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Virginia requires licensure of debt settlement service providers
On April 7, the Virginia governor signed HB 1553, which outlines licensing and regulatory requirements for debt settlement services providers. Among other things, HB 1553 specifies that all debt settlement services providers must be licensed by the state, must file a bond with the state commissioner, and must comply with outlined record retention, reporting, and examination requirements. HB 1553 also outlines prohibited conduct, including prohibiting licensees from accepting a fee from a consumer prior to providing the requested debt settlement service, or from using false, misleading, or deceptive advertisements in connection with the offered services. HB 1553 also provides for cease and desist orders and civil penalties to be issued against licensees that violate these requirements, grants consumers a private right of action against licensees, and makes a violation a prohibited practice under the Virginia Consumer Protection Act. Additionally, the State Corporation Commission is directed to “establish a procedure, to be in effect by March 1, 2021, for any person to apply, prior to July 1, 2021, for a license” that will take effect when HB 1553’s requirements become effective on July 1, 2021.
2nd Circuit: Interest disclosure in collection letter did not violate FDCPA
On April 9, the U.S. Court of Appeals for the Second Circuit affirmed a district court’s dismissal of an FDCPA action, holding that a debt collection letter that stated interest, late charges, and other charges “may” vary from day to day is not deceptive or misleading. According to the opinion, the plaintiff co-signed a student loan that fell into default and was charged-off. The creditor purchased the debt and placed the account with a collection agency (collectively, defendants), and a letter was sent to the plaintiff that included a “‘time sensitive’ offer” to pay a slightly reduced amount, as well as the following language: “Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater.” The plaintiff filed a class action complaint against the defendants, claiming the letter violated the FDCPA because it suggested that late fees and other charges could accrue, even though “such charges are not legally or contractually available.” After the defendants filed a motion to dismiss, the plaintiff filed an amended complaint adding more allegations. However, the amended complaint was marked as “deficient,” and because the 21-day window had closed, the plaintiff was required to request leave from either the defendants or the district court to re-file. The defendants did not consent to re-filing, and the district court denied the plaintiff’s motion for leave and granted the defendants’ motion to dismiss.
On appeal, the 2nd Circuit first examined whether the plaintiff had timely filed her amended complaint. In concluding that the amended complaint was timely filed (notwithstanding the deficiency notice), the appellate court stated that “when a plaintiff properly amends her complaint after a defendant has filed a motion to dismiss that is still pending, the district court has the option of either denying the pending motion as moot or evaluating the motion in light of the facts alleged in the amended complaint.” However, the appellate court nevertheless concluded that the district court properly dismissed the plaintiff’s amended complaint on the merits because she failed to sufficiently state a plausible claim for relief. Furthermore, because the initial letter said that interest and late charges “may” be applied to the balance, the appellate court concluded that the letter was not inaccurate and therefore not deceptive or misleading under the FDCPA even though the debt collector had not previously charged interest and did not intend to do so in the future. Moreover, acknowledging that interest may accrue is not “threatening” language under the FDCPA, the appellate court wrote.
FDIC encourages relief for Oregon borrowers affected by severe weather
On April 10, the FDIC issued FIL-42-2020 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Oregon affected by a recent series of severe weather. In the letter, the FDIC encourages institutions to consider, among other things, (i) extending repayment terms; (ii) restructuring existing loans; or (iii) easing terms for new loans to borrowers affected by the severe weather, provided the measures are “done in a manner consistent with sound banking practices, can contribute to the health of the local community and serve the long-term interests of the lending institution.” Additionally, the FDIC notes that institutions may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The FDIC states it will also consider regulatory relief from certain filing and publishing requirements.
Find continuing InfoBytes coverage on disaster relief guidance here.
SBA, Treasury release additional PPP FAQs
On April 15 and 14, the Small Business Administration (SBA) and the Treasury Department (Treasury) provided additional guidance to the Paycheck Protection Program (PPP) frequently asked questions (FAQs) to address lender concerns about, among other things, application submissions, signature requirements, and applications from SBA employees and family. Some of the FAQs include the following guidance:
- Lenders may submit loan applications through E-Tran only after collecting the same borrower information and certifications contained in the application form, and performing a good faith review of the borrower’s payroll calculations.
- Lenders that submitted applications prior to April 14 without collecting the required borrower information and certifications must do so as soon as possible before loan closing.
- Lenders may accept scanned copies of loan applications, borrower certifications, and other required documents. E-sign compliant electronic signatures and consents may also be accepted.
