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FHA updates HECM procedures for mortgagee default
On July 11, FHA announced modifications to certain FHA home equity conversion mortgage requirements in Mortgagee Letter (ML) 2023-15, entitled “Modifications to FHA Home Equity Conversion Mortgage (HECM) Requirements Related to Secretary Payment of Borrower Disbursements Due to Mortgagee Default.” The letter updates FHA’s investigation requirements regarding situations where a mortgage lender is unable or unwilling to fulfill a borrower’s payment obligations required under an HECM. Mortgagees that fail to make a necessary payment to a borrower must now furnish specific information to FHA. The modifications provide additional sources where FHA can receive notice of a mortgagee’s anticipated or actual default on borrower payments and are designed to improve FHA’s ability to make prompt payments in the event of mortgagee default to ensure HECM borrowers timely receive scheduled or requested funds. ML 2023-15 is effective immediately.
CFPB holds hearing on medical billing and collections
On July 11, CFPB Director Rohit Chopra delivered prepared remarks at a public hearing on medical billing and collections. Chopra commented on the prevalence of medical debt in the country, which affects over 100 million Americans, while $433.2 billion of the national GDP is sourced from consumers’ out-of-pocket expenses. Specifically, the CFPB hearing addressed the effects of medical payment products, including special-purpose credit cards and installment loans used to cover the cost of medical treatment, which Chopra claimed can leave patients “worse off.” The Bureau highlighted the predatory nature of such medical credit cards, which typically have a higher interest rate than other cards and are often presented to consumers by their providers. According to Chopra, the Bureau recently launched a public inquiry (covered by InfoBytes here) to answer questions related to these products.
During the expert panel discussion, multiple panelists raised issues regarding the federal requirements for hospital financial assistance programs that exist in exchange for tax benefits. Panelists criticized the complicated processes patients must follow for such programs and compared it to the simple and fast online application process for medical credit cards. Panelists also highlighted the need to include stronger, clearer federal requirements for hospital financial assistance programs, such as setting standards on income and setting minimums or floors, so consumers can access such services more easily. Panelists commonly noted that state requirements for hospital financial assistance programs are more robust than the federal requirements. In response to Chopra’s question on what the panelists wish to see from the Bureau regarding regulation, one panelist asked for a ban on deferred interest, noting the “special regulatory authority” the Bureau has. Another panelist requested that the agency ban medical credit cards from being offered in a medical setting, citing her communication with clients who claim they feel “pressured” to sign the paperwork in that setting. Additionally, another panelist requested that the Bureau prohibit the reporting of medical debt on credit reports—mentioning Colorado’s headway in being the first state to ban such reporting and noting the Bureau’s potential to ban it at a federal level. The panelists each applauded the agency’s efforts to bolster regulations on medical payment products.
FHFA proposes amendments to strengthen Suspended Counterparty Program
On July 7, the FHFA issued a notice of proposed rulemaking and announced that it is seeking feedback on a proposed rule to amend the Suspended Counterparty Program (SCP) regulation. The SCP regulation currently requires FHFA-regulated entities to report to FHFA if they became aware of certain forms of misconduct committed within the past three years by individuals or institutions they do business with. The SCP regulation also grants FHFA the authority to issue orders directing the regulated entities to cease or refrain from doing business with certain counterparties.
According to FHFA Director Sandra L. Thompson, the proposed rule aims to strengthen FHFA’s ability to protect its regulated entities from business risks associated with misconduct, enabling them to continue serving as reliable sources of liquidity. The proposed rule would specifically authorize the suspension of business between regulated entities and counterparties who are found to have committed misconduct in the context of civil enforcement actions in connection with the management or ownership of real property. Furthermore, the proposed rule would allow FHFA to immediately suspend business without prior notice when misconduct has resulted in debarment, suspension, or limited denial of participation imposed by a federal agency. Comments on the proposed rule are due within 60 days of publication in the Federal Register.
FTC bans operators of auto-warranty scam
On July 6, the FTC announced that it reached an agreement on a stipulated order to resolve a lawsuit against the operators of a telemarketing scam that pitched “extended automobile warranties” to hundreds of thousands of consumers nationwide. The stipulated order, which has been approved by the U.S. District Court for the Southern District of Florida, imposes a lifetime ban against a consulting group and its owner from any outbound telemarketing business and any involvement with extended automobile warranty sales. In February 2022, the FTC sued several companies—including the consulting group and its owner—in connection with their alleged involvement in the telemarketing scam, alleging that they had defrauded consumers out of millions of dollars. The complaint alleged that the companies made numerous unsolicited calls, falsely claiming to be affiliated with vehicle manufacturers and inaccurately promoting their products as offering comprehensive “bumper-to-bumper” protection.
