CFPB issues warning to mortgage servicers

On April 1, 2021, acting Director of the Consumer Financial Protection Bureau (CFPB), David Uejio, fired a shot across the bow of mortgage servicers in the form of a Compliance Bulletin and Policy Guidance (Bulletin). A copy of the Bulletin can be found here

As the mortgage industry is well aware, there are millions of borrowers currently in default of their mortgage obligations. This could lead to a flood of foreclosures when forbearance periods end later this year. 

In no uncertain terms, the Bulletin warns that the CFPB will be keeping an eye on how mortgage servicers respond to borrower requests for loss mitigation assistance and process loss mitigation applications. Among other things, the CFPB will consider a servicer’s overall effectiveness at reducing avoidable foreclosures (along with other relevant factors) in using its discretion to address violations of federal consumer financial law in supervisory and enforcement matters. Read more >>

Consumer Lending and Services, Legal Developments

Important changes to debt collection practices: What you need to know

The Consumer Financial Protection Bureau (CFPB) has issued major updates to the rules that affect creditors and those that collect their debt by amending Regulation F, which implements the Fair Debt Collection Practices Act (FDCPA).  Businesses covered by the new rules should consider preparing for the changes as soon as possible before the amendments go into effect on November 30, 2021.
As a threshold issue, it is noteworthy that the Bureau expanded the definition of a covered “consumer” by now including both living and deceased people within the regulation’s coverage.  A deceased consumer’s estate is now entitled to protections of the FDCPA, a change that may result in important consequences for debt collectors, who will now be required to provide validation information to an estate representative when it seeks collection against a decedent’s estate.
In addition to modernizing the guidelines to address collection-related communications through email, text messaging, and social media, the CFPB has also imposed new rules for consumer-oriented disclosures, the reporting of credit information to consumer reporting agencies (CRAs) and bringing suit on time-barred debt. For more information, read the full story.  
Consumer Lending and Services

Recent CFPB guidance provides flexibility for investigating consumer credit reporting disputes

On April 1, 2020, the Consumer Financial Protection Bureau (CFPB) provided guidance on how it plans to handle consumer credit reporting oversight during COVID-19. As part of that guidance, the CFPB stated that it intends to provide flexibility for lenders and credit bureaus in regard to the time they take to investigate disputes. As long as lenders and credit bureaus make a good faith effort to investigate disputes as quickly as possible during the COVID-19 outbreak, the CFPB will not take supervisory or enforcement action against them. The CFPB’s guidance also expressly encouraged lenders to continue to voluntarily provide payment relief to consumers and to accurately report information regarding that relief to credit bureaus. 

Consumer Lending and Services, Legal Developments

COVID-19 Ohio Business Response Toolkit

On Sunday, March 22, 2020, Ohio Governor Mike DeWine and the Ohio Department of Health released a "stay at home" order (the "order") requiring individuals to stay at home at all times unless otherwise authorized under the terms of the order. The order went into effect on Monday, March 23, 2020, at 11:59 p.m. EST and will remain in effect until 11:59 p.m. EST on April 6, 2020. A copy of the order is available here

Bricker’s multidisciplinary team of attorneys have assembled a toolkit to assist individuals, business owners and other public and private entities to efficiently navigate the requirements of the order and identify, assess and manage business risk throughout the COVID-19 pandemic. 

A cross-disciplinary team of Bricker attorneys is regularly monitoring COVID-19 (coronavirus) news and guidance to help our clients assess the potential impacts on their operations. If you have questions regarding COVID-19 and its impact on your business, or if a situation arises and you need legal counsel, visit our resource center for more information.

Legal Developments

HUD/FHFA announce details of foreclosure and eviction moratorium

On March 18, 2020, President Trump announced during a White House briefing that “the Department of Housing and Urban Development (HUD) will be providing immediate relief to renters and homeowners by suspending all foreclosures and evictions until the end of April.” Following the President’s announcement, HUD released the details of its Foreclosure and Eviction Moratorium for single-family homeowners with FHA-insured mortgages. Specifically, HUD clarified that it would be halting foreclosure actions and evictions for the next 60 days, including all new foreclosure filings, all current foreclosures in process, and all evictions of persons from FHA-insured single-family properties. For more, read the full story.

Consumer Lending and Services

FTC announces new and improved data security guidance

On January 6, 2020, Andrew Smith, Director of the Federal Trade Commission (FTC) Bureau of Consumer Protection, announced three significant improvements to the FTC’s approach to data security enforcement cases. The improvements fall into three categories:

1) Greater specificity: The FTC will continue to require that a company implement a comprehensive, process-based data security program, but now require that the company implement specific safeguards, such as yearly employee training, access controls, monitoring systems, and encryption.  The FTC believes these specific safeguards will provide more clarity to companies and enhance order enforceability.

