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  • Florida Attorney General Rolls Out Military Consumer Protection Program; CFPB Publishes Annual Servicemember Report

    Consumer Finance

    On May 17, Attorney General Pam Bondi announced a new consumer protection program designed to spread awareness and help prevent deceptive business practices affecting military and veteran communities. The Military and Veterans Assistance Program (MVAP) will provide resources and information to consumers on emerging scams and other consumer protection related issues, as well as encourage open communication among local, state, and federal partners to help ensure complaints are handled appropriately.

    On May 16, the CFPB’s Office of Servicemember Affairs (OSA) published its fifth annual servicemember report, The Office of Servicemember Affairs: Charting our course through the military lifecycle, and a follow-up blog post outlining the work the office has conducted over the past five years and the work it intends to do in the future. The structure of the report—designed to be presented within the construct of the “military lifecycle”—presents the ways that “many common and some uniquely-military consumer issues . . . fit within that continuum.” Under the Dodd-Frank Act, OSA monitors servicemember complaints about consumer financial products or services and coordinates with the efforts of federal and state agencies to improve measures and provide assistance. As of April 1, 2017, the OSA reports that it has handled approximately 74,800 complaints submitted by servicemembers, veterans, and their families since July 2011, of which 42 percent related to debt collection, 18 percent to mortgages, and 11 percent to credit reporting. In total, the OSA claims it has provided approximately $3.3 million in monetary relief to military consumers who submitted complaints to the CFPB.

    Consumer Finance State AG Consumer Education Servicemembers

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  • OIG Recommends CFPB Improve Enforcement Data Security

    Consumer Finance

    On May 15, the Office of Inspector General for the Consumer Financial Protection Bureau issued findings in a report entitled The CFPB Can Improve Its Practices to Safeguard the Office of Enforcement’s Confidential Investigative Information (the Report), stemming from an evaluation to determine whether the Bureau has effective controls to manage and safeguard access to Confidential Investigative Information (CII). The Report found that the Bureau’s practices could be improved. According to the findings, the Bureau’s Office of Enforcement (Office) allowed 113 unique users to have access to databases in which there was CII—which may include personally identifiable information—about companies that were subject to reviews by enforcement staff. Of those 113 users, 72 were still employed by the CFPB but did not have a need for access to that information, the report said.

    Specifically, the OIG determined users continued to have access to at least one electronic application when it was no longer relevant to the performance of the users’ assigned duties. The OIG also cited instances of improper handling and safeguarding of sensitive information and inconsistent naming conventions for matters across its four electronic applications and two internal drives, which impeded the Office’s ability to verify, maintain, and terminate access to files. The OIG noted in the report that during its assessment the Office took several steps to correct these issues.

    The OIG presented the following recommendations: (i) enhance practices for managing access rights to matter folders; (ii) improve the handling of printed sensitive information; and (iii)establish a standard naming convention for electronically stored information.

    Consumer Finance CFPB Federal Reserve OIG

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  • FDIC Fines Wisconsin Bank and Affiliated Lenders for Overcharging Military Members

    Consumer Finance

    On May 11, the FDIC announced that a Wisconsin-based bank and its two institution-affiliated parties agreed to settle allegations of unfair and deceptive practices in violation of Section 5 of the Federal Trade Commission Act. According to the FDIC, the unfair and deceptive practices, which harmed consumers including military service members and their families, included: (i) charging interest on loans that were marketed as interest-free if they were repaid within six months; (ii) selling add-on products without clearly disclosing the terms; and (iii) not allowing consumers the opportunity to use the monthly premium-payment option when they bought debt cancellation products. Under the terms of the settlement with the FDIC, the bank will establish a $3 million restitution fund for eligible consumers (and has agreed to add more if that amount is insufficient to make all of the required payments). In addition, the bank and its institution-affiliated parties are required to: (i) prepare a comprehensive restitution plan; (ii) retain an independent auditing firm to determine compliance with the plan; and (iii) provide the FDIC with quarterly written progress reports describing the actions taken by the parties to comply with the terms of the settlement. The settlement also requires the bank to pay a civil penalty of $151,000, and the institution-affiliated parties to pay civil money penalties of $54,000 and $37,000 respectively.

