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  • Chopra outlines CFPB’s efforts to promote competition in financial markets

    Federal Issues

    On July 11, CFPB Director Rohit Chopra provided an overview of recent steps taken by the agency as part of a “whole-of-government effort” to promote financial market competition. In an effort to identify obstacles facing consumers who want to refinance or easily switch providers, the Bureau sent letters to the CEOs of the nation’s largest credit card companies asking for explanations of how they furnish data to credit reporting agencies regarding the exact monthly payment amounts made by borrowers (covered by InfoBytes here). The Bureau reported that “[c]onsumers reasonably expect that they will receive competitively priced credit based on their ability to manage and repay their credit obligations,” but warned that “this is impaired if actual payment amount information is being suppressed by major credit card companies.” Chopra added that the Bureau is also working to “identify[] impediments to refinancing in other markets, including mortgages and auto,” and is “accelerating its work to implement a required rulemaking on personal financial data rights” to help promote competition and switching by providing consumers more control of their data.

    Chopra also highlighted an initiative to reduce junk fees. As previously covered by InfoBytes, the Bureau has requested comments from the public on fees associated with consumers’ bank accounts, prepaid or credit card accounts, mortgages, loans, payment transfers, and other financial products that are allegedly not subject to competitive processes to ensure fair pricing. The Bureau also issued an advisory opinion last month stating its interpretation that Section 808 of the FDCPA and Regulation F generally prohibit debt collectors from charging consumers “pay-to-pay” fees, also commonly known as convenience fees, for making payments online or by phone to make sure debt collectors are not “disadvantaged by those that impose unlawful fees” (covered by InfoBytes here). A rulemaking process has also begun to address credit card late fees and late payments and card issuers’ revenue and expenses (covered by InfoBytes here).

    Additionally, Chopra discussed Bureau efforts to identify roadblocks facing small financial institutions and new entrants when challenging larger, more dominant players. Specifically, the Bureau issued orders to six large U.S. technology companies seeking information and data on their payment system business practices (covered by InfoBytes here). According to Chopra’s statement, the “information will help the CFPB shed light on how they will decide who they kick off their platform and how they will use the data of individual consumers and any competing businesses.” The Bureau is also working with community banks to understand the impact of major core services providers on their business (covered by InfoBytes here).

    Federal Issues CFPB Consumer Finance Competition Consumer Credit Junk Fees Fees Innovation Fintech

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  • CFPB reminds creditors of ECOA adverse action notice requirements

    Federal Issues

    On May 26, the CFPB released Circular 2022-03 to reiterate creditors’ adverse action notice requirements under ECOA. The Circular, among other things, explains that ECOA and Regulation B require companies to explain the specific reasons for denying an application for credit or taking other adverse actions, even if the creditor is relying on credit models using complex algorithms. Specifically, the Circular stated that “[l]aw-abiding financial companies have long used advanced computational methods as part of their credit decision-making processes, and they have been able to provide the rationales for their credit decisions.” While the Bureau recognized that some creditors “make credit decisions based on the outputs from complex algorithms, sometimes called ‘black-box’ models,” it stressed that the adverse action notice requirements of ECOA and Regulation B apply equally to all credit decisions, regardless of the technology used to make them. The Bureau expressed that “the reasoning behind some of these models’ outputs may be unknown to the model’s users, including the model’s developers,” and that “with such models, adverse action notices that meet ECOA’s requirements may not be possible.” The Bureau further explained that, “[c]reditors cannot lawfully use technologies in their decision-making processes if using them means that they are unable to provide these required explanations.” Stated differently, a “creditor cannot justify noncompliance with ECOA and Regulation B’s requirements based on the mere fact that the technology it employs to evaluate applications is too complicated or opaque to understand.”

    Federal Issues CFPB Consumer Finance Agency Rule-Making & Guidance ECOA Regulation B Consumer Credit

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  • CFPB examines pandemic effect on card limits

    Federal Issues

    On August 11, the CFPB released findings regarding trends in credit card limits for consumers throughout the Covid-19 pandemic. The post—the fourth in a series documenting trends in consumer credit outcomes during the Covid-19 pandemic (the first covered by InfoBytes here)—examines whether “credit has tightened on existing credit card accounts” and if “financial institutions cut limits or closed accounts” during the pandemic. As previously covered by InfoBytes, last August, the Bureau issued a report examining trends through June 2020 in delinquency rates, payment assistance, credit access, and account balance measures, which showed that generally there was an overall decrease in delinquency rates since the start of the pandemic for auto loans, first-lien mortgages, student loans, and credit cards. According to the Bureau’s recent findings, starting in March 2020, credit limits for prime and near prime borrowers broke with their previous upward trend, largely flattened out, then began to grow more quickly for these groups in February 2021. Researchers also found that for subprime and deep subprime borrowers, there was nearly no change in credit limits, though the trend ticks upward toward the end of 2020. Additionally, the spike in accounts being closed early in the pandemic seems to have been short-lived because “[a]fter the spike in closures in May 2020, the total number of account closures declined through July and then returned to pre-COVID-19 levels through at least May of 2021.”

