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Washington reaches $1.6 million settlement with debt collector
On September 8, the Washington attorney general announced that a Renton-based debt collector (defendant) will pay over $1.6 million in a settlement to resolve allegations that it violated the Washington Consumer Protection Act by misleading consumers with offers for “settlements” of debts. According to the AG, the defendant sent letters titled “settlement offers,” but failed to disclose that because the debt was older than the six year statute of limitations for filing a suit to collect, it could not enforce the debt in court. The term “settlement offer” allegedly deceptively suggested the defendant could potentially litigate to collect the debt. Under the terms of the settlement, the defendant is required to: (i) pay full restitution to 1,400 Washingtonians, a total of nearly $710,000; (ii) pay $1,675,000 to the attorney general’s office, including payment to cover the costs of the case and fund future investigations and enforcement of the Consumer Protection Act; (iii) cease using the words “settle” or “settlement” when attempting to collect on time-barred debts; and (iv) disclose that the statute of limitations to sue on the debt has passed.
DC passes debt collection bill
On September 1, the District of Columbia Mayor signed B24-0347, which updates the District’s collection laws by expanding protections to cover most consumer debt, including medical and credit card debt, in addition to strengthening existing protections for DC consumers. Among other things, the bill: (i) prohibits excessive communications that qualifies as harassment, including making over three phone calls in a 7-day period; (ii) increases penalties for debt collection violations; (iii) clarifies that no one can be jailed for failing to pay a debt; (iv) prohibits debt collectors to communicate any information regarding a person’s debt to their employers or family members; and (v) clarifies that debt buyers are required to follow all laws applicable to debt collectors. The law is effective September 23.
NYDFS: Regulated insurers should expedite Ida-related claims
On September 2, NYDFS advised regulated insurers to expedite Tropical Depression Ida-related insurance claims. Emphasizing the severity of damage experienced by homeowners and businesses, NYDFS urged insurers to work towards a fair and speedy resolution of claims. In addition to outlining expectations related to the claims process, NYDFS noted that it will also “expedite the issuance of temporary adjustor permits as necessary to qualified out-of-state independent insurance adjusters pursuant to New York Insurance Law” to increase the number of available adjusters to process claims.
Massachusetts announces $27 million settlement with auto lender
On September 1, the Massachusetts attorney general announced “the largest settlement of its kind” with a Michigan-based auto finance company (defendant) resolving allegations of predatory lending and deceptive debt collection practices. The defendant allegedly made high-interest subprime auto loans that it knew or should have known that many borrowers would be unable to repay. The assurance of discontinuance states that some of the company’s borrowers were subject to hidden finance charges, which resulted in violations of Massachusetts’s 21 percent usury cap. The defendant also allegedly “failed to inform investors that it topped off securitization loan pools with higher-risk loans.” Under the terms of the settlement, the defendant must pay a total of $27.2 million and provide debt relief and credit repair to over 3,000 borrowers across the state who are expected to be eligible for settlement funds. The settlement also requires that the defendant make changes to its loan handling practices. According to the AG, this action “is part of her Office’s ongoing industry-wide review of securitization practices in the subprime auto loan market.”
DFPI: Debt collection licensing applications due before January 1
On September 1, the California Department of Financial Protection and Innovation (DFPI) announced that all debt collectors operating in California can apply to be licensed by the DFPI, which portrays the initial step in increased state oversight including an assessment of applications, formal examinations, and protections for California consumers. As previously covered by InfoBytes, as required under SB 908, all debt collectors must submit a license application prior to Jan. 1, 2022, to continue operating in California next year and authorizes the DFPI to take in borrowers’ complaints and enforce violations. Debt collectors, debt buyers, and debt collection attorneys operating in the state can submit their license applications here at the Nationwide Multistate Licensing System (NMLS), which requires financial and other information electronically, starting September 1. The announcement notes that, “[a]ny debt collector collecting debt in the state of California must submit an application on or before Friday, Dec. 31, 2021.” When a debt collector has submitted an application, “they may continue operating as a debt collector in California while the application is pending,” according to the DFPI. However, the applicant will be required to wait for the issuance of a license prior to continuing operations in the state if an application is submitted after December 31.
