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Utah District Court says FDCPA does not bar state law claims
On January 23, the U.S. District Court for the District of Utah denied a debt collector’s motion to dismiss a plaintiff’s claim that the debt collector’s practices violated the Utah Consumer Sales Protection Act (UCSPA). After the plaintiff sued the debt collector for allegedly collecting amounts in excess of what was actually owed in violation of the FDCPA and the UCSPA, the debt collector moved to dismiss the claim under UCSPA because a more specific statute, the FDCPA, controls. In denying the motion, the court found that the plaintiff should not be denied remedies under UCSPA simply because a more specific federal law exists. The court noted that the UCSPA claim would only be barred if there were a more specific state statute that regulated debt collection and the debt collector did not identify one.
Ginnie Mae updates MBS program risk parameters
On January 25, Ginnie Mae issued an All Participant Memorandum (APM 18-02) announcing updates to multiple chapters of their MBS Guide. According to the memo, effective immediately, Chapters 3, 5, 9, 10, and 18 now provide expanded information about acceptable risk parameters for Ginnie Mae portfolios and applicable non-compliance consequences. Specifically, Chapter 3 is updated to include examples of violations of program requirements that Ginnie Mae considers outside of acceptable risk parameters, such as:
- “Rates of delinquency that are above the thresholds published in Chapter 18(3)(C) or that otherwise pose a risk to an Issuer’s responsibility to advance P&I payments to security-holders”;
- “‘Run-off’ portfolios, or business models that involve the recurring sale of substantially all the servicing created by issuance”;
- “Heavily-concentrated portfolios”; and
- “Recurring issuance of multi-issuer program packages that exhibit prepayment activity that is substantially different from that of comparable packages.”
Chapter 3 also includes examples of non-compliance restrictions that may be imposed, including but not limited to, requiring an Issuer’s portfolio to be recalibrated to fall within acceptable risk parameters.
Other MBS Guide updates include:
- Chapter 5. Expansion on risks associated with non-compliance of MBS program requirements, such as, (i) “denial of authority to issue additional securities;” and (ii) “the imposition of civil money penalties.”
- Chapter 9. Participation in a multiple Issuer pool is considered an event of non-compliance if Ginnie Mae has restricted, in writing, the Issuer’s ability to participate.
- Chapter 10. GinnieNET must be used for paperless electronic processing of pools submitted for immediate transfer of Issuer responsibility. Ginnie Mae reserves the right to reevaluate an Issuer’s participation in the Pools Issued for Immediate Transfer (PIIT) program based on compliance with Chapter 3’s applicable risk parameters.
Chapter 18. Failure to maintain delinquency rates may result in denial of participation in multiple Issuer pools, the PIIT program, and/or the imposition of additional financial obligations.
NYDFS promises to fill CFPB regulatory void
On January 25, the New York Department of Financial Services (NYDFS) Superintendent, Maria T. Vullo, issued a statement critical of the recent policy changes by the CFPB’s new leadership. As previously covered by InfoBytes, acting CFPB Director Mick Mulvaney announced, among other things, that the CFPB will no longer “push the envelope” in pursuit of the agency’s mission. Vullo stated that NYDFS remains “committed to its mission to safeguard the financial services industry and protect New York consumers,” and promised to fill the “regulatory voids” left by the new administration.
In December, as previously covered by InfoBytes, seventeen state attorneys general sent a letter to President Trump expressing concern about Mulvaney serving as acting director, and emphasizing that if the CFPB does not do the job, the states will “redouble our efforts at the state level to root out such misconduct and hold those responsible to account.”
Federal Reserve vice chairman evaluates post-crisis regulations
On January 19, Federal Reserve Vice Chairman for Supervision Randal Quarles spoke at the American Bar Association Banking Law Committee Annual Meeting to discuss his initial observations on the post-crisis regulation regime and provide a status update on the Fed’s key areas of focus for improving the “efficiency, transparency, and simplicity of regulation.” Quarles emphasized that there are a variety of means to improve efficiency, such as (i) addressing unintended adverse consequences of a regulation, or (ii) calibrating a regulation “more precisely to the risks in need of mitigation.” Transparency around rulemaking encourages a variety of perspectives, and simplifying regulations “promotes public understanding of regulation, promotes meaningful compliance by the industry with regulation, and reduces unexpected negative synergies among regulations,” he added.
According to Quarles, “small bank capital simplification, burden reduction in resolution planning, enhancements to stress testing, leverage ratio recalibration, and Volcker rule simplification” are common ground areas for improvement, efforts have progressed, and regulations have been proposed for changes, including extending the resolution planning cycle to reduce the reporting burden. Quarles also noted that the Fed expects to release a proposal on leverage ratio recalibration in the near future, and has started working with five banking agencies on a proposal to streamline the Volcker rule.
Another area of focus Quarles highlighted is the Fed’s plan to revisit the “advanced approaches” thresholds used to identify internationally active banks, including risk-based capital requirements as well as the supplementary leverage ratio. Quarles further noted that the current $250 billion-asset or $10 billion in on-balance-sheet foreign exposures thresholds were formulated more than a decade ago “and have not been refined since then.” Additionally, Quarles announced plans to work with his Fed colleagues to simplify the framework for loss absorbency requirements. According to Quarles, candidates for simplification include (i) eliminating the advanced approaches risk-based capital requirements; (ii) eliminating one or more stress testing ratios; and (iii) modifying the total loss-absorbing capacity requirements. The framework for making determinations of control under the Bank Holding Company Act—while not a post-crisis regulation—could also be improved to be less “burdensome and time-consuming,” Quarles added.
