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CFPB secures $12 million after decade-old complaint against foreclosure relief scam company
On February 8, the CFPB announced the resolution of an enforcement action, begun in 2014, against a foreclosure relief operation that allegedly violated Regulation O. After a decade of court orders, opinions, and appeals, on February 5, 2024, the defendants and the CFPB jointly agreed to the dismissal of their respective appeals and on February 7, 2024, the Seventh Circuit dismissed the parties’ appeals. The final settlement required the defendants to pay $10.9 million in consumer redress and a $1.1 million penalty. The enforcement action notes that the defendants remain “subject to the bans” under the district court’s 2022 order.
The CFPB had alleged that the defendants violated Reg. O by taking payments from consumers for (i) mortgage modifications before they signed an agreement from their lender; (ii) failing to make required disclosures; (iii) directing consumers not to contact lenders; and (iv) making deceptive statements to consumers. As previously reported by InfoBytes, the CFPB and the Florida Attorney General obtained a judgment against this group in May 2015 for parallel violations.
OCC and FDIC announce their CRA evaluations
On February 2, OCC and the FDIC released their Community Reinvestment Act (CRA) evaluations. The OCC disclosed a list of evaluations of national banks, federal savings associations, and insured federal branches of foreign banks that became public in January 2024. Out of the 18 evaluations, six were rated “outstanding,” nine were rated “satisfactory,” and three were rated as “needs to improve.” The evaluations can be accessed on the OCC’s website, including a searchable list of all public CRA evaluations. Simultaneously, the FDIC released its list of state nonmember banks that were evaluated for CRA compliance in November 2023. Out of 57 evaluations, 56 were rated as “satisfactory” and one bank was rated as “outstanding.”
Federal Reserve releases January SLOOS report on bank lending practices from Q4 2023
On February 5, the Federal Reserve Board released the results from their January 2024 Senior Loan Officer Opinion Survey (SLOOS) on bank lending practices. The SLOOS addressed changes in standards, terms, and the demand over bank loans over the past three months (i.e., Q4 of 2023). The SLOOS’s topics included commercial and industrial lending, commercial and residential real estate lending, and consumer lending. The SLOOS included questions on banks’ expectations for changes in lending standards, borrower demand and asset quality over 2024.
The SLOOS provided specific findings for each of its topics. On loans to businesses, banks generally reported tighter standards and weaker demand for commercial and industrial loans, as well as all commercial real estate loan categories. Demand weakened for all residential real estate loans. On loans to households, banks generally reported tighter lending standards for residential real estate loans, but the standards were unchanged for government-sponsored enterprise-eligible residential mortgages. For home equity lines of credit, banks reported tighter standards and weaker demand; this falls in line with credit card, auto, and other consumer loans, generally. Last, on the banks’ 2024 expectations, they expect lending standards to remain unchanged for commercial and industrial loans, and residential real estate loans, but to tighten further for commercial real estate, credit card, and auto loans. Banks also reported that they expect demands for loans to strengthen, but loan quality to weaken, across all categories. The SLOOS includes 67 pages of data gleaned from its questions.
Federal bank regulatory agencies seek comment on interagency effort to reduce regulatory burden
On February 6, the FDIC, Fed, and OCC initiated a series of requests for public comment aimed at reducing regulatory burden on supervised institutions. This effort is mandated by the Economic Growth and Regulatory Paperwork Reduction Act of 1996, which required a review of regulations every 10 years. The agencies have divided regulations into 12 categories, with the first round focusing on three categories: Applications and Reporting, Powers and Activities, and International Operations. The public has 90 days to comment on the regulations in these categories. Over the next two years, the agencies will seek public feedback on more, remaining categories to identify regulations that are outdated, unnecessary, or unduly burdensome. Additionally, outreach meetings will be held to allow interested parties to provide direct input on regulatory requirements. Further details about these meetings will be shared as they are finalized.
House Committee calls for new quantitative analysis from Basel III “Endgame” original proposal
On January 31, the House Financial Services Committee issued a press release after holding its hearing on “Federal Banking Proposals Under the Biden Administration,” which invited two leaders from trade organizations, a lawyer, and a business school professor. The Committee’s main takeaway was that the Notice of Proposed Rulemaking from July 2023, as released by the OCC, Federal Reserve, and FDIC, provides “little quantitative analysis” of the potential economic impacts (covered by InfoBytes, here). This Notice initially opened the comment period for the Basel III “Endgame” meant to revise the capital requirements for large banking organizations.
