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  • Virginia Attorney General sues pension sale lender who targeted retired veterans and government employees; obtains full restitution for customers of online lender

    State Issues

    On March 7, the Virginia Attorney General took action against Delaware- and Nevada-based installment lenders (defendants) for allegedly making illegal loans with excessive annual interest rates that were disguised as “lump sum” cash payouts to Virginia consumers, in violation of the Virginia Consumer Protection Act (VCPA). According to the complaint, the defendants disguised the high interest loans to Virginia pensioners as “Purchase and Sale Agreements” involving a “sale” or “pension advance” in an effort to bypass consumer lending laws, including TILA and Regulation Z disclosure requirements. Furthermore, the complaint alleges that the loans charged interest rates as high as 183 percent, far exceeding the state’s 12 percent annual usury cap, but because they were misrepresented as sales, defendants avoided potential private actions brought by consumers to recover excessive interest payments. The complaint seeks injunctive and monetary relief.

    Separately, on February 23, the Virginia Attorney General announced a settlement with a group of affiliated online lenders and debt collectors (defendants) to resolve violations of the VCPA through the offering of unlawful open-end credit plan loans and engaging in illegal debt collection practices. According to the Assurance of Voluntary Compliance approved earlier in February, between January 2015 through mid-June 2017, the defendants (i) offered open-end credit plan loans and imposed bi-monthly “service fees” that—when calculated with the advertised interest—greatly increased the loan’s cost and exceeded the state’s 12 percent annual limit; (ii) imposed illegal finance charges and other service fees on borrowers during the required 25-day grace period; (iii) contacted consumers in an effort to collect on these loans; and (iv) contacted the consumers' employers to implement wage assignments and garnish wages from consumers' paychecks. Under the terms of the settlement, defendants will provide nearly $150,000 in restitution and debt forgiveness, pay $105,000 in civil penalties and attorneys’ fees, and are permanently enjoined from consumer lending and debt collection activities in the state.

    State Issues State Attorney General Predatory Lending Settlement TILA Regulation Z

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  • CFPB releases 2018 lists of rural, underserved counties

    Agency Rule-Making & Guidance

    On March 6, the CFPB released its annual list of rural counties and rural or underserved counties for lenders to use when determining qualified exemptions under certain TILA regulatory requirements. In addition to these lists, the Bureau also directed lenders to use its web-based Rural or Underserved Areas Tool to assess whether a rural or underserved property qualifies for safe harbor for purposes of Regulation Z.

    Agency Rule-Making & Guidance CFPB TILA Regulation Z Consumer Finance Lending

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  • CFPB issues final rule on periodic statements during bankruptcy

    Agency Rule-Making & Guidance

    On March 8, the CFPB issued a final rule updating technical aspects of the upcoming periodic statement requirements for borrowers in bankruptcy under Regulation Z. The Bureau adopted the proposed rule, released in October 2017, without revision (previously covered by InfoBytes here). Specifically, the final rule changes the transition rules for borrowers who enter or leave bankruptcy by replacing the previous single-billing-cycle exemption with a single-statement exemption for the next periodic statement or coupon book that a servicer would otherwise have to provide, regardless of when in the billing cycle the triggering event occurs. The Bureau also added new commentary to clarify the operation of the single-statement exemption. The rule is effective April 19. 

    Agency Rule-Making & Guidance CFPB Mortgage Servicing Bankruptcy Consumer Finance Regulation Z

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  • CFPB finalizes prepaid rule updates; moves effective date

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance CFPB Succession CFPB Prepaid Rule Regulation Z

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  • District of Columbia Adopts Student Loan Borrower Bill of Rights


    On October 11, the District of Columbia (DC) released a student loan borrower bill of rights (Bill) pursuant to the Student Loan Ombudsman Establishment and Servicing Regulation Amendment Act of 2016. The Bill sets out basic principles and protections for student loan borrowers, covering:

    • Pricing and Terms. Lenders to comply with TILA; specifically, to focus on clear and plain-English disclosures of the APR and other key pricing terms.
    • Loan Products. Lenders should avoid extending abusive loan products to borrowers; including, not extending new credit to borrowers who are unable to repay existing loans.
    • Underwriting. Lenders should exercise fair and responsible underwriting; including offering loans that are affordable and meet the borrower’s needs. It also encourages lenders to engage in responsible credit reporting.
    • Collection Activities. Lenders and servicers to abide by the spirit of the Fair Debt Collection Practices Act, as well as, maintain accurate and complete information about borrowers’ loans.
    • Customer Service. Servicers should have responsible complaint management, be easily accessible, and avoid discrimination of any protected borrower classification.

