Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
On August 28, the CFPB announced a settlement with an Illinois-based debt collection company to resolve allegations that the company engaged in improper debt collection tactics in violation of the Consumer Financial Protection Act and the FDCPA. Among other things, the company allegedly engaged in deceptive acts and practices by (i) threatening consumers with arrest, lawsuits, liens on their homes, and wage garnishment that the company did not plan on initiating; (ii) misrepresenting to consumers that company employees were attorneys; and (iii) informing consumers that their credit reports would be negatively affected if they failed to pay even though the company does not report consumer debts to credit-reporting agencies. While the company neither admitted nor denied the allegations, it has agreed to pay $36,878 in redress to harmed consumers and a $200,000 civil money penalty.
On August 27, the FTC announced a settlement with an Illinois-based educational services company and its subsidiaries (defendants) to resolve deceptive marketing allegations in violation of the FTC Act and the Telemarketing Sales Rule. In the complaint, the FTC claimed the defendants used third-party lead generators that posed as military recruiters or job-finding services to encourage consumers to provide contact information via websites. The websites did not clearly inform the consumers that the personal information entered into online forms might be sold or used in training or educational programs. Rather, the FTC asserted that the lead generators falsely informed consumers that their information would not be shared. According to the FTC, the defendants then purchased these leads to call consumers in an attempt to enroll them in post-secondary schools, with many of these calls made to consumers on the National Do Not Call Registry. While the defendants did not carry out the deceptive practices to generate the leads, the FTC stated that the defendants established control over the marketing materials and reviewed telemarketing scripts that allegedly directed lead generators to falsely identify themselves as military recruiters. The FTC’s press release emphasized that “[t]his case demonstrates that the FTC will seek to hold advertisers liable for the deceptive or illegal practices of their affiliates, publishers, or other lead generators. We expect companies purchasing leads to implement strong vendor management programs and stay on the right side of the law.” Under the terms of the settlement, the defendants are: (i) ordered to pay $30 million; (ii) required to implement a system to review any marketing materials used by lead generators; (iii), prohibited from calling numbers on the National Do Not Call Registry without obtaining written consent; and (iv) banned from falsely stating that they represent the military or prospective employers.
On August 23, House Financial Services Committee Chair, Maxine Waters (D-Calif) and 101 other members of Congress wrote to CFPB Director Kathy Kraninger to express concern over the Bureau’s recent amendment of and delay to certain ability-to-repay provisions of the agency’s 2017 final rule covering “Payday, Vehicle Title, and Certain High-Cost Installment Loans” (the Rule), previously covered by InfoBytes here and here. Specifically, the letter opposes the CFPB’s decision to remove certain ability-to-repay requirements, as well as the Bureau’s June 2019 decision to delay the August 19 compliance date for the mandatory underwriting provisions of the Rule until November 19, 2020. The letter cites to an April 30 subcommittee hearing that examined the payday lending industry and argues that “payday and car-title lenders lack the incentive to make loans that borrowers have the ability to repay while still being able to afford basic necessities of life.” The agency, according to the letter, is betraying “its statutory purpose and objectives to put consumers, rather than lenders, first” by delaying the Rule’s implementation.
Additionally, in the press release announcing the letter, Waters also expressed concern that the CFPB had not yet asked the U.S. District Court for the Western District of Texas to lift a stay of compliance so that the payment provisions of the Rule could be implemented. As previously covered by InfoBytes, two payday loan trade groups initiated the suit against the Bureau in April 2018, asking the court to set aside the Rule on the grounds that, among other reasons, the Bureau is unconstitutional and the rulemaking failed to comply with the Administrative Procedures Act. The court recently ordered the stay of the full Rule’s compliance date to remain in full force and effect and requested another joint status report from the parties by December 6.
