InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
9th Circuit: Providing disclosure with employment documents does not violate FCRA
On April 24, the U.S. Court of Appeals for the Ninth Circuit affirmed a district court’s ruling that an employer that obtained a consumer report for employment purposes did not violate the FCRA when it provided disclosure simultaneously with other documents and failed to use a standalone document for the FCRA authorization. The plaintiff, a former employee, alleged that during the hiring process, applicants were presented with employment documents and were required to sign two forms related to consumer reports: (i) a separate “disclosure” form that informed applicants that the employer could obtain reports pertaining to their employment record, drug tests, and driving record; and (ii) an “authorization” form appearing at the end of the application, which authorized the employer or its agent or subsidiary to investigate the applicant’s previous employment record. The plaintiff’s suit alleged that the forms violated the FCRA’s standalone disclosure requirement because the defendant presented the forms at the same time as other application materials and failed to place the authorization on a standalone document. The district court granted summary judgment to the defendant.
On appeal, the 9th Circuit rejected the plaintiff’s argument, concluding that there is nothing that prohibits an employer from “providing a standalone FCRA disclosure contemporaneously with other employment documents.” While the 9th Circuit acknowledged that the FCRA requires a disclosure form to contain nothing more than the disclosure itself, “no authority suggests that a disclosure must be distinct in time, as well.” With respect to the authorization, the appellate court rejected the argument that it violated the FCRA because “the authorization subsection of FCRA lacks the disclosure subsection’s standalone document requirement” and only requires that the authorization be in writing.
NCUA to seek information about emerging credit risks
On April 29, the National Credit Union Administration announced that it expanded its Covid-19 outreach to federally-insured credit unions to identify emerging credit risks. The NCUA notified regulated entities that examiners will contact them between May 4 and May 18 to discuss a list of questions concerning operating status, status of cash reserves and withdrawals, liquidity status, loans in forbearance, and balance of loans with outstanding balances.
CFPB enhances Consumer Complaint Database
On April 27, the CFPB announced enhancements to its Consumer Complaint Database. With the addition of a geospatial view, consumers will now be able to view complaints by state using an interactive map. Additional new options will also allow users to view recent marketplace conditions and aggregate information concerning specific products and issues compiled from consumer complaints. In addition to being able to filter complaints by date, company name, and key words, users will now be able to apply word searches and filters to the interactive map.
Connecticut Insurance Department will grant extensions to foreign insurers for hard copy filings
On April 29, the Connecticut Department of Insurance issued a bulletin to foreign-chartered insurers, health care centers, and fraternal benefit societies authorized to do business in Connecticut discussing regulatory relief in light of the Covid-19 pandemic. The department continues to require that foreign companies timely make all required electronic filings. However, upon request, it will grant an additional 30 or 45 days to complete many hard copy filings, a list of which is included in the bulletin.
Connecticut Insurance Department will grant extensions to domestic insurers for hard copy filings
On April 29, the Connecticut Department of Insurance issued a bulletin to state-chartered insurers, health care centers and fraternal benefit societies discussing regulatory relief in light of the Covid-19 pandemic. The department continues to require that domestic companies timely make all required electronic filings. However, upon request, it will grant an additional 30, 45, 60 or 90 days (depending upon the type of filing) to complete many hard copy filings. A list of these filings is included in the bulletin.
Maryland governor prohibits garnishment of CARES Act recovery rebates
On April 29, the governor of Maryland issued an executive order prohibiting any garnishment or setoff of CARES Act recovery rebates. The order also provides that Maryland-incorporated banks and credit unions have no right of setoff or lien upon funds in a customer or member’s account that are traceable to a CARES Act recovery rebate.
Iowa adopts rulemaking for remote notarial acts
On April 29, the Iowa secretary of state adopted rules governing remote notarizations. The rules, which take effect July 1, 2020, govern training, technology, standards for communication, and proof of identity for remote notarial acts.
