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CFPB guidance on automobile repossession warns on UDAAPs
On February 28, the CFPB released Bulletin 2022-4 regarding the repossession of vehicles and the potential for violations of Dodd-Frank’s prohibition on engaging in unfair, deceptive, or abusive acts or practices (collectively, “UDAAPs”) when repossessing vehicles. According to the Bulletin, “[t]he Bureau intends to hold loan holders and servicers accountable for UDAAPs related to the repossession of consumers’ vehicles.” To prevent UDAAPs, the Bureau noted that entities should, among other things: (i) review their policies and procedures regarding repossession and cancellation of repossession; (ii) ensure prompt communications between servicers and repossession service providers when a repossession is canceled and monitor compliance with cancellations; (iii) utilize monitoring of wrongful repossessions through routine oversight and audits of customer communications; and (iv) ensure corrective action programs are in place to address any violations and reimburse consumers for costs incurred as a result of unlawful repossessions. Additionally, the Bulletin suggests that entities should monitor service providers and any force-placed collateral protection insurance programs to verify that consumers are not charged for unnecessary force-placed insurance. According to the CFPB’s blog post released the same day, “the Bureau is closely watching the auto lending market. Auto loans are already the third largest consumer credit market in the United States at over $1.46 trillion outstanding, double the amount from ten years ago.”
CFPB blogs about growth in auto lending
On February 24, the CFPB published a blog post regarding the auto lending market. In the post, the Bureau noted that the consumer price index for new and used cars increased by nearly 40 percent over the last year, and that it anticipated “that both the total amount of debt and the average loan size will continue to increase and that larger car loans will put increased pressure on some consumers’ budgets for much of the next decade.” Among other things, the Bureau highlighted it is monitoring the loan-to-value ratios in the auto lending market, auto loan servicing and collections practices, and the subprime auto lending market, stating that with respect to the subprime auto lending market, it is “looking to better understand potential barriers to competition in the subprime auto lending market that may drive” variation among subprime interest rates for auto loans. The post pointed to research that found “that typical ‘shallow subprime’ small BHPH ('buy-here-pay-here') borrowers would save around $894 over the life of a loan if they could reduce the interest rate from 13 percent, which is typical for such BHPH borrowers, to 9 percent, which is typical for bank borrowers with similar default rates.” The Bureau also noted that it “will continue to research auto lending policies and practices that may hinder a fair, transparent, and competitive market" and will work with its counterparts at the FTC and the Federal Reserve to use the agencies' collective authorities to address issues in the market.
HUD announces Nebraska and Iowa disaster relief
On February 24, HUD announced disaster assistance for certain areas in Nebraska and Iowa impacted by severe storms, straight-line winds, and tornadoes on December 15, 2021. This follows President Biden’s major disaster declaration for certain counties on February 23. The disaster relief includes providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” Additionally, HUD’s Section 203(k) loan program will allow individuals who have lost homes to finance the purchase of a house, or refinance an existing house and the costs of repair, through a single mortgage. The program will also allow homeowners with damaged property to finance the rehabilitation of existing single-family homes. Flexibility measures for state and local governments, public housing authorities, tribes, and tribally designated house entities are also addressed.
4th Circuit reviews whether borrowers’ letters are QWRs under REPSA
On February 22, the U.S. Court of Appeals for the Fourth Circuit affirmed in part and reversed in part a district court’s dismissal of claims related to whether letters sent by plaintiff borrowers to a defendant loan servicer constituted qualified written requests (QWRs) under RESPA or Regulation X that would require the defendant to stop sending adverse information about accounts to credit reporting agencies. According to the opinion, one of the plaintiffs wrote to the defendant asking to have his records corrected after noticing his credit reports reflected purported overdue home loan payments that were allegedly affecting his employment after his employer expressed concerns about the credit report. The plaintiff noted a discrepancy between the amount he was allegedly behind on his mortgage payment and included a copy of the credit report his employer received, his account number, the ID number of the agent with whom he spoke on the phone, and requested that the error be corrected. However, the plaintiff alleged that the defendant continued to report adverse loan information. The other named plaintiff allegedly fell behind on her loan payments, and the defendant began reporting adverse information to the credit reporting agencies. She later applied for a loan modification, which was not finalized due to the existence of a lien by a solar panel company. The plaintiff sent a letter to the defendant challenging the existence of “title issues” and asked for her dispute to be investigated and corrected. The parties ultimately finalized a loan modification, but in the interim, the defendant continued reporting adverse information. The plaintiffs filed a putative class action alleging that despite sending QWRs, the defendant continued to report adverse information on their loans to credit reporting agencies; however, the district court dismissed the claims.
