Skip to main content
Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations

Filter

Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.

  • CFPB Issues Fall Rulemaking Agenda, Potential Student Loan Servicing Rules on Horizon

    Consumer Finance

    On November 20, the CFPB released its fall rulemaking agenda. The CFPB’s notable current initiatives include: (i) addressing arbitration clauses in contracts related to consumer financial products and services and  providing an outline of rulemaking ideas such as “whether to propose rules that would prevent companies from using these agreements to foreclose consumers’ ability to bring class action lawsuits”; (ii) developing a Notice of Proposed Rulemaking, with an anticipated release date in the first quarter of 2016, to address concerns relating to payday and auto title lending; (iii) finalizing its December 2014 proposed rule, “Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z),” to address consumer protection concerns relating to reloadable cards and other similar prepaid products; and (iv) considering rules to designate consumer installment loans and vehicle title loans as  “larger participants” under the CFPB’s supervisory authority. Looking ahead, the CFPB’s report highlights the potential for rulemaking to address issues related to credit reporting and student loan servicing. Regarding student loan servicing, the CFPB stresses that it “has made it a priority to take action against companies that are engaging in illegal servicing practices,” and that it will “continue to monitor the market for trends and developments and evaluate possible policy responses, including potentially proposing rules.”

    CFPB Payday Lending TILA Student Lending EFTA Agency Rule-Making & Guidance

  • CFPB Files Notice of Charges Against Online Payday Lender

    Consumer Finance

    On November 18, the CFPB announced an action against a Delaware-based online payday lender and its CEO for alleged violations of the Truth in Lending Act and the Electronic Fund Transfer Act, and for engaging in unfair or deceptive acts or practices. Specifically, the CFPB alleges that, from May 2008 through December 2012, the online lender (i) continued to debit borrowers’ accounts using remotely created checks after consumers revoked the lender’s authorization to do so; (ii) required consumers to repay loans via pre-authorized electronic fund transfers; and (iii) deceived consumers about the cost of short-term loans by providing them with contracts that contained disclosures based on repaying the loan in one payment, while the default terms called for multiple rollovers and additional finance charges. The case will be tried by an Administrative Law Judge from the CFPB’s Office of Administrative Adjudication.

    Payday Lending Electronic Fund Transfer

  • FDIC Issues Letter to Financial Institutions Regarding Applicability of Payday Lending Rules

    Consumer Finance

    On November 16, the FDIC issued FIL-52-2015 to advise financial institutions that it revised its 2005 guidance on payday lending, which established the FDIC’s expectations for prudent risk-management practices in the payday loan industry. The letter emphasizes that the 2005 payday lending guidance, as issued in FIL-14-2005, does not apply to depository institutions offering certain products and services, such as deposit accounts and extensions of credit, to non-bank payday lenders. Specifically, the letter states, “[f]inancial institutions that can properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing services to any category of business customers or individual customers operating in compliance with applicable state and federal laws.”

    FDIC Payday Lending Deposit Products Risk Management

  • FTC Announces Action Against Data Brokers for Fraud Allegations, Settles with Three Defendants

    Consumer Finance

    On August 12, the FTC announced an action against a data broker enterprise for violations of the FTC Act. The FTC’s complaint alleges that, from at least 2011 to 2013, the data broker enterprise (i) sold payday loan applications to Ideal Financial Solutions and other non-lender third party companies for less than market value; and (ii) knew or had reason to know that Ideal Financial used the information to make unauthorized debits from consumers’ bank accounts. The complaint further alleges that the financial information of over 500,000 consumers was provided to Ideal Financial, which resulted in over $7.1 million of unauthorized debits to consumers’ accounts. Three of the defendants have agreed to settle the FTC’s allegations. The proposed settlement orders prohibit all three defendants from selling or otherwise benefitting from consumers’ personal information, and impose a $7.1 million judgment against two defendants and a $3.7 million judgment against the third. The settlement orders are subject to approval by the U.S. District Court for the District of Nevada.

    FTC Payday Lending

  • FTC Bans Owners of Online Payday Lending Operations from Consumer Lending Industry

    Consumer Finance

    On July 7, the FTC entered into settlement agreements with two individuals and the entities they operate seeking to permanently restrict them from doing business in the consumer lending industry. According to the FTC’s complaint filed in September 2014, the defendants allegedly operated an online payday lending scheme using personal financial information purchased from third-party lead generators or data brokers to make unauthorized deposits and withdrawals into consumers’ bank accounts, regardless of whether or not the consumer applied for a payday loan. Once the loan proceeds were placed into the consumers’ accounts, the defendants would withdraw “finance charges” from the accounts on a recurring basis, but would not credit the loans’ principal balances for those payments. Collectively, the defendants issued $28 million in payday loans, and extracted over $46.5 million from consumers’ bank accounts over an 11-month period. In addition to being banned from the consumer lending industry, the proposed agreements also order the defendants to pay approximately $52 million in restitution (subject to certain conditions), dismiss any consumer debt that may be owed, and prohibit the defendants from reporting such debts to any credit reporting agency or benefiting from the collection of customers’ personal information.

