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  • CFPB orders bank to pay $6.2 million; alleges overdraft fees violate CFPA, EFTA

    Federal Issues

    On December 7, the CFPB announced a consent order against a Virginia-based bank, alleging it engaged in deceptive acts and practices and failed to comply with Regulation E. According to the CFPB, the bank did not comply with Regulation E because it did not provide appropriate written disclosures before enrolling customers in its overdraft service and imposing overdraft fees. The CFPB alleged that under the bank’s procedures, branch employees would provide oral disclosures and obtain oral consent but did not provide customers with the required written consent form under Regulation E until the end of the account-opening process. According to the CFPB, while the bank changed its practices partway through the period covered by the consent order, the disclosures it provided were still inadequate. The bank allegedly “requested that new customers orally specify their enrollment decision before providing them with adequate written notice describing the [opt-in] service,” which thereby allegedly breached the Electronic Fund Transfer Act. 

    The CFPB also alleged the bank committed deceptive actions or practices when marketing opt-in overdraft services to consumers via telephone. Specifically, the CFPB alleged that the bank did not provide its customer service representatives with a script, which resulted in representatives failing to clearly differentiate between transactions covered by the bank’s standard versus its opt-in overdraft protection service. The CFPB asserted that these statements qualified as “representations and omissions of key information were likely to mislead consumers,” and that as a result, the Bank did not comply with the CFPA and Regulation E.  

    The consent order imposes a $1.2 million civil money penalty and requires the bank to refund at least $5 million to affected consumers. The consent order also requires the bank to obtain a new overdraft enrollment decision from affected consumers before charging overdraft fees. Moreover, the bank must also create and implement a comprehensive compliance plan to ensure its overdraft program complies with all applicable laws. Finally, the consent order requires the bank to monitor compliance, maintain records, and inform the CFPB of any changes or developments that could impact its compliance responsibilities in the consent order. 

    Federal Issues CFPB CFPA Regulation E Overdraft Disclosures Opt-In Enforcement

  • NY AG and others demand cooperation and accountability from big banks; write to CFPB and OCC

    State Issues

    On December 7, the Attorney General for the State of New York, Letitia James, led a group of 20 attorneys general in submitting letters to the OCC and the CFPB urging the agencies to ensure that national banks cooperate with state attorneys’ general investigations into violations of state laws. The letters state that in the beginning of the 2000s, banks began to claim immunity from state oversight. The attorneys general argue that this position was furthered by a 2002 OCC advisory letter directing states to refer potential violations of state law to the OCC, and a 2004 rule which expanded the test for when national banks were exempted from state laws. The attorneys general allege that states’ have been limited “in their ability to address a wide range of unfair and deceptive practices that affect their citizens, including bait-and-switch practices and the failure to clearly and conspicuously disclose rate changes, late fees and overdraft fees.” As a result, the attorneys general ask the OCC to “issue supervisory guidance… advising that it is unsafe and unsound, and that it creates a material risk of unfair or abusive acts or practices, for any [b]ank to refuse to cooperate with State AG information requests that seek to further enforcement of applicable state laws.” 

    State Issues CFPB OCC State Attorney General

  • CFPB comments on California DFPI licensing provisions, income-based advances

    Agency Rule-Making & Guidance

    On December 1, the CFPB posted a blog entry sharing its comment letter responding to the California DFPI’s notice of proposed rulemaking for “income-based advances” from earlier this year. As previously covered by InfoBytes, the DFPI’s proposed regulations would, among other things, clarify licensing provisions and the applicability of the CFL to certain activities. Within the CFPB’s comment letter, it stressed the importance of regulatory consistency of consumer financial products and services across federal and state law. The letter noted the CFPB’s view that companies offering “income-based advances” (also marketed as “earned wage access”) are subject to federal oversight, and the CFPB supports state oversight of such companies as well. Moreover, the CFPB said that DFPI’s particular treatment of income-based advances takes a similar approach to TILA and Regulation Z and that the CFPB plans to issue further guidance regarding the applicability of TILA to these products. 

    Agency Rule-Making & Guidance CFPB DFPI Consumer Finance California State Regulators CCFPL

  • CFPB’s report on Americans’ financial health, post-pandemic.

    Federal Issues

    On December 1, the CFPB released a report titled: “Making Ends Meet in 2023: Insights from the Making Ends Meet Survey” that discussed Americans’ financial health in 2023 in comparison to 2019 – before the Covid-19 pandemic. From June 2019 to February 2021, consumers benefited from increased savings and expanded unemployment benefits; however, beginning in 2022 and carrying into 2023, consumers experienced an increased strain on their finances. When comparing the last two years to 2019, the CFPB found that: (i) more families are facing greater difficulty paying their bills; (ii) more families are unprepared for a short interruption of income; (iii) access to credit remains difficult; (iv) liquidity remains available to households; and (v) large disparities in financial stability continue.

    Federal Issues CFPB Consumer Finance

  • CFPB releases 2023 Ombudsman report

    Federal Issues

    On November 30, the CFPB Ombudsman’s Office published its annual report, which detailed inquiries handled by the office, included a new FAQ section, and described the second year of the Ombudsman’s post-examination survey of supervised entities. The Ombudsman reviewed some pertinent topics the CFPB faced in the past year, including recognizing imposter scams, distinguishing between new and duplicate consumer complaints, assisting consumers with diminished capacity, and helping the public contact the CFPB.

