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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 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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  • Ohio Enacts Consumer Installment Loan Act

    State Issues

    On June 13, Ohio Governor John R. Kasich signed into law S.B. 24, the Ohio Consumer Installment Loan Act (CILA). According to a blog post on the Ohio senate majority caucus’ website, CILA aims to “clarify Ohio's installment lending laws to help eliminate confusion for consumers and lenders as well as simplify the role of industry regulators.” CILA applies to loans that, among other requirements, exceed a term of six months, generally require equal monthly payments, are not secured by real property, are not covered by any other Ohio loan laws, and have a maximum interest rate of 25 percent (or 28 percent for an open-end loan). CILA also provides for regulation and lender licensing by the state’s Division of Financial Institutions in the Department of Commerce. The law goes into effect on July 1.

    State Issues Consumer Finance Installment Loans Lending NMLS State AG State Legislation

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  • Gap Waiver Act Promulgated in Maine

    State Issues

    On June 12, Maine Governor Paul LePage signed into law S.P. 531, “An Act To Amend the Usage and Consumer Protections of Guaranteed Asset Protection [GAP] Waivers.” The Act applies to finance agreements for motor vehicles in which the creditor offers, for a separate charge, to “cancel or waive all or part of the amount due on a borrower’s finance agreement . . . in the event of a total physical damage loss or unrecovered theft.” The GAP waiver agreement must either be included in the auto finance agreement or attached to it as an addendum, and the waiver remains part of the finance contract when the contract is assigned, sold, or transferred. Additionally, the Act provides that the waiver may be sold in the state for a single or monthly payment, but “may not be considered a finance charge or interest” when disclosed in compliance with the Truth in Lending Act.

    A required disclosure with a GAP waiver is a “free-look” period during which the borrower can cancel the waiver agreement and receive a full refund of costs paid for the waiver as long as no waiver benefits have been provided. The waiver contract must also provide clear instructions for the borrower to follow in order to obtain waiver benefits, and the method for calculating the amount of the refund due if the contract is cancelled or terminated early.

    The law takes effect on January 1, 2018.

    State Issues State Legislation Truth in Lending Act Auto Finance Installment Loans

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  • CFPB Monthly Complaint Snapshot Highlights Consumer Loan Complaints

    Consumer Finance

    On June 28, the CFPB released its monthly complaint report focusing on consumer loans, including vehicle loans and leases, installment loans, title loans, and pawn loans. According to the report, of the 906,400 consumer complaints across all products the CFPB has received as of June 1, 2016, approximately 38,500 were in the consumer loans category. Findings regarding consumer loan complaints highlighted in the report include: (i) just over half of consumer loan complaints pertain to vehicle loans, with installment loans following at 31 percent; (ii) consumers most often complain about issues related to servicing the loan, lease, or line of credit; and (iii) additional common consumer loan complaints include encountering problems when shopping for a loan, when taking out a loan, and when consumers are unable to repay a loan.

    This month’s report includes a “sub product spotlight” to highlight complaints specific to auto lending, which make up 60 percent of the 38,500 consumer loan complaints the CFPB has received since July 21, 2011. Consumer loan complaints specific to auto lending include, but are not limited to: (i) payment processing issues, such as consumers not having their accounts debited timely and correctly; (ii) confusion over fees and interest rates; (iii) repossession of vehicles without notification; (iv) misleading advertising at “Buy Here Pay Here” dealerships; and (v) insufficient warranty coverage, with consumers alleging that they believed they were required to purchase warranties that did not end up covering basic repairs as they expected.

    In addition to a focus on consumer loan complaints, the report identifies Arkansas as its geographical spotlight. As of June 1, Arkansas consumers have submitted 4,200 of the 906,400 total complaints across all products. According to the report, mortgage-related complaints make up 19 percent of complaints from Arkansas, lower than the national average of 26 percent, while debt collection complaints account for 29 percent of Arkansas complaints, higher than the national average of 27 percent.

