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Financial Services Law Insights and Observations


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  • CFPB announces e-disclosures and HMDA platform Tech Sprints

    Federal Issues

    On June 29, the CFPB announced two Tech Sprints that will “bring together regulators, technologists, software providers, consumer groups, and financial institutions to develop technological solutions to shared compliance challenges.” As previously covered by InfoBytes, the CFPB announced, in September 2019, its intention to use Tech Sprints—which had been used by the U.K.’s Financial Conduct Authority seven times since 2016 and resulted in a pilot project on digital regulatory reporting—to encourage regulatory innovation and requested comments from stakeholders on the plan.

    • E-Disclosures, October 5-9, 2020. This Tech Sprint will have participants “improve upon existing consumer disclosures” by “design[ing] innovative electronic methods for informing consumers about adverse credit actions, including from the use of algorithms.” The Bureau notes that many disclosure laws “were written in a paper-based age” and using digital technology for disclosures may “enable greater consumer engagement and understanding.”
    • HMDA platform and submission, March 22-26, 2021. This Tech Sprint will encourage participants to “develop new tools to address compliance challenges and improve the filing process” on the HMDA platform (operated by the Bureau on behalf of the Federal Financial Institutions Examination Council). Additionally, participants “may work to further develop the HMDA Platform’s Application Programming Interfaces to increase efficiency and lower cost.”

    Separately, the FDIC also announced the start of a prototyping competition intended “to help develop a new and innovative approach to financial reporting, particularly for community banks.” The competition will involve 20 technology firms from across the country that will propose solutions for the FDIC’s consideration to make financial reporting “seamless and less burdensome for banks.”

    Federal Issues CFPB Fintech HMDA Disclosures

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  • 9th Circuit: Judicial foreclosure not debt collection under FDCPA


    On June 30, the U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal of an FDCPA action, concluding that the FDCPA does not apply when a creditor is enforcing a security interest through a foreclosure, but is not seeking a deficiency judgment. According to the opinion, the plaintiff filed an action against Fannie Mae, Fannie Mae’s loan servicer, the law firm that represented Fannie Mae in the foreclosure proceeding, and the firm’s attorneys (collectively, “defendants”) for, among other things, violating the FDCPA when seeking to foreclose on his residential property. The district court dismissed the action, concluding that the FDCPA did not apply because the defendants had not engaged in any debt collection behavior by initiating the judicial foreclosure. In 2018, the 9th Circuit affirmed the dismissal, but subsequently ordered a supplemental briefing based on the U.S. Supreme Court’s intervening decision in Obduskey v. McCarthy & Holthus LLP (which held that law firms performing nonjudicial foreclosures are not “debt collectors” under the FDCPA, covered by InfoBytes here).

    After the supplemental briefing, the appellate court affirmed the district court’s dismissal of the action. The appellate court rejected the plaintiff’s argument that the letter sent by the defendants when initiating the judicial foreclosure, which included monetary amounts owed, amounted to debt collection activity under the FDCPA. The appellate court noted that the defendants were merely fulfilling a procedural requirement (that has since been amended) of Oregon foreclosure law, and “in no event would a money award have been enforceable against [the plaintiff],” because of Oregon’s anti-deficiency judgment law. Thus, the appellate court concluded that a judicial foreclosure is not considered a debt collection activity when it does not “include a request for a deficiency judgment or some other effort to recover the remaining debt,” and therefore, the district court properly dismissed the action.

    Courts Appellate Ninth Circuit FDCPA Foreclosure Debt Collection

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  • CFPB releases spring 2020 rulemaking agenda

    Agency Rule-Making & Guidance

    On June 30, the CFPB released its spring 2020 rulemaking agenda. According to a Bureau announcement, the information details the regulatory matters that the Bureau “expect[s] to focus on” between May 1, 2020 and April 30, 2021. The announcement notes that the agenda was set before the Covid-19 pandemic struck and while the Bureau “continues to move forward with other regulatory work,” it will prioritize work related to supporting consumers and the financial sector during and after the Covid-19 pandemic.