    FTC Payday Lending Enforcement

  • CFPB Publishes Eighth Edition of Supervisory Highlights

    Consumer Finance

    On June 23, the CFPB published its eighth edition of Supervisory Highlights, covering supervisory activities from January 2015 through April 2015. The latest edition identifies issues with dual-tracking at mortgage servicers and the need for improved quality control measures at consumer reporting agencies. The report also provided supervisory observations related to debt collection, student loan servicing, mortgage origination and servicing, and fair lending. Notably, the report reveals that non-public supervisory actions and self-reported violations at banks and nonbanks in the areas of mortgage origination, fair lending, mortgage servicing, deposits, payday lending, and debt collection resulted in $11.6 million in remediation to more than 80,000 consumers during the first four months of 2015.

    CFPB Payday Lending Mortgage Origination Mortgage Servicing Debt Collection Fair Lending

  • FTC Provides Annual Financial Acts Enforcement Report to CFPB and Federal Reserve

    Consumer Finance

    On June 9, the FTC announced that it has provided to the CFPB its 2014 Annual Financial Acts Enforcement Report. The report highlights the FTC’s enforcement, research, rulemaking, and policy development activities with respect to the Truth in Lending Act (Regulation Z), the Consumer Leasing Act (Regulation M), and the Electronic Fund Transfer Act (Regulation E). Areas detailed within the report include enforcement actions related to non-mortgage credit, including auto finance and payday lending, mortgage loan advertising, and forensic audit scams; and consumer and business outreach related to truth in lending requirements.  The report, submitted on May 29, will be used to prepare the CFPB’s Annual Report to Congress. The FTC also submitted a copy of the report to the Federal Reserve Board.

    CFPB FTC Payday Lending TILA Auto Finance Electronic Fund Transfer U.S. Senate U.S. House Consumer Leasing Act

  • Nevada Enacts Payday Lender Best Practices Act

    Consumer Finance

    On May 27, Nevada Governor Brian Sandoval signed into law S.B. 242, enacting the Payday Lender Best Practices Act. The legislation requires payday and similar lenders to use various specified best practices – advocated by the Community Financial Services Association of America – to strengthen consumer protections and promote responsible lending. The Act applies to any lender licensed within the state who operates a deferred deposit loan service, high-interest loan service, or title loan service. In addition to requiring lenders to fully comply with federal TILA disclosure requirements, the Act mandates lenders must also, among other things, (i) disclose to and provide borrowers with the option to enter into a repayment plan if the borrower is unable to pay; (ii) include a notice on marketing materials and advertisements advising borrowers that the loan should be used for short-term financial needs, and that borrowers with credit impairments should seek credit counseling; and (iii) report violations of Nevada’s short-term loan law to the state’s Financial Institutions Division.

    Payday Lending

  • California Teams-Up with Internet Search Engines to Block Unlicensed Payday Lender Advertising

    Consumer Finance

    On April 7, the California Department of Business Oversight announced a new initiative to prevent unlicensed payday lenders from advertising on major Internet search engines, including Microsoft, Google, and Yahoo. In the announcement, DBO Commissioner Jan Lynn Owen labeled unlicensed online payday lenders as “one of the most significant consumer protection threats” to California consumers and stated that curbing advertising of unlicensed lenders is vital to protect vulnerable borrowers from paying unlawful fees. Under the initiative, once the DBO issues a final cease and desist order against an unlicensed online lender, the DBO will notify Internet companies which will in turn block the lenders’ ads.

    Payday Lending

  • Special Alert: CFPB Releases Outline of Proposed Rule for Payday, Vehicle Title, and Similar Loans

    Consumer Finance

    On March 26, the CFPB announced that it is considering proposing a rule to “end payday debt traps” and released several related documents, including a fact sheet and an outline of the proposal that will be presented to a panel of small businesses pursuant to the Small Business Regulatory Enforcement Fairness Act (SBREFA).  The proposal sets forth ability to repay requirements for “short-term” and “longer-term” loans, and then provides alternative options for lenders to provide both types of loans in lieu of complying with the general ability to repay requirements.

    Under the SBREFA process, the CFPB first seeks input from a panel of small businesses that likely will be subject to the forthcoming rule.  A report regarding the input of those reviewers is then created and considered by the CFPB before issuing its proposed rule.

    Click here to view the full Special Alert.

     

    ***

    Questions regarding the matters discussed in this Alert may be directed to the lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.

    CFPB Payday Lending Title Loans Small Business Regulatory Enforcement Fairness Act

Pages

Upcoming Events