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

Enforcement actions


CFPB files complaint against debt buyers for debt-placement practices. The Consumer Financial Protection Bureau (CFPB) filed a complaint in the US District Court for the Western District of New York against a group of New York-based companies and their principals for unfair, deceptive or abusive acts or practices (UDAAP) and Fair Debt Collection Practices Act (FDCPA) violations in connection with buying and placing debts with third-party debt collectors. The CFPB alleged that the companies, which collectively managed more than $8 billion in debt, (i) intentionally disregarded red flags from compliance staff that their third-party collectors were engaged in deceptive and abusive debt-collection practices, such as making false threats of arrest, jail time or lawsuits if consumers did not pay and (ii) intentionally increased the amount of business with such companies.

CFPB announces inquiry into “buy now, pay later” credit providers. The CFPB has issued a series of orders to five companies offering “buy now, pay later” (BNPL) credit in an effort to gather information on the risks and benefits of this type of lending. The CFPB expressed concern that (i) this type of lending could lead to the accumulation of large amounts of debt by unqualified consumers with subprime credit histories, (ii) BNPL lenders may not be adequately applying consumer protection laws and (iii) it needed to better understand BNPL lenders’ data collection, behavioral targeting and data monetization practices. A sample copy of the CFPB’s order to BNPL lenders is available here.

FTC announces $675,000 settlement and permanent ban against merchant cash advance provider for deceptive marketing and abusive collection practices. The FTC announced a stipulated order with a New York-based merchant cash advance lender for alleged unfair and deceptive acts and practices (UDAP) and Gramm-Leach Bliley Act (GLBA) violations. The FTC alleged that the lender misrepresented the terms of loans issued to small businesses, made unauthorized withdrawals from customer accounts and engaged in unlawful collection practices, including the illegal use of confessions of judgment and threatening customers with physical violence.

FTC announces settlement with mortgage analytics firm for data security violations. The FTC announced a settlement with a Texas-based mortgage analytics firm for alleged violations of the GLBA Safeguards Rule. The FTC alleged that the firm hired an outside vendor to perform text recognition scanning on mortgage documents, most of which included sensitive consumer data. The vendor stored these documents on an unsecure server without any protections to block unauthorized access. The server was allegedly accessed in an unauthorized manner dozens of times. The settlement will require the firm to bolster its data security protections and oversight of vendors to ensure compliance with the Safeguards Rule.

FTC announces $12 million settlement and permanent ban against debt collectors for phantom debt collection. The FTC announced a settlement with several South Carolina-based debt collection companies and their principal for alleged Fair Debt Collection Practices Act (FDCPA) violations. The FTC alleged that the defendants used threats of imminent legal action to collect payments for consumer debts that were not real or that the companies had no right to collect. In addition to the monetary judgment, which is partially suspended due to inability to pay, the defendants are required to surrender numerous assets, including bank accounts, investment accounts and real estate owned by the companies or their principal.

FTC announces $500,000 settlement with payment processor for assisting in fraudulent student loan relief scheme. The FTC announced a stipulated order with a Washington-based payment processor for alleged violations of the Telemarketing Sales Rule (TSR). The FTC alleged that the payment processor knowingly processed approximately $31 million in payments for a student loan debt relief company that was charging illegal upfront fees from borrowers, during which the payment processor ignored multiple red flags including high return rates and multiple company name changes. The order also permanently bans the payment processor from processing any future payments relating to “Debt Relief Services,” including, but not limited to, the student loan-related debts.


California DFPI announces settlement with auto lender for loan marketing and servicing violations. The California DFPI announced a consent order with an auto lender for alleged violations of the California Fair Access to Credit Act’s interest rate cap of approximately 36 percent. The DFPI alleged that the lender was unlawfully partnering with an out-of-state bank in order to circumvent the interest rate cap. The consent order (i) prohibits the lender from marketing or servicing automobile title loans worth less than $10,000 with interest rates greater than 36 percent in the State of California over the next 21 months and (ii) prohibits the lender from making any loans available through a state-chartered bank partner until September 2023, unless there is an intervening change in the law or regulation that would otherwise permit it to do so.