    In addition to the rulemaking activities already completed by the Bureau in May and June of this year, the agenda highlights other regulatory activities planned, including:

    • Escrow Rulemaking. The Bureau intends to issue a proposed rule to implement Section 108 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018, which directs the Bureau to exempt certain loans made by creditors with assets of $10 billion or less (and that meet other criteria) from the escrow requirements applicable to higher-priced mortgage loans.
    • Small Business Rulemaking. The Bureau states that in September 2020, it will publicly release materials for an October panel (convening under the Small Business Regulatory Enforcement Fairness Act) with small entities likely to be directly affected by the Bureau’s rule to implement Section 1071 of Dodd-Frank.
    • HMDA. The Bureau states that two rulemakings are planned, including (i) a proposed rule that follows up on a May 2019 advanced notice of proposed rulemaking which sought information on the costs and benefits of reporting certain data points under HMDA and coverage of certain business or commercial purpose loans (covered by InfoBytes here); and (ii) a proposed rule addressing the public disclosure of HMDA data.
    • Debt Collection. The Bureau intends to release the final rule amending Regulation F to implement the Fair Debt Collection Practices Act in October 2020 (InfoBytes coverage of the May 2019 proposed rule here). Additionally, “at a later date” the Bureau intends to finalize the February supplemental proposal, which covers time-barred debt disclosures (covered by a Buckley Special Alert here).
    • Qualified Mortgages (QM). The Bureau states it is considering issuing a proposed rule “later this year” that would create a new “seasoning” definition of a QM under Regulation Z, allowing for QM status after the borrower has made consistent timely payments for a defined period.

    Additionally, in its announcement, the Bureau notes that it is (i) participating in an interagency rulemaking process on quality control standards for automated valuation models (AVMs) with regard to appraisals; and (ii) continuing to review and conduct the five-year lookback assessments under Section 1022(d) of Dodd-Frank.

    Agency Rule-Making & Guidance CFPB Rulemaking Agenda HMDA Small Business Lending Regulation Z Debt Collection ECOA Escrow EGRRCPA Mortgages

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  • FCC narrows “autodialer” definition

    Agency Rule-Making & Guidance

    On June 25, the FCC narrowed the Commission’s definition of an “autodialer,” providing that “if a calling platform is not capable of originating a call or sending a text without a person actively and affirmatively manually dialing each one, that platform is not an autodialer and calls or texts made using it are not subject to the TCPA’s restrictions on calls and texts to wireless phones.” The FCC reiterated that only sequential number generators or other systems that can store or produce numbers to be called or texted at random are the only technologies considered to be autodialers. The FCC further noted that whether a system can make a large number of calls in a short period of time does not factor into whether the system is considered an autodialer, and that message senders may avoid TCPA liability by obtaining prior express consent from recipients. The FCC issued the ruling in response to an alliance’s 2018 petition, which asked the FCC to clarify whether the definition of an autodialer applied to peer-to-peer messaging (P2P) platforms that, among other things, allow organizations to text a large number of individuals and require a person to manually send each text message one at a time. The FCC declined to rule on whether any particular P2P text platform is an autodialer due to the lack of sufficient factual basis.

    The FCC issued a separate declaratory ruling the same day reiterating that the TCPA requires autodialer or robocall senders to obtain prior express consent before making any texts or robocalls, stressing that the “mere existence of a caller-consumer relationship does not satisfy the prior-express-consent requirement for calls to wireless numbers, nor does it create an exception to this requirement.” The ruling was issued in response to a health benefit company’s 2015 petition, which asked the FCC to exempt health plans and providers, as well as certain non-emergency, urgent health care-related calls, from the prior consent requirement as long as the company permitted consumers to opt out after the fact.

    As previously covered by InfoBytes, several appellate courts have issued conflicting decisions with respect to the definition of an autodialer.

    Agency Rule-Making & Guidance FCC Autodialer TCPA

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  • ARRC releases updated fallback language in the event of LIBOR transition

    Federal Issues

    On June 30, the Alternative Reference Rates Committee (ARRC) released updated recommended fallback language for U.S. dollar LIBOR denominated syndicated loans and new variable rate private student loans. ARRC noted that the private student loan language is intended to minimize risk and market disruption in the event of LIBOR’s anticipated cessation at the end of 2021. ARRC also released conventions for how market participants can voluntarily use the Secured Overnight Financing Rate (SOFR) in new student loan products. With respect to syndicated loans, ARRC noted that the updated fallback language recommends “the use of simple daily SOFR in arrears,” which, among other things, includes “a more permissive early opt-in trigger” to “allow parties involved in the loan to switch over to an alternative rate like SOFR before LIBOR is officially discontinued or determined to be unrepresentative.” Additionally, ARRC announced new details regarding its recommendation of spread adjustments for cash products that reference LIBOR. Market participants may voluntarily use ARRC’s recommended methodology to produce spread adjustments “where a spread-adjusted [SOFR] can be selected as a fallback.”

