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Ohio will grant occupational licenses to applicants experienced in another state
On January 2, the Ohio governor signed SB 131, which, among other things, requires “an occupational licensing authority to issue a license or government certification to an applicant who holds a license, government certification, or private certification or has satisfactory work experience in another state under certain circumstances.” The Act eases licensing burdens by allowing licensed professionals to apply for and be granted a license to work provided they meet certain criteria. Specifically, a licensing authority shall issue a license or government certification to an applicant if the authority determines that the applicant meets several conditions, including: (i) the applicant holds either a “substantially similar out-of-state occupational license that authorizes the applicant to engage in the same profession, occupation, or occupational activity as the license or government certification for which the applicant is applying in this state” or a “government certification in the same profession, occupation, or occupational activity as the license or government certification for which the applicant is applying in this state from one of the uniformed services or a state that does not issue an out-of-state occupational license for the respective profession, occupation, or occupational activity”; (ii) the applicant possesses a valid out-of-state license for at least one year immediately preceding the date the application is submitted and has been actively engaged in the profession (a licensing authority may choose to waive this requirement); (iii) the applicant is in good standing; (iv) the applicant satisfied minimum education, training, or experience requirements or passed an examination to receive an out-of-state occupational license or government certification (this provision is waived if applicable law does not require these requirements); (v) the applicant has not surrendered or had revoked a license, out-of-state occupational license, or government certification, and does not have any disqualifying criminal history or is the subject of a complaint, allegation, or investigation related to unprofessional conduct or a violation of a law; and (vi) the applicant pays the required fees. The Act also discusses additional pathways for licensure through private certification.
Credit unions to pay $4 million in GAP fee refunds
On January 4, the Colorado attorney general announced settlements with two credit unions that will pay a combined $4 million in refunds to borrowers in the state who were entitled to “guaranteed automobile protection” (GAP) fee refunds. An investigation conducted by the Consumer Protection Section of the Colorado Department of Law found that the credit unions historically failed to refund unearned GAP fees owed to consumers. According to the state, the credit unions act as creditors by purchasing retail installment sales contracts from auto dealers that include GAP purchased by Colorado consumers. The state explained in its announcement that borrowers pay the full GAP fee when they purchase a car (the fee is typically only earned gradually over the loan’s lifetime). However, should a borrower prepay the loan prior to maturity or the car is repossessed and sold at auction before the loan is paid off, Colorado law requires lenders to refund the unearned portion of the GAP fee to the borrower, the state said.
The assurances of discontinuance (see here and here) apply to all consumer credit transactions entered into with consumers in the state related to any alleged unfair conduct committed by the credit unions related to GAP fee refund practices. In additional to paying consumer remediation and $100,000 each to the state, the credit unions also agreed to alter their business practices to ensure that applicable refunds will be provided to consumers going forward.
3rd Circuit: Now-invalid default judgment still in effect when debt collection attempts were made
On January 11, the U.S. Court of Appeals for the Third Circuit affirmed a district court’s decision to grant summary judgment in favor of defendants accused of violating the FDCPA when attempting to collect on a judgment that was later vacated. According to the opinion, the plaintiff was sued in state court for an unpaid debt. Contradictory orders were entered by the Superior Court, one which dismissed the action due to one of the defendant’s failure to attend trial, and another that entered default judgment against the plaintiff (which was confirmed two years later by the state court).
A few years later, an attempt was made to collect on the debt. The plaintiff disputed the debt and later sued, claiming the defendants “knew or should have known” that the debt was unenforceable. The plaintiff later filed a motion in state court to vacate the default judgment and declare it “void ab initio,” which was eventually granted by the state court after it determined that the judgment was erroneously entered by the clerk after the court had already dismissed the case due to the debt collector’s failure to appear for trial. The plaintiff filed a cross-motion for summary judgment in the district court.