Regulatory developments


CFPB issues final rule on transition away from LIBOR. The CFPB issued a final rule meant to facilitate the transition away from the LIBOR interest rate index for consumer financial products. The rule establishes requirements for how creditors must select replacement indices for existing LIBOR-linked consumer loans after April 1, 2022. Pursuant to the rule, no new financial contracts may reference LIBOR as the relevant index after the end of 2021, and following June 2023, LIBOR can no longer be used for any existing financial contracts. The new final rule, which becomes effective April 1, 2022, includes closed-end credit provisions that require creditors to choose an index comparable to LIBOR when changing the index of a variable rate loan, or consider it a refinancing for purposes of Regulation Z. Another closed-end credit provision of the final rule includes a non-exhaustive list of factors for creditors to help determine whether a replacement index meets the Regulation Z “comparable” standard regarding a particular LIBOR index. The rule also contains various consumer disclosure and notice requirements intended to help consumers understand how creditors will determine rate changes in the variable rates for their loans. These disclosure requirements become effective April 1, 2022 and have a mandatory compliance date of October 1, 2022.

CFPB and DOJ send notice letters about servicemembers’ and veterans’ rights. The CFPB and DOJ issued two joint letters regarding legal housing protections for military families. The first letter is intended to remind landlords and other housing providers of important housing protections for military tenants, some of whom may have been forced to change their housing arrangements in response to the coronavirus disease 2019 (COVID-19) crisis. These protections arise under both the general law applicable to all renters as well as the Servicemembers Civil Relief Act (SCRA), which provides special protections for active military and veterans in addition to general law. The second letter, sent to mortgage servicers, concerns a range of potential mortgage servicing violations, including inaccurate credit reporting, misleading communications to borrowers and requests for lump sum payments to reinstate mortgage loans.

CFPB and OCC release statements on overdraft fee revenue.The CFPB issued a statement announcing (i) reports on overdraft and non-sufficient funds revenue by financial institutions and (ii) that it will be enhancing its supervisory and enforcement scrutiny for institutions that are “heavily” dependent on such fees. The OCC’s Acting Comptroller also issued a statement critical of banks’ reliance on overdraft revenue and that the OCC would be working with the CFPB on regulatory reform and enforcement actions related to overdraft issues.

Federal and state agencies issue joint statement on enforcement approach relating to mortgage loan servicers. The Board of Governors of the Federal Reserve, the CFPB, the FDIC, the National Credit Union Administration, the OCC and various state financial regulators, issued a “Joint Statement on Supervisory and Enforcement Practices Regarding the Mortgage Servicing Rules in Response to the Continuing COVID-19 Pandemic and CARES Act.” This statement reverses an April 2020 joint statement from these agencies, which indicated that the agencies would ease the enforcement of their various regulatory schemes due to ongoing hardships resulting from the pandemic. The statement clarifies that the agencies will resume exercising their full supervisory and enforcement authorities in the regulation of mortgage loan servicers, including full compliance with pre-pandemic regulatory requirements.

CFPB seeks whistleblowers to alert it to potential violations of consumer protection laws arising from the use of artificial intelligence. The CFPB published a blog post titled “CFPB Calls Tech Workers to Action,” in which the CFPB stated that it wants those in the consumer financial products and services realms to report potential misconduct regarding the use of artificial intelligence for both intention and unintentional discrimination. In making this call, the CFPB highlighted a recent study of over two million mortgage applicants in which researchers found discriminatory effects from the use of artificial intelligence, where Black and Hispanic families were more likely to be denied than similarly situated white families.


New York DFS proposes amendment to regulation intended to protect consumers from predatory debt collection. The New York DFS has proposed an amendment to its banking laws intended to enhance protections for consumers against predatory debt collection practices and scams and ensure that consumers pay only those debts that they owe and pay them only once. The proposed amendment will require debt collectors to maintain records and disclose key data about alleged debts to consumers so that consumers can identify and/or dispute such debts. The proposed amendment is also intended to further limit harassing phone calls and other excessive communications from debt collectors to consumers.

New York DFS issues letter stating that requirements under the Commercial Finance Disclosure Law do not go into effect until the NYDFS issues final regulations. The New York Department of Financial Services (NYDFS) issued a letter stating that providers’ obligations under the Commercial Finance Disclosure Law (CFDL) will not go into effect until the NYDFS issues the implementing regulations. The NYDFS issued its formal proposed regulation on October 20, 2021, and the notice-and-comment period ended on December 20, 2021. Because the extensive comments received, the NYDFS has concluded that, even though the CFDL took effect January 1, 2022, a provider’s obligations under the CDFL will not arise until NYDFS issues final rules and those rules take effect.

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