    Consumer Finance FDIC UDAAP FTC

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  • Oklahoma Governor Vetoes Legislation Expanding High-Cost Payday Lending

    Consumer Finance

    On May 5, Oklahoma Governor Mary Fallin vetoed legislation that would have expanded consumer payday lending in the state. Oklahoma House Bill 1913—known as the “Oklahoma Small Loan Act”—would have allowed lenders to offer installment loans with terms no longer than 12 months and interest rates up to 17 percent per month. Fallin’s veto message to the House expressed concerns about adding another high interest loan product without eliminating or restricting existing payday loan products: “House Bill 1913 adds yet another level of high interest borrowing (over 200% APR) without terminating or restricting access to existing payday loan products.” Fallin further asserted that “some of the loans created by this bill would be more expensive than the current loan options.” Four years prior, Fallin vetoed Senate Bill 817 “due to [her] concerns with the frequency [with which] low-income families in Oklahoma were using these lending options, and the resulting high cost of repayment to those families.” In the veto message, Fallin requested that the state legislature seek advice from her office as well as consumer advocates and mainstream financial institutions if it decides to revisit these issues. Under Section 11 of Article 6 of the Oklahoma Constitution, the legislation can still be enacted if two-thirds of the members of both legislative chambers vote to override the veto. In earlier votes, the legislation fell short of the two-thirds threshold, passing the Oklahoma House 59-31 and the Senate by a 28-16 margin.

    Notably, last year, the CFPB published proposed rules in the Federal Register affecting payday, title, and certain other high-cost installment loans (see previously posted Special Alert).

    Consumer Finance State Issues Payday Lending CFPB

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  • Advocacy Organization Argues Need for CFPB Prepaid Rule Communications Before CRA Vote

    Consumer Finance

    On April 28, an advocacy organization filed a reply to the CFPB’s opposition for expedited handling of two FOIA requests issued to the Bureau on April 12. The organization filed a lawsuit in the U.S. District Court for the District of Columbia on April 18 contending that the Bureau failed to comply with a statutory expedition processing request, and asserts that there is a “compelling need” for information that would enable the public to learn about efforts to influence the government's policymaking process before a proposed Congressional vote in mid-May to overturn the CFPB’s Prepaid Rule. The organization further argues—despite the Bureau’s assertions to the contrary—that in order to fulfill its mission it is “primarily engaged in disseminating information” with its public education efforts, and therefore, like others whose requests have been granted expedited processing, has “met the dissemination of information as a primary activity” requirement (citing Leadership Conference on Civil Rights v. Gonzales, 404 F. Supp. 2d 246, 260 (D.D.C. 2005)). Additionally, the organization claims that its FOIA requests pertain to issues for which there is an “urgency to inform the public” because of an imminent deadline under the Congressional Review Act (CRA), which “permits Congress to overrule a regulation within a certain amount of time after its promulgation.” Specifically, the FOIA requests seek access to communications about the Prepaid Rule between the CFPB and 12 Senators, and between the Bureau and two prepaid companies. The organization is asking the court to order the Bureau to take whatever steps are necessary to comply with the FOIA requests prior to the CRA vote on the Prepaid Rule.

    Consumer Finance CFPB FOIA Prepaid Rule

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  • CFPB Releases Report on Diversity and Inclusion in the Mortgage Industry, Banking Agencies Attend Roundtable Meeting

    Consumer Finance

    On April 27, the Consumer Financial Protection Bureau published its report summarizing strategies intended to promote diversity and inclusion by mortgage industry participants. The report, Diversity and Inclusion in the Mortgage Industry: Readout from an Opening Roundtable, is the result of the Bureau’s collaboration with the financial services industry. The roundtable meeting—led by the Bureau’s Office of Minority and Women Inclusion (OMWI)—convened representatives from the mortgage industry, nonbank financial companies, and OMWI staff from the OCC, FDIC, Federal Reserve, and FHFA. OMWI was a created by Section 342 of the Dodd-Frank Act and charges directors with “increasing diversity in agency programs and contracts, and assessing diversity policies and practices of entities regulated by the agency.” The report highlights issues raised by roundtable participants and stresses the need to develop a “strong business case for diversity and inclusion.” The Bureau’s position on the strategies and practices discussed include the following:

    • promoting diversity and inclusion strengthens organizations and improves overall performance;
    • building in diversity and inclusion as “fundamental principles” and taking a “tone from the top” approach highlights the importance of leadership buy-in and accountability;
    • boosting diversity and inclusion through the recruitment, hiring, retention, and advancement of personnel creates opportunities for more diverse viewpoints;
    • promoting a more diverse workforce and tailoring products to the needs of different consumers fosters a greater understanding of the needs of a more diverse customer base; and
    • understanding the importance of data collection and analysis supports the business case for diversity.