The district court, however, found that the defendants’ alleged efforts to collect the debt were not false or misleading because the now-invalid default judgment at issue was technically still valid and existed when the collection attempts were made. The plaintiff appealed, arguing that the summary judgment violated the Rooker-Feldman doctrine because the district court “‘could not have reached the decision that it did without necessarily supplanting’ the Superior Court’s order vacating the judgment against her.” The plaintiff also argued that the district court erred when it found the Superior Court judgment against the plaintiff to be “in effect . . . until such time as it was vacated, . . . rather than ‘per se not valid’” when the defendants engaged in their efforts to collect the debt.
On appeal, the 3rd Circuit disagreed with the plaintiff’s assertions. According to the appellate court, the plaintiff satisfied none of the four requirements to trigger the Rooker-Feldman doctrine, adding that regardless of whether the state court declared the judgment “void ab initio,” it was in effect when the defendant attempted to collect on the debt. Moreover, the appellate court noted that the plaintiff “failed to present a triable issue that any communication from Defendants to [the plaintiff] regarding the collection of the default judgment was made unlawful retroactively upon the Superior Court vacating its default judgment order.”
NYDFS describes plan to include medical debt in Consumer Credit Fairness Act
On January 10, NYDFS announced that the New York governor revealed several healthcare-related proposals in the State of the State address, including a plan to include medical debt in the state’s Consumer Credit Fairness Act. NYDFS noted that the governor “will create a comprehensive plan to address excessive medical debt” by amending “the Consumer Credit Fairness Act to cover medical debt, launching an industry and consumer education campaign that addresses medical debt and affordability, and reforming hospital financial assistance applications to require hospitals to use a uniform application form.” According to NYDFS, the best way to combat “medical debt is a commitment to an affordable and equitable healthcare system with transparency that empowers consumers, regardless of their socioeconomic status.”
9th Circuit reverses decision in COPPA suit
In December, the U.S. Court of Appeals for the Ninth Circuit reversed and remanded a district court’s decision to dismiss a suit alleging that a multinational technology company used persistent identifiers to collect children’s data and track their online behavior surreptitiously and without their consent in violation of the Children’s Online Privacy Protection Act (COPPA). According to the opinion, the company used targeted advertising “aided by sophisticated technology that delivers curated, customized advertising based on information about specific users.” The opinion further explained that “the company’s technology ‘depends partly on what [FTC] regulations call ‘persistent identifiers,’ which is information ‘that can be used to recognize a user over time and across different Web sites or online services.’” The opinion also noted that in 2013, the FTC adopted regulations under COPPA that barred the collection of children’s “persistent identifiers” without parental consent. The plaintiff class claimed that the company used persistent identifiers to collect data and track their online behavior surreptitiously and without their consent, and alleged state law claims arising under the constitutional, statutory, and common law of California, Colorado, Indiana, Massachusetts, New Jersey, and Tennessee, in addition to COPPA violations. The district court ruled that the “core allegations” in the third amended complaint were squarely covered, and preempted, by COPPA.
On appeal, the 9th Circuit considered whether COPPA preempts state law claims based on underlying conduct that also violates COPPA’s regulations. To determine this, the appellate court examined the language of COPPA’s preemption clause, which states that state and local governments cannot impose liability for interstate commercial activities that is “inconsistent with the treatment of those activities or actions” under COPPA. The opinion noted that the 9th Circuit has long held “that a state law damages remedy for conduct already proscribed by federal regulations is not preempted,” and that the statutory term “inconsistent” in the preemption context refers to contradictory state law requirements, or to requirements that stand as obstacles to federal objectives. The appellate court stated that it was not “persuaded that the insertion of ‘treatment’ in the preemption clause here evinces clear congressional intent to create an exclusive remedial scheme for enforcement of COPPA requirements.” The opinion noted that because “the bar on ‘inconsistent’ state laws implicitly preserves ‘consistent’ state substantive laws, it would be nonsensical to assume Congress intended to simultaneously preclude all state remedies for violations of those laws.” As such, the appellate court held that “COPPA’s preemption clause does not bar state-law causes of action that are parallel to, or proscribe the same conduct forbidden by, COPPA. Express preemption therefore does not apply to the children’s claims.”
