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CFPB settles with two military loan companies
On November 25, the CFPB announced a settlement with two companies that originated and serviced travel-related loans for military servicemembers and their families. According to the consent order with the lender and its principal, the lender (i) charged fees to customers who obtained financing, at a higher rate than those customers who paid in full, but failed to include the fee in the finance charge or APR; (ii) falsely quoted low monthly interest rates to customers over the phone; and (iii) failed to provide the required information about the terms of credit and the total of payments in violation of TILA and the TSR. The consent order prohibits future lending targeted to military consumers and requires the lender and its principal to pay a civil money penalty of $1. The order also imposes a suspended judgment of almost $3.5 million, based on an inability to pay.
In its consent order against the servicer, the Bureau asserts the servicer engaged in deceptive practices by overcharging servicemembers for debt-cancellation products and, in violation of the FCRA’s implementing Regulation V, never established or maintained written policies and procedures regarding the accuracy of information furnished to credit reporting agencies. The consent order issues injunctive relief and requires the servicer to (i) pay a $25,000 civil money penalty; (ii) provide redress to consumers who were allegedly overcharged for the debt-cancellation product; (iii) pay over $54,000 in restitution to borrowers with no outstanding balance on their loans and issue additional account credits to borrowers with outstanding balances; and (iv) establish reasonable policies and procedures for accurate reporting to consumer reporting agencies.
CFPB examines student loan borrowers enrolled in IDR plans
On November 22, the CFPB released a new Data Point report from the Office of Research titled “Borrower Experiences on Income-Driven Repayment,” which examines, among other things, the types of student loan borrowers who participate in income-driven repayment (IDR) plans, the evolution of borrower delinquencies, and borrower experiences with enrollment recertification processes. According to the Bureau, while student loans are currently the largest non-mortgage form of debt held by U.S. consumers, “there remains limited evidence of how this growing debt burden affects the use of other financial products and services.” Key findings of the report include:
- Delinquencies decreased 19 to 26 percent after one year into IDR enrollment for borrowers who received partial payment relief as compared to the quarter before enrollment, and the share of borrowers actively in repayment on their loans was 27 percent higher at the end of the first year of being enrolled in IDR than prior to entering IDR.
- Delinquent borrowers who enrolled in IDR showed a 17 percent reduction in their delinquencies on other credit products, however, the Bureau noted that “one in five such borrowers were still behind on their payments on these other credit products one year later, reflecting persistent financial struggles for some borrowers.”
- Roughly two-thirds of borrowers who recertified their IDR enrollment for a second year did so either immediately or within two months after the initial IDR period ended, with an additional 12 percent entering forbearance or deferment. The Bureau stated that borrowers who do not recertify on time after their first year may face persistent difficulties, and reported that delinquencies more than tripled for these borrowers.
- More than 80 percent of borrowers enrolled in IDR “sought out prolonged payment relief beyond a single year.”
According to the Bureau, the data “helps the Bureau and other researchers and policymakers understand how consumers repay their student loans and how that behavior affects their use of other financial products.”
OFAC amends the Venezuela Sanctions Regulations
On November 21, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that the Venezuela Sanctions Regulations (Regulations) have been amended to incorporate additional Executive Orders (E.O.s), a new general license, and a new interpretive provision. Specifically, since the Regulations were published in July 2015, six E.O.s have been issued pursuant to E.O. 13692, “Blocking Property and Suspending Entry of Certain Persons Contributing to the Situation in Venezuela.” OFAC is amending the Regulations to specify that the prohibitions include all transactions prohibited by E.O. 13692 or any further E.O issued pursuant to the national emergency declared in E.O. 13692. Moreover, OFAC is amending the Regulations to incorporate a general license, which authorizes the U.S. Government to engage in certain activities related to Venezuela (see previous InfoBytes coverage on actions related to Venezuela, including general licenses here). Lastly, an interpretive provision has been added to clarify that “the entry into a settlement agreement or the enforcement of any lien, judgment, arbitral award, decree, or other order through execution, garnishment, or other judicial process purporting to transfer or otherwise alter or affect property or interests in property blocked pursuant to [the Regulations] is prohibited unless authorized pursuant to a specific license issued by OFAC pursuant to this part.” The amendments were effective November 22.