    Consumer Finance CFPB Mortgages Diversity

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  • CFPB Sues Online Lenders Following Investigation into Debt Collection Practices

    Consumer Finance

    On April 27, the CFPB announced that it filed a suit against four online installment lenders for allegedly deceiving customers by collecting debts they were not legally owed. In a complaint filed in the United States District Court for the Northern District of Illinois, the Bureau claims, among other things, that the lenders engaged in unfair, abusive, and deceptive acts—a violation of Dodd-Frank—by collecting on installment loans that are partially or wholly void under state law. The Bureau further claims that lenders violated the Truth in Lending Act for failing to disclose the annual percentage rate for their loans when they were required to do so. The complaint alleges that the lenders originated, serviced, and collected high-cost, small-dollar installment loans. Since at least 2012, consumers could borrow between $300 and $1,200 with annual percentage rates from 440 percent up to 950 percent. These high-cost loans allegedly violate licensing requirements or usury limits in a least 17 states—thus rendering the loans void in whole or in part. The CFPB asserts that the lenders not only misrepresented that consumers were obligated to pay debts that were void, but also reinforced the misrepresentations through actions such as sending letters, making phone calls demanding payment, and originating ACH debit entries from consumers’ bank accounts.The complaint seeks a permanent injunction prohibiting the lenders from committing future violations of federal consumer financial law, as well as other legal and equitable relief including restitution to affected consumers, disgorgement of ill-gotten revenue, and civil money penalties.

    Consumer Finance CFPB TILA Debt Collection UDAAP

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  • CFPB Provides Resources for Consumers During Money Smart Week

    Consumer Finance

    On April 22, the CFPB highlighted a series of consumer education resources as part of its participation in Money Smart Week—(April 22-29)—and Financial Literacy Month. The CFPB blog post is here. Among the financial decision-making resources are: (i) Ask CFPB—an online tool that the Bureau states will provide “clear, unbiased” answers to common financial questions; (ii) Owning a Home—a tool that provides resources for homebuyers; and (iii) Money as You Grow—a resource center where parents can find activities and conversation starters to help children build money skills. In addition, the Bureau also advised consumers that there are numerous free financial education classes and seminars conducted by local and regional organizations covering a variety of money-management topics such as buying a house, credit management, saving for college, and financing retirement. Consumers should visit Money Smart Week to find events and online resources.

    Consumer Finance CFPB Consumer Education

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  • FTC Announces Civil Penalty Judgment Against Debt Collector Fined $2 Million for FDCPA Violations

    Consumer Finance

    On April 24, the FTC announced a civil penalty judgment against the president of a Texas-based debt collection company, ordering him to pay $2 million for violating the Fair Debt Collection Practices Act by falsely threatening debtors (see previous InfoBytes post). The judgment was filed in the Eastern District of Texas and resolves a case filed on the FTC’s behalf by the Department of Justice in January 2015, alleging that the company’s collectors were impersonating attorneys and judicial employees; falsely threatening litigation, wage garnishments and asset seizures; and misrepresenting the character or legal status of debts under collection. Both the president and the debt collection company have been banned from the debt collection business under a permanent injunction issued in April 2016.

    Consumer Finance FTC Debt Collection

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  • CFPB Takes Action Against Law Firm for Alleged FDCPA Violations Concerning Claims of Attorney Involvement in Debt Collection

    Consumer Finance

    On April 17, the CFPB announced that it was seeking a permanent injunction and fines against a law firm for allegedly engaging in illegal debt collection practices by making false representations regarding attorney involvement in debt collection calls and in “millions of collection letters sent to consumers.” In a complaint filed in the United States District Court for the Northern District of Ohio, the Bureau claims, among other things, that the firm violated the Fair Debt Collection Practices Act and Dodd-Frank by sending “demand letters” and making collection calls to consumers falsely implying that the consumer’s account files had been reviewed by an attorney. The complaint alleges that a majority of the demand letters were created through an automated process and, in most cases, no attorney had reviewed the account file to determine whether sending such a letter was accurate and appropriate. These letters included payment coupons through which consumers made millions of dollars in debt payments to the law firm. The complaint also alleges that a majority of the collection calls made to consumers were handled by non-attorney collectors who conveyed the impression that the matters had been reviewed by attorneys even though no attorney had in fact reviewed the account files. The complaint seeks a permanent injunction prohibiting the firm from committing future violations as well as other legal and equitable relief including restitution to affected consumers, disgorgement of ill-gotten revenue, and civil money penalties.

    Consumer Finance Courts CFPB FDCPA UDAAP Debt Collection

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