NY restricts lenders’ ability to reset statute of limitations on foreclosures
In December, the New York governor signed A 7737-B, the “Foreclosure Abuse Prevention Act,” which amends the rights of parties in foreclosure actions. Among other things, the law provides that a lender or servicer’s voluntary discontinuance of a foreclosure action does not reset New York’s 6-year statute of limitations on foreclosures, according to New York CPLR §213. Further, pursuant to the new law, if an action to foreclose a mortgage or recover any part of the mortgage debt is time-barred, any other action seeking to foreclose the mortgage or recover the debt is also time-barred. The amendments are effective immediately and, notably, apply to all pending actions in which a final judgment of foreclosure and sale has not been enforced.
DFPI modifies Student Loan Servicing Act proposal
On January 6, the California Department of Financial Protection and Innovation issued modified proposed regulations under the Student Loan Servicing Act (Act), which provides for the licensure, regulation, and oversight of student loan servicers by DFPI (covered by InfoBytes here). Last September, DFPI issued proposed rules to clarify, among other things, that income share agreements (ISAs) and installment contracts, which use terminology and documentation distinct from traditional loans, serve the same purpose as traditional loans (i.e., “help pay the cost of a student’s higher education”), and are therefore student loans subject to the Act. As such, servicers of these products must be licensed and comply with all applicable laws, DFPI said. (Covered by InfoBytes here.) The initial proposed rules also (i) defined the term “education financing products” (which now fall under the purview of the Act) along with other related terms; (ii) amended various license application requirements, including financial requirements for startup applicants; (iii) outlined provisions related to non-licensee filing requirements (e.g., requirements for servicers that do not require a license but that are subject to the Student Loans: Borrower Rights Law, which was enacted in 2020 (effective January 1, 2021)); (iv) specified that servicers of all education financing products must submit annual aggregate student loan servicing reports to DFPI; and (v) outlined new clarifications to the Student Loans: Borrower Rights Law to provide new requirements for student loan servicers (covered by InfoBytes here).
Following its consideration of public comments on the initial proposed rulemaking, DFPI is proposing the following changes:
- Amendments to definitions. The modified regulations revise the definition of “education financing products” by changing “private loans” to “private education loans,” which are not traditional loans. DFPI explained that changing the term to what is used in TILA will provide consistency for servicers and eliminate operational burdens. While the definition of “education financing products” also no longer includes “income share agreements and installment contracts” in order to align it with TILA, both of these terms were separately defined in the initial proposed rulemaking. The definition of “traditional student loan” has also been revised to distinguish which private student loans are traditional loans and which are education financing products (in order to help servicers determine the applicable aggregate reporting and records maintenance rules). The modifications also revise the definitions of “federal student loan,” “income,” “income share agreement,” “installment contract,” “payment cap,” “payment term,” and “qualifying payments,” remove unnecessary alternative terms for “income share,” and add “maximum payments” as a new defined term.
- Time zone requirement revisions. The modified regulations revise the time zone in which a payment must be received to be considered on-time to Pacific Time in order to protect California borrowers.
- Additional borrower protections. The modified regulations specify that servicers are required to send written acknowledgement of receipt and responses to qualified written requests via a borrower’s preferred method of communication. For borrowers who do not specify a preferred method, servicers must send acknowledgments and responses through both postal mail to the last known address and to all email addresses on record.
- Examinations, books, and records requirement updates. The modified regulations revise the information that servicers must provide in their aggregate reports for traditional student loans, including with respect to: (i) loan balance and status; (ii) cumulative balances and amounts paid; and (iii) aggregate information specific to ISAs, installment contracts, and other education financing products. Additionally, DFPI clarified that while the amount a borrower will be required to pay to an ISA provider in the future is unknown, many ISAs contain an “early completion” provision to allow a borrower to extinguish future obligations, and ISA providers must give this information to borrowers. DFPI further clarified that while servicers may choose to maintain records electronically, they must also be able to produce paper records for inspection at a DFPI-designated servicer location to allow an examination to be conducted in one place.
