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Virginia expands military service member housing protections
On July 1, the Virginia governor signed SB 1410, which, among other things, amends the state’s anti-discrimination statutes to prohibit discrimination in public accommodations, employment, and housing based on military status. The bill amends the Virginia Fair Housing Law to prohibit discrimination in the sale or rental of dwellings by any person or entity, and prohibit discrimination by “any person or other entity, including any lending institution, whose business includes engaging in residential real estate-related transactions.” The bill also provides that “the term ‘residential real estate-related transaction’ means any of the following: [t]he making or purchasing of loans or providing other financial assistance (i) for purchasing, constructing, improving, repairing, or maintaining a dwelling or (ii) secured by residential real estate; or [t]he selling, brokering, insuring, or appraising of residential real property.” The bill is effective immediately.
CFPB resumes MLA exams
On June 16, the CFPB issued an interpretive rule explaining the reversal of its prior determination that it lacked the authority to examine supervised financial institutions for compliance with the Military Lending Act (MLA). As previously covered by InfoBytes, in 2018, the Bureau discontinued MLA-related examination activities, contending the law does not explicitly prescribe the Bureau the authority to examine financial institutions for compliance with the MLA. In January 2019, the Bureau issued a statement from former Director Kathy Kraninger announcing that she had asked Congress to grant the agency “clear authority to supervise for compliance with the [MLA],” and in March 2019, Senate Democrats issued a letter urging the resumption of reviews for compliance with the MLA during routine lender examinations (covered by InfoBytes here and here).
The CFPB’s interpretive rule states that the Bureau has statutory authority to conduct MLA examinations “[b]ecause conduct that violates the MLA is associated with activities that are subject to TILA and the CFPA.” The Bureau also indicated it may “conduct examinations of very large banks and credit unions for purposes of detecting and assessing those ‘risks to consumers’ that are ‘associated’ with ‘activities subject to’ Federal consumer financial laws.” The interpretive rule states that the Bureau can use formal administrative adjudications, civil enforcement actions, and other authorities to enforce the MLA, which is “complemented by the Bureau’s use of the examination process to detect and assess risks to consumers arising from violations of the MLA.” The rule also points out that the Bureau “believes that the very harmful conduct that Congress sought to prevent in the MLA, which the Bureau has the authority to remedy through its other authorities (specifically enforcement action), sits within the core of this authority.” CFPB acting Director Dave Uejio further emphasizes in the Bureau’s press release that “[t]hrough our enforcement of the MLA, companies that harmed military borrowers have been ordered to pay millions of dollars in redress and civil penalties. To fulfill its purpose and protect military borrowers we must supervise financial institutions and hold them accountable for endangering consumers.” With the issuance of the interpretative rule, the Bureau will now resume MLA-related examination activities.
VA extends Covid-19 foreclosure and eviction moratorium
On January 29, the Department of Veterans Affairs issued Circular 26-21-2, which further extends foreclosure and eviction relief for borrowers affected by Covid-19 (previously covered here). Specifically, all properties secured by VA-guaranteed loans, including those previously secured by VA-guaranteed loans but currently in the VA’s REO (real estate owned) portfolio, are subject to a moratorium on foreclosure and eviction through March 31, 2021. With the exception of abandoned or vacant property, the moratorium applies to the initiation of foreclosures, the completion of foreclosures in process, and evictions.
Online lender settles MLA violations for $1.25 million
On January 19, the CFPB announced a settlement with a California-based online lender resolving allegations that the company violated the Military Lending Act (MLA) when making installment loans. This settlement is part of “the Bureau’s broader sweep of investigations of multiple lenders that may be violating the MLA,” which provides protections connected to extensions of consumer credit for active-duty servicemembers and their dependents. As previously covered by InfoBytes, last month the Bureau filed a complaint in the U.S. District Court for the Northern District of California alleging that since October 2016 the lender, among other things, made more than 4,000 single-payment or installment loans to over 1,200 covered borrowers in violation of the MLA. These violations included (i) extending loans with Military Annual Percentage Rates (MAPR) exceeding the MLA’s 36 percent cap; (ii) requiring borrowers to submit to arbitration in loan agreements; and (iii) failing to make certain required loan disclosures, including a statement of the applicable MAPR, before or at the time of the transaction.
Under the terms of the settlement, the company is required to pay $300,000 in consumer redress and pay a $950,000 civil money penalty. The company is also be prohibited from committing future MLA violations and from “collecting on, selling, or assigning any debts arising from Void Loans.” Furthermore, the company is required to submit a compliance plan to ensure its extension of consumer credit complies with the MLA. This plan must include, among other things, a process for correcting information furnished to credit reporting agencies about affected consumers.
VA re-extends foreclosure and eviction moratorium for borrowers affected by Covid-19
On December 28, the Department of Veterans Affairs issued Circular 26-20-40, which further extends foreclosure and eviction relief for borrowers affected by Covid-19 (previously covered here). Specifically, all properties secured by VA-guaranteed loans, including those previously secured by VA-guaranteed loans but currently in the VA’s REO (real estate owned) portfolio, are subject to a moratorium on foreclosure and eviction through February 28, 2021. With the exception of abandoned or vacant property, the moratorium applies to the initiation of foreclosures, the completion of foreclosures in process and evictions.