The Committee took the position, through bipartisan agreement, that the Biden Administration “must withdraw” its Basel III “Endgame” implementing proposal and replace it with one that offers a sound and objective economic analysis that is not skewed by politics but supported by data. The Committee supports its position that the Notice provides a “paltry” economic and regulatory analysis by noting that it devotes only 17 out of 1087 pages to the analysis. The press release cited comments from various congressional members, some of whom raised concerns about the proposal’s potential impact on homebuyers and mortgage lending, and the proposal’s potential to disincentivize financing for renewable energy projects. Finally, the Committee linked several members’ comment letters over the past few months.
FTC bans student loan “scammers” from debt relief industry
On February 6, the FTC announced two orders (here and here) that will ban a group of student loan debt relief “scammers” (defendants) from the debt relief industry. As previously covered by InfoBytes, defendants allegedly misled consumers by charging them for services that are free through the Department of Education, claiming consumers needed to pay fees or make payments to access federal student loan forgiveness. As a consequence, the FTC filed a temporary restraining order resulting in an asset freeze, among other things.
As a result of the FTC’s action, and subject to court approval, defendants are banned from operating in the debt relief industry, as well as prohibited from making false statements about financial products or services and from using deceptive tactics to gather consumers’ financial information. Moreover, the proposed orders include a monetary judgment of $7.4 million, with a significant portion suspended due to financial constraints. Defendants must surrender personal and business assets, and if any of them materially misrepresent their finances, the entire monetary judgment will become immediately payable.
DOJ announces settlement against Pennsylvanian bank for alleged redlining
On February 5, the DOJ, together with the State of North Carolina, announced a settlement with a Pennsylvania-based bank (respondent) to resolve allegations that the bank engaged in a pattern or practice of lending discrimination by engaging in “redlining” in Charlotte and Winston-Salem, North Carolina, in violation of the Fair Housing Act and ECOA. The DOJ’s complaint alleged that from at least 2017 through 2021, the bank failed to provide mortgage lending services to predominantly Black and Hispanic neighborhoods in Charlotte and Winston-Salem and discouraged people seeking credit in those communities from obtaining home loans. The DOJ compared the respondent’s performance with other lenders, noting that other lenders generated applications in predominantly Black and Hispanic neighborhoods at two-and-a-half times the rate of respondents in Charlotte, and four times the rate of respondents in Winston-Salem.
Under the two proposed consent orders, the respondent will, among other things (i) invest at least $11.75 million in a loan subsidy fund to increase access to home mortgage, home improvement, and home refinance loans for residents of majority Black and Hispanic neighborhoods; (ii) spend $1 million on community partnerships; (iii) spend $750,000 for advertising, outreach, consumer financial education, and credit counseling focused on the areas at hand; (iv) open three new branches in the areas at hand, with at least one mortgage banker assigned to each branch; (v) hire a director of community lending who will oversee the continued development of lending in communities of color; (vi) retain independent consultants to enhance its fair lending program and better meet communities’ needs for mortgage credit; (vii) conduct a community credit needs assessment and offer a staff training; and (viii) evaluate its fair lending compliance management systems.
FTC orders tax filing software company to cease and desist following ALJ decision
On January 22, the FTC issued an opinion and order against the maker of a popular tax filing software. The FTC found that the company engaged in unfair and deceptive acts or practices by marketing the software as “free” when it was not available as free to more than two-thirds of consumers and ordered the company to “cease and desist making the deceptive claims.”
The FTC’s opinion and order were issued after its de novo review following the September 2023 ruling from an administrative law judge (“ALJ”), in the FTC’s March 2022 administrative complaint against the company (previously reported by InfoBytes here), in which the ALJ found that the company engaged in deceptive advertising.
The company is a publicly traded corporation that offers a variety of software programs. The software in question is a program that assists customers with preparing and filing their taxes. The FTC alleged that since 2016 the company marketed its tax filing software in violation of Section 5 of the FTC Act through television and online ads, stating consumers could file their taxes for free when less than one-third of taxpayers were eligible for the company’s free edition of the software.