Comments on the modified regulations are due January 26.
Senators ask FTC, CFPB to investigate deceptive listing agreements
In December, Senate Banking Committee Chairman Sherrod Brown (D-OH), along with Senators Tina Smith (D-MN) and Ron Wyden (D-OR) sent a letter to the FTC and the CFPB requesting a review of a Florida-based real estate brokerage firm’s use of exclusive 40-year listing agreements marketed as a “loan alternative.” The request follows a November press release by the Florida attorney general announcing legal action against the firm for engaging in allegedly deceptive, unfair, and unconscionable business practices. According to the AG’s complaint, the firm offered homeowners $300 to $5,000 as a cash loan alternative in exchange for an agreement to use the firm as an exclusive real estate listing broker for a 40-year period. The complaint claimed the firm informs homeowners that there is no obligation to return the cash, stressing the homeowner will owe the firm nothing unless and until the home is sold. The AG asserted, however, that what is not clearly disclosed is that after accepting the payment, the firm files a 40-year lien on the property so that if at any time within 40 years the home is foreclosed upon or transferred to heirs upon the homeowner’s death, or if homeowners simply wish to cancel the deal, the firm will attempt to take three percent of the home’s value. Further, the AG claimed that the firm also failed to inform customers that the liens are filed in the public record, which can make it difficult for homeowners to refinance or access their home’s equity. The complaint seeks injunctive relief, restitution, and civil penalties.
NYDFS announces winter storm relief
On December 27, NYDFS announced actions to provide financial relief to New Yorkers in the Western and North Country regions in the aftermath of a historic winter storm. The relief is part of New York’s continuing and comprehensive efforts to address the historic winter storm that caused statewide devastation. According to the announcement, NYDFS requested that state-chartered banking organizations, federally-chartered banks, and credit unions operating in the area provide fee-free access services to nearby customers and non-customers while travel conditions remain dangerous. NYDFS will also issue temporary adjuster permits to qualified out-of-state independent insurance adjusters to expedite insurance claims in light of the winter storm. Expediting permits will increase the number of adjusters available to process claims and help New Yorkers get their claims paid faster. Insurers are encouraged to make any necessary applications on the NYDFS website. NYDFS urged the insurance industry to work towards a fair and speedy resolution of all claims and provide the necessary resources to do so.
New Jersey reaches $27.3 million settlement with merchant cash advance operation
On January 3, the New Jersey attorney general announced a $27.4 million settlement with a private equity firm, its parent company, and six other associated companies (collectively, “respondents”) to resolve allegations related to violations of the New Jersey Consumer Fraud Act (CFA). According to the press release, the respondents targeted small businesses to enter into lending arrangements disguised as merchant cash advances (MCA) on future receivables. The AG claimed these loans effectively charged interest rates far exceeding the state’s usury caps. According to the attorney general’s press release, the respondents also allegedly engaged in deceptive servicing and collection practices against small businesses.
Under the terms of the consent order, the respondents are permanently enjoined from engaging in any acts or practices that violate the CFA and any applicable Advertising Regulations. The respondents have also agreed to forgive all outstanding balances for customers who entered MCAs (approximately $21.75 million) and pay $5.625 million to cover restitution, attorneys’ fees, costs of investigation and litigation and costs of administering restitution, and penalties not to exceed $250,000. The press release stated that the respondents will also (i) dismiss any pending debt collection actions against customers who had their balances forgiven as a result of the settlement; (ii) provide current customers with the ability to request modifications to their payment terms based on actual receivables; (iii) “[i]mprove internal business practices, be transparent in any terms of future MCA agreements regarding fees and reconciliation rights, and give notice to customers before taking legal action to collect on purported unpaid balances”; and (iv) ensure that all respondents, principals, and any future business entities that may result from a change in structure comply with the terms of the consent order.