In addition to the lifetime ban, the stipulated order includes a monetary judgment of $6.5 million, which is partially suspended based on the defendants’ alleged inability to pay. The FTC reached a separate settlement with three of the other original defendant companies and their owners in March 2023.
CFPB launches medical-debt inquiry with HHS and Treasury
On July 7, the CFPB, Department of Health and Human Services, and the Treasury Department announced they are looking into high-cost specialty financial products such as medical credit cards and installment loans used by patients to pay for health care. These products, the agencies explained, were once primarily used to pay for medical treatments not traditionally covered by health insurance but may now be more widely used even when medical care may be covered by insurance or financial assistance. The agencies released a request for information (RFI) seeking feedback on a range of topics, including costs associated with medical payment products, how prevalent the products are, health care providers’ incentives to offer these products to patients, and whether patients fully understand the risks and consequences associated with medical payment products.
Specifically, the agencies are soliciting comments “on whether these products may allow health care providers to operate outside of a broad range of patient and consumer protections.” Feedback is also requested on whether use of these products is contributing to health care cost inflation, displacing hospitals’ provision of financial assistance, causing patients to pay inaccurate or inflated medical bills, increasing the amount patients must pay due to financing costs, or otherwise contributing to consumer harm, including through downstream credit reporting and debt collection practices. The agencies also want to know if using these products is creating disparities across different demographic groups, as well as policy options to protect consumers from harm.
The agencies commented that the RFI will assist in their understanding of consumer harms and financial challenges caused by specialty medical payment products and will serve to guide next steps, including future Bureau actions focusing on credit origination, debt collection, and credit reporting practices of the financial companies that originate and service these products.
Comments on the RFI are due within 60 days of publication in the Federal Register.
Additionally, the Bureau is hosting a hearing on July 11 to address medical billing and collection concerns with a focus on medical payment products.
FTC proposal would ban deceptive reviews
On June 30, the FTC introduced a proposed rule to combat deceptive review practices and ensure consumer protection in light of the impact and progression of technology and artificial intelligence. The rule seeks to prohibit the creation and sale of fake consumer reviews, prevent review hijacking, and restrict the manipulation of reviews through incentives. Under the proposed rule, businesses would be prohibited from creating or selling reviews by individuals who do not exist or lack real experience with the product or service. Additionally, the proposed rule prohibits businesses from providing compensation or incentives in exchange for consumer reviews expressing specific sentiments, whether positive or negative. To enhance transparency and integrity, the proposed rule also includes provisions related to insider reviews and testimonials. It also emphasizes the importance of transparency by requiring disclosure of relationships in insider reviews and testimonials. Under these provisions, officers and managers of companies would be required to disclose their relationships when writing reviews or testimonials about their products or services. Businesses would also be obligated to disclose relationships in testimonials written by insiders. Moreover, the FTC's proposed rule targets businesses that create or control websites claiming to provide impartial opinions about a particular category of products or services, including their offerings. Further, it prohibits businesses from using unjustified legal threats, intimidation, or false accusations to prevent or remove negative consumer reviews. This provision aims to preserve the independence and authenticity of consumer reviews, preventing businesses from manipulating public perception through controlled review websites. Considering the widespread influence of social media, the rule would prohibit businesses from selling or buying fake followers or views.
The FTC is currently seeking public comments on the proposed rule.
CFPB issues guidance on small business data collection
On June 28, the CFPB released additional guidance to help financial institutions comply with the agency’s small-business lending data collection rule. The small business lending rule, which implements Section 1071 of the Dodd-Frank Act, requires financial institutions to collect and provide to the Bureau data on lending to small businesses with gross revenue under $5 million in their previous fiscal year. As previously covered by InfoBytes, the final rule prescribes a tiered compliance date schedule, with the earliest compliance date being October 1, 2024, for financial institutions that originate at least 2,500 covered small business loans in both 2022 and 2023 (financial institutions with lower origination amounts have later compliance dates).
To aid financial institutions, the Bureau updated several frequently asked questions to provide additional clarity on who is covered by the small business lending rule and to explain that a financial institution that meets the origination threshold in each of the two immediately preceding calendar years is a covered financial institution, regardless of whether the financial institution has a branch or office in a metropolitan statistical area. The FAQs also (i) outline qualified covered credit transactions and exemptions; (ii) provide a detailed breakdown of the types of transactions a financial institution must count when determining whether it satisfies the origination threshold; (iii) discuss whether a financial institution that is not subject to HMDA reporting is required to count HMDA-reportable loans as covered originations; (iv) address how to count a covered origination if multiple financial institutions were involved in originating the covered credit transaction or when a covered credit transaction is extended to multiple borrowers but only one is a small business; and (v) explain methodologies financial institutions can use to calculate estimated covered originations. In conjunction with the FAQs, the Bureau also released a compliance aid providing additional information covered during a recent Bureau presentation.
