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Financial Services Law Insights and Observations


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  • CFPB publishes rulemaking agenda

    Federal Issues

    On June 11, the Office of Information and Regulatory Affairs released the CFPB’s spring 2021 rulemaking agenda. According to a Bureau announcement, the information released represents regulatory matters the Bureau is “currently pursuing under interim leadership pending the appointment and confirmation of a permanent Director.” Any changes made by the new permanent director will be reflected in the fall 2021 rulemaking agenda. Additionally, the Bureau indicates that it plans to continue to focus resources on actions addressing the adverse impacts to consumers due to the ongoing Covid-19 pandemic, and highlighted an interim final rule issued in April that addresses certain debt collector conduct associated with the CDC’s temporary eviction moratorium order (covered by InfoBytes here). The Bureau will also continue to take concrete steps toward furthering the agency’s “commitment to promoting racial and economic equity.”

    Key rulemaking initiatives include:

    • Small Business Rulemaking. Last September, the Bureau released a Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) outline of proposals under consideration, convened an SBREFA panel last October, and released the panel’s final report last December (covered by InfoBytes here and here). The Bureau reports that it anticipates releasing a notice of proposed rulemaking (NPRM) for the Section 1071 regulations this September to “facilitate enforcement of fair lending laws as well as enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses.”
    • Consumer Access to Financial Records. The Bureau notes that it is considering rulemaking to implement section 1033 of Dodd-Frank in order to address the availability of electronic consumer financial account data. The Bureau is currently reviewing comments received in response to an Advance Notice of Proposed Rulemaking (ANPR) issued last fall regarding consumer data access (covered by InfoBytes here).
    • Property Assessed Clean Energy (PACE) Financing. As previously covered by InfoBytes, the Bureau published an ANPR in March 2019 seeking feedback on the unique features of PACE financing and the general implications of regulating PACE financing under TILA. The Bureau notes that it continues “to engage with stakeholders and collect information for the rulemaking, including by pursuing quantitative data on the effect of PACE on consumers’ financial outcomes.”
    • Automated Valuation Models (AVM). Interagency rulemaking is currently being pursued by the Bureau, Federal Reserve Board, OCC, FDIC, NCUA, and FHFA to develop regulations for AVM quality control standards as required by Dodd-Frank amendments to FIRREA. The standards are designed to, among other things, “ensure a high level of confidence in the estimates produced by the valuation models, protect against the manipulation of data, [ ] avoid conflicts of interest, require random sample testing and reviews,” and account for any other appropriate factors. An NPRM is anticipated for December.
    • Amendments to Regulation Z to Facilitate LIBOR Transition. As previously covered by InfoBytes, the Bureau issued an NPRM in June 2020 to amend Regulation Z to address the sunset of LIBOR, and to facilitate creditors’ transition away from using LIBOR as an index for variable-rate consumer products. A final rule is expected in January 2022.
    • Reviewing Existing Regulations. The Bureau notes in its announcement that while it will conduct an assessment of a rule implementing HMDA (most of which took effect January 2018), it will no longer pursue two HMDA proposed rulemakings previously listed in earlier agendas related to the reporting of HMDA data points and public disclosure of HMDA data. Additionally, the Bureau states that it finished a review of Regulation Z rules implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009 and plans to publish any resulting changes in the fall 2021 agenda.

    The Bureau’s announcement also highlights several completed rulemaking items, including (i) a final rule that formally extended the mandatory compliance date of the General Qualified Mortgage final rule to October 1, 2022 (covered by InfoBytes here); (ii) proposed amendments to the mortgage servicing early intervention and loss mitigation-related provisions under RESPA/Regulation X (covered by a Buckley Special Alert) (the Bureau anticipates issuing a final rule before June 30, when the federal foreclosure moratoria are set to expire); and (iii) a proposed rule (covered by InfoBytes here), which would extend the effective date of two final debt collection rules to allow affected parties additional time to comply due to the ongoing Covid-19 pandemic (the Bureau plans to issue a final rule in June on whether, and for how long, it will extend the effective date once it reviews comments).

    Federal Issues CFPB Agency Rule-Making & Guidance Covid-19 Small Business Lending SBREFA Consumer Finance PACE Programs AVMs Dodd-Frank Regulation Z LIBOR HMDA RESPA TILA CARES Act Debt Collection

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  • CFPB to address racial equality

    Federal Issues

    On June 2, CFPB acting Director Dave Uejio published a blog post highlighting Bureau efforts to address issues regarding racial injustice and the long-term economic effects of the Covid-19 pandemic on consumers. In January, as previously covered by InfoBytes, Uejio released a statement announcing his immediate priorities for the Bureau as: (i) relief for consumers facing hardship due to the Covid-19 pandemic and the related economic crisis; and (ii) racial equity. In the recent blog post, Uejio acknowledged that the “pandemic has created economic and financial insecurity for millions of Americans,” and has disproportionally impacted communities of color in terms of health and the related financial crises. Uejio also pointed out that, as acting director, his top priority is to “take bold and swift action to address issues of pervasive racial injustice and the long-term economic impacts of the COVID-19 pandemic on consumers” and noted that it is his “intent that the CFPB use all of [its] tools and authorities to protect and fight for fairness and equity.”

