Skip to main content
Menu Icon Menu Icon

InfoBytes Blog

Financial Services Law Insights and Observations


Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • DOJ announces settlement against Pennsylvanian bank for alleged redlining

    Federal Issues

    On February 5, the DOJ, together with the State of North Carolina, announced a settlement with a Pennsylvania-based bank (respondent) to resolve allegations that the bank engaged in a pattern or practice of lending discrimination by engaging in “redlining” in Charlotte and Winston-Salem, North Carolina, in violation of the Fair Housing Act and ECOA. The DOJ’s complaint alleged that from at least 2017 through 2021, the bank failed to provide mortgage lending services to predominantly Black and Hispanic neighborhoods in Charlotte and Winston-Salem and discouraged people seeking credit in those communities from obtaining home loans. The DOJ compared the respondent’s performance with other lenders, noting that other lenders generated applications in predominantly Black and Hispanic neighborhoods at two-and-a-half times the rate of respondents in Charlotte, and four times the rate of respondents in Winston-Salem.  

    Under the two proposed consent orders, the respondent will, among other things (i) invest at least $11.75 million in a loan subsidy fund to increase access to home mortgage, home improvement, and home refinance loans for residents of majority Black and Hispanic neighborhoods; (ii) spend $1 million on community partnerships; (iii) spend $750,000 for advertising, outreach, consumer financial education, and credit counseling focused on the areas at hand; (iv) open three new branches in the areas at hand, with at least one mortgage banker assigned to each branch; (v) hire a director of community lending who will oversee the continued development of lending in communities of color; (vi) retain independent consultants to enhance its fair lending program and better meet communities’ needs for mortgage credit; (vii) conduct a community credit needs assessment and offer a staff training; and (viii) evaluate its fair lending compliance management systems.  

    Federal Issues DOJ Redlining North Carolina Enforcement Pennsylvania Mortgages

  • CFPB, seven State AGs file suit against debt-relief company

    Federal Issues

    On January 19, the CFPB and seven state attorneys general (Colorado, Delaware, Illinois, Minnesota, New York, North Carolina, and Wisconsin) announced a lawsuit against a debt-relief company, its subsidiaries, and its two individual owners (defendants) for allegedly facilitating an unlawful debt relief service. According to the complaint, the company used third parties to solicit consumers with large debts and direct them to contact defendants. The company then, allegedly, advised consumers to enroll in their debt-relief service that will negotiate reduced payoff amounts with consumers’ creditors and represent consumers. Additionally, individual defendants implicated in the action created law firms paired with one of the company’s subsidiaries, which performed little to no work on behalf of consumers, while non-attorney negotiators from the company were tasked with renegotiating a consumer’s debt. The CFPB and the AGs alleged that the company charges fees ($84 million since 2016) before and during the service, that left consumers with additional debt, lower credit scores, lawsuits with creditors, and had none of their original debts settled or reduced.

    Among other things, the CFPB claimed the company violated the Telemarketing Sales Rule (TSR) by (i) charging advance fees before a consumer has made at least one payment under a debt settlement plan; (ii) collecting fees after settling some of a consumer’s debts when the fees are not proportional to the amount of debt defendant successfully settled or based on a fixed percentage of the amount saved; and, (iii) supporting its subsidiary law firms that the company knew or knowingly avoided knowing engaged in abusive acts or practices. The complaint sought permanent and preliminary injunctive relief, redress for consumers, and a civil money penalty. On January 11, the court granted the Bureau’s request for a temporary restraining order.

    Federal Issues CFPB State Attorney General Colorado Delaware Illinois Minnesota New York North Carolina Wisconsin Debt Relief

  • Payment processor fined $75k, partner owes $243M in CFPB suit


    On July 31, the District Court for the Central District of California entered judgment in favor of the court-appointed receiver for defendants against the non-party provider of payment processing and escrow services to defendants and its managing member in the amount of $75,000, following a July 10 order requiring defendant to pay $243 million in redress and civil penalties. These judgments were entered in connection with the lawsuit filed by the CFPB, along with the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney, against a student loan debt relief operation for allegedly deceiving thousands of student-loan borrowers and charging more than $71 million in unlawful advance fees (covered by InfoBytes here).

    The defendant companies and one of the controlling business partners settled in 2020, but the court ordered the remaining controlling business partner to pay $243 million in redress and civil penalties earlier in July based on his involvement in violating various laws through the operation, including the TSR and the CFPA. Of the $243 million, the CFPB is entitled to over $95 million as redress for unlawful fees paid by consumers affected by the student loan debt relief operation and nearly $148 million of civil money penalties, and Minnesota, North Carolina, and California are each entitled to $5,000 of civil money penalties. The recent judgment of $75,000 entered against the non-party payment processing service provider resulted from the settlement of a separate lawsuit alleging that the service provider facilitated the fraud perpetuated by the defendants in the student loan debt relief operation and later attempted to deceptively transfer consumer funds held by defendants to avoid their transfer to the receiver.