On April 13, one of the SBA and Treasury FAQs—also included on FinCEN’s website along with FAQ 18—discusses beneficial ownership requirements for PPP loans. For new customers, lenders meet their beneficial ownership obligations by collecting the following information from natural persons with ownership stakes in the applicant of 20 percent or greater: “owner name, title, ownership %, TIN, address, and date of birth.” SBA and Treasury also released an FAQ that addressed lender submission requirements prior to issuing PPP loans. FAQ 21 states that lenders are required to sign the lender application form for the PPP (SBA Form 2484) in order to issue PPP loans, but lenders do not need a separate SBA Authorization. Terms and conditions in the lenders’ promissory note must be consistent with CARES Act sections 1102 and 1106 as well as the PPP Interim Final Rule. Additional FAQs from this date address nonbank lenders, the $10 million loan cap, and the affiliation rules applicability to various kinds of businesses.
Please see Buckley’s dedicated SBA page, which includes additional SBA resources.
FTC provides advice to mortgage borrowers impacted by Covid-19
On April 14, the FTC released guidance entitled “Coronavirus and your mortgage” to provide financial information to consumers affected by the Covid-19 pandemic. The guidance points out that many mortgage borrowers facing Covid-19-related financial hardships may benefit from CARES Act protections. Starting on March 18, borrowers with federally-backed mortgages cannot have foreclosure proceedings instituted against them for 60 days. The CARES Act also provides borrowers the right to request forbearance for up to 180 days in order to temporarily freeze or lower mortgage payments. After the forbearance period ends, borrowers may request an additional forbearance for up to 180 days if they are still having trouble making mortgage payments as a result Covid-19. The FTC’s guidance provides contact information for the GSEs so borrowers can determine if their mortgages are federally backed. In addition, the guidance encourages all borrowers to contact their servicers for available payment options and assistance. The FTC suggests that approved housing counselors may also help, and can be found on the Department of Housing and Urban Development’s website here, while the Homeownership Preservation Foundation may be able to assist borrowers in making payment arrangements with their mortgage servicers. (See website here.) The FTC advises borrowers to check state government websites for state-specific information, though the agency warns borrowers to be wary of mortgage relief scams. Finally, the guidance reminds borrowers never to pay up-front for help with their mortgage payments and provides additional links for more detailed information.
Wisconsin DFI issues emergency guidance on debt collection
On April 13, the Wisconsin Department of Financial Institutions issued guidance on debt collection practices that are prohibited during the Covid-19 crisis. Among them are repeated telephone calls and unsolicited threats to sue. The guidance warns that debt collectors that fail to respect hardships arising from the Covid-19 pandemic “should expect to be judged harshly.”
California insurance commissioner issues bulletin requiring premium refunds, credits, and reductions
On April 13, the California insurance commissioner issued Bulletin 2020-3 to property and casualty insurers regarding premium refunds, credits, and reductions in response to Covid-19. In light of the reductions in risk across certain lines of insurance as a result of reduced activity during Covid-19, insurers are required to make an initial premium refund for the months of March and April to all adversely impacted California policyholders for certain lines of insurance as soon as practicable but within 120 days from April 13. The bulletin contains additional guidance regarding how to refund the premiums, whether approval is required from the Department of Insurance for certain changes in premiums, and reporting requirements for actions taken.
Massachusetts attorney general: CARES Act payments are exempt from seizure
On April 13, the Massachusetts Office of the Attorney General notified creditors and debt collectors that, in its view, stimulus payments made under the CARES Act are exempt from garnishment or attachment by creditors under Massachusetts law, and remain exempt regardless of how the funds are deposited or held after receipt. Any act, or threat to act, to garnish, attach, or otherwise seize the funds will be a violation of the attorney general’s regulations governing debt collection.
Pennsylvania Insurance Department issues guidance for insurance companies
On April 13, the Pennsylvania Insurance Department issued Notice #2020-10 addressing obligations of domestic insurance companies during the Covid-19 pandemic. The notice details (i) extensions of 30 or 60 days for various regulatory filing deadlines; (ii) waivers of the hard copy, original signature, notarization and other in-person related filing requirements; and (iii) adjustments for remote examinations.
Pennsylvania Insurance Department encourages premium finance companies to offer grace periods
On April 13, the Pennsylvania Insurance Department issued Notice #2020-11 communicating its expectations for premium finance companies during the Covid-19 pandemic. Such companies, and the insurance carriers they work with, are encouraged to extend grace periods for loan payments, be flexible with regard to determinations of default, and waive delinquency or other late payment charges.