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Financial Services Law Insights and Observations


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  • Banking regulators urge small-dollar lending during Covid-19 crisis

    Federal Issues

    On March 26, the FDIC, Federal Reserve Board, CFPB, NCUA, and OCC issued a joint statement encouraging banks, savings associations, and credit unions to offer responsible, small-dollar loans to consumers and small businesses affected by Covid-19. The agencies recognize that small-dollar lending can play an important role in meeting credit needs during this time period, and recommend that financial institutions offer loans “through a variety of structures including open-end lines of credit, closed-end installment loans, or appropriately structured single payment loans.” For borrowers experiencing unexpected circumstances who cannot repay a loan as structured, financial institutions are “further encouraged to consider workout strategies designed to help borrowers to repay the principal of the loan while mitigating the need to re-borrow.” All loans, however, should be offered in a manner “consistent with safe and sound practices” that “provides fair treatment of consumers, and complies with applicable statutes and regulations, including consumer protection laws.”

    Federal Issues Agency Rule-Making & Guidance FDIC Federal Reserve CFPB OCC NCUA Small Dollar Lending Small Business Lending Covid-19

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  • CFPB outlines regulatory flexibility related to Covid-19

    Federal Issues

    On March 26, the CFPB announced several regulatory flexibility measures to help financial companies work with consumers affected by Covid-19. Specifically, the measures postpone certain industry data collections on Bureau-related rules. These include:

    • HMDA. Quarterly information reporting by certain mortgage lenders as required under HMDA and Regulation C will not be expected during this time. However, entities should continue collecting and recording HMDA data in anticipation of making annual submissions. Entities will be provided information by the Bureau on when and how to commence new quarterly HMDA data submissions. (See statement here.)
    • TILA. During this time, annual submissions required under TILA, Regulation Z, and Regulation E “concerning agreements between credit card issuers and institutions of higher education; quarterly submission of consumer credit card agreements; collection of certain credit card price and availability information; and submission of prepaid account agreements and related information” will not be expected. (See statement here.)
    • Section 1071. A survey seeking information from financial institutions on the cost of compliance in connection with pending rulemaking on Section 1071 of the Dodd-Frank Act has been postponed. As previously covered by InfoBytes, under the terms of a stipulated settlement resolving a 2019 lawsuit that sought an order compelling the Bureau to issue a final rule implementing Section 1071, the Bureau agreed to outline a proposal for collecting data and studying discrimination in small-business lending.
    • PACE Financing. A survey of firms providing Property Assessed Clean Energy (PACE) financing to consumers for the purposes of implementing Section 307 of the Economic Growth, Regulatory Relief, and Consumer Protection Act has been postponed.
    • Supervision and Enforcement. The Bureau’s policy statement provides “that it does not intend to cite in an examination or initiate an enforcement action against any entity for failure to submit to the Bureau” specified information related to credit card and prepaid accounts. However, the Bureau’s announcement advises entities to “maintain records sufficient to allow them to make delayed submissions pursuant to Bureau guidance.” With respect to operational challenges facing institutions due to Covid-19, the Bureau states that it will work with institutions when scheduling examinations and other supervisory activities to minimize disruption and burden. “[W]hen conducting examinations and other supervisory activities and in determining whether to take enforcement action, the Bureau will consider the circumstances that entities may face as a result of the [Covid-19] pandemic and will be sensitive to good-faith efforts demonstrably designed to assist consumers,” the announcement states.

    Federal Issues CFPB Agency Rule-Making & Guidance Data Collection / Aggregation Mortgages Data HMDA Credit Cards Prepaid Cards TILA Dodd-Frank PACE Programs Examination Supervision Consumer Finance Covid-19

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  • CFPB announces consumer financial resources for Covid-19 pandemic

    Federal Issues

    On March 24, the CFPB announced the resources available on the Bureau’s website to assist consumers in protecting their personal finances during the Covid-19 pandemic. According to Director Kathy Kraninger, the Bureau “want[s] consumers to know the various steps they can take to help themselves or a loved one, both in the short and long term. Our resources address situations ranging from consumers having difficulty paying their bills or meeting other financial obligations to consumers experiencing a loss of income to avoiding scams.” Resources also include links detailing how consumers who experience problems with financial products or services can file effective complaints, what steps consumers can take to protect older adults, and how consumers can protect their credit during the pandemic. The Bureau will continue to update the website regularly with additional Covid-19 related content.

    Federal Issues CFPB Consumer Finance Consumer Complaints Consumer Credit Covid-19

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  • 2nd Circuit: Confirmation email to consumer satisfies EFTA’s written authorization requirement


    On March 20, the U.S. Court of Appeals for the Second Circuit partially affirmed a district court’s order granting summary judgment in favor of one of two defendants on plaintiff’s Electronic Funds Transfer Act (EFTA) claims, holding that the defendant satisfied its EFTA obligations by providing the plaintiff a confirmation email containing the material terms and conditions authorizing a recurring monthly charge to the plaintiff’s debit card. However, the appellate court vacated the district court’s dismissal of the plaintiff’s Connecticut Unfair Trade Practices Act (CUTPA) claims against the defendants for lack of subject matter jurisdiction and remanded for further proceedings. The plaintiff contended that one of the defendants—a discount club operator—failed to provide him with a written copy of the authorized electronic fund transfer after he joined the defendant’s fee-based monthly discount club. The plaintiff filed a putative class action lawsuit against the defendant club operator, as well as the retailer from whom he purchased a video game online, alleging, among other things, that the defendant violated the EFTA, and that both defendants engaged in “unfair or deceptive trade practices in violation of CUTPA.” The district could granted summary judgment in favor of the defendants on both claims.

