Troutman Pepper Weekly Consumer Financial Services Newsletter

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To keep you informed of recent activities, below are several of the most significant federal and state events that have influenced the Consumer Financial Services industry over the past week:

Federal Activities

State Activities

Federal Activities:

  • On January 5, the Consumer Financial Protection Bureau (CFPB) published an issue spotlight on its oversight of student loan servicing practices in the early months of the resumption of federal student loan repayments after a payment pause of more than three years due to the COVID-19 emergency. The issue spotlight highlights several key concerns, including:
    • Long hold times and abandoned calls: The report finds that borrowers are frequently forced to wait on hold for more than an hour when calling their servicer, and many give up without ever receiving assistance;
    • Significant delays in processing income-driven repayment plan applications: Per the report, processing times vary across servicers, with some servicers taking five times longer than others to process applications. “These delays put borrowers at risk for making significantly higher payments than they can afford”; and
    • Inaccurate and untimely billing statements: Borrowers are receiving faulty and confusing bills from servicers. Alleged errors include listing premature due dates before the end of the payment pause, inflating monthly payment amounts due to the servicer using outdated poverty guidelines, or using the incorrect income when calculating a borrower’s new income-driven repayment plan payment.

For more information, click here.

  • On January 4, the Federal Trade Commission (FTC) and the State of Connecticut announced they are filing suit against an auto dealer for several of its business practices. They allege that the dealer deceived consumers about the price of certified used cars, add-ons, and government fees. The complaint alleges that the dealership, in addition to deceiving consumers, regularly charges them junk fees for certification, add-on products, and government charges without the consumers’ consent, sometimes costing them thousands of dollars in unwanted and unauthorized charges. For more information, click here.
  • On January 3, Fannie Mae announced that during the weekend of January 20, it will update its loan underwriting system, Desktop Underwriter, to support changes to FHA and VA loan limits. For more information, click here.
  • On January 2, the CFPB issued a report noting that during December 2023, it sent $6 million in financial relief to consumers harmed by illegal lending practices targeting veterans. For more information, click here.
  • On January 2, the CFPB published a blog titled, “Holding Debt Collectors Responsible for False Statements.” In the blog, the CFPB examined Carrasquillo v. CICA Collection Agency, a First Circuit case in which the CFPB has filed an amicus brief. In that case, after an individual filed for bankruptcy, a debt collector sent the consumer a collection letter that said the consumer could be sued if they did not pay the debt — a process the CFPB believes is against the law. “Because of the bankruptcy rules, that statement was false — the consumer couldn’t actually be sued.” The consumer sued to hold the debt collector accountable for the misrepresentation, but the debt collector pled ignorance. The debt collector claimed that they were only responsible under the law when they intended to say something false. “The debt collector’s argument is wrong,” the CFPB remarked in its blog. “As our amicus brief explains, a debt collector can be liable under the Fair Debt Collection Practices Act even if they claim that they did not know that their statement was false.” The CFPB goes on to say that “[t]his interpretation has been upheld by numerous courts, and it is what Congress clearly intended.” For more information, click here.
  • On January 2, the FTC announced it entered a consent order with Response Tree LLC and its president, Derek Thomas Doherty, for operating more than 50 websites designed to trick consumers into providing their personal information for supposed mortgage refinancing loans and other services. For more information, click here.
  • On January 1, Freddie Mac announced that it is launching a pilot program to work with sellers on improving the quality of performing loans. The pilot program, which is called Fee-Based Repurchase Alternative for Performing Loans, will use a fee-based structure based on nonacceptable quality (NAQ) rates. For more information, click here.
  • On December 29, 2023, the Office of Comptroller of Currency (OCC), jointly with the Federal Reserve, the FDIC, and the National Credit Union Administration, published a final rule amending the Uniform Rules of Practice and Procedure in 12 C.F.R. 19 to recognize the use of electronic communications in all aspects of administrative hearings and to otherwise increase the efficiency and fairness of administrative adjudications. For more information, click here.
  • On December 27, 2023, the FDIC released its proposed revisions to the reporting forms and instructions for the call reports and the FFIEC 002 to the reporting on (1) loans to nondepository financial instructions and other loans, (2) guaranteed structured financial products, and (3) proposed long-term debt requirements. For more information, click here.
  • On December 27, 2023, the FTC filed suit against Grand Canyon Education, Inc., (GCE) Grand Canyon University (GCU), and Brian Mueller, CEO of CGE and president of GCU — for deceiving prospective doctoral students about the cost and course requirements of its doctoral programs and about being a nonprofit. For more information, click here.
  • On December 26, 2023, the OCC announced revisions to the asset-size threshold amounts used to define “small bank or savings association” and “intermediate small bank or savings association” under the Community Reinvestment Act regulations. The revisions became effective on January 1. For more information, click here.
  • S. Senators Richard Durbin (D-IL), Amy Klobuchar (D-MN), Jack Reed (D-RI), Tina Smith (D-MN), and Peter Welch (D-VT) introduced S3404, the Student Loan Borrower Bill of Rights Act. The reintroduced bill would create “consistent servicing and disclosure standards across private and federal student loans and allows the Secretary of Education to adjust those standards for federal servicers through regulation to benefit federal student loan borrowers.” For more information, click here.
  • S. Representative Adam Schiff (D-CA) and five other Democratic lawmakers in the House introduced HR6889, the Student Loan Relief for Medicare and Social Security Recipients Act. The bill would forgive student loan debt dating back more than 20 years for current Medicare and Social Security Disability Insurance participants and future enrollees. For more information, click here.

