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FHA: Temporary endorsement of mortgages under forbearance will expire March 31
On March 23, FHA issued a reminder regarding the upcoming expiration of the temporary guidance concerning endorsement processes for mortgages where a borrower was granted a forbearance related to the Covid-19 pandemic prior to the loan being endorsed for FHA insurance. As previously covered by InfoBytes, the temporary guidance—announced last June in Mortgagee Letter (ML) 2020-16—granted mortgagees the ability to submit a mortgage for insurance endorsement involving a borrower who is experiencing financial hardships due to the Covid-19 pandemic, provided the mortgagee “executes a two-year partial indemnification agreement.” The temporary guidance was last extended in ML 2020-45, and is set to expire March 31.
SBA implements newest PPP changes
On March 22, the SBA published an interim final rule (IFR) implementing recent changes to the Paycheck Protection Program (PPP) that were included in the American Rescue Plan Act of 2021, enacted on March 11 (covered by InfoBytes here). These changes include “expanding the eligibility for First- and Second-Draw PPP loans, revising the exclusions from payroll costs for purposes of loan forgiveness, and providing that a PPP borrower that receives a PPP loan after December 27, 2020 can be approved for a Shuttered Venue Operator Grant [(SVOG)] under certain conditions.” Specifically, if a borrower received a First- or Second-Draw PPP loan after December 27, 2020, the amount of the subsequently approved SVOG will be reduced by the amount of the PPP loan. However, if a PPP applicant is approved for an SVOG before SBA issues a PPP loan number, the applicant will be ineligible for the PPP loan and “acceptance of any PPP loan proceeds will be considered an unauthorized use.” The IFR also provides several other clarifications and changes, which will apply to PPP loans approved, as well as loan forgiveness applications submitted, on or after March 11, 2021. The IFR took effect March 18. To assist SVOG applicants, SBA announced the launch of a splash page for the SVOG application portal, which will begin accepting applications April 8.
Earlier on March 18, SBA also released the following updated forms: (i) PPP loan guaranty application for lenders; (ii) Second-Draw loan guaranty lender application; (iii) First-Draw and Second-Draw PPP loan application forms; and (iv) First-Draw and Second-Draw PPP borrower applications for Schedule C filers using gross income.
CFPB and FTC release 2020 FDCPA report
On March 22, the CFPB and the FTC released their 2020 annual report to Congress on the administration of the FDCPA. Under a memorandum of understanding, the agencies are provided joint FDCPA enforcement responsibility and may share supervisory and consumer complaint information, as well as collaborate on education efforts. Among other things, the report provides a broad overview of the debt collection industry during the Covid-19 pandemic and highlights enforcement actions, education efforts, policy initiatives, and supervisory findings. The report also notes that the Bureau handled roughly 82,700 complaints filed by consumers about first- and third-party debt collectors in 2020, up from the 75,000 complaints it received in 2019, and engaged in four public enforcement actions arising from alleged FDCPA violations. Judgments resulting from these actions yielded nearly $15.2 million in consumer redress and $80,000 in civil money penalties. Additionally, the report discusses the Bureau’s FDCPA-rulemaking actions taken last year, including the issuance of two final rules amending Regulation F, which implements the FDCPA (covered by InfoBytes here and here). The report notes that both final rules are scheduled to take effect on November 30, but also refers to a February statement released by acting Director Dave Uejio, in which he “directed staff to ‘explore options for preserving the status quo’” with respect to the debt collection rules.
Earlier in the week, the FTC announced it provided the CFPB last month with its annual summary of debt collection-related activities taken in 2020. While the FTC’s debt collection program primarily focuses on enforcement investigations and litigation with respect to violations of the FDCPA and the FTC Act, the summary also highlights Commission efforts to engage in public outreach, as well as partnerships with the Bureau and other government agencies to combat unlawful debt collection practices. Highlights of the summary include:
- The creation of Operation Corrupt Collector, a nationwide enforcement and outreach effort led by the FTC in coordination with the CFPB and more than 50 federal and state law enforcement partners to target illegal debt collection practices (covered by InfoBytes here).