On August 23, House Financial Services Committee Chairwoman Maxine Waters released an overview of the Committee’s fall 2019 priorities and highlighted efforts undertaken during the 116th Congress so far. Upcoming areas of focus will include (i) holding hearings to examine the state of minority depository institutions, review stock buybacks, and analyze innovations for loan instruments; (ii) conducting an ongoing review of a social media company’s proposed cryptocurrency and digital wallet; (iii) continuing oversight of federal financial agencies through testimony from Treasury Secretary Steven T. Mnuchin, CFPB Director Kathy Kraninger, FHFA Director Mark Calabria, and Federal Reserve Vice Chairman Randal K. Quarles; (iv) examining the Terrorism Risk Insurance Program; (v) analyzing workforce diversity improvements; and (vi) increasing homeownership access through Federal Housing Administration improvements and housing finance reform. The Committee will also continue its task forces on data privacy, the use of artificial intelligence in the financial services market, and the evolution of payments and cash.
On August 21, President Trump issued a presidential memorandum to Secretary Betsy DeVos of the U.S. Department of Education directing the Department to implement a streamlined process to automatically discharge the federal student loan debt of totally and permanently disabled veterans (TPD discharge). The Higher Education Act currently allows veterans to seek a TPD discharge, but the “process has been overly complicated and difficult, and prevented too many  veterans from receiving the relief for which they are eligible.” The memo notes “[o]nly half of the approximately 50,000 totally and permanently disabled veterans who currently qualify for the discharge” have availed themselves of the benefit. The memo defines “federal student loan debt” as Federal Family Education Loan Program loans, William D. Ford Federal Direct Loan Program loans, and Federal Perkins Loans, and requires the Department to create a policy to facilitate the swift and effective discharge of the applicable loan. The Department is required to implement the directive “as expeditiously as possible.”
On August 20, the Federal Reserve Board announced enforcement actions against two separate Massachusetts-based banks for allegedly violating the National Flood Insurance Act (NFIA) and Regulation H, which implements the NFIA. The first consent order assesses a $20,000 penalty against the bank for a pattern or practice of violations of Regulation H, but does not specify the number or the precise nature of the alleged violations; the second consent order assesses a $36,000 penalty, while similarly not specifying the number or precise nature of the violations. The maximum civil money penalty under the NFIA for a pattern or practice of violations is $2,000 per violation.
On August 16, the CFPB announced Robert G. Cameron as the Bureau’s private education loan ombudsman. Cameron, who served in the U.S. Army for 29 years and is a Colonel and Staff Judge Advocate for the Pennsylvania Army National Guard, joins the Bureau from the Pennsylvania Higher Education Assistance Agency—a national student loan servicing company. While there, Cameron was responsible for overseeing efforts related to litigation, risk mitigation, and compliance with federal and state laws, including Dodd-Frank. Cameron’s new responsibilities as ombudsman will include overseeing student loan borrower complaints and analyzing complaint data to make recommendations to the Secretary of the Treasury, the Secretary of Education, CFPB Director Kathy Kraninger, and Congress.
On August 15, the CFPB and the Arkansas attorney general announced a proposed settlement with three loan brokerage companies, along with their owner and operator (collectively, “defendants”) for allegedly misrepresenting the contracts offered to veterans and other consumers. According to the complaint, from 2011 through 2016, the defendants offered high-interest credit to consumers, deceptively marketed as purchases of future pension or disability payments. The contracts allegedly required veterans to instruct that their pension direct deposits or monthly allotments be routed to the bank account controlled by the defendants or pay the contracted amounts from other sources, including purchasing life-insurance policies, to ensure the contract amount would be paid. The defendants allegedly did not disclose to consumers the interest rates associated with the products, marketing the contracts as sale of payments and not credit offers. The defendants also allegedly did not disclose that the contracts were void under federal and state law, which prohibit the assignment of certain benefits.
Under the proposed settlement, the defendants are: (i) prohibited from brokering or participating in agreements that sell future pension rights; (ii) required to pay a civil money penalty of $1 to the Bureau; and (iii) required to pay $75,000 to the Arkansas AG’s Consumer Education and Enforcement Fund. Additionally, the settlement imposes a judgment of $2.7 million in redress, which is suspended upon the owner paying $200,000 in redress and making the payments to the Bureau and the Arkansas AG.
