On April 24, the CFPB released its latest edition of Supervisory Highlights detailing the agency’s actions taken to combat “junk fees” it alleges are charged by mortgage servicers. This spotlight on fees in mortgage servicing marks a continuation of previous CFPB exam work on the agency’s ongoing efforts to combat excessive fees affecting consumers in personal banking, student and auto loans in addition to mortgage servicing.Continue Reading CFPB Announces Update in Continued War on Mortgage Servicing Junk Fees
Consumer Finance
Crypto Platform Settles SEC and State Regulator Charges over Interest Bearing Feature on Customer Accounts
On February 7, a Florida-based cryptocurrency company agreed to settle charges brought by the SEC and the California Department of Financial Protection and Innovation alleging that, an interest-earning feature offered on the company’s platform, constitutes an illegal securities offering.Continue Reading Crypto Platform Settles SEC and State Regulator Charges over Interest Bearing Feature on Customer Accounts
FTC Announces Settlement of Junk Fee Enforcement Action
On February 6, the FTC announced that it had reached proposed settlements with several defendants in a pending action where the parties were accused of operating a fraudulent student debt relief scheme and collecting so-called “junk fees” from consumers.Continue Reading FTC Announces Settlement of Junk Fee Enforcement Action
Washington State Enacts Credit Repair Law
On April 20, Washington Governor, Jay Inslee, signed into law HB 1311 creating new regulations for credit repair organizations (CROs) in the state. Among other things, the new law outlines requirements for CROs, which include the following:Continue Reading Washington State Enacts Credit Repair Law
CFPB Blogs About Need for Standardized Credit Reporting
On June 15, the CFPB posted a blog, titled “Buy Now, Pay Later and Credit Reporting” discussing the Bureau’s viewpoint on the importance of standardized data furnishing by buy now, pay later (BNPL) firms to consumer reporting companies for inclusion in consumer credit reports. BNPL products provide consumers with a short-term, no-interest credit option and are widely used for online purchases and, increasingly, brick-and-mortar stores. The CFPB has recently expressed concerns about the fast-growing BNPL credit industry, noting the potential for consumers to accumulate debt by making multiple BNPL purchases across several different BNPL firms. (See our previous posts about the CFPB’s December 2021 BNPL market monitoring inquiry here and here).
Continue Reading CFPB Blogs About Need for Standardized Credit Reporting
Connecticut Stops FinTech from Unlicensed Lending Activities
On May 4, the Connecticut Department of Banking issued a temporary cease and desist order directing a peer-to-peer lending platform that connected borrowers with third-party lenders to cease its lending-related activities on grounds that it was operating as an unlicensed small loan company. The FinTech company was also cited for operating as an unlicensed consumer collection agency, and for engaging in deceptive acts or practices under consumer protection laws.
Continue Reading Connecticut Stops FinTech from Unlicensed Lending Activities
DFPI Reports Increase in Consumer Loans Under $2,500, Decrease in Consumer Loans Between $2,500 and $10,000
On November 16, the California DFPI released Version 2.0 of its Annual Report of Finance Lenders, Brokers and PACE Administrators Licensed under the California Financing Law (CFL). The Annual Report examined unaudited data gathered from finance lenders, brokers, and Property Assessed Clean Energy (PACE) administrators licensed under the CFL, as well as new data from the “buy now, pay later” or BNPL industry.
Continue Reading DFPI Reports Increase in Consumer Loans Under $2,500, Decrease in Consumer Loans Between $2,500 and $10,000
Hawaii Amends Small Dollar Lending Law
Hawaii recently enacted HB 1192, which amends the state’s small dollar lending law by setting forth a new licensing requirement for “installment lenders” and specifies various consumer protection requirements. The amendments, which impact consumer loans of $1,500 or less, include a broad definition of “installment lender” that would capture loans offered under a bank partnership model:
Continue Reading Hawaii Amends Small Dollar Lending Law
Wyoming and Maine Issue New Licensing Requirements Potentially Impacting Passive Loan Investors
Wyoming and Maine recently amended their laws related to licensure requirements for consumer lending:
Continue Reading Wyoming and Maine Issue New Licensing Requirements Potentially Impacting Passive Loan Investors
Maine Enacts “True Lender” Legislation, Amends Consumer Credit Code to Include Anti-Evasion Provisions
Maine’s Governor, Janet Mills, recently signed S.P. 205/L.D. 522, which amended the Consumer Credit Code to protect consumers from predatory and fraudulent lending practices. In particular, the amendments include an anti-evasion provision under which purported bank agents or service providers are deemed “lenders” for the purposes of statute. The amendment contains the following key provisions:
- Covered entities “may not engage in any device, subterfuge or pretense to evade the requirements of this Article, including, but not limited to…making, offering, assisting, or arranging a debtor to obtain a loan with a greater rate of interest, consideration or charge than is permitted by this Article through any method.”
- Loans that violate these provisions are “void and uncollectible as to any principal, fee, interest or charge.”
- A person qualifies as a lender if it:
- holds, acquires or maintains, directly or indirectly, the predominant economic interest in the loan;
- markets, brokers, arranges or facilitates the loan and holds the right, requirement or first right of refusal to purchase the loan or a receivable or interest in the loan; or
- the totality of the circumstances indicate that the person is the lender and the transaction is structured to evade the requirements of this Article.
- The circumstances that would weigh in favor of an entity being deemed the lender include, without limitation, when the entity:
- indemnifies, insures or protects an exempt entity for any costs or risks related to the loan
- predominately designs, controls or operates the loan program, or
- purports to act as an agent or service provider for an exempt entity while acting directly as a lender in other states.
- Lenders who violate these provisions may not furnish information concerning a debt associated with the violation to a consumer reporting agency, nor may it refer the associated debt to a debt collector.
CFPB Reaches Correct Resolution On Juneteenth Disclosure Issues
When President Biden signed the bill on June 17 which made Juneteenth (June 19) a federal legal holiday immediately, it impacted certain Regulation Z timing requirements related to rescission of closed-end mortgage loans and the TILA-RESPA Integrated Disclosures (TRID), particularly with respect to transactions that either (i) closed on or before June 17, 2021 but for which consumers’ rescission periods had not yet expired or (ii) were close to the planned closing date on June 17, 2021 and subject to certain disclosure timing requirements of the TRID provisions. Since the CFPB did not publish immediate guidance, mortgage lenders were forced to make educated guesses as to how to treat Friday, June 18 and Saturday, June 19, particularly with respect to measurement periods that had already commenced before or on the date the new law became effective. On August 5 the CFPB published an interpretive rule on how to deal with these issues, and the Bureau consistently reached a result which permitted mortgage lenders to treat June 19 as either a business day or a federal holiday for the purposes of these provisions, as set forth immediately below in more detail.
Continue Reading CFPB Reaches Correct Resolution On Juneteenth Disclosure Issues