    The Bill became effective on September 8.

    Lending Student Lending TILA Regulation Z FDCPA

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  • CFPB Issues Interim Final Rule Regarding Foreclosure Communications; Seeks Comment on Proposed Rule About Periodic Statements During Bankruptcy

    Agency Rule-Making & Guidance

    On October 4, the CFPB announced one change and one proposed change to the amendments to its mortgage servicing rules under Regulations X and Z. These amendments, which were previously covered by a Buckley Sandler Special Alert, are scheduled to take effect in two phases on October 19, 2017 and April 19, 2018.

    First, the CFPB amended the amendments to Regulation X’s provision regarding early intervention notices in order to address timing issues that result when a borrower has invoked his or her cease in communication rights under the FDCPA. Had the most recent amendment not been made, a mortgage servicer subject to a cease in communication request would have been required to provide a modified early intervention notice to the borrower every 180 days but not more than once during any 180-day period, leaving no margin for error and creating operational challenges if the 180th day fell on a weekend or holiday. Based on concerns from the mortgage industry the CFPB issued an interim final rule without advance public comment to give servicers a 10-day window to provide the modified notices at the end of the 180-day period. The interim final rule becomes effective on October 19, 2017, at the same time the broader amendments to the early intervention requirements take effect.

    Second, the CFPB proposed to update technical aspects of the upcoming periodic statement requirements for borrowers in bankruptcy. Specifically, the CFPB is seeking public comment on changes to the transition rules for borrowers who enter or leave bankruptcy, including replacing the single-billing-cycle exemption with a single-statement exemption for the next periodic statement the servicer would have to provide regardless of when in the billing cycle a triggering event occurs. The Bureau proposed that these amendments take effect on April 19, 2018, at the same time as the new periodic statement requirements for borrowers in bankruptcy. 

    The comment period on both the interview final rule and the proposed rule will close 30 days after publication in the Federal Register.

    Agency Rule-Making & Guidance CFPB Mortgages FDCPA Regulation Z Regulation X Mortgage Servicing Federal Register

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  • CFPB Publishes Final Rule Amending Annual Dollar Threshold in TILA Regulations


    On August 30, the CFPB issued a final rule amending Regulation Z, which implements the Truth in Lending Act (TILA), under the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), the Home Ownership and Equity Protection Act of 1994 (HOEPA), and the Dodd-Frank ability-to-repay and qualified mortgage provisions (ATR/QM). The CFPB is required to make adjustments to dollar amounts in the Regulation Z provisions implementing these laws based on the annual percentage change reflected in the Consumer Price Index effective June 1, 2017. For open-end consumer credit plans under TILA, the minimum interest charge disclosure threshold will remain unchanged at $1.00 in 2018. For open-end consumer credit plans under the CARD Act amendments, the adjusted dollar amount for the safe harbor for a first violation penalty fee will remain unchanged at $27 in 2018, and the adjusted dollar amount for the safe harbor for a subsequent violation penalty fee will remain unchanged at $38 in 2018. For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages in 2018 will increase to $21,032, and the adjusted points and fees dollar trigger for high-cost mortgages in 2018 will be $1,052. To satisfy the underwriting requirements under the ATR/QM rule, the maximum thresholds for total points and fees for qualified mortgages in 2018 will be: (i) 3 percent of the total loan amount for loans greater than or equal to $105,158; (ii) $3,155 for loan amounts greater than or equal to $63,095 but less than $105,158; (iii) 5 percent of the total loan amount for loans greater than or equal to $21,032 but less than $63,095; (iv) $1,052 for loan amounts greater than or equal to $13,145 but less than $21,032; and (v) 8 percent of the total loan amount for loan amounts less than $13,145. The final rule is effective January 1, 2018.

    Lending Agency Rule-Making & Guidance CFPB TILA Credit Cards HOEPA Ability To Repay Qualified Mortgage Federal Register Regulation Z Mortgages

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  • CFPB Seeks Comments on Proposed Amendments to Prepaid Rule, Releases Updated Small Entity Compliance Guide

