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  • Buckley Sandler Insights: CFPB Updates Rulemaking Agenda

    Consumer Finance

    On July 20, the CFPB released its Spring 2017 rulemaking agenda. The agenda was last updated in Fall 2016. The summer release date, and the fact that certain deadlines listed in the updated agenda have already passed, indicates that the agenda’s release may have been delayed after the CFPB drafted it. The following aspects of the updated agenda are particularly noteworthy:

    • Regulation Reviews: The Bureau plans to begin “the first in a series of reviews of existing regulations that we inherited from other agencies through the transfer of authorities under the Dodd-Frank Act,” noting that “other federal financial services regulators have engaged in these types of reviews over time, and believe that such an initiative would be a natural complement to our work to facilitate implementation of new regulations.” The Bureau has formed “an internal task force to coordinate and deepen the agency’s focus on concerns about regulatory burdens and projects to identify and reduce unwarranted regulatory burdens….” The agenda lists “pre-rule activities” as continuing through September 2017. Separately, the Bureau notes its ongoing assessments of the effectiveness of the Mortgage Servicing Rules, the Ability-to-Repay/Qualified Mortgage Rule, and the Remittance Transfer Rule pursuant to the Dodd-Frank Act’s five-year lookback provision.
    • Small Dollar Lending: The Bureau reports that it received more than one million comments on its June 2016 proposed rule to impose ability-to-repay requirements for payday, vehicle title, and similar installment loans. The Bureau states that it “continue[s] to believe that the concerns articulated in the [proposed rule] are substantial” but does not provide an expected release date for a final rule.
    • “Larger Participants” in Installment Lending: The agenda lists September 2017 as the expected release date for “a proposed rule that would define non-bank ‘larger participants’ in the market for personal loans, including consumer installment loans and vehicle title loans.” Designation as a larger participant brings a non-bank entity within the CFPB’s supervisory jurisdiction. The agenda indicates that a companion rule requiring payday, vehicle title lenders, and other non-bank entities to register with the Bureau is also underway, as noted below.
    • Debt Collection: In July 2016, the Bureau released an outline of proposals under consideration for debt collection and convened a panel under the Small Business Regulatory Enforcement Fairness Act in conjunction with the Office of Management and Budget and the Small Business Administration’s Chief Counsel for Advocacy to consult with representatives of small businesses that might be affected by the rulemaking. The Bureau notes that, “[b]uilding on feedback received through [that] panel, we have decided to issue a proposed rule later in 2017 concerning debt collectors’ communications practices and consumer disclosures.” The agenda states that a proposed rule is expected in September 2017. The Bureau also states that, in a departure from the July 2016 outline of proposals, the Bureau “intend[s] to follow up separately at a later time about concerns regarding information flows between creditors and FDCPA collectors and about potential rules to govern creditors that collect their own debts.”
    • Overdrafts: The Bureau states that the current opt-in regime “produces substantially different opt-in rates across different depository institutions” and that its “supervisory and enforcement work indicates that some institutions are aggressively steering consumers to opt in.” The Bureau reports that it is “engaged in consumer testing of revised opt-in forms and considering whether other regulatory changes may be warranted to enhance consumer decision making.” The agenda lists “pre-rule activities” as continuing through June 2017.
    • Small Business Lending: The agenda lists “pre-rule activities” on the implementation of the small business data reporting provisions of the Dodd-Frank Act as continuing through June 2017. Specifically, the agenda states that, at this juncture, the CFPB “is focusing on outreach and research to develop its understanding of the players, products, and practices in the small business lending market and of the potential ways to implement section 1071.”
    • HMDA & ECOA Amendments: The agenda lists October 2017 as the expected release date for the April 2017 proposed ECOA amendments to clarify requirements for collecting information on ethnicity, race, and sex, but does not list an expected release date for finalization of the April 2017 proposed technical corrections to the 2015 HMDA rule, or the July 2017 proposed amendments to the 2015 HMDA rule’s requirements for reporting home equity lines of credit. 
    • TRID/Know Before You Owe Amendments: The agenda lists March 2018 as the expected release date for finalization of the July 2017 proposed rule addressing the “black hole” issue, which is discussed in our special alert.
    • Mortgage Servicing Amendments: The Bureau states that it expects to issue a proposal in September 2017 “to make one or more substantive changes to the rule in response to . . . concerns” raised by the industry. 
    • Arbitration: Interestingly, the agenda states that the Bureau’s final rule on mandatory arbitration clauses, which was released this month to significant controversy, was not expected until August.
    • Non-Bank Registration: The Bureau states that it is “considering whether rules to require registration of [installment lenders] or other non-depository lenders would facilitate supervision, as has been suggested to us by both consumer advocates and industry groups.”
    • Prepaid Cards: The agenda does not provide an expected release date for finalization of the June 2017 proposed amendments addressing error resolution and limitations on liability, application of the rule’s credit-related provisions to digital wallets, and other issues. 
    • Credit Card Agreement Submission: The Bureau is “considering rules to modernize our database of credit card agreements to reduce burden on issuers that submit credit card agreements to us and make the database more useful for consumers and the general public.” The agenda lists “pre-rule activities” as continuing through October 2017.

