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CFPB settles with California-based company for debt collection violations
On April 6, the CFPB announced a consent order against a California-based debt collector and its former owner for allegedly harassing consumers and threatening to take legal action if they did not pay their debts. According to the CFPB, the respondents violated the FDCPA and the CFPA’s prohibition against deceptive acts or practices by mailing letters to consumers printed with “Litigation Notice” that threatened recipients with legal action if they did not repay their debts. However, the Bureau stated that the respondents did not file lawsuits against the consumers, nor did they hire law firms or lawyers to obtain any judgments or collect on any such judgments. Under the terms of the consent order, the respondents are permanently banned from the debt collection industry and are ordered to pay $860,000 in redress to its victims, which has been suspended due to an inability to pay, as well as a $2,200 civil money penalty. This is the CFPB’s latest action taken against debt collectors that have used false threats to collect debts. As previously covered in InfoBytes, in 2019 the CFPB and New York attorney general announced proposed settlements with a network of New York-based debt collectors to resolve allegations that the defendants engaged in improper debt collection tactics in violation of the CFPA, the FDCPA, and various New York laws. Also, in 2018, the CFPB announced a settlement with a Kansas-based company and its former CEO and part-owner that allegedly engaged in improper debt collection tactics in violation of the CFPB’s prohibitions on engaging in unfair, deceptive, or abusive acts or practices (covered by InfoBytes here).
FINRA fines broker-dealer for alleged supervision failures
On April 5, the Financial Industry Regulatory Authority (FINRA) entered into a Letter of Acceptance, Waiver, and Consent (AWC), with a New York-based broker-dealer subsidiary of a global financial services company to resolve allegations that it failed to monitor employees’ outside brokerage accounts for “potentially deceptive trading practices.” Among other things, FINRA alleged that the firm’s failure to maintain a supervisory system to ensure employees disclosed their outside brokerage accounts precluded the personal account trading team from accurately monitoring account activity for compliance with the firm’s trading restrictions. FINRA further indicated that “[w]hile the firm ultimately was able to review the relevant trading activity, the inability to do so earlier led to the firm’s failure to timely monitor trading in these accounts.” The firm neither admitted nor denied the findings set forth in the AWC letter but agreed to pay a $345,000 fine.
OFAC sanctions Pakistan-based transnational human smuggling organization
On April 7, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order 13581, “Blocking Property of Transnational Criminal Organizations,” against a Pakistani national and a transnational criminal organization (TCO). In addition, OFAC designated three individuals and one entity associated with the TCO. According to OFAC, Treasury’s designation of this human smuggling organization as a significant TCO is an “important step taken alongside our partners, towards disrupting . . . operations based in Pakistan and around the world.” As a result of the sanctions, all assets belonging to the designated persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC. U.S. persons are generally prohibited from engaging in dealings involving any property or interests in property of the blocked or designated persons.
OFAC sanctions Mexican cartel members and facilitator
On April 6, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to the Foreign Narcotics Kingpin Designation Act against two members of a major Mexico-based drug trafficking cartel, along with another individual responsible for facilitating travel related to the illicit activities for senior cartel members and their allies. In addition, OFAC designated two businesses located in Mexico. According to OFAC, the designations serve as “a reminder that Treasury will continue to sanction those providing support to [the cartel], whether that person is a violent actor or a complicit businessperson.” As a result of the sanctions, all property and interests in property belonging to the sanctioned individuals and entities subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons.
Arkansas amends FMLA mortgage licensing provisions
On April 1, the Arkansas governor signed SB 149, which amends provisions related to licensing requirements under the state’s Fair Mortgage Lending Act (FMLA). Among other things, the act (i) modifies certain definitions, including expanding the definition of a mortgage servicer to include a person that makes a payment to a borrower in the case of a home equity conversion mortgage or a reverse mortgage; (ii) clarifies the qualifications for licensure under the FMLA and outlines licensing renewal requirements; (iii) provides a process for the Arkansas Securities Commissioner to allow loan officers to work from a location that is not licensed as the principal place of business or branch office; (iv) modifies the process concerning notice of a change in name or address; and (v) requires licensees to establish and enforce written cybersecurity policies and procedures that comply with the FMLA and any regulations or orders promulgated thereunder. The act takes effect 90 days after adjournment of the legislature.
New York enacts LIBOR replacement provisions
On April 6, the New York Governor signed S297B into law, which addresses the permanent discontinuance of LIBOR for specified contracts, securities, and other instruments that are economically tied to LIBOR. Among other things, S297B stipulates that contracts using LIBOR as a benchmark that do not contain adequate interest rate fallback provisions (or contain a fallback provision “that result[s] in a benchmark replacement, other than a recommended benchmark replacement, that is based in any way on any LIBOR value”) will automatically convert to the “recommended benchmark replacement”—currently the secured overnight financing rate (SOFR)—when LIBOR is no longer available. As previously covered by InfoBytes, all sterling, euro, Swiss franc and Japanese yen settings, and one-week and two-month U.S. dollar settings will cease immediately after December 31, 2021, while all remaining U.S. dollar settings will cease immediately after June 30, 2023. Of note, S297B will not override LIBOR replacements that are mutually agreed upon by contracting parties, and provides a safe harbor from liability for parties that use a recommended benchmark replacement. Further, parties are also prohibited from discharging or refusing to perform contractual obligations or declaring a breach of contract as a result of the discontinuance of LIBOR or the use of a replacement.
