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Main Street Lending Program opens for lender registration
On June 15, the Federal Reserve Bank of Boston (Boston Fed) announced the opening of lender registration for the Main Street Lending Program. The Main Street Lending Program is administered by the Boston Fed and was established pursuant to the CARES Act to support small and medium-sized businesses (covered by a Buckley Special Alert). Recently, the Federal Reserve expanded the program to extend five-year loans with principal payments deferred for two years and interest payments deferred for one year. Additionally, the Fed (i) lowered the minimum loan size for certain loans to $250,000 from $500,000; and (ii) raised the purchase rate to 95 percent of each eligible loan (covered by InfoBytes here).
According to the announcement, lenders must register for the program using the lender portal. The program will begin purchasing loans soon, and, once purchases begin, all the necessary documents will be submitted through the portal. The Boston Fed encourages lenders to begin making program loans immediately.
Fed proposes expansion of Main Street Lending Program to nonprofit organizations
On June 15, the Federal Reserve Board (Fed) announced plans to seek public feedback on a proposal to expand the Main Street Lending Program to tax-exempt, nonprofit organizations. The proposed expansion would allow small and medium-sized nonprofits to apply for loans for additional liquidity, provided they were in sound financial condition prior to the start of the Covid-19 pandemic. The loan terms would be the same as those for Main Street business loans, which include (i) a minimum loan size of $250,000 and a maximum loan size of $300 million; and (ii) principal payment deferments for the first two years of a loan, and interest payment deferments for one year. The proposed expansion would also provide two loan options with modified borrower eligibility requirements that “reflect the operational and accounting practices of the nonprofit sector.” Feedback on the proposal may be submitted through June 22. The Fed’s announcement also contains a chart covering the detailed changes and term sheets for the program’s Nonprofit Organization Expanded Loan Facility and Nonprofit Organization New Loan Facility.
SBA reopens economic injury disaster loans and advance program
On June 15, the Small Business Administration (SBA) reopened the Economic Injury Disaster Loan (EIDL) and the EIDL Advance program portal to new applicants experiencing economic impacts due to the Covid-19 pandemic, including qualified small businesses and U.S. agricultural businesses. The EIDL program offers long-term, low-interest federal disaster loans for small businesses or non-profit organizations that can be used to cover payroll and inventory, pay debt, or fund other expenses not already covered by a Paycheck Protection Program loan. The loans carry interest rates of 3.75 percent for small businesses and 2.75 percent for non-profits and have terms up to a maximum of 30 years. The first payment on these loans will also be deferred for one year. In addition, as part of the loan process, qualified applicants may also apply for an EIDL Advance, which “will provide up to $10,000 ($1,000 per employee) of emergency economic relief to businesses that are currently experiencing temporary difficulties.” These “emergency grants,” SBA notes, do not have to be repaid.
New Jersey Bureau of Securities begins annual examinations of investment advisors
On June 12, the New Jersey Bureau of Securities, within the Office of the Attorney General Division of Consumer Affairs, announced that its annual investment adviser examinations are underway. This year’s examination will include questions asking investment adviser firms, among other things, about the impact of Covid-19 on operations and the steps taken to protect senior investors. The examination intends to survey the impact Covid-19 has had on investment advisers and to assess their business continuity plans.
Massachusetts Division of Banks issues guidance to credit unions on annual meetings
On June 12, the Massachusetts Office of Consumer Affairs and Business Regulation, Division of Banks, issued industry guidance regarding annual meetings for Massachusetts chartered credit unions. Massachusetts credit unions that have not yet held their annual membership meeting may postpone the annual meeting until the state of emergency is lifted, the order declaring the state of emergency has expired or is rescinded, or such time as the credit union believes it may safely hold the meeting. Alternatively, a credit union may remotely hold the annual meeting, or may conduct a hybrid meeting consisting of a combination of remote communication in conjunction with a limited in-person meeting. A credit union may also utilize mail voting with either options. Credit unions that exercise a virtual meeting option must comply with certain requirements in the guidance.
Massachusetts Division of Banks issues guidance to mutual institutions on annual meetings
On June 12, the Massachusetts Office of Consumer Affairs and Business Regulation, Division of Banks, issued industry guidance regarding annual meetings for Massachusetts state-chartered mutual banks and subsidiary banks of a Massachusetts mutual holding company. Mutual institutions that have not yet held their annual meeting this year may use remote communications to conduct the annual meeting virtually or as a hybrid meeting that includes limited in-person attendance of depositors or corporators, provided certain requirements are met. Alternatively, such mutual institutions may postpone an in-person annual meeting until after the state of emergency has ended. Mutual institutions that elect to offer remote annual meetings must comply with certain requirements in the guidance.