DFPI issues second Debt Collection Licensing Act proposed rulemaking
On August 19, the California Department of Financial Protection and Innovation (DFPI) issued an invitation for comments on a proposed second rulemaking (NPRM) under the Debt Collection Licensing Act (the Act). As previously covered by InfoBytes, in 2020, California enacted the Act, which requires a person engaging in the business of debt collecting in the state, as defined by the Act, to be licensed and provides for the regulation and oversight of debt collectors by DFPI. Earlier in April, DFPI issued an NPRM to adopt new debt collector licensing requirements (covered by InfoBytes here). The most recent NPRM, among other things, seeks further input from stakeholders on topics related to:
- The scope of the Act as related to several definitions, including “debt,” “debt collection,” “person,” “consumer credit transaction,” “debt collector,” and “debt buyer,” to determine if additional clarity is necessary and whether these definitions are the same as those in California’s Rosenthal Fair Debt Collection Practices Act (Rosenthal Act) and the Fair Debt Buying Practices Act (FDBPA).
- Whether certain terms related to definition of a debt collector, such as “engage in the business of debt collection,” “in the ordinary course of business,” or “regularly,” require clarifying regulations.
- Whether additional clarification is needed concerning entities or transactions exempt from the Act’s requirements.
- Whether the term “due or owing” is clear with respect to the definition of a “debtor.”
- Whether additional clarification is needed regarding DFPI’s authority to enforce the Rosenthal Act and the FDBPA. Under the Act, DFPI has the “authority to enforce the Rosenthal Act and the FDBPA against persons required to be licensed under the [Act] and persons expressly exempt from licensure, including certain federally regulated entities.”
The NPRM also addresses certain provisions related to annual reports and bond amounts. Comments on the most recent proposed rulemaking are due October 5, and may be sent electronically to regulations@dfpi.ca.gov.
Illinois amends Real Estate Appraisal Licensing Act
On August 25, the Illinois governor signed into law HB 0806, which amends the Illinois Real Estate Appraiser Licensing Act (the Act), among other things, to include provisions regarding that all applicants and licensees under the Act shall provide a valid address and email address to the Department of Financial and Professional Regulation and creates provisions regarding: (i) inactive licenses; (ii) citations; and (iii) illegal discrimination. Specifically, the bill changes provisions concerning license necessity, use of title, and exemptions stating that, “[i]t is unlawful for any person, including any entity, to act or assume to act as a home inspector, to engage in the business of home inspection, to develop a home inspection report, to practice as a home inspector, or to advertise or hold oneself out to be a home inspector without a home inspector license issued under this Act.” The bill also changes provisions regarding applications for a(n) (i) state certified general real estate appraiser, (ii) state certified residential real estate appraiser, and (iii) associate real estate trainee appraiser, in addition to the duration of application and renewal of license, among other things. This bill is effective January 1, 2022, except for the provisions amending the Regulatory Sunset Act.
Maryland Court of Appeals says inspection fee ban applies to mortgage assignees and servicers
On August 27, the Maryland Court of Appeals held that the Maryland Usury Law applied to assignees of mortgage loans–and not just lenders as a defendant argued–and that the law’s prohibition on property inspection fees therefore applied to the mortgage servicer, as the agent of the loan’s assignee. The borrower entered into a mortgage loan secured by a deed of trust that was later assigned to Fannie Mae and contracted to the mortgage servicer. After the borrower defaulted, the servicer allegedly threatened foreclosure and assessed “fees for drive-by inspections of the property.”
The parties entered into a loan modification agreement to resolve the default, but the borrower objected to the inclusion of the property inspection fees. The borrower later filed a complaint claiming the servicer collected property inspection fees prohibited by the Maryland Usury Law (CL §12-121). The borrower also alleged violations of the Maryland Consumer Debt Collection Act (MCDCA). The trial court dismissed the claims concluding, among other things, that neither Fannie Mae nor the servicer were subject to state usury prohibitions because neither entity “fit the definition of ‘lender’ in the law.” An intermediate appellate court later reversed the trial court’s dismissal.