- The FTC filed or resolved seven cases against 39 defendants, obtaining $26 million in judgments.
- The FTC accused a company and three of its officers of allegedly engaging in passive debt collection—a practice known as “debt parking”—in which the defendants placed debts that consumers did not owe or the defendants were not authorized to collect on consumers’ credit reports without first attempting to communicate with the consumers about the debts (covered by InfoBytes here).
- The FTC and the New York attorney general permanently banned an individual defendant accused of engaging in “serious and repeated violations of law” from participating in debt collection activities (covered by InfoBytes here).
- The FTC produced educational materials for both consumers and debt collectors covering rights and responsibilities under the FDCPA and FTC Act, including resources specifically for Spanish speakers.
Agencies issue rulemaking to facilitate Emergency Capital Investment Program for CDFIs and MDIs
On March 22, the OCC, Federal Reserve Board, and the FDIC published an interim final rule (IFR) to facilitate the implementation of the Emergency Capital Investment Program (ECIP). As previously covered by InfoBytes, the ECIP was established by the Consolidated Appropriations Act of 2021, and will provide up to $9 billion in capital directly to Community Development Financial Institutions and minority depository institutions to provide, among other things, “loans, grants, and forbearance for small and minority businesses and consumers in low income communities” that may be disproportionately impacted by the Covid-19 pandemic. The IFR outlines capital designations and investment eligibility criteria, and specifically notes that the agencies have revised “the capital rule to clarify that senior preferred stock will qualify as additional tier 1 capital and subordinated debt will qualify as tier 2 capital.” The ECIP will expire six months after the date on which the national Covid-19 emergency ends.
FCC issues record $225 million fine for spoofed robocalls
On March 17, the FCC issued a record $225 million fine against two Texas-based telemarketers and their associated companies for allegedly transmitting roughly one billion illegally spoofed robocalls falsely claiming to offer plans issued by well known-health insurance companies. The Truth in Caller ID Act prohibits telemarketers from manipulating caller ID information with the intent to harm, defraud or wrongfully obtain anything of value. According to the FCC’s investigation, one of the companies’ allegedly spoofed robocalls “caused at least one company whose caller IDs were spoofed to become overwhelmed with angry call-backs from aggrieved consumers.” One of the telemarketers also apparently admitted that he placed millions of spoofed calls each day, including to numbers on the Do Not Call list. FCC acting Chairwoman Jessica Rosenworcel issued a statement commenting on the agency’s “largest fine ever,” in which she noted that the “individuals involved didn’t just lie about who they were when they made their calls—they said they were calling on behalf of well-known health insurance companies on more than a billion calls. That’s fraud on an enormous scale.”
3rd Circuit: ECOA does not preempt NJ’s common-law doctrine of necessaries in FDCPA case
On March 16, the U.S. Court of Appeals for the Third Circuit held that because ECOA does not preempt New Jersey’s common-law doctrine of necessaries (where a spouse is jointly liable for necessary expenses incurred by the other spouse) a defendant debt collector was permitted to send medical debt collection letters to a deceased individual’s spouse without violating the FDCPA. The defendant was retained to collect the deceased spouse’s medical debt and sent collection letters to the plaintiff who maintained she was not responsible for the debt and subsequently filed suit alleging violations of the FDCPA. The defendant moved for dismissal, arguing that the plaintiff owed the debt under New Jersey’s doctrine of necessaries because her deceased spouse incurred the debt for medical treatment. The district court agreed and dismissed the case. The plaintiff appealed, arguing, among other things, that the doctrine of necessaries conflicts with the spousal-signature prohibition found in the ECOA.
