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  • Biden announces key FCC nominees

    Federal Issues

    On October 26, President Biden nominated acting FCC Chair Jessica Rosenworcel to be permanent Chair of the FCC. According to the announcement, in her time at the FCC, Rosenworcel has focused on addressing illegal robocalls and worked to enhance consumer protections in the agency’s telecommunications policies. Prior to joining the FCC, Rosenworcel served as Senior Communications Counsel for the United States Senate Committee on Commerce, Science, and Transportation. Biden also nominated Gigi Sohn, currently a Distinguished Fellow at the Georgetown Law Institute for Technology Law & Policy, to be a Commissioner. Biden’s announcement highlighted Sohn’s work pertaining to competition, innovation, and access to the Internet. The FCC’s leadership will be fully staffed at five members if Rosenworcel and Sohn are confirmed as commissioners.

    Federal Issues Biden FCC

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  • OCC consent order addresses risk management at mortgage servicer

    Federal Issues

    On October 26, the OCC issued a consent order against a leading subservicer of mortgage loans for allegedly maintaining inadequate risk management controls related to its servicing and default servicing activities. According to the OCC, the bank’s “internal controls and risk management practices do not support the current risk profile and size of the [b]ank’s mortgage sub-servicing portfolio, which is an unsafe or unsound practice.” The OCC also asserted that the bank had previously been informed about the alleged risk management deficiencies and did not take timely corrective action. Under the terms of the consent order, the bank is required, among other things, to take comprehensive corrective measures, including developing and implementing internal controls that are “commensurate with the types and complexity of risks associated with all transactions the [b]ank executes.” The bank is also required to implement an effective default operations program for its loss mitigation, foreclosure, and claims activities to ensure compliance with applicable state and federal laws and GSE requirements. The order also requires the bank to receive a non-objection from OCC prior to onboarding new clients or before paying dividends to shareholders while the order is in effect. The order does not indicate any specific violations of consumer protection laws and does not contain a civil money penalty. The bank did not admit or deny the allegations.

    Federal Issues OCC Enforcement Bank Regulatory Risk Management Mortgages Mortgage Servicing

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  • CFPB urged to regulate fee-based EWA products as credit subject to TILA

    Federal Issues

    On October 12, CFPB Director Rohit Chopra received a letter from “96 consumer, labor, civil rights, legal services, faith, community and financial organizations and academics,” which urged the Bureau to rescind its earned wage access (EWA) advisory opinion and sandbox approval, and requested that the Bureau regulate fee-based EWA products as credit subject to TILA. As previously covered by InfoBytes, last November the Bureau issued an advisory opinion on EWA products to address the uncertainty as to whether EWA providers that meet short-term liquidity needs that arise between paychecks “are offering or extending ‘credit’” under Regulation Z, which implements TILA. The advisory opinion stated that ““a Covered EWA Program does not involve the offering or extension of ‘credit,’” and noted that the “totality of circumstances of a Covered EWA Program supports that these programs differ in kind from products the Bureau would generally consider to be credit.” In December, the Bureau approved a compliance assistance sandbox application, which confirmed that a financial services company’s EWA program did not involve the offering or extension of “credit” as defined by section 1026.2(a)(14) of Regulation Z. The Bureau noted that various features often found in credit transactions were absent from the company’s program, and issued a two-year approval order, which provides the company a safe harbor from liability under TILA and Regulation Z, to the fullest extent permitted by section 130(f) as to any act done in good faith compliance with the order. (Covered by InfoBytes here).

    The letter asserted that “[r]egardless of how they are structured, the essence of virtually all of these programs is that a third party advances funds to the consumer before the consumer’s regular payday and is repaid later in some fashion out of the paycheck. That is a loan. Methods to verify that the consumer has earned wages coming to them are simply a form of underwriting or security. . . . Similarly, the involvement of the employer or the use of payroll deduction does not mean that an advance is not a loan.” The letter raised several concerns, including that the Bureau’s position which views EWA products “as something other than loans leads to evasions of federal credit laws, such as [TILA], and of state laws, in particular usury laws.” Moreover, the letter stressed that this reasoning could have an impact on fair lending laws and “could be used in an attempt to weaken the scope of ECOA and its protections against discrimination against communities of color and other protected classes.” The letter stressed that asking for EWA products to be treated as credit does not mean they should not exist, but rather that the Bureau should examine fee-based EWA providers under its payday lending supervisory authority.