On appeal, the 4th Circuit reversed the district court’s dismissal of the first plaintiff’s claim, holding that the plaintiff’s letter was a QWR subject to RESPA because it contained sufficient details to identify his account and indicate why he believed the credit reporting was in error. In particular, the court noted that the letter constituted a QWR because it did not rely solely on the alleged phone call “as the basis for the description of the problem,” but also detailed conflicting balance information received from the defendant and the credit reporting service. The dissenting judge wrote that this plaintiff’s letter was not a QWR because it failed to identify the possible error and did not provide a statement of reasons for believing the unidentified error existed.
With respect to the other named plaintiff’s claim, the court affirmed dismissal because the letter did not qualify as a QWR. The court explained that the content of the plaintiff’s letter failed to satisfy the requirements of a valid QWR, finding that “correspondence limited to the dispute of contractual issues that do not relate to the servicing of the loan, such as loan modification applications, do not qualify as QWRs.”
Massachusetts settles with auto lender
On February 18, the Massachusetts attorney general announced that a national auto lender entered into a settlement with the Commonwealth resolving allegations that the lender did not provide sufficient disclosures to consumers related to its debt collection practices, with over 1,000 borrowers expected to be eligible for relief. According to the Assurance of Discontinuance (AOD), the lender allegedly failed to provide certain consumers with sufficient information about the calculation methods for any deficiencies remaining on their auto loans after their cars were repossessed. The AOD requires the auto lender to pay $5.6 million in restitution to eligible borrowers, and cover administration and investigation costs associated with the matter. According to Massachusetts Attorney General Laura Healey, the “settlement, which combines cash payments with debt relief and credit repair, will help many subprime borrowers in need.”
FTC publishes ANPR on bogus money-making opportunities
On February 17, the FTC announced an advanced notice of proposed rulemaking (ANPR), which “launched a proceeding to challenge bogus money-making claims used to lure consumers, workers, and prospective entrepreneurs into risky business ventures that often turn into dead-end debt traps.” According to the FTC, a rule in this area would permit “the Commission to recover redress for defrauded consumers, and seek steep penalties against the multilevel marketers, for-profit colleges, ‘gig economy’ platforms, and other bad actors who prey on people’s hopes for economic advancement.” The FTC summarized recent actions against “coaching or mentoring schemes, multi-level marketing companies, work-from-home, e-commerce, or other business opportunity scams, chain referral schemes, gig companies and employers, job scams, and businesses purporting to offer educational opportunities,” but noted that “the recent Supreme Court decision in the AMG Capital Management LLC v. FTC has hindered the FTC’s ability to seek monetary relief for consumers under the FTC Act.” (Covered by InfoBytes here). The ANPR gives notice of a new possibility of rulemaking for false, misleading, and unsubstantiated earnings claims, and, if adopted, the FTC will have the ability to return money to consumers injured by deceptive income claims, while holding bad actors accountable with civil penalties. The ANPR also solicits public comment on: (i) whether earnings claims are prevalent among all or only some industries; (ii) how a rule addressing earnings claims should be drafted; (iii) the benefits to consumers from such a rule and the costs to businesses; and (iv) whether the potential rule should address disclaimers, lifestyle claims, or liability for agents’ claims.
CFPB scrutinizes student loan servicers’ PSLF compliance
On February 18, the CFPB released a compliance bulletin warning student loan servicers to make sure they provide complete and accurate information to eligible borrowers about Public Service Loan Forgiveness (PSLF) benefits. The Bureau indicated that it will be paying close attention to servicers’ compliance with Dodd-Frank’s prohibition on unfair, deceptive, or abusive acts or practices. Last October, the Department of Education changed its PSLF program to now provide qualifying borrowers with a time-limited PSLF waiver that allows all payments to count towards PSLF regardless of loan program or payment plan. The waiver covers payments made on loans under the Federal Family Education Loan Program or Perkins Loan Program. (Covered by InfoBytes here.) However, Bureau supervisory findings revealed unfair or deceptive practices taken by servicers that have prevented many borrowers from making progress towards forgiveness. The Bureau emphasized that it expects servicers to comply with federal consumer financial protection laws when administering the new PSLF waiver and providing assistance to borrowers. The Bureau “will pay particular attention” to whether (i) servicers of any federal loan type provide complete and accurate information about the PSLF waiver in communications related to PSLF or loan consolidation; (ii) servicers have adequate policies and procedures to recognize when borrowers express interest in PSLF or the PSLF waiver (or where borrowers’ files otherwise demonstrate their eligibility), in order to direct borrowers to appropriate resources; and (iii) servicers take measures “to promote the benefits of the PSLF Waiver to borrowers who express interest or whose files otherwise demonstrate their eligibility.” The Bureau advised servicers to consider enhancing their compliance management systems to ensure borrowers receive accurate and complete information about the PSLF waiver and that their enrollment is facilitated.