State Activities:

  • On January 5, New York Attorney General (AG) Letitia James announced a settlement with a health care provider, resolving claims that the provider failed to use appropriate safeguards to protect sensitive patient data. The provider experienced a ransomware attack around mid-2021 that enabled the attacker to gain access to files that contained patient names, addresses, phone numbers, social security numbers, dates of birth, and financial account information, among other sensitive data. According to the AG’s investigation, the perpetrators were able to access this information because the health provider failed to implement sufficient data security practices, including, but not limited to, failing to decommission inactive user accounts, failing to rotate user account credentials, failing to restrict employee access to the necessary resources and data, failing to use multifactor authentication, and failing to encrypt patient data. The settlement requires the health provider to invest $1.2 million to develop and maintain stronger information security programs. For more information, click here.
  • On January 2, New York Governor Kathy Hochul unveiled a plan for a “sweeping” consumer protection and affordability agenda. Her proposal includes a plan to amend the state’s consumer laws to enhance consumer protections against unfair business practices, establish regulations for the buy now pay later loan industry, increase paid medical leave benefits, adjust certain elements of medical insurance plans, and combat medical debt. The proposed changes to the state’s consumer laws include, among other things, enhancing AG’s reach with respect to enforcing consumer protections, and giving the state more tools to pursue “bad actors.” Additionally, Hochul will propose legislation that will require “buy now pay later” providers to obtain a license to operate within the state and to allow the state’s Department of Financial Services to propose and issue regulations for the industry. For more information, click here.
  • Recently, Governor Hochul vetoed S5056. The bill would have directed the superintendent of financial services to create a private education debt registry containing information and documentation relating to loans issued by creditors, including interest rates and copies of the notes and instruments used by such creditors for education loans. For more information, click here.
  • Recently, Montana AG Austin Knudsen issued an opinion regarding whether an earned wage access (EWA) product meets the definition of “consumer loan” or a “deferred deposit loan” under two of the state’s statutes. Generally, EWAs allow a consumer to access a portion of their earned income, as a percentage of earned income or as a predetermined amount, prior to payday. The advance is then repaid through employer payroll deduction or debit from the consumer’s bank on payday. Knudsen opined that EWAs do not meet the definitions of a “consumer loan” or “deferred deposit loan” where (i) the EWA product is fully non-recourse; (ii) does not condition an income-based advance on any interest, fees, or other consideration or expenses; and (iii) limits income-based advances to income already earned by the consumer.” For more information, click here.

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