Find continuing InfoBytes coverage on LIBOR here.
Split 11th Circuit says website not a “public accommodation” under ADA
On April 7, a split U.S. Court of Appeals for the Eleventh Circuit concluded that a website is not a “public accommodation” under the Americans with Disabilities Act (ADA). The plaintiff sued a supermarket chain under Title III of the ADA, alleging its website was incompatible with screen reader software and caused him injury by denying him the “full and equal enjoyment” provided to sighted customers. The district court issued a judgment ordering the supermarket chain to bring its website into compliance with the Web Content Accessibility Guidelines 2.0 standard after concluding that the plaintiff sufficiently demonstrated a sufficient “nexus” between the website and the supermarket chain’s physical premises. On appeal, the appellate court reviewed, among other things, the question of whether websites are public accommodations under the ADA. The majority vacated the district court’s ruling that the website was an intangible barrier to the supermarket chain’s physical stores and in violation of the ADA. Specifically, the majority reviewed the 12 types of locations listed as public accommodations under Title III, and found that none of them were “intangible places or spaces, such as websites.”
The majority further distinguished its conclusion from its holding in Rendon. v. Valleycrest Products, Ltd., in which it determined that the ADA covers both tangible, physical barriers as well as “intangible barriers, such as eligibility requirements and screening rules or discriminatory policies and procedures that restrict a disabled person’s ability to enjoy the defendant entity’s goods, services and privileges,” noting that the “limited use website, although inaccessible by individuals who are visually disabled, does not function as an intangible barrier to an individual with a visual disability accessing the goods, services, privileges or advantages of [the supermarket chain’s] physical stores.” Moreover, the majority rejected the plaintiff’s argument that Rendon established that a plaintiff only has to demonstrate a “nexus” between the service and the physical public accommodation, declining to adopt such a standard after finding no basis for it in the ADA or in previous precedent. This decision further divides the circuits over the scope of a “public accommodation.”
CFPB settles with California-based company for debt collection violations
On April 6, the CFPB announced a consent order against a California-based debt collector and its former owner for allegedly harassing consumers and threatening to take legal action if they did not pay their debts. According to the CFPB, the respondents violated the FDCPA and the CFPA’s prohibition against deceptive acts or practices by mailing letters to consumers printed with “Litigation Notice” that threatened recipients with legal action if they did not repay their debts. However, the Bureau stated that the respondents did not file lawsuits against the consumers, nor did they hire law firms or lawyers to obtain any judgments or collect on any such judgments. Under the terms of the consent order, the respondents are permanently banned from the debt collection industry and are ordered to pay $860,000 in redress to its victims, which has been suspended due to an inability to pay, as well as a $2,200 civil money penalty. This is the CFPB’s latest action taken against debt collectors that have used false threats to collect debts. As previously covered in InfoBytes, in 2019 the CFPB and New York attorney general announced proposed settlements with a network of New York-based debt collectors to resolve allegations that the defendants engaged in improper debt collection tactics in violation of the CFPA, the FDCPA, and various New York laws. Also, in 2018, the CFPB announced a settlement with a Kansas-based company and its former CEO and part-owner that allegedly engaged in improper debt collection tactics in violation of the CFPB’s prohibitions on engaging in unfair, deceptive, or abusive acts or practices (covered by InfoBytes here).
SBA clarifies bankruptcy PPP eligibility
On April 6, the Small Business Administration (SBA) updated its Paycheck Protection Program (PPP) frequently asked questions to clarify when an applicant or owner is no longer considered to be “presently involved in any bankruptcy” for PPP loan eligibility purposes. In order to be eligible for a PPP loan, SBA requires all borrowers to certify on their applications that the applicant, as well as any owner of 20 percent or more of the applicant, is not “presently involved in any bankruptcy.” SBA’s FAQ provides that “[i]f an applicant or owner has filed a Chapter 7 bankruptcy petition, the applicant or owner is considered to be ‘presently involved in any bankruptcy’ for PPP eligibility purposes until the Bankruptcy Court has entered a discharge order in the case.” For Chapter 11, 12, or 13 bankruptcy petitions, the applicant or owner will be “considered to be ‘presently involved in any bankruptcy’ for PPP eligibility purposes until the Bankruptcy Court has entered an order confirming the plan in the case.” An applicant or owner will not be considered to be “presently involved in any bankruptcy” if the Bankruptcy Court has entered an order dismissing the case, regardless of the type of bankruptcy petition. SBA stipulates, however, that the order must be entered before the date of the PPP loan application.
The SBA also issued a procedural notice to lenders announcing it will shut down the PPP platform to new PPP loan guaranty applications at 12 a.m. EDT on June 1.
California regulator reminds mortgage lenders and servicers of pandemic-related relief
On April 9, the California Department of Financial Protection and Innovation issued guidance to mortgage lenders and servicers to remind them of state law protections for homeowners and encourage them to work with impacted borrowers to avoid foreclosure. The regulator noted that, under California’s Homeowner Relief Act, if a mortgage servicer denies a forbearance request between August 31, 2020 and September 1, 2021, the servicer must provide written notice to the borrower that specifies why relief was not provided, and provide certain information to assist the borrower with defects in the application. The regulator also encouraged mortgage services to work with their customers to propose solutions to avoid foreclosure and stated that prudent efforts to do so will not be criticized by examiners.