InfoBytes
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Texas Office of Consumer Credit updates guidance urging credit access businesses to work with borrowers
On November 16, the Texas Office of the Consumer Credit Commissioner updated its advisory bulletin urging credit access businesses to work with consumers during the Covid-19 crisis (previously covered here, here, here, and here). Among other measures, the regulator urges licensees to increase consumer communication regarding the effects of Covid-19 for licensees, work out modifications for payment difficulties, and review policies for fees, late charges, delinquency practices, and repossessions. The guidance also: (i) reminds licensees of legal requirements for using electronic signatures, and (ii) continues to permit licensees to conduct activity from unlicensed locations, subject to certain conditions. The guidance is in effect through December 31, 2020, unless withdrawn or revised.
Texas Office of Consumer Credit updates guidance urging motor vehicle sales finance licensees to work with borrowers
On November 16, the Texas Office of the Consumer Credit Commissioner updated its advisory bulletin urging motor vehicle sales finance licensees to work with consumers during the Covid-19 crisis (previously covered here, here, here, here, here, and here). Among other measures, the regulator urges licensees to increase consumer communication regarding the effects of Covid-19 for licensees, work out modifications for payment difficulties, and review policies for fees, late charges, delinquency practices, and repossessions. The guidance also: (i) reminds licensees of legal requirements for using electronic signatures and (ii) continues to permit licensees to conduct activity from unlicensed locations, subject to certain conditions. The guidance is in effect through December 31, 2020, unless withdrawn or revised.
Texas Office of Consumer Credit updates guidance for regulated lenders
On November 16, the Texas Office of the Consumer Credit Commissioner issued updated guidance (previously covered here, here, here, and here) for regulated lenders relating to the Covid-19 crisis. The guidance: (1) encourages lenders to work with consumers, including by working out modifications to assist with payments, and reviewing policies for fees, late charges, delinquency practices, and repossessions, among other things; (2) reminds lenders of legal requirements for using electronic signatures; and (3) permits lenders to conduct regulated lending activity from unlicensed locations, subject to certain conditions. The guidance is in effect through December 31, 2020, unless withdrawn or revised.
Another district court dismisses PPP agent fee class action
On November 16, the U.S. District Court for the Central District of California issued an order dismissing a putative class action against several large banks over whether agents providing consulting, legal, accounting, and tax preparation services are entitled to “agent fees” from lenders for helping businesses secure loans under the Paycheck Protection Program (PPP). The agents argued that the banks received lender fees from the government and funded PPP loans for borrowers but failed to and refused to pay any agent fees. The court found, however, that the agents failed to allege facts sufficient to establish standing or to “inform any Defendant of its particular role in the alleged general harm,” and instead relied “merely on generalized, conclusory allegations.” While the court gave the agents 21 days to amend their complaint, it noted that “[b]ecause the CARES Act does not provide a private cause of action to recover agent fees absent an agreement between agent and lender, it appears unlikely that Plaintiffs can overcome the [identified] deficiencies.” The court’s decision follows decisions issued by other federal courts, which have also dismissed similar agent fee class actions (see InfoBytes here and here).
FSB to address Covid-19 impact on global financial stability
On November 15, the Financial Stability Board (FSB) published a letter from their Chair, Randal K. Quarles, ahead of the G20’s November summit. In the letter, Quarles explains that, while financial conditions are easing, global economic outlook remains uncertain. He also notes that the challenges posed by Covid-19 have not yet dissipated and that continued efforts are required to support financial resilience and to ensure a sustained flow of financing to the real economy. Finally, he states that, despite the pandemic, the FSB with support from G20 leaders must continue to press forward with priority reforms, such as developing more efficient cross-border payment services, addressing risks from stablecoins, assessing climate-related financial stability risks, strengthening cyber resilience, and facilitating a smooth transition away from LIBOR in order to strengthen the global financial system.
Illinois extends prohibition on residential evictions
On November 13, the Illinois governor issued Executive Order 2020-72 further extending the state’s prohibition on residential evictions (previously covered here, here, and here).
Illinois governor suspends consumer garnishment and wage deductions
On November 13, the Illinois governor re-issued over 30 previous Covid-related executive orders that had previously been suspended. Of note, Executive Order 2020-55, which suspended portions of the Illinois Code of Civil procedure permitting service of a garnishment summons, wage deduction summons or a citation to discover assets on a consumer debtor, was reissued in its entirety and extended through December 12, 2020.