New York adopts language access requirements for debt collectors
Recently, the New York Department of Consumer Affairs (Department) adopted language access amendments to the state’s debt collection rules. The Department published the proposed rules on March 5, and held a public hearing on April 10. The new rules, among other things, require debt collectors to (i) detail in debt validation notices and on any publically maintained websites, the availability of language access services provided by the collector and a statement that a translation of commonly-used debt collection terms is available in multiple languages on the Department’s website; (ii) request and retain, to the extent reasonably possible, a record of the language preference of each consumer from whom the collector attempts to collect a debt; and (iii) maintain a report that details the number of consumer accounts the collector attempted to collect a debt on in a language other than English. The amendments also prohibit debt collectors from (i) providing false, inaccurate, or incomplete translations to a consumer in the course of collecting a debt; and (ii) misrepresenting or omitting a language preference when returning, selling, or referring for litigation a consumer account, when the debt collector is aware of the preference. The new rules are effective June 27.
Louisiana allows financial institutions to use e-signatures
On June 9, the Louisiana governor signed HB 722, which provides that “[e]lectronic signatures used in transactions by and with financial institutions are enforceable to the full extent of the law.” Specifically, HB 722 states that financial institutions may submit evidence in electronic signature disputes proving that the purported signer’s electronic signature is valid and enforceable, including evidence showing that the purported signer (i) “received a direct or indirect benefit or value from the transaction, such as the deposit of funds into the purported signer’s preexisting account with the financial institution;” (ii) received loan proceeds; or (iii) paid a debt. The act takes effect August 1.
D.C. Circuit says consumer failed to show injury in FDCPA action
On June 9, the U.S. Court of Appeals for the D.C. Circuit vacated the district court’s judgment in favor of a consumer, concluding that the consumer failed to demonstrate a concrete injury-in-fact traceable to the FDCPA violations she alleged. According to the opinion, the consumer brought the putative class action against the debt collector after the collector sued the consumer to collect an outstanding auto loan debt. The collector allegedly used affidavits in its lawsuit against the consumer that were signed by an agent of the collector, not by an employee as attested. As requested by the debt collector, the action was then dismissed with prejudice. Subsequently, the consumer filed the putative class action against the debt collector and its agent alleging various violations of the FDCPA. The defendants moved to dismiss the action, which the district court denied. Subsequently, the district court granted their motion for summary judgment, concluding that any “any falsehoods in the [] affidavits were immaterial—and thus not actionable—because they ‘had no effect on [the consumer]’s ability to respond or to dispute the debt.’”
On appeal, the D.C. Circuit disagreed with the district court, concluding that the consumer lacked standing to sue the defendants altogether. Specifically, the appellate court held that the consumer failed to identify a traceable injury to the “false representations” made in the affidavits, citing to the fact that the consumer “testified unequivocally that she neither took nor failed to take any action because of these statements.” Moreover, citing to the U.S. Supreme Court decision in Spokeo, Inc. v. Robins, the appellate court emphasized that “[n]othing in the FDCPA suggests that every violation of the provisions implicated here…create[] a cognizable injury.” The appellate court vacated the district court’s judgment and remanded the case with instructions to dismiss the complaint.
7th Circuit upholds summary judgment in favor of debt collector
On June 9, the U.S. Court of Appeals for the Seventh Circuit affirmed summary judgment in favor of a third-party debt collector in a class action asserting violations of the FDCPA. According to the opinion, a consumer filed a putative class action alleging the debt collector sent a misleading letter in violation of the FDCPA because the letter stated that her debt “may be reported to the national credit bureaus.” The consumer argued that the use of the word “may” was deceptive, as it implied “future reporting” even though the debt had already been reported at the time she received the letter. The debt collector moved to dismiss the action, which the district court denied, concluding that whether a communication is misleading is a question of fact and therefore, “dismissal would be premature.” After class certification, the consumer and the debt collector submitted cross-motions for summary judgment, and the district affirmed in favor of the debt collector.
On cross-appeals, the 7th Circuit agreed with the district court’s denial of the debt collector’s motion to dismiss, stating that “[w]hether a significant fraction of debtors would be misled as [the consumer] describes is questionable, but it is not so implausible….” As for summary judgment, the appellate court also agreed with the district court, concluding that the consumer “failed to present any evidence beyond her own opinion” that the collection letter was misleading. The appellate court rejected the consumer’s assertion that her own opinion was evidence enough and noted that the consumer cited to cases using the “least sophisticated consumer standard,” which the 7th Circuit has rejected. Moreover, the appellate court emphasized that the consumer failed “to provide any outside evidence as to the likelihood that a hypothetical unsophisticated debtor (or even the least sophisticated debtor) would in fact be confused by the language in [the debt collector]’s letter.”