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CFPB reports on potential impacts of medical debt
On July 27, the CFPB issued a report analyzing how actions announced by three national consumer reporting companies affect people who have allegedly unpaid medical debt on their credit reports. The report is a part of a CFPB series that examines consumer credit trends using a longitudinal sample of approximately five million de-identified credit records maintained by one of the three nationwide consumer reporting agencies. According to the report, in March, the credit reporting companies announced voluntarily that they would no longer report certain medical collections. Specifically, starting July 1, 2022, the time before unpaid medical collections can appear on a consumer’s report will increase from 180 days to one year and paid medical collections will no longer appear at all. In addition, sometime in 2023, medical collections with balances below a threshold of “at least” $500 will not appear on a consumer’s report. The Bureau’s report stated that “[t]hese changes have the potential to reduce the amount of medical debt reported on consumer credit reports and to benefit some consumers.” The report describes the characteristics of consumers with reported medical collections currently and provides a state-by-state breakout of how the credit reporting changes will impact consumers’ credit reports. Highlights of the report include: (i) consumers in Northern and Eastern states have higher concentrations of medical debt that are likely to be removed; (ii) consumers with medical debt are significantly more likely to reside in neighborhoods that majority Black or Hispanic and have lower median income, but consumers likely to have all their medical debt removed by the change are slightly more likely to live in neighborhoods that are majority white and higher income; and (iii) eliminating paid collections is less likely to have a substantial effect, as very few medical collection tradelines are ever marked paid. The CFPB also noted that, due to the nature of the data, the report does not examine the impact of the extension of the time between referral of the medical bill for collections and the reporting of the bill from 180 days to one year.”
FSOC releases fact sheet on climate-related progress
On July 28, the Financial Stability Oversight Council (FSOC) released a Fact Sheet detailing the progress made to-date by the FSOC’s members in implementing the climate-related financial risk report’s recommendations. As previously covered by InfoBytes, in October 2021 the FSOC released a report, Report on Climate Related Financial Risk, identifying climate change as an emerging threat to financial stability and issued over 30 related recommendations to financial regulators. According to the Fact Sheet, the FSOC has made substantial progress since the October 2021 report by: (i) enhancing public climate-related disclosure; (ii) assessing and mitigating climate-related risks that could threaten U.S. financial stability; (iii) building capacity and expanding efforts to address climate-related financial risks; and (iv) filling climate-related data and methodological gaps.
CDFI Fund seeks comment on criteria for MDIs
On July 28, the Community Development Financial Institutions (CDFI) Fund published a notice in the Federal Register soliciting public comment to refine the criteria it should use to designate “minority lending institutions” (MDIs) as a subset of CDFIs. According to the notice, CDFI Fund “seeks to implement the designation for those CDFIs that wish to be recognized for their high levels of service and accountability to Minority populations, as well as to identify barriers such CDFIs experience in providing access to capital.” Among other things, the CDFI Fund is soliciting information on topics that include: (i) majority-minority Census tracts and the time period used to assess service in these tracts; (ii) CDFI status; (iii) financial products delivered to non-minority-owned customers that serve individuals from racial and ethnic minorities; (iv) methods MLIs may use to demonstrate accountability to minority populations; and (v) standards for accountability to minority populations, as determined by the CDFI Fund. Comments are due by November 25.
CFPB updates debt collection FAQs
On July 27 the CFPB added a new section to the Debt Collection Rule Frequently Asked Questions (FAQs), which address questions related to the electronic communication and unusual or inconvenient time and place provisions in the Debt Collection Rule.
CFPB, DOJ take action against mortgage lender
On July 27, the CFPB and the DOJ jointly filed a lawsuit against a Delaware-based mortgage lender for engaging in unlawful discrimination. The complaint, filed in the U.S. District Court for the Eastern District of Pennsylvania, alleges that the defendant violated the Equal Credit Opportunity Act (ECOA) and its implementing Regulation B and the Consumer Financial Protection Act (CFPA) by, among other things, engaging in unlawful discrimination on the basis of race, color, or national origin against applicants and prospective applicants, including by redlining majority-minority neighborhoods, and by engaging in acts and practices directed at prospective applicants that would discourage prospective applicants from applying for credit. The DOJ also alleged a violation of the Fair Housing Act, including the “making unavailable or denial of dwellings to persons because of race, color, and national origin,” among other things.
The proposed consent order, if entered by the court, would be Bureau’s first nonbank mortgage redlining resolution. It would require the defendant, among other things, to: (i) deposit $18.4 million into a loan subsidy program; (ii) pay a $4 million penalty to the Bureau; and (iii) pay $2 million to fund advertising to generate applications in redlined areas. The proposed order also notes the defendant neither admits nor denies the allegations in the complaint. According to a statement released by CFPB Director Rohit Chopra, the Bureau “will continue to seek new remedies to ensure all lenders meet and fulfill their responsibilities and obligations and the CFPB continues to be on the lookout for emerging digital redlining to ensure that discrimination cannot be disguised by an algorithm.”
