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Court preliminarily approves $30 million settlement for post-payment interest charges on FHA mortgages
On August 22, the U.S. District Court for the Northern District of California preliminarily approved a $30 million settlement resolving allegations that a national bank improperly collected post-payment interest on FHA-insured mortgages but did not use the FHA-approved form to provide the disclosures to consumers before doing so. The settlement covers a nationwide class of borrowers who, between June 1996 and January 2015, obtained an FHA-insured mortgage loan. The settlement requires the bank to pay $30 million.
3rd Circuit reverses dismissal of FDCPA action over voicemail
On August 22, the U.S. Court of Appeals for the 3rd Circuit reversed the dismissal of a putative class action claim alleging a debt collector violated the FDCPA when it used an “alternative business name” in a voicemail. According to the opinion, the consumers allege the debt collector violated three sections of the FDCPA by leaving voicemail messages identifying itself by a different business name than the company’s corporate name. The lower court dismissed all three FDCPA claims for failure to state a claim. The panel affirmed the dismissal as to two counts of the amendment complaint, but reversed as to the third, finding that the consumers stated a plausible claim that the debt collector violated the FDCPA’s “true name” provision. The panel cited to FTC interpretive guidance, which notes a company may use a name other than its registered name so long as “it consistently uses the same name when dealing with a particular consumer.” The court found that the alternative name used in the voicemails is “neither [the company]’s full business name, the name under which it usually transacts business, nor a commonly used acronym of its registered name” and the name used is actually associated with other debt collection companies. Therefore, the consumers stated a plausible claim under the “true name” provision of the FDCPA.
29 bipartisan state Attorneys General respond to FTC's consumer protection hearing announcement
On August 20, a bipartisan coalition of 29 state Attorneys General, led by Oregon Attorney General Ellen Rosenblum, submitted a comment letter to the FTC regarding the agency’s June announcement of public hearings on “Competition and Consumer Protection in the 21st Century.” The letter requests that the state Attorneys General be included in the discussions regarding consumer protection during the agency’s hearing process, which intends to address “whether broad-based changes in the economy, evolving business practices, new technologies, or international developments might require adjustments to competition and consumer protection enforcement law, enforcement priorities, and policy.” The letter emphasizes the states’ “long history of protecting consumers from unfair and deceptive practices” under each state’s consumer protection authority and offers specific comment on three areas of the FTC request: (i) privacy and big data; (ii) communication and media technology; and (iii) algorithmic decision tools and other artificial intelligence. Specifically, the Attorneys General note consumers’ concerns over personal information and data security, stating the “[i]ndustry must place privacy and security front and center in its research and development of products and services.” The letter concludes with a request that the agency take into account the “important role” the Attorneys General have in consumer protection and include their offices in the hearing process.
17 state Attorneys General urge HUD not to change Disparate Impact Regulation
On August 20, 17 state Attorneys General in a comment letter urged HUD to not make any changes to its 2013 Disparate Impact Regulation (regulation), which implements the Fair Housing Act’s disparate impact standard, as well as the 2016 Application of the Fair Housing Act’s Discriminatory Effects Standard to Insurance (supplement). The comment letter responded to HUD’s June advance notice of proposed rulemaking (ANPR), which sought comments on whether the 2013 regulation and the 2016 supplement are consistent with the 2015 Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (Covered by a Buckley Sandler Special Alert.)
In the letter, the Attorneys General state that the regulation “strikes the proper balance between promoting an integrated society and protecting housing providers from unmeritorious discrimination claims” and is “entirely consistent” with the Supreme Court decision. The letter cites to multiple federal and state court decisions, which have held that the regulation is “‘adopted’ by, or consistent with, the Supreme Court decision” and emphasizes that, to their awareness, no court has held the regulation to be inconsistent. Conversely, even if the Supreme Court decision left room for revisions to the regulation, the letter notes that the issues of segregation and discrimination in the housing and lending market have not dissipated in the five years since the regulation was finalized and therefore, no revisions are warranted. Lastly, among other points, the Attorneys General conclude that any revisions would “reduce clarity and add uncertainty because any revision would likely fail to rely on the half century of disparate impact case law.”
The letter was led by North Carolina Attorney General, Josh Stein. The other state Attorneys General included California, Illinois, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia and Washington as well as the District of Columbia.
9th Circuit holds plaintiff must establish defendant’s net worth to seek damages under FDCPA
On August 20, the U.S. Court of Appeals for the 9th Circuit held that the plaintiff bears the burden of establishing a defendant’s net worth when seeking an award of class statutory damages in an FDCPA action. The appeals court affirmed the lower court’s dismissal of the plaintiff’s class action, which alleged a law firm’s letters violated the FDCPA by using “false, deceptive, or misleading representation[s].” The panel found that the language of the FDCPA’s class statutory damages provision—"not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector"— makes it clear that a defendant’s net worth is a prerequisite to establishing statutory damages. The court noted that the FDCPA is silent as to which party bears the burden, but the “ordinary default rule” establishes the burden upon the party seeking relief and there is no reason to believe Congress intended otherwise under the FDCPA. The court rejected the plaintiff’s argument that because the defendant has “superior access” to the evidence of net worth, it must bear the burden because it is “not uniquely difficult for consumer plaintiffs to acquire the debt collector’s financial information.” Because the plaintiff failed to present evidence of the law firm’s net worth, the 9th Circuit concluded the lower court was correct in dismissing the action.