    Federal Issues ARRC LIBOR SOFR Student Lending Lending

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  • Fed issues enforcement action for flood insurance violations

    Federal Issues

    On June 30, the Federal Reserve Board announced an enforcement action against a Virginia-based bank for alleged violations of the National Flood Insurance Act (NFIA) and Regulation H, which implements the NFIA. The consent order assesses an $8,500 penalty against the bank for an alleged pattern or practice of violations of Regulation H, but does not specify the number or the precise nature of the alleged violations. The maximum civil money penalty under the NFIA for a pattern or practice of violations is $2,000 per violation.

    Federal Issues Federal Reserve Enforcement Flood Insurance National Flood Insurance Act

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  • New York AG settles with student debt relief defendants

    State Issues

    On June 25, the U.S. District Court for the Southern District of New York entered a stipulated final judgment and order to resolve allegations concerning an allegedly fraudulent and deceptive student loan debt relief scheme. According to the New York attorney general, the defendants allegedly sold debt-relief services to student loan borrowers that violated several New York laws, including the state’s usury, banking, credit repair, and telemarketing laws, as well as the Credit Repair Organizations Act, the Telemarketing Sales Rule, and TILA. The order imposes a $5.5 million judgment against the majority of the defendants, which will be partially suspended after certain defendants pay $250,000. The AG’s case against one of the defendants, however, will continue. The order also prohibits the defendants from engaging in unlawful acts or deceptive practices such as false advertising, and, among other things, imposes compliance and reporting requirements and permanently bans the defendants from offering, providing, or selling any debt relief products and services or collecting payments from consumers related to these products and services.

    State Issues State Attorney General Student Lending Debt Relief Usury TILA Telemarketing Sales Rule

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  • SEC issues $18.5 million civil penalty for unregistered digital token offering


    On June 26, the SEC announced a settlement with two offshore entities, resolving allegations that the entities violated federal securities laws by raising more than $1.7 billion in unregistered digital token offerings. As previously covered by InfoBytes, in October 2019, the SEC obtained a temporary restraining order, halting the offerings. According to the SEC, the entities violated Sections 5(a) and 5(c) of the Securities Act by failing to register its offers and sales of securities with the SEC. Prior to the restraining order, the entities had sold approximately 2.9 million digital tokens worldwide, including more than 1 billion tokens to 39 U.S. purchasers. The settlement requires the entities to return more than $1.2 billion to investors in “ill-gotten gains” from the token offerings. Additionally, the parent company is required to pay an $18.5 million civil penalty and give proactive notice to the SEC before participating in any digital asset issuances for the next three years. The entities entered into the settlement without admitting or denying the allegations in the SEC’s complaint.

    Securities SEC Initial Coin Offerings Blockchain Virtual Currency

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  • Fannie and Freddie issue Covid-19-related selling updates

    Federal Issues

    On July 1, Fannie Mae and Freddie Mac updated its Covid-19 frequently asked questions regarding the underwriting and loan eligibility for sellers.  Fannie Mae’s FAQs (previously discussed here) were updated to address questions regarding documentation and calculations related to self-employed income and variable income, including where borrowers experienced gaps of employment due to Covid-19.  Freddie Mac’s origination, underwriting, and eligibility FAQs were updated to address questions regarding, among other things, pre-closing verifications, fluctuating employment earnings, self-employed income, determining income eligibility with additional analysis and documentation, documentation requirements, and Covid-19 business assistance, including proceeds from Paycheck Protection Program loans.

    Federal Issues Covid-19 Fannie Mae Freddie Mac Underwriting Loan Origination SBA Mortgages

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  • North Dakota governor issues order on cooperatives’ annual meetings

    State Issues

    On July 1, the North Dakota governor issued Executive Order 2020-37, which suspends the provision in North Dakota law requiring cooperatives to hold an annual meeting within six months after the close of the fiscal year. Cooperative associations are permitted to schedule the 2020 annual meeting at a date, time and place, and in a manner that preserves and protects the health and safety of participating members.

    State Issues Covid-19 North Dakota

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