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Biden extends PPP deadline
On March 30, President Biden signed the PPP Extension Act of 2021, extending the covered period for the Paycheck Protection Program from March 31 to June 30. However, new loan applications will not be accepted after May 31.
FTC restructures rulemaking as justices debate its limits on consumer redress
On March 25, FTC acting Chairwoman Rebecca Kelly Slaughter announced a new rulemaking group within the FTC’s Office of the General Counsel created to streamline and strengthen the Commission’s rulemaking process and coordinate rulemaking among various units. The FTC’s current rulemaking process is decentralized, according to Slaughter, with individual bureaus and divisions responsible for particular rules. “The new structure will aid the planning, development, and execution of rulemaking,” she said, noting that with the “new group in place, the FTC is poised to strengthen existing rules and to undertake new rulemakings to prohibit unfair or deceptive practices and unfair methods of competition.” Slaughter also emphasized the critical importance of effective rulemaking “given the risk that the Supreme Court substantially curtails the FTC’s ability to seek consumer redress under Section 13(b)” through enforcement actions.
As previously covered by InfoBytes, last year the Court granted review in two cases that had reached different conclusions regarding the availability of restitution under Section 13(b) of the FTC Act: (i) the 9th Circuit’s decision in FTC v. AMG Capital Management (covered by InfoBytes here), which upheld a $1.3 billion judgment against the petitioners for allegedly operating a deceptive payday lending scheme and concluded that a district court may grant any ancillary relief under the FTC Act, including restitution; and (ii) the 7th Circuit’s ruling in FTC v. Credit Bureau Center (covered by InfoBytes here), which held that Section 13(b) does not give the FTC power to order restitution. The Court consolidated the two cases and will decide whether the FTC can demand equitable monetary relief in civil enforcement actions under Section 13(b) of the FTC Act.
The same day, Acting Chairwoman Slaughter released the FTC’s 2020 Annual Highlights. Among other things, it discusses the Commission’s response to the Covid-19 pandemic and efforts to educate consumers about Covid-19-related scams, as well as businesses’ responsibilities concerning honest advertising.
CFPB and FTC monitoring eviction practices
On March 29, CFPB acting Director Dave Uejio and FTC acting Chairwoman Rebecca Kelly Slaughter issued a joint statement indicating staff at both agencies will be monitoring and investigating eviction practices to ensure that they comply with the law. The statement follows the CDC’s March 28 announcement extending its current moratorium on residential evictions for three additional months, through June 30. Uejio and Slaughter noted that the agencies are coordinating with the CDC to ensure renters are informed of their rights under the eviction moratorium and understand how to complete declarations needed to stop evictions. Additionally, the agencies are monitoring consumer complaints for spikes and trends in potential Covid-19-related violations of the prohibitions against deceptive and unfair practices, including those under the FDCPA and the FTC Act.
SBA gives guidance on PPP loan-error codes
On March 29, the Small Business Administration (SBA) issued an updated procedural notice to lenders providing instructions on Paycheck Protection Program (PPP) loan error codes. The notice revises guidance provided in a previously issued procedural notice (covered by InfoBytes here) and addresses (i) Second Draw PPP loan guaranty applications where there is a hold code on the borrower’s First Draw PPP loan, as well as (ii) First Draw PPP loan guaranty applications and Second Draw PPP loan guaranty applications with compliance check error messages. The updates address compliance check error messages related to disqualifying criminal history, delinquent or defaulted federal student loan restrictions, and updated lender certification.
CFPB to address harm created from revocation of payday rule’s ability to repay standard
On March 23, CFPB acting Director Dave Uejio published a blog post highlighting the Bureau’s belief that harms in the small dollar lending market identified by its 2017 final rule covering “Payday, Vehicle Title, and Certain High-Cost Installment Loans” still exist. As previously covered by InfoBytes, in 2020, the Bureau issued a final rule revoking certain underwriting provisions of the 2017 final rule, including (i) the provision that makes it an unfair and abusive practice for a lender to make covered high-interest rate, short-term loans or covered longer-term balloon payment loans without reasonably determining that the consumer has the ability to repay the loans according to their terms; (ii) the prescribed mandatory underwriting requirements for making the ability-to-repay determination; (iii) the “principal step-down exemption” provision for certain covered short-term loans; and (iv) related definitions, reporting, and recordkeeping requirements. Uejio stressed that the Bureau intends to “use the authority provided by Congress to address these harms, including through vigorous market monitoring, supervision, enforcement, and, if appropriate, rulemaking.” Additionally, he noted that the Bureau “continues to believe that ability to repay is an important underwriting standard. To the extent small dollar lenders’ business models continue to rely on consumers’ inability to repay, those practices cause harm that must be addressed by the CFPB.”
