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New York AG Announces Settlement Payments to Consumers Affected by Alleged Predatory Lending Scheme
On December 22, New York AG Schneiderman announced that more than 3,000 consumers received partial compensation from funds stemming from a global settlement negotiated by AG Schneiderman and the CFPB. In July 2014, the CFPB and 13 state AGs announced a consent order with a military consumer lender requiring it to provide $92 million in debt relief to approximately 17,000 U.S. servicemembers and other consumers affected by the company’s alleged predatory lending scheme. At the time of the order, the company was in Chapter 7 bankruptcy and the redress requirement was suspended until it complied with the debt-relief provisions of the consent order. The recent redress payment exceeds $3.7 million and was issued to 82 victims in New York.
FTC Signs Memorandum of Agreement to Prevent Fraudulent and Deceptive Practices Against Servicemembers
On November 12, the FTC announced that it signed a Memorandum of Agreement with the Veterans Administration (VA) to provide mutual assistance in preventing fraudulent and deceptive acts by “institutions of higher learning and other establishments that offer training” targeting U.S. servicemembers, veterans, and dependents using military education benefits. In its press release, the FTC warned servicemembers of for-profit schools that may make unrealistic promises and pressure them to enroll in unnecessary courses or take out loans they may not be able to pay off.
Rhode Island Modifies its Fair Housing Practices Act to Include Military Status Under Discrimination Protections
On July 9, Governor Raimondo signed S.0241, which amends the Rhode Island Fair Housing Practices Act to include discrimination based on a person’s military status as a prohibited and unlawful housing and credit granting practice. Protected classes now include veterans with an honorable discharge (or an honorable or general administrative discharge), and active servicemembers in the Armed Forces. The amendments are effective immediately.
CFPB Report Details Ongoing Challenges Between Servicemembers and Student Loan Servicers
On July 7, the CFPB released a report detailing the continued challenges military servicemembers experience related to the servicing of their student loans, particularly when trying to invoke certain rights granted under the Servicemembers Civil Relief Act (SCRA). This report follows the CFPB’s May announcement seeking public comment on student loan servicing practices related to servicemembers. Based on over 1,300 complaints received, the report details how both private and federal student loan servicers continue to make mistakes handling servicemembers’ student loan repayments, leading to wrongful denial of legal benefits and negative credit reporting for military families. Specifically, the report highlights servicemembers’ difficulties in (i) obtaining the SCRA’s 6-percent interest rate cap; (ii) receiving adequate information or having requests properly processed, especially regarding deferment plans (leading to unwarranted delinquencies, defaults, and debt collections); and (iii) discharging the debts of severely injured veterans or the families of deceased servicemembers.
Indiana Enacts Servicemembers Civil Relief Act
On May 4, Indiana Governor Michael Pence signed H.B. 1456 into law, amending the state’s civil relief act to include protections for servicemembers under the federal Servicemembers Civil Relief Act (SCRA). The legislation also requires the Indiana National Guard provide both active and reserve members a list that details the rights a servicemember or a dependent of a servicemember are entitled to under the state and federal SCRA. The law will take effect on July 1, 2015.
CFPB Publishes Information Regarding Servicemembers' Complaints
On April 27, the CFPB published a report regarding the trend of recent complaints submitted to the Bureau by Servicemembers entitled, A Snapshot of Complaints Received from Servicemembers, Veterans, and their Families. According to the report, between July 21, 2011 and December 31, 2014, the areas servicemembers reported to have the most problems with were debt collection, mortgage, and credit reporting. With debt collection making up 39% of the complaints, it is the most common type of complaint the Bureau receives from servicemembers: “[S]ervicemembers assert that the calculation of debt is inaccurate or unfair… [They] complain about telephone collections that are too frequent and that come at inconvenient times. They also complain about debt collectors calling their place of employment or third parties.” In addition to debt collection, mortgage, and credit reporting complaints, the report reveals the following products as problem areas for servicemembers: credit cards, bank accounts, consumer loans, and student loans. The Bureau’s report is an overview of the approximated 29,500 complaints the Bureau received from servicemembers since July 2011.
CFPB Tackles Payment Processor for Charging Servicemembers Hidden Fees, Orders Over $3 Million in Consumer Relief
On April 20, the CFPB announced an enforcement action against a Kentucky-based third-party processor of military allotments and its subsidiary – together “Respondents” – for allegedly charging servicemembers millions of dollars in hidden fees. According to the Bureau, servicemembers set up allotment arrangements with the Respondents, and the Respondents were to pay creditors – auto lenders, installment lenders, and retail merchants – on behalf of deployed servicemembers. The Bureau alleges that from 2010 to 2014, the company violated UDAAP provisions of the Consumer Financial Protection Act by failing to (i) adequately disclose information about various fees associated with the Respondents’ services; and (ii) inform servicemembers when they were being charged residual-balance fees. The consent order requires that the Respondents pay approximately $3.1 million in relief to the affected servicemembers.
CFPB Supports DoD's Proposal to Expand Scope of Military Lending Act
On December 29, the CFPB released a report highlighting its concern that loopholes in the Military Lending Act (MLA) have allowed companies to offer costly credit products to military personnel and their families. The report findings are included in a comment letter urging the Department of Defense to finalize its proposal to expand the scope of the MLA to include deposit advance products and more types of payday, auto title, and installment loans. Passed in 2006, the MLA protects military personnel – active and reserve – and their dependents from predatory lending practices.
CFPB & State Attorneys General Fine Retailer and Debt Collectors for Alleged Illegal Debt Collection Practices Against Military Servicemembers
On December 18, the CFPB and the Attorneys General of North Carolina and Virginia announced an enforcement action against three affiliated companies offering credit and financing services to military servicemembers. The complaint filed in the Eastern District of Virginia alleges that the companies used illegal tactics to collect debts in violation of Dodd-Frank, including by (i) filing illegal lawsuits; (ii) debiting consumers’ accounts without authorization; and (iii) contacting servicemembers’ commanding officers. The complaint also charges that one of the companies violated the EFTA by failing to properly disclose the terms of preauthorized transfers, while another company violated TILA by failing to properly disclose terms and interest rates on the loans it offered to servicemembers. The CFPB and the Attorneys General filed a consent order in the district court to require the companies and their owners and chief officers to provide over $2.5 million in consumer redress, pay a $100,000 civil penalty, and undergo ongoing compliance monitoring for a period of five years.
Deputy Comptroller Describes OCC's SCRA, Consumer Compliance Focus
On August 18, in a speech to the Association of Military Banks of America, Deputy Comptroller for Compliance Policy Grovetta Gardineer described the OCC’s increasing supervisory and enforcement focus on SCRA compliance. Ms. Gardineer explained that given the significant risks presented by a bank’s failure to comply with the SCRA, the OCC has “stepped up its focus on compliance” and “now requires . . . examiners to include evaluation of SCRA compliance during every supervisory cycle”—even though this closer scrutiny is not required by statute. Ms. Gardineer also highlighted the OCC’s concern regarding potential unfair and deceptive practices associated with overdraft and other administrative fees, especially when “poorly worded disclosures about fees” are contained in “page after page of legal notices and disclaimers.” And while Ms. Gardineer stated that the OCC itself is willing to take enforcement actions where necessary, she also stressed the importance of coordination between regulators to more effectively implement rules and help create a “culture that encourages . . . financial readiness” among servicemembers.