On August 12, the CFPB announced a proposed settlement with a defunct for-profit educational institution to resolve allegations that the defendant engaged in unfair and abusive acts and practices in violation of the Consumer Financial Protection Act through its private student loan origination practices. As previously covered by InfoBytes, the CFPB filed a lawsuit in 2014 alleging, among other things, that the defendant offered new students short-term zero-interest loans to cover the difference between the cost of attendance and federal loans obtained by students, but when the short-term loans came due at the end of the students’ first academic year, the defendant forced borrowers into “high-interest, high-fee” private student loans knowing that borrowers could not afford them. According to the Bureau, this practice resulted in a 64 percent default rate on the loans. The terms of the proposed settlement include a $60 million judgment against the defendant as well as an injunction prohibiting the defendant from offering or providing student loans in the future.
Earlier in June, the Bureau announced a settlement with a company that managed student loans for the defendant, which includes approximately $168 million in student loan forgiveness. (See previous InfoBytes coverage here.) The company has also agreed to permanently cease enforcing, collecting, or receiving payments on any of its loans.
On August 8, the FTC announced a settlement with an email management company, which requires the company to delete the personal information it obtained from consumers’ email receipts after allegedly misleading consumers about the company’s services. In the complaint, the FTC alleges that the company, which assisted consumers in unsubscribing from unwanted subscription emails, deceptively told consumers that it would “never touch [their] personal stuff,” when providing the company access to their emails, but in reality, the company would access inboxes to collect consumers’ e-receipts to sell the purchase information to other companies. Moreover, the complaint alleges that, even after consumers chose to decline to allow the company access to their email, the company persisted with deceptive messages, which resulted in “[o]ver 20,000 consumers chang[ing] their minds and decid[ing] to complete the sign-up process after viewing the messages.” The settlement requires the company to: (i) delete from its system, and its parent company’s system, the email receipts it collected from consumers, unless it obtains their affirmative consent to maintain the information; (ii) cease misrepresenting the way it collects, uses, stores, or shares the information it collects; and (iii) notify consumers who have signed up for the service, after viewing the deceptive messages, about how it collects and shares information.
- Daniel P. Stipano to discuss "BSA/AML culture of compliance roundtable" at the FiSCA Annual Conference
- Daniel P. Stipano to discuss "Is there a better way to fight money laundering" at the FiSCA Annual Conference
- Michelle L. Rogers to discuss "What's trending in enforcement" at the Mortgage Bankers Association Annual Convention & Expo
- Kathryn L. Ryan and Moorari K. Shah to discuss "Today's regulatory environment - Are you in the know?" at the Equipment Leasing and Finance Association Annual Convention
- Buckley Webcast: Smoke and mirrors: Navigating the regulatory landscape in banking the marijuana industry
- H Joshua Kotin to discuss "CMS - Components of a successful monitoring program" at the RegList Annual Workshop
- Tim Lange to discuss "Temporary authority to operate - Are you prepared? Hear what the states are doing" at the RegList Annual Workshop
- Sherry-Maria Safchuk to discuss "Cybersecurity" at the RegList Annual Workshop
- Jeffrey P. Naimon to discuss "Hot topics in mortgage origination" at the Conference on Consumer Finance Law Annual Consumer Financial Services Conference
- Sherry-Maria Safchuk to discuss "CCPA: Countdown to compliance – A discussion of common questions and what is next on the CA privacy horizon" at the Conference on Consumer Finance Law Annual Consumer Financial Services Conference
- Jonice Gray Tucker to discuss "Fintech regulatory developments, crypto-assets, blockchain and digital banking, and consumer issues" at the Practising Law Institute Banking Law Institute
- Daniel P. Stipano to discuss "Adapting to the rapidly changing compliance landscape involving marijuana and marijuana-related businesses" at an ACAMS webinar
- Amanda R. Lawrence to discuss "How to balance a successful (and stressful) career with greater personal well-being" at the American Bar Association Women in Litigation Joint CLE Conference