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CFPB seeks feedback on TRID
On November 20, the CFPB issued a request for information (RFI) regarding the TILA-RESPA Integrated Disclosures Rule (TRID Rule) assessment, which is required by Section 1022(d) of the Dodd-Frank Act. Section 1022(d) requires the Bureau to conduct an assessment of each “significant rule or order” no later than five years after its effective date. The Bureau issued the TRID Rule in November 2013, and the rule took effect on October 3, 2015. In addition to comments received on this RFI, the Bureau notes that it is also considering the approximately 63 comments already received regarding the TRID Rule from the 2018 series of RFIs issued on the adopted regulations and new rulemakings, as well as the inherited regulations (covered by InfoBytes here and here).
The RFI seeks public feedback on any information relevant to assessing the effectiveness of the TRID Rule, including (i) comments on the feasibility and effectiveness of the assessment plan; (ii) recommendations to improve the assessment plan; (iii) data and information about the benefits, costs, and effectiveness of the TRID Rule; and (iv) recommendations for modifying, expanding, or eliminating the TRID Rule.
Comments must be received within 60 days of publication in the Federal Register.
District Court enters stipulated final judgment against debt collector
On November 15, the U.S. District Court for the Northern District of Georgia entered a stipulated final judgment and order to resolve allegations concerning one of the defendants cited in a 2015 action taken against an allegedly illegal debt collection operation. As previously covered by InfoBytes, the CFPB claimed that several individuals and the companies they formed attempted to collect debt that consumers did not owe or that the collectors were not authorized to collect. The complaint further alleged uses of harassing and deceptive techniques in violation of the CFPA and FDCPA, and named certain payment processors used by the collectors to process payments from consumers. While the claims against the payment processors were dismissed in 2017 (covered by InfoBytes here), the allegations against the outstanding defendants remained open. The November 15 stipulated final judgment and order is issued against one of the defendants who—as an officer and sole owner of the debt collection company that allegedly engaged in the prohibited conduct—was found liable in March for violations of the FDCPA, as well as deceptive and unfair practices and substantial assistance under CFPA.
Among other things, the defendant, who neither admitted nor denied the allegations except as stated in the order, is (i) banned from engaging in debt collection activities; (ii) permanently restrained and enjoined from making misrepresentations or engaging in unfair practices concerning consumer financial products or services; and (iii) prohibited from engaging in business ventures with the other defendants; using, disclosing or benefitting from certain consumer information; or allowing third parties to use merchant processing accounts owned or controlled by the defendant to collect consumer payments. The stipulated order requires the defendant to pay a $1 civil money penalty and more than $5.2 million in redress, although full payment of the judgment is suspended upon satisfaction of specified obligations and the defendant’s limited ability to pay.
CFPB says some organizations won’t need to comply with screening and training requirements for temporary MLOs
On November 15, the CFPB issued an interpretive rule, which clarifies the screening and training requirements for mortgage loan originators (MLOs) with temporary authority under Regulation Z. As previously covered by InfoBytes, Section 106 of Economic Growth, Regulatory Relief, and Consumer Protection Act amends the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) to establish temporary authority, providing a way for eligible MLOs who have applied for a new state loan originator license to act as a loan originator in the application state while the state considers the application. Regulation Z currently requires organizations to perform criminal screenings (including whether the applicant has been convicted of enumerated felonies within specified timeframes) and training requirements before permitting the individual to originate loans. According to the Bureau, Regulation Z is “ambiguous” as to whether these requirements would apply to MLOs with temporary authority and therefore, the interpretive rule clarifies that an organization is not required to conduct the criminal screening or ensure the training of any MLOs with temporary authority under the SAFE Act.
The interpretive rule is effective November 24, the same day the SAFE Act amendments take effect.
CFPB argues private class action settlement interferes with its CFPA enforcement authority
On November 6, the CFPB filed an amicus brief with the Court of Appeals of Maryland in a case challenging a private class action settlement against a structured settlement company, which purports to “release the Bureau’s claims in a pending federal action, to enjoin class members from receiving benefits from the Bureau’s lawsuit, and to assign any benefits the Bureau might obtain for class members to the class-action defendants.” As previously covered by InfoBytes, in 2017, the U.S. District Court for the District of Maryland allowed a UDAAP claim brought by the CFPB to move forward against the same structured settlement company, where the Bureau alleged the company employed abusive practices when purchasing structured settlements from consumers in exchange for lump-sum payments. A similar action was also brought by the Maryland attorney general against the company. In addition to the state and federal enforcement actions, the plaintiffs filed a private class action against the company, and a trial court approved a settlement. The Court of Special Appeals reversed the lower court’s approval of the settlement, concluding that it “interferes with the [state’s] and Bureau’s enforcement authority.” The company appealed.
