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  • DOJ Announces $5.4 Million in Additional Relief for Servicemembers Impacted by Bank’s Alleged SCRA Violations

    Lending

    On November 14, the DOJ announced it had secured an additional $5.4 million from a major U.S. bank related to a September 2016 settlement (previously covered by InfoBytes) resolving allegations that between January 2008 and July 2015 the bank repossessed vehicles owned by active duty servicemembers without required court orders in violation of the Servicemembers Civil Relief Act. The original consent order with the DOJ required the bank to pay $10,000, plus lost equity, to each of the 413 affected servicemembers whose cars were found to be unlawfully seized and further stipulated the bank could be required to compensate additional servicemembers. Since entering into the 2016 settlement with the DOJ, the bank announced it had uncovered another 450 qualifying servicemembers, bringing the combined affected total to 863, with compensatory payouts of more than $10 million

    Lending Fair Lending DOJ SCRA Servicemembers Settlement Enforcement

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  • CFPB Releases 50-State Snapshots of Student Debt, Servicemember Complaints

    Consumer Finance

    On October 27, the CFPB published a blog post highlighting the Bureau’s October 20 “50-state snapshot of student debt,” which illustrates how the “more than $1.4 trillion in student loan debt” is spread across the country. The snapshot also provides data on the more than 50,000 student loan complaints and 10,000 debt collection complaints received by the CFPB through September 2017 (over the course of 5 years). Specifically, for each state, the snapshot provides (i) the “total outstanding student loan debt balance as of 2016”; (ii) the “total student loan complaints handled”; (iii) the “change in volume of student loan complaints handled”; (iv) the “total debt collection complaints handled related to student loans”; and (v) the “change in volume of debt collection complaints handled related to student loans.” The blog post also provides tips and tools intended to assist student loan borrowers navigate problems with their loans.

    On October 31, the CFPB published a blog post releasing the Bureau’s “50 state snapshot of servicemember complaints,” which provides state-specific data on the over 91,000 complaints received from servicemembers, veterans, and their families since 2011 (which the CFPB collectively defines as, “servicemember”). Specifically, for each state, the snapshot provides (i) the total number of servicemember complaints handled since 2011, (ii) distribution of complaints by product for both servicemembers and non-servicemembers; (iiI) distribution of complaints by branch of service; and (iv) a visual representation of complaints by zip code.

    Consumer Finance Lending Student Lending Debt Collection Consumer Complaints CFPB Servicemembers

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  • CFPB Issues Report: Student Loan Complaints Initiated Actions Bringing Relief to Borrowers

    Lending

    On October 16, the CFPB published its annual report analyzing consumer complaints submitted between September 1, 2016 and August 31, 2017. The report, titled “Annual Report of the CFPB Student Loan Ombudsman,” is based on more than 22,000 complaints, which related to federal student loan servicing, debt collection, private student loans servicing, and debt relief services. The press release announcing the report noted that this represented a 120 percent increase in student loan complaints compared to last year, but also that this can partly be attributed to the fact that the Bureau updated its student loan complaint form in late February 2016 to accept complaints about federal student loan servicing issues. The report also noted that student loan complaints from July 2011 through August 2017 have led to actions resulting in more than $750 million in relief to student loan borrowers and improved the loan repayment process for millions of additional borrowers.

    The CFPB estimates that federal and private student loan debt combined has reached $1.4 trillion, mostly from federal loans, with more than 8 million student loan borrowers in default due to not making a required monthly payment for at least nine months. The report makes additional observations, including the following:

    • Military student loan borrowers continue to complain about difficulties in accessing protections guaranteed under federal law, such as interest rate caps under the Servicemembers Civil Relief Act, automatic recertification of income-driven repayment (IDR) plans, zero percent interest rate reductions while serving in areas of hostility, and discharging loans for veterans due to Total and Permanently Disability (TPD).
    • Consumers continue to report challenges concerning repayment roadblocks, such as difficulty in applying for or recertifying IDR plans, obtaining TPD discharge, and accessing advertised loan benefits for private loans.
    • Harassing and aggressive debt collection tactics, including the possibility for suspension or revocation of professional licenses in some states following a default, reportedly are creating additional challenges for consumers.

    Lending Student Lending CFPB Servicemembers SCRA Debt Collection

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  • California Governor Incorporates Federal Military Lending Act Amendments Into State Financial Code

    State Issues

    On October 5, California Governor Jerry Brown signed into law revisions to sections of the state’s Financial Code to incorporate references to federal Military Lending Act (MLA) amendments and applicable regulations. Impacted are the state’s Banking Law, Credit Union Law, Finance Lenders Law, and Deferred Deposit Transaction Law. Specifically, SB 266 is designed to ensure that the California Department of Business Oversight’s Commissioner has the authority to enforce violations of the federal MLA rules by state-regulated lenders. The provisions also incorporate additional changes to Section 394 of the state’s Military and Veterans Code to prohibit discrimination against servicemembers (Assembly Bill No. 1710 was approved by Governor Brown on October 8). The amendments take effect January 1, 2018.

