This regular publication by DLA Piper lawyers focuses on helping clients navigate the ever-changing consumer finance regulatory landscape.

Enforcement actions


OCC and DOJ announce $3 million penalty against bank for FHA violations. The Office of the Comptroller of the Currency (OCC) issued a consent order against an Atlanta-based bank for alleged violations of the Fair Housing Act. The OCC found that the bank had denied equal mortgage loan opportunities to minority residents in certain neighborhoods in and around the Houston area. The OCC and the DOJ found that, although the bank’s mortgage lending in the Houston area accounted for more than 40 percent of its total home mortgage business, (i) the bank’s lending activity in majority-minority census tracts and majority-Hispanic census tracts in the Houston area was consistently and statistically significantly lower than the lending activity of its peers; (ii) only 1 of the bank’s 11 branches in the Houston area was located in a majority-minority census tract; and (iii) the bank did not have a mortgage loan officer working in its single majority-minority census tract branch, unlike its other branches in non-majority-minority and non-majority-Hispanic census tracts in the Houston area, which were staffed with mortgage loan officers. Under the consent order, the bank will be liable for a $3 million civil money penalty to be paid to the US Treasury.

CFPB announces settlement with student loan originator for deceptive practices. The Consumer Financial Protection Bureau (CFPB) announced a consent order against a student loan originator for alleged Truth in Lending Act (TILA), Regulation Z and UDAAP violations. The CFPB alleged that the company, which offered income share agreements (ISA), (i) misrepresented the nature of its product by falsely representing that ISAs are not loan products and do not create debt, (ii) failed to provide mandatory disclosures for private education loans and (iii) imposed unlawful prepayment penalties on its educational loans. The consent order does not impose financial penalties but did require the company to (i) describe its ISAs as loans, (ii) provide consumers with all disclosures applicable to private educational loans, (iii) reform its contracts to comply with applicable laws and (iv) not object to any discharge of ISAs in bankruptcy.

CFPB announces $850,000 settlement with debt collector for failure to investigate reports of identity theft and consumer disputes. The CFPB announced a settlement order against a debt collector for alleged Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA) and Regulation V violations. The CFPB alleged that the company (i) willfully failed to investigate numerous reports of identity theft made by its customers, (ii) lacked reasonable policies and procedures regarding the accuracy of information furnished to consumer reporting companies and for handling consumer disputes, and (iii) collected debts for portfolios with high rates of dispute without substantiating the debts. Under the terms of the settlement, the company will also be required to (i) implement new internal controls and procedures and (ii) retain an independent consultant to monitor and advise on policies and procedures.


California DFPI announces $1.37 million penalty against student loan debt-relief operation. The California DFPI issued a consent order against a student loan debt-relief company for collecting illegal advance fees under the California Consumer Financial Protection Law (CCFPL) and federal Telemarketing Sales Rule (TSR). The DFPI found that the company had lured consumers with promises of getting their student loans reduced or forgiven in exchange for an initial payment as high as $899 and an ongoing monthly fee of $39. Under the consent order, the company also agreed to cease all illegal conduct and issue refunds within 60 days.

Regulatory developments


FFIEC issues guidance on cybersecurity for banking services. The Federal Financial Institutions Examination Council (FFIEC) published a report offering guidance on effective authentication and access risk management processes for financial institutions. The report addresses the current landscape of cybersecurity threats, risk assessment and management principles for financial institutions, and the importance and efficacy of multi-factor authentication for access to banking services and platforms. The report also offers examples of proper authentication controls and a list of government and industry resources and references to assist financial institutions with authentication and access management. This new guidance replaces previous documents issued by the FFIEC in 2005 and 2011.

CFPB announces ruling in district court challenge to the Payday, Vehicle Title and Certain High-Cost Installment Loans Rule. The CFPB announced that the US District Court for the Western District of Texas has upheld the legality of “Payment Provisions” portion of the Payday, Vehicle Title, and Certain High-Cost Installment Loans rule. A copy of the decision is available here. The court rejected (i) a challenge to the Bureau’s ratification of the Payment Provisions after the Supreme Court’s Selia Law decision and (ii) a challenge to the CFPB’s authority to enact the rule under the Administrative Procedure Act and the Constitution. The court, however, agreed with the plaintiffs with respect to granting a stay of the compliance date to allow time for appeal and stayed the compliance date for 286 days after final judgment.

CFPB announces new small-business data collection rule. The CFPB announced a new proposed rule that would require lenders to collect and report data about credit applications from small businesses, which would apply to a wide range of credit products such as term loans, lines of credit, credit cards and merchant cash advances. The CFPB proposes that lenders would be required to report on (i) the demographic and ownership information about the principal owners of the borrower, (ii) the process that was used to evaluate each small-business lending application and (iii) the outcomes of each lending decision. The comment period on the rule is 90 days from the publication in the Federal Register, although the CFPB stated that it did not anticipate a deadline extension.


California DFPI proposes regulations for small business lenders. The California DFPI released draft regulations and invited public comment on new regulations under the California Consumer Financial Protection Law that would permit the DFPI to take action against small business loan providers engaged in “abusive” practices. The regulations would also require lenders providing financial services to small businesses, nonprofits or family farms to disclose certain data regarding these services, including the costs to the lender to provide the same.

California DFPI decides to treat income share agreements as student loans. The California DFPI recently announced it would start treating income share agreements (ISAs) as student loans. Treating ISAs as student loans will subject them to regulation under the Student Loan Servicing Act, including the disclosure and reporting requirements thereunder. Following this decision, the DFPI entered into a first-of-its-kind agreement with a New York-based ISA provider. The provider has voluntarily sought a license in California under the SLSA, which will be conditionally granted pursuant to the agreement.

California DFPI announces new licensure requirement for debt collectors. Under the recently enacted Debt Collection Licensing Act (DCLA), all debt collectors operating in the State of California must submit an application for licensures on or before December 31, 2021 to continue operating in the state next year. Companies that submit an application before this date will be able to continue operating in the state until their application is approved. Applications can be submitted online through the NMLS website.

New York DFS issues guidance on preventing sexual orientation discrimination in mortgage lending. The New York Department of Financial Services (DFS) has issued a letter to mortgage lenders in the state offering guidance on compliance with the state’s fair lending law, Executive Law § 296-a, which prohibits discrimination in credit transactions on certain protected bases, including sexual orientation. This guidance comes after an investigation by the agency revealed disparities between the rates at which same-sex pairs of applicants were denied mortgages as compared to opposite-sex applicants. Additionally, this investigation revealed that same-sex pairs of applicants often received higher interest rates than opposite-sex pairs. The agency’s letter recommends a series of actions to reduce the risk of sexual orientation discrimination, including developing and implementing a “fair lending plan,” utilizing rate sheets and exception logs to document applications from same-sex pairs who indicated that they would live together in the mortgaged property and documenting approved loans for such same-sex pairs that received less favorable terms than applicable rate sheets would otherwise determine.