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Financial Services Law Insights and Observations

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  • VA encourages loan holders to extend relief to Arkansas borrowers

    Federal Issues

    On June 20, the Department of Veterans Affairs (VA) issued Circular 26-19-16, encouraging mortgagees to provide relief for VA borrowers impacted by severe storms and flooding in Arkansas. Among other forms of assistance, the Circular encourages loan holders and servicers to (i) extend forbearance to borrowers in distress because of the severe storms and flooding; (ii) establishes a 90-day moratorium from the disaster date on initiating new foreclosures on affected loans; (iii) waives late charges on affected loans; and (iv) suspends credit reporting. The Circular is effective until July 1, 2020. Mortgage servicers and veteran borrowers are also encouraged to review the VA’s Guidance on Natural Disasters.

    Find continuing InfoBytes coverage on disaster relief guidance here.

    Federal Issues Department of Veterans Affairs Disaster Relief

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  • FTC halts the operation of alleged credit repair scheme

    Federal Issues

    On June 21, the FTC announced that the U.S. District Court for the District of Connecticut temporarily halted the operation of an alleged credit repair scheme based on allegations the company charged illegal upfront fees and falsely claimed to substantially improve consumers’ credit scores in violation of the FTC Act, the Credit Repair Organizations Act, the Telemarketing Sales Rule (TSR), the Consumer Review Fairness Act, TILA, and the EFTA. According to the complaint, since 2014, the company, among other things, (i) claims they can improve consumers’ credit scores by removing negative items and hard inquiries from credit reports; (ii) charges advance fees for their services; (iii) does not provide the required disclosures for its services, including credit transaction disclosures related to the financing of the service fees; (iv) engages in electronic funds transfers from consumers’ bank accounts without proper authorization; and (v) threatens consumers with legal action after consumers complain about the lack of results. The court order requires the company to temporarily cease its operations and ensures the company’s assets are frozen.

    Federal Issues FTC Credit Repair Credit Scores Courts TILA EFTA FTC Act Telemarketing Sales Rule

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  • Fed concludes largest banks are well positioned to absorb economic shock

    Federal Issues

    On June 21, the Federal Reserve Board released the results of its supervisory Dodd-Frank Act bank stress tests conducted on 18 financial institutions, which collectively hold 70 percent of bank assets in the U.S. Under the most severe scenario tested by the Fed, consisting of a severe global recession— “with the U.S. unemployment rate rising by more than 6 percentage points to 10 percent, accompanied by a large decline in real estate prices and elevated stress in corporate loan markets”— the Fed projected losses at the 18 institutions would total $410 billion and the aggregate common equity tier 1 capital ratio would fall from an actual 12.3 percent in the fourth quarter of 2018 to 9.2 percent. Vice Chairman, Randal K. Quarles, noted that “[t]he results confirm that our financial system remains resilient,” and “the nation’s largest banks are significantly stronger before the crisis and would be well-positioned to support the economy after a secure shock.”

    Federal Issues Stress Test Dodd-Frank Federal Reserve EGRRCPA

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  • Agencies release 2019 list of distressed, underserved communities

    Federal Issues

    On June 17, the OCC, together with the Federal Reserve and the FDIC, released the 2019 list of distressed or underserved communities where revitalization or stabilization efforts by financial institutions are eligible for Community Reinvestment Act (CRA) consideration. According to the joint release from the agencies, the list of distressed nonmetropolitan middle-income geographies and underserved nonmetropolitan middle-income geographies are designated by the agencies pursuant to their CRA regulations and reflect local economic conditions, including changes in unemployment, poverty, and population. For any geographies that were designated by the agencies in 2018 but not in 2019, the agencies apply a one-year lag period, so such geographies remain eligible for CRA consideration for another 12 months.

    Similar announcements from the Federal Reserve and the FDIC are available here and here.

    Federal Issues OCC FDIC Federal Reserve CRA

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  • VA encourages loan holders to extend relief to Louisiana and Oklahoma borrowers

    Federal Issues

    On June 18, the Department of Veterans Affairs (VA) issued Circular 26-19-14 and Circular 26-19-15, encouraging relief for VA borrowers impacted by severe storms in Louisiana and Oklahoma. Among other things, the Circulars encourage loan holders to (i) extend forbearance to borrowers in distress because of the severe storms and flooding; (ii) establish a 90-day moratorium from the disaster date on initiating new foreclosures on affected loans; (iii) waive late charges on affected loans; and (iv) suspend credit reporting. The Circulars are effective until July 1, 2020. Mortgage servicers and veteran borrowers are also encouraged to review the VA’s Guidance on Natural Disasters.

    Find continuing InfoBytes coverage on disaster relief guidance here.

    Federal Issues Department of Veterans Affairs Disaster Relief

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  • DOJ announces redlining settlement with Indiana bank

    Federal Issues

    On June 13, the DOJ announced a settlement with an Indiana bank resolving allegations the bank engaged in unlawful “redlining” in Indianapolis by intentionally avoiding predominantly African-American neighborhoods in violation of the Fair Housing Act and ECOA. In the complaint, the DOJ alleges that from 2011 to 2017, among other things, the bank (i) excluded Marion County in Indianapolis and its “50 majority-Black census tracts” from its Community Reinvestment Act assessment area; (ii) did not have any branch locations in majority-Black areas of the county; (iii) did not market in the majority-Black areas of the country; and (iv) had a residential mortgage lending policy that allegedly showed preference to the location of borrowers, not the creditworthiness. Under the settlement agreement, which is subject to court approval, the bank will, among other things, expand its business services and lending to the predominantly African-American neighborhoods in Indianapolis and will invest at least $1.12 million in a special loan subsidy fund to be used to increase credit opportunities in the specified neighborhoods. Additionally, the bank will designate a full-time Director of Community Lending and Development to oversee the continued development of the bank’s lending in the specified areas.

