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  • 2nd Circuit affirms dismissal of FDCPA action

    Courts

    On March 12, the U.S. Court of Appeals for the 2nd Circuit affirmed dismissal of a consumer’s action against a debt collector, holding that the collection letter complied with the FDCPA. According to the opinion, the consumer filed a putative class action alleging the letter he received from the debt collection company violated Sections 1692e and 1692g of the FDCPA because it failed to inform him of details about his debt, such as what portion is principal and if there is interest. Additionally, the consumer alleged the letter conveyed the “mistaken impression ‘that the debt could be satisfied by remitting the listed amount as of the date of the letter, at any time after receipt of the letter.’” The lower court dismissed the action, noting that the letter stated the debt owed as of its date and stated that the amount may increase because of interest and fees, as required by the FDCPA.

    On appeal, the 2nd Circuit agreed with the lower court. The appellate court rejected the consumer’s arguments that the letter failed under Section 1692g because it didn’t specify what portion of the debt is principal and if interest applied when it stated, “[a]s of the date of this letter, you owe $5918.69.” The appellate court found that the letter adequately informed the consumer of the total quantity of his debt and emphasized that nothing in Section 1692g requires the debt collector to explain the components of the debt or “precise rates by which it might later increase.” Moreover, the appellate court concluded that nothing about the debt collection letter “could be fairly characterized as ‘false, deceptive, or misleading’” under Section 1692e, as the letter explicitly stated the consumer’s balance may increase based on the day he remitted payment.

    Courts Second Circuit Appellate FDCPA Debt Collection

  • CFPB issues winter 2019 Supervisory Highlights

    Federal Issues

    On March 12, the CFPB released its winter 2019 Supervisory Highlights, which outlines its supervisory and enforcement actions in the areas of auto loan servicing, deposits, mortgage servicing, and remittances. The findings of the report cover examinations that generally were completed between June 2018 and November 2018. Highlights of the examination findings include:

    • Auto Loan Servicing. The Bureau determined that attempts to collect miscalculated deficiency balances from extended warranty products were unfair. The Bureau also found that deficiency notices were deceptive where eligible rebates were not sought or applied, although the notice purported to be calculated to include such rebates.
    • Deposits. The Bureau found that companies engaged in a deceptive act or practice by failing to adequately disclose that when a payee accepts only a paper check through the institutions online bill-pay service, a debit may occur earlier than the date selected by the consumer.
    • Mortgage Servicing. The Bureau noted several issues related to mortgage servicing, including servicers (i) charging consumers late fees greater than the amount permitted by mortgage notes; (ii) misrepresenting the reasons PMI could not be cancelled; and (iii) failing to complete loss mitigation applications with “reasonable diligence.”
    • Remittances. The Bureau determined that remittance transfer providers erred when they failed to refund fees and taxes when funds were not made available to recipients by the date listed in the disclosure and the mistake did not result from one of the exceptions listed in the Remittance Rule.

    The report notes that in response to most examination findings, the companies have already remediated or have plans to remediate affected consumers, and implement corrective actions, such as new policies and procedures.

    Lastly, the report also highlights recent public enforcement actions and guidance documents issued by the Bureau.

    Federal Issues CFPB Supervision Compliance Mortgage Servicing Auto Finance Remittance Brokered Deposits

  • CFPB does not request lift of compliance date stay for payment-related provisions of Payday Rule

    Courts

    On March 8, the CFPB and two payday loan trade groups filed a joint status report with the U.S. District Court for the Western District of Texas in the litigation over the Bureau’s final rule on payday loans, vehicle title loans, and certain other installment loans (Rule). As previously covered by InfoBytes, the two payday loan trade groups initiated the suit against the Bureau in April 2018, asking the court to set aside the Rule on the grounds that, among other reasons, the Bureau is unconstitutional and the rulemaking failed to comply with the Administrative Procedures Act. In June 2018 and November 2018, the court stayed the litigation and the compliance date of the Rule, after the Bureau’s announcement that it intended to issue a proposed rulemaking to reconsider parts of the Rule. In February 2019, the Bureau issued a proposal, which seeks to rescind certain provisions of the Rule related to the ability-to-repay underwriting standards and delay the compliance date of those affected provisions until August 2020. The proposal does not reconsider the payment-related provisions of the Rule, leaving the compliance date for those provisions at August 19, 2019. (Covered by InfoBytes here.)

