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  • New Jersey Department of Banking and Insurance extends no-action position regarding temporary work from home

    State Issues

    On May 28, the New Jersey Department of Banking and Insurance issued Bulletin No. 20-26 to certain licensees regarding temporarily working from home due to Covid-19. The bulletin extends the department’s no-action position regarding licensure for certain branch office locations due to individuals temporarily working from home first announced in Bulletin No 20-06 (covered here).  The no-action position is only effective with a submission that includes specified materials and may be subject to pre-conditions and operating, reporting, and other requirements. Licensees who have already submitted materials to the department in response to Bulletin No. 20-06 are not required to resubmit those materials.

    State Issues Covid-19 New Jersey Licensing Banking Insurance

  • Fannie and Freddie issue temporary underwriting guidance for self-employment income; updates to renovation loan programs

    Federal Issues

    On May 28, Fannie Mae and Freddie Mac issued guidance for underwriting self-employed borrowers during the Covid-19 pandemic. According to Fannie Mae’s Lender Letter LL-2020-03 and Freddie Mac’s Guide Bulletin 2020-19, lenders are now required to obtain additional documentation from self-employed borrowers to determine if the borrower’s income is “stable and has a reasonable expectation of continuance.” Lenders must obtain either (i) an audited year-to-date profit and loss statement for the business, or (ii) an unaudited year-to-date profit and loss statement signed by the borrower and two business depository account statements no older than the latest two months represented on the profit and loss statement. Bulletin 2020-19 and LL-2020-03 also provide guidance to assist lenders when reviewing the documentation to determine whether the business operations were impacted by the Covid-19 pandemic and whether they are considered stable. Fannie and Freddie encourage lenders to apply the temporary requirements immediately, however, they must be applied to any applications received on or after June 11.

    Additionally, Bulletin 2020-19 provides temporary flexibilities with Freddie Mac’s “CHOICERenovation” Mortgages, and LL 2020-04 provides guidance on Fannie Mae’s “HomeStyle Renovation” loans. Fannie Mae also issued updates to its Covid-19 servicing FAQs.

    Federal Issues Fannie Mae Freddie Mac GSE Underwriting Mortgage Origination Mortgage Servicing Covid-19

  • CDFIs to exclusively lend $10 billion in PPP funding

    Federal Issues

    On May 28, the SBA, in consultation with the Treasury Department, announced that $10 billion of Round 2 funding for the Paycheck Protection Program (PPP) will be lent exclusively by Community Development Financial Institutions (CDFIs) to ensure that “the PPP reaches all communities in need of relief during the Covid-19 pandemic.” SBA Administrator Jovita Carranza stated, “CDFIs provide critically important capital and technical assistance to small businesses from rural, minority and other underserved communities, especially during this economically challenging time.” The announcement notes that as of May 23, CDFIs have approved more than $7 billion in PPP loans, including $3.2 billion in Round 2 funding, leaving a balance of $6.8 billion in Round 2.

    Federal Issues SBA Department of Treasury Small Business Lending Covid-19

  • New Mexico regulator extends permission to work from home

    State Issues

    On May 28, the New Mexico Financial Institutions Division extended its guidance allowing mortgage licensees and their staff to work from home until August 31, 2020 (previously covered here). The guidance permits licensees and their staff to work from their home residences, which may not be licensed as a branch, if various conditions regarding data and information security, worker and customer health, and advertising are met.

    State Issues Covid-19 New Mexico Mortgage Licensing Licensing Mortgages

  • Michigan governor extends tax foreclosure redemption deadline

    State Issues

    On May 28, the Michigan governor issued an executive order extending the deadline by which Michigan residents must pay back taxes to avoid foreclosures on their property. The governor extended the deadline until June 29, 2020. The governor had previously extended the deadline from March 31 to May 29.

    State Issues Covid-19 Michigan Foreclosure Mortgages

  • South Carolina regulator updates guidance on working remotely and defers deadline for submitting the 2019 mortgage log

    State Issues

    On May 28, the South Carolina Department of Consumer Affairs issued updated interim guidance (previously discussed here) regarding working remotely from unlicensed locations and the deadline for submission of the 2019 mortgage log. The updated interim guidance provides that, until July 1, 2020, licensed mortgage loan originators are permitted to work from home, whether in South Carolina or another state, even if the home is not a licensed branch. The guidance also notes the deferral of filing deadline for the 2019 mortgage log required of mortgage broker companies until June 1, 2020.

    State Issues Covid-19 South Carolina Mortgages Mortgage Licensing Loan Origination Mortgage Origination

  • Oklahoma prohibits local governments from regulating supervised licensees

    State Issues

    On May 21, the Oklahoma governor signed SB 1682, which prohibits any state municipality or other political subdivision from regulating certain practices of businesses and occupations licensed, regulated, and controlled under the supervision of the state’s Department of Consumer Credit. Specifically, local governments may not regulate interest rates, fees, or physical locations, or prevent licensed lenders from engaging in lending practices authorized under the state law. Additionally, SB 1682 allows a person whose rights are violated under the provisions of this section the right to bring an action for injunctive relief. The act takes effect November 1.

