Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • CFPB Director Addresses State Attorneys General, Spotlight on Payday Lenders, Debt Collectors, and Servicing Rules

    Consumer Finance

    The National Association of Attorneys General (NAAG) met this week in Washington, DC. Among the topics covered at the annual meeting was the ongoing and future coordination between federal and state law enforcement with regard to financial services. CFPB Director Cordray, a former state attorney general, noted that NAAG and the CFPB already have several working groups organized to address payday loans, foreclosure scams, auto loans, and debt collection. These efforts will be supported through a formal Memorandum of Understanding that is expected to be finalized soon. In his remarks and in follow up questioning, Director Cordray specifically addressed enforcement and supervision with regard to payday lenders and debt collectors. It was reported that Director Cordray indicated that the CFPB and the FTC are “zoning in” on issues related to payday lenders associated with Native American tribes. Regarding debt collectors, the Director stated that aggressive enforcement by the FTC and states is not enough, and that the CPFB would like federal and state regulators and enforcement agencies to develop a national strategic plan that leverages the CFPB’s supervision and enforcement capabilities. Finally, on planned rulemaking by the CFPB, the Director noted ongoing efforts to develop rules governing mortgage servicing, including force-placed insurance products and hybrid ARMs.

    CFPB Payday Lending FDCPA Mortgage Servicing State Attorney General

  • FTC Expands Enforcement Action Against Tribe-Affiliated Payday Lenders

    Consumer Finance

    On March 7, the FTC announced the expansion of an existing enforcement action against several payday lending firms and their owner alleging that they sought to force borrowers throughout the country to travel to South Dakota to appear before a tribal court that did not have jurisdiction over their cases. The defendants are facing a number of claims relating to alleged attempts to garnish employees’ wages without appropriate court orders. The amended complaint adds allegations that the loan contracts issued by the defendants illegally state that the contracts are subject solely to the jurisdiction of the Cheyenne River Sioux Tribe. The defendants have brought suit in the tribal court against non-tribal members to obtain garnishment orders. The FTC contends that the tribal court does not have jurisdiction over claims against people who do not belong to the Cheyenne River Sioux Tribe and who do not reside on the reservation or elsewhere in South Dakota.

    FTC Payday Lending

  • Colorado State Court Rules Payday Lending Firms Affiliated with Native American Tribes are Immune from State Investigation and Prosecution

    Consumer Finance

    On February 13, the District Court for the City and County of Denver ruled that online payday lending businesses affiliated with two Native American tribes are protected from state investigation and enforcement. Colorado v. Cash Advance, No. 05-1143 (Col. Dist. Ct. Feb. 13, 2012). For several years the state had been trying to investigate and regulate the payday lending practices of the firms and brought suit to enforce subpoenas and cease and desist orders issued with regard to the firms’ operations. The state claimed that, among other things, the businesses were in violation of state laws that require firms doing business with Colorado consumers over the internet to have a valid state license. The defendants moved to dismiss, arguing that the firms are immune from those subpoenas and enforcement orders under the doctrine of tribal sovereign immunity. The defendant’s motion to dismiss was denied. On appeal, the state supreme court held that tribal sovereign immunity applies to state investigative subpoena enforcement actions and remanded the case to the trial court for additional inquiry into the immunity status of the tribes’ affiliated businesses. On remand, the state claimed that sovereign immunity did not apply because the firms engaged non-tribal members in some of their operations and designed their affiliation with two online payday lending firms to avoid state regulation and oversight, a practice sometimes referred to as “rent-a-tribe.” After discovery, the court disagreed and ruled for the defendant tribes and their businesses, holding that the companies are extensions of the tribes and therefore immune from state investigatory actions and judicial enforcement.