In its brief to the Maryland Court of Appeals, the Bureau argues that the Court of Special Appeals decision should be affirmed because the settlement provisions “threaten to interfere with the Bureau’s authority under the [Consumer Financial Protection Act] in two significant ways.” Specifically, the Bureau argues that the settlement (i) could interfere with the Bureau’s statutory mandate to remediate consumers harmed through the Civil Penalty Fund; and (ii) would interfere with the Bureau’s authority to use restitution to remediate consumer harm. The Bureau states that “the risk of windfalls to such wrongdoers could force the Bureau to decline to award Fund payments to victims,” and would “threaten to offend basic principles of equity.”
Government says CFPB should have authority to continue enforcement actions even if declared unconstitutional
On November 6, the CFPB and the DOJ filed a brief with the U.S. Supreme Court arguing that the Bureau should still “have the authority to commence or continue enforcement proceedings” in the event that the Court declares the Bureau’s structure unconstitutional. The brief was filed in response to a petition for writ of certiorari by two Mississippi-based payday loan and check cashing companies (collectively, “petitioners”) urging the Court to grant certiorari before the U.S. Court of Appeals for the Fifth Circuit renders a decision on a challenge to the Bureau’s single-director structure. The petitioners are not only challenging the Bureau’s structure but also arguing that the asserted constitutional violation requires the dismissal of the underlying lawsuit brought by the Bureau.
The government argues that dismissal of the underlying enforcement action is not the way to remedy a constitutional structure violation, at least in a situation where “an official fully accountable to the President determines that it should go forward.” The brief notes that, in this case, then-Acting Director Mulvaney, to whom the Bureau has argued the limitation to for-cause removal did not apply, had ratified the enforcement action against petitioners at issue. While the Bureau and the DOJ acknowledge that lower courts “have not yet addressed the particular issue here,” they make the case that “the few reasoned decisions that address related issues are in accord: A separation-of-powers problem with an agency does not compel invalidation of the agency’s actions if those actions are subsequently approved in compliance with separation-of-powers requirements.”
In its brief, the Bureau and the DOJ also argue that questions presented to the Court do not warrant review of the case before the 5th Circuit has an opportunity to rule. The government emphasizes that the Court has already agreed to hear a different case, Seila Law LLC v. CFPB, to answer the question of whether an independent agency led by a single director violates the Constitution’s separation of powers under Article II (covered by InfoBytes here). In doing so the Court also directed the parties to that action to brief and argue whether 12 U.S.C. §5491(c)(3), which established removal of the Bureau’s single director only for cause, is severable from the rest of the Dodd-Frank Act, should it be found to be unconstitutional.
CFPB holds small business lending symposium
On November 6, the CFPB held a symposium covering small business lending and Section 1071 of the Dodd-Frank Act, which amends ECOA to require financial institutions to compile, maintain, and submit to the Bureau certain information concerning credit applications by women-owned, minority-owned, and small businesses, and also directs the Bureau to promulgate regulations to implement these requirements. In her opening remarks, Director Kraninger, noted that the symposium was being convened to assist the Bureau with information gathering for upcoming rulemaking and emphasized that the Bureau is focused on a rulemaking that would not impede small business access to credit by imposing unnecessary costs on financial institutions. The symposium consisted of two panels, with the first covering policy issues related to small business lending, while the second discussed specific aspects of the requirements of Section 1071. Highlights of the panels include:
- Panel #1. During the policy discussion, panelists focused on non-traditional lenders, namely fintech firms, that have entered the small business lending market, with most noting that these online alternative lenders have filled a necessary lending gap left by traditional banks and depository institutions. While concerns around bad actors in the online lending space were discussed, most panelists agreed that online financing may provide an opportunity for women and minority-owned businesses to avoid potential biases in underwriting, with one panelist noting that his company does not collect gender or race information in its online application.
- Panel #2. Panelists focused their discussion on specific implementation concerns of Section 1071, including compliance costs, definitions of small business and financial institutions, data elements to be reported, and privacy concerns. Among other things, panelists noted that the definition of “small business” should be limited to businesses under $1 million in revenue, which is a figure included in other regulations such as ECOA and the CRA. Panelists disagreed on whether the Bureau should exercise its exemptive authority under Section 1071 for the definition of “financial institution.” While some panelists believe that the broad definition included in the Act is necessary to hold all the players in the market accountable, others argued that large financial institutions that receive an “outstanding” CRA rating should be excluded from the reporting requirements. As for data elements, most agreed that the Bureau should only require the statutorily mandated elements and not include any others in the rulemaking, while one panelist suggested that APR must be included in order to ensure that approval rates for minority-owned small businesses are the result of actual innovation and effective business models and not just the charging of high rates. Moreover, panelists reminded the Bureau to be cognizant of the small business lending reporting requirements of the CRA and HMDA and cautioned the Bureau to keep Section 1071 data requirements compatible.