    Federal Issues CFPB Covid-19

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  • Fed winding down Secondary Market Corporate Credit Facility

    Federal Issues

    On June 2, the Federal Reserve Board announced plans to wind down the portfolio of the Secondary Market Corporate Credit Facility (SMCCF), a temporary emergency lending facility that was established and provided by the Treasury Department under the CARES Act, which closed in December 2020. The SMCCF (covered by InfoBytes here) played a role in restoring market functioning, supported the availability of credit for certain employers, and assisted employment numbers during the Covid-19 pandemic. According to the announcement, sales from the SMCCF portfolio will be “gradual and orderly,” aiming to decrease the likelihood of  “any adverse impact on market functioning by taking into account daily liquidity and trading conditions for exchange traded funds and corporate bonds.” The announcement also indicates that the Federal Reserve Bank of New York, which manages the operations of the SMCCF, will release more details before sales begin.

    Federal Issues Covid-19 Federal Reserve Liquidity Bond Department of Treasury CARES Act

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  • SBA updates PPP FAQs

    Federal Issues

    On June 8, the SBA updated its Paycheck Protection Program (PPP) frequently asked questions to clarify certain conditions related to whether a nonprofit organization that has received approval of an application for tax exemption from the Puerto Rico Departamento de Hacienda qualifies as a “nonprofit organization” under section 7(a)(36)(A)(vii) of the Small Business Act. The FAQ discusses exemption criteria for certain nonprofit organizations, and specifies that SBA will treat a nonprofit organization that has obtained approval of its application for tax exemption from the Puerto Rico Departamento de Hacienda as meeting the definition of “nonprofit organization” under section 7(a)(36)(A)(vii) of the Small Business Act “if the nonprofit organization reasonably determines, in a written record maintained by the nonprofit organization, that it would be an organization described in section 501(c)(3) of the Internal Revenue Code (without regard to the notification requirement in section 508(a) of the Internal Revenue Code) and is therefore within a category of organizations that are eligible to be exempt from taxation under section 501(a), regardless of whether the nonprofit organization has applied for recognition from the Internal Revenue Service.” However, these nonprofit organizations must meet all other applicable eligibility criteria in order to receive a PPP loan and loan forgiveness, SBA emphasizes.

    As previously covered by InfoBytes, the SBA stopped accepting new PPP loan guarantee applications on June 1.

    Federal Issues SBA Covid-19 Small Business Lending

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  • 6th Circuit: SBA can’t prioritize race or sex for Covid relief


    On May 27, the majority of the U.S. Court of Appeals for the Sixth Circuit held that the Small Business Administration (SBA) cannot allocate limited Covid-19 relief funds based on the race and sex of the applicants. The plaintiff filed a lawsuit claiming the SBA’s practice of giving priority to certain Restaurant Revitalization Fund applicants (i.e. restaurants owned and controlled at least 51 percent by women, veterans, or the “socially and economically disadvantaged”) during the first 21 days violates the U.S. Constitution’s equal protection clause by impermissibly granting priority based on race and gender classifications. The plaintiff applied for funding on the first day the application period opened, but because the restaurant he co-owned 50/50 with his Hispanic wife was not owned 51 percent by a woman or a veteran, he faced an added evidentiary burden to show he qualified as “socially and economically disadvantaged” to get priority status. The plaintiff requested a temporary restraining order and a preliminary injunction to prohibit the SBA from granting funds unless it did so in a manner that ignored race and sex. The district court denied the request, as well as subsequent requests made by the plaintiff, ruling that he was unlikely to succeed on the merits of his claims.

    On appeal, the majority of the Sixth Circuit disagreed, concluding that the district court should have issued an injunction pending appeal since the SBA “failed to justify its discriminatory policy.” According to the majority, the SBA “injected explicit racial and ethnic preferences into the priority process” by “presume[ing] certain applicants are socially disadvantaged based solely on their race or ethnicity.” Additionally, the majority stated that the “added evidentiary burden faced by white men and other non-presumptively disadvantaged groups stands in marked contrast with lenient evidentiary standards set by the American Rescue Plan Act,” and pointed out that “broad statistical disparities cited by the government are not nearly enough” to suggest intentional discrimination. Because “an effort to alleviate the effects of societal discrimination is not a compelling interest,” the majority stated, “the government’s policy is not permissible.” The majority also rejected the SBA’s argument that the issue was moot because the priority period for the program has ended, commenting that race and sex preferences continue to factor in whether an applicant receives funds before the program’s money runs out.

    The dissenting judge argued, however, that the “Constitution permits the government to use race-based classifications to remediate past discrimination,” and added that the plaintiff has not demonstrated that he will be irreparably harmed by the way the program’s funds are distributed.