    State Issues State Legislation Lending Military Lending Act Servicemembers

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  • DOJ Obtains Auto Repossession Settlement for Servicemembers

    Consumer Finance

    On September 27, the DOJ announced a settlement with a California-based indirect auto financing company and its subsidiary responsible for extending auto title loans (defendants) resolving allegations that the defendants violated the Servicemembers Civil Relief Act (SCRA) by illegally repossessing at least 70 SCRA-protected servicemembers’ vehicles. The DOJ filed its complaint against the defendants in the U.S. District Court for the Central District of California the same day the settlement agreement was reached. This is the second DOJ settlement reached this month over alleged SCRA violations concerning auto repossessions. (See previous InfoBytes summary here.) According to the complaint, the CFPB’s Office of Servicemember Affairs alerted the DOJ in 2016 to the alleged unlawful vehicle repossessions. The DOJ’s investigation concluded that the defendants repossessed the vehicles between 2011 and 2016, without confirming whether the servicemembers were SCRA-protected or obtaining court orders. The defendants’ practice of violating the SCRA, the DOJ contends, was “intentional, willful, and taken in disregard for the rights of servicemembers.”

    Under the terms of the settlement agreement, the defendants must comply with the following: (i) obtain a court order or “valid SCRA waiver” in compliance with the outlined terms of the agreement before repossessing servicemember vehicles; (ii) develop a set of SCRA policies and procedures that outline repossession compliance measures and another set of policies and procedures to provide SCRA relief; (iii) appoint SCRA-specialized employees; and (iv) provide SCRA compliance training. The defendants must also compensate affected servicemembers $700,000, in addition to “lost equity,” accrued interest, credit repair relief, and an auto loan interest rate cap for eligible servicemembers. Further, the defendants must pay a civil penalty of $60,788 to the Treasury, and provide a list of repossessions between October 2016 and the effective date of the settlement to be reviewed by the DOJ for additional SCRA-violations.

    Consumer Finance DOJ Enforcement Settlement SCRA CFPB Servicemembers Compliance

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  • FTC Launches Military Task Force Website, CFPB Blog Post Discusses Servicemember Debt Collection Rights

    Consumer Finance

    On September 25, the FTC launched a new website to showcase the work of the agency’s Military Task Force. The Military Task Force identifies the needs of military consumers and their families and develops initiatives such as workshops that examine financial issues and scams more likely to affect military consumers or training for military attorneys, law enforcement personnel, and financial advisors. (See previous InfoBytes summaries here and here.) The FTC reported in a press release that in 2016, servicemembers, their dependents, military retirees, and veterans submitted more than 100,000 consumer complaints, with retirees and veterans comprising approximately two-thirds of the complaints. The top complaints were imposter scams, identity theft, and debt collection. The new webpage includes links to resources for servicemembers and veterans, workshops, related FTC cases and other initiatives, and congressional testimony.

    On September 22, the CFPB published a blog post to discuss servicemembers’ debt collection rights and resources. According to the Bureau, as of August 1, 41 percent of servicemember complaints were related to debt collection, as compared to 26 percent of non-servicemember complaints. The Fair Debt Collection Practices Act (FDCPA) protects servicemembers from debt collectors who use abusive, unfair, or deceptive practices to collect debts, but according to the Bureau, some military consumers claim they have received threats from debt collectors stating that they will report the debt to their commanding officer, have their rank reduced, or put their security clearance up for review. As the post notes, making false threats or disclosing debts to third parties without permission are violations of the FDCPA.

    Consumer Finance Servicemembers FTC CFPB FDCPA Consumer Complaints Debt Collection UDAAP

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  • District Court Grants Preliminary Settlement Approval in SCRA Class Action Suit

    Courts

    On September 13, the U.S. District Court for the Eastern District of North Carolina granted preliminary approval to settle a class-action suit resolving allegations that a national bank overcharged military families on interest and fees related primarily to mortgage and credit card accounts in violation of the Servicemembers Civil Relief Act (SCRA). The order also, in the context of the proposed settlement only, preliminarily certifies the class, which is comprised of members who—after September 11, 2001—were entitled to “additional compensation related to military reduced interest rate benefits from [the bank].” The plaintiffs filed the complaint against the bank in 2015 claiming alleged violations of the SCRA, TILA, and the North Carolina Unfair and Deceptive Trade Practices Act. In May 2016, the court denied the defendants’ motion to dismiss the first amended complaint, and at the end of 2016, the parties agreed to mediation. A second amended complaint—now the operative complaint—was filed just prior to the motion for preliminary approval. While the bank has not admitted any wrongdoing, it has agreed to refrain from using an “interest subsidy method for interest benefits calculations for a five-year period,” which, plaintiffs pleaded, can lead to higher costs.