    Courts CFPB Student Lending Debt Relief Payment Processors California Minnesota North Carolina State Attorney General CFPA TSR

  • CFPB to issue $95 million in redress to victims of student loan debt relief operation

    Federal Issues

    On December 13, the CFPB announced that it will distribute more than $95 million in redress to over 87,000 consumers harmed by a student loan debt relief operation. As previously covered by InfoBytes, the CFPB, along with the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney (together, the “states”), announced an action against the defendants for allegedly deceiving thousands of student loan borrowers and charging more than $71 million in unlawful advance fees. In the complaint filed October 21, 2019, and unsealed on October 29, 2019 in the U.S. District Court for the Central District of California, the Bureau and the states alleged that since at least 2015, the defendants have violated the CFPA, the TSR, 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. The CFPB also claimed that the defendants automatically put loans in forbearance and submitted false information to loan servicers to qualify customers for lower monthly payments.

    Federal Issues State Issues State Attorney General CFPB Consumer Redress Consumer Finance Enforcement Student Lending CFPA TSR Minnesota North Carolina

  • OCC announces Tropical Storm Nicole disaster relief

    On November 9, the OCC issued a proclamation permitting OCC-regulated institutions, at their discretion, to close offices affected by Tropical Storm Nicole in Florida, Georgia, North Carolina, and South Carolina “for as long as deemed necessary for bank operation or public safety.” The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on actions they should take in response to natural disasters and other emergency conditions. According to the OCC, only bank offices directly affected by potentially unsafe conditions should close, and institutions should make every effort to reopen as quickly as possible to address customers’ banking needs.

    Bank Regulatory Federal Issues OCC Disaster Relief Florida Georgia North Carolina South Carolina

  • North Carolina Supreme Court orders appeals court to review HAMP fraud claims


    On November 4, the Supreme Court of North Carolina determined that an appeals court erred by remanding a case concerning a defendant bank’s Home Affordable Modification Program to a trial court with instructions to make factual findings and conclusions of law on the defendant’s motion to dismiss. Plaintiffs sued the defendant alleging fraud and other related claims arising out of the bank’s mortgage modification program. The trial court dismissed the claims for failure to state a claim pursuant to North Carolina’s Rule of Civil Procedure 12(b)(6), after concluding that plaintiffs’ claims were time barred and “that ‘the claims of all [p]laintiffs who were parties to foreclosure proceedings [were] barred by the doctrines of res judicata and collateral estoppel.’” Plaintiffs appealed. A divided panel of the Court of Appeals remanded the case to the trial court claiming that “it could not ‘determine the reason behind the grant’ and could not ‘conduct a meaningful review of the trial court’s conclusions of law.’” The North Carolina Supreme Court countered, however, that there exists “no legal basis or practical reason for the Court of Appeals to remand the case to the trial court to make factual findings and conclusions of law” as “a trial court is not required to make factual findings and conclusions of law to support its order unless requested by a party”—a request neither party made. According to the North Carolina Supreme Court, the appeals court erred by not conducting a de novo review of the sufficiency of the plaintiffs’ allegations. The North Carolina Supreme Court ordered the appeals court to address whether the plaintiffs’ allegations, if treated as true, are sufficient to state a claim upon which relief can be granted.

    Courts Appellate North Carolina State Issues Fraud HAMP Mortgages Consumer Finance

  • North Carolina issues enforcement order against debt collection operation

    State Issues

    On October 10, the North Carolina attorney general announced a consent judgment with the president and CEO of two debt collection companies (collectively, “defendants”). According to the AG, in 2019, the AG sued the defendants for allegedly engaging in illegal debt collection practices. The AG alleged that from 2012 to 2018, the CEO used his debt collection companies to buy unpaid consumer debt from a national corporation that sells rent-to-own household furniture, appliances, and electronics. Since 2018, he allegedly collected or attempted to collect on these unpaid debts from North Carolina consumers, even though he did not have the correct registration or permits to operate in the state. The AG further noted that the defendants allegedly sent customers simulated court notices that were not from the court and claimed they had committed a criminal violation by failing to return rented property. When consumers contacted the companies they received debt collection threats. The defendants also filed criminal complaints in several counties that resulted in actual criminal summonses being issued against customers. Among other things, the defendants are ordered to forgive the debts of 20,000 individuals, refund 650 consumers, and pay fines. The defendants are also permanently banned from collecting debts in North Carolina, and are required to report compliance to the AG’s office.