    Courts Appellate Sixth Circuit Covid-19 SBA

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  • VA updates loan repayment relief for Covid-19 borrowers

    Federal Issues

    On June 3, the Department of Veterans Affairs (VA) issued changes updating Circular 26-21-07 to address loan repayment relief for borrowers affected by Covid-19. The circular provides servicers with information regarding home retention options and foreclosure alternatives to use to assist borrowers affected by the pandemic. The guidance stems from the extended duration of the pandemic and developments in the VA’s program. According to the changes, “servicers should not require a borrower to make a lump sum payment to bring the loan current.” Additionally, the VA will allow “for Disaster Extend Modifications to extend the loan’s original maturity date for up to 18 months, in cases where the loan is modified not later than the date that is 18 months after the date on which the COVID-19 national emergency ends.” The circular is effective until April 1, 2022.

    Federal Issues Department of Veterans Affairs Covid-19 Mortgages Forbearance Consumer Finance

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  • D.C Circuit keeps CDC eviction moratorium in place


    On June 2, the U.S. Court of Appeals for the District of Columbia denied a group of realtors’ motion to lift an administrative stay placed by a district court on its own order, in which it had previously ruled that the CDC’s nationwide eviction moratorium issued in response to the Covid-19 pandemic exceeded the agency’s statutory authority with the temporary ban. As previously covered by InfoBytes, the district court vacated the CDC’s eviction moratorium and rejected the federal government’s request that the decision be narrowed, ruling that “when ‘regulations are unlawful, the ordinary result is that the rules are vacated—not that their application to the individual petitioner is proscribed.’” However, shortly after the federal government filed a notice of appeal, the district court stayed its own summary judgment order pending appeal.

    In denying the plaintiffs’ motion to vacate the stay pending appeal, the appellate court held that the district court did not abuse its discretion in staying its own ruling, and noted that the federal government has a good chance of winning its appeal. “[W]hile of course not resolving the ultimate merits of the legal question, we conclude that [the federal government] has made a strong showing that it is likely to succeed on the merits,” the appellate court wrote, adding, among other things, that “Congress has expressly recognized that the agency had the authority to issue its narrowly crafted moratorium.” Moreover, the D.C. Circuit determined that the plaintiffs failed to show the likelihood of irreparable injury should the stay remain in place.

    Courts Appellate D.C. Circuit Covid-19 Evictions CDC

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  • Bank enjoined from administering prepaid debit cards for EDD benefits


    On June 1, the U.S. District Court for the Northern District of California issued a preliminary injunction enjoining a national bank from certain actions in administering prepaid debit cards to class member recipients of Employment Development Department unemployment or disability benefits. Under the terms of the preliminary injunction, the bank is prohibited from “considering the results of [its] initial automated fraud claims filter” when investigating or resolving any alleged unauthorized transaction error claims, or from closing claims or denying credit before conducting an investigation, pursuant to EFTA and Regulation E. Class members are also entitled to a written explanation of investigative findings before the bank can deny or close a claim. Additionally, the bank is, among other things, (i) prohibited from considering the results of its claim fraud filter as justification for freezing the card account of any class member; (ii) required to reopen any claims that were closed or denied “based solely” on results of its claim fraud filter if those claims have not already been paid or previously reopened and investigated; (iii) required to provide written notice to class members with blocked accounts explaining that their accounts will be unblocked if they authenticate their identity; and (iv) establish a process for handing class member claims.

    Courts Debit Cards Prepaid Cards Class Action Covid-19 EFTA Regulation E

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  • Colorado amends executive order regarding eviction protections

    State Issues

    On June 1, the Colorado governor issued Executive Order 2021 110, which amends Executive Order 2021 088, as extended by Executive Order 2021 105. The amendment provides that an individual is prohibited from filing or initiating actions for forcible entry and detainer (i.e., eviction), including any demand for rent, unless the individual has notified the tenant in writing of the resources available to tenants and landlords, including a copy of the Department of Local Affairs resources. The Executive Order also directs the Executive Officer of the Department of Local Affairs to continue working with landlords to implement the model rent repayment agreements, to assist individuals who are unable to pay rent. Executive Order 2021 110 is set to expire on June 30. Previous coverage relating to Colorado’s eviction orders can be found herehere, here, and here.

    State Issues Covid-19 Colorado Mortgages Evictions

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  • PPP closes to new applications

    Federal Issues

    On June 1, the Small Business Administration (SBA) issued an announcement on the closure of the Paycheck Protection Program (PPP) to new loan guaranty applications. The PPP has provided over $798 billion in economic relief to over 8.5 million small businesses and nonprofits across the nation, and was among the first Covid-19 economic disaster relief programs to provide small businesses affected by the pandemic with emergency funds. According to the announcement, the PPP supported the “smallest of small businesses with 32 percent of the loans going to Low-and-Moderate Income (LMI) communities.” Additionally, Community Financial Institutions played a role in PPP lending to underserved communities by providing 1.5 million loans, which totaled around $30 billion. SBA Administrator Isabella Casillas Guzman pointed out, “in 2021, 96 percent of PPP loans went to small businesses with fewer than 20 employees. Moving forward, [the SBA] will continue to prioritize equity in all SBA programs and services.”

    Federal Issues Department of Treasury SBA Small Business Lending CARES Act Covid-19

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