    Agency Rule-Making & Guidance

    On June 15, the CFPB announced a request for comment on proposed amendments to Regulation E, which concerns prepaid accounts under the Electronic Fund Transfer Act (EFTA) and the Truth in Lending Act (Regulation Z). According to the Bureau, the request aims to address prepaid companies’ concerns over “unanticipated complexities” regarding certain aspects of the rule. As previously covered in InfoBytes, in April the CFPB issued a final rule delaying the general effective date to April 1, 2018. The prepaid rule provides consumers, among other things, additional federal protections under EFTA on prepaid financial products, person-to-person payment products, and other electronic accounts with the ability to store funds. Specifically, the proposed amendments would impact error resolution requirements for unregistered accounts, enhance flexibility for credit cards linked to digital wallets, and open for consideration whether a further delay to the rule’s effective date is necessary due to the proposed amendments or if safe harbor provisions should be added for early compliance. The proposal also addresses amendments affecting the following: (i) the exclusion of loyalty, award, or promotional gift cards; (ii) “unsolicited issuance of access devices and pre-acquisition disclosures”; and (iii) submission of account agreements to the Bureau. Comments are due 45 days after the request is published in the Federal Register.

    Separately, on the same day, the Bureau released an updated edition of its small entity compliance guide for the prepaid rule. The guide notes the new effective date, and also offers clarification on prepaid reload packs, the consistent use of fee names and other terms, foreign language disclosure requirements, URL names in short form disclosures, mobile accessible transaction histories, account agreement submissions to the Bureau, and clarification that stipulates “reversing a provisional credit does not otherwise trigger Regulation Z coverage under the Prepaid Rule.”

    Agency Rule-Making & Guidance CFPB Prepaid Rule EFTA TILA Regulation E Regulation Z Prepaid Cards

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  • CFPB Seeks Public Comment on its Plans for Assessing RESPA Mortgage Servicing Rule

    Agency Rule-Making & Guidance

    On May 4, the CFPB issued a request for comment on its plans for assessing the 2013 Real Estate Settlement Procedures Act (RESPA) servicing rule’s effectiveness in meeting the purposes and objectives outlined in the Dodd-Frank Act, which requires the CFPB to assess each significant rule or order it adopts under Federal consumer financial laws. According to the request for comment and a May 4 blog post on the CFPB’s website, the self-assessment will focus on objectives to ensure that: (i) “[c]onsumers are provided with timely and understandable information to make responsible decisions about financial transactions”;  (ii) “[c]onsumers are protected from unfair, deceptive, or abusive acts and practices and from discrimination”;  (iii) “[o]utdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in order to reduce unwarranted regulatory burdens”;  (iv) “[f]ederal consumer financial law is enforced consistently”; and (v) “[m]arkets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.”

    In 2013, the Bureau adopted the 2013 RESPA Servicing Final Rule and further amended the rule several times to address questions raised by the industry, consumer advocacy groups, and other stakeholders. The CFPB deemed the 2013 RESPA Servicing Final Rule, effective January 10, 2014, a “significant rule” for purposes of the Dodd-Frank Act. Importantly, however, in Footnote 10 of its most-recent request for comment, the Bureau clarifies that it “is not seeking comment on the amendments to the mortgage servicing rules that became or will become effective after the January 10, 2014 effective date.” (emphasis added) Accordingly, it appears that the Bureau is not presently seeking comments on the Amendments to Regulation X and Regulation Z that the CFPB published as a Final Rule (12 CFR Parts 1024 and 1026) in the October 19, 2016 edition of the Federal Register – see earlier InfoBytes coverage here – and which are slated to take effect in part on October 19, 2017 and in full on April 19, 2018.

    Agency Rule-Making & Guidance CFPB RESPA Regulation X Regulation Z Mortgages Dodd-Frank UDAAP

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  • FTC Reaches Settlement of More Than $3.6 Million with California-Based Auto Dealership Groups

    Consumer Finance

    On March 14, the FTC announced that it reached a settlement with a Los-Angeles-based auto dealership group over charges that the group engaged in deceptive and unfair sales and financing practices, deceptive advertising, and deceptive online reviews.  The settlement, in the form of a stipulated final order, requires that the auto group pay more than $3.6 million in consumer remediation and is pending approval by the U.S. District Court for the Central District of California. The complaint, which was filed in September of last year, also alleged the defendants participated in deceptive and unfair practices related to add-on products that consumers did not authorize. Furthermore, the FTC claimed the defendants violated TILA and Regulation Z, as well as the Consumer Leasing Act and Regulation M, for “failing to clearly disclose required credit information and lease information in their advertising.” The proposed settlement order prohibits “the defendants from making misrepresentations relating to their advertising, add-on products, financing, and endorsements or testimonials,” and also bars “the defendants from engaging in other unlawful conduct when a sale is cancelled.”

    Consumer Finance UDAAP FTC TILA Regulation Z Consumer Leasing Act

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