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FTC launches military consumer data tool
On July 13, the FTC released an interactive military dashboard (updated quarterly) that explores data received from active duty servicemembers, veterans, and all military (including military families and reservists) on issues they may experience in the marketplace. Government imposter was the top reported scam type for active duty military personnel, followed by unwanted telemarketing calls, business imposters, online shopping and counterfeit check scams. Other top report categories included identity theft, credit bureaus, third party debt collection, credit cards, mortgage lending, and creditor debt collection. Additionally, reports from the Consumer Sentinel Network showed that from 2015 through the first two quarters of 2020, the median fraud loss for veterans and retirees was $750. The FTC noted that it uses these reports as part of its law enforcement investigations and shares the reports with law enforcement users around the country.
CFPB takes action against student debt-relief operation
On July 13, the CFPB filed a complaint in federal district court against a nationwide student loan debt-relief business—consisting of two companies, their owners, and four attorneys—for allegedly charging thousands of customers approximately $11.8 million in upfront fees in violation of the Telemarketing Sales Rule (TSR). According to the complaint, filed in the U.S. District Court for the Central District of California, the companies would market its debt-relief services to customers over the phone, encouraging those with private loans to sign up with an attorney to reduce or eliminate their student debt. The attorney agreement typically provided for “a fee, typically 40 [percent] of the outstanding debt, to be paid by monthly installments, along with a processing fee that costs an additional $10 per month.” The business allegedly charged the fees before the consumer had made at least one payment on the altered debts, in violation of the TSR’s prohibition on requesting or receiving advance fees for debt-relief service or, for certain defendants, the TSR’s prohibition on providing substantial assistance to someone charging the illegal fees.
On August 17, the court approved stipulated final judgments with four of the defendants (one company owner and three of the attorneys, here, here, and here). The company owner is permanently banned from providing debt-relief services or engaging in telemarketing of any consumer financial product or service, and is required to pay $25,000 in partial satisfaction of a suspended $11.8 million in redress. Similarly, the three attorneys are each banned from providing debt-relief services and required to pay $5,000, $21,567, and $30,000 each in partial satisfaction of various redress amounts. Additionally, the judgments impose a civil money penalty of $1 against each defendant.
CFPB reports on debt settlement and credit counseling
On July 10, the CFPB released the latest quarterly consumer credit trends report on debt settlement and credit counseling from 2007 through 2019. The report notes that debt settlements “increased sharply” during the 2008 recession. It also noted that debt settlement activity has been on the rise again following changes in delinquencies and credit tightness. The Bureau concludes that the recent increase in debt settlement activity is a “function of changing macroeconomic conditions, creditor account management strategies, and apparent increases in for-profit [debt settlement] activity.” The report notes that there is no corresponding increase in credit counseling activities, which is consistent with debt settlement companies “gaining market presence” and a reduction in the availability of credit counseling programs.
Fannie Mae updates Lender Letter 2020-07 on Covid-19 payment deferrals
On July 15, Fannie Mae updated Lender Letter 2020-07. The additions (i) update requirements for repayment of escrow shortage amounts identified in connection with a Covid-19 payment deferral or as part of the next annual analysis, (ii) clarify how certain applicable fees (e.g., servicing, guaranty, and excess servicing fees) will be reimbursed for mortgage loans that receive a disaster payment deferral, and (iii) clarify that the servicer must evaluate the borrower for a Flex Modification in accordance with the reduced eligibility criteria when the borrower becomes 60 days delinquent within six months of the Covid-19 related payment deferral’s effective date and the servicer is unable to achieve quality right party contact.
Fannie Mae updates Lender Letter 2020-02 to address impact of Covid-19 on disbursing insurance loss proceeds and HAMP incentives.
On July 15, Fannie Mae updated Lender Letter 2020-02 to include information on servicer requirements related to disbursing insurance loss proceeds for borrowers impacted by Covid-19 as well as Home Affordable Modification Program (HAMP) “Pay for Performance” incentives. For purposes of disbursing insurance loss proceeds, the servicer must consider a loan to be current or less than 31 days delinquent if the borrower has experienced a Covid-19 related hardship and certain criteria are met. Separately, the guidance clarifies the impact of Covid-19 on HAMP “Pay for Performance” incentives. Specifically, the mortgage loan does not lose good standing and the borrower will not lose any “pay for performance” incentives if the borrower (i) immediately reinstates the mortgage loan upon expiration of the Covid-19 related forbearance plan or (ii) transitions directly from a Covid-19 related forbearance plan to a repayment plan.
