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Financial Services Law Insights and Observations

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  • Virginia AG Announces Settlement With Internet Lender Over Licensing Claims and Origination Fees

    State Issues

    On November 30, Virginia Attorney General Mark R. Herring announced a settlement with a Chicago-based “open-end credit plan internet lender” to resolve alleged violations of the Virginia Consumer Protection Act (VCPA). Specifically, the Attorney General’s Office alleged that the lender misrepresented that it was licensed to conduct lending activity in Virginia and charged unlawful origination fees during a statutorily required grace period. According to a press release issued by the Attorney General’s office, the settlement requires the lender to provide more than $3 million of refunds and interest forgiveness to borrowers, and pay the state $30,000 in civil money penalties, costs, and fees. The settlement also contains a permanent injunction that prohibits the lender from misrepresenting its status as a licensed Virginia lender and violating the VCPA.

    State Issues State AG Consumer Finance Anti-Predatory Lending Settlement

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  • Virginia AG Announces Settlement With Internet Lender Over Licensing Claims and Excessive Interest

    State Issues

    On October 25, Virginia Attorney General Mark R. Herring announced a settlement with a Nevada-based internet lender to resolve allegations that the lender violated the Virginia Consumer Protection Act by misrepresenting it was licensed by the state’s Bureau of Financial Institutions and collecting interest exceeding the state’s general usury limit. According to a press release issued by the Attorney General’s office, the settlement requires the lender to provide refunds and interest forgiveness of more than $265,000 to borrowers, and pay the state $50,000 in civil money penalties, costs, and fees. A permanent injunction also prohibits the lender from, among other things, misrepresenting its licensing status and collecting interest exceeding the amount allowed by the state’s general usury statute.

    State Issues State AG Usury Anti-Predatory Lending Consumer Finance Settlement Enforcement

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  • Massachusetts AG Takes Action Against Auto Dealer for Deceptive Marketing and Sales Tactics

    Lending

    On September 26, Massachusetts Attorney General Maura Healey announced a lawsuit against a large auto dealership and its in-house lender for allegedly misleading consumers into purchasing unfavorable sale packages. According to the Commonwealth’s complaint, filed in the Suffolk County Superior Court, the auto dealer purportedly (i) sold consumers cars priced at more than double their retail value; (ii) extended loans to consumers with an APR of 20 percent, regardless of credit qualifications; and (iii) combined these sales with an expensive and limited service contract. The complaint further alleges that because of these sales practices and a faulty underwriting process, more than half of the auto dealer’s sales fail or end in repossession. The complaint seeks injunctive relief, restitution, civil penalties, and attorney fees.

    Lending State AG UDAAP Auto Finance Enforcement Anti-Predatory Lending

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  • Illinois Governor Enacts Amendments to Predatory Lending Database Article

    State Issues

    On September 15, Illinois Governor Bruce Rauner signed into law amendments to the state’s Residential Real Property Disclosure Act to change provisions under its Predatory Lending Database Article. Public Act 100-0509 sets forth the following changes, among others: (i) certificates of compliance or certificates of exemption must now contain at least “one of the borrower’s names on the mortgage loan and the property index number for the subject property”; (ii) amends the definitions of “counseling” by removing the reference to “telephone counseling” and “originator” to reference “mortgage loan originator”; (iii) eliminates the requirement that originators shall provide information regarding affiliated or third party service providers or monies received from a broker or originator for inclusion in the predatory lending database; and (iv) provides additions to the information that must be collected and submitted by the title insurance company or closing agent for inclusion in the predatory lending database, such as a detailed list of all notices provided to the borrower at closing, including information in connection with the Integrated Closing Disclosure and the Integrated Loan Estimate Disclosure required under TILA-RESPA. The amendments took effect September 15, 2017.

    State Issues State Legislation Anti-Predatory Lending Mortgages TRID TILA RESPA GFE Mortgage Origination

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  • White House Big Data Review Addresses Discrimination, Privacy Risks

    Privacy, Cyber Risk & Data Security

    On May 1, the White House’s working group on “big data” and privacy published a report on the findings of its 90-day review. In addition to considering privacy issues associated with big data, the group assessed the relationship between big data and discrimination, concluding, among other things, that “there are new worries that big data technologies could be used to ‘digitally redline’ unwanted groups, either as customers, employees, tenants, or recipients of credit” and that “big data could enable new forms of discrimination and predatory practices.” The report adds, “[t]he same algorithmic and data mining technologies that enable discrimination could also help groups enforce their rights by identifying and empirically confirming instances of discrimination and characterizing the harms they caused.” The working group recommends that the DOJ, the CFPB, and the FTC “expand their technical expertise to be able to identify practices and outcomes facilitated by big data analytics that have a discriminatory impact on protected classes, and develop a plan for investigating and resolving violations of law in such cases,” and adds that the President’s Council of Economic Advisers should assess “the evolving practices of differential pricing both online and offline, assess the implications for efficient operations of markets, and consider whether new practices are needed to ensure fairness.” The working group suggests that federal civil rights offices and the civil rights community should collaborate to “employ the new and powerful tools of big data to ensure that our most vulnerable communities are treated fairly.” With regard to privacy the report states that the “ubiquitous collection” of personal information and data, combined with the difficulty of keeping data anonymous, require policymakers to “look closely at the notice and consent framework that has been a central pillar of how privacy practices have been organized for more than four decades.” Among its policy recommendations, the working group urges (i) enactment of a Consumer Privacy Bill of Rights, informed by a Department of Commerce public comment process, and (ii) the adoption of a national data breach bill along the lines of the Administration’s May 2011 Cybersecurity legislative proposal. It also calls for data brokers to provide more transparency and consumer control of data.

    CFPB FTC DOJ Anti-Predatory Lending Discrimination Privacy/Cyber Risk & Data Security

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  • North Carolina Amends Anti-Predatory Lending Law

    Lending

    On August 23, North Carolina enacted HB 692, which amends the state’s anti-predatory lending law. Effective October 1, 2013, the law increases the points and fees threshold for high cost home loans from 4% to 5% for loans of $20,000 or more and excludes from the points and fees calculation any up-front fees collected and paid to the FHA, VA, or USDA. The bill also alters the state’s rate spread home loans provisions to match federal restrictions.

    FHA Anti-Predatory Lending

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