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FTC reaches settlements with two student loan debt relief operators
On December 7, as part of Operation Game of Loans—a coordinated effort between the FTC and state law enforcement—the FTC announced settlements with operators of two student loan debt relief operations to resolve allegations that the defendants violated the FTC Act and the Telemarketing Sales Rule by, among others (i) charging consumers who purchased the debt relief services illegal upfront fees; and (ii) falsely promising to assist consumers in enrolling in government programs that would reduce or forgive their student loan debt.
Under the terms of the settlement, the defendants are 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. Combined, the settlements total more than $36 million, though judgments have been partially suspended due to the defendants’ inability to pay.
Illinois Attorney General settles with bank over pre-crisis marketing and sale of RMBS
On December 4, the Illinois Attorney General announced a $17.25 million settlement with a national bank resolving allegations of misconduct in the marketing and sale of residential mortgage backed securities (RMBS) dating back to before the 2008 mortgage crisis. According to the announcement, the bank’s $17.25 million settlement will be distributed to the Teachers Retirement System of the State of Illinois, the State Universities Retirement System of Illinois, and the Illinois State Board of Investment. Additional details on the settlement have not been made available by the state.
Virginia Attorney General joins bipartisan coalition to stop or reduce robocalls
On December 6, Virginia Attorney General Mark Herring announced he is joining a bipartisan group of 40 state Attorneys General to stop or reduce “annoying and dangerous” robocalls. The multistate group is reviewing, through meetings with several major telecom companies, the technology the companies are pursuing to combat robocalls. According to the announcement, the working group’s goals are to (i) develop an understanding of the technology that is feasible to combat unwanted robocalls; (ii) encourage the major telecom companies to expedite a technological solution for consumers; and (iii) determine if the states should make further recommendations to the FCC. As previously covered by InfoBytes, in October, a group of 35 Attorneys General, including Herring, submitted reply comments to the FCC in response to a public notice seeking ways the FCC could create rules that would enable telephone service providers to block more illegal robocalls. In their comments to the FCC, the coalition encouraged the FCC to implement rules and additional reforms that go beyond the agency’s 2017 call-blocking order, which allows phone companies to proactively block illegal robocalls originating from certain types of phone numbers.
FDIC updates Affordable Mortgage Lending Guide
On December 6, the FDIC issued FIL-84-2018 announcing updates to the Affordable Mortgage Lending Guide, Part I: Federal Agencies and Government Sponsored Enterprises (Guide), which reflect current information available about mortgage products offered through Fannie Mae and Freddie Mac. The Guide covers federal programs targeted to a variety of communities and individuals including rural, Native American, low- and moderate-income, and veterans, and is designed to provide community banks resources “to gain an overview of a variety of products, compare different products, and identify next steps to expand or initiate a mortgage lending program.” Updates to the Guide include, among other things, (i) revisions to the Program Matrix; (ii) changes to student loan debt in FHA, Fannie Mae, and Freddie Mac programs; and (iii) updates to certain FHA loan insurance products, USDA single family housing programs, and various Fannie Mae and Freddie Mac products.
Freddie Mac announces temporary selling requirements related to California wildfires
On December 6, Freddie Mac issued Bulletin 2018-25 (Bulletin), announcing temporary selling requirements for certain mortgages secured by properties located in identified zip codes that were impacted by the California wildfires. With respect to properties located in the eligible areas with a mortgage application date on or before November 12, 2018 and a note date on or before May 12, 2019, the Bulletin, among other things, provides (i) age of documentation requirements that will remain in effect for six months; (ii) specific collateral requirements and guidance; and (iii) seller reimbursement for certain property inspections.
U.S.-based agriculture company discloses investigation
On November 30, a U.S.-based agriculture company disclosed in an SEC filing that it is cooperating with an investigation being conducted by the SEC and DOJ involving payments made to Mexican customs officials. The payments were made in connection with grain shipments crossing the U.S.-Mexican border by train. The company is a Fortune 100 company that is owned primarily by farmer and rancher cooperatives and has extensive operations in the energy sector in addition to agriculture.
The SEC filing states that the company voluntarily self-disclosed the potential violations and stressed the company’s full cooperation with the investigation, which includes “investigating other areas of potential interest to the government.” The DOJ has placed great emphasis on the importance of voluntary self-disclosure and cooperation in recent policy statements. See previous Scorecard coverage here. This investigation is noteworthy because while investigations in the energy sector are common, investigations in the agricultural sector are less so. The eventual resolution of this investigation may provide useful guidance for other agribusiness companies.
