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  • Texas Office of Consumer Credit updates advisory to work with consumers

    State Issues

    On February 18, 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 herehereherehere, 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 The guidance is in effect through March 31, 2021, unless withdrawn or revised.

    State Issues Covid-19 Texas Consumer Credit Licensing ESIGN

  • Maryland regulator exempts RELIEF Act stimulus payments from garnishment or set-off

    State Issues

    On February 17, the Maryland commissioner of financial regulation issued guidance specifying that stimulus payments to residents pursuant to the Maryland RELIEF Act of 2021 are exempt from garnishment and set-off laws. 

    State Issues Covid-19 Maryland Debt Collection

  • OFAC issues new executive order connected to Burmese military coup, adds sanctions targets under new order

    Financial Crimes

    On February 11, President Biden issued Executive Order (E.O.) 14014, “Blocking Property With Respect To The Situation In Burma.” Among other things, the new executive order permits the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) to target any person determined to operate in the defense sector of the Burmese economy, or any other sector of the economy as determined by the Secretary of the Treasury. The order also targets persons determined to have undermined democracy, threatened peace or stability, or engaged in a number of other activities threatening freedoms or human rights in Burma, and other persons determined to be a leader, part of, or associated with the Government of Burma. Under this new authority, OFAC announced sanctions against 10 current and former military officials and three entities connected to a Burmese military coup. The sanctions “specifically target those who played a leading role in the overthrow of Burma’s democratically elected government.” As a result of the sanctions all property and interests in property belonging to the sanctioned individuals and entities, and “any entities that are owned, directly or indirectly, 50 percent or more by them,” subject to U.S. jurisdiction are blocked and must be reported to OFAC. U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific license.

    Financial Crimes OFAC Designations Department of Treasury Enforcement Sanctions Of Interest to Non-US Persons Burma OFAC

  • 8th Circuit affirms summary judgment for servicer without proof of RESPA injury

    Courts

    On February 11, the U.S. Court of Appeals for the Eighth Circuit affirmed summary judgment in favor of a mortgage loan servicer, concluding that the consumer failed to establish that he was injured by the servicer’s alleged violation of RESPA. As previously covered by InfoBytes, the U.S. District Court for the District of Minnesota ruled on a motion for summary judgment concerning whether the Minnesota Mortgage Originator and Servicer Licensing Act’s (MOSLA) provision prohibiting “a mortgage servicer from violating ‘federal law regulating residential mortgage loans’” provides a cause of action under state law when a loan servicer violates RESPA but where the consumer ultimately has no federal cause of action because the consumer “sustained no actual damages and thus has no actionable claim under RESPA.” The 8th Circuit previously overturned the district court’s earlier ruling to grant summary judgment in favor of the consumer, concluding that while the loan servicer failed to (i) conduct an adequate investigation following the plaintiff’s request as to why there was a delinquency for his account, and (ii) failed to provide a complete loan payment history when requested, its failure did not cause actual damages.

    In affirming the district court’s recent order, the 8th Circuit agreed that for the consumer to pursue a MOSLA cause of action when a loan servicer violates a federal law regulating mortgage loans, such as RESPA, there must be a federal cause of action. Even though the 8th Circuit previously concluded the servicer violated RESPA, the plaintiff must still prove actual damages to establish an injury in order to prevail under MOSLA.

    Courts Appellate Eighth Circuit RESPA Mortgages

  • Yellen addresses “digital divide”

    Federal Issues

    On February 9 and 10, the U.S. Treasury Department hosted its U.S. Financial Sector Innovation Policy Roundtable, which convened public and private sector experts “to exchange views for collaborating on policy issues and innovative technologies that support global financial integrity, while fostering economic recovery, competitiveness, and financial inclusion.” Treasury Secretary Yellen delivered the opening remarks touching on the enactment of the Anti-Money Laundering Act, which was included in the National Defense Authorization Act (NDAA) for Fiscal Year 2021 (covered by InfoBytes here), noting that the law is timely as “we’re living amidst an explosion of risk related to fraud, money laundering, terrorist financing, and data privacy.” Moreover, due to the Covid-19 pandemic, the world has seen “more sophisticated” cyberattacks. Yellen asserts that the pandemic has highlighted the “digital divide” in the country and that “millions of people remain disconnected from the financial system.” Similar to broadband deserts, there are “financial services deserts,” as shown the Paycheck Protection Program’s issues with reaching small businesses in communities of color. Yellen concluded that “just as much as we need responsible innovation, we also need equitable innovation; tools that can help bring the benefits of the financial system and modern IT to more people.”

    Federal Issues Financial Crimes Of Interest to Non-US Persons Department of Treasury Fintech Anti-Money Laundering SBA Covid-19

  • FTC settles with payday lender

    Federal Issues

    On February 11, the FTC announced a settlement with the owners and operators of a payday lending enterprise (collectively, “defendants”) for allegedly deceptively overcharging consumers and withdrawing money from consumers’ accounts without permission. The FTC filed a complaint against the defendants last year claiming, among other things, that the defendants violated the FTC Act, the Telemarketing Sales Rule, TILA/Regulation Z, and EFTA/Regulation E, by advertising loans with fixed payback terms and promising consumers that their loans would be repaid after a pre-determined number of payments. However, the FTC claimed that in many cases the payback terms defaulted to debiting the financial fee only, and the U.S. District Court for the District of Nevada granted a temporary restraining order against the defendants (covered by InfoBytes here). Under the terms of the stipulated final order, the FTC ordered that any consumer debt for loans issued and assigned to the defendants are “deemed paid in full to the extent that such [e]xisting [d]ebt exceeds the amount financed plus one finance charge. . . .” The defendants are also (i) permanently banned from the payday lending industry, including making loans or extending credit of any kind; (ii) prohibited from making any misrepresentations related to the collection of any debt; (iii) prohibited from making unauthorized electronic fund transfers from consumers’ bank accounts; and (iv) permanently banned from creating, or causing to be created, any remotely created payment orders. A $114 million monetary judgment will be partially suspended upon completion of asset transfers from all financial institutions holding accounts in the defendants’ names.