    Federal Issues CFPB Earned Wage Access Regulatory Sandbox No Action Letter TILA Regulation Z

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  • FSOC directs regulators to take measures to mitigate climate-related financial risks

    Federal Issues

    On October 21, the Financial Stability Oversight Council (FSOC) released a new report in response to President Biden’s May executive order, which directed financial regulators to take steps to mitigate climate-related risk related to the financial system. The Report on Climate-Related Financial Risk (see also FSOC’s fact sheet) identified more than 30 specific recommendations for member agencies, including that members should: (i) expand capacity and efforts “to define, identify, measure, monitor, assess, and report on climate-related financial risks and their effects on financial stability,” including through “investments in staffing, training, expertise, data, analytic and modeling methodologies, and monitoring”; (ii) promptly conduct an internal inventory of currently available data and develop plans for acquiring necessary additional data to fill climate-related data and methodological gaps; (iii) review existing public disclosure requirements and consider updating public reporting requirements in a way that would build on the work of the Task Force on Climate-Related Financial Disclosures; and (iv) continue to assess and mitigate climate-related risks to financial stability, including through scenario analysis, and evaluate whether revised or new regulations or guidance is necessary to clarify expectations for regulated or supervised institutions. The report also called for enhanced coordination across member agencies, and said a Climate-related Financial Risk Committee will be formed to “identify priority areas for assessing and mitigating climate-related risks to the financial system and serve as a coordinating body to share information, facilitate the development of common approaches and standards, and foster communication across FSOC members.” A Climate-related Financial Risk Advisory Committee will also be formed to help gather information and analysis from stakeholders on climate-related financial risks. Treasury Secretary Janet Yellen warned that FSOC has a responsibility under the Dodd-Frank Act “to respond to emerging threats to the stability of the United States financial system” and to “ensure the resilience of the financial system to the future impacts of climate change.”

    Federal Issues FSOC Climate-Related Financial Risks Department of Treasury SEC Federal Reserve OCC FHFA Biden Dodd-Frank Bank Regulatory

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  • Treasury highlights strategy to advance racial equity

    Federal Issues

    On October 25, the U.S. Treasury Department released a blog post that highlights how the Department is focusing on advancing racial equity. Among other things, the blog noted that this focus has informed the Treasury’s decision to establish “a dedicated Office of Recovery Programs and has flowed through the policy and operational decisions [it has] made to implement the historic American Rescue Plan.” According to the blog, the Office of Recovery Programs addresses urgent needs and makes lasting investments to mitigate long-term disparities by making equity a foundational priority in the delivery of the program, which has improved the circumstances of vulnerable households and created opportunities for small businesses, cities, and states. In addition, Treasury announced the appointment of Janis Bowdler to be the Department’s first Counselor for Racial Equity. The blog also noted that Treasury’s “efforts go beyond [Treasury’s] diverse, dedicated political appointees,” because Treasury is “also deeply committed to improving diversity and inclusion among the broader career Treasury workforce, where we acknowledge much more work remains to be done.”

    Federal Issues Diversity Racial Bias Department of Treasury

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  • CFPB releases education ombudsman’s annual report

    Federal Issues

    On October 26, the CFPB Private Education Loan Ombudsman published its annual report on consumer complaints submitted between September 1, 2020 and August 31, 2021. The report is based on approximately 5,300 complaints received by the Bureau regarding federal and private student loans. Of these complaints, roughly 900 were related to debt collection, while approximately 730 mentioned Covid-19. The Bureau’s press release noted that the overall decrease in both federal and private student loan complaints may be attributed to the CARES Act relief measures and administrative extensions that were extended through January 31, 2022. The Bureau stated, however, that the pandemic exacerbated socio-economic and racial disparities in the student lending space and caused heightened risk of borrower harm, particularly to vulnerable populations. Additionally, the Bureau warned that the risk of borrower harm may also increase as more than 32 million borrowers with federal loans resume payments in the first quarter of 2022, and, because four of nine federal student loan servicers have or will soon stop servicing federal student loans, over 16 million borrowers will transfer to different servicers. Findings in the report included topics related to student loan complaint trends, debt collection complaints, and supervisory findings related to student loan servicers, etc.

    The report also advised policymakers to consider several recommendations, including: (i) considering metrics for sharing risks shouldered by borrowers with schools that fail to provide meaningful paths to repayment; (ii) accelerating efforts to incorporate qualitative and quantitative metrics to protect consumers into future federal student loan servicing contracts; (iii) requiring detailed disclosures provided with every student loan disbursement; (iv) considering various loan forgiveness programs; (v) examining return to repayment and servicer transitions; and (vi) identifying and prosecuting data aggregators and payment processors, as well as student loan debt relief scammers.