In affirming the district court’s dismissal, the 3rd Circuit concluded that “ECOA does not preempt the doctrine of necessaries because the debt is ‘incidental credit’ exempt from the prohibition.” According to the 3rd Circuit, the Federal Reserve Board determined that incidental credit is exempt from the § 202.7(d) spousal-signature prohibition because it “refers to extensions of consumer credit. . .(i) [t]hat are not made pursuant to the terms of a credit card account; (ii) [t]hat are not subject to a finance charge. . .and (iii) [t]hat are not payable by agreement in more than four installments.” The 3rd Circuit determined that because the medical debt in question satisfied all three criteria, the spousal-signature prohibition did not apply, and therefore ECOA and its regulations did not conflict with the doctrine of necessaries. Further, the 3rd Circuit held that ECOA focuses “on ensuring the availability of credit rather than the allocation of liability between spouses.”
OFAC announces Hong Kong-related designations
On March 17, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) added several Chinese citizens and Hong Kong nationals to the Specially Designated Nationals List. The individuals were designated under Executive Order (E.O.) 13936, which, among other things, authorizes the imposition of sanctions on persons who are determined to be responsible for or complicit in actions or policies that threaten the peace, security, stability, or autonomy of Hong Kong. Under E.O. 13936, “[a]ll property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of any United States person, . . .are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in” with any foreign person identified to have engaged in the aforementioned activities.
Agencies to allow supplementary leverage ratio flexibility to expire
On March 19, the OCC, FDIC, and Federal Reserve Board announced that the temporary changes to the supplementary leverage ratio (SLR) for depository institutions will expire as scheduled on March 31. As previously covered by InfoBytes, the federal banking agencies issued an interim final rule last May, which temporarily permitted depository institutions to exclude U.S. Treasury securities and deposits at Federal Reserve Banks from the calculation of the SLR, enabling depository institutions to expand their balance sheets to provide additional credit to households and businesses in light of the Covid-19 pandemic. In connection with announcing its decision to allow the temporary SLR changes to expire, the Fed noted that due to “recent growth in the supply of central bank reserves and the issuance of Treasury securities, the Board may need to address the current design and calibration of the SLR over time to prevent strains from developing that could both constrain economic growth and undermine financial stability.” The Fed noted it intends to “shortly seek comments on measures to adjust the SLR” and “will take appropriate actions to assure that any changes to the SLR do not erode the overall strength of bank capital requirements.”
CFPB sues student loan debt-relief operation
On March 16, the CFPB sued a California-based student loan debt relief company, its owner, and manager (collectively, “defendants”) for allegedly charging borrowers more than $3.5 million in unlawful advance fees. The complaint alleged that between 2015 and 2019, the defendants violated the Telemarketing Sales Rule (TSR) and the CFPA by unlawfully marketing and enrolling borrowers in the company’s purported debt relief services. Defendants allegedly charged and collected advance fees from borrowers with federal student loans to file paperwork on their behalf in order to access free Department of Education debt-relief programs. According to the Bureau, the defendants violated the TSR by requesting and receiving payment of fees before renegotiating, settling, reducing, or altering the terms of at least one debt pursuant to an agreement, and before the consumer made at least one payment pursuant to that agreement. The Bureau also alleged that the owner defendant formed a California limited liability company (relief defendant) and unlawfully transferred a portion of the funds received from the advance fees into the relief defendant’s bank account. The complaint seeks injunctive relief, as well as restitution and civil money penalties. The complaint also seeks to have the relief defendant disgorge or compensate consumers for the funds it received.
FDIC encourages banks to submit diversity self-assessments
On March 15, the FDIC’s Office of Minority and Women Inclusion (OMWI) encouraged FDIC-supervised financial institutions with 100 or more employees to submit voluntary self-assessments of their diversity policies and practices. OMWI’s diversity program will assess a financial institution’s diversity policies in the following areas: (i) organizational commitment; (ii) workforce profile and employment practices; (iii) procurement and business practices/supplier diversity; (iv) transparency of organizational diversity and inclusion; and (v) an entities’ self-assessment. OMWI noted that the self-assessment is not an examination requirement, and therefore will not impact a financial institution’s safety and soundness, consumer compliance, or Community Reinvestment Act examination ratings.