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Financial Services Law Insights and Observations


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  • FDIC announces Kentucky and Alabama disaster relief

    Federal Issues

    On April 30, the FDIC issued FIL-31-2021 and FIL-32-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Kentucky and Alabama affected by severe storms. The FDIC acknowledged the unusual circumstances faced by institutions affected by the storms and suggested that institutions work with impacted borrowers to, among other things, (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements.

    Federal Issues FDIC Disaster Relief Kentucky Alabama Consumer Finance CRA

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  • CFPB reports on Covid-19 mortgage borrower challenges

    Federal Issues

    On May 4, the CFPB released two reports analyzing mortgage borrowers’ challenges due to the ongoing Covid-19 pandemic. The first report explores the characteristics of borrowers who are delinquent or in forbearance based a sample of nearly 662,000 loans for owner-occupied properties. The report shows that Black and Hispanic borrowers are more at risk than others, as they comprised 33 percent of borrowers in forbearance (and 27 percent of delinquent borrowers) while only constituting 18 percent of the total population of mortgage borrowers. Other findings include that (i) loans reported in March 2021 as being in forbearance or delinquent were “more likely than current loans to be single-borrower loans and to have been 30+ days delinquent in February 2020,” and (ii) “the share of loans with [a loan-to-value] ratio above 60 percent was significantly larger for borrowers in forbearance (50 percent) or delinquent (51 percent) compared to those who were current (34 percent).”

    The second report examines mortgage forbearance issues described in consumer complaints from the 2020 Consumer Response Annual Report. According to the complaint bulletin, the mortgage complaint volume “has remained relatively steady since January 2020, averaging around 2,500 complaints per month,” while peaking to 3,400 complaints in March 2021—the greatest monthly mortgage complaint volume in nearly three years. The most common issue reported since January 2020 was consumers experiencing difficulty during the payment process. The bulletin also highlights that: (i) many consumers reported that servicers were not providing advice about loss mitigation until after the consumer’s forbearance had been terminated; and (ii) consumers reported long delays in having their loans modified so they could resume payments on their mortgages.

    The CFPB also issued a reminder in its press release that it is seeking comments on a proposal intended to help prevent avoidable foreclosures for borrowers affected by the Covid-19 pandemic. As covered by a Buckley Special Alert, the proposal would temporarily require servicers to enhance communications with borrowers who are delinquent or in forbearance, allow servicers to offer certain streamlined loan modification options to borrowers with Covid-19-related hardships, and require servicers to afford all borrowers a special pre-foreclosure review period, if finalized. The CFPB indicated that a final rule implementing the proposal will take effect August 31—a tight timeline to address public comments, which are due May 10.

    Federal Issues CFPB Covid-19 Mortgages Consumer Finance

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  • CFPB sued over Covid-19 FDCPA eviction rule


    On May 3, plaintiffs, including members of the National Association of Residential Property Managers, sued the CFPB asserting the Bureau’s recently issued interim final rule (IFR) violates their First Amendment rights. As previously covered by InfoBytes, the IFR amended Regulation F to require debt collectors to provide tenants clear and conspicuous written notice alerting them of their rights under the CDC’s moratorium on evictions in response to the Covid-19 pandemic. Under the IFR, failure to provide notice is considered a violation of the FDCPA. The plaintiffs argue that the moratorium, however, has been challenged and invalidated by several federal courts, including the U.S. Court of Appeals for the Sixth Circuit. As such, the plaintiffs contend that the IFR compels “false speech” and “requir[es p]laintiffs to lie about the lawfulness and availability” of consumers’ rights under the moratorium. The complaint asks the court to “enjoin this CFPB policy, declare it unlawful, and set it aside.”

    Courts CFPB Debt Collection Consumer Finance Covid-19 Agency Rule-Making & Guidance FDCPA

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  • CFPB releases tech sprints presentations

    Federal Issues

    On April 26, the CFPB announced presentations from the Bureau’s first two tech sprints—forums that gather “regulators, technologists, financial institutions, and subject matter experts from key stakeholders for several days to work together to develop innovative solutions to clearly-identified challenges”—as a means to encourage regulatory innovation and collaborate with stakeholders on solutions to regulatory compliance challenges. The first tech sprint, covering Adverse Action Notices, took place in October 2020, and focused on improving electronic distribution of these disclosures to assist consumers in making more informed financial choices. Participants were able to contribute in “developing innovations in the way lenders notify consumers of adverse credit actions.” The second tech sprint, covering the submission and publication of Home Mortgage Disclosure Act (HMDA) data, took place in March 2021 and challenged participants to work with the Bureau on ways to innovate on how the Bureau receives and processes HMDA data. The second forum also focused on how to improve accessibility to the data to increase market transparency and drive better decision making, especially around issues of equity and inclusion.

