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Fannie and Freddie issue Covid-related servicing updates
On June 10, Fannie Mae and Freddie Mac issued numerous updates to temporary servicing guidelines due to the Covid-19 pandemic. Fannie Mae issued Lender Letter LL 2020-07, which, among other things (i) updates the workout option incentive fee structure introduced in LL-2020-09 (these updates are also reflected in LL-2020-05); (ii) clarifies when a HAMP borrower will keep “good standing” under a Covid-19 payment deferral; (iii) clarifies continued solicitation for a Fannie Mae Flex Modification after a borrower has defaulted on a Covid-19 payment deferral; and (iv) revises the Covid-19 payment deferral agreement. Additionally, LL 2020-02 clarifies that a servicer is not required to send a payment reminder notice to the borrower during an active forbearance plan term. Similar updates can be found in Freddie Mac’s Guide Bulletin 2020-21.
FHFA’s Calabria discusses housing market with Senate Committee
On June 9, Federal Housing Finance Agency (FHFA) Director Mark Calabria testified before the Senate Committee on Banking, Housing, and Urban Affairs on the state of the housing market due to the Covid-19 pandemic. In his published statement, Calabria noted that at the start of 2020, the housing market was in a “strong position,” but “in response to Covid-19, financial markets endured a severe dislocation in March.” According to the statement, home prices have remained supported, as drops in demand have been balanced by a decrease in inventory. The statement also provides an update on FHFA’s policy responses to the Covid-19 pandemic. With regard to forbearances, Calabria acknowledged that forbearance rates were predicted to reach 25-50 percent; however, internal data indicates that “[e]nterprise forbearance rates remain manageable.” Specifically, the 30-60 day combined delinquency rate for borrowers with loans in Enterprise mortgage-backed securities “remains below the estimated rate of forbearance,” with Calabria commenting that some borrowers “who have requested forbearance are nonetheless continuing to make payments on their loan.” At the hearing, in response to a question asking if the FHFA plans to extend the foreclosure moratorium past June 30, Calabria noted that the agency is considering extending it “a month at a maximum” and would be “making that announcement certainly within a week.”
Calabria also discussed FHFA’s re-proposed capital rule for the Enterprises (covered by InfoBytes here). His statement notes that “Fannie and Freddie lack the capital to withstand a serious downturn in the housing market,” and the re-proposed rule would “help each [E]nterprise become safe and sound to fulfill its statutory mission across the economic cycle.”
NYDFS launches Covid-19-era fintech program
On June 9, the New York Department of Financial Services (NYDFS) announced the launch of “DFS FastForward,” a program “to support innovators seeking to deliver new solutions in financial services, Fintech, InsurTech, and HealthTech for New Yorkers in the COVID-19 era.” DFS FastForward is intended to assist the New York marketplace in adapting to a “new normal” due to Covid-19, and NYDFS is encouraging businesses (NYDFS-regulated and non-regulated) looking to “operate novel financial services and products in New York.” Specifically, NYDFS is seeking innovations that (i) promote recovery for small businesses; (ii) provide “HealthTech” solutions to give New Yorkers better access and assistance to healthcare; and (iii) offer tools to assist consumers in building financial resilience. NYDFS is encouraging those who are interested in participating in program to complete an inquiry form.
FTC shares 2019 enforcement report with CFPB
On June 4, the FTC announced that it submitted its 2019 Annual Financial Acts Enforcement Report to the CFPB. The report covers the FTC’s enforcement activities regarding the Truth in Lending Act (TILA), the Consumer Leasing Act (CLA), and the Electronic Fund Transfer Act (EFTA). Highlights of the enforcement matters covered in the report include:
- TILA and CLA. FTC enforcement actions concerning TILA/Regulation Z and CLA/Regulation M include: (i) efforts to combat deceptive automobile dealer practices; (ii) a payday lending action involving undisclosed, inflated fees; (iii) credit repair and debt relief schemes, including the failure to make clear, conspicuous written disclosures for closed-end financing; and (iv) consumer electronics financing.