    Federal Issues FTC Enforcement Payday Lending FTC Act Deceptive UDAP

  • Biden extends foreclosure protections

    Federal Issues

    On February 16, the Biden administration announced an extension of the Covid-19 forbearance and foreclosure protections for homeowners through June 30. According to the White House statement, the administration has directed HUD, Department of Veterans Affairs, and Department of Agriculture to (i) extend the foreclosure moratorium for homeowners through June 30; (ii) extend the mortgage payment forbearance enrollment window until June 30; and (iii) provide up to six months of additional mortgage payment forbearance, in three-month increments. The announcement notes that the extension will “directly benefit the 2.7 million homeowners currently in COVID forbearance and extend the availability of forbearance options for nearly 11 million government-backed mortgages nationwide.” The FHA extensions are reflected in Mortgagee Letter 2021-05 and the VA extensions are reflected in Circulars 26-21-04 and 26-21-05.

    As previously covered by InfoBytes, FHFA announced an extension of Fannie Mae and Freddie Mac’s foreclosure moratorium until March 31 and the option for borrowers to receive an additional three-month Covid-19 forbearance extension.

    Federal Issues Covid-19 HUD Foreclosure Forbearance Department of Veterans Affairs USDA Mortgages

  • FTC settles with credit card laundering defendants

    Federal Issues

    On February 10, the FTC announced settlements with several defendants that allegedly violated the FTC Act and the Telemarketing sales Rule by assisting an operation responsible for laundering millions of dollars in credit card charges through fraudulent merchant accounts. As previously covered by InfoBytes, the defendants engaged in a credit card laundering scheme with the operation to process credit card charges through merchant accounts set up by the operation under fictitious company names instead of processing charges through a single merchant account under the operation’s name. According to the FTC’s complaint, the defendants purportedly (i) underwrote and approved the operation’s fictitious companies; (ii) set up merchant accounts with its acquirer for the fictitious companies; (iii) used sales agents to market processing services to merchants; (iv) processed nearly $6 million through credit card networks; and (v) transferred sales revenue from the transactions to companies controlled by the defendants. 

    The settlements (see here, here, and here) permanently ban three of the defendants from payment processing and telemarketing or acting as independent sales organizations or sales agents in the payment processing industry. A previously issued settlement against a fourth defendant banned him from payment processing or acting as an independent sales organization or sales agent in the payment processing industry. Monetary judgments totaling more than $10.7 million collectively have been suspended due to the defendants’ inability to pay.

    Federal Issues FTC Enforcement Credit Cards FTC Act Telemarketing Sales Rule Payment Processors

  • Massachusetts AG settles with federal loan servicer to resolve allegations of unfair and deceptive practices

    State Issues

    On February 10, the Massachusetts attorney general announced a “first-of-its-kind” settlement with one of the nation’s largest federal student loan servicers, resolving allegations that the servicer engaged in unfair and deceptive practices by overcharging borrowers and improperly processing claims for public service loan forgiveness. As previously covered by InfoBytes, the AG filed a complaint in 2017 claiming the servicer, among other things, (i) failed to timely and properly process applications for income driven repayment (IDR) plans, thereby denying borrowers the opportunity to make qualifying payments under forgiveness programs; (ii) failed to properly count qualifying payments under the Public Service Loan Forgiveness program; (iii) failed to properly process certification forms in connection with the Teacher Education Assistance for College and Higher Education Grant program, causing grants to be converted into loans; and (iv) collected amounts not legitimately due and owing and failing to refund them.

    Under the terms of the settlement, more than 200,000 Massachusetts borrowers will be able to submit a claim for a detailed audit. Should the audit identify a servicing error or misrepresentation, the servicer must “restore borrowers to their rightful statuses” under the federal loan forgiveness programs; however, if corrections cannot be made, the servicer is required to provide monetary relief to borrowers. The servicer is also is required to repay teachers whose grants were converted into loans erroneously and have not already received relief from the Department of Education, and make corrections for borrowers who experienced IDR application processing delays resulting in missed opportunities for making qualifying payments towards loan forgiveness. Further, the servicer must implement an enhanced quality assurance review practice to identify servicing errors, affected borrowers, as well as root causes for the errors.

    State Issues State Attorney General Enforcement Student Lending Student Loan Servicer

  • Washington issues updated guidance to residential mortgage loan servicers

    State Issues

    On February 12, the Director of the Washington Department of Financial Institutions issued their fourth amended guidance to residential mortgage loan servicers.  The guidance reminds residential mortgage loan servicers to take all necessary precautions to help prevent the spread of Covid-19, including allowing them to continue working from home (previously discussed here.)  It also urges servicers to take “reasonable and prudent actions” to support consumers by:

    • Forbearing mortgage payments;
    • Refraining from reporting late payments to credit rating agencies;
    • Offering mortgagors additional time to complete trial loan modifications, and ensuring that late payments do not affect their ability to obtain permanent loan modifications;
    • Waiving late payment fees and online payment fees;
    • Postponing foreclosures;
    • Ensuring that the closure of the mortgage servicer’s office does not disrupt services to borrowers; and
    • Proactively reaching out to mortgagors via app announcements, text, email or otherwise to explain the assistance being offered to mortgagors.

    The guidance also notes that efforts to assist mortgagors will not be subjected to examiner criticism.

    State Issues Covid-19 Washington Mortgages

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