This regular post from DLA Piper lawyers aims to help clients navigate the ever-changing consumer credit regulatory landscape.

Enforcement measures

Federal

OCC and DOJ Announce $ 3M Fine Against Bank for FHA Violation. The Office of the Comptroller of the Currency (OCC) has 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 the Houston area and surrounding areas. The OCC and DOJ found that while the bank’s mortgage lending in the Houston area accounted for over 40% of its total residential mortgage business, (i) the bank’s lending business in the Houston area banking in majority minority census tracts and Hispanic majority 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 only majority minority census tract branch, unlike its other branches in the non-majority and non-majority Hispanic census tracts in the Houston area. , who were staffed with mortgage loan officers. Under the consent order, the bank will be liable to a civil fine of $ 3 million payable to the US Treasury.

CFPB announces a settlement with the author of the student loan for deceptive practices. The Consumer Financial Protection Bureau (CFPB) has announced a consent order against a student loan originator for alleged violations of the Truth in Lending Act (TILA), Regulation Z and the UDAAP. The CFPB alleged that the company, which offered Revenue Sharing Agreements (ISAs), (i) distorted the nature of its product by falsely stating that ISAs are not loan products and do not create debt, (ii) failed to provide mandatory education loan disclosures and (iii) imposed illegal prepayment penalties on its education loans. The consent order does not impose financial penalties, but required the company to (i) describe its ISAs as loans, (ii) provide consumers with all information applicable to private educational loans, (iii) reform its contracts to comply with applicable laws and (iv) not to oppose any release from ISAs in bankruptcy.

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

State

California DFPI announces a penalty of $ 1.37 million against the student loan debt relief operation. The California DFPI issued a consent order against a student loan debt relief company for collecting illegal advances under the California Consumer Financial Protection Act (CCFPL) and Federal Telemarketing Rule (TSR). The DFPI found that the company lured consumers by promising them to reduce or cancel their student loans in exchange for an upfront payment of up to $ 899 and an ongoing monthly fee of $ 39. Under the consent order, the company also agreed to stop any illegal behavior and issue refunds within 60 days.

Regulatory developments

Federal

The FFIEC publishes a guide on cybersecurity for banking services. The Federal Financial Institutions Review Council (FFIEC) has published a report providing advice on effective authentication and access risk management processes for financial institutions. The report discusses the current cybersecurity threat landscape, risk assessment and management principles for financial institutions, as well as the importance and effectiveness of multi-factor authentication for accessing banking services and platforms. The report also provides examples of suitable authentication controls and a list of government and industry resources and references to help financial institutions manage authentication and access. This new guide replaces the previous documents published by the FFIEC in 2005 and 2011.

CFPB announces a district court decision to challenge the rule on payday, vehicle title and certain high-cost installment loans. CFPB announcement that the United States District Court for the Western District of Texas upheld the legality of the “Payment Arrangements” portion of the payday rule, vehicle title, and certain high cost installment loans. A copy of the decision is available here. The court dismissed (i) a challenge to the Office’s ratification of the payment arrangements after the Supreme Court Selia Law decision and (ii) a challenge to the authority of the CFPB to adopt the rule under the Administrative Procedure Law and the Constitution. The court, however, agreed with the plaintiffs to grant a stay of the compliance date to allow an appeal and suspended the compliance date for 286 days after the final judgment.

CFPB announces a new data collection rule for small businesses. The CFPB announced a new proposed rule which would require lenders to collect and report data on small business credit applications, which would apply to a wide range of credit products such as term loans, lines of credit, credit cards and cash advances to traders. The CFPB proposes that lenders be required to report (i) demographic and property information on the principal owners of the borrower, (ii) the process that was used to assess each small business loan application and (iii) the results of each loan decision. The comment period on the rule is 90 days from publication in the Federal Register, although the CFPB has said it has no plans for an extension.

State

California DFPI offers regulations for small business lenders. The California DFPI has published draft regulation and invited the public to comment on new regulations under California’s Consumer Financial Protection Act that would allow DFPI to take action against “abusive” small business loan providers. The regulation would also require lenders providing financial services to small businesses, nonprofits or family farms to disclose certain data regarding those services, including the costs for the lender to provide them.

California DFPI decides to treat revenue sharing agreements like student loans. California’s DFPI recently announced that it will start treating income sharing agreements (ISAs) like student loans. Treating ISAs as student loans will subject them to regulation under the Student Loans Service Act, including disclosure and reporting requirements under it. Following this decision, the DFPI concluded a first agreement with an ISA provider based in New York. The supplier has voluntarily applied for a license in California under the SLSA, which will be conditionally granted in accordance with the agreement.

California DFPI announces new licensing requirement for debt collectors. Under the recently enacted Debt Collection Licensing Act (DCLA), all debt collectors operating in the state of California must submit a license application by December 31, 2021 to continue operating in the state next year. . Businesses 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’s DFS publishes guidelines on preventing discrimination based on sexual orientation in mortgages. The New York Department of Financial Services (DFS) issued a letter to State Mortgage Lenders offering advice on compliance with the State Equitable Loans Act, Executive Law § 296-a, which prohibits discrimination in credit transactions on certain protected grounds, including sexual orientation. The guidance comes after an agency investigation found disparities between the rates at which pairs of same-sex applicants were denied mortgage loans compared to opposite-sex applicants. Additionally, this survey found that same-sex candidate couples often received higher interest rates than opposite-sex couples. The agency’s letter recommends a series of measures to reduce the risk of discrimination based on sexual orientation, including developing and implementing a “fair loan plan”, using rate sheets and exception diaries to document requests from same-sex couples who indicated they would live together in the mortgaged property and document approved loans for those same-sex couples who received less favorable terms than the mortgage sheets applicable rates would determine otherwise.