InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Virginia requires licensure of debt settlement service providers
On April 7, the Virginia governor signed HB 1553, which outlines licensing and regulatory requirements for debt settlement services providers. Among other things, HB 1553 specifies that all debt settlement services providers must be licensed by the state, must file a bond with the state commissioner, and must comply with outlined record retention, reporting, and examination requirements. HB 1553 also outlines prohibited conduct, including prohibiting licensees from accepting a fee from a consumer prior to providing the requested debt settlement service, or from using false, misleading, or deceptive advertisements in connection with the offered services. HB 1553 also provides for cease and desist orders and civil penalties to be issued against licensees that violate these requirements, grants consumers a private right of action against licensees, and makes a violation a prohibited practice under the Virginia Consumer Protection Act. Additionally, the State Corporation Commission is directed to “establish a procedure, to be in effect by March 1, 2021, for any person to apply, prior to July 1, 2021, for a license” that will take effect when HB 1553’s requirements become effective on July 1, 2021.
FDIC encourages relief for Oregon borrowers affected by severe weather
On April 10, the FDIC issued FIL-42-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Oregon affected by a recent series of severe weather. In the letter, the FDIC encourages institutions to consider, among other things, (i) extending repayment terms; (ii) restructuring existing loans; or (iii) easing terms for new loans to borrowers affected by the severe weather, provided the measures are “done in a manner consistent with sound banking practices, can contribute to the health of the local community and serve the long-term interests of the lending institution.” Additionally, the FDIC notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC states it will also consider regulatory relief from certain filing and publishing requirements.
Find continuing InfoBytes coverage on disaster relief guidance here.
Massachusetts attorney general: CARES Act payments are exempt from seizure
On April 13, the Massachusetts Office of the Attorney General notified creditors and debt collectors that, in its view, stimulus payments made under the CARES Act are exempt from garnishment or attachment by creditors under Massachusetts law, and remain exempt regardless of how the funds are deposited or held after receipt. Any act, or threat to act, to garnish, attach, or otherwise seize the funds will be a violation of the attorney general’s regulations governing debt collection.
Maryland insurance administration calls on commercial insurers to work with consumers
On April 13, the Maryland insurance administration commissioner issued a bulletin to all property and casualty insurers regarding commercial insurance in light of the Covid-19 crisis. The bulletin called on insurers to cooperate with impacted insureds to revise policies utilizing estimated payroll and revenue; waive or reduce short-rate cancellation penalties; rely on pre-crisis data when assessing credit-worthiness for underwriting; and refrain from penalizing insureds that have inquired or filed business interruption claims that have not involved claim payments.
HUD announces multifamily mortgage payment relief
On April 13, HUD announced new measures for FHA-approved multifamily mortgagees regarding the implementation of CARES Act forbearance. The guidance stipulates that servicers must grant multifamily borrowers who experience financial hardships due to Covid-19 and request assistance up to 90 days of forbearance, and may grant this forbearance without receiving direct approval from HUD provided they follow guidance outlined in Mortgagee Letter 2020-09 (covered by InfoBytes here). As required by the CARES Act, all owners and agents of FHA-insured multifamily properties and properties participating in HUD multifamily assisted housing programs must also cease all evictions of tenants for non-payment of rent for 120 days. The guidance also outlines the standard multifamily forbearance protocol, which is intended to streamline processing for borrowers, servicers, and lenders. The protocol stipulates that HUD is (i) “allowing servicers to grant, without HUD approval, up to 30 days of forbearance for borrowers experiencing a financial hardship due to COVID-19 if the borrower was current on their mortgage payments as of February 1, 2020”; (ii) “allowing automatic forbearance extensions from servicers to borrowers for up to two additional 30-day periods, without HUD approval”; and (iii) “encouraging borrowers to enter into repayment plans with renters (residential and commercial) that experience an income reduction or temporary loss of household income but are able to make up the difference over time, without HUD approval.”
States ask Treasury to exempt stimulus payments from garnishment and urge CFPB to “vigorously enforce” FCRA
On April 13, a coalition of state attorneys general and the Hawaii Office of Consumer Protection (states) sent a letter to Treasury Secretary Steven T. Mnuchin, calling for immediate action to ensure that stimulus checks issued under the CARES Act to consumers affected by the Covid-19 pandemic are not subject to garnishment by creditors and debt collectors. While the CARES Act does not “explicitly designate these emergency stimulus payments as exempt from garnishment,” the states claim that a “built-in mechanism” contained within a provision of the CARES Act can rectify the legislative oversight. Specifically, the states point to Section 2201(h), which “authoriz[es] Treasury to issue ‘regulations or other guidance as may be necessary to carry out the purposes of this section,’” and ask Treasury to immediately designate the stimulus checks as “‘benefit payments’ exempt from garnishment.”