    In the joint status report, both parties agree that the court’s stay of compliance date and stay of litigation should remain with regard to the underwriting provisions until the Bureau concludes the rulemaking process. As for the payment-related provisions, the payday loan trade groups request the court maintain both the litigation stay and compliance stay of payment provisions until the Bureau completes the underwriting rulemaking process, because the Bureau acknowledged in the proposals that it intends to examine issues related to the payment provisions and “and if the Bureau determines that further action is warranted, the Bureau will commence a separate rulemaking initiative,” which may ultimately moot the litigation. Moreover, the trade groups believe lifting the stays would lead to “piecemeal and potentially wasteful litigation.”

    The Bureau also does not seek a lift to the stay of the litigation or compliance date for the payment-related provisions, but for separate reasons. The Bureau argues that the stay of the litigation should be “more limited,” at least until the 5th Circuit issues a decision on the Bureau’s constitutionality in a pending action (covered by InfoBytes here). As for the compliance date stay for the payment-related provisions, the Bureau believes it is not an issue the court needs to decide at this time, but acknowledges that should it request the court lift the stay in the future, the trade groups and the Bureau would have an opportunity to address whether lifting the stay should be delayed to “allow companies to come into compliance with the payments provisions.”

    In response to the joint status report, on March 19, the court entered an order continuing the stay of the litigation and the compliance date for both the Rule’s underwriting provisions and its payment-related provisions.

    Courts CFPB Payday Rule Federal Issues Agency Rule-Making & Guidance Fifth Circuit Appellate

  • CFPB defends MLA and Payday Rule position in Senate hearing

    Federal Issues

    On March 12, Director of the CFPB, Kathy Kraninger, testified at a hearing held by the Senate Banking, Housing, and Urban Affairs Committee on the CFPB’s Semi-Annual Report to Congress. While Kraninger’s opening statement and question responses were similar to her comments made last week during a House Financial Services Committee hearing (detailed coverage here), notable highlights include:

    • Fair Lending. Kraninger did not provide a status update on the Bureau’s pre-rulemaking activities as they relate to whether disparate impact is cognizable under ECOA, but emphasized that the Bureau is committed to the fair lending mission.
    • Data Collection. In response to concerns over the Bureau’s history of expansive data collection, Kraninger noted that data collection is an especially important tool for rulemaking, but stated that going-forward she would ensure the Bureau only collects the information needed to carry out the Bureau’s mission, noting that the less personally identifiable information that is collected, the less that requires protection. She acknowledged the Bureau is reviewing the comments submitted in response to its fall 2018 data governance program report (covered by InfoBytes here) and stated the Bureau remains committed to reviewing the internal processes it has for collecting and using data.
    • Military Lending Act (MLA). Kraninger stated that she disagrees with the Democratic Senator’s broad interpretation of Section 1024(b)(1)(C) of the Dodd-Frank Act allowing for the Bureau to examine for compliance with the MLA because that interpretation would permit the Bureau to examine for anything that is a “risk to consumers,” including things like safety and soundness, which is not currently under the Bureau’s purview. While she acknowledged that the Bureau has the direct authority to enforce the MLA, she repeatedly rejected the notion that this would also give the Bureau the authority to supervise for the MLA, as Dodd-Frank separates the Bureau’s enforcement and supervision powers.
    • Payday Rule. Kraninger repeatedly emphasized that the reconsideration of the underwriting standards in the Payday Rule was to determine if the legal and factual basis used to justify certain practices as unfair and abusive was “robust” enough. She acknowledged that the Bureau will be reviewing all the comments to the proposal and that the evidence used for the original Rule will be part of the record for the reconsideration.
    • GSE Patch. In response to questions regarding the 2021 expiration of the Qualified Mortgage (QM) Rule’s 43 percent debt-to-income ratio exception for mortgages backed by Fannie Mae and Freddie Mac (GSEs), Kraninger acknowledged the “non-QM” market hasn’t materialized over the last few years, as was originally anticipated. However, Kraninger was reluctant to provide any further details, noting that she would not be making any “dramatic changes” to the mortgage market. Additionally, she acknowledged that the GSE patch has the potential to expire at the end of the conservatorship as well.
    • CFPB Structure. Kraninger did not specify whether she believes the Bureau should be led by a board, rather than a single director, or whether the Bureau should be under appropriations. Specifically Kraninger stated that she would “welcome any changes Congress made that would increase the accountability and transparency of the Bureau,” and would “dutifully carry out” legislation that would place the Bureau under appropriations if the President signed it.
    • Student Lending. Kraninger stated that the Bureau intends to re-engage with the Department of Education on a Memorandum of Understanding (MOU) to assist with complaint and information sharing once a new Student Loan Ombudsmen has been hired. The MOUs were previously terminated by the Department in August 2018 (covered by Infobytes here).

