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Washington extends proclamation regarding garnishments and accrual of interest
On May 22, Washington governor Jay Inslee issued Proclamation 20-49.2 amending and extending proclamations 20-05 (declaring a state of emergency) and 20.49, and 20.49.1 (regarding garnishments and accrual of interest) until the earlier of the termination of the Covid-19 state of emergency or 11:59pm on May 27. Proclamations 20.49 and 20.49.1 were previously covered here and here.
Idaho Department of Finance extends work from home guidance for its licensees and registrants
On May 22, the Idaho Department of Finance extended temporary work from home guidance previously issued to Idaho mortgage brokers and lenders, mortgage loan originators, regulated lenders, title lenders, payday lenders, and collection agency licensees and registrants. The original guidance, previously covered here, permits employees to work from home where the residence is not a licensed branch. The guidance is extended through September 1, 2020.
Arkansas Securities Department extends work from home guidance for mortgage loan officers
On May 22, the Arkansas Securities Department extended interim regulatory guidance previously issued to licensed mortgage companies, mortgage loan officers, and branch managers. The original interim regulatory guidance, previously covered here, permits mortgage loan officers to conduct activities requiring a license from home, provided certain data security provisions are met. This guidance is extended through September 1, 2020.
Indiana updates notary public requirements
Indiana Secretary of State Connie Lawson issued an announcement highlighting new laws and regulations regarding continuing education for notaries public, remote notary authorization, and criminal history record checks for notaries public. As of March 31, active notaries public can receive authorization to conduct remote notarizations if they submit an application, complete an educational course, pay a $100 fee, and contract with an approved technology vendor. The new laws relating to continuing education and criminal history record checks take effect on July 1.
OFAC designates Iran’s interior minister and senior law enforcement officials for human rights abuses
On May 20, the U.S. Treasury Department's Office of Foreign Assets Control (OFAC), pursuant to Executive Order 13553, sanctioned Iran’s interior minister, in addition to seven senior officials of Iran’s Law Enforcement Forces (LEF), a provincial commander of Iran’s Islamic Revolutionary Guard Corps, and a foundation along with its director and members of the board of trustees, for serious human rights abuses against Iranians. According to OFAC, the foundation is controlled by LEF and plays an active role in Iran’s energy, construction, services, technology, and banking industries. As a result of the sanctions, “all property and interests in property of these persons that are in the United States or in the possession or control of U.S. persons must be blocked and reported to OFAC.” OFAC further noted that its regulations “generally prohibit all dealings by U.S. persons or within (or transiting) the United States that involve any property or interests in property of blocked or designated persons,” and warned foreign financial institutions that knowingly facilitating significant transactions or providing significant financial services to the designated individuals may subject them to U.S. correspondent account or payable-through sanctions.
District court: Initial debt collection communication via email does not violate FDCPA
On May 19, the U.S. District Court for the Northern District of California granted a debt collector’s motion to dismiss a lawsuit with prejudice brought by a plaintiff alleging violations of the Electronic Signatures in Global Commerce (E-SIGN) Act and the FDCPA. The defendant sent an email to the plaintiff attempting to collect an unpaid debt that contained a validation notice. The plaintiff argued that the email violated the E-SIGN Act because she did not consent to receive email from the defendant, and that it also violated the FDCPA “because the email referred to ‘send[ing]’ a copy of the verification of the debt whereas § 1692g(a)(4) specifies that a copy of the verification will be ‘mailed.’” Among other arguments, the plaintiff claimed that the email’s subject line, which stated “This needs your attention,” violated the FDCPA because it did not convey that the message was seeking to collect a debt, and that she received several more emails during the validation period, which confused her and “overshadowed” the validation notice in the initial communication.
The court disagreed, stating that because there are “no express restrictions” within the FDCPA about how the initial communication must be made, allowing it to be made electronically is a “reasonable argument.” Specifically, the court noted that the CFPB has recognized that certain communication technologies such as email did not exist when the FDCPA was passed, and referred to the Bureau’s commentary on its proposed debt collection rule that stated “a validation notice as part of an initial communication can be conveyed via email.” [Emphasis in the original.] The court also determined that the plaintiff lacked standing with respect to her claim that the initial email’s subject line violated the FDCPA since she opened the email and clicked on the link. Furthermore, the court noted that using the word “send” instead of “mailed” in the initial communication would not have confused the least sophisticated debtor because the “debtor, if concerned about getting a verification of debt via email, could always ask for a copy to be sent via physical mail instead.”
