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Rhode Island Banking Division issues guidelines detailing flexibility for premium finance lenders
On April 3, the Rhode Island Department of Business Regulation Banking Division issued a bulletin asking premium finance companies to work with insured individuals and entities to maintain coverage during the Covid-19 crisis. The bulletin requests that premium lenders: (1) extend payment periods, implement alternative payment plans, and take other necessary steps to avoid the cancellation or lapse of coverage during the emergency period; (2) implement alternative payment methods, such as facilitation electronic payments; (3) consider waiving late payments and other penalties, and extend grace periods on statement due dates and; (4) streamline processes that might delay issuing new coverage or cause the lapse of existing coverage.
District court dismisses class action overdraft fee claims
On March 31, the U.S. District Court for the Northern District of Illinois dismissed proposed class action overdraft fee claims brought against a national bank and the national bank’s parent company. The plaintiff argued that the bank unfairly charged him overdraft fees for debit transactions he made using two separate merchant debit cards (known as “decoupled debit cards”) that linked to his bank account. The plaintiff contended that because the bank’s contract language stated it would not charge overdraft fees on “non-recurring” debit transactions, this language should control despite the fact that the decoupled debit cards were not issued by the bank. The plaintiff brought multiple claims against the bank, including “breach of contract, breach of the covenant of good faith and fair dealing, unconscionability, conversion, and unjust enrichment.” The bank moved to dismiss for failure to state a claim.
The court first dismissed all claims brought against the national bank’s parent company, saying that the plaintiff combined and conflated the two entities. The court then dismissed with prejudice the plaintiff’s claims against the national bank for breach of the implied covenant of good faith and fair dealing, conversion, and unjust enrichment. The court also dismissed, but without prejudice, the claims against the national bank for breach of contract and unconscionability, although the court noted that the bank’s contract language “only applies to debit cards or access devices that were issued by [the bank], unlike the decoupled debit cards at issue here.”
CFPB issues 2019 Consumer Response Annual Report
On March 31, the CFPB published its Consumer Response Annual Report, providing a review of the Bureau’s complaint process and a description of complaints received from consumers in all 50 states and the District of Columbia between January 1 and December 31, 2019.
According to the report, the Bureau handled approximately 352,400 consumer complaints. Of these complaints, roughly 81 percent were submitted to companies for review and response, 14 percent were referred to other regulatory agencies, and five percent were determined to be incomplete. Report data showed that more than 3,200 companies responded to complaints received by the Bureau, with roughly 7,800 complaints receiving administrative responses. In addition, at the end of 2019, approximately 15,700 complaints were still being reviewed by companies, the report stated. The top products and services—representing approximately 89 percent of all complaints—were credit or consumer reporting, debt collection, credit cards, mortgages, and checking or savings accounts. The Bureau also received complaints related to: (i) student, personal, and payday loans; (ii) money transfers and virtual currency; (iii) vehicle finance; (iv) prepaid cards; (v) credit repair; and (vi) title loans. As reported by the CFPB, the majority of consumers who submitted complaints indicated that they first tried to resolve their issues with the companies.
Texas regulator urges credit unions to meet member needs
On April 1, the Texas Credit Union Department issued an informational memorandum encouraging state-chartered credit unions to consider taking steps to assist members adversely impacted by Covid-19. Among other considerations, the department urged credit unions to waive fees, increase cash withdrawal limits, waive early withdrawal penalties on time deposits, and allow borrowers to defer or skip some payments, among other things.
Special Alert: Treasury and SBA release initial details on Paycheck Protection Program
On Tuesday, March 31, the Department of the Treasury and the Small Business Administration released initial details regarding the nearly $350 billion Paycheck Protection Program established by the Coronavirus Aid, Relief, and Economic Security Act. Under the program, private lenders will offer SBA-guaranteed loans to small businesses that require capital to meet payroll and other expenses.
The SBA published a COVID-19-specific webpage with additional information about programs and resources, and Treasury posted four documents outlining key features of the program, as well as information for borrowers and lenders:
- The PPP Overview describes the program’s scope, eligibility requirements, and application process. It notes that no-fee loans used to meet payroll and to pay mortgage interest, rent, or utilities may be forgiven, with payments deferred for up to six months. Businesses in all industries with up to 500 employees are eligible, and larger businesses in certain industries may also be eligible. Applications will be accepted starting April 3, 2020.
- The PPP Lender Information Fact Sheet provides details regarding lenders that are eligible to make the SBA-guaranteed loans. Importantly, all existing SBA-certified lenders are granted “delegated authority” to originate loans eligible for the SBA guarantee (subject to eligibility and other requirements). Federally insured depository institutions and credit unions, as well as Farm Credit System institutions, may also make SBA-guaranteed loans under the program. Lenders that currently do not hold SBA certification may submit applications to participate to the address noted in the Lender Fact Sheet. We expect additional detail regarding the application process in the near future.