    Federal Issues CFPB Covid-19 Credit Cards Consumer Credit Consumer Finance Consumer Credit Outcomes

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  • Texas updates guidance for credit access businesses, continuing to urge them to work with consumers and allowing employees to work remotely

    State Issues

    On April 15, the Texas Office of the Consumer Credit Commissioner updated its advisory bulletin (as described here, here, here, here, here, and here) urging credit access businesses to continue to work with consumers during the Covid-19 crisis. Among other measures, the regulator asks licensees to increase consumer communication regarding the effects of Covid-19 on the business’ policies (including communication procedures), work out modifications for payment difficulties, and review policies for fees, late charges, delinquency practices, and repossessions. The guidance also: (i) reminds licensees of legal requirements for using electronic signatures, and (ii) continues to permit licensees to conduct activity from unlicensed locations, subject to certain conditions. The guidance is in effect through May 31, 2021, unless withdrawn or revised.

    State Issues Covid-19 Texas Consumer Credit Licensing

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  • Texas updates guidance related to regulated lenders, continuing to urge them to work with borrowers and allowing employees to work remotely

    State Issues

    On April 15, the Texas Office of the Consumer Credit Commissioner updated its advisory bulletin (previously covered here, here, here,  here, here, and here) urging regulated lenders to continue to work with borrowers during the Covid-19 crisis. Among other measures, the regulator asks licensees to increase borrower communication regarding the effects of Covid-19 on the lender’s policies (including communication procedures), work out modifications for payment difficulties, review policies for fees, late charges, delinquency practices, and repossessions, and that certain mortgages may be covered by federal foreclosure moratoriums. The guidance also: (i) reminds licensees of legal requirements for using electronic signatures, and (ii) continues to permit licensees to conduct activity from unlicensed locations, subject to certain conditions.   The guidance is in effect through May 31, 2021, unless withdrawn or revised.

    State Issues Covid-19 Texas Consumer Credit Foreclosure Mortgages Auto Finance Licensing ESIGN Fintech

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  • Texas updates guidance for regulated lenders

    State Issues

    On February 18, the Texas Office of the Consumer Credit Commissioner issued updated guidance (previously covered herehere,  herehere, and here) for regulated lenders relating to the Covid-19 crisis. The guidance: (1) encourages lenders to work with consumers, including by working out modifications to assist with payments, and reviewing policies for fees, late charges, delinquency practices, and repossessions, among other things; (2) reminds lenders of legal requirements for using electronic signatures; and (3) permits lenders to conduct regulated lending activity from unlicensed locations, subject to certain conditions.  The guidance is in effect through March 31, 2021, unless withdrawn or revised.

    State Issues Covid-19 Texas Consumer Credit ESIGN Lending Licensing

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  • Texas Office of Consumer Credit updates advisory to work with consumers

    State Issues

    On February 18, the Texas Office of the Consumer Credit Commissioner updated its advisory bulletin urging credit access businesses to work with consumers during the Covid-19 crisis (previously covered herehereherehere, and here). Among other measures, the regulator urges licensees to increase consumer communication regarding the effects of Covid-19 for licensees, work out modifications for payment difficulties, and review policies for fees, late charges, delinquency practices, and repossessions. The guidance also: (i) reminds licensees of legal requirements for using electronic signatures, and (ii) continues to permit licensees to conduct activity from unlicensed locations, subject to certain conditions. The guidance is in effect through March 31, 2021, unless withdrawn or revised.

    State Issues Covid-19 Texas Consumer Credit Licensing ESIGN

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  • Oklahoma extends working from home guidance

    State Issues

    On December 7, the Oklahoma Department of Consumer Credit extended, for the sixth time, its interim guidance to regulated entities on working from home (see here,  herehereherehere, and here for previous coverage). The guidance sets forth data security standards required for regulated entities with employees working from home and also provides that the department will expedite and waive fees for change of address applications in the event that a licensed location is compromised by Covid-19 or is undergoing decontamination. The guidance was extended through March 31, 2021.

    State Issues Covid-19 Oklahoma Consumer Credit Privacy/Cyber Risk & Data Security

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  • Texas regulators update emergency-related home equity lending guidance

    State Issues

    On November 30, the Texas Department of Banking, Department of Savings and Mortgage Lending, Office of Consumer Credit Commissioner, and Credit Union Department issued updated guidance on emergency measures for home equity lenders to consider in response to the COVID-19 pandemic. The guidance covers emergency measures in relation to the refinance and modification of home equity loans. The guidance also indicates that lenders are permitted to close loans in any area located at the permanent physical address of the lender, attorney, or title company, including outdoor settings such as parking lots.

    State Issues Covid-19 Texas Home Equity Loans Mortgages Consumer Credit

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  • Texas agencies issue revised emergency guidance for home equity lenders

    State Issues

    On November 30, the Texas joint financial regulatory agencies (Department of Banking, Department of Savings and Mortgage Lending, Office of Consumer Credit Commissioner, and Credit Union Department) issued guidance to replace its April 22, 2020 guidance (previously discussed here) regarding emergency measures for home equity lenders to consider in response to the COVID-19 pandemic. The agencies encouraged lenders to work with borrowers to help borrowers recover and provide an opportunity to repay their debt. However, lenders must ensure that they comply with Texas law to have a valid home equity lien. The agencies reiterated guidance regarding authorized closing locations and noted that lenders should consider ways to close loans in accordance with social distancing recommendations.

    State Issues Covid-19 Texas Home Equity Loans Consumer Credit Mortgages

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