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New Mexico regulator extends permission to work from home
On May 28, the New Mexico Financial Institutions Division extended its guidance allowing mortgage licensees and their staff to work from home until August 31, 2020 (previously covered here). The guidance permits licensees and their staff to work from their home residences, which may not be licensed as a branch, if various conditions regarding data and information security, worker and customer health, and advertising are met.
Michigan governor extends tax foreclosure redemption deadline
On May 28, the Michigan governor issued an executive order extending the deadline by which Michigan residents must pay back taxes to avoid foreclosures on their property. The governor extended the deadline until June 29, 2020. The governor had previously extended the deadline from March 31 to May 29.
South Carolina regulator updates guidance on working remotely and defers deadline for submitting the 2019 mortgage log
On May 28, the South Carolina Department of Consumer Affairs issued updated interim guidance (previously discussed here) regarding working remotely from unlicensed locations and the deadline for submission of the 2019 mortgage log. The updated interim guidance provides that, until July 1, 2020, licensed mortgage loan originators are permitted to work from home, whether in South Carolina or another state, even if the home is not a licensed branch. The guidance also notes the deferral of filing deadline for the 2019 mortgage log required of mortgage broker companies until June 1, 2020.
Oklahoma prohibits local governments from regulating supervised licensees
On May 21, the Oklahoma governor signed SB 1682, which prohibits any state municipality or other political subdivision from regulating certain practices of businesses and occupations licensed, regulated, and controlled under the supervision of the state’s Department of Consumer Credit. Specifically, local governments may not regulate interest rates, fees, or physical locations, or prevent licensed lenders from engaging in lending practices authorized under the state law. Additionally, SB 1682 allows a person whose rights are violated under the provisions of this section the right to bring an action for injunctive relief. The act takes effect November 1.
New York AG announced proposed settlement with student debt relief companies
On May 22, the New York attorney general (NYAG) announced a proposed settlement with three student loan debt relief companies and two of the companies’ executive officers (collectively, “defendants”), resolving allegations that the defendants participated in a broader scheme that fraudulently, deceptively, and illegally marketed, sold, and financed student debt relief services to consumers nationwide. As previously covered by InfoBytes, the September 2018 complaint alleged that a total of nine student loan debt relief companies, along with their financing company, and the two individuals violated several federal and state consumer protection statutes, including the Telemarketing Sales Rule, New York General Business Law, the state’s usury cap on interest rates, disclosure requirements under TILA, and the Federal Credit Repair Organization Act. Specifically, the NYAG asserted, among other things, that the defendants (i) sent direct mail solicitations to consumers that deceptively appeared to be from a governmental agency or an entity affiliated with a government agency; (ii) charged consumers over $1,000 for services that were available for free; (iii) requested upfront payments in violation of federal and state credit repair and debt relief laws; and (iv) charged usurious interest rates.
If approved by the court, the proposed consent judgment would require the five defendants to pay $250,000 of a $5.5 million total judgment, due to their inability to pay. Additionally, the defendants are also permanently banned from advertising, marketing, promoting, offering for sale, or selling any type of debt relief product or service—or from assisting others in doing the same. Additionally, the defendants must request that any credit reporting agency to which the defendants reported consumer information in connection with the student loan debt relief services remove the information from those consumers’ credit files. The defendants also agreed not to sell, transfer, or benefit from the personal information collected from borrowers.
The NYAG previously settled with two other defendants in February, covered by InfoBytes here.
District court: Unilateral imposition of post-judgment interest violates FDCPA
On May 19, the U.S. District Court for the District of Connecticut granted in part and denied in part parties’ motions for summary judgment in an FDCPA action concerning post-judgment interest. According to the ruling, the defendants—a debt buyer and an attorney who represents creditors, including the debt buyer, in collection actions—obtained a judgment from the Connecticut State Superior Court (state court) for the plaintiff’s unpaid credit card debt. The judgment awarded the defendant $33,921.25 plus post judgment interest under state law. While the complaint requested post-judgment interest of 10 percent—the maximum amount allowed by state law—the judgment did not reference a specific interest rate. After the defendants began charging post-judgment interest at 10 percent, the plaintiff filed suit alleging the defendant violated the FDCPA by using false, deceptive, or misleading representations or means in connection with the collection of any debt. The defendants sought clarification of the rate of post-judgment interest from the state court and received a clarification order stating that the state court “intended that the interest rate be set at the allowable rate of ten percent per year in accordance with the statute.” In its defense, the defendants asserted a bona fide error defense under the FDCPA, arguing, among other things, that they “erroneously believed that application of post-judgment interest at a rate of ten percent was neither false nor misleading because they relied on the state court’s judgment and Clarification Order, which explicitly provided for post-judgment interest at a rate of ten percent.”
