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Fed issues enforcement action for flood insurance violations
On June 9, the Federal Reserve Board announced an enforcement action against a California-based bank for alleged violations of the National Flood Insurance Act (NFIA) and Regulation H, which implements the NFIA. The consent order assesses a $129,108 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.
FTC, Ohio AG reach $8.6 million settlement with payment processor
On June 9, the FTC and the Ohio attorney general announced a settlement with a payment processor and its owners (collectively, “defendants”) for allegedly facilitating payments for multiple scam operations. The FTC’s 2019 complaint claimed that the defendants, among other things, generated and processed remotely created payment orders or remotely created checks (RCPOs) that allowed third-party merchants—including deceptive telemarketing schemes—the ability to withdraw money from consumers’ bank accounts (covered by InfoBytes here). According to the FTC, even though the FTC’s Telemarketing Sales Rule (TSR) prohibits sellers and telemarketers from using RCPOs in connection with telemarketing sales, the defendants allegedly marketed their RCPO payment processing services to telemarketers and other merchants considered “high risk” by financial institutions and card networks, and used RCPOs to process millions of dollars for credit card interest reduction and student loan debt relief telemarketing schemes. Under the terms of the settlement, the defendants are permanently banned from participating in any payment processing activities and are prohibited from violating the TSR and the Ohio Consumer Sales Practice Act. The settlement also imposes a monetary judgment of over $8.6 million, which is mostly suspended due to the defendants’ inability to pay.
CFPB outlines plans for consumer financial law taskforce
On June 8, the CFPB published a blog post written by Todd Zywicki, the Chair of the Taskforce on Federal Consumer Financial Law, which discusses the future plans of the taskforce. In addition to the March request for information (RFI) seeking input on consumer protection areas for the taskforce to focus its research and analysis on (covered by InfoBytes here), the post notes that the taskforce intends to gain feedback from other public forums as well in order to produce a two-volume report. The first volume, among other things, will contain a history of consumer financial protection laws, a cost-benefit analysis of financial products and services, and an outline of the current regulatory framework. The second volume will include a set of recommendations for the Bureau “on ways to improve and strengthen the application of financial laws and regulations.” Through the fall, the taskforce will (i) analyze the comments received from the RFI; (ii) hold a public hearing; and (iii) participate in public listening sessions with the Bureau’s four advisory committees.
FTC releases expanded data on consumer Covid-19 complaints
On June 11, the FTC released new interactive complaint data dashboards, which provide national and state-level breakdowns on consumer complaints related to Covid-19. The expanded reporting provides data on several categories, including fraud, identity theft, and unwanted calls. According to one of the dashboards, “of the total fraud reports indicating a dollar loss, 87.8% [also referenced] a payment method,” with credit cards, bank account debits, and internet/mobile methods representing the top three categories. The FTC reports that consumers have submitted over 91,000 Covid-19-related complaints during 2020 as of June 8, and reported losing almost $60 million to Covid-19-related fraud.
FHFA extends Covid-19 origination flexibilities to July 31
On June 11, the Federal Housing Finance Agency (FHFA) announced the extension of several temporary origination flexibilities put in place to assist borrowers during the Covid-19 pandemic. Specifically, FHFA has extended until at least July 31, the following flexibilities: “(i) alternative appraisals on purchase and rate term refinance loans; (ii) alternative methods for verifying employment before loan closing; (iii) expanding the use of power of attorney and remote online notarizations to assist with loan closings; and (iv) authority to purchase mortgages in forbearance.” The extensions are reflected in updates to the following Fannie Mae Lender Letters LL-2020-03, LL 2020-04, LL-2020-06, and Covid-19 selling FAQs. Similar updates include Freddie Mac’s Guide Bulletin 2020-23 and Covid-19 selling-related FAQs.
FINRA extends temporary changes to its procedural rules
On June 10, FINRA filed a proposed rule change with the SEC to extend the effective date of previous temporary changes to its procedure rules, previously covered here. The previous rule change modified certain timing, method of service, and other procedural requirements contained in FINRA rules. The amendments extend the rule changes through July 31, 2020.