    The opinion discusses the 2nd Circuit’s holding from the plaintiff’s first appeal, in which the appellate court previously held “that the district court improperly rested its decision on evidence outside the scope of [the plaintiff’s] complaint,” with respect to the claim that the defendant failed to provide “‘a copy of such authorization’” to the plaintiff, as required by the EFTA. In addressing the plaintiff’s second appeal, the 2nd Circuit considered the plaintiff’s argument that the defendant failed to satisfy the EFTA’s requirements because it did not provide him with a “duplicate or facsimile of the Enrollment Page on which he authorized recurring payments.” The appellate court determined that: (i) the EFTA does not require the defendant to provide the plaintiff “with a duplicate of the webpage on which he provided authorization for recurring fund transfers”; and (ii) the defendant’s confirmation email to the plaintiff was sufficient to satisfy its EFTA obligations. The appellate court emphasized that, despite the parties’ “dueling dictionary definitions” of “copy” and “authorization,” the “EFTA’s stated purpose of consumer protection would be served whether the term ‘copy of such authorization’ is read to mean a duplicate or a summary of material terms.” The appellate court also highlighted the CFPB’s Official Interpretation of Regulation E, which states that a person “‘that obtains the [payment] authorization must provide a copy of the terms of the authorization to the consumer either electronically or in paper form.’ 12 C.F.R. Pt. 205, supp. I, §10(b), cmt. 5 (emphasis added).”

    Courts Appellate Second Circuit EFTA State Issues CFPB

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  • Agencies issue joint statement on loan modifications and reporting for financial institutions

    Federal Issues

    On March 22, the Federal Reserve Board (Fed), CFPB, FDIC, NCUA, OCC, and Conference of State Bank Supervisors (CSBS) issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” to address the “unique and evolving situation” created by Covid-19. Guidance covered in the statement includes, among other things (i) “encourage[ing] financial institutions to work prudently with borrowers” negatively impacted by disruptions in the economy caused by the virus, to include providing loan modifications to borrowers and mitigating credit risk; (ii) advising that in “accounting for loan modifications” the modifications “do not automatically result in [troubled debt restructurings] (TDRs).” The agencies assert that “short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not TDRs”; (iii) reporting loans as past due as a result of a payment deferral is “not expected”; (iv) reporting short-term loan arrangements, such as deferrals, as nonaccrual assets is temporarily not required; and (v) reminding financial institutions that restructured loans “continue to be eligible as collateral at the [Fed’s] discount window.” The statement adds that “the agencies view prudent loan modification programs offered to financial institution customers affected by COVID-19 as positive and proactive actions that can manage or mitigate adverse impacts on borrowers, and lead to improved loan performance and reduced credit risk,” and “agency examiners will not criticize prudent efforts to modify terms on existing loans for affected customers.” (See Fed press release; OCC press release; FDIC press release and FIL-22-2020; NCUA press release; CFPB press release; and CSBS press release.)

    Federal Issues Bank Regulatory Agency Rule-Making & Guidance Loan Modification Federal Reserve CFPB FDIC NCUA OCC CSBS Covid-19

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  • CFPB extends comment period for proposed rulemaking on time-barred debt disclosures; CFPB and FTC release 2019 FDCPA report

    Federal Issues

    On March 20, the CFPB announced it was extending the comment period on its Supplemental Notice of Proposed Rulemaking related to time-barred debt disclosures (covered by a Buckley Special Alert) for an additional 30 days. Given the challenges created by Covid-19, the comment period will now end June 5.

    The same day, the CFPB and FTC released their annual report to Congress on the administration of the FDCPA, which highlights the 2019 efforts of the agencies. Under a memorandum of understanding, the agencies are provided joint FDCPA enforcement responsibility and may share supervisory and consumer complaint information, as well as collaborate on education efforts. Among other things, the report provides general demographic and economic data about consumer debt and the debt collection industry, and highlights enforcement actions, education efforts, and supervisory findings. The report also notes that the CFPB handled roughly 75,000 complaints filed by consumers about first- and third-party debt collectors in 2019, down from the 81,500 it received in 2018, and engaged in five public enforcement actions arising from alleged FDCPA violations. Judgments resulting from these actions yielded nearly $50 million in consumer redress and $11.2 million in civil money penalties.

    With respect to the FTC, the report states that in 2019 the agency obtained approximately $25 million in judgments and permanently banned 23 companies and individuals that engaged in serious and repeated violations of law from working in the debt collection industry. The report also highlights the FTC’s comment letter on the Bureau’s May 2019 Notice of Proposed Rulemaking to implement the FDCPA and to address other debt collection issues, in which the agency stated that it “has long advocated for amendments and clarifications to existing laws to account for changes in the debt collection marketplace and consumer technology” (covered by InfoBytes here).