The same day, another coalition of state attorneys general sent a letter to CFPB Director Kathy Kraninger urging the Bureau to rescind an April 1 policy statement directed at consumer reporting agencies (CRAs) and furnishers (covered by InfoBytes here) that stated the Bureau will take a “flexible supervisory and enforcement approach during this pandemic regarding compliance with the Fair Credit Reporting Act [(FCRA)] and Regulation V.” According to the states, the policy statement suggests that the Bureau does not plan on enforcing the CARES Act amendment to the FCRA, which requires lenders to report as current any loans subject to Covid-19 forbearance or other accommodation. The Bureau’s decision, the states contend, may discourage consumers from taking advantage of offered forbearances and other accommodations. The states also argue that allowing CRAs to take longer than the FCRA-prescribed 30 days to investigate consumer disputes puts consumers at risk. The states stress that the recent increase in Covid-19 scams has heightened the need for the Bureau to vigorously enforce the FCRA, and that, moreover, the thousands of complaints received by the states, FBI, FTC, and DOJ concerning phishing and other scams designed to gather consumers’ financial information have highlighted identity theft risks. The states emphasize “that even if the CFPB refuses to act. . .we will not hesitate to enforce the FCRA’s deadlines against companies that fail to comply with the law.”
New Jersey mandates 90-day grace period for insurance policyholders
On April 10, the New Jersey Department of Business and Insurance issued Bulletin 20-17 directing insurance premium finance companies to provide a 90-day grace period to pay insurance premiums to any clients experiencing a financial hardship due to Covid-19. In addition, the bulletin directs companies to (i) waive late payment fees, finance charges, and delinquency charges and not report late payments to credit rating agencies; (ii) allow payments not paid during the 90-day period to be paid over 12 months or the remainder of the policy term, whichever is longer; and (iii) ensure that late payments are not considered in future premium calculations.
CFPB updates Covid-19 student loan debt relief guidance for borrowers
On April 9, the CFPB released updated guidance for student loan borrowers during the Covid-19 pandemic. As previously covered by InfoBytes, the Bureau first released student loan borrower information on March 27, which covered debt relief provided by the CARES Act, including the automatic freeze on student loan payments until September 30 for those with federally held loans. Servicers will send required notices detailing the payment freeze to borrowers by the middle of April. The guidance notes that some federal student loans—including some Federal Family Education Loans—may be held by commercial lenders. These loans and other privately held loans do not qualify for automatic suspension of payments, and the Bureau encourages borrowers to contact their servicers for debt relief options such as deferment or forbearance if borrowers have difficulty making payments at this time. Borrowers with Perkins loans may also request loan forbearance from the borrowers’ institution for up to three months without submitting documentation.
Minnesota governor extends stay at home order
On April 8, Minnesota governor issued an executive order extending the previously issued stay at home order to May 3, 2020. Minnesota also issued guidance regarding the business exemptions. Financial services, notaries, and real estate transactions are considered critical sectors, but, debt collection professionals and other workers supporting debt collection are not.
CFPB publishes annual report on servicemember complaints
On April 3, the CFPB Office of Servicemember Affairs (OSA) released its annual report, which provides an overview of OSA’s activities in fulfilling its statutory responsibilities for fiscal year 2019 and covers the period between October 1, 2018 and September 30, 2019. OSA’s responsibilities include monitoring complaints from military consumers, and the report highlights issues facing military consumers based on approximately 34,600 complaints submitted by servicemembers, veterans, and their families (collectively “servicemembers”). Key takeaways from the report include the following:
- Education and empowerment. OSA examined financial issues that impact military consumers and provided various educational tools on topics including the Servicemembers Civil Relief Act, the Military Lending Act, mortgage lending and foreclosure protections, and credit reporting and monitoring. These tools include in-person outreach and digital education and engagement resources.
- Consumer complaints. Thirty-six percent of servicemember complaints focused on credit or consumer reporting. Complaints related to debt collection were the second most frequent issue, with most complaints alleging that debt collectors were attempting to collect debt that the servicemember did not owe. In particular, OSA expressed concern about complaints where “the debt collector ‘took or threatened to take negative or legal action.’” With respect to mortgage debt, many servicemembers reported challenges in the payment process, as well as difficulties in being able to afford mortgage payments. With respect to credit cards, the greatest concentration of complaints focused on problems with purchases on statements. Checking or savings account complaints centered on issues related to account management, and more than two-thirds of student lending complaints related to challenges dealing with lenders or servicers. With respect to auto lending, complaints focused on managing the loan or lease. Other complaint categories included money transfers/services and virtual currency, personal loans, prepaid cards, credit repair, and title loans.
- Agency coordination. During the reporting period, OSA coordinated several consumer protection activities with federal and state government agencies, including the Departments of Defense, Veterans Affairs (VA), Education, and Treasury, as well as the FTC, SEC, and state attorneys general. OSA also noted its participation in interagency working groups focused on helping servicemembers.
- Military consumer research. Coordinated research efforts into the financial well-being of veterans and the increased use of home loans guaranteed by the VA are highlighted.