    Federal Issues CFPB Senate Banking Committee House Financial Services Committee Fair Lending ECOA Disparate Impact Payday Rule Privacy/Cyber Risk & Data Security GSE Military Lending Act

  • North Dakota allows collection agencies to charge credit card fees to debtors

    State Issues

    On March 6, the North Dakota governor signed HB 1204, which allows a collection agency to collect a transaction fee for processing a credit card payment. Under the amended law, a collection agency may collect, in addition to the principal amount of the claim, a transaction fee up to two and half percent for processing a credit card payment if: (i) the transaction fee is not otherwise prohibited under the law; (ii) a no-cost payment option is available to the debtor; and (iii) the no-cost payment option is disclosed to the debtor at the same time and in the same manner that the credit card information is taken. The law takes effect on August 1.

    State Issues Debt Collection State Legislation Credit Cards Fees

  • District Court allows usurious interest and TILA violation claims to proceed

    Courts

    On March 5, the U.S. District Court for the Eastern District of Arkansas denied a request for summary judgment by several defendant pawnbrokers and pawnshops concluding there exists “disputed general issues of material fact” concerning claims filed by two plaintiffs who entered into pawn-loan contracts with the defendants. Among other things, the plaintiffs alleged that the defendants violated Amendment 89 of the Arkansas Constitution (Amendment 89) and the Arkansas Deceptive Trade Practices Act (ADTPA) by charging usurious rates of interest, and violated ADTPA by making false statements on pawn loan contracts (pawn tickets). The plaintiffs additionally claimed that the defendants violated TILA by failing to identify creditors on the face of their pawn tickets.

    In dismissing the defendants’ motion for summary judgment, the court determined that success of the claims hinged upon whether “the pawn transactions . . . are ‘loans’ charging usurious rates of interest under Arkansas law.” Specifically, genuine issues of material fact remained on: (i) whether the defendants knowingly entered into loans charging usurious interest because “the differences between traditional bank loans and pawn transactions . . . may not prevent the pawn transactions entered into by [the plaintiffs] from being classified as ‘loans’ under Arkansas law”; (ii) whether the plaintiffs were charged usurious interest or otherwise suffered damages under Amendment 89 or ADTPA as a result of the pawn transactions; (iii) whether the language on the pawn tickets stating that “the finance charge ‘is not interest for any purpose of the law,’” was a false statement in violation of the ADTPA; and (iv) whether the defendants’ failure to disclose the identity of the creditors on the pawn tickets is a violation of TILA, because, among other things, there remains a dispute as to whether the identified finance charges constitute as “credit,” and whether certain defendants qualify as “creditors” under TILA. Furthermore, the court rejected the defendants’ argument that they were entitled to summary judgment on the plaintiffs’ TILA claims “due to plaintiffs’ alleged failure to demonstrate detrimental reliance.”

    Courts Interest TILA Usury Deceptive Consumer Finance

  • OCC identifies key data fields for HMDA reporters

    Agency Rule-Making & Guidance

    On March 7, the OCC released Bulletin 2019-12, which identifies the key HMDA data fields for full and partial reporters. Specifically, the Bulletin highlights the 37 key data fields for banks required to report all of the data set forth in the CFPB’s October 2015 and August 2017 HMDA amendments, as well as, the 21 key data fields required for banks that qualify for the partial HMDA exemption pursuant to the May 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act. According to the Bulletin, OCC examiners will focus on the identified key data fields during transaction testing pursuant to HMDA for data collected on or after January 1, 2018. The Bulletin rescinds OCC Bulletin 2017-41, “Home Mortgage Disclosure Act: Interagency Key Fields.”