2) Increased third-party assessor accountability: The FTC will continue to require outside assessors to review a company’s comprehensive data security program, but the review must now be more rigorous.  Assessors are now required to substantiate their conclusions with evidence, retain documents related to the assessment, and cannot invoke privilege when asked to provide those documents to the FTC.  The FTC now also has the authority to approve and re-approve assessors every two years, allowing them to require companies to hire new assessors if they aren’t meeting certain expectations.

3) Boards and C-Suite have a more active stake in data security matters: Every year, companies must now present their Board or governing body with their written information security program, and senior officers must now provide annual certifications of compliance with the security programs to the FTC.  The FTC desires a company’s senior leadership to be more involved in complying with key data security guidelines. These changes are consistent with research that suggests that increased oversight at the executive level dramatically improves the company’s data security safeguarding. 

The FTC has already incorporated these improvements into seven orders it made against companies in 2019. Although the results of these new changes have yet to be seen in enhancing cybersecurity nationwide, the changes no doubt address gaps in companies’ data security programs that have led to serious and large-scale breaches of consumer information in the past few years. The FTC’s efforts to address cybersecurity are intended to protect consumers but will require businesses to devote additional resources to counter a problem that is not likely to go away any time soon.

Consumer Lending and Services, Legal Developments

New California lending rate limit (AB 539) impacts some B2B loans

On October 10, 2019, the Fair Access to Credit Act (AB 539) was signed into law by California Governor Gavin Newsom and becomes effective on January 1, 2020. As detailed in a previous publication, the law applies only to loans made under the California Financing Law (CFL) and imposes requirements related to interest rate caps, borrower education, credit reporting and maximum loan repayment periods.

It is important for commercial (B2B) CFL licensed lenders to note that under AB 539, commercial loans with a principal amount of less than $5,000 are considered consumer loans under the CFL, regardless of the intended purpose of the loan.

Under Section 22203 of the CFL, “consumer loans” are defined as loans that the borrower intends to use primarily for personal, family or household purposes. 

Under Section 22502 of the CFL, “commercial loans” are defined loans with a principal amount of $5,000 or more, and the intended use is for other than personal, family or household purposes.

However, the definitions of consumer loans and commercial loans are not mutually exclusive, and under Section 22204 of the CFL, loans for commercial purposes with a principal amount of less than $5,000 are considered consumer loans under the CFL.  Such loans are, therefore, subject to provisions of the CFL applicable to consumer loans, even if the intended use is for commercial purposes. Accordingly, the provisions of AB 539 similarly apply to commercial loans made by CFL licensed lenders in an amount less than $5,000. 

Bricker attorneys have extensive experience with commercial lending regulations in California and other jurisdictions. For more information, please contact the author or any member of Bricker’s Banking & Financial Services group.

Consumer Lending and Services, Legal Developments

California limits lending rates for consumer loans

The Fair Access to Credit Act (AB 539) was signed into law by California Governor Gavin Newsom on October 10, 2019. The act requires California Finance Law (CFL) licensed lenders making consumer loans from at least $2,500 to less than $10,000 to comply with the following:

  • Lenders shall not charge a rate or service charges in excess of 36 percent plus the Federal Funds Rate.
  • Before providing loans, lenders must offer, at no cost to the borrower, an approved credit education class, which must include the following information:
    • The value of establishing a credit score
    • How to establish a credit score
    • Factors that impact a credit score
    • How to check one’s credit score
    • How to obtain a free copy of one’s credit report
    • How to dispute an error in one’s credit report
  • Lenders must not provide loans with terms less than 12 months, and such loans may not exceed the maximums under the act based on the principal amount of the loans. (Maximum terms range from 24 months and 15 days to 60 months and 15 days.)
  • Lenders must report each borrower’s payment performance to at least one nationwide consumer reporting agency. Newly licensed lenders or lenders that don’t currently report borrower performance have until July 1, 2020, to meet this requirement, provided they report the performance of borrowers dating back to January 1, 2020.

The act makes sweeping changes for consumer lenders providing applicable loans to California consumers through their CFL licenses, decreasing rates that may be charged while increasing compliance costs and obligations.

Consumer Lending and Services, Legal Developments

Ohio's new requirements for junior lienholders and mortgage servicers

It has been a little over six months since Ohio Revised Code § 1349.72 went into effect—a law that requires holders of junior liens on residential real property to first send a written notice containing specific information prior to attempting to collect any part of a debt in default. Due to the vague terms contained in the law, however, there is quite a bit of uncertainty surrounding it. Unfortunately, none of that uncertainty has been resolved since its enactment, as the law does not appear to have been cited by a single Ohio court decision. 

Residential mortgage lending and servicing businesses should consider whether they have procedures in place that comply with this new law. If you have any questions, please contact the authors or a member of Bricker's banking& financial services team.

Consumer Lending and Services, Legal Developments

Nevada joins other states to enhance privacy protections for consumers