On May 21, the Massachusetts Attorney General entered into an Assurance of Discontinuance (“AOD”) with a California-based fintech alleging that it was the “true lender” of its consumer installment loans. Under the terms of the settlement, the fintech is required to pay $625,000 in restitution, request deletion of tradelines on credit reports for loans reported to credit bureaus, and cease doing business in the state. Continue Reading Massachusetts AG Forces Fintech from State as Part of “True Lender” Settlement

The CFPB is continuing its crusade against so called “junk fees,” and now is looking at credit reporting fees. In a May 20 speech to the Mortgage Bankers Association, Director Rohit Chopra highlighted the rising costs of obtaining credit reports which he stated affects both lenders and consumer. Chopra criticized FICO’s recent move to a flat fee pricing model for credit scores, stating that it led to a 400% increase in costs for many lenders. He also complained about FICO’s policy of charging the same fee for both soft and hard credit inquiries, despite the fact that there are significant differences in the amount of information provided.Continue Reading CFPB Director Targets Credit Reporting Fees

On May 22, the CFPB announced an interpretive rule confirming that Buy Now, Pay Later (BNPL) lenders qualify as credit card providers under the Truth in Lending Act, Regulation Z and are required to provide consumers legal protections and rights that apply to credit cards, including the ability to dispute charges, secure refunds for returned products and receive billing statements.Continue Reading CFPB Interpretive Rule Holds That BNPL Lenders Are Credit Card Providers

On May 20, the CFPB settled an enforcement action against a California-based telemarketing firm for practices related to student loan debt relief services. The Bureau has ordered the firm to permanently halt operations and pay a $400,000 civil money penalty, in addition to ordering the recission of all the firm’s existing contracts with consumers.Continue Reading CFPB Shuts Down Debt Relief Provider Over Fraudulent Student Loan Practices

On April 26, the U.S. Department of Housing and Urban Development (HUD) issued Mortgagee Letter 2024-06, announcing changes to the Home Equity Conversion Mortgages (HECMs) for purchases (H4P loans), a mortgage program designed for older homeowners who wish to buy a primary residence using a reverse mortgage. The program allowed seniors to purchase a new home that better suits their needs without the burden of monthly mortgage payments.Continue Reading HUD Updates Home Equity Conversion Rules for Purchases

On May 17, the CFPB filed a lawsuit against a California-based fintech that operates a nationwide website and mobile-application based peer-to-peer lending platform through which consumers can obtain small-dollar, short-term loans. The Bureau alleges that while the company markets itself as offering 0% APR loans, its use of dark patterns ensures that almost every borrower pays a fee, in the form of a “tip” or “donation.” Continue Reading CFPB Sues Fintech for Deceptive Practices Surrounding Tipping Service

On May 3, a California resident filed a class action lawsuit in federal court accusing a Los Angeles-based credit union of discriminatory practices, and raised a civil rights claim under 42 U.S.C. § 1981, and violations of the California’s Unruh Civil Rights Act. In the complaint, the plaintiff alleges his automobile loan application was unfairly denied because of his immigration status as a Deferred Action for Childhood Arrivals (DACA) recipient.Continue Reading DACA Recipient Accuses California Credit Union of ECOA Violations

On May 16, the United States Supreme Court, in a 7-2 ruling, held that the CFPB’s funding mechanism does not violate the Appropriations Clause of the U.S. Constitution. As we previously discussed in greater detail here, under the Dodd-Frank Act, Congress provided a standing source of funding for the CFPB outside the ordinary annual appropriations process—the Bureau draws from the Federal Reserve System an amount determined by its Director, subject only to an inflation-adjusted cap. Plaintiffs had argued the structure violated the Appropriation’s Clause as it did not go through an annual appropriations process and was effectively “double insulated” from congressional oversight. Continue Reading CFPB Wins at the Supreme Court

On March 28, the FDIC released the spring edition of its consumer compliance supervisory highlights. The FDIC supervises approximately 3,000 state-chartered banks and thrifts that are not members of the Federal Reserve System. Most of these institutions are community banks that provide credit and services locally. Like the CFPB, the FDIC conducts supervisory activities, including examinations, to review institutions’ compliance management systems. Its examination focuses on identifying the greatest potential risk of harm to consumers, based on the business model and products offered by a particular institution. The FDIC’s report highlights consumer compliance issues identified by the agency’s examination of close to 900 institutions in 2023. While the entire report is worth a read, here are some key areas of focus:Continue Reading Takeaways From the FDIC’s Spring 2024 Consumer Compliance Supervisory Highlights