    Consumer Finance Agency Rule-Making & Guidance CFPB Regulator Enforcement Lending Installment Loans Debt Collection Overdraft Small Business Lending HMDA ECOA TRID Mortgages Arbitration Prepaid Cards Credit Cards

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  • FTC Announces Charges Against Debt Collection Operation for FDCPA and FTC Act Violations

    Consumer Finance

    On July 17, the FTC issued a press release announcing charges against a Florida-based debt collection operation for allegedly posing as lawyers and threating individuals with lawsuits or prison time if they failed to pay debt they did not actually owe. According to the complaint filed by the FTC, the defendants’ violated the FTC Act by making false, unsubstantiated, or misleading representations regarding debt owed and threatened legal action. Additionally, the defendants allegedly violated the Fair Debt Collection Practices Act by (i) engaging in “unlawful third-party communications” without obtaining prior consumer consent; (ii) failing to disclose they were debt collectors; (iii) making false, deceptive, or misleading representations by withholding the true status of the debt, impersonating attorneys, and threatening legal action, among others; and (iv) failing to provide consumers written verification of their debt within the required time frame. As a result, the FTC announced a federal court has temporarily halted the operation and frozen its assets.

    Consumer Finance FTC Debt Collection FDCPA

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  • Hawaii Enacts Law to Prohibit Release of Credit Information of Children, Others

    State Issues

    On July 5, Hawaii Governor David Y. Igge signed into law H.B. 651, which was devised to protect children and certain other individuals from identity theft and credit fraud. The law applies to “protected consumers,” defined as minors under the age of 16 years, incapacitated persons, and individuals with appointed guardians or conservators.

    Based on research suggesting that minors may be targeted for identity theft due to their clean credit reports, the legislation permits representatives of protected consumers to place and remove security freezes on protected consumers’ credit files. Because one impediment to requesting such a freeze is the lack of an existing credit file, the legislation also requires consumer credit reporting agencies (CRAs) to create records for the protected consumers. A CRA may not release the protected person’s file when it is in a security freeze until the representative requests a removal of the freeze. In order to request a security freeze or a freeze removal, a protected person’s representative must provide proper identification and evidence of authority to the CRA. Additionally, with a few exceptions, the CRA may charge a fee not to exceed five dollars for each freeze or removal of a freeze to a protected person’s credit file.

    The law will go into effect on January 1, 2018.

    State Issues Credit Rating Agencies Debt Collection Fraud Privacy/Cyber Risk & Data Security State Legislation Consumer Reporting Agency

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  • FTC to Host Military Consumer Financial Workshop

    Lending

    On July 19, the FTC will host a free public workshop in San Antonio, entitled 2017 Military Consumer Financial Workshop: Protecting Those Who Protect Our Nation, to educate military consumers on financial issues and scams that they may face.

