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Financial Services Law Insights and Observations


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  • CFPB publishes annual report on servicemember complaints

    Federal Issues

    On June 13, the CFPB's Office of Servicemember Affairs (OSA) released its annual report, which provides an overview of OSA’s activities in fulfilling its statutory responsibilities for fiscal year 2021. The report highlights issues facing military consumers based on approximately 42,700 complaints submitted by servicemembers, veterans, and their families (collectively “servicemembers”). Key takeaways from the report include the following:

    • Credit or consumer reporting. In 2021, servicemembers submitted over 17,000 credit or consumer reporting complaints, making it the most complained about financial product or service. The report found that the most common issue that servicemembers noted in their credit or consumer reporting complaints concern problems with incorrect information on a report.
    • Medical billing. The report found that over half of medical debt collection complaints from servicemembers were about debts the individuals reported they did not owe. Many of these complaints stemmed from breakdowns in communication between private health care providers and TRICARE, the health insurance program for active-duty military. The report also discussed how frequent moves can increase the difficulty in receiving information or resolving the matter.
    • Policy developments. The report noted that earlier this year, the VA published a final rule in the Federal Register amending its regulations around the conditions by which VA benefits debts or medical debts are reported to consumer reporting agencies (CRAs), and creating a methodology for determining a minimum threshold for debts reported to the CRAs (covered by InfoBytes here). According to the report, the final rule by the VA “set a clear and important precedent for the health care industry.”
    • Recommendations. Among other things, the report recommended that there should be “more robust data” on the scope and impact of medical debt on servicemembers, and that “[m]edical providers and third-party billing companies should have adequate systems in place to serve servicemembers.”

    Federal Issues CFPB Consumer Finance Consumer Complaints Servicemembers Consumer Education

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  • DOJ: $4.5 million judgment in case targeting Hispanic homeowners

    Federal Issues

    On June 10, the DOJ announced that the U.S. District Court for the Middle District of Florida entered a consent order against several defendants accused of violating the Fair Housing Act by targeting Hispanic homeowners for predatory mortgage loan modification services. After several Hispanic homeowners filed discrimination complaints with HUD, the agency conducted an investigation, issued charges of discrimination, and referred the matter to the DOJ for litigation. According to the DOJ’s complaint, the defendants targeted Hispanic homeowners with deceptive Spanish-language advertising “that falsely promised to cut their mortgage payments in half” and guaranteed “lower payments in a specific timeframe in exchange for thousands of dollars of upfront fees and continuing monthly fees of as much as $550, which defendants claimed were ‘non-refundable.’” The DOJ further contended that many of the targeted Hispanic homeowners (who had limited English proficiency) were told not to communicate with their lenders and were instructed to stop making monthly mortgage payments; however, the defendants allegedly “did little or nothing to obtain the promised loan modifications,” leading to defaults and foreclosures.

    The consent order, reached in partnership with the Civil Rights Division’s Housing Section, enters a nearly $4.6 million judgment (which is mostly suspended) against the defendants to compensate harmed homeowners. Of this amount, $95,000 in total will go to three individuals who intervened as plaintiffs in the DOJ’s lawsuit. Defendants must also pay a $5,000 civil penalty. In addition to monetary relief, the consent order permanently enjoins defendants “from providing any mortgage relief assistance services, including, but not limited to, mortgage loan modification, foreclosure rescue, or foreclosure defense services.” The consent order also imposes training and reporting/recordkeeping requirements for defendants’ other real-estate activities.

    Federal Issues Courts DOJ Fair Lending Fair Housing Act Discrimination Limited English Proficiency Settlement Mortgages HUD Consumer Finance

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  • Hsu highlights importance of MDIs, CDFIs