The FTC took issue with the company’s claim that the software was “free” when it restricted its eligibility for the free version to those with “simple tax returns.” While the definition of “simple tax returns” has changed over time, in 2022 it was limited to filed returns that included a Form 1040 with limited attached schedules. However, the FTC alleged most taxpayers do not have “simple tax returns” as defined by the company, including those with mortgage or property income, investment income, or charitable donations over $300.
According to the FTC, from 2016 to 2022, the company ran “dozens” of unique ads through television, radio, the internet, social media, and other advertising channels, that garnered “billions of impressions.” The company and its ad agency understood that advertising its product as free would be a “powerful” lure to entice new customers, stating “Lead with [f]ree to raise heads and drive traffic and acquisition[.]” Although disclaimers are present in the ads, the FTC alleged the company’s disclaimers are inadequate to “cure the misrepresentations” faced by the consumer.
The company continued to market its products as free for three years after multiple lawsuits were filed by the Los Angeles City Attorney and the County Counsel for the County of Santa Clara, California, alleging unfair and deceptive marketing of free versions of the software. Various state Attorneys General opened subsequent investigations that led the company to enter into a settlement agreement with all fifty states pursuant to which the company agreed to pay $141 million and submit to restrictions on its advertising and marketing of the software. Among other restrictions, the FTC’s final order prohibits the company from making any misrepresentations of the cost of its products and services, or the requirement that a consumer use its paid products or services in order to accurately file their taxes online or claim a credit or deduction. Additionally, the order imposes record-keeping and reporting requirements that will remain effective for a period of twenty years after the issuance date of the order.
FDIC issues December 2023 enforcement actions
On January 26, the FDIC released a list of administrative enforcement actions taken against banks and individuals in December 2023. During that month, the FDIC made public 12 orders consisting of “four orders of termination of deposit insurance; three orders terminating consent orders; two consent orders; one order terminating supervisory prompt corrective action directive; one order of prohibition from further participation; one order to pay a civil money penalty (CMP); and one Decision and Order to Prohibit from Further Participation and Assessment of Civil Money Penalty.”
Included is a consent order with a Mississippi-based bank for alleged Bank Secrecy Act violations, along with violations of a previous consent order from 2020, imposing a $600,000 civil money penalty. Also included is a consent order with a Kentucky-based bank, alleging the bank engaged in “unsafe or unsound banking practices and violations of law or regulation” relating to, among other things, the Bank Secrecy Act. The bank neither admitted nor denied the allegations but agreed to create a written plan to recover its losses from the bank’s relationship with a third-party loan program, to reduce the bank’s risk position in the program, and to stop granting any extensions of credit through adversely classified or criticized loans related to the third-party loan program. The consent order additionally requires the bank’s board to assess the sufficiency of the bank’s allowance for credit losses (ACL), ensuring the establishment of an appropriate ACL and to uphold and accurately report it. Specifically, “management shall review updated credit risk metrics and loss data for the third-party loan programs referenced in the ROE and ensure appropriate provisions to the ACL relative to this information.”
OCC issues proposed rule for bank merger approvals
On January 29, the OCC announced a proposed rule for bank merger approvals under the Bank Merger Act (BMA). The OCC proposed changes to 12 CFR 5.33 to reflect its view that a business combination is a significant corporate transaction.
The OCC suggested two key changes to its business combination regulation (12 CFR 5.33). First, it proposed removing the expedited review procedures outlined in § 5.33(i). Currently, this provision automatically approves certain filings after the 15th day following the close of the comment period, but the OCC believes that no business combinations subject to § 5.33 should be approved solely based on elapsed time. Additionally, the OCC suggests removing paragraph (d)(3), as it pertains to defining applications eligible for expedited review. Second, the OCC proposes the removal of § 5.33(j), which outlines four scenarios allowing an applicant to use the OCC's streamlined business combination application instead of the full Interagency Bank Merger Act Application. The streamlined application seeks information on similar topics, but only requires detailed information if the applicant answers affirmatively to specific yes-or-no questions. Currently, a transaction eligible for the streamlined application also qualifies for expedited review, a feature the OCC is proposing to eliminate. Additionally, a new policy statement (proposed as Appendix A to 12 CFR part 5, subpart C) is introduced to provide clarity and guidance on general principles used by the OCC in reviewing applications under the BMA. The policy statement also covers considerations for financial stability, resources, prospects, and convenience and needs factors. Criteria for deciding whether to hold a public meeting on a BMA application were also outlined.
Comments from the public are due 60 days from the date of publication in the Federal Register.