     

    Federal Issues CFPB Student Lending Covid-19 CARES Act Debt Collection

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  • FTC says ISPs provide limited protections for consumer data

    Federal Issues

    On October 21, the FTC reported that internet service providers (ISPs) are able to gather and share large pools of sensitive consumer data while providing limited privacy protections. According to an FTC staff report, ISPs’ data collection and use practices allow them to monitor and record their customers’ every online move, granting them the ability to collect large amounts of information without their customers’ knowledge. The FTC launched the internet privacy study in 2019 under Section 6(b) of the FTC Act and analyzed information from six major ISPs, which comprise roughly 98 percent of the mobile internet market. Three advertising affiliates associated with the ISPs were also asked to provide information on their data collection and use practices. The report found, among other things, that ISPs typically collect and share more customer information than is necessary to provide ISP services. According to the report, some ISPs collected personal information to market products and services, serve targeted ads on behalf of third parties, or share insights into customers’ behaviors with other businesses. The report also found that customers are often placed into categories by “race, ethnicity, sexual orientation, economic status, political affiliations, or religious beliefs,” and that ISPs often share real-time location data with third parties.

    Additionally, the report found that while several ISPs tell customers their personal information will not be sold, the companies’ privacy notices obscure other ways personal data can be used, transferred, or monetized by other parties, and “often bury[] such disclosures in the fine print of their privacy policies.” The report further explained that many customers are often confused about how to opt-out of or limit ISPs’ data collection, adding that while several ISPs promise to retain data only for as long as needed for a business reason, the definition of what constitutes a “business reason” varies widely.

    Chair Lina M. Khan issued separate remarks, emphasizing that the report’s finding are “striking” and “underscore deficiencies of the ‘notice-and-consent’ framework for privacy, especially in markets where users face highly limited choices among service providers.”

    Federal Issues FTC Privacy/Cyber Risk & Data Security Consumer Protection Act

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  • FTC settles with companies involved with alleged deceptive investment training company

    Federal Issues

    On October 21, the FTC announced a proposed settlement with the funder and servicer (collectively, “defendants”) of payment plans utilized by consumers to pay for investment “trainings” from a professional trader education company (company). Under the proposed settlement, the funder is required to offer debt forgiveness to company consumers who have debt held by the funder. According to the complaint, the defendants allegedly violated the FTC Act by, among other things, facilitating the company’s deceptive scheme by underwriting, funding, and servicing its retail installment contracts. According to the announcement, in September 2020, the FTC settled with the company and, as part of that settlement, the company was required to offer debt forgiveness to consumers who owed it money. The settlement, however, did not cover consumers whose debt was held by the funder. The funder is also required to give these consumers notice of the offer of debt forgiveness and allow 45 days to request forgiveness from the funder. Additionally, the proposed settlement requires the defendants to utilize adequate due diligence when screening prospective covered clients, monitor covered clients, and investigate consumer complaints.

    Federal Issues FTC UDAP FTC Act Deceptive Enforcement

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  • OCC issues semi-annual Interest Rate Risk Statistics Report

    Federal Issues

    On October 20, the OCC published the fall 2021 edition of the Interest Rate Risk Statistics Report. The report presents interest rate risk data gathered during examinations of OCC-supervised midsize and community banks and federal savings associations with reported data by asset size, charter type, and minority depository institutions. The OCC’s supervisory process for the fall 2021 report reviewed banks’ reported data from September 30, 2019 to June 30, 2021, including exposures, risk limits, and non-maturity deposit assumptions. The OCC notes that the statistics presented within the report “are for informational purposes only and do not represent OCC-suggested limits or exposures.”

    Federal Issues OCC Interest Rate Risk Management Bank Regulatory

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  • District Court approves order permanently banning defendants from making robocalls

    Federal Issues

    On October 21, the U.S. District Court for the Middle District of Florida issued an order approving a permanent injunction and $6.4 million civil money penalty against the remaining participants in a cruise line telemarketing operation allegedly aimed at marketing free cruise packages to consumers. In January, the FTC filed a complaint against the defendants (two individuals and five companies they controlled, including the cruise line) for their alleged involvement in the telemarketing operation. As previously covered by InfoBytes, the complaint asserted violations of the FTC Act and the Telemarketing Sales Rule. The same day the complaint was filed, the FTC announced that it had entered into two settlement agreements—one with a call center and two individuals, and one with an additional individual—for their roles in the telemarketing operation. The court’s October order follows a recent FTC announcement (covered by InfoBytes here), indicating it had reached an agreement with the defendants who neither admitted nor denied the allegations. The court’s order requires the individual defendants to cooperate with any future FTC investigations and to disclose “the contents of their auto-dialed, telemarketing, or pre-recorded telephone communications and records or other information pertaining to [the] autodialed, telemarketing, or pre-recorded telephone communications.” The order also suspends the $6.4 million civil money penalty after the two individual defendants each pay $50,000 to the Treasury Department.

    Federal Issues FTC Enforcement Robocalls FTC Act Telemarketing Sales Rule UDAP

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