emanuel Cleaver (D-Mo.) called upon the Bureau to address potential abuses by FinTech companies that may be engaged in predatory small-business lending. In so doing, he asked that the Bureau “investigate whether FinTech companies engaged in small business lending are complying with all anti-discrimination laws, including the Equal Credit Opportunity Act.” The letter also seeks responses to three questions:
- When does the CFPB anticipate finalizing regulation and guidance to fully implement Section 1071 of the ECOA (requiring financial institutions to collect and maintain loan data for women-owned, minority-owned and small business credit applicants)?
- Has the CFPB engaged in any supervisory activities over FinTech small business lenders and, if so, did the CFPB identify any ECOA-related compliance issues?
- Will the CFPB solicit complaints through its consumer complaint portal from consumers, particularly those from communities of color, who feel they have been discriminated against by a FinTech lender offering small business loans (and, if not, how can consumers formally submit a complaint)?
CFPB Reaches Settlement with Arizona-Based Title Lender
On March 13, the CFPB issued a consent order and stipulation in an enforcement action against the fifth of five Arizona-based title lenders under investigation for advertising periodic interest rates without including corresponding annual percentage rates. As previously covered in Infobytes in September and February, this marks the conclusion of the investigation initiated by the Bureau last year against five title lenders for alleged violations of TILA, Regulation Z, and the Consumer Financial Protection Act’s prohibition against unfair, deceptive, or abusive acts or practices. The terms of the consent order include a $40,000 civil money penalty, an agreement that the lender will refrain from further violations of TILA, and a requirement that the lender submit a comprehensive plan to ensure compliance with all applicable federal consumer financial laws and the terms of the consent order.
CFPB Issues Largest HMDA Fine in Bureau History Against Nonbank Mortgage Lender
On March 15, the CFPB announced a consent order assessing a $1.75 million civil money penalty against a national mortgage lender for failing to accurately report mortgage data in violation of the Home Mortgage Disclosure Act (“HMDA”). The Bureau alleged that, during the supervision process, it found the lender’s HMDA compliance systems to be flawed, and that the flaws led to the generation of “significant, preventable” errors in its mortgage lending data. The following violations were also alleged: (i) a failure to “maintain detailed HMDA data collection and validation procedures”; (ii) a failure to “implement adequate compliance procedures”; and (iii) a failure to “consistently define data among its various lines of business,” which resulted in data discrepancies. As reported by the Bureau, the size of the penalty reflects the lender’s market size, the magnitude of the errors, and its history of violations. The terms of the consent order require the lender to pay a $1.75 million penalty, develop an effective compliance management system to prevent future violations, and review and correct HMDA reporting inaccuracies for the defined time period. Notably, the consent order does not provide for consumer redress.
Later that day, the mortgage lender issued a statement announcing the resolution of the Bureau’s examination and highlighting the company’s efforts “over the past two years” to “proactively ma[ke] substantial investments in new staff, training and technology to enhance all of [their] HMDA-related processes and controls.”
Illinois-Based Lender, HUD Resolve Fair Housing Act Matter
On March 10, HUD released a Conciliation Agreement with an Illinois-based lender alleged to have discriminated against African-American and Hispanic borrowers seeking mortgage loans. The complaint, brought by HOPE Fair Housing Center (HOPE), claims the lack of bank branches in majority African-American and Hispanic communities resulted in fewer financial services being offered to applicants based on their race and national origin in violation of the Fair Housing Act. HOPE’s complaint also claims that African-American and Hispanic applicants were more likely to receive less favorable mortgage terms than other races. As part of the settlement, the lender will establish a $1 million loan program to “increase mortgage lending to residents in majority African-American and Hispanic areas” and will pay $75,000 to HOPE. Among other things, the agreement also states the lender will offer consumer education outreach in minority areas and provide fair lending training for its staff.
FDIC Advisory Committee on Community Banking to Host Open Meeting on March 28
The Federal Deposit Insurance Corporation’s Advisory Committee on Community Banking will host an open meeting on Tuesday, March 28, 2017, at 9 a.m. The Advisory Committee will provide advice and recommendations on a broad range of policy issues that have particular impact on small community banks and the local communities they serve, with a focus on rural areas.