    On June 9, acting Comptroller of the Currency Michael J. Hsu spoke before the 2022 Community Development Bankers Association Peer Forum to discuss agency efforts to support underserved communities, as well as initiatives for revitalizing Minority Depository Institutions (MDIs) and increasing investments in Community Development Financial Institutions (CDFIs). Emphasizing the important role MDIs and CDFIs play in providing mortgage credit, small business lending, and other banking services to minority and low-to-moderate-income (LMI) communities, Hsu discussed ongoing challenges facing MDIs in terms of accessing capital and meeting customer needs. He noted that these challenges have caused many MDIs to close, fail, or be acquired by larger banks. Ensuring the survival of the remaining MDIs is important, Hsu said, since these are often the only financial institutions fulfilling minority communities’ financial needs. He further explained that the OCC is “doubling down” on Project REACh, which brings together leaders from the banking industry, national civil rights organizations, and various businesses and technology organizations to identify and reduce barriers to accessing capital and credit (covered by InfoBytes here), and stated that Project REACh has “challenged large and midsize banks to sign a pledge to revitalize MDIs with capital investments, technical assistance, business opportunities, executive training, and other resources.” Hsu also discussed recently proposed interagency rules to modernize enforcement of the Community Reinvestment Act (CRA), which will also benefit MDIs and CDFIs. As previously covered by InfoBytes, the Federal Reserve Board, FDIC, and OCC issued a joint notice of proposed rulemaking (NPRM) in May 2022 to update how CRA activities qualify for consideration, where CRA activities are considered, and how CRA activities are evaluated.

    Bank Regulatory Federal Issues OCC CDFI MDI Underserved CRA Agency Rule-Making & Guidance Federal Reserve FDIC

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  • CFPB launches inquiry into employer-driven debt practices

    Federal Issues

    On June 9, the CFPB issued a request for information (RFI) seeking public input on practices and financial products that may cause an employee to owe a debt to their employer. The Bureau’s focus is on debt obligations incurred by consumers in the context of an employment or independent contractor arrangement, including training repayment agreements where employees are required to repay the costs of job training should they voluntarily or involuntarily leave a job within a set time period. Other employer-driven debt products include up-front purchases of equipment or other supplies that are not paid for by the employer—a common occurrence when workers are outsourced or classified as independent contractors. Among other things, the RFI seeks information on “prevalence, pricing and other terms of the obligations, disclosures, dispute resolution, and the servicing and collection of these debts.” The Bureau is particularly interested in whether consumers “have a meaningful choice” in agreeing to these products, what these agreements’ terms and conditions are, and whether they might prevent individuals from seeking alternative employment. “The labor market operates at its best when workers are able to move freely within it,” CFPB Director Rohit Chopra said in the announcement, noting that the inquiry will study “the effects of an emerging form of debt that may have the potential to trap employees in place.”

    Federal Issues CFPB Consumer Finance Employer-Driven Debt Products

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  • CFPB releases HAF flyers in multiple languages

    Federal Issues

    On June 9, the CFPB released Homeowner Assistance Fund (HAF) informational flyers in English, Spanish, Chinese, Vietnamese, Korean, Tagalog, and Arabic. As previously covered by InfoBytes, the HAF program was created to provide direct assistance to consumers for mortgage payments, property insurance, utilities, and other housing-related costs to help prevent delinquencies, defaults, and foreclosures after January 21, 2020 related to the Covid-19 pandemic. Mortgage servicers may voluntarily provide these flyers to their borrowers and are advised that the flyer is not required by regulation. Additional HAF program information is available in multiple languages on the Bureau’s website.

    Federal Issues CFPB Mortgages Mortgage Servicing Consumer Finance Covid-19

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  • CFPB settles with student-loan debt relief company

    Federal Issues

    On June 9, the CFPB filed a stipulated final judgment and order in the U.S. District Court for the Southern District of California resolving allegations that the operator of a student-loan debt relief company engaged in unfair debiting of consumer accounts, in violation of the CFPA. According to the complaint, in 2016, the defendant founded a student debt relief company, which “did not solicit new consumers, but instead obtained student-loan account and billing information for hundreds of former [student debt relief operation] consumers without the knowledge or consent of those consumers.” As previously covered by InfoBytes, in 2016, the CFPB filed a consent order against a San Diego-based student debt relief operation for alleged violations of the CFPA, the TSR, and Regulation P by deceiving borrowers into paying fees for federal loan benefits and misrepresenting to consumers that it was affiliated with the Department of Education. The CFPB alleged that the defendant led a debt collection scheme by withdrawing $39 per month, and collecting hundreds of thousands of dollars in total fees from student borrowers’ bank accounts, without authorization, after previously obtaining their names and account information from the former student loan debt relief business. According to the CFPB, “under this scheme, [the defendant’s] company had unlawfully debited more than $240,000 from hundreds of student borrowers’ accounts.” Under the terms of the settlement, the defendant is permanently banned from engaging in debt relief services and must pay a $175,000 penalty to the CFPB.