    According to the terms of the memorandum in support of the motion for preliminary approval, class members will receive payments based on the strength of their individual claims, considering such factors as: (i) loan type; (ii) whether they previously received remediation from the bank, and how much; and (iii) the eligible period for interest rate refunds. The memorandum further stipulates that approximately $15.4 million of the nearly $42 million overall settlement will be provide to class members who have not received or deposited any payments from the bank. Unclaimed amounts from the first round will be pooled with the remainder of the settlement to be allocated as outlined in the distribution plan. A final approval hearing is scheduled for February of next year.

    Courts SCRA TILA Servicemembers Mortgages Credit Cards Class Action Litigation Settlement

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  • FTC Announces Agenda for Joint Conference on Protecting Military Consumers

    Consumer Finance

    On August 22, the FTC released the agenda for the Protecting Military Consumers: A Common Ground Conference to be held on September 7 in Los Angeles. As previously discussed in InfoBytes, the conference is geared towards military attorneys, law enforcement personnel, and consumer protection officials to provide training on consumer fraud and other issues affecting servicemembers and their families, and will be held in partnership with state and local authorities. Topics for discussion on the agenda include, among things:

    • higher education;
    • identity theft and imposter scams;
    • real estate fraud;
    • auto financing;
    • debt collection;
    • lending; and
    • privacy issues such as data collection, storage, and sharing.

    Consumer Finance Agency Rule-Making & Guidance FTC Servicemembers Student Lending Mortgages Debt Collection Privacy/Cyber Risk & Data Security Auto Finance

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  • FTC to Host Joint Conference on Protecting Military Consumers

    Consumer Finance

    On July 27, the FTC announced it is partnering with state and local authorities to host the Protecting Military Consumers: A Common Ground Conference on September 7 in Los Angeles to provide training on consumer fraud and other issues affecting servicemembers and their families. The conference is geared towards military attorneys, law enforcement personnel, and consumer protection officials, and will include the following topics:

    • student loans and for-profit colleges;
    • identity theft and imposter scams;
    • debt collections;
    • mortgage disputes; and
    • real estate fraud.

    Additionally, the conference will discuss several federal, state, and local consumer protection laws, including the Servicemembers Civil Relief Act, the Military Lending Act, and FTC and CFPB rules and regulations.

    Earlier in July, the FTC held a Military Consumer Financial Workshop to educate consumers on financial issues and scams they may face. (See previous InfoBytes coverage here.)

    Consumer Finance Agency Rule-Making & Guidance FTC Servicemembers SCRA Military Lending Act CFPB Student Lending Mortgages Debt Collection Privacy/Cyber Risk & Data Security

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  • DOJ Announces Settlement with Michigan Credit Union over SCRA Violations

    Federal Issues

    On July 6, the DOJ announced a settlement with a Michigan-based credit union resolving allegations that the credit union illegally repossessed four servicemembers’ vehicles in violation of the Servicemembers Civil Relief Act (SCRA). As previously reported, the DOJ filed its complaint on July 26, 2016, alleging that the credit union violated the “SCRA’s prohibition against repossessing a motor vehicle from a servicemember during military service without a court order if the servicemember made a deposit or installment payment on the loan before entering military service.”

    Servicemember protections under the SCRA empower the court to (i) review and approve each repossession; (ii) delay a repossession or require the lender to refund the payments made by the servicemember prior to the repossession; (iii) appoint an attorney to represent the servicemember; and (iv) require the lender to post bond with the court.

    Under the settlement, the credit union agreed to a civil penalty of $5,000. In addition, the credit union agreed to pay up to $10,000 plus lost equity in the vehicle with interest and to repair the credit of each affected servicemember whose vehicle was repossessed. The credit union also agreed to obtain either a court order or a valid SCRA waiver before repossessing a servicemember’ s vehicle, and to develop policies and procedures for vehicle repossessions that comply with the SCRA as well as provisions to ensure that servicemembers may benefit from the 6 percent interest rate cap on vehicle loans.

    Federal Issues DOJ Credit Union SCRA Courts Settlement Servicemembers

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