    The workshop with consist of five panel discussions led by FTC personnel as well as military consumer advocates, attorneys, legal services clinics, industry representatives, and government agencies. The panels will include the following topics:

    • auto purchase, financing, and leasing;
    • lending including student loans and installment loans;
    • debt collection;
    • legal rights and remedies; and
    • financial literacy and capability.

    Additionally, the workshop will include presentations on online promotions and protecting sensitive information, as well as encouraging financial readiness along with financial resources for military consumers.

    The FTC will hold the workshop at Trinity University in the Chapman Auditorium beginning at 8:30 am and preregistration is not required.

    Lending FTC Auto Finance Student Lending Debt Collection Installment Loans Consumer Finance Consumer Education Financial Literacy

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  • Fifth Circuit Affirms Debt Collector Violation of FDCPA

    Consumer Finance

    On July 6, the U.S. Court of Appeals for the Fifth Circuit held that a debt collector violated the Fair Debt Collection Practices Act (FDCPA) when it failed to notify credit reporting agencies that a consumer had disputed a debt. The Fifth Circuit further determined that this failure was sufficient to comprise a concrete injury conferring standing for the consumer to sue.

    In its opinion, the appellate court focused on FDCPA § 807(8) and § 809(b), since the debt collector argued that the requirements in § 809 apply to § 807(8), relieving it of its notification duty under § 807(8). Although the appellate court found that the consumer had not disputed his debt under § 809, it agreed with the district court that this failure did not obviate the debt collector’s responsibility under § 807(8). The appellate court found that the debt collector was in violation of the FDCPA for passing on “credit information which is known or which should be known to be false, including the failure” to notify credit agencies of consumer’s disputed debt. Additionally, the appellate court determined that the debt collector’s violation of § 807(8) “exposed [the consumer] to a real risk of financial harm caused by an inaccurate credit rating.”

    Consumer Finance Courts Federal Issues Debt Collection FDCPA Fifth Circuit Litigation

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  • Maine Passes Law to Notify Secretary of State About Abandoned Motor Vehicles

    State Issues

    On June 21, LD 1251, “An Act Regarding Certain Abandoned Vehicles and Notice to the Secretary of State Regarding Those Vehicles” became law in Maine. The law applies to a vehicle left at a business after authorized repairs were made at the request of the vehicle owner, and to a vehicle left in storage when the vehicle owner has not paid the storage fee. The law requires the owner of a repair or storage facility or the owner’s agent to notify the Secretary of State within 14 days after the earliest date that the vehicle owner becomes responsible for unpaid repair or storage and towing fees. After notice is provided by the facility (or facility’s agent), the Secretary of State must notify the vehicle’s owner and lienholder that the vehicle is being claimed unless the charges against the vehicle are paid. If the Secretary of State is not notified within 14 days using the prescribed form, the owner of the auto repair business or storage facility cannot charge the vehicle owner more than 14 days of storage fees. The law will take effect 90 days following the adjournment of the legislative session.

    State Issues State Legislation Auto Finance Debt Collection

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  • CFPB Monthly Complaint Snapshot Focuses on State-Level Consumer Complaints

    Consumer Finance

    On June 27, the CFPB released its monthly complaint report, highlighting complaints from around the country. According to the Bureau, it has handled over 1.2 million complaints from 2011 through June 1 of this year. The report shows nationwide complaint statistics and statistics for service members and older consumers. In addition, the report breaks down statistics on the state level covering financial products and services, company responses to complaints, as well as number of complaints. The vast majority of consumers report high company response rates to complaints averaging in the high 90 percent range, although the volume of complaints is trending upward. The top five products receiving complaints across the country in descending order are: (i) debt collection; (ii) mortgages; (iii) credit reporting; (iv) credit cards; and (v) bank accounts or services.