    Federal Issues CFPB FTC Debt Collection FDCPA Covid-19

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  • 5th Circuit will review CFPB constitutionality case en banc


    On March 20, the U.S. Court of Appeals for the Fifth Circuit issued an opinion ordering that—“on the Court’s own motion”—it will conduct an en banc hearing on whether the CFPB’s single-director leadership structure is constitutional. The order vacates the appellate court’s March 3 opinion (covered by InfoBytes here), in which it previously determined that there was no constitutional issue with allowing the Bureau director to only be fired for cause. According to the now-vacated opinion, the majority concluded that the claim that the Bureau’s structure is unconstitutional “find[s] no support. . .in constitutional text or in Supreme Court decisions.” The 5th Circuit’s prior decision came the same day the U.S. Supreme Court heard oral arguments in Seila Law LLV v. CFPB on the same issue.

    Courts Appellate Fifth Circuit CFPB Single-Director Structure Seila Law

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  • Warren and Brown question CFPB on auto lending policies

    Federal Issues

    On March 12, Senators Elizabeth Warren (D-MA) and Sherrod Brown (D-OH) sent a letter to CFPB Director Kathy Kraninger expressing concerns over the Bureau’s oversight of the auto lending market. The Senators contend that the Bureau has not taken any auto lending enforcement actions since Kraninger became director, despite reports expressing concern with the volume of outstanding auto debt and “auto lenders [] engaging in predatory practices and cutting back safeguards.” The Senators were “particularly concerned with the targeting of subprime consumers by non-bank lenders through indirect financing.” The letter seeks information regarding the Bureau’s plans to “fulfill its mission of stopping abusive practices and protecting consumers from this emerging threat,” including (i) whether the Bureau believes that the “incentive structure” between dealers and lenders in indirect financing can create risks for consumers; (ii) whether the Bureau believes lenders are intentionally charging higher rates because of arrangements with auto dealers; (iii) the types of actions the Bureau would take when it identifies a problematic relationship between a lender and a dealer; and (iv) a list of past enforcement actions by the Bureau against lenders who incentivized dealers to offer consumers a larger loan than the market value of the vehicle. In addition, the letter seeks information on the ways that the Bureau evaluates lender underwriting practices and whether it maintains a database with average LTV ratios, length of loan terms, and related data points for each lender. Finally, the Senators asked for clarifications on how the Bureau would evaluate whether auto lenders are engaging in abusive practices in light of its revised “abusiveness” standard and whether the Bureau has identified fair lending concerns with auto lenders. The letter requests that the Bureau respond to the questions by March 26.

    Federal Issues CFPB Senate Banking Committee Auto Finance Abusive

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  • CFPB releases HMDA FAQs

    Agency Rule-Making & Guidance

    On March 6, the CFPB released seven updated FAQs to assist reporting institutions in complying with HMDA and Regulation C. As previously covered by InfoBytes, the Federal Financial Institutions Examinations Council’s issued the 2020 edition of the “Guide to HMDA Reporting: Getting It Right!” in February. The FAQs offer guidance for reporting the following data points: (i) universal loan identifier (ULI); (ii) legal entity identifier (LEI); (iii) ethnicity, race, and sex; (iv) discount points; and (v) construction and construction/permanent transactions. Highlights are listed below:

    • Regulation C does not “require a financial institution to provide the ULI on loan documents.” It requires a financial institution to “collect, record, and report a ULI for applications for covered loans that is receives, covered loans that it originates, and covered loans that it purchases for each calendar year.”
    • “For applications taken by telephone…a person collecting the race or ethnicity information [is required] to orally state the information in the collection form unless the information pertains uniquely to applications taken in writing, for example, the italicized language in the sample data collection form.”
    • “[A] financial institution should not correct the race or ethnicity as reported by the applicant, even if the applicant has entered clearly incorrect or inappropriate information.”
    • “Where a natural person applicant does not provide ethnicity, race, or sex information for a mail, internet, or telephone application, and a financial institution does not have an opportunity to collect this information during an in person meeting during the application process, the financial institution may report either that the information was not collected on the basis of visual observation or surname (code 2) or that the requirement to report this data field is not applicable (code 3).”
    • “For construction and permanent loans where the construction loan is a separate transaction, the financial institution reports only the loan term of the permanent loan. Because the separate construction loan is designed to be replaced by permanent financing, it is excluded as temporary financing.”

    Agency Rule-Making & Guidance CFPB Enforcement HMDA Consumer Finance Regulation C

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  • CFPB provides consumers with Covid-19 guidance

    Federal Issues

    The CFPB is maintaining a website with steps consumers can take to protect themselves from the financial impact of Covid-19. The website includes guidance on steps to take in the event of difficulty meeting mortgage payment obligations, working with housing counselors, questions relating to credit reporting, and other resources.

    Federal Issues CFPB Consumer Finance Covid-19

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