CFPB issues consent order against nonbank automotive finance company
On July 26, the CFPB announced a consent order against a nonbank automotive finance company to resolve allegations that it engaged in furnishing inaccurate information to consumer reporting companies. The CFPB alleged that the company violated the FCRA and Regulation V by, among other things, failing to: (i) “promptly update and correct information it furnished to Consumer Reporting Agencies (CRAs) that it determined was not complete or accurate, and continued to furnish this inaccurate and incomplete information;” (ii) “modify or delete information disputed by consumers that [the company] found to be inaccurate”; and (iii) “establish and implement reasonable written policies and procedures regarding the accuracy and integrity of information provided to CRAs.” The CFPB also alleged that the company violated the CFPA because of the FCRA and Regulation V violations, which it alleged also constitute violations of the CFPA, and for using “ineffective manual processes and systems containing known logic errors to furnish information to CRAs.” Under the terms of the Bureau’s consent order, the company is required to provide $13.2 million in redress to harmed consumers, review all account files that it currently furnishes to credit reporting companies and correct all inaccuracies described in the order, then send updated information to the credit reporting companies, establish and implement written a compliance plan, and pay a $6 million civil penalty to the Bureau.
Senate Republicans urge FHFA to “abandon” equitable finance plans
On July 19, twelve Republican Senators wrote a letter to FHFA Director Sandra Thompson expressing their “many significant concerns” about “race-based housing subsidies” in the recently released Equitable Housing Finance Plans for Fannie Mae and Freddie Mac (GSEs). As previously covered by InfoBytes, in June, the GSEs released their Equitable Housing Finance Plans for 2022-2024 (available here and here), affirming their commitment to addressing racial and ethnic disparities in homeownership and wealth. The plans were developed following FHFA’s September 2021 request for public input, which invited comments to help the GSEs prepare their first plans and to aid FHFA in overseeing the plans (covered by InfoBytes here). In the letter, the Senators argued that the plans “raise significant legal concerns,” adding that “no law authorizes FHFA to use a GSE’s assets to pursue affirmative action in housing.” The Senators also wrote that the Biden administration “is conscripting the GSEs as instrumentalities of its progressive racial equity agenda to achieve outcomes it cannot achieve legislatively or even legally.” The Senators urged Thompson to “abandon” the plans and, “in anticipation of litigation challenging the legality” of them, requested that the GSEs “retain all correspondence with FHFA and other records relating to these plans.”
Dem senators urge CFPB to expand Regulation E fraud protections for P2P payment service users
On July 20, six Senate Democrats sent a letter to CFPB Director Rohit Chopra urging the Bureau to hold banks that own instant digital payment networks accountable for facilitating fraudulent payments. In the letter, the senators noted that “consumers are often on the hook because existing rules do not reflect new technological developments.” The Senators further noted that the Electronic Fund Transfer Act (EFTA) and Regulation E protect consumers “if they are tricked into handing over account information to a fraudster who then initiates a transfer.” However, the letter further explained, that consumers are not protected “if they are tricked into opening an application to transfer funds directly to the fraudster.” The senators believe consumers should be protected in both instances. In particular, the Senators suggested that the CFPB could issue guidance providing that a “fraudulently induced” transfer counts as an “unauthorized” transaction under the EFTA, which could “end up shifting liability from consumers to financial institutions.” The letter suggested, among other things, that the Bureau expand the definition of what counts as a payment “error” under the EFTA, to “clarify that, in certain circumstances, a payment is an 'error' when a consumer is defrauded into initiating a transfer to a scammer.” The letter further argued that expanding financial institutions’ potential liability for covering their customers’ losses to fraud would create “powerful incentives” for them to prevent scams on their payment platforms. The letter concludes with the senators urging the Bureau “to similarly protect banks’ customers against transfers with ‘fraudulent intent’ involving other consumers on payment services that banks themselves own, operate, and control.”
FINRA announces electronic filing amendments
On July 20, FINRA announced that it has amended its rules to permit, and in some cases to require, electronic service and filing of documents in disciplinary and other proceedings and appeals. FINRA also announced that it amended its rules to require parties in proceedings before the Office of Hearing Officers to file and serve the parties with their current email address and contact information at the time of their first appearance, and to file and serve any change in email address or contact information during the course of the proceeding. The amendments are effective August 22.
FCC orders phone companies to block car warranty scammers
On July 21, the FCC announced it is ordering phone companies to stop carrying traffic regarding a known robocall scam marketing auto warranties. The FCC noted that the operation is also the target of an ongoing investigation by the FCC’s Enforcement Bureau and a lawsuit by the Ohio Attorney General. As previously covered by InfoBytes, the Ohio AG filed a complaint against multiple companies for participating in an alleged unwanted car warranty call operation. The complaint, filed in the U.S. District Court for Southern District of Ohio, alleged that the 22 named defendants “participated in an unlawful robocall operation that bombarded American consumers with billions of robocalls.” The FCC’s order follows its announcement of actions taken to decrease robocalls, including sending cease and desist letters to several carriers in an attempt “to cut off a flood of possibly illegal robocalls marketing auto warranties targeting billions of consumers.” The announcement also noted that the FCC has authorized “all U.S.-based voice service providers to cease carrying any traffic originating from the [named] operation consistent with FCC regulations,” as detailed in the notice.