    Federal Issues Enforcement CFPB Student Lending Debt Relief Consumer Education CFPA UDAAP TSR Regulation P Consumer Finance

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  • Special Alert: Congress releases draft privacy bill

    Federal Issues

    A comprehensive federal privacy law drew one step closer to reality earlier this month when a bipartisan group of representatives and senators released a draft of the proposed American Data Privacy and Protection Act.

    Passage of the ADPPA, which combines elements of prior proposals in an effort to reach a legislative compromise, is still far from assured. But it represents a meaningful starting point for further discussions, and is already shaping the long-running debate on national privacy standards. This alert looks closely at the proposed statutory text that seeks to define the breadth and scope of a federal privacy regime that policymakers have contemplated for years.

    Greater clarity about bill text and its overall prospects for passage are likely to emerge at the House Energy and Commerce Committee’s hearing scheduled for tomorrow at 10:30 a.m. ET.

    Federal Issues Federal Legislation Privacy/Cyber Risk & Data Security Special Alerts House Energy and Commerce Committee FTC Consumer Protection American Data Privacy and Protection Act

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  • CFPB grants financial services company’s request to end no action letter

    Federal Issues

    On June 8, the CFPB announced an order to end a “no-action letter” (NAL) issued to a consumer lending platform in 2020 in response to the NAL recipient’s request to shorten the term of the letter, which the company noted was necessary in order to be able to keep its underwriting models accurate and up-to-date during a period of significant economic change. As previously covered by InfoBytes, the Bureau first issued a NAL to the company in 2017, as part of the CFPB’s Project Catalyst initiative, relating to the Equal Credit Opportunity Act and the company’s loan underwriting and pricing model. Under the NAL, the company was immunized “from being charged with fair lending law violations with respect to its underwriting algorithm, while the ‘no-action letter’ remained in force.” In November 2020, the Bureau issued a second NAL after the first one expired (covered by InfoBytes here).

    Federal Issues CFPB No Action Letter ECOA Fair Lending Underwriting

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  • CFPB reports on consumer financial well-being

    Federal Issues

    On June 7, the CFPB published a “Data Spotlight” report regarding financial well-being of consumers between 2017 and 2020. In September 2017, the CFPB published its first report on Financial Well-Being in America, which found a wide variation in how people feel about their financial well-being. The recently released report shows that Americans experienced an average increase in their financial well-being between 2017 and 2020, which was likely due to the government response to the Covid-19 pandemic. Using respondent-level public use data from the Fed’s November 2017 and November 2020 Survey of Household Economics and Decision-making, the Bureau’s report found that despite a national average increase, 36 percent of U.S. adults reported having lower financial well-being in 2020 than in 2017. In analyzing the specific characteristics, including income, education, gender, race/ethnicity, and age, nearly “40 percent of respondents that reported a decline in financial well-being were individuals with incomes of less than $25,000, individuals without a bachelor’s degree or greater, women, and Black/non-Hispanic adults.” The report also found that “five percent of adults with low and very low financial well-being reported moving out of their homes due to immediate or future foreclosure or eviction, compared to only one percent of the general population.” Additionally, the report noted that “between 2017 and 2020, U.S. adults of color, younger adults, and women had smaller increases in financial well-being than white adults, older adults, and men.”

    Federal Issues CFPB Consumer Finance Covid-19

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  • ARRC releases recommendations for LIBOR ICE contracts

    Federal Issues

    On June 8, the Alternative Reference Rates Committee (ARRC) issued recommendations for contracts linked to U.S. dollar LIBOR Intercontinental Exchange Swap Rates. According to the ARRC, the recommendations recognize that such contracts are not covered by federal LIBOR legislation and that counterparties may have to take proactive steps to address the end of the USD LIBOR ISR. The recommendations include a suggested fallback formula that may be used for USD LIBOR ISR fixings after three-month USD LIBOR has been discontinued or becomes non-representative. The ARRC also noted that if a legacy position cannot be proactively converted or amended, “the ARRC believes that, once three-month USD LIBOR has ceased to be published as a representative rate, the fallback formula suggested would accurately represent the at-the-money rates of standard interest rate swaps which are tied to it and which incorporate the fallback provisions introduced in the ISDA 2020 IBOR Fallbacks Protocol.”

    Federal Issues ARRC LIBOR Swaps

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