    Federal Issues CFPB Fintech Disclosures HMDA Consumer Finance Mortgages

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  • CFPB reports on consumer financial status changes

    Federal Issues

    On April 30, the CFPB released a report that analyzed the early impacts of Covid-19 on the financial status of consumers. According to the Changes in Consumer Financial Status During the Early Months of the Pandemic data point report, fewer consumers had difficulty paying bills in the initial months of the Covid-19 pandemic than in the preceding year, and both credit scores and CFPB financial well-being scores increased. In addition, “[d]espite volatile economic conditions, the average consumer’s financial status improved between June 2019 and June 2020.” These improvements were largely consistent across demographics like race, ethnicity, gender, rural status, and income. Additionally, research examining the first several months of the pandemic showed that “delinquencies as reported in credit bureau data declined, credit card debt fell even for financially vulnerable consumers, bank account balances rose, and survey-based measures of financial conditions rose.”

    Federal Issues CFPB Covid-19 Data Point Reports Consumer Finance

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  • Oklahoma and North Dakota adjust finance charges, rates on small dollar loans

    State Issues

    On April 21, the governor of Oklahoma signed SB 796, which amends the loan finance charge limit for supervised lenders. Specifically, a loan finance charge “may not exceed the equivalent of the greater of either” 25 percent per year on an unpaid principal balance or: (i) 32 percent annually on unpaid principal of $7,000 or less; (ii) 23 percent annually on unpaid principal that is greater than $7,000 but does not exceed $11,000; and (iii) 20 percent annually on unpaid principal of more than $11,000. The act also allows lenders to charge a closing fee of up to $28.85. The act takes effect November 1.

    The North Dakota governor also signed into law SB 2103 on April 16, which, when it takes effect on August 1, imposes limits on charges that licensed money brokers can assess, including a 36 percent annual interest rate limit on installment loans, and caps nonpayment or late payment fees at five percent for loans greater than $50,000. The act also includes additional restrictions for loans of less than $2,000, including that (i) the maximum term for an installment loan may not exceed 36 months and balloon payments are prohibited; (ii) existing loan balances may be refinanced into a new loan, provided it is less than $2,000 and “the combination of any refinance fees along with any fees collected as part of the original loans” do “not exceed one hundred dollars per calendar year”; and (iii) licensees may not contract for or receive charges exceeding $100 for a loan extension or payment deferment.

    State Issues State Legislation Consumer Finance Small Dollar Lending

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  • District Court certifies class challenging online lender’s rates


    On April 23, the U.S. District Court for the Northern District of California granted class certification to residents who received loans from an online lender, allowing them to pursue class claims based on allegations they were charged interest rates that exceeded state limits for lenders claiming tribal immunity. The class of borrowers include California residents who collected loans from an Oklahoma-based tribe, and California residents who received loans from a Montana-based tribe before June 2016. The district court held that the proposed class met the requirements for certification, including that the borrowers brought a common, predominant claim, and found that data from a separate settlement, which contained defendant’s consumer-level account information, could be used to establish damages. Although the defendants highlighted an error in the data regarding a plaintiff's residency, the court held that such an error was not substantial enough to undermine the entire data set, because “[d]espite the error … [the] consumer-level data for each transaction provides a fair basis for identifying the scope of the class and aggregate damages for the California class.”