CFTC issues new civil monetary penalty guidance
On May 20, the CFTC’s Division of Enforcement issued new civil monetary penalty guidance—the first such public issuance since 1994. The guidance, which has been incorporated into the Division’s Enforcement Manual, outlines a three-pronged approach enforcement staff will apply when evaluating the appropriate penalty for recommendation to the Commission: (i) “the gravity of the violation,” which may include the nature and scope of a violation, a respondent’s role in the violation, whether the conduct was intentional or willful, and the nature and scope of any consequences resulting from the violations; (ii) “mitigating and aggravating circumstances,” such as a respondent’s post-violation conduct, whether the respondent self-reported the misconduct, the extent of cooperation and remediation, and a respondent’s prior misconduct; and (iii) “other considerations,” including factors such as timely settlements and remedies and monetary relief to be imposed in parallel actions by other criminal authorities or self-regulatory agencies and organizations. “In applying the various factors, staff will be guided by the overarching consideration of ensuring that any proposed penalty achieves the dual goals of specific and general deterrence,” CFTC Director of Enforcement James McDonald stated.
FTC and Utah add TSR charges to real estate seminar complaint
On May 20, the FTC announced that it and the Utah Division of Consumer Protection amended their complaint against a Utah-based company and its affiliates (collectively, “defendants”) for allegedly using deceptive marketing to persuade consumers to attend real estate events costing thousands of dollars. The amended complaint adds additional defendants and new charges asserting the defendants violated the Telemarketing Sales Rule (TSR). As previously covered by InfoBytes, the U.S. District Court for the District of Utah issued a temporary restraining order against the defendants after the FTC and the Utah Division of Consumer Protection accused the defendants of violating the FTC Act, the Consumer Review Fairness Act (CRFA), and Utah state law, by marketing real estate events with false claims and celebrity endorsements. Among other things, the defendants allegedly told consumers they would (i) earn thousands of dollars in profits from real estate investment “flips” by using the defendants’ products; (ii) receive 100 percent funding for their real estate investments, regardless of credit history; and (iii) receive a full refund if they do not make “‘a minimum of three times’” the price of the workshop within six months. The amended complaint alleges that, in addition to the claims made at the real estate events, the defendants reiterated the false or misleading statements in the course of their telemarketing activities in violation of the TSR.
FHFA tries again on GSE capital framework
On May 20, the FHFA announced the re-proposal of a notice of proposed rulemaking that would establish a new regulatory capital framework for Fannie Mae and Freddie Mac (GSEs). In June 2018, the FHFA issued a proposed rulemaking that would implement a regulatory capital framework for the GSEs including (i) a new framework for risk-based capital requirements; and (ii) two alternative approaches to setting minimum leverage capital requirements. (Covered by InfoBytes here.) The FHFA states that while the 2018 proposal remains the foundation of the re-proposal, including the mortgage risk-sensitive framework, the re-proposal “increas[es] the quantity and quality of the [GSEs]’ regulatory capital and reduc[es] the pro-cyclicality of the aggregate capital requirements.”
According to a factsheet released in conjunction with the re-proposal, the purpose is to ensure that the GSEs operate in a safe and sound manner and are positioned, particularly during times of financial stress, to “fulfill [their] statutory mission to provide stability and ongoing assistance to the secondary mortgage market across the economic cycle.” Specifically, the re-proposal changes include, among other things (i) supplemental capital requirements; (ii) quality of capital changes, such as a risk weight floor and capital buffers; (iii) measures to address pro-cyclicality; and (iv) requirements for the GSEs to assess their own credit, market, and operational risk. Comments on the proposal must be submitted within 60 days of publication in the Federal Register.
CFPB approves mortgage servicing and small-dollar lending NAL templates
On May 22, the CFPB announced it issued two no-action letter (NAL) templates. The two templates approved by the Bureau are intended to support financial institutions to better assist struggling consumers during the Covid-19 pandemic. Details of the two approved templates include:
- Mortgage servicing. The Bureau approved a template submitted by a mortgage software company that would enable mortgage servicers to use the company’s online platform—which is an online version of Fannie Mae Form 710—to implement loss mitigation practices for borrowers. A copy of the company’s application is available here.
- Small-dollar lending. The Bureau approved a template, in response to a request by a nonpartisan public policy, research and advocacy group for banks, that would assist depository institutions in offering a standardized, small-dollar credit product under $2,500 with a repayment term between 45 days and one year. The template covers, among other things, a product structured as either (i) a fixed-term, installment loan, which the customer would pay back in fixed minimum payment amounts over the term of the loan; or (ii) an open-end line of credit, linked to the consumer’s deposit account, where any amounts drawn would be repaid by consumers in fixed minimum amounts over a fixed repayment period. An institution would need to certify that their product offering meets the product features—labeled as “guardrails” in the template—but the Bureau notes that the inclusion of “any particular guardrail should not be interpreted as a statement by the Bureau that small-dollar credit products must contain such guardrails to avoid violating the law.” A copy of the group’s application is available here.