    In detail, and on recognizing imposter frauds, the Ombudsman provided CFPB resources and posted a blog on scam awareness in English and Spanish. On distinguishing between new and existing complaints, consumers expressed concern that the CFPB closed their cases without providing a reason or that the CFPB mistakenly identified complaints as duplicative. The report described the CFPB’s process for identifying duplicate complaints, noted consumers’ concerns, and indicated that the CFPB continues to review this issue. On assisting consumers with diminished capacity, the Ombudsman discussed challenges with third-party entities assisting with a case, as well as offering resources on power of attorney questions. And on helping the public contact the CFPB, the Ombudsman identified contact points that could improve, such as the CFPB’s website and telephone switchboard, and asked the CFPB to update the contact points. 

    Federal Issues CFPB FAQs Consumer Finance Ombudsman

  • CFPB obtains stipulated judgment ordering student financing company to pay over $30 million in damages

    Federal Issues

    On November 20, the United States Bankruptcy Court for the District of Delaware entered a stipulated judgment in favor of the CFPB and 11 other state enforcement agencies in connection with an adversary proceeding against a vocational training program. As previously covered by InfoBytes, the complaint alleged that the education firm (company) engaged in deceptive practices by misrepresenting its income share agreement as not a loan and not debt, and misleading borrowers into believing that no payments would need to be made until they received a job offer. According to the CFPB, the company trained consumers to become sales development representatives, an entry-level role that requires “little or no prior sales experience or training,” and made promises it could not deliver on, such as promising a “6-figure” career in software sales. The company also initially priced its services at $2,500 in 2018, and then increased it to $15,000 the following year without any value justification. The company would recoup its payment through income share agreements (ISA). The CFPB alleged multiple causes of action against the company, including violations of the CFPA, TILA, and the FDCPA, among others. The stipulated judgment includes orders requiring the company to refund student borrowers, cancel outstanding loans, and permanently shut down.

    Federal Issues CFPB Enforcement State Attorney General Consumer Protection CFPA TILA FDCPA Regulation Z

  • CFPB report on FDCPA highlights medical debt collection issues

    Federal Issues

    On November 16, the CFPB released its annual Fair Debt Collection Practices Act report, which highlighted challenges specific to medical debt collection. For example, 8,500 complaints were submitted in 2022 related to medical debt collection and described problems such as collectors billing for services never received, collecting the wrong amounts, miscommunication with insurance companies or financial assistance programs, or placing bills on credit reports without prior consumer contact. The report emphasized collectors may violate federal law when they pursue inaccurate medical bills and stressed the need for medical debt collectors to comply with the Fair Debt Collection Practices Act, the No Surprises Act, and the Fair Credit Reporting Act.

    The report also includes developments in state law regarding medical debt collection, including recent legislation in Colorado, New York, Maine, and Nevada. Additionally, the report contains sections related to supervision of debt collection activities, enforcement actions, education and outreach initiatives, rulemaking, and research and policy initiatives. 

    Federal Issues CFPB Medical Debt FDCPA Consumer Protection FCRA

  • CFPB’s Chopra testifies at Senate Banking Committee hearing

    Federal Issues

    On November 30, the Director of the CFPB, Rohit Chopra, testified during the Senate Banking Committee’s hearing on the Bureau’s Semi-Annual Report to Congress. The Senate Banking Committee questioned Chopra on the Bureau’s oversight of financial institutions providing benefits under the Servicemembers Civil Relief Act (SCRA), medical debt collection, so-called “junk fees,” and the increasing popularity of buy now, pay later (BNPL) products.

    In response to questions regarding SCRA, Director Chopra stated that the CFPB estimates that fewer than 10% of servicemembers receive the 6% pre-service rate cap on loans as required by the SCRA. In response to a question on BNPL popularity, Chopra noted there was a high amount of BNPL usage on Black Friday, and the CFPB plans on creating basic consumer protection standards.

    Director Chopra stated that the CFPB is developing rules or researching potential activity in several areas, including: (i) reporting certain medical debts to the credit bureaus; (ii) BNPL standards; and (iii) protecting consumer data, particularly in the context of credit reporting.

    Federal Issues Senate Banking Committee CFPB Consumer Finance

  • CFPB releases its spring 2023 semi-annual report

    Federal Issues

    The CFPB recently issued its semi-annual report to Congress covering the Bureau’s work for the period beginning October 1, 2022 and ending March 31, 2023. The report, which is required by Dodd-Frank, includes, (i) a list of significant rules and orders (including final rules, proposed rules, pre-rule materials, and upcoming plans and initiatives); (ii) an analysis of consumer complaints, (iii) lists of public supervisory and enforcement actions, (iv) assessments of actions by state regulators and attorneys generals related to consumer financial law; (v) assessment of fair lending enforcement and rulemaking; and (vi) an analysis of efforts to increase workforce and contracting diversity.

    Federal Issues CFPB Consumer Finance Dodd-Frank Supervision ECOA HMDA Fair Lending

  • CFPB approves pilot program for construction loans

    Federal Issues

    On November 21, the CFPB announced it approved an application from a community banking trade organization to pilot disclosures for construction loans. The application was submitted pursuant to the CFPB’s trial policy programs under Section 1032(e) of Dodd-Frank. According to the community banking trade organization, the application aims to increase the number of affordable loans that combine a construction phase loan with a mortgage, all within a single set of closing costs, i.e., a single-close construction-to-permanent loan. The community banking trade organization hopes to increase the number of these specific loans because first-time homebuyers in rural and small-town communities are more likely to build their first home than purchase existing ones. The community banking trade organization also stated that the current loan disclosure requirements offered by the CFPB were designed for either standard home purchase or refinance mortgage loans. The Bureau states that it wishes to receive applications for this pilot disclosure from lenders rather than single-market participants.

    Federal Issues CFPB Construction Consumer Finance Mortgages

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