26 state AGs support FTC’s proposal on Negative Option Rule
On June 26, a coalition of 26 state attorneys general from New York, Pennsylvania, Alabama, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Oklahoma, Oregon, Vermont, Washington, and Wisconsin, submitted a comment letter in support of the FTC’s proposed amendments to its Negative Option Rule. While the Negative Option Rule is intended to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs, the FTC maintained that current laws and regulations do not clearly provide a consistent legal framework for these types of programs. (Covered by InfoBytes here.)
In March, the FTC issued a notice of proposed rulemaking (NRPM), which would apply to all subscription features in all media (including “the internet, telephone, in-print, and in-person transactions”) and would regulate additional types of negative-option practices, including automatic renewals, free trial offers, and continuity plans. The NPRM proposes to add a new “click to cancel” provision making it as easy for consumers to cancel their enrollment as it was to sign up. Sellers would be required to first ask consumers whether they want to hear about new offers or modifications before making a pitch when consumers are trying to cancel their enrollment. Sellers further must provide consumers who are enrolled in negative option programs with an annual reminder involving anything other than physical goods before they are automatically renewed.
In their letter, the states expressed support for the FTC’s NPRM, in particular, the provisions that would preserve state authority to regulate negative-option marketing and to enact greater protections and stricter laws than those proposed by the FTC. The states also agreed that the NPRM provides additional guidance and clarity on how businesses can comply with existing legal frameworks. However, the states urged the FTC to consider additional clarifications and improvements, including (i) requiring businesses to “clearly and conspicuously inform consumers of any conditions (or lack thereof) concerning cancellation”; (ii) requiring businesses to obtain an additional round of consent before charging a consumer at the end of a free trial; (ii) clarifying businesses’ cancellation mechanisms must be cost effective, timely, simple, and easy to use; (iii) expanding the methods that a consumer may use to cancel a recurring contract and allowing “all consumers to cancel through any medium that the seller uses to sell subscriptions or memberships, regardless of the medium through which that particular consumer signed up”; and (iv) requiring businesses to provide negative option reminders in additional ways—“not only through the same medium that the consumer used to consent to the negative option feature but also through any other medium that the seller uses to communicate with the consumer.”
FTC notifies online marketplaces on INFORM compliance
On June 20, the FTC sent 50 letters to online marketplaces nationwide notifying them of their obligation to comply with the INFORM Consumers Act (the “Act”) set to take effect on June 27. The Act “imposes obligations on online marketplaces regarding the collection, verification, safeguarding, and disclosure of certain identifying information of ‘high-volume third party sellers’ that sell, offer to sell, or contract to sell new or unused consumer products in the United States through marketplaces’ platforms.” The Act also requires that online marketplaces make reporting of certain suspicious marketplace activity available. The letter warns that the FTC will enforce the Act to its fullest extent, and therefore encourages online vendors to prepare for the Act’s imposition, including by communicating with and informing third party sellers about the information the Act requires to be collected, verified, and disclosed. The FTC also emphasizes the civil penalties for violations of the Act, which are north of $50,000, in the letter. According to the FTC, the Act is designed to protect consumers from unsafe, stolen, and counterfeit goods by verifying the identity of their third-party sellers and simplifying the avenues for consumers to report suspicious activity.
CFPB looking at privacy implications of worker surveillance
On June 20, the CFPB released a statement announcing it will be “embarking on an inquiry into the data broker industry and issues raised by new technological developments.” The Bureau requested information in March about entities that purchase information from data brokers, the negative impacts of data broker practices, and the issues consumers face when they wish to see or correct their personal information. (Covered by InfoBytes here.) The findings from this inquiry will help the Bureau understand how employees’ personal information can find its way into the data broker market.
With similar intentions, the White House Office of Science and Technology Policy (OSTP) released a request for information (RFI) to learn more about the automated tools employers use to monitor, screen, surveil, and manage their employees. The OSTP blog post cited to an increase in the use of technologies that handle employees’ sensitive information and data. The OSTP also highlighted the Biden administration’s Blueprint for an AI Bill of Rights (covered by InfoBytes here), which underscored the importance of building in protections when developing new technologies and understanding associated risks. Responses to the RFI will be used to “inform new policy responses, share relevant research, data, and findings with the public, and amplify best practices among employers, worker organizations, technology vendors, developers, and others in civil society,” the OSTP said.
The CFPB’s response to the RFI described the agency’s concerns regarding risks to employees’ privacy, noting that it has long received complaints from the public about the lack of transparency and inaccuracies in the employment screening industry. Specifically mentioned are FCRA protections for consumers and guidelines around the sale of personal data. The Bureau also commented that employees may not be at liberty to determine how their information is used, or sold, and have no opportunity for recourse when inaccurately reported information affects their earnings, access to credit, ability to rent a home or buy a car, and more.