     

    Federal Issues DOJ Fair Lending Redlining Fair Housing Act ECOA CRA

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  • FDIC encourages release for Arkansas and South Dakota borrowers

    Federal Issues

    On June 17, the FDIC issued Financial Institution Letters FIL-32-2019 and FIL-33-2019 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Arkansas and South Dakota affected by severe weather. FIL-32-2019 covers severe storms and flooding caused significant property damage in areas of Arkansas from May 21 through the present and FIL-33-2019 covers severe winter storm, snowstorm, and flooding caused significant property damage in areas of South Dakota from March 13 through April 26.

    The FDIC is encouraging institutions to consider, among other things, extending repayment terms and restructuring existing loans to borrowers affected by the severe weather. Additionally, the FDIC notes that institutions may receive favorable Community Reinvestment Act (CRA) consideration for community development loans, investments, and services in support of disaster recovery.

    Find continuing InfoBytes coverage on disaster relief guidance here.

    Federal Issues FDIC Disaster Relief CRA Consumer Finance

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  • HUD: DACA recipients not eligible for FHA loans

    Federal Issues

    On June 11, Len Wolfson, the Assistant Secretary for Congressional and Intergovernmental Relations at HUD sent a letter to Representative Pete Aguilar (D-CA) specifying that Deferred Action for Childhood Arrivals (DACA) recipients are not eligible for FHA loans. According to the letter, HUD has not implemented any new policies changes during the current Administration with respect to FHA eligibility requirements for DACA recipients. Wolfson asserts that, “Since at least October 2003, FHA has maintained published policy that non-U.S. citizens without lawful residency ‘are not eligible for FHA-insured loans,’” and determination of immigration status is not the responsibility of HUD. Therefore, Wolfson argues, “because DACA does not confer lawful status, DACA recipients remain ineligible for FHA loans.”   

    Federal Issues Agency Rule-Making & Guidance HUD FHA U.S. House

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  • FDIC issues first Consumer Compliance Supervisory Highlights

    Federal Issues

    On June 13, the FDIC released a new publication, Consumer Compliance Supervisory Highlights, intended to provide information and observations related to the FDIC’s consumer compliance supervision activities in 2018. Specifically, the report covers approximately 1,200 consumer compliance examinations conducted by the FDIC in 2018. Overall, the FDIC noted that, “supervised institutions demonstrated strong and effective management of consumer compliance responsibilities.” The report identifies some of the most salient compliance issues identified by the FDIC during 2018, including (i) overdraft programs, which were found to be potentially unfair or deceptive when an institution used an “available balance method,” sometimes resulting in more overdraft fees than were appropriate because the institution assessed a fee when the transaction did not overdraw the account; (ii) RESPA anti-kickback violations, which concerned payments “disguised as above-market payments for lead generation, marketing services, and office space or desk rentals” or as marketing and advertising agreements; and (iii) Regulation E, where certain institutions were found to have incorrectly calculated consumer liability for unauthorized transfers, failed to resolve errors properly, or discouraged consumers from filing error resolution requests. The report also covers issues with skip-a-payment loan programs and the calculation of finance charges and disclosures related to lines of credit.

     

    Federal Issues FDIC Bank Supervision Examination RESPA Overdraft Regulation E

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  • CFPB settles with defunct schools’ student loan management company

    Federal Issues

    On June 14, the CFPB announced a proposed settlement, subject to approval by a federal district court, with a company that manages student loans for a defunct for-profit educational institution resolving allegations it provided substantial assistance to the institution in engaging in unfair acts and practices in violation of the Consumer Financial Protection Act (CFPA). As previously reported by InfoBytes, the Bureau filed suit against the now-defunct for-profit institution in February 2014.  The Bureau’s complaint against the institution alleged that the institution offered first-year students no-interest short-term loans to cover the difference between the costs of attendance and federal loans obtained by students. The complaint asserts that the institution then forced borrowers into “high-interest, high-fee” private student loans without providing borrowers an adequate opportunity to understand their loan obligations, when their short-term loans became due. In the complaint in the current matter, filed the same day as the proposed stipulated judgment, the Bureau alleges that the management company: (i) was substantially involved in the creation and operation of the loan program, including raising money and overseeing the origination and servicing of the loans; and (ii) knew, or was reckless in not knowing, the risks associated with the loan program. The proposed stipulated judgment requires the company to (i) cease enforcement and collection efforts on all outstanding loans associated with the program; (ii) discharge all outstanding loans associated with the program; and (iii) direct credit reporting agencies to delete consumers’ trade lines associated with the loan program. The company must also provide notice of these actions to affected consumers. The proposed judgment does not include a monetary penalty or require refunds to consumers.

     

    Federal Issues Courts Settlement CFPA Unfair UDAAP For-Profit College Lending Student Lending

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