OCC launches Project REACh to help underserved populations access capital and credit
On July 10, the OCC launched an initiative to promote greater financial inclusion of underserved populations. Project REACh (Roundtable for Economic Access and Change) brings together leaders from the banking industry, national civil rights organizations, and various businesses and technology organizations who will identify and reduce barriers to accessing capital and credit. REACh program participants will focus on “inherent policy and structural issues at the national and local levels” to expand financial inclusion, and convened on July 10 to discuss which financial inclusion projects to address.
SBA updates guidance on collecting PPP lender processing fees
On July 13, the Small Business Administration (SBA) issued Procedural Notice 5000-20036 concerning Form 1502 that lenders must file in order to report fully disbursed Paycheck Protection Program (PPP) loans and request payment of eligible PPP processing fees. As previously covered by InfoBytes, the SBA began accepting Form 1502 on fully disbursed or cancelled PPP loans on May 22. Among other things, the notice provides updated guidance to lenders on (i) the amount of lenders fees the SBA will pay for processing PPP loans; (ii) the process for submitting Form 1502 and how to report loans that are fully disbursed or cancelled; (iii) the procedure for reporting PPP loans that are voluntarily terminated and repaid after disbursement; (iv) situations in which a lender is not eligible to receive a processing fee, as well as clawback circumstances; (v) lender service provider responsibilities; and (vi) ongoing PPP loan reporting requirements.
SBA completes $20 billion in funding for EIDL Advance program
On July 11, the Small Business Administration announced the conclusion of the Economic Injury Disaster Loan (EIDL) Advance program after the agency allocated the full $20 billion appropriated by Congress. As previously covered by InfoBytes, the EIDL Advance program provided up to $10,000 ($1,000 per employee) of emergency economic relief to businesses that were experiencing temporary difficulties due to the Covid-19 pandemic. The emergency funds under the EIDL Advance program do not have to be repaid. While the EIDL Advance program is now discontinued, non-Advance EIDL loan applications are still being processed. These loans carry interest rates of 3.75 percent for small businesses and 2.75 percent for non-profits and have terms up to 30 years, with the first payment deferred for one year.
Senators introduce E-SIGN modernization bill
On July 2, three Republican senators introduced a bill that would make electronic transactions easier by simplifying how consumers signal their acceptance of them. Sens. John Thune, Jerry Moran, and Todd Young introduced S.4159, the “E-SIGN Modernization Act,” which would allow companies to use electronic documents instead of paper ones if they secure the consumer’s consent to the substitution. Under the original E-SIGN Act passed 20 years ago, consumers also had to demonstrate to the company that they could access the records in the electronic form.
“Computers, smart phones, and other devices are more reliable and accessible than ever before,” Thune said in a press release accompanying the bill. “This legislation makes necessary updates to E-Sign to reflect these advancements in technology and make it easier for consumers to receive documents electronically.”
The bill also would no longer require transaction parties to obtain new consents when hardware or software changes. Instead, the company would simply disclose the updated requirements and notify the consumer of their right to withdraw consent without penalty.
CFPB proposes settlement with student debt-relief operation
On July 8, the CFPB announced a proposed settlement with a Florida-based student debt-relief company and three of its owners and officers (collectively, “defendants”), which would resolve allegations that the defendants violated the Telemarketing Sales Rule (TSR) by charging advance fees for services to renegotiate, settle, reduce, or alter the terms of federal student loans. According to the complaint, filed with the U.S. District Court for the Southern District of Florida on the same day as the proposed order, the Bureau alleges that from 2016 through October 2019, the defendants used telemarketing campaigns to solicit over 7,300 consumers to pay up to $699 in fees to have their federal student loan monthly payments reduced or eliminated through government-offered programs. The Bureau alleges that—not only are government programs (such as loan consolidation, income-based repayment, or certain loan-forgiveness options) available without charge—the defendants violated the TSR by charging and receiving upfront fees from consumers for their services before the terms of the student debt had been altered or settled.
On August 12, the court entered a stipulated final judgment and order, which permanently bans the defendants from providing debt-relief services and imposes a suspended $3.8 million in consumer redress, upon the owners and officers each paying between $5,000 and $10,000 individually. Additionally, each defendant is required to pay $1 in civil money penalties.