CFTC extends no-action relief to market participants in light of Covid-19
On June 10, the Commodity Futures Trading Commission announced that it has extended through September 30, 2020, certain aspects of its no-action relief issued in response to Covid-19. The CFTC’s staff letter extends previously issued no-action guidance regarding certain regulatory requirements for persons who are registered with the CFTC as futures commission merchants, introducing brokers, swap dealers, retail foreign exchange dealers, and floor brokers. Certain relief for members of designated contract markets or swap execution facilities that are not registered with the CFTC is also extended. Those relying on relief are expected to establish and maintain a supervisory system to oversee activities of personnel who are working from remote locations during Covid-19.
FBI warns of increased mobile banking cyber threats
On June 10, the Federal Bureau of Investigation issued a Public Service Announcement (PSA) cautioning mobile banking application users to remain vigilant of cyber activity. Specifically, the PSA indicated, with a more than 50 percent increase in mobile web application usage since the start of the year, that cyber actors may attempt to steal login credentials through the introduction of trojans embedded in other software and the deployment of fake banking applications, designed to trick consumers into entering their credentials. The PSA provides three recommendations for all mobile banking application users and organization: (i) use strong passwords (at least eight characters); (ii) use multifactor authentication and not share multifactor PINs; and (iii) contact the financial institution if a banking application appears suspicious. Finally, the PSA reminds consumers that financial institutions will not ask for login credentials over the phone.
Fannie and Freddie issue Covid-related servicing updates
On June 10, Fannie Mae and Freddie Mac issued numerous updates to temporary servicing guidelines due to the Covid-19 pandemic. Fannie Mae issued Lender Letter LL 2020-07, which, among other things (i) updates the workout option incentive fee structure introduced in LL-2020-09 (these updates are also reflected in LL-2020-05); (ii) clarifies when a HAMP borrower will keep “good standing” under a Covid-19 payment deferral; (iii) clarifies continued solicitation for a Fannie Mae Flex Modification after a borrower has defaulted on a Covid-19 payment deferral; and (iv) revises the Covid-19 payment deferral agreement. Additionally, LL 2020-02 clarifies that a servicer is not required to send a payment reminder notice to the borrower during an active forbearance plan term. Similar updates can be found in Freddie Mac’s Guide Bulletin 2020-21.
FHFA’s Calabria discusses housing market with Senate Committee
On June 9, Federal Housing Finance Agency (FHFA) Director Mark Calabria testified before the Senate Committee on Banking, Housing, and Urban Affairs on the state of the housing market due to the Covid-19 pandemic. In his published statement, Calabria noted that at the start of 2020, the housing market was in a “strong position,” but “in response to Covid-19, financial markets endured a severe dislocation in March.” According to the statement, home prices have remained supported, as drops in demand have been balanced by a decrease in inventory. The statement also provides an update on FHFA’s policy responses to the Covid-19 pandemic. With regard to forbearances, Calabria acknowledged that forbearance rates were predicted to reach 25-50 percent; however, internal data indicates that “[e]nterprise forbearance rates remain manageable.” Specifically, the 30-60 day combined delinquency rate for borrowers with loans in Enterprise mortgage-backed securities “remains below the estimated rate of forbearance,” with Calabria commenting that some borrowers “who have requested forbearance are nonetheless continuing to make payments on their loan.” At the hearing, in response to a question asking if the FHFA plans to extend the foreclosure moratorium past June 30, Calabria noted that the agency is considering extending it “a month at a maximum” and would be “making that announcement certainly within a week.”
Calabria also discussed FHFA’s re-proposed capital rule for the Enterprises (covered by InfoBytes here). His statement notes that “Fannie and Freddie lack the capital to withstand a serious downturn in the housing market,” and the re-proposed rule would “help each [E]nterprise become safe and sound to fulfill its statutory mission across the economic cycle.”