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FCC proposes obligations on international robocalls
On October 1, the FCC released a notice of proposed rulemaking (NPRM) to impose obligations on gateway providers to prevent illegal robocalls originating abroad from reaching U.S. consumers and businesses. Among other things, the NPRM seeks to require domestic gateway providers “to apply STIR/SHAKEN caller ID authentication to, and perform robocall mitigation on, foreign-originated calls with U.S. numbers.” As previously covered by InfoBytes, the STIR/SHAKEN framework addresses “unlawful spoofing by confirming that a call actually comes from the number indicated in the Caller ID, or at least that the call entered the US network through a particular voice service provider or gateway.” According to the FCC, the STIR/SHAKEN framework decreases illegal spoofing, provides assistance to law enforcement, and strengthens voice service providers’ blocking of robocalls using illegally spoofed caller ID information. The notice also proposes ensuring that gateway providers are engaged in the fight against illegal robocalls by requiring them to timely respond to traceback requests, which are utilized to block illegal robocalls and inform FCC enforcement investigations. Additionally, the NPRM seeks to require that both the gateway provider and the network accepting questionable traffic from the gateway provider actively block such calls. In a statement, acting Chairwoman Jessica Rosenworcel stated that such measures “will help [the FCC] tackle the growing number of international robocalls.” Comments on the proposed rules are due 30 days after the date of publication in the Federal Register.
HUD announces Vermont and Montana disaster relief
On September 30, HUD announced disaster assistance for certain areas in Vermont impacted by a severe storm and flooding from July 29 to July 30, providing foreclosure relief and other assistance to affected homeowners. This followed President Biden’s major disaster declaration for the counties of Bennington and Windham issued on September 29. The following day, HUD announced disaster assistance for certain areas in Montana affected by the Richard Spring Fire from August 8 to August 20, also providing foreclosure relief and other assistance to affected homeowners. This followed President Biden’s major disaster declaration for Rosebud County and the Northern Cheyenne Indian Reservation issued on September 30. According to the announcement, federal funding is additionally available on a cost-sharing basis for hazard mitigation in all areas of Montana.
For both disaster relief measures, 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.” 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.
CFPB releases debt collection FAQs
On October 1, the CFPB released a set of FAQs discussing limited-content messages and the call frequency provisions under the Debt Collection Rule in Regulation F. As previously covered by InfoBytes, in October 2020 the CFPB issued its final rule amending Regulation F, which implements the Fair Debt Collection Practices Act, addressing debt collection communications and prohibitions on harassment or abuse, false or misleading representations, and unfair practices. Among other things, the FAQs clarify: (i) the qualifications of a “limited-content message”; (ii) that debt collectors can utilize a pre-recorded voice message for limited-content messages; (iii) that the final rule “establishes a presumption of a violation of, and a presumption of compliance with, the prohibition against harassing, oppressive, or abusive conduct, based on the frequency of a debt collector’s telephone calls and conversations”; (iii) that the final rule “does not preempt a state law that affords greater protection to consumers, including, for example, by imposing limits or more restrictive presumptions related to telephone call frequency”; (iv) that seven days is the maximum time a consumer’s direct prior consent applies to additional telephone calls; and (v) the factors that may rebut the presumption of a violation.
CFPB examines subprime auto loans
On September 30, the CFPB released a Data Point report, titled Subprime Auto Loan Outcomes by Lender Type, which examines interest rate and default risk trends across different types of subprime lenders, including how much of the variation of interest rates charged among subprime lenders can be explained by differences in default rates and how much is left to be explained. The report found notable average differences across lender types in the borrowers they serve and the types of vehicles they finance. Banks and credit unions offering subprime auto loans typically lend to borrowers with higher credit scores compared to finance companies and buy-here-pay-here dealerships, the report noted, adding that different lenders also charge very different interest rates on average. According to the report’s sample, a bank’s average subprime loan interest rate is approximately 10 percent, compared to 15 to 20 percent at finance companies and buy-here-pay-here dealerships. The report found that higher default rates were found at lenders that charged higher interest rates, and that “the likelihood of a subprime auto loan becoming at least 60 days delinquent within three years is approximately 15 percent for bank borrowers and between 25 percent and 40 percent for finance company and buy-here-pay-here borrowers.”
