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

Enforcement actions

CFPB announces $150,000 settlement with debt-relief companies for deceptive acts or practices. The CFPB announced a consent order with a debt-relief and credit-repair company and its principals for UDAAP and TSR violations concerning its marketing and sales practices. The CFPB alleged that the company (i) made false promises that its services would eliminate consumers’ credit card debt and improve their credit scores and (ii) charged illegal advance fees for debt-relief and credit-repair services. Under the terms of the settlement agreement, the defendants will be prohibited from telemarketing any consumer-financial products or services and from offering financial-advisory, debt-relief or credit-repair services.

FTC announces $18 million settlement with online lender for deceptive marketing practices. The FTC announced a consent order against an online lender for UDAAP violations concerning alleged misrepresentations in communications with loan applicants. The FTC alleged that the company, despite promising loan applicants that they would receive a specific loan amount with “no hidden fees,” charged consumers hundreds or thousands of dollars in upfront fees. Further, the company misrepresented to consumers that their loans were “on the way” and “100% backed” while knowing that many applicants would never receive a loan. The company also charged fees to consumers who cancelled automatic payments or paid off their loans. The consent order requires the lender to conspicuously and clearly disclose any prepaid, upfront or origination fees as well as the amount that borrowers will actually receive.

FTC files amended complaint adding Gramm-Leach-Bliley Act violations to enforcement action against merchant cash advance provider. The FTC filed an amended complaint against a merchant cash advance company and its principals, adding claims under the Gramm-Leach-Bliley Act (GLBA) to its earlier complaint asserting UDAP claims in connection with misrepresentation of lending terms and in collection practices. The new claim alleges that the allegedly deceptive marketing practices also constitute violations of section 521 of the GLBA, which prohibits any person from obtaining or attempting to obtain customer information of a financial institution by making false or fraudulent statements. The FTC is seeking civil monetary penalties of up to $43,792 for each violation of the GLBA.

FTC announces $28.6 million settlement with payment processors for aiding criminal student loan debt relief scam. The FTC announced a consent order with two Florida-based payment-processing companies concerning their alleged role in aiding a criminal student loan debt relief operation that scammed consumers out of $62 million. The FTC alleged that the companies and their CEO had knowingly submitted fraudulent payment processing applications to credit card and ACH processors to obtain merchant processing for the scam. The FTC’s settlement with the companies will require them to pay a monetary judgment of $28.6 million, which will be partially suspended after payments of $20,493 due to the companies’ inability to pay the full amount. Additionally, the settlement will bar the companies and their CEO from engaging in payment processing, sales and any further deceptive acts or practices.

New York DFS announces settlements with auto lenders for fair lending violations. The New York DFS announced consent orders with two companies for alleged violations of New York’s fair lending law with respect to indirect auto lending. The DFS alleged that the companies both failed to monitor dealers in their loan purchase programs, in which dealers had broad discretion to apply interest rate markups, and were found to be charging minority groups 20 to 59 basis points more than similarly situated non-Hispanic white borrowers.

Regulatory developments

CFPB issues final rule limiting foreclosures after federal moratoria are lifted. The CFPB issued a final rule that amends Regulation X of the Real Estate Settlement Procedures Act (RESPA) to protect borrowers whose loans will soon exit COVID-19 hardship forbearances. The rule includes five amendments: (i) additional procedural safeguards for borrowers with COVID-19-related hardships through January 1, 2022; (ii) permission for servicers to offer streamlined loan modifications based on the evaluation of incomplete loss mitigation applications; (iii) through October 1, 2022, obligation for servicers to discuss forbearance and homeownership counseling services if the borrower is not in a forbearance program or is nearing the end of a forbearance program; (iv) requirement for servicers to contact borrowers in COVID-19-related hardship programs based on incomplete loss mitigation applications no later than 30 days before the end of the program and inquire whether they wish to complete the application; and (v) clarification of the definition of COVID-19-related hardships. The final rule will be effective on August 31, 2021.

CFPB issues interpretive rule on Military Lending Act examinations. The CFPB issued an interpretive rule explaining the basis for its authority to examine supervised financial institutions for violations of the Military Lending Act (MLA), reversing a 2018 determination that the CFPB lacked authority to conduct MLA examinations because it was not considered a federal consumer financial law for the purposes of the Consumer Financial Protection Act (CFPA). The Bureau stated that it can conduct MLA examinations based on its general authority under the CFPA to conduct examinations for “risks to consumers,” which includes MLA compliance.

CFPB issues enforcement bulletin on post-COVID-19 credit reporting of rental and eviction information.The CFPB has issued an enforcement bulletin, stating that it intends to prioritize scrutiny of consumer reporting agencies and furnishers’ compliance with accuracy and dispute obligations under the Fair Credit Reporting Act (FCRA) and Regulation V with respect to rental and enforcement information. In addition, the CFPB expressed concern about reporting on “questionable charges and fees” in response to recent consumer complaints.

OCC issues statement on rescinding 2020 Community Reinvestment Act Rule and joint rulemaking on modernization.The OCC issued a statement that it plans to propose rescinding a rule that had been issued in May 2020 under the Community Reinvestment Act and put forward a proposal for joint rulemaking with the Federal Reserve Board and FDIC. According to Acting Comptroller Michael Hsu, this joint rulemaking would aim to strengthen and modernize the CRA “[t]o ensure fairness in the face of persistent and rising inequality and changes in banking,” which have become even more evident over the past year given the “disproportionate impacts of the pandemic on low and moderate income communities[.]”

OCC reports that mortgage performance declines in first quarter 2021. The OCC issued a report on the performance of first-lien mortgages in the federal banking system during Q1 2021. The report shows that the number of mortgages that were current and performing by the end of the quarter decreased by 2.3 percent from the previous year. Additionally, the percentage of seriously delinquent mortgages (ie, mortgages that are 60 or more days past due or are held by bankrupt borrowers whose payments are 30 or more days past due) was 4.6 percent in first quarter 2021, compared to 5.2 percent in the prior quarter and 1.4 percent a year ago. Foreclosures have increased by 5.6 percent – but have decreased by 95.8 percent compared to a year ago, due in part to COVID-19-related moratoria. Modifications have increased by 16.4 percent from the previous year, with over half of these modifications reducing borrowers’ monthly payments.