ARRC not yet in a position to recommend forward-looking SOFR term rate
On March 23, the Alternative Reference Rates Committee (ARRC) announced that it “will not be in a position to recommend a forward-looking Secured Overnight Financing Rate (SOFR) term rate by mid-2021.” Additionally, ARRC noted that it cannot guarantee that it will be able to recommend an administrator to produce a robust forward-looking term rate by the end of 2021, when certain LIBOR U.S. dollar settings cease being published (covered by InfoBytes here). ARRC “encourage[d] market participants to continue to transition from LIBOR using the tools available now,” such as the SOFR averages and index data and ARRC’s A User’s Guide to SOFR, and “not to wait for a forward-looking term rate for new contracts.”
Federal Reserve Board Vice Chair for Supervision Randal K. Quarles also discussed “safety and soundness risks associated with the continued use of USD LIBOR in new transactions after 2021.” Speaking at “The SOFR Symposium: The Final Year” hosted by ARRC, Quarles expressed concerns that use of USD LIBOR has actually increased over the past three years, and emphasized that there should be no “remaining doubts as to exactly when and whether LIBOR will end.” Among other things, Quarles also highlighted a recent Fed supervisory letter (covered by InfoBytes here), which provides supervisory guidance for examiners to consider when assessing an institution’s plan to transition away from LIBOR.
Find continuing InfoBytes coverage on LIBOR here.
Fed establishes Financial Stability Climate Committee
On March 23, Federal Reserve Governor Lael Brainard spoke at the “Transform Tomorrow Today” Ceres 2021 Conference to discuss the challenges and risks climate change poses to financial institutions. To strengthen the Fed’s capacity to identify and assess these financial risks, Brainard announced the establishment of the Financial Stability Climate Committee, which will complement the work of the Fed’s Supervision Climate Committee, and is “charged with developing and implementing a program to assess and address climate-related risks to financial stability.” The new committee will coordinate with the Financial Stability Oversight Council and its member agencies, as well as with the Fed’s community development, payments, international coordination, and economic research and data areas, in order to develop a coordinated approach. Brainard emphasized that the Fed is committed to increasing its capacity “to understand and address the risks, complexities, and challenges related to climate change within the Federal Reserve's responsibilities,” and noted that “climate change can be seen as similar to other financial stability shocks emanating from outside the financial system, such as COVID-19, which are difficult to predict with precision.”
HUD approves settlement resolving alleged lending discrimination
On March 19, HUD released a Conciliation Agreement between an individual consumer and a mortgage lender to resolve allegations that the lender violated the Fair Housing Act by denying the consumer’s loan for a group home for persons with disabilities. The lender denied any discriminatory behavior, and agreed to resolve the complaint by (i) paying the consumer $125,000; (ii) implementing additional training for employees, including home mortgage consultants, managers, and underwriters; and (iii) ensuring its policies comply with the Fair Housing Act.
Fed targets flood insurance violations
On March 18, the Federal Reserve Board announced an enforcement action against a Pennsylvania-based bank for alleged violations of the National Flood Insurance Act (NFIA) and its implementing Regulation H. The consent order assesses a $105,000 penalty against the bank for an alleged pattern or practice of violations of Regulation H but does not specify the number or the precise nature of the alleged violations. The maximum civil money penalty under the NFIA for a pattern or practice of violations is $2,000 per violation.
Department of Education streamlines borrower defense relief process
On March 18, the Department of Education announced a new, streamlined approach for ensuring federal borrowers who attended institutions that engaged in certain misconduct are able to receive full discharges of their William D. Ford Direct Loan Program loans. The new approach—which rescinds a methodology announced in December 2019 that relied “on publicly available earnings data and a scientifically robust statistical methodology to determine harm”—will immediately create a path for borrowers with approved borrower defense claims to date to receive full loan discharges, including borrowers who already had their claims approved and received only partial relief. In addition, the Department said full relief under the new approach will also include requests to credit bureaus to remove any negative ratings tied to the loans, and reinstatement of a borrower’s federal student aid eligibility, where applicable.