However, the report presented statistical analysis that called into question whether differences in default rates fully explained the average differences in interest rates across subprime lender types. As an example, an average borrower with a 560 credit score or higher would have the same default risk whether the borrower obtained a loan from a bank or a small buy-here-pay-here lender, but the estimated interest rate would be nine percent with a bank loan versus 13 percent from a small buy-here-pay-here lender. The report noted that there are other variables, not observed in the data collected, that may explain differences in interest rates charged by different types of auto lenders, such as down payments, vehicle values, variations in borrowers’ access to information, borrowers’ financial sophistication, and variations within lenders’ business practices and incentives.
CSBS responds to regulators’ request on emerging technologies
On September 27, the Conference of State Bank Supervisors (CSBS) sent a letter to Ranking Member of the Senate Banking Committee Senator Pat Toomey (R-PA) detailing state bank regulators’ role in supervising money transmission and virtual currencies, in addition to recommending an activities-based approach to regulation. The letter is in response to a request by Senator Toomey for input on the regulation of financial technologies earlier this year. In Senator Toomey’s August 26 letter, he requested collection of public comments on proposed legislative language, among other things, to regulate emerging technologies. The Senator also requested that each proposal have a brief description that includes “how it will encourage the growth of cryptocurrency and blockchain technology” in the U.S. According to the letter from CSBS, state bank regulators are encouraging “Congress and federal regulators to focus on the activities at issue and making clarifications in existing laws, regulations, and interpretations,” and believe that “[a]n activities-based approach must be performed with collaboration from all stakeholders or risk one regulatory view overextending into areas where it would hurt innovation and consumers.” CSBS also points out that the Money Transmission Modernization Act established a regulatory baseline and represents a critical step in enhancing multistate harmonization in the money transmission industry. CSBS further discussed Networked Supervision, a strengthened collaboration which permits states to operate as a network. According to the letter, earlier this year, CSBS approved public priorities, which highlighted efforts that states will take to advance Networked Supervision focused on money services businesses. CSBS states that these priorities “emphasize the states’ commitment to harmonization, collaboration, and innovation throughout the state regulatory system.”
FHA publishes draft HECM sections of handbook
On September 29, FHA requested stakeholder review and feedback on the draft Home Equity Conversion Mortgage (HECM) Origination through Servicing sections of its Single Family Housing Policy Handbook 4000.1. The new draft sections are a continuation of the agency’s move toward a consolidated, authoritative Handbook 4000.1, and contain revisions to policy language to improve clarity and consistency along with proposed new policies. FHA stated that once the final version is published, the HECM Origination through Servicing sections will conform to the new organizational structure of Handbook 4000.1 and will replace existing HECM guidance on: (i) origination through post-closing and endorsement; (ii) appraiser and property requirements; (iii) servicing and loss mitigation; and (iv) glossary and acronyms. Feedback on the draft sections (posted on the agency’s drafting table) are due by November 15.
Auto-financer settles with DOJ on SCRA allegations
On September 29, the DOJ announced a settlement with a California-based auto-financing company resolving allegations that the company failed to refund up-front lease payments to servicemembers who lawfully terminated their motor vehicle leases early, in violation of the Servicemembers Civil Relief Act (SCRA). According to the press release, the SCRA “permits servicemembers to terminate motor vehicle leases early without penalty after entering military service or receiving qualifying military orders for a permanent change of station or to deploy.” When servicemembers end their motor vehicle leases early under the SCRA, the lessor must refund all lease payments made in advance under the SCRA. The settlement, filed by the DOJ in the U.S. District Court for the Central District of California, alleged that the company provided cash refunds for capitalized cost reduction (CCR) by servicemembers, but failed “to refund, on a pro rata basis, lease amounts—in the form of [CCR] from vehicle trade-in value—paid in advance by servicemembers who lawfully terminated their motor vehicle leases upon receipt of qualifying military orders.”