NYDFS launches online registration form for credit reporting agencies to comply with new regulation
On August 22, the New York Department of Financial Services (NYDFS) announced an online registration form for credit reporting agencies (CRAs) to comply with the state’s final regulation that requires CRAs with significant operations in New York to register with NYDFS and to comply with New York’s cybersecurity regulation. (As previously covered by InfoBytes, the newly promulgated regulation, entitled “Registration Requirements & Prohibited Practices for Credit Reporting Agencies,” 23 NYCRR 201, requires CRAs that reported on 1,000 or more New York consumers in the preceding year to register annually with NYDFS.) Registration must be complete by September 15 of this year and by February 1 of each successive year for the calendar year thereafter. Under the new regulation, CRAs are also required to comply with New York’s cybersecurity requirements by November 1, which requires, among other things, covered entities have a cybersecurity program designed to protect consumers’ data and controls and plans to help ensure the safety and soundness of New York’s financial services industry. (Continuing InfoBytes coverage on NYDFS’ cybersecurity regulation available here.)
FHA updates loss mitigation options for mortgages in certain areas of Puerto Rico and the U.S. Virgin Islands
On August 15, the Federal Housing Administration (FHA) released Mortgagee Letter 2018-05 (ML 2018-05), which updates loss mitigation options for certain FHA-insured mortgages located in Puerto Rico or Virgin Islands. The properties must be located in Presidentially-Declared Major Disaster Areas (PDMDAs) as a result of Hurricane Maria. In adition, FHA is also instituting a 30-day foreclosure moratorium on certain properties located in Puerto Rico or the Virgin Islands that FEMA has declared to be eligible for individual assistance. (As previously covered by InfoBytes, ML 2018-03 had extended an existing moratorium through August 16.) Additionally, in order to reduce foreclosures and minimize losses to the Insurance Fund, ML 2018-05 provides updated loss mitigation options “designed to provide greater alternatives to foreclosure for mortgagees to use with borrowers in the designated PDMDAs.” The new options supersede the previous ones offered in ML 2018-01 and rearrange the loss mitigation waterfall in order to provide expedited permanent loss mitigation solutions by considering “Disaster Standalone Partial Claims” earlier. This option would allow borrowers, among other things, to maintain their pre-disaster monthly payment of principle and interest and does not change interest rate and term of the mortgage. These loss mitigation options must be implemented by September 15 and expire May 1, 2019. The foreclosure mortgage moratorium is effective immediately and applies to the initiation of foreclosures and foreclosures already in process.
Illinois updates Residential Mortgage License Act
On August 14 and 10, the Illinois governor signed HB 4404 and SB 2615, which amend the Illinois Residential Mortgage License Act of 1987. Effective immediately, SB 2615, now Public Act 100-0795, requires, among other things, that mortgage loan advertisements in Illinois, whether print or electronic, reference the Nationwide Multistate Licensing System (NMLS) and Registry’s Consumer Access website, except where exempted by the Secretary of Financial and Professional Regulation.
HB 4404, now Public Act 100-0851, provides that an entity that is engaged solely in independent loan processing through the sponsoring of individuals is considered exempt from the licensing requirements of the Residential Mortgage License Act but is required to annually apply through the NMLS for an exempt company registration for the purpose of sponsoring one or more licensed mortgage loan originators. The changes are effective immediately.
Court approves 1.8 million FCRA class action settlement with national bank
On August 16, the U.S. District Court for the Northern District of California approved a $1.8 million class action settlement resolving allegations that a national bank’s soft credit report inquiries were not permitted under the Fair Credit Reporting Act (FCRA). In 2015, a consumer filed the class action complaint alleging that the bank pulled his credit information without consent following a bankruptcy. The consumer alleged that because his debts to the bank had been discharged, the bank did not have a “permissible purpose” to pull the credit information. The approved settlement covers 114,512 claimants, who state their credit reports were accessed without permission by the bank, and grants each claimant $4.06. The settlement also requires the bank to pay attorneys’ fees and litigation costs for the plaintiff.
Illinois law prevents disciplinary actions against professional licenses for student loan defaults
On August 14, the Illinois governor signed into law the “Illinois Career Preservation and Student Loan Repayment Act,” Public Act 100-0872, which amends various Illinois laws with the purpose of preventing state government agencies or boards from denying, refusing to renew, suspending, revoking, or initiating another disciplinary action upon a state professional license for a person’s failure to perform on a state guaranteed student loan or grant. The act is effective immediately.