- The PPP Borrower Fact Sheet sets forth information for potential small-business borrowers. One important condition of obtaining a loan under the program: Employee and compensation levels must be maintained. However payroll costs are capped at $100,000 on an annualized basis for each employee, so any amounts above $100,000 paid to a single employee will not be calculated in the loan amount nor towards meeting a potential threshold for loan forgiveness (e.g., SBA indicates non-payroll costs may be limited to not more than 25% of the forgiven amount). Additional details regarding an exact percentage of the loan that must be used for payroll are forthcoming.
- The PPP Application Form is now available online. Small businesses will need to provide basic information and respond to disclosure questions, including whether the business is delinquent on any federal debt. The application form requires that the borrower respond to seven certification statements that relate to the intended use of funds, the necessity of the loan to support ongoing obligations of the business, the total number of employees, and that the information in the application is correct. It appears that lenders will calculate loan amounts by referencing the businesses’ prior-year tax returns. Due to the federal extension on filing taxes, most businesses will likely submit 2018 tax returns for review.
Please see Buckley’s March 30 Special Alert for additional information on the program. We will continue to provide timely updates regarding any guidance published on this topic on our dedicated SBA page, which includes additional SBA resources you may find helpful. If you have any questions regarding the matters discussed in this alert, please contact a Buckley attorney with whom you have worked in the past.
Rhode Island regulator delays reporting deadlines
In light of widespread interruptions created by the Covid-19 emergency, the Rhode Island Division of Banking extended the due date for debt collectors, small loan lenders, and debt management companies to submit 2020 Rhode Island Annual Reports to April 30, 2020. Extensions beyond that date will be considered on a case-by-case basis.
Oregon publishes website with Covid-19 insurance and financial services information for consumers
In late March, Oregon published a website that includes FAQs addressing Covid-19 insurance and financial services information for consumers. The website addresses questions regarding, among other things, making mortgage payments and addressing concerns about keeping money in checking or savings accounts during the Covid-19 outbreak. In addition, the responses to the FAQs indicate that the Division of Financial Regulation is encouraging its regulated lenders and financial service providers to take active measures to provide help to people and businesses affected by the pandemic, including offering loan forbearance plans, fee waivers, and other deferred payment options to their customers.
Oklahoma State Banking Department issued FAQs from financial institutions affected by Covid-19
In late March, the Commissioner of the Oklahoma State Banking Department issued FAQs as a supplement to FAQs issued earlier by the FDIC. The FAQs address: (i) working with borrowers, and appropriately documenting the credit file; (ii) closing a lobby but maintaining drive through service; (iii) access to safe deposit boxes; (iv) conducting board meetings remotely, and (v) bank examinations.
Special Alert: CARES Act places significant burdens on servicers of consumer debt but provides some relief to depositories
President Trump late last week signed the Coronavirus Aid, Relief, and Economic Security Act that attempts to soften the negative economic effects of the Covid-19 pandemic on consumers, including by suspending payments for certain student loan borrowers and enabling mortgage loan borrowers to easily obtain temporary forbearances. The act also provides certain limited regulated relief for banks and credit unions.
This Special Alert summarizes the provisions providing relief to borrowers with federal student loans and the provisions of Title IV that dictate the manner in which servicers and collectors report borrowers to consumer reporting bureaus; provide forbearance, foreclosure, and eviction relief throughout the housing market; and provide limited regulatory relief to depository institutions.
Buckley issued a separate Special Alert on the Small Business Administration-related provisions contained in Title I of the act and will be covering separately the new Special Inspector General’s office created by the act, False Claims Act considerations, and other liability risks that we expect to arise.
CFPB taskforce seeks input on consumer financial protection law improvements
On March 27, the CFPB’s Taskforce on Federal Consumer Financial Law issued a request for information (RFI) seeking input on consumer protection areas for the taskforce to focus its research and analysis, and requesting suggestions for “harmonizing, modernizing, and updating the federal consumer financial laws.” Specifically, the taskforce seeks information on “fair, transparent, and competitive” consumer financial service areas that are currently functioning well, as well as areas that may benefit from regulatory improvements to “facilitate competition and materially increase consumer welfare.” Areas of interest include: (i) automobile financing; (ii) consumer credit and reporting; (iii) debt collection and settlements; (iv) deposit accounts, electronic payments, money transfers, and prepaid cards; (v) mortgage origination and servicing; (vi) small-dollar lending; and (vii) student lending and servicing. Responses are due 60 days after the RFI is published in the Federal Register.