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  • Federal Reserve Task Force Shoots for Real-Time Payments Network by 2020

    FinTech

    On July 21, the Faster Payments Task Force, created by the Federal Reserve in 2015, announced the publication of its final report detailing strategic efforts to implement faster payment solutions (part one of the report was published in January of this year). The report outlines 16 proposed faster payments solutions and is the culmination of proposals and feedback from providers across the payments industry, including more than 300 representatives from financial institutions, consumer groups, payment service providers, financial technology firms, merchants, government agencies, and numerous other interested parties. The task force’s goal is to have a real-time payments network available to U.S. consumers and businesses by 2020. The report discusses various solutions and technologies for implementing faster payments and recommends a framework for ongoing collaboration, decision-making, and rule setting. The report also addresses security threats, advocates for infrastructure to support faster payments, recommends that the Fed collaborate with relevant regulators to evaluate current laws and make necessary rule changes.

    “Our goal is to ensure that anyone, anywhere is able to pay and be paid quickly and securely,” said Sean Rodriguez, the Fed's faster payments strategy leader and chair of the Faster Payments Task Force. “In real terms, that means people will not have to wait hours or days to deliver and access their money. Businesses will have enhanced cash management and better information associated with their payments.”

    Fintech Federal Reserve Consumer Finance Payments

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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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  • 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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  • OCC Releases Spring 2017 Semiannual Risk Report

    Agency Rule-Making & Guidance

    On July 7, the Office of the Comptroller of the Currency (OCC) announced the release of its Semiannual Risk Perspective for Spring 2017 indicating key risk areas for national banks and federal savings associations. Acting Comptroller of the Currency Keith Noreika pointed out in his remarks that, “[w]hile these are risks that the system faces as a whole, we note that the risks differ from bank to bank based on size, region, and business model. Compliance, governance, and operational risk issues remain leading risk issues for large banks while strategic, credit, and compliance risks remain the leading issues for midsize and community banks.”

    The report details the four top risk areas:

    • Elevated strategic risk—banks are expanding into new products and services as a result of fintech competition. According to the report, this competition is increasing potential risks. The OCC hopes to finish developing a special purpose banking charter for fintech companies soon.
    • Increased compliance risk—banks must comply with anti-money laundering rules and the Bank Secrecy Act in addition to addressing increased cybersecurity challenges and new consumer protection laws.
    • Upswing in credit risk—underwriting standards for commercial and retail loans have been relaxed as banks exhibit greater enthusiasm for risk and attempt to maintain loan market share as competition increases.
    • Rise in operational risk—banks face increasingly complex cyber threats while relying on third-party service providers, which may be targets for hackers.

    The report used data for the 12 months ending December 31, 2016.

    Agency Rule-Making & Guidance OCC Risk Management Consumer Finance Payments Consumer Lending Privacy/Cyber Risk & Data Security Anti-Money Laundering Military Lending Act Compliance Bank Regulatory

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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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  • 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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  • Buckley Sandler Insights: CFPB Releases Proposed Changes to Final Rule on Prepaid Accounts

    Consumer Finance

    On June 15, 2017, the Consumer Financial Protection Bureau (CFPB) released proposed changes (Proposal) to its final rule, published last November, which created consumer protections for prepaid accounts under Regulation E and Regulation Z (Final Rule). The CFPB is proposing these revisions because of feedback it received through its outreach to industry participants regarding the Final Rule combined with comments received in response to its effective date proposal (which was later finalized and which delayed the effective date by six months to April 1, 2018). Comments on the Proposal must be received by August 14, 2017.

    The CFPB also released an updated version of its Small Entity Compliance Guide. The update reflects the effective date delay as well as other clarifications on the Final Rule. The update does not include any of the proposed changes included within the June 15, 2017 Proposal.

    Click here to read the full post.

    Consumer Finance Prepaid Cards

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  • North Carolina Changes Retail Installment Sales Act Default Fee

    State Issues

    On June 12, the General Assembly of North Carolina ratified Senate Bill 577, which amends the North Carolina Retail Installment Sales Act. Specifically, Senate Bill 577 modifies the late charge on an installment sale contract to be a flat fee of fifteen dollars, which is an increase from the prior limit of the lesser of five percent of the installment payment amount or six dollars. The amendment became effective on June 26 and applies to defaults from that day forward.

    State Issues CFPB State Legislation Consumer Finance Lending Consumer Lending

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  • Texas Passes Law Repealing Vehicle Protection Product Regulatory Act

    State Issues

    On June 15, Texas Governor Greg Abbott signed SB 2065. The law modifies a number of motor vehicle-related regulations and licensing requirements. Specifically, the law:

    • eliminates the Vehicle Protection Product Act;
    • abolishes the Vehicle Protection Product Warrantor Advisory Board;
    • requires the warrantor of a vehicle protection product to pay expenses to the person who purchases the product or system if loss or damage occurs due to failure of the product or system;
    • prohibits a retail seller from requiring a vehicle buyer—“as a condition of a retail installment transaction or the cash sale of a commercial vehicle”—to buy a vehicle protection product that is not installed on the vehicle at the time of the transaction, classifying this violation as a “false, misleading, or deceptive act or practice” actionable under the Deceptive Trade Practices-Consumer Protection Act; and
    • eliminates the licensing requirements for boot operators and boot companies, but requires a booting company to remove a boot within an hour of being contacted by the owner or forfeit all removal fees.

    The law takes effect September 1.

    State Issues Auto Financing State Legislation Consumer Finance Lending Consumer Lending Licensing

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