    Consumer Finance Lending Consumer Complaints Internet Lending CFPB Debt Collection Credit Cards Mortgage Servicing

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  • Debt Collector Liable for Violating FDCPA and TCPA

    Courts

    On July 3, the Court of Appeals for the Third Circuit affirmed that a debt collector violated the Telephone Consumer Practices Act (TCPA) when it called a consumer’s cell phone without the consumer’s consent, resulting in a damages award of $34,500. Additionally, the appellate court reversed the district court’s decision regarding a Fair Debt Collection Practices Act (FDCPA) claim for sending a collection letter to the consumer without taking proper precautions to ensure the consumer’s account number would remain private. The debt collector put forth the defense of bona fide error regarding its alleged violations of the FDCPA. The appellate court, citing Supreme Court precedent, rejected the defense, holding that bona fide error could be claimed only in the case of a clerical or factual error, but a “mistaken interpretation of the law is inexcusable under the FDCPA’s bona fide error defense.” The Third Circuit remanded the FDCPA claim to the district court to enter judgment for the consumer and calculate the damages the debt collector must pay.

    Courts Privacy/Cyber Risk & Data Security Third Circuit Debt Collection TCPA FDCPA Appellate

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  • Iowa Enacts Amendments to Consumer Credit Code

    State Issues

    Two amendments to the Iowa Consumer Credit Code (ICCC) recently signed into law by Iowa Governor Terry Branstad will go into effect July 1. The ICCC applies to, among others, consumer credit transactions, retail installment sales, lending transactions, and motor vehicle financing.

    Senate File 502, which relates to banks, credit unions, and specific consumer credit transactions, adds a new subsection 2A to the ICCC, which states a supervised loan made in violation of subsection 2 is void and “the consumer is not obligated to pay either the amount financed or the finance charge.” Additionally, “[i]f the consumer has paid any part of the amount financed or the finance charge, the consumer has the right to recover the payment from the [lender] . . . or from an assignee . . . who undertakes direct collection of payments or enforcement of rights arising from the debt.” Open-end loans have a statute of limitations of two years from the date of the violation, and closed-end loans have a statute of limitations of one year after the due date of the last scheduled payment. Other changes under Senate File 502 include a removal of the ban prohibiting returned check fees, an increase in the maximum late fee applied to transactions, and a clause that allows credit reporting charges to be excluded from finance charges.

    Senate File 503, which concerns “the deferral of unpaid installments and deferral charges for certain interest-bearing consumer credit transactions,” contains the following changes, among others: (i) parties may agree in writing to the deferral of unpaid installments before or after default, and (ii) deferral charges are permitted on closed-end, interest-bearing transactions and limited to $30.

    State Issues State Legislation Debt Collection Consumer Lending Consumer Finance

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  • Maine Amends Fair Debt Collection Practices Act to Enact Debt Collection Requirements for Debt Buyers

    State Issues

    On June 16, Maine Governor Paul LePage signed into law amendments (H.P. 836) to the state’s Fair Debt Collection Practices Act (Maine FDCPA) to promote the fiscally responsible collection of purchased debts. Changes affect the definitions of charge-off, debt buyer and resolved debt, as well as licensing and documentation requirements, transferring debt ownership, collection actions, and civil penalties.

    The law now considers a “debt buyer” to be a debt collector, and defines a debt buyer as a person “regularly engaged in the business of purchasing charged-off consumer debt for collection purposes, whether the person collects the debt or hires a [third] party, which many include an attorney-at-law, in order to collect the debt.” Notably, the definition excludes supervised financial organizations or a person that “acquires charged-off consumer debt incidental to the purchase of a portfolio predominantly consisting of consumer debt that has not been charged off.” Debt buyers must comply with existing licensing requirements and criminal background checks under the provisions of Maine FDCPA Section 11031.

    The law will apply to a debt buyer with respect to debt sold to the debt buyer on or after January 1, 2018. Furthermore, it will not “affect the validity of any collection actions taken, civil actions or arbitration actions commenced or judgments entered into prior to January 1, 2018.”

    State Issues State Legislation Debt Collection Debt Buyer FDCPA

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