NJ Lawyer Convicted of $40.8 Million Mortgage Fraud Scheme
On March 8, a U.S. District Court Judge sentenced a New Jersey lawyer to a four year prison term for participating in a mortgage fraud scheme that tricked lenders into releasing $40.8 million based on fraudulent loan applications. The investigation, led by the District of New Jersey U.S. Attorney’s Office, concluded that the defendant and his co-conspirators created false documents to help “straw buyers”—“people with good credit scores but lacking the financial resources to qualify for mortgage loans”—appear more creditworthy so they could purchase properties. The defendant then falsified mortgage loan applications and supporting documents, submitted the paperwork to mortgage lenders, and laundered a portion of the loan proceeds through accounts controlled by the defendant and co-conspirators. In addition to the prison term, the defendant was sentenced to three years of supervised release, ordered to pay restitution of over $13.1 million and required to forfeit over $2.41 million of fraudulent proceeds.
President Trump Hosts “National Economic Council” Listening Session with CEOs of Small and Community Banks
On March 9, President Trump met with 11 community bank CEOs at the White House seeking the bankers’ input on which regulations may be crimping their ability to lend to consumers and small businesses. The meeting included representatives from the Independent Community Bankers of America (ICBA), and the American Bankers Association (ABA), as well as nine bank executives from across the country. Treasury Secretary Steven Mnuchin, National Economic Council Chairman Gary Cohn, and White House Chief of Staff Reince Priebus also were present.
The President started the meeting by noting that “[n]early half of all private-sector workers are employed by small businesses” and that “[c]ommunity banks are the backbone of small business in America” before announcing his commitment to “preserving our community banks.” Following the President’s brief opening remarks, the attendees had the opportunity to introduce themselves and share specific examples of how excessive regulatory burdens affect their ability to serve their customers, make loans and create jobs at the local level. Proposals, such as the ICBA’s Plan for Prosperity, also were discussed.
Following the meeting, ABA President and CEO Rob Nichols released a statement “commend[ing] President Trump for meeting with community bankers to hear the challenges they face serving their clients.” He described the meeting as “an important step” toward re-examining the “highly prescriptive rules” that have created a “regulatory environment” in which “mortgages don’t get made, small businesses don’t get created and banks find it more difficult to make the loans that drive job creation.” The ICBA also issued a post-meeting Press Release, in which their Chairman, Rebeca Romero Rainey, explained that among the items discussed at the meeting was the ICBA’s “Plan for Prosperity”—a “pro-growth platform to eliminate onerous regulatory burdens on community banks” that “includes provisions to cut regulatory red tape, improve access to capital, strengthen accountability in bank exams, incentivize credit in rural America and more.” The ICBA Chairman also confirmed that the Association “looks forward to continuing to work with President Trump, his administration and Congress to advance common-sense regulatory relief that will support communities nationwide.”
Also weighing in was House Financial Services Committee Chairman Jeb Hensarling (R-TX), who issued a press release praising the President for “listening to the concerns of community bankers who have been buried under an avalanche of burdensome regulations as a result of Dodd-Frank.” Chairman Hensarling also took the opportunity to tout the Financial CHOICE Act, his bill that would make sweeping amendments to the Dodd-Frank Act. According to Chairman Hensarling, GOP members on the Financial Services Committee are “eager to work with the President and his administration this year to fulfill the pledge to dismantle Dodd-Frank and unclog the arteries of our financial system so the lifeblood of capital can flow more freely and create jobs.”
Fannie, Freddie and FHLBs Ordered to Report Results of Annual Stress Tests
On March 3, FHFA Director Melvin Watt issued orders directing FHFA regulated government-sponsored enterprises (GSEs)—Fannie Mae (Order No. 2017-OR-FNMA-01), Freddie Mac (Order No. 2017-OR-FHLMC-01), and the 11 Federal Home Loan Banks collectively (Order No. 2017-OR-B-01)—to report the results of their stress tests so that the financial regulators may determine whether the GSEs “have the capital necessary to absorb losses as a result of adverse economic conditions.” The orders were issued pursuant to the requirement under the Dodd-Frank Act that covered financial institutions with total consolidated assets of more than $10 billion conduct an annual stress test to determine whether they have sufficient capital to support operations in adverse economic conditions. Accompanying each order was a copy of the “2017 Report Cycle Dodd-Frank Stress Tests Summary Instructions and Guidance.”
On April 14, the FHFA order was officially published in the Federal Register.
FDIC Releases March List of CRA Compliance Examinations
On March 3, the FDIC published its monthly list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). The list reports CRA evaluation ratings assigned to institutions in December 2016. Monthly lists of all state nonmember banks whose evaluations have been made publicly available since July 1, 1990 can be accessed through the FDIC's website.