    CFPB Auto Finance Debt Collection Consumer Lending Installment Loans Title Loans

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  • CFPB Releases Report on Supplemental Findings on Payday, Vehicle, and Installment Loans

    Consumer Finance

    On June 2, the CFPB released a report with various analyses of payday loans, payday installment loans, vehicle title loans, and deposit advance products. The report’s six chapters examine: (i) consumer usage and default patterns for vehicle title installment loans and payday installment loans; (ii) consumer account activity before and after the discontinuation of deposit advance products, analyzing whether consumers who used such products “overdrew their accounts or took out payday loans more frequently after banks stopped offering the products”; (iii) the impact of varying state laws on storefront payday lending in Texas, Colorado, Washington, and Virginia; (iv) the share of payday loans that are reborrowed across states, comparing it to varying limits on renewals and requirements for cooling-off periods between the loans; (v) borrower and default patterns for storefront payday loans for three alternative definitions of the loan sequence concept; and (vi) a series of simulations regarding the estimated impacts of certain requirements on the payday, payday installment, and vehicle title loan markets. On June 2, the CFPB simultaneously released its Proposed Rule on Payday, Title, and Installment loans; to review BuckleySandler’s full coverage on the proposal, please see the Special Alert: CFPB’s Proposed Rule Regarding Payday, Title, and Certain Other Installment Loans.

    The CFPB’s recent supplemental report comes after its April 20 report titled “Online Payday Loan Payments” and its May 18 report titled “Single-Payment Vehicle Title Lending.”

    CFPB Payday Lending Installment Loans

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  • CFPB Issues Report on Payday and Installment Loans; Director Cordray Weighs in on Online Lending Industry

    Consumer Finance

    On April 20, the CFPB issued a report titled “Online Payday Loan Payments,” which covers an 18-month period in 2011 and 2012 and examines how online lenders’ attempts to recover debts are affecting consumers. Also on April 20, the CFPB held a press call during which Director Cordray delivered remarks regarding the small-dollar lending market, specifically focusing on findings included in the simultaneously released report. According to Director Cordray, online payday lenders have considerable power over consumers’ bank accounts because they use automated networks to deposit loans and collect payments, which often results in banks or credit unions charging consumers overdraft and non-sufficient funds fees. Director Cordray further summarized key findings from the report, including, but not limited to: (i) half of online consumers incurring an average of $185 in bank penalties – in addition to the penalties imposed by the lenders and the average annualized interest rate of 300% to 500% – as a result of reoccurring failed debits made by online payday lenders; (ii) one-third of online consumers losing their checking or savings accounts due to overdraft and non-sufficient funds fees; and (iii) consumers facing “hefty bank fee[s]” due to lenders’ repeated debit requests, despite the fact that second payment requests have a 70% failure rate, with third or subsequent payment attempts failing at an even higher rate. Director Cordray concluded by emphasizing that the CFPB’s “process of reforming the market for small-dollar loans” is ongoing, and that the CFPB will consider the data from the report as it prepares new regulations to address the industry.

    CFPB Payday Lending Installment Loans Online Lending

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  • CFPB Orders Subsidiary of Peer-to Peer Lending Company to Provide $700,000 in Restitution over Practices Related to its Health Care Loan Product

    Consumer Finance

    On August 19, the CFPB announced a consent order against a subsidiary of an online lending company, ordering the subsidiary to provide $700,000 in monetary relief to affected consumers. According to the CFPB, the subsidiary marketed two loan products at dental offices as part of its health-care services financing program – an installment loan and a deferred-interest loan – to assist consumers in paying for dental services. The CFPB contended that consumers were provided inaccurate information related to the terms and conditions of the deferred-interest loan product, finding that, in certain instances, the loan product was marketed as a “no-interest” loan. However, the dental service providers who marketed the loan product failed to note that the 22.98 percent interest rate would be added to the principal if consumers failed to pay the loan in full before the end of the promotional period.

    CFPB Enforcement Installment Loans

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  • North Dakota Grants Attorney General Power to Enforce Retail Installment Provisions

    Consumer Finance

    On March 12, the Legislative Assembly of North Dakota approved legislation H.B. 1346 amending the North Dakota Retail Installment Sales Act to grant enforcement authority to a state attorney or to the North Dakota Attorney General. Under the new law, the Attorney General has all powers provided under the Act, in addition to powers provided under the state’s Unlawful Sales or Advertising Practices law. The law as amended will be effective August 1, 2015.

    State AG Enforcement Installment Loans

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  • Missouri Assembly Overrides Governor’s Veto Of Installment Lending Bill

    Consumer Finance

    On September 10, the Missouri General Assembly voted to override Governor Jay Nixon’s veto of SB 866, which defines traditional installment loans as "fixed rate, fully amortized, closed-end extensions of direct consumer loans” and preempts certain local government actions that would affect lenders who only make such installment loans and who operate under a consumer installment loan license or a consumer credit loan license. The preemption provisions do not apply to ordinances in a home rule city with more than four hundred thousand residents and located in more than one county, i.e., Kansas City, or to a charter provision or valid ordinance as of August 28, 2014, that expressly applies to traditional installment loan lenders.

    Installment Loans

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