SBA, Treasury discuss borrower eligibility for PPP loans
On April 29, the Small Business Administration (SBA), in consultation with the Department of Treasury (Treasury) released two new frequently asked questions (FAQs) regarding the Paycheck Protection Program (PPP). The new guidance states that businesses in operation as of February 15, 2020 are eligible to apply for PPP loans, even if the business changes ownership after that date, as long as all other criteria are met. The SBA also plans to review each PPP loan of $2 million or more after the lender submits the small business borrower’s application for forgiveness, and states that as long as lenders follow the PPP lender requirements, all loans will retain the SBA guarantee no matter what the SBA review concludes. A joint Treasury and SBA statement suggests that because a “large number of companies” returned their PPP loans after the SBA issued guidance on PPP borrower loan certification (covered by InfoBytes here), the review of loans $2 million and above will “ensure PPP loans are limited to eligible borrowers.”
Earlier in the week, Treasury and the SBA added additional guidance in the FAQs addressing various other eligibility questions. These include:
- Borrowers should refer to FAQ #31 (covered by InfoBytes here) to determine whether a small business “owned by large companies with adequate sources of liquidity to support the business’s ongoing operations” would be eligible to apply for a PPP loan;
- Housing stipends or housing allowances to employees are compensation and should be included in the employer’s calculation of payroll costs;
- To determine an employee’s principal place of residence, lenders and borrowers should consult IRS regulations (26 CFR §1.121-1(b)(2));
- Agricultural producers, farmers, and ranchers can apply for PPP loans as long as the individual or entity meets certain criteria, including that it has 500 or fewer employees or $1 million or less in annual receipts;
- Agricultural cooperatives and other cooperatives may apply for PPP loans as long as they meet all PPP requirements; and
- Small business PPP loan applicants must count all employees—full-time and part-time—when calculating whether the small business has 500 or fewer employees.
On April 24, the SBA issued an interim final rule stating, among other things, that hedge funds and private equity firms are not eligible to apply for PPP loans, and that companies in private equity portfolios should consider whether they can make the required good faith certification of need for the PPP loans. In addition, small businesses in bankruptcy proceedings are not eligible to apply for PPP loans.
CFPB issues TRID interpretive rule, ECOA FAQ
On April 29, the CFPB issued an interpretive rule (IR) “clarifying that consumers can exercise their rights to modify or waive certain required waiting periods” in order to allow borrowers impacted by Covid-19 to access mortgage credit faster. The IR states that if, as a result of the Covid-19 pandemic, a mortgage borrower determines that a mortgage transaction must be completed prior to the end of the waiting period for either the TRID Rule or the Regulation Z right of rescission rule, the borrower may waive the waiting period. Further, the IR asserts that the Covid-19 pandemic qualifies as a “changed circumstance” for purposes of certain TRID Rule provisions, permitting the use of revised estimates of settlement charges. In addition, the Bureau issued a frequently asked question that addresses the Equal Credit Opportunity Act Valuations Rule, which states that a first-lien loan borrower may also waive the requirement that a lender provide the borrower with appraisals and valuations at or before settlement of the loan.
UK FCA extends LIBOR benchmark deadline
On April 29, the United Kingdom’s Financial Conduct Authority (FCA) issued a follow-up statement that allows firms the ability to use the LIBOR interest rate benchmark in new sterling LIBOR linked loans for an addition six months due to the Covid-19 pandemic. The FCA acknowledges that due to challenges presented by the current operating environment, it is not feasible for lenders to complete the transition from LIBOR across all new sterling LIBOR linked loans before the original Q3 2020 target end date. The FCA provides several recommendations including: (i) lenders should be in a position to offer non-LIBOR linked products by the end of Q3; (ii) from Q3 onward, lenders and borrowers should agree on a process to facilitate conversion to an alternative rate prior to the end of 2021; and (iii) all new issuances of sterling LIBOR-referencing loan products that expire after the end of 2021 should cease by the end of Q1 2021. The announcement also reiterates the FCA’s previously stated position that the central assumption that firms cannot rely on LIBOR being published after the end of 2021 remains unchanged (covered by InfoBytes here).
Find continuing InfoBytes coverage on LIBOR here.