UK Serious Fraud Office ends first deferred prosecution agreement with a South African bank
On November 30, the United Kingdom’s Serious Fraud Office (SFO) announced the successful conclusion of the deferred prosecution agreement entered into in 2015 with a South African bank, which had followed allegations that payments were made by two former employees to bribe members of the Tanzanian government. This deferred prosecution agreement was the first ever entered into by the SFO and also marked the first use of Section 7 of the Bribery Act of 2010—failure of commercial organizations to prevent bribery—by any U.K. prosecutor. Upon entering into the deferred prosecution agreement in 2015, the bank had also settled related charges with the SEC. See previous Scorecard coverage here.
The DPA required the bank to pay fines and disgorgement totaling almost $26 million, pay an additional $6 million to compensate the government of Tanzania, and hire an external compliance consultant. On the basis that the bank had fully complied with the terms of the agreement, the SFO announced that it had advised the relevant UK court that it will conclude the DPA without restarting proceedings against the bank. The SFO’s announcement also promised that a “Details of Compliance” document outlining how the bank met the terms of the deferred prosecution agreement would be published on the SFO’s website in the future. Because this is the SFO’s first deferred prosecution agreement, this document could be very useful guidance for companies to understand what measures will be expected to satisfy the SFO.
California DBO requests comments on future rulemaking for commercial financing disclosures
On December 4, the California Department of Business Oversight (DBO) released an invitation for comments from interested stakeholders in the development of regulations to implement the state’s new law on commercial financing disclosures. As previously covered by InfoBytes, on September 30, the California governor signed SB 1235, which requires non-bank lenders and other finance companies to provide written consumer-style disclosures for certain commercial transactions, including small business loans and merchant cash advances. Most notably, the act requires financing entities subject to the law to disclose in each commercial financing transaction —defined as an “accounts receivable purchase transaction, including factoring, asset-based lending transaction, commercial loan, commercial open-end credit plan, or lease financing transaction intended by the recipient for use primarily for other than personal, family, or household purposes”—the “total cost of the financing expressed as an annualized rate” in a form to be prescribed by the DBO.
The act requires the DBO to first develop regulations governing the new disclosure requirements, addressing, among other things, (i) definitions, contents, and methods of calculations for each disclosure; (ii) requirements concerning the time, manner, and format of each disclosure; and (iii) the method to express the annualized rate disclosure and types of fees and charges to be included in the calculation. While the DBO has formulated specific topics and questions in the invitation for comments covering these areas, the comments may address any potential area for rulemaking. Comments must be received by January 22, 2019.
CFPB sues mortgage company for allegedly deceiving veterans about refinance benefits
On December 6, the CFPB announced the filing of a complaint and proposed final judgment in the U.S. District Court for the District of Nevada against a non-bank mortgage company for allegedly deceiving veterans about the benefits of refinancing their mortgages in violation of the Consumer Financial Protection Act. According to the complaint, during in-home presentations, the company would allegedly use flawed “apples to apples” comparisons between the consumers’ mortgages and an Interest Rate Reduction Refinancing Loan (a loan, guaranteed by the Department of Veterans Affairs, which allows veterans to refinance mortgages at lower interest rates). The Bureau alleges the presentations misrepresented the future cost savings of the refinance by (i) inflating the future amount of principal owed under the existing mortgage; (ii) overestimating the future loan’s term, which underestimated the future monthly payments; and (iii) overestimating the total monthly benefit of the loan after the first month.
If ordered by the court, the judgment would require the company to pay $268,869 in redress to consumers and a civil penalty of $260,000; it would also prohibit the company from misrepresenting the terms or benefits of mortgage refinancing.
CFPB’s latest fair lending report focuses on promoting fair, equitable, and nondiscriminatory access to credit
On December 4, the CFPB issued its sixth fair lending report to Congress, which outlines the Bureau’s efforts in 2017. According to the report, in 2017, the Bureau continued to focus on promoting fair, equitable, and nondiscriminatory access to credit, highlighting several fair lending priorities such as redlining, mortgage and student loan servicing, and small business lending. The report also addresses the Bureau’s risk-based prioritization approach to supervisory examinations and enforcement activity relating to underwriting, pricing, steering, servicing, and HMDA data integrity. Specifically, the report covers fair lending supervision and enforcement activities, guidance and rulemaking, and interagency coordination efforts, including (i) taking enforcement actions against a bank for alleged credit card lending discrimination, and a mortgage lender that allegedly failed to accurately report consumer application and loan data; (ii) issuing its first no-action letter to a company that uses alternative, non-traditional data and modeling techniques “to make credit and pricing decisions to support innovation and enable people with limited credit history, among others, to obtain credit or obtain credit on better terms”; (iii) collaborating with other federal banking regulators to issue, among other things, the “HMDA Examiner Transaction Testing Guidelines,” which present uniform guidelines for examiners when evaluating whether covered mortgage lenders are reporting accurate data; and (iv) communicating fair lending information to the public through various platforms. Notably, the report is silent regarding plans for upcoming fair lending activities in 2019, unlike previous reports that included future actions. (See InfoBytes coverage on the 2016 report here.)