CFPB charges online lender with MLA violations
On December 4, the CFPB announced it filed a complaint in the U.S. District Court for the Northern District of California against a California-based online lender alleging violations of the Military Lending Act (MLA). According to the CFPB, the “action is part of a broader Bureau sweep of investigations of multiple lenders that may be violating the MLA,” which provides protections connected to extensions of consumer credit for active-duty servicemembers and their dependents. The complaint alleges that since October 2016 the lender, among other things, made more than 4,000 single-payment or installment loans to over 1,200 covered borrowers in violation of the MLA. Specifically, the Bureau claims that these violations include (i) extending loans with Military Annual Percentage Rates (MAPR) exceeding the MLA’s 36 percent cap; (ii) requiring borrowers to submit to arbitration in loan agreements; and (iii) failing to make certain required loan disclosures, including a statement of the applicable MAPR, before or at the time of the transaction. The complaint seeks an injunction against the lender that would require the lender to “correct inaccurate information furnished to consumer reporting agencies concerning loans that were void ab initio,” and would prohibit it from collecting on those loans and require it to rescind the credit agreements on those loans. The complaint also seeks damages, redress, disgorgement of ill-gotten gains, and civil money penalties.
CFPB and South Carolina settle with loan broker for veteran pension loans
On October 30, the CFPB and the South Carolina Department of Consumer Affairs filed a proposed final judgment in the U.S. District Court for the District of South Carolina to settle an action alleging that two companies and their owner (collectively, “defendants”) violated the Consumer Financial Protection Act and the South Carolina Consumer Protection Code by offering high-interest loans to veterans and other consumers in exchange for the assignment of some of the consumers’ monthly pension or disability payments. As previously covered by InfoBytes, in October 2019, the regulators filed an action alleging, among other things, that the majority of credit offers that the defendants broker are for veterans with disability pensions or retirement pensions and that the defendants allegedly marketed the contracts as sale of payments and not credit offers. Moreover, the defendants allegedly failed to disclose the interest rate associated with the offers and failed to disclose that the contracts were void under federal and state law, which prohibit the assignment of certain benefits.
If approved by the court, the proposed judgment would require the defendants to pay a $500 civil money penalty to the Bureau and a $500 civil money penalty to South Carolina. The proposed judgment would permanently restrain the defendants from, among other things, (i) extending credit, brokering, and servicing loans; (ii) engaging in deposit-taking activities; (iii) collecting consumer-related debt; and (iv) engaging in any other financial services business in the state of South Carolina. Additionally, the proposed judgment would permanently block the defendants from enforcing or collecting on any contracts related to the action and from misrepresenting any material fact or conditions of consumer financial products or services.
District court: No SCRA foreclosure protections for servicemember not on the note
On September 23, the U.S. District Court for the Eastern District of New York held that an active duty servicemember could not avail herself of the foreclosure protections provided by the Servicemembers Civil Relief Act (SCRA) even though she was a signatory on the mortgage, because she was not a signatory on the note. According to the opinion, the SCRA foreclosure protections are afforded only to an “obligation on real . . . property” which is “secured by a mortgage” and that it is the note “which evidences the obligations, i.e. the promise to pay the debt.” By signing the mortgage, the servicemember-spouse “merely mortgaged her interest in the property, to secure her husband’s obligation to pay.” Accordingly, the court vacated a prior stay of foreclosure.
DOJ settles with Texas furniture company on SCRA violations
On September 15, the DOJ announced a settlement with a Texas-based furniture and appliance company, resolving allegations that the company charged excess interest on servicemembers’ purchases in violation of the Servicemembers Civil Relief Act (SCRA). According to the press release, the DOJ launched an investigation into the company after receiving a referral from a United States Army Staff Judge Advocate. After receiving notice of the investigation, the company conducted a self-audit and determined that between March 2014 and May 2019, it had not granted the request for the full six percent interest rate cap required by the SCRA for 184 out of the 322 servicemembers that requested the relief. The complaint, filed by the DOJ in the U.S. District Court for the Southern District of Texas, states that the company “engaged in a pattern or practice of violating” the SCRA by “failing or refusing to timely and/or accurately lower the interest rate on pre-service obligations obtained by at least 184 SCRA protected servicemembers to 6% per year after being provided with the documentation required by the SCRA.”
The settlement notes that the company voluntarily disclosed its findings to the DOJ and issued over $59,000 in refund checks and over $28,000 in account credits to affected servicemembers. The settlement requires the company to pay an additional $500 to each affected servicemember, and to hire an independent consultant to determine if any other servicemembers were overcharged. Additionally, the company is required to make a $50,000 payment to the United States.
DOJ initiates two SCRA actions for auctions without court orders
On August 18, the DOJ announced (see here and here) two separate Servicemembers Civil Relief Act (SCRA) actions. First, the DOJ filed a complaint against a Massachusetts-based moving and storage company for failing to obtain a court order prior to auctioning an active duty servicemember’s storage unit, while he was deployed overseas. The DOJ asserts that while a servicemember has no duty to inform lienholders of their military service, the servicemember told the storage company’s agent about his military status during a phone call. Additionally, the servicemember provided the storage company with his address on Hanscom Air Force Base. In the second complaint, the DOJ alleges a Florida-based towing company auctioned a car belonging to an active duty servicemember without obtaining a court order. The DOJ asserts that the towing company had reason to believe the car was owned by a servicemember, including that there was a military decal on the car and the owner’s auto loan was through a military-oriented financial institution. In both actions, the DOJ is seeking damages, injunctive relief and civil penalties.