    Courts Tribal Lending Usury Class Action Online Lending Consumer Finance

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  • 9th Circuit will rehear Oakland’s Fair Housing Act case en banc


    On April 20, a majority of nonrecused active judges of the U.S. Court of Appeals for the Ninth Circuit vacated a three-judge panel’s 2020 Fair Housing Act (FHA) decision and ordered that the case be reheard en banc. As previously covered by InfoBytes, the City of Oakland sued a national bank alleging violations of the FHA and the California Fair Employment and Housing Act, claiming the bank provided minority borrowers mortgage loans with less favorable terms than similarly situated non-minority borrowers, leading to disproportionate defaults and foreclosures causing (i) decreased property tax revenue; (ii) increases in the city’s expenditures; and (iii) neutralized spending in Oakland’s fair-housing programs. Last year, the three-judge panel affirmed both the district court’s denial of the bank’s motion to dismiss claims for decreased property tax revenue, as well as the court’s dismissal of Oakland’s claims for increased city expenditures. Regarding Oakland’s alleged municipal expenditure injuries, the panel agreed with the district court that Oakland’s complaint failed to account for independent variables that may have contributed or caused such injuries and that those alleged injuries therefore did not satisfy the FHA’s proximate-cause requirement. The panel further held that Oakland’s claims for injunctive and declaratory relief were also subject to the FHA’s proximate-cause requirement, and that on remand, the district court must determine whether Oakland’s allegations satisfied this requirement. The bank filed a petition for panel rehearing and rehearing en banc last October, arguing, among other things, that the panel had “fashioned a looser, FHA-specific proximate-case standard” in conflict with the U.S. Supreme Court’s decisions involving the City of Miami (covered by InfoBytes here). Oakland responded by noting, however, that the panel’s decision is consistent with the City of Miami decisions, and that, among other things, the Supreme Court’s decision did not establish “precise boundaries of proximate cause” but rather asked lower courts to define “the contours of proximate cause under the FHA and decide how that standard applies to the City’s claims for lost property-tax revenue and increased municipal expenses.”

    Courts Appellate Ninth Circuit Fair Housing Fair Housing Act Consumer Finance Mortgages State Issues Fair Lending

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  • District Court: Identity theft alone is not enough to remove allegedly fraudulent debt from credit report


    On April 20, the U.S. District Court for the Southern District of California granted a defendant debt collector’s motion for summary judgment, ruling that claiming to be a victim of identity theft alone is not enough to have a collection item removed from a credit report, or to give rise to an FDCPA violation. In 2014, the plaintiff purportedly obtained a payday loan from a lender who ultimately assigned the loan to the defendant for collection. In 2019, the plaintiff called the defendant to verbally dispute the debt as fraudulent after seeing the loan on her credit report. The defendant continued to report the loan to the consumer reporting agencies (CRAs), but marked the account as disputed, and informed the plaintiff of measures she needed to take to have the item removed from her credit report, including instructions for filing an identity theft affidavit. After an attorney representing the plaintiff submitted a formal written dispute of the debt, the defendant responded with the required verification and continued reporting the debt until the account was recalled by the lender. At this point the loan record was deleted and the defendant stopped reporting the loan account to the CRAs. The plaintiff filed suit alleging the defendant violated FDCPA Sections 1692e and 1692f and various state laws by continuing to report the debt after it was notified of the potential fraud. The court disagreed, stating, “there was nothing about [the defendant’s] statements that would confuse or mislead even the least sophisticated debtor’s attempt to remove the fraudulent account from their credit report,” the court wrote, adding that none of the defendant’s communications were false, deceptive, or misleading, nor did they undermine the plaintiff’s “ability to intelligently choose her action concerning the loan account.”

    Courts Debt Collection FDCPA Consumer Finance Consumer Reporting Agency State Issues

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  • Court certifies two classes in restaurant chain data breach

    Privacy, Cyber Risk & Data Security

    On April 15, the U.S. District Court for the Middle District of Florida certified a nationwide class and a California-only class of restaurant customers who claim the restaurant chain’s negligence led to a 2018 data breach that compromised their credit card information. The two classes of consumers include those who made credit or debit card purchases at affected restaurants in March and April 2018, when their data was accessed by cybercriminals, and who incurred reasonable expenses or time spent mitigating the consequences of the breach. The judge certified the classes only on the plaintiffs’ negligence and state Unfair Competition Law (California) claims, and deferred ruling on the class certification related to claims that the restaurants’ parent company breached an implied contract with customers by failing to have adequate cybersecurity protocols. Certifying that claim, the judge stated, could require applying 50 different state laws on the breach of implied contracts. 

    Privacy/Cyber Risk & Data Security Courts Data Breach Consumer Finance State Issues

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