Finally, as previously covered in InfoBytes, Quarles commented on the Fed’s requests for comments issued last December on three proposals designed to increase stress testing transparency while also testing the resiliency of large, complex banks. “I believe that the disclosure we have provided does not go far enough to provide visibility into the supervisory models that often deliver a firm's binding capital constraint,” Quarles noted.
CFPB finalizes prepaid rule updates; moves effective date
On January 24, the CFPB released updates to the final rule governing prepaid accounts (Rule) delaying the effective date of the rule by one year, to April 1 2019. In December, as previously covered by InfoBytes, the Bureau announced its plan to delay the effective date and adopt final amendments to the Rule. In addition to certain clarifications and other minor adjustments, the updates include: (i) finalizing that the requirement for consumers to register their accounts to receive fraud and error protection benefits will only be applied prospectively, after a consumer’s identity has been verified; and (ii) creating a limited exception to certain provisions of the Rule for instances where traditional credit card accounts, subject to Regulation Z open-end credit rules, are linked to digital wallets.
Agencies offer CRA credit for certain disaster relief efforts
On January 25, the FDIC, OCC, and the Fed (collectively “Agencies”) issued an interagency statement on the availability of Community Reinvestment Act (CRA) credit for financial institution activities that “help revitalize or stabilize the U.S. Virgin Islands and Puerto Rico, which were designated as major disaster areas by the President because of Hurricane Maria.” Provided financial institutions continue to be responsive to the community needs of their own CRA assessment areas, the Agencies will now give “favorable consideration” to community development activities, such as assistance to displaced people, in the areas impacted by Hurricane Maria. The Agencies state that they may give higher consideration to activities aimed at assisting the low- and moderate-income affected areas but that general consideration will be given regardless of median or personal income.
11th Circuit denies revival of TCPA suit
On January 22, the U.S. Court of Appeals for the Eleventh Circuit denied an Ohio-based bank’s request for a rehearing en banc. Last August, the three-judge panel reinstated a suit accusing the bank of violating the Telephone Consumer Protection Act (TCPA) when it allegedly made “over 200 automated calls” to the consumer plaintiff who claimed to have partially revoked her consent by telling the bank to stop calling at certain times. As previously covered in InfoBytes, the appellate court’s August 2017 decision to remand the case for trial concluded that “the TCPA allows a consumer to provide limited, i.e., restricted, consent for the receipt of automated calls,” and that “unlimited consent, once given, can also be partially revoked as to future automated calls under the TCPA.” Furthermore, the decision made clear that the lower court erred in its decision to grant summary judgment in favor of the bank “because a reasonable jury could find that [the consumer plaintiff] partially revoked her consent to be called in ‘the morning’ and ‘during the workday’” during a phone call with a bank employee.
However, in its en banc rehearing petition, the bank argued that the “ruling is likely to create ambiguity amongst both consumers and callers regarding the ability of consumers to impose arbitrary limits on communications . . . despite the FCC’s consistent and unwavering proclamation that in order to revoke consent, consumers must clearly request no further communications.” The appellate court’s decision to deny the petition provides no explanation aside from noting that none of its active judges requested that the court be polled on a rehearing en banc.
Pennsylvania requires non-bank mortgage servicers to submit licensing applications through NMLS
On January 23, the Pennsylvania Department of Banking and Securities announced it will begin accepting licensing applications from non-bank servicers through the Nationwide Multistate Licensing System (NMLS) as early as April 1 as part of the state’s move to increase oversight into non-bank mortgage servicing. The licensing requirement falls within SB 751 (Act No. 81), which amended Title 7 of the Pennsylvania Consolidated Statutes to regulate certain mortgage servicing activities, and was signed into law on December 22 by Governor Tom Wolf. (See previous InfoBytes coverage here.) The deadline for submitting licensing applications is June 30.
New York, Montana governors sign executive orders to safeguard net neutrality
On January 24, New York Governor Andrew M. Cuomo signed an executive order to protect net neutrality in his state, while earlier on January 22, Montana Governor Steve Bullock signed his own executive order designed to “safeguard internet freedom.” Both executive orders have been issued in response to the FCC’s Declaratory Ruling, Report and Order released last December to rollback the 2015 Open Internet Order rules (known as “Net Neutrality” rules), which removes the restrictions barring providers from slowing down or speeding up web traffic based on business relationships. Under Governor Cuomo’s direction, New York State’s government must refrain from entering into any internet service contracts with ISPs that do not agree to follow the Net Neutrality rules. Similarly, Governor Bullock ordered the procurement process for telecommunication services to require that contract recipients adhere to the neutrality principles.
As previously covered in InfoBytes, a coalition of 22 state attorneys general filed a protective petition for review in the D.C. Circuit Court of Appeals to block the FCC’s Order. See here for additional InfoBytes coverage on Net Neutrality rules.
OFAC continues to expand North Korean sanctions
On January 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) imposed additional sanctions in response to North Korea's ongoing weapons development programs, continued sanctions evasions, and United Nations Security Council Resolutions violations. The sanctions were issued against nine entities, 16 individuals, and six vessels pursuant to Executive Orders 13810 or 13687. Five of the sanctioned individuals have links to North Korean financial networks, with several of the individuals in possession of accounts held at Chinese banks. All property held by the sanctioned individuals and entities within U.S. jurisdiction was frozen, and transactions between the sanctioned individuals and entities and Americans are also prohibited.
See here for previous InfoBytes coverage on North Korean sanctions.