The court partially granted summary judgment in favor of the plaintiff on her FDCPA claim, stating that the unilateral imposition of post-judgment interest at a rate of 10 percent per year, which was not awarded in the judgment, is a “clear violation” of the FDCPA that is not subject to the bona fide error defense. The court stated that the bona fide error defense does not apply in this situation because “the FDCPA violation resulted from the defendants’ mistaken belief that, absent a rate of post-judgment interest expressly set by the state court, defendants were entitled to set a rate at the maximum amount allowed under the statute.” According to the court, when a state court “fails to include a specific rate of interest based on the state law,” a debt collector may not apply a default interest rate. In holding that the FDCPA’s bona fide error defense is inapplicable here, the court extended the holding of the U.S. Supreme Court in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, L.P.A. that the “bona fide error defense . . . is not available to debt collectors who misinterpret the legal requirements of the FDCPA,” to include misinterpretations of state law as well.
The court did, however, partially grant the defendant’s motion for summary judgment with respect to the application of pre-judgment interest.
Credit repair trade association sues CFPB over TSR six-month waiting period
On May 21, a credit repair trade association filed a complaint against the CFPB in the U.S. District Court for the Southern District of Florida alleging the Bureau violated the credit repair organizations’ First Amendment rights under the Constitution by enforcing a six-month payment waiting period in the FTC’s Telemarketing Sales Rule (TSR). The association is challenging Section 310.4(a)(2)(ii) of the TSR, which prohibits credit repair organizations from requesting or receiving payment for services rendered for a minimum of six months after the services have been performed. The complaint alleges that the prohibition (i) exceeds the FTC’s statutory authority under the Telemarketing and Consumer Fraud and Abuse Prevention Act; (ii) conflicts with the Credit Repair Organizations Acts (CROA); and (iii) is an infringement on the First Amendment rights of credit repair organizations by improperly impairing fully protected speech. Specifically, the association argues that the TSR is only applicable to credit repair organizations in certain situations, and the CROA—which does not require the six-month waiting period nor proof that “results were achieved”—is “the final and decisive law concerning credit repair organizations, including the time and manner of their billing practices.” Moreover, the complaint argues that the Bureau does not have the authority to enforce the TSR against credit repair organizations, as the Dodd-Frank Act did not explicitly transfer the authority from the FTC. The complaint is seeking a declaratory judgment that the TSR is unenforceable, invalid, and unlawful.
CFPB updates HMDA Small Entity Compliance Guide
On May 27, the CFPB issued an updated HMDA Small Entity Compliance Guide to reflect the changes made to Regulation C by the April final rule, which permanently raised coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit (covered by InfoBytes here). The final rule, which amends Regulation C, increases the permanent threshold from 25 to 100 loans starting July 1, 2020, for both depository and nondepository institutions. The final rule also increases the permanent threshold for collecting and reporting data about open-end lines of credit from 100 to 200, but this change will not take effect until January 1, 2022, when the current temporary threshold of 500 open-end lines of credit expires. Beginning in 2022, both depository and nondepository institutions that meet this threshold must report data on open-end lines of credit by March 1 of the following calendar year. The Guide also notes the CFPB’s statement that, as of March 26, 2020, it “does not intend to cite in an examination or initiate an enforcement action against any institution for failure to report its HMDA data quarterly.”
OCC issues Comptroller’s Handbook booklet updating sampling methodologies
On May 26, the OCC issued Bulletin 2020-56 announcing the revision of the Sampling Methodologies booklet of the Comptroller’s Handbook. Among other things, the revised booklet (i) discusses the differences between statistical and judgmental sampling; (ii) details the OCC’s statistical sampling methodologies; and (iii) includes look-up tables covering statistical sample sizes and upper confidence bounds. The revised booklet is effective for supervisory activities beginning on or after June 15.
CFPB and Massachusetts AG sue credit-repair telemarketers
On May 22, the CFPB and the Massachusetts attorney general announced a joint lawsuit against a credit repair organization and the company’s president and owner (collectively, “defendants”) for allegedly committing deceptive acts and practices in violation of the Consumer Financial Protection Act (CFPA) and the Massachusetts Consumer Protection Law. The complaint also alleges the defendants engaged in deceptive and abusive telemarketing acts or practices in violation of the Consumer Financial Protection Act’s (CFPA) prohibition against deceptive acts or practices and the FTC’s Telemarketing Sales Rule (TSR). According to the complaint filed in the U.S. District Court for the District of Massachusetts, the defendants allegedly enrolled tens of thousands of consumers by deceptively claiming that their credit-repair services could help consumers substantially improve their credit scores. The services also allegedly promised to fix “unlimited” amounts of negative items from consumers’ credit reports. However, the complaint asserts that in “numerous instances,” the defendants failed to achieve these results. The defendants also allegedly engaged in abusive acts and practices in violation of the TSR by requesting and collecting fees before achieving any results related to repairing a consumer’s credit. Among other things, the complaint further alleges that the defendants claimed to have more than 60 credit repair experts but actually only employed a handful of Boston-based employees, only some of whom interacted with consumers. The majority of the interactions, the complaint alleges, were conducted by telemarketers located in Central America who were paid “almost entirely by commission” based on the number of consumers they enrolled.
The complaint seeks injunctive relief; “damages and other monetary relief against [the defendants] as the Court finds necessary to redress injury to consumers resulting from [the defendants’] violations, which may include, among other things, rescission or reformation of contracts, refund of monies paid, and restitution; and civil money penalties.”