District Court orders millions in restitution and civil penalties against two foreclosure relief companies
On November 4, the U.S. District Court for the Western District of Wisconsin ordered restitution and disgorgement, civil penalties, and permanent injunctive relief in an action brought by the CFPB against two former foreclosure relief companies and their principals (collectively, “defendants”) for violations of Regulation O. As previously covered by InfoBytes, in 2014, the CFPB, FTC, and 15 state authorities took action against foreclosure relief companies and associated individuals, including the defendants, alleging the use of deceptive marketing tactics to obtain business from distressed borrowers. The CFPB filed three suits, the FTC filed six, and the state authorities collectively initiated 32 actions. Specifically, the CFPB alleged that the companies and individuals (i) collected fees before obtaining a loan modification; (ii) inflated success rates and likelihood of obtaining a modification; (iii) led borrowers to believe they would receive legal representation; and (iv) made false promises about loan modifications to consumers, in violation of Regulation O, formerly known as the Mortgage Assistance Relief Services (MARS) Rule. Among other things, the court order holds company one and its principals jointly and severally liable for over $18 million in restitution, while company two and its same principals are jointly and severally liable for nearly $3 million in restitution. Additionally, the court ordered civil penalties totaling over $37 million against company two and four principals.
Agencies adjust threshold for Regulations Z and M
On October 31, the CFPB and the Federal Reserve Board finalized the annual dollar threshold adjustments that govern the application of Regulation Z (Truth in Lending Act) and Regulation M (Consumer Leasing Act) to credit transactions, as required by the Dodd-Frank Act (published in the Federal Register here and here). Each year the thresholds must be readjusted based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The exemption threshold for 2020, based on the annual percentage increase in the CPI-W, is now $58,300 or less, except for private student loans and loans secured by real property, which are subject to TILA regardless of the amount.
Senate Democrats press CFPB to investigate Pennsylvania servicer’s PSLF management
On October 28, 23 Senate Democrats wrote to CFPB Director Kathy Kraninger urging the Bureau to open an enforcement investigation into a Pennsylvania-based student loan servicer’s alleged mismanagement of the Public Service Loan Forgiveness (PSLF) program. The Senators contend that the servicer’s failure to properly administer the PSLF program “has resulted in widespread violations of federal law,” referring to reports by the CFPB, the Government Accountability Office, and the Department of Education Inspector General that claim that missteps and errors have caused public service workers to be denied loan forgiveness. The CFPB’s Student Loan Ombudsman’s report cites to the servicer’s “‘flawed payment processing, botched paperwork and inaccurate information,’” while the GAO report claims “that public service workers [have] improperly been denied loan forgiveness because of [the servicer’s] inability to properly account for qualifying payments and reliance on inaccurate information.” The letter requests that the Bureau investigate the servicer’s servicing practices, its management of the PSLF program, and other potential violations of federal consumer financial laws.
As previously covered by InfoBytes, on October 3, the New York attorney general filed an action against the servicer for violating the Consumer Financial Protection Act and New York law through its mishandling of income driven repayment plans and misconduct related to the administration of PSLF program applications.
Regulators tackle company offering relief from student loans
On October 30, the CFPB, along with the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney (together, the “states”), announced an action against a student loan debt relief operation for allegedly deceiving thousands of student-loan borrowers and charging more than $71 million in unlawful advance fees. In the complaint filed October 21 and unsealed on October 29 in the U.S. District Court for the Central District of California, the Bureau and the states alleged that since at least 2015 the defendants have violated the Consumer Financial Protection Act, the Telemarketing Sales Rule, and various state laws by charging and collecting improper advance fees from student loan borrowers prior to providing assistance and receiving payments on the adjusted loans. In addition, the Bureau and the states claim the defendants engaged in deceptive practices by misrepresenting (i) the purpose and application of fees they charged; (ii) their ability to obtain loan forgiveness; and (iii) their ability to actually lower borrowers’ monthly payments. The defendants also allegedly failed to inform borrowers that they automatically requested that the loans be placed in forbearance and submitted false information to student loan servicers to qualify borrowers for lower payments. The complaint seeks injunctive relief, as well as damages, restitution, disgorgement, and civil money penalties.
On November 15, the court entered a preliminary injunction enjoining the alleged violations of law in the complaint, continuing the asset freeze, and appointing a receiver against the defendants.