9th Circuit affirms dismissal of bank’s quiet-title action against HOA
On November 5, the U.S. Court of Appeals for the Ninth Circuit affirmed a district court judgment, which had dismissed for failure to state a claim a national bank’s quiet-title action against the purchaser of real property at a foreclosure sale, a Nevada homeowners association (HOA), and the HOA’s agent (collectively, “defendants”). According to the opinion, borrowers financed the purchase of a home located within the HOA through the bank, but fell behind on their HOA dues. The HOA recorded a lien on the property for the delinquent assessments, foreclosed on the home to satisfy the lien, and ultimately sold the property at a public auction to a trust, which extinguished the bank’s deed of trust. The bank filed the quiet-title action against the defendants, alleging, among other things, that the foreclosure sale was invalid and that the bank’s “deed of trust continues as a valid encumbrance against the [p]roperty.” In addition, the bank claimed that applying Nevada Revised Statutes section 116.3116 “produces a harsh result” because it prioritizes an HOA lien over “all other liens, including the first deed of trust held by the mortgage lender,” and also violates the Takings Clause and the Due Process Clause of the U.S. Constitution. The bank further argued that the foreclosure sale was not valid because it did not receive adequate notice of the sale. The district court granted the defendants’ motion to dismiss, ruling, among other things, that the HOA had the right to foreclose on the property and that the bank had received adequate notice of the property’s sale.
On appeal, the 9th Circuit concluded that the bank’s constitutional rights under the Takings Clause—which provides that private property cannot be taken for public use “without just compensation”—were not violated. “Because the enactment of section 116.3116 predated the creation of [the bank’s] lien on the property, [the bank cannot] establish that it suffered an uncompensated taking,” the appellate court wrote, additionally noting that “the foreclosure proceeding itself was not a ‘taking’ because the Takings Clause governs the conduct of the government, not private actors.” With respect to the alleged violation of the Due Process Clause, the appellate court agreed with the district court’s determination that the bank had received adequate, actual notice of the delinquent assessment and the foreclosure sale.
Regulators update Senate on Covid-19
On November 10, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled “Oversight of Financial Regulators,” which primarily focused on Covid-19-related actions taken by the Federal Reserve Board (Fed), OCC, FDIC, and NCUA since the federal financial regulators last testified in May (covered by InfoBytes here). Committee Chairman Mike Crapo (R-ID) opened the hearing by applauding the actions taken by the regulators after the passage of the CARES Act to help mitigate the economic impact of the pandemic. Crapo cautioned, however, that the regulators should continue to review and adjust their regulatory and supervisory frameworks to support economic recovery, including by “alleviat[ing] the regulatory burdens associated with a variety of asset-based regulatory thresholds on [] banks and credit unions temporarily experiencing growth from participation in recovery-orientated programs” such as the Paycheck Protection Program (PPP).
In his written statement, Fed Vice Chair for Supervision Randal K. Quarles discussed actions taken by the Fed, such as (i) issuing a set of key principles concerning Covid-related credit accommodations; (ii) updating guidance on bank examinations to “consider the unique, evolving, and potentially long-term issues that institutions face”; (iii) clarifying the Fed’s approach to Covid-related activity under the Community Reinvestment Act; and (iv) supporting the ability of banks to meet customer needs by issuing PPP loans, underwriting loans in the Main Street Lending Program, and acting as counterparties in several other facilities.
OCC Acting Comptroller Brian Brooks also discussed activities undertaken by the agency, and noted that the regulators are working on an interagency basis “on a set of rule[s] that would relieve for a period of time certain asset thresholds being tripped that trigger heightened scrutiny and heightened compliance requirements at different levels.” According to Brooks, this relief would “cap out at $10 billion, most likely, based on current conversations.” Brooks agreed with Quarles that while larger banks are “fully capable of managing those risks,” smaller banks will face difficulties.
FDIC Chairman Jelena McWilliams also provided an update on actions undertaken to provide banks flexibility while maintaining safety and soundness. McWilliams discussed five key areas: (i) responding to Covid-19 economic risks; (ii) “enhancing [] resolution readiness”; (iii) supporting communities; (iv) “fostering technology solutions and encouraging innovation”; and (v) “finalizing outstanding rulemakings,” including approving an interim final rule to provide regulatory relief to insured depository institutions that have experienced significant, but temporary, asset growth due to government stimulus efforts (covered by InfoBytes here).
NCUA Chairman Rodney E. Hood also discussed updated agency measures in response to the pandemic, such as adjusting supervision priorities to ensure that credit unions’ good-faith efforts to comply with the CARES Act are reviewed. Hood further emphasized in his written statement that “NCUA’s examiners will not criticize a credit union’s efforts to provide prudent relief for members when such efforts are conducted in a reasonable manner with proper controls and management oversight.” Hood also discussed, among other things, NCUA’s cybersecurity efforts in response to the pandemic and significant rulemaking actions, including an interim final rule that provides relief to credit unions that temporarily fall below the well-capitalized level.
The House Financial Services Committee also held a hearing later in the week to discuss the regulators' responses to the pandemic.
FHFA extends GSEs’ ability to buy mortgages in forbearance
On November 12, the FHFA announced an extension of a temporary policy related to the Covid-19 pandemic that allows Fannie Mae and Freddie Mac (GSEs) to purchase qualified single-family mortgages in forbearance that meet specific eligibility criteria. The policy is now extended for loans originated through December 31. As previously covered by InfoBytes, in an effort to provide liquidity to ensure continued lending during the Covid-19 pandemic, FHFA is allowing the GSEs to buy certain mortgages that enter forbearance within the first month after loan closing, prior to delivery to the GSEs.