    Payday Lending State Attorney General

  • FTC Takes Action Against Collectors of Alleged Phantom Payday Loan Debts

    Consumer Finance

    On February 21, the FTC announced that, at its request, a U.S. federal court stopped the operations of entities the FTC alleges collected over $5 million of payday loan debts that either did not exist or were owed to another entity. The FTC asked the court to freeze the assets of the firm while it continues its investigation and prosecution. The FTC charges that the defendants, California-based American Credit Crunchers LLC and affiliated entities and individuals, violated the FTC Act and the Fair Debt Collection Practices Act by posing as law enforcement and demanding immediate payment of payday loan debts from consumers that had no such debt.

    FTC Payday Lending

  • FFETF Launches Federal-State Financial Fraud Consumer Protection Working

    Financial Crimes

    On February 10, the Financial Fraud Enforcement Task Force (FFETF) launched the Consumer Protection Working Group, which is charged with coordinating federal and state law enforcement and regulatory efforts to address consumer financial fraud, including fraud targeting unemployed persons, students, active-duty military personnel and veterans. The group is co-chaired by Assistant Attorneys General Tony West and Lanny Breuer, U.S. Attorney for the Central District of California André Birotte, Director of the FTC Bureau of Consumer Protection David Vladek, and CFPB Director of Enforcement Kent Markus. The Department of Justice’s press release states that meeting participants set priorities for the group as it seeks to address fraud in (i) payday lending, (ii) high-pressure telemarketing and Internet scams, (iii) business opportunity schemes, (iv) for-profit colleges, and (v) third-party payment processors. The meeting also addressed plans to establish a best-practices tool kit, policy initiatives (including legislative and regulatory proposals), and an information-sharing structure for Working Group participants.

    Fraud Payday Lending

  • CFPB Holds Field Hearing on Payday Lending, Releases Payday Lending Exam Guide

    Consumer Finance

    On January 19, the CFPB held a field hearing in Birmingham, Alabama to discuss payday lending products. The hearing, which was the first such hearing held by the CFPB, included three panels featuring CFPB staff, consumer groups, and industry representatives. In conjunction with the event, the CFPB also released its “Short-Term, Small-Dollar Lending Procedures,” which is a field guide for use in examining bank and nonbank payday lenders. These procedures are structured to mirror payday lending activities ranging from initial advertising to collection practices. The CFPB will prioritize its supervision of payday lenders depending on the perceived risk to consumers, taking into account factors such as a lender’s volume of business and the extent of existing state oversight. In remarks at the event, Director Richard Cordray stated that there are some payday lenders and practices that deserve more urgent attention because they present immediate risk to consumers and are “clearly illegal.” The Director identified two examples of such practices, including (i) unauthorized debits on a consumer’s checking account that can occur when the consumer unknowingly “is dealing with several businesses hidden behind a payday loan,” any one of which could be a “fraudster” merely seeking the customer’s private financial information, and (ii) “aggressive debt collection tactics” including “posing as federal authorities, threatening borrowers with criminal prosecution, trying to garnish wages improperly, and harassing the borrower.”

    CFPB Payday Lending Nonbank Supervision

  • Texas Finance Commission Adopts New Rules Regarding Mortgages and Consumer Credit

    Consumer Finance

    On December 30, the Finance Commission of Texas published two sets of rules impacting (i) mortgage lenders and servicers, (ii) credit access businesses, and (iii) debt management companies. The first set of rules reorganizes mortgage-related regulations to republish as Chapter 76 all regulations previously published as Chapter 79 of the Texas Administrative Code. This set of rules also establishes certain new regulations as Chapter 79 to implement SB 17 regarding residential mortgage loan servicers. Among the new rules are those to establish registration and bonding requirements for servicers.

    The second set of rules includes two that implement HB 2594 and HB 2592, which require the Commission to establish licensing for credit access businesses that provide payday loans or title loans, and to design new consumer notice disclosure and notice requirements for such firms. These regulations, among other things, set up a process for provisional licenses and a transition period to allow businesses to continue operating while obtaining a full license. Another rule sets new requirements related to standard payoff statement forms for mortgage servicers responding to requests from title insurance companies. Finally, this set of rules revises credit counseling standards for debt management service providers to remove certain obsolete language.

    For a copy of the rules as proposed, click here.

    Payday Lending

Pages

Upcoming Events