Education Dept. to forgive $72 million of student loans after FTC action
On February 16, the FTC announced that the Department of Education (Department) will forgive $71.7 million in federal loans for approximately 1,800 former students deceived by a for-profit university. In 2016, the FTC sued university operators for allegedly advertising that 90 percent of graduates found jobs in their fields within six months of graduation, and that graduates had a 15 percent higher income on average than graduates of all other colleges or universities one year after graduation. The announcement expands on a prior FTC settlement, which required the university to pay $49.4 million in partial refunds to qualifying students and $50.6 million in debt relief. The forgiven debt included the full balance owned on all private unpaid student loans issued by the university to students as well as debts for items such as tuition, books, and lab fees. According to the Department’s announcement, these are the first approved borrower defense claims associated with a currently operating institution. The Department noted that it intends to recoup discharge costs from the university and anticipates an increase in the number of approved claims related to the university as it continues to review pending applications.
The Department stated in total it is cancelling $415 million in student loan debt under the borrower defense to repayment program, noting that several other actions will provide borrower defense discharges to nearly 14,000 borrowers attending other colleges and universities. “The Department remains committed to giving borrowers discharges when the evidence shows their college violated the law and standards,” said U.S. Secretary of Education Miguel Cardona. The Department further noted that it is working on new regulations to improve the borrower defense to repayment program, as well as other discharge programs to provide more protections for students and taxpayers. “This includes writing a new borrower defense regulation, proposing to re-establish a gainful employment regulation to hold career training programs accountable for unaffordable debt, and proposing to create financial triggers so that the Department has monetary protection against potential losses, including borrower defense liabilities,” the Department said in its announcement.
HUD announces Hawaii and Kansas disaster relief
On February 16, HUD announced disaster assistance for certain areas in Hawaii impacted by severe storms, flooding, and landslides. The disaster assistance supplements state and local recovery efforts in specific counties, and provides foreclosure relief and other assistance to affected homeowners following President Biden’s major disaster declaration on February 15. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program allows individuals who have lost homes to finance the purchase of a house or refinance an existing house along with the costs of repair through a single mortgage. The program also allows homeowners with damaged property to finance the rehabilitation of existing single-family homes. Furthermore, HUD is allowing applications for administrative flexibility and waivers for community planning and development grantees and public housing authorities.
On February 18, HUD announced disaster assistance for certain areas in Kansas impacted by severe storms and straight-line winds. The disaster assistance supplements state and local recovery efforts in specific counties, and provides foreclosure relief and other assistance to affected homeowners following President Biden’s major disaster declaration on February 17. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program allows individuals who have lost homes to finance the purchase of a house or refinance an existing house along with the costs of repair through a single mortgage. The program also allows homeowners with damaged property to finance the rehabilitation of existing single-family homes. Furthermore, HUD is allowing applications for administrative flexibility and waivers for community planning and development grantees and public housing authorities.
CFPB opens rulemaking petition to public
On February 16, the CFPB announced the launch of a new process for the public to submit petitions for rulemaking directly to the Bureau. According to the announcement, the public will have the ability to request that the Bureau pursue a new rule, amend an existing one, or repeal a rule. By allowing the public to make rulemaking suggestions, the Bureau is hoping to “identify consumer protection issues worthy of reform, rulemaking, or in need of further clarification.” The Bureau also noted that “[f]ormer government employees and other individuals who are paid to influence the agency’s rulemaking agenda behind the scenes will be asked to submit their petition for public inspection instead.” The initiative “is part of a series of steps the CFPB is taking to ensure high standards of transparency and ethics, particularly when it comes to addressing the corrosive effects of the ‘revolving door.’” According to CFPB Director Rohit Chopra, the program “will broaden access to the agency’s rulemaking process.”