FHFA increases conforming loan limits for 2020
On November 26, the FHFA announced that it will raise the maximum conforming loan limits for mortgages purchased in 2020 by Fannie Mae and Freddie Mac from $484,350 to $510,400. In high-cost areas, such as Los Angeles, New York, San Francisco, and Washington, D.C., the maximum loan limit will be $765,600. For a county-specific list of the maximum loan limits in the U.S., click here.
CFPB reaches $8.5 million settlement with background screening company
On November 22, the CFPB announced a settlement with an employment background screening company resolving allegations that the company violated the FCRA. In the complaint, the Bureau asserts that the company failed to “employ reasonable procedures to assure maximum possible accuracy” in the consumer reports it prepared. Specifically, the Bureau claims that until October 2014, the company matched criminal records with applicants based on only two personal identifiers, which created a “heightened risk of false positives” in commonly named individuals. The company also had a practice of including “high-risk indicators,” sourced from a third party, in its consumer reports and did not follow procedures to verify the accuracy of the designations. Additionally, the Bureau asserts that the company failed to maintain procedures to ensure that adverse public record information was complete and up to date, resulting in reporting outdated adverse information in violation of the FCRA. Under the stipulated judgment, in addition to injunctive relief, the company will be required to pay $6 million in monetary relief to affected consumers and a $2.5 million civil money penalty.
New York considers privacy legislation broader than the CCPA
On November 22, the New York Senate’s Committee on Consumer Protection and Committee on Internet and Technology held a joint hearing titled, “Consumer Data and Privacy on Online Platforms,” which discussed the proposed New York Privacy Act, SB S5642 (the Act). The Act was introduced in May and seeks to regulate the storage, use, disclosure, and sale of consumer personal data by entities that conduct business in New York State or produce products or services that are intentionally targeted to residents of New York State. The Act contains different provisions than the California Consumer Privacy Act (CCPA), which is set to take effect on January 1, 2020 (visit here for InfoBytes coverage on the CCPA). Highlights of the Act include:
- Fiduciary Duty. Most notably, the Act requires that legal entities “shall act in the best interests of the consumer, without regard to the interests of the entity, controller or data broker, in a manner expected by a reasonable consumer under the circumstances.” Specifically, the Act states that personal data of consumers “shall not be used, processed or transferred to a third party, unless the consumer provides express and documented consent.” The Act imposes a duty of care on every legal entity, or affiliate of a legal entity, with respect to securing consumer personal data against privacy risk and requires prompt disclosure of any unauthorized access. Moreover, the Act requires that legal entities enter into a contract with third parties imposing the same duty of care for consumer personal data prior disclosing, selling, or sharing the data with that party.
- Consumer Rights. The Act requires covered entities to provide consumers notice of their rights under the Act and provide consumers with the opportunity to opt-in or opt-out of the “processing of their personal data” using a method where the consumer must clearly select and indicate their consent or denial. Upon request, and without undue delay, covered entities are required to correct inaccurate personal data or delete personal data.
- Transparency. The Act requires covered entities to make a “clear, meaningful privacy notice” that is “in a form that is reasonably accessible to consumers,” which should include: the categories of personal data to be collected; the purpose for which the data is used and disclosed to third parties; the rights of the consumer under the Act; the categories of data shared with third parties; and the names of third parties with whom the entity shares data. If the entity sells personal data or processes data for direct marketing purposes, it must disclose the processing, as well as the manner in which a consumer may object to the processing.
- Enforcement. The Act defines violations as an unfair or deceptive act in trade or commerce, as well as, an unfair method of competition. The Act allows for the attorney general to bring an action for violations and also prescribes a private right of action on any harmed individual. Covered entities are subject to injunction and liable for damages and civil penalties.
According to reports, state lawmakers at the November hearing indicated that federal requirements would be “the best scenario,” but in the absence of Congressional movement in the area, one state senator noted that the state legislators must “assure [their] constituents that [the state legislature is] doing everything possible to protect their privacy.” Witnesses expressed concern that the Act would be placing too many new requirements on businesses that differ from what other states have already enacted, and encouraged more consistent baseline standards for compliance instead of a patchwork approach. Some witnesses expressed specific concern with the opt-in requirement for the collection and use of consumer data, noting that waiting on consumers to opt-in, as opposed to just opting-out, makes compliance difficult to administer. Lastly, many witnesses were displeased about the broad private right of action in the Act, but consumer groups praised the provision, noting that the state attorney general does not have the resources to regulate and enforce against all the data collection and sharing in the state.