    As previously covered by InfoBytes, in December 2018, the Federal Reserve Board, the FDIC, and the OCC issued joint guidance regarding the same key data fields that Federal Reserve examiners would use to evaluate the accuracy of HMDA data collected since January 1, 2018.

    Agency Rule-Making & Guidance Federal Issues OCC HMDA CFPB FDIC Federal Reserve EGRRCPA Mortgages

  • OFAC issues continued extension of Venezuela-related General Licenses

    Financial Crimes

    On March 8, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) amended two General Licenses (GL) to extend the expiration date of previous Venezuela-based GLs to May 10 for certain provisions related to sanctions issued against Venezuela’s state-owned oil company pursuant to Executive Order 13850. GL 3D, which supersedes GL 3C, authorizes transactions necessary to wind down financial contracts, and transactions related to, provision of financing for, and other dealings in certain bonds, provided the divestment or transfer (including the facilitation) of any holdings of these bonds are to a non-U.S. person. GL 9C, which supersedes GL 9B, authorizes certain transactions related to securities issued prior to August 25, 2017 by the oil company and its subsidiaries. Additionally, OFAC issued correspondingly revised FAQs 661 and 662 to provide additional clarification on expected levels of due diligence, as well as implications for U.S. and non-U.S. persons.

    Visit here for additional InfoBytes coverage of actions related to Venezuela.

    Financial Crimes Venezuela Sanctions

  • New Jersey AG sues used-car dealerships for predatory selling practices

    State Issues

    On March 5, the New Jersey Attorney General's Office and Division of Consumer Affairs filed a lawsuit against two auto dealerships and their owner for allegedly targeting financially vulnerable consumers through the use of predatory sales and loan practices. According to a March 7 press release issued by the New Jersey AG, the defendants allegedly targeted consumers who were unable to qualify for credit at more traditional auto dealerships by offering in-house loans on used vehicles with inflated prices, high interest rates, and terms that presented a high risk of default. When the consumers were unable to make the required payments, the defendants allegedly reclaimed the vehicles and restarted the “sell, finance, and repossess” churning cycle. The AG claims that the defendants’ practices violated the New Jersey Consumer Fraud Act, the Used Car Lemon Law, and the state’s motor vehicle advertising regulations. The complaint asks the court to permanently shut down the defendants’ operations and permanently enjoin the owner from owning, managing, and/or operating any business that advertises and/or sells motor vehicles in the state. The complaint also seeks restitution, civil penalties, and attorneys’ fees.

    State Issues State Attorney General Consumer Finance Auto Finance Fraud

  • Indiana Court of Appeals allows class action to proceed against dealership

    Courts

    On March 6, the Indiana Court of Appeals affirmed the lower court’s denial of an auto dealership’s motion to dismiss a proposed class action alleging the dealership violated the Indiana Deceptive Consumer Sales Act (the Consumer Act). According to the opinion, consumers filed the proposed class action alleging that the dealership charged document preparation fees that exceeded the actual costs incurred by the dealership for preparation and that the fees were not affirmatively disclosed or negotiated with the consumers. The proposed class action argued the charging of the fees was an “unfair, abusive, or deceptive act, omission, or practice in connection with a consumer transaction” under the Consumer Act and quoted a statutory provision from the Indiana Motor Vehicle Dealer Services Act (the Dealer Act). The dealership moved to dismiss the action, arguing there was no private right of action under the Dealer Act and that the consumers failed to state a claim for relief under the Consumer Act. The consumers conceded there was no private right under the Dealership Act, but noted the quoted reference was used to merely describe an unfair practice that is prohibited by the Consumer Act. The lower court denied the motion, concluding that the non-disclosure claim fell within the “catch-all” provision of the Consumer Act.

    On appeal, the appellate court noted that in order to state a claim under the Consumer Act, the consumer must have alleged the dealership “committed an uncured or incurable deceptive act.” The appellate court acknowledged that the allegations that the dealership charged an unfair fee and “did not state its intention as part of the bargaining process” generally fell within the realm of the Consumer Act, and determined that, even without specifics, the complaint’s “general allegations of uncured and incurable acts are adequate to withstand dismissal.”

    Courts State Issues UDAAP Appellate Auto Finance Fees Consumer Finance

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