Among other things, the settlement requires the company to compensate 714 servicemembers, pay $64,715 to the U.S. Treasury, adopt new policies, and implement new training requirements consistent with the SCRA. The settlement also notes that the company fully cooperated with the investigation.
CFPB releases consumer credit card report
On September 29, the CFPB released its fifth biennial report on the state of the credit card market as required by Section 502 of the Credit Card Accountability Responsibility and Disclosure Act. The 2021 report covers the credit card market for the 2019-2020 period, and revisits similar baseline indicators and in-depth topics to examine market changes and track market developments and trends. Specifically, the report updates the deferred interest analysis last conducted in the 2017 Report. The report also analyzes the latest research on consumer card use, cost, and availability, among other things, finding that “[f]rom a 2019 peak of $926 billion, credit card debt fell to $811 billion by the second quarter of 2020, the largest six-month decline on record, before reaching $825 billion by the end of the year.” The report also highlights indicators related to consumer credit card activity during the pandemic, including (i) more than 25 million consumer credit card accounts represented approximately $68 billion in outstanding credit card debt entered relief programs in 2020; (ii) application volume for credit cards sharply declined in 2020 from its peak in 2019; (iii) late payment and default rates were at a historic low; (iv) consumers with below prime scores saw the greatest constriction in available credit card line; and (v) digital engagement is increasing across all age groups.
Fed governor discusses community-bank supervision
On September 29, Federal Reserve Governor Michelle W. Bowman spoke at the Community Banking in the 21st Century Research and Policy Conference held in St. Louis, Missouri on creating a new model for the future of supervision in banking. Bowman stated that the Fed has “actively explored ways to reduce regulatory burden and provide greater transparency into the work of bank supervisors,” including a reassessment of disproportionate regulatory burdens on small institutions. Bowman noted there was a systematic movement to FDIC-insured deposits in state or nationally chartered banks during the Covid-19 pandemic. For example, total deposits at all FDIC-insured institutions increased by 22 percent in comparison to deposit data from 2019 to 2020, and small business lending increased significantly. Bowman pointed out that community banks played a large role in allocating credit through the Paycheck Protection Program during the pandemic. She also discussed ways the Fed has evolved since the start of the pandemic, such as utilizing technology that enabled the opportunity to remotely supervise the safety and soundness of institutions and adjusting supervisory practices, among other things.
For the future of supervision, Bowman announced an initiative to investigate the implications of banking evolutions for the Fed’s supervision function, which will ensure the Fed’s supervisory approaches “accommodate a much broader range of activities” while also ensuring it does not “create an unlevel playing field with unfair advantages, or unfair disadvantages, for some types of firms versus others.” Bowman said that when there is significant uncertainty around a new regulation, supervisory expectation, or practice, the Fed “will look beyond [its] traditional communications tools to find innovative ways to reduce that uncertainty.” She also shared some underlying principles, among other things, that she believes will guide future supervisory approaches, such as (i) committing to preserving the stability, integrity, functionality, and diversity of the banking system; (ii) maintaining consumer protection and ensuring banks can safely offer financial products and services; (iii) avoiding adding new burdens on banks; (iv) enhancing transparency around supervisory expectations for safety and soundness and consumer compliance matters; (v) providing timelier feedback to banks; and (vi) having the ability to adjust supervisory expectations effectively and efficiently to enable banks to be more flexible in serving different communities.
FTC appoints consumer protection and competition directors
On September 28, FTC Chair Lina M. Khan appointed Samuel A.A. Levine as Director of the Bureau of Consumer Protection and Holly Vedova as Director of the Bureau of Competition. Levine—who served as an attorney advisor to Commissioner Rohit Chopra—previously worked for the Illinois attorney general where he prosecuted predatory for-profit colleges and engaged in rulemaking to expand income-driven repayment options for student borrowers. Vedova, who has a background in mergers and antitrust, most served recently as an attorney advisor to Chopra and previously served as counsel to the Director of the Bureau of Competition. “[A]s permanent directors of the FTC’s enforcement bureaus, their mission will be to guide this agency as we work to safeguard fair competition and check unfair or deceptive practices,” Khan stated.