New York blocks use of social networks in credit decisions
On November 25, the Governor of New York signed S2302, a measure which prohibits entities that are “licensed lenders” in New York, as well as consumer reporting agencies (CRAs), from including a consumer’s social network information in credit decisions. S2302 amends New York’s general business law and the banking law to prohibit licensed lenders and CRAs from considering “the credit worthiness, credit standing, or credit capacity of members of the consumer’s social network” or “the average credit worthiness, credit standing, or credit capacity of members of the consumer’s social network or any group score that is not the [consumer’s] own credit” information. Specifically, the amendment prohibits licensed lenders and CRAs from collecting, evaluating, reporting, or maintaining the information in a file. Additionally, the consumer’s internet viewing history also may not be factored into the licensed lender’s or agency’s “credit scoring formulas.”
FCRA allowable disclosure charge remains unchanged
On November 27, the CFPB announced that the ceiling on the maximum allowable charge for disclosures by a consumer reporting agency to a consumer pursuant to section 609 of the FCRA will remain unchanged at $12.50 for the 2020 calendar year. The final rule announcing the amount was published the same day in the Federal Register.
Democrats urge HUD to “immediately rescind” disparate impact proposal
On November 22, the Democratic members of the House Financial Services Committee sent a letter to Secretary of HUD Ben Carson, opposing the agency’s proposed rule amending its interpretation of the Fair Housing Act’s (FHA) disparate impact standard (also known as the “2013 Disparate Impact Regulation”). The letter argues that the proposed rule would “make it harder for everyday Americans who find themselves victims of housing discrimination to get justice.” As previously covered by InfoBytes, in August, HUD issued the proposed rule in order to bring the rule “into closer alignment with the analysis and guidance” provided in the 2015 Supreme Court ruling in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (covered by a Buckley Special Alert) and to codify HUD’s position that its rule is not intended to infringe on the states’ regulation of insurance. Specifically, the proposed rule codifies the burden-shifting framework outlined in Inclusive Communities, adding five elements that a plaintiff must plead to support allegations that a specific, identifiable policy or practice has a discriminatory effect. Moreover, the proposal provides methods for defendants to rebut a disparate impact claim.
The letter urges Secretary Carson to “immediately rescind” the proposed rule, calling the proposal a “huge departure from a standard and framework that has been expressly supported by HUD…[and] a deviation from decades of legal precedent, including a Supreme Court decision affirming the legitimacy of the disparate impact standard under the [FHA].” Moreover, the letter argues that “[i]n 2018, Black homeownership rates reached the lowest they had since before the [FHA] was passed,” and that HUD’s mission to build inclusive and sustainable communities will be “seriously compromised” with this proposed rule.
CFPB report compares large and small mortgage servicers
On November 21, the CFPB released a new Data Point report from the Office of Research titled, “Servicer Size in the Mortgage Market,” which examines the differences between large and small mortgage servicers in the mortgage market. The report considers mortgage servicers in three size categories, (i) “small servicers” that service 5,000 or fewer loans; (ii) “mid-sized servicers” that service between 5,000 and 30,000 loans; and (iii) “large servicers” that service more than 30,000 loans.” Key findings of the report include:
- Only five percent of loans at small servicers are insured by FHA or guaranteed by the VA, the Farm Service Agency, or the Rural Housing Service, whereas such loans account for about 25 percent of loans at mid-sized and large servicers.
- Less than one-third of conventional loans are serviced on behalf of Fannie Mae or Freddie Mac at small servicers, whereas at large servicers, over 75 percent of conventional loans are serviced for Fannie Mae or Freddie Mac.
- Small servicers service the majority of loans in a number of rural counties in the U.S., particularly in the Midwest.
- From 2012 to 2018, delinquency rates of loans at large and small servicers generally converged, as compared to mortgage crisis levels when delinquency rates for loans serviced by small services were much lower than at mid-sized and large servicers.
- In response to a survey, 74 percent of borrowers with mortgages at small servicers said having a branch or office nearby was important, compared to 44 percent of borrowers with mortgages at large servicers.