- EFTA. The FTC reported 12 new or ongoing cases related to EFTA/Regulation E. These include: (i) negative option plans involving, among other things, companies applying recurring charges to consumers’ debit or credit card numbers for goods or services without obtaining proper written authorization; and (ii) unfair loan servicing practices.
Additionally, the report addresses the FTC’s research and policy efforts related to truth in lending and leasing, and electronic fund transfer issues, including (i) a study of consumers’ experiences in buying and financing automobiles at dealerships; (ii) a small business financing forum to examine “trends and consumer protection issues in the small business marketplace, including. . .online loans and alternative financing products”; and (iii) the FTC’s Military Task Force’s work on military consumer protection issues. The report also outlines the FTC’s consumer and business education efforts, which include several blog posts warning of new scams and practices.
OCC addresses technology advances in rulemaking issuances
On June 4, the OCC announced two rulemaking issuances: a Notice of Proposed Rulemaking (NPR) that is intended to eliminate outdated regulatory requirements, and an Advance Notice of Proposed Rulemakings (ANPR) seeking comments on banking issues related to digital technology and innovation.
Specifically, the NPR would amend 12 CFR part 7 to update or eliminate outdated regulatory requirements and clarify and codify recent OCC interpretations related to the modern financial system. Among other things, the changes would include (i) codifying interpretations which permit covered institutions to engage in certain tax equity finance transactions; (ii) clarifying anti-takeover provisions; and (iii) expanding the ability of national banks to choose corporate governance provisions under state law.
The ANPR seeks comment on regulations 12 CFR part 7, subpart E and 12 CFR part 155, and, among other things, asks commenters to discuss (i) whether, in light of technological advances, the legal standards of both regulations are flexible enough; (ii) whether there are digital banking activities not covered by these rules that the OCC should address; (iii) the barriers or obstacles to further adoption of crypto-related activities in the banking industry; and (iv) the potential implications of new payments technologies and processes for the banking industry.
Comments on both issuances are due August 3.
District court: Plaintiffs whose search terms were disclosed to third parties have standing under Spokeo
On June 5, the U.S. District Court for the Northern District of California issued an order denying a global search engine’s (defendant) motion to dismiss class action claims, ruling that the plaintiffs’ claims met the standing requirement under Spokeo, Inc. v. Robins. The court determined that the plaintiffs pled a concrete injury by claiming that the defendant violated the Electronic Stored Communications Act (ESCA) and their contractual privacy rights by disclosing their search terms to third party servers without their authorization. The court rejected the defendant’s arguments that (i) the “plaintiffs cannot show the search terms can or will be linked to a searcher’s identity,” and (ii) “anonymized search terms could ‘rarely if ever result in harm or certainly impending harm.’” According to the court, this argument assumes that harm must take the form of “‘individuals’ discovered identities’ being ‘exploit[ed]. . .to their detriment,” which is “[n]ot so.” The court stressed that the ESCA “protects users’ privacy rights against the mere disclosure of their communications,” and that “the statute makes such disclosure actionable regardless whether those communications reveal the user’s identity.” Among other things, the court also noted that Congress has “identified a concrete privacy interest in communications stored with electronic communication service providers—even if those communications cannot be linked to the user.” “Because plaintiffs ‘need not allege any additional harm beyond the one Congress has identified,’ their standing in no way depends on whether the search terms may be used to discover their identities,” the court wrote.
