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Pension advance company settles with Virginia Attorney General over high-interest loans targeting veterans and retirees
On November 15, the Virginia Attorney General announced a $51.7 million settlement with a pension advance company, its owner, and related entities (defendants) to resolve allegations concerning allegedly illegal, high-interest loans made to more than 1,000 Virginia veterans and retirees in violation of the Virginia Consumer Protection Act (VCPA). According to the Attorney General’s complaint, the defendants allegedly “disguised [the] illegal, high interest loans as ‘pension sales’ that could provide Virginia pension holders with a quick lump sum of cash,” and seemingly concentrated the sales in two Virginia areas where a large number of retired veterans and civil servants reside. Following the lawsuit, the defendants shut down lending operations in Virginia and around the country. Under a permanent injunction and final judgment, the court—which declared the defendants’ agreements to be “usurious and illegal”—ordered the defendants to: (i) provide over $20 million in borrower debt forgiveness; (ii) pay a $31.7 million civil money penalty; (iii) pay $414,473 in restitution; (iv) pay $198,000 for costs and attorneys’ fees; and (v) agree to injunctive relief to prevent further violations of the VCPA.
On October 30, the U.S. Attorney for the Middle District of Florida filed a lawsuit against a Florida legal services provider and two of its officers (defendants) for allegedly violating the Fair Housing Act by “intentionally discriminating against Hispanic homeowners by targeting them with a predatory mortgage loan modification and foreclosure rescue services scheme.” Specifically, the complaint alleges that the defendants, among other things, (i) targeted borrowers through the use of Spanish-language advertisements that allegedly promised to cut mortgage payments in half; (ii) promised payments would be lowered “in a specific timeframe in exchange for thousands of dollars of upfront fees and continuing monthly fees of as much as $550,” without delivering the promised loan modifications; (iii) instructed borrowers to stop making monthly mortgage payments and to stop communicating with their lenders; and (iv) had borrowers sign English-language contracts while only translating the provisions regarding payment. The complaint seeks to enjoin the defendants from participating in discriminatory activities on the basis of national origin, and requests monetary damages and civil penalties.
New York City Department of Consumer Affairs sues for-profit college for deceptive and predatory lending practices
On October 19, New York City Department of Consumer Affairs (DCA) announced that it filed suit in New York County Supreme Court against a for-profit college alleging deceptive and predatory lending practices that violate NYC Consumer Protection Law and local debt collection rules. The DCA alleges that college recruiters engaged in deceptive practices such as (i) masquerading federal loan applications as scholarships; (ii) steering students towards college loans and referring to them as “payment plans”; and (iii) deceiving students about institutional grants by failing to disclose that they require students to obtain the maximum amount of federal loans available before a grant can be awarded. DCA also alleges that the for-profit college violated debt collection laws by concealing its identity on invoices when collecting debt, and seeking payments from graduates for debts not owed.
VA issues policy guidance on VA refinance loans in response to the Economic Growth, Regulatory Relief and Consumer Protection Act
On May 25, the Department of Veterans Affairs (VA) issued Circular 26-18-13 discussing the impact of “The Protecting Veterans from Predatory Lending Act of 2018” (the Act), which was included in the recently enacted bipartisan regulatory relief bill, Economic Growth, Regulatory Relief and Consumer Protection Act, S. 2155, previously covered by InfoBytes here. The Act addresses “loan churning” of VA-guaranteed refinance loans and sets out new requirements for VA eligibility. As of May 25, a lender (broker or agent included), a servicer, or issuer of an Interest Rate Reduction Refinance Loan (IRRRL) must, among other things:
- Recoup Fees. Certify that certain fees and costs of the loan will be recouped on or before 36 months after the loan note date;
- Establish a Net Tangible Benefit. Establish that when the previous loan had a fixed interest rate (i) the new fixed interest rate is at least 0.5 percent lower or (ii) if the new loan has an adjustable rate, that the rate is at least 2 percent lower than the previous loan. In each instance, the lower rate cannot be produced solely from discount points except in certain circumstances; and
- Apply a Seasoning Period. Follow a seasoning requirement for all VA-guaranteed loans. A loan cannot be refinanced by an IRRRL or a VA cash-out refinance (if the new principle amount is less than the loan being refinanced) until (i) 210 days after the date of the first payment made on the loan and (ii) the date of the sixth monthly payment is made on the loan.
The circular is rescinded on January 1, 2020.
On April 16, the New York Department of Financial Services (NYDFS) announced an investigation into whether rent-to-own and land installment home purchase agreements constitute unlicensed, predatory mortgage lending in New York. NYDFS acknowledged the ongoing investigation while releasing a consumer alert to New Yorkers about rent-to-own and land installment contract pitfalls. The alert notifies consumers that the agreements may violate certain New York laws and regulations governing fair lending, mortgage protection, interest rates, habitability, and property condition. NYDFS encourages consumers to consider a traditional leasing option and be aware of the state of disrepair the property may be in before signing the agreement.
Virginia Attorney General sues pension sale lender who targeted retired veterans and government employees; obtains full restitution for customers of online lender
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.
On February 7, Virginia’s Attorney General, Mark R. Herring, announced a $2.7 million settlement with a Virginia affiliate of a New York-based internet lender to resolve alleged violations of the Virginia Consumer Protection Act (VCPA). According to the announcement, between January 2017 and July 2017, the online lender (i) offered installment loans with interest rates as high as 359 percent without qualifying for an exception to the state’s 12 percent interest cap; (ii) falsely claimed it was licensed by Virginia’s Bureau of Financial Institutions; and (iii) charged state residents an unlawful check-processing fee of $15 for payments made by check on closed-end installment loans. The attorney general’s office stated that the settlement requires the lender to disgorge more than $2 million in illegal interest payments received, provide over $300,000 in refunds to affected state consumers, 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.
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.
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.
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.
- Jonice Gray Tucker to discuss "Trends in regulatory enforcement" at the American Bar Association Banking Law Committee Meeting
- Jessica L. Pollet to discuss "Your career is impacting your life..." at the Ark Group Women Legal Conference
- Jon David D. Langlois to discuss "Successors in interest updates" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo
- Brandy A. Hood to discuss "Keeping your head above water in flood insurance compliance" at the Mortgage Bankers Association National Mortgage Servicing Conference & Expo