    State Issues State Legislation Oklahoma Consumer Lending

  • New York AG announced proposed settlement with student debt relief companies

    State Issues

    On May 22, the New York attorney general (NYAG) announced a proposed settlement with three student loan debt relief companies and two of the companies’ executive officers (collectively, “defendants”), resolving allegations that the defendants participated in a broader scheme that fraudulently, deceptively, and illegally marketed, sold, and financed student debt relief services to consumers nationwide. As previously covered by InfoBytes, the September 2018 complaint alleged that a total of nine student loan debt relief companies, along with their financing company, and the two individuals violated several federal and state consumer protection statutes, including the Telemarketing Sales Rule, New York General Business Law, the state’s usury cap on interest rates, disclosure requirements under TILA, and the Federal Credit Repair Organization Act. Specifically, the NYAG asserted, among other things, that the defendants (i) sent direct mail solicitations to consumers that deceptively appeared to be from a governmental agency or an entity affiliated with a government agency; (ii) charged consumers over $1,000 for services that were available for free; (iii) requested upfront payments in violation of federal and state credit repair and debt relief laws; and (iv) charged usurious interest rates.

    If approved by the court, the proposed consent judgment would require the five defendants to pay $250,000 of a $5.5 million total judgment, due to their inability to pay. Additionally, the defendants are also permanently banned from advertising, marketing, promoting, offering for sale, or selling any type of debt relief product or service—or from assisting others in doing the same. Additionally, the defendants must request that any credit reporting agency to which the defendants reported consumer information in connection with the student loan debt relief services remove the information from those consumers’ credit files. The defendants also agreed not to sell, transfer, or benefit from the personal information collected from borrowers.

    The NYAG previously settled with two other defendants in February, covered by InfoBytes here.

    State Issues State Attorney General Courts Student Lending Debt Relief Usury Telemarketing Sales Rule TILA Credit Repair Organizations Act Settlement

  • District court: Unilateral imposition of post-judgment interest violates FDCPA

    Courts

    On May 19, the U.S. District Court for the District of Connecticut granted in part and denied in part parties’ motions for summary judgment in an FDCPA action concerning post-judgment interest. According to the ruling, the defendants—a debt buyer and an attorney who represents creditors, including the debt buyer, in collection actions—obtained a judgment from the Connecticut State Superior Court (state court) for the plaintiff’s unpaid credit card debt. The judgment awarded the defendant $33,921.25 plus post judgment interest under state law. While the complaint requested post-judgment interest of 10 percent—the maximum amount allowed by state law—the judgment did not reference a specific interest rate. After the defendants began charging post-judgment interest at 10 percent, the plaintiff filed suit alleging the defendant violated the FDCPA by using false, deceptive, or misleading representations or means in connection with the collection of any debt. The defendants sought clarification of the rate of post-judgment interest from the state court and received a clarification order stating that the state court “intended that the interest rate be set at the allowable rate of ten percent per year in accordance with the statute.” In its defense, the defendants asserted a bona fide error defense under the FDCPA, arguing, among other things, that they “erroneously believed that application of post-judgment interest at a rate of ten percent was neither false nor misleading because they relied on the state court’s judgment and Clarification Order, which explicitly provided for post-judgment interest at a rate of ten percent.”

    The court partially granted summary judgment in favor of the plaintiff on her FDCPA claim, stating that the unilateral imposition of post-judgment interest at a rate of 10 percent per year, which was not awarded in the judgment, is a “clear violation” of the FDCPA that is not subject to the bona fide error defense. The court stated that the bona fide error defense does not apply in this situation because “the FDCPA violation resulted from the defendants’ mistaken belief that, absent a rate of post-judgment interest expressly set by the state court, defendants were entitled to set a rate at the maximum amount allowed under the statute.” According to the court, when a state court “fails to include a specific rate of interest based on the state law,” a debt collector may not apply a default interest rate. In holding that the FDCPA’s bona fide error defense is inapplicable here, the court extended the holding of the U.S. Supreme Court in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, L.P.A. that the “bona fide error defense . . . is not available to debt collectors who misinterpret the legal requirements of the FDCPA,” to include misinterpretations of state law as well.

    The court did, however, partially grant the defendant’s motion for summary judgment with respect to the application of pre-judgment interest.

    Courts FDCPA Interest State Issues

  • Credit repair trade association sues CFPB over TSR six-month waiting period

    Courts

    On May 21, a credit repair trade association filed a complaint against the CFPB in the U.S. District Court for the Southern District of Florida alleging the Bureau violated the credit repair organizations’ First Amendment rights under the Constitution by enforcing a six-month payment waiting period in the FTC’s Telemarketing Sales Rule (TSR). The association is challenging Section 310.4(a)(2)(ii) of the TSR, which prohibits credit repair organizations from requesting or receiving payment for services rendered for a minimum of six months after the services have been performed. The complaint alleges that the prohibition (i) exceeds the FTC’s statutory authority under the Telemarketing and Consumer Fraud and Abuse Prevention Act; (ii) conflicts with the Credit Repair Organizations Acts (CROA); and (iii) is an infringement on the First Amendment rights of credit repair organizations by improperly impairing fully protected speech. Specifically, the association argues that the TSR is only applicable to credit repair organizations in certain situations, and the CROA—which does not require the six-month waiting period nor proof that “results were achieved”—is “the final and decisive law concerning credit repair organizations, including the time and manner of their billing practices.” Moreover, the complaint argues that the Bureau does not have the authority to enforce the TSR against credit repair organizations, as the Dodd-Frank Act did not explicitly transfer the authority from the FTC. The complaint is seeking a declaratory judgment that the TSR is unenforceable, invalid, and unlawful.

    Courts CFPB Telemarketing Sales Rule Credit Repair Dodd-Frank FTC Credit Repair Organizations Act

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