State AGs emphasize the importance of robocall traceback work
On June 4, 52 state attorneys general, through the National Association of Attorneys General, submitted reply comments to the FCC in support of an April final rule, which amends and adopts its rules in accordance with Section 13(d) of the Pallone–Thune Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (TRACED Act) to create a single registered consortium that serves as a neutral third party to manage the private-led efforts to trace back the origin of unlawful robocalls. In the letter, the attorneys general emphasized the importance of traceback efforts to assist law enforcement in identifying and investigating illegal robocallers more efficiently. Moreover, the attorneys general note that traceback investigations help “shed light” on other actors in the “telecommunication ecosystem” that may support robocall scammers. Similarly, in May, the attorneys general, also through the National Association of Attorneys General, published a letter to industry groups asserting their intention to intensify enforcement efforts against illegal robocallers, and urged the US Telecom and the Industry Traceback Group to expand capabilities related to tracebacks in anticipation of growth in the need for data analysis and the number of civil investigative demands and subpoenas that will be issued directly to the Industry Traceback Group (covered by InfoBytes here).
District of Columbia AG claims online lender violated usury statutes
On June 5, the District of Columbia attorney general filed a complaint against an online lender for alleged violations of the District of Columbia Consumer Protection Procedures Act (CPPA) by marketing high-costs loans carrying interest rates exceeding D.C.’s interest rate caps. The complaint alleges that the lender offers two loan products to D.C. residents: (i) an installment loan with an annual percentage rate (APR) range of 99-149 percent; and (ii) a second loan product with an undisclosed APR that ranges between 129-251 percent. However, interest rates in D.C. are capped at 24 percent for loans with the rate expressed in the contract (loans that do not state an express interest rate in the contract are capped at six percent), and licensed money lenders that exceed these limits are in violation of the CPPA. According to the AG, the lender—who has allegedly never possessed a money lending license in D.C.—violated the CPPA by (i) unlawfully misrepresenting it is allowed to offer loans in D.C. and failing to disclose or adequately disclose that its loans contain APRs in excess of D.C. usury limits; (ii) engaging in unfair and unconscionable practices through misleading marketing efforts; and (iii) violating D.C. usury laws. In addition, the lender allegedly violated District of Columbia Municipal Regulations Title 16 by lending money in D.C. without being licensed. The complaint seeks a permanent injunction, restitution, and civil penalties. In addition, the complaint asks the court to order the lender’s loans unenforceable and void.
FTC settles with app developer for COPPA violations
On June 4, the FTC announced that a children’s mobile application developer agreed to pay $150,000 and to delete the personal information it allegedly unlawfully collected from children under the age of 13 to resolve allegations that the developer violated the Children’s Online Privacy Protection Act Rule (COPPA). According to the complaint filed in the U.S. District Court for the Northern District of California, the developer, without notifying parents or obtaining verifiable parental consent, allowed third-party advertising networks to use persistent identifiers to track users of the child-directed apps in order to send targeted advertisements to the children. The proposed settlement requires the developer to destroy any personal data collected from children under 13 and notify and obtain verifiable consent from parents for any child-directed app or website they offer that collects personal information from children under 13. A $4 million penalty is suspended upon the payment of $150,000 due to the developer’s inability to pay.
In dissent, Commissioner Phillips argued that the fine imposed against the developer was too high, noting that having children view advertisements based on the collection of persistent identifiers “is something; but it is not everything,” under COPPA. Commissioner Phillips argued that because the developer did not “share[] sensitive personal information about children, or publicize[] it” nor did the developer expose children “to unauthorized contact from strangers, or otherwise put [the children] in danger,” the assessed penalty was too large in comparison to the harm.
In response to the dissent, Chairman Simons argued that while “harm is an important factor to consider…[the FTC’s] first priority is to use [] penalties to deter [] practices. Even in the absence of demonstrable money harm, Congress has said that these law violations merit the imposition of civil penalties.”
OFAC publishes Syria-related sanctions regulations
On June 4, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced the issuance of regulations to implement Executive Order (E.O.) 13894: “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Syria.” E.O. 13894 was issued last October following the determination that the situation in and in relation to Syria “undermines the campaign to defeat [ISIS].” The final rule implementing the regulations, which was published in an abbreviated form to provide immediate guidance to the public, took effect June 5. OFAC states it “intends to supplement these regulations with a more comprehensive set of regulations, which may include additional interpretive and definitional guidance, general licenses, and statements of licensing policy.”