    State Issues North Carolina State Attorney General Enforcement Debt Collection

  • District Court grants defendant’s judgment in FDCPA suit over dispute response


    On June 21, the U.S. District Court for the Western District of North Carolina granted a defendant’s motion for judgment on the pleadings in an FDCPA case concerning dispute responses over a debt. According to the order, the defendants—who represented a bank—sent a letter to the plaintiff attempting to collect an unpaid credit card debt. The letter included information about the creditor, the outstanding balance, and a validation notice. The plaintiff disputed the debt and requested validation of charges, payments, and credits on the account. The defendants responded with another letter, providing information about the original creditor and the balance of the unpaid debt. The plaintiff then sent another letter to the defendants requesting the original account agreement, all original account level documentation, and a “wet ink signature of the contractual obligation.” The defendants filed a collection suit against the plaintiff. The plaintiff filed suit in response, alleging the collection lawsuit violated the FDCPA and North Carolina state law because it “unjustly” condemned and vilified plaintiff for his non-payment of the alleged debt.

    The court found that the “[p]laintiff’s allegations misconstrue the obligations of the debt collector in verifying the debt.” The court also noted that the FDCPA did not require the defendants provide “account level documentation,” stating that “[v]erification only requires a showing that the amount demanded ‘is what the creditor is claiming is owed,’ not conclusive proof of the debt.”

    Courts North Carolina State Issues FDCPA Debt Collection Consumer Finance

  • North Carolina appellate court affirms district court’s decision in debt collection case


    On March 15, the Court of Appeals of North Carolina affirmed a district court’s grant of summary judgment in favor of a debt buyer plaintiff and rejected the debtor defendant’s argument that the plaintiff failed to comply with a provision of North Carolina’s Consumer Economic Protection Act (CEPA). According to the order, the defendant appealed the district court’s grant of summary judgment to the plaintiff in its 2019 suit to renew a default judgment that was entered in 2010 against the defendant. The defendant argued that the default judgment “is void because it was procured by fraud and the clerk lacked jurisdiction to enter the default judgment for various reasons,” and “that Plaintiff’s interest rates on Defendant’s debt violate North Carolina law.” The appellate court noted that the CEPA “did not apply” because the statute requires that, “[p]rior to entry of a default judgment or summary judgment against a debtor in a complaint initiated by a debt buyer, the plaintiff shall file evidence with the court to establish the amount and nature of the debt.” The appellate court noted that although the plaintiff filed its original complaint against the defendant in August 2009, this CEPA provision did not take effect until October 1, 2009, and therefore only applies to “foreclosures initiated, debt collection activities undertaken, and actions filed on or after that date.” The defendant argued that the plaintiff was still required to comply with the CEPA provision because the plaintiff filed its motion for a default judgment in February 2010—after the effective date of the CEPA provision. But the appellate court determined that the plaintiff’s motion for a default judgment “was part of prosecuting its ‘action filed’ and was not a ‘debt collection activity’ within the meaning of the Act.”

    Courts Appellate Debt Buyer State Issues North Carolina Debt Collection

  • North Carolina creates regulatory sandbox

    State Issues

    On October 15, the North Carolina governor signed HB 624, which creates a regulatory sandbox program and establishes the North Carolina Innovation Council (Council). Under the North Carolina Regulatory Sandbox Act of 2021, participants will have 24 months from the date an application is approved (unless granted an extension) to test an innovative product or service on consumers in the state without being subject to state laws and regulations that normally would regulate such products or services. The waiver “shall be no broader than necessary to accomplish the purposes” established under the Act. The Act notes that legislative findings determined that existing legal and regulatory frameworks restrict innovation because they “were established largely at a time when technology was not a fundamental component of industry ecosystems, including banking and insurance,” and that innovators would benefit from a flexible regulatory regimen to test new products, services, and emerging technologies. In addition, the Council will provide support for innovation, encourage participation in the regulatory sandbox, and set standards, principles, guidelines, and policy priorities for the types of innovations supported by the regulatory sandbox. The Council will also be responsible for admission into the regulatory sandbox and for assigning selected participants to the appropriate state agency. The program stipulates that innovative products or services may only be offered to state residents, with the exception of products and services associated with a money transmitter, “in which case only the physical presence of the consumer in the [s]tate at the time of the transaction may be required.” The program also allows participants and the applicable state agency to mutually agree to an extension or an increase in the numbers of consumers or dollar limits for a particular product or service. Among other things, participants may also request an extension of not more than 12 months to obtain a license or other authorization required by law to continue to market the product or service.  The Act is effective immediately.

    State Issues State Legislation Fintech Regulatory Sandbox North Carolina


Upcoming Events