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Financial Services Law Insights and Observations


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  • White House Big Data Review Addresses Discrimination, Privacy Risks

    Privacy, Cyber Risk & Data Security

    On May 1, the White House’s working group on “big data” and privacy published a report on the findings of its 90-day review. In addition to considering privacy issues associated with big data, the group assessed the relationship between big data and discrimination, concluding, among other things, that “there are new worries that big data technologies could be used to ‘digitally redline’ unwanted groups, either as customers, employees, tenants, or recipients of credit” and that “big data could enable new forms of discrimination and predatory practices.” The report adds, “[t]he same algorithmic and data mining technologies that enable discrimination could also help groups enforce their rights by identifying and empirically confirming instances of discrimination and characterizing the harms they caused.” The working group recommends that the DOJ, the CFPB, and the FTC “expand their technical expertise to be able to identify practices and outcomes facilitated by big data analytics that have a discriminatory impact on protected classes, and develop a plan for investigating and resolving violations of law in such cases,” and adds that the President’s Council of Economic Advisers should assess “the evolving practices of differential pricing both online and offline, assess the implications for efficient operations of markets, and consider whether new practices are needed to ensure fairness.” The working group suggests that federal civil rights offices and the civil rights community should collaborate to “employ the new and powerful tools of big data to ensure that our most vulnerable communities are treated fairly.” With regard to privacy the report states that the “ubiquitous collection” of personal information and data, combined with the difficulty of keeping data anonymous, require policymakers to “look closely at the notice and consent framework that has been a central pillar of how privacy practices have been organized for more than four decades.” Among its policy recommendations, the working group urges (i) enactment of a Consumer Privacy Bill of Rights, informed by a Department of Commerce public comment process, and (ii) the adoption of a national data breach bill along the lines of the Administration’s May 2011 Cybersecurity legislative proposal. It also calls for data brokers to provide more transparency and consumer control of data.

    CFPB FTC DOJ Predatory Lending Discrimination Privacy/Cyber Risk & Data Security

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  • Congressional Democrats Want Meeting With Attorney General On Mortgage Fraud Enforcement

    Financial Crimes

    On March 17, Senator Elizabeth Warren (D-MA) and Representatives Elijah Cummings (D-MD) and Maxine Waters (D-CA) sent a letter requesting a meeting with Attorney General Eric Holder to review the findings of a recent report on the DOJ’s mortgage fraud enforcement efforts.  The lawmakers state that the report raises questions about the DOJ’s “commitment to investigate and prosecute crimes such as predatory lending, loan modification scams, and abusive mortgage servicing practices.” They are seeking information from the Attorney General about steps the DOJ will take to ensure that its efforts “to identify and prosecute those responsible for fraudulent mortgage practices are equal to the harms such crimes have caused [the members’] constituents.”

    DOJ False Claims Act / FIRREA Financial Crimes Elizabeth Warren Mortgage Fraud Predatory Lending

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  • CFPB Releases Revised Payday Loan Exam Manual Incorporating MLA Requirements

    Consumer Finance

    On September 17, the CFPB released revised short-term, small-dollar lending Examination Procedures  that incorporate the regulations issued by the Department of Defense (DoD) to implemente the Military Lending Act (MLA), which addresses alleged predatory lending practices by lenders that operate near military bases. The CFPB was given explicit power to enforce the MLA in the National Defense Authorization Act for Fiscal Year 2013.

    The revised Procedures note that the MLA covers active-duty military members and their dependents and applies to “consumer credit,” defined as closed-end loans that are payday loans with a term of 91 days or fewer and an amount financed of $2,000 or less as well as certain vehicle title loans and tax refund anticipation loans.  The revised Manual notes the special requirements of the MLA, including: (i) capping the Military Annual Percentage Rate (the APR under TILA plus other charges such as credit insurance premiums and fees for certain credit-related ancillary products) at 36 percent; (ii) prohibiting a lender from holding a post-dated personal check, debit authorization, or title to a vehicle for repayment or security; (iii) prohibiting mandatory arbitration clauses and waivers of legal rights under the SCRA or other consumer protection laws; (iv) prohibiting lenders from rolling over loans, unless the new transaction results in more favorable terms for the consumer; (v) prohibiting lenders from requiring consumers to pay through the military wage allotment system; and (vi) prohibiting prepayment penalties.

    The CFPB’s press release notes  the Bureau’s ongoing coordination with the Department of Defense on servicemember protection, as described in the agencies’ 2012 Joint Statement of Principles on small-dollar lending.

    CFPB Payday Lending Examination Servicemembers Military Lending Act Predatory Lending

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  • North Carolina Amends Anti-Predatory Lending Law


    On August 23, North Carolina enacted HB 692, which amends the state’s anti-predatory lending law. Effective October 1, 2013, the law increases the points and fees threshold for high cost home loans from 4% to 5% for loans of $20,000 or more and excludes from the points and fees calculation any up-front fees collected and paid to the FHA, VA, or USDA. The bill also alters the state’s rate spread home loans provisions to match federal restrictions.

    FHA Predatory Lending

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  • State Law Update: Michigan Excludes Certain Loans from State Mortgage Laws, Extends Loan Modification Program


    On December 22, Michigan Governor Rick Snyder signed three bills—SB 1283, SB 1284, and SB 1285—to exclude from state mortgage laws, including its predatory lending law and loan originator licensing act, any loan transaction in which the proceeds are not used primarily for a personal, family, or household purpose. The changes took effect immediately. On December 28, the Governor executed SB 1172, which extends until June 30, 2013 a law enacted in 2009 to create a residential mortgage loan modification program. The program provides for a 90-day moratorium before a mortgage lender may pursue a non-judicial foreclosure against a delinquent borrower, during which time the borrower must be given an opportunity to modify the loan. Under prior law the program was scheduled to sunset on December 31, 2012.

    Foreclosure Mortgage Origination Mortgage Servicing Fair Lending Predatory Lending

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  • Illinois Amends Its Mortgage Licensing Act


    On August 3, Illinois enacted numerous changes to its Residential Mortgage Licensing Act. Effective immediately, House Bill 4521 (i) increases annual licensing fees, (ii) substantially raises the cap on fines for fraudulent and deceptive acts, (iii) authorizes the state regulator to contract with the NMLS to collect and maintain records and process fees, (iv) prohibits advance fees for loan modifications, and (v) restricts short sale facilitation services to those originators who also hold a license under Illinois' Real Estate License Act. The bill amends and adds several definitions to facilitate the substantive changes above, such as its revision of the definition of “mortgage loan originator” to incorporate individuals engaged in loan modification activities. The bill also amends the state Residential Real Property Disclosure Act to require that monthly consumer debt be included in reports prepared by originators for the state predatory lending database. This change takes effect January 1, 2013.

    Mortgage Licensing Mortgage Origination NMLS Predatory Lending

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