In a 6-1 holding, the Court of Appeals concluded that “the Maryland Commissioner of Financial Regulation has taken the position that mortgage servicers. . .are subject to the prohibition on inspection fees in CL §12-121 during the life of a mortgage loan,” and that, moreover, CL §12-121 “limits the authority of a person who makes a mortgage loan to charge property inspection fees in connection with that loan.” As such, the Court of Appeals held that the addition of the definition of “lender” to the Maryland Usury Law that made the Usury Law part of the Commercial Law Article, “did not change that rule.” The Court of Appeals also stated that the borrower adequately alleged the elements of an MCDCA claim when she asserted the servicer “attempted to collect an alleged debt by asserting a right to collect inspection fees with knowledge that the right did not exist.”
NYDFS offers guidance on preventing sexual orientation discrimination in mortgage lending
On August 31, NYDFS issued new guidance to regulated mortgage lenders for developing and implementing programs to comply with the state’s fair lending law, which “prohibits discrimination in, among other things, the granting, withholding, extending, or renewing, or in the fixing of the rates, terms, or conditions of any form of credit on the basis of sexual orientation.” According to an analysis conducted by NYDFS of mortgage loan applications and mortgage loan terms (between 2016 and 2018) from four non-depository lenders and one bank, “in all but two of the fifteen data sets reviewed, same-sex pairs of applicants were denied mortgage loans at higher rates than opposite-sex pairs of applicants.” Additionally, the analysis found that “in six of the data sets, same-sex pairs received between 9 and 17 basis points higher average annual percentage rates than opposite-sex pairs.” NYDFS emphasized that a “same-sex pair” does not necessarily involve LGBTQI individuals, but could also be a mortgage loan application from a father and son or two business partners of the same sex, among other pairings. As such, NYDFS acknowledged that it was “unable to determine with certainty whether discrimination based on sexual orientation occurred as to any particular same-sex pair within the data set.”
However, because NYDFS concluded that its findings raised enough concerns over the potential for discrimination against LGBTQI mortgage applicants, NYDFS advised mortgage lenders to take the following actions, among others, to mitigate discrimination: (i) vest responsibility in senior management to develop a fair lending plan and ensure mortgage lending practices comply; (ii) monitor the implementation of the fair lending plan and “continually address[] application and underwriting processes as well as pricing policies”; (iii) implement a training program and semi-annually provide updates on fair lending issues; (iv) “[e]nsure automatic and timely review by a higher-level supervisor of all rejected or withdrawn applications for loans from same-sex pairs who indicated that they would live together in the mortgaged property; (v) extend (in writing) a fair lending plan’s principles to a mortgage lender’s refinancing and collection practices; and (vi) periodically review and update fair lending compliance programs and fair lending plans to ensure they remain current. Mortgage lenders are also advised to utilize rate sheets and exception logs to document applications from same-sex pairs, document approved loans for such applicants that received less favorable terms, and conduct statistical and regression analysis of loan data.
Massachusetts announces consent judgment against debt-collection company
On August 31, the Massachusetts attorney general announced a “first-of-its-kind” consent judgment against a Massachusetts-based debt-settlement company and its chief operating officer for allegedly violating the Massachusetts Consumer Protection Act, among other things. The consent judgment settled a lawsuit in which the AG alleged that the company charged inflated and premature fees, knowingly and regularly enrolled consumers who were not able to benefit from its program, and failed to communicate the harms that consumers could encounter after enrolling in its program. According to the AG, the company “directed consumers to stop paying their debts and to stop communicating with creditors, and to instead make payments into a dedicated ‘savings’ account administered by [a] payment processor.” The AG also alleged the company “engaged in the unauthorized practice of law by continuing to represent consumers after they were sued in relation to an enrolled debt.” Under the terms of the AG’s consent order, the company is required to pay $1 million to the Commonwealth.
As previously covered by InfoBytes, in May, the CFPB announced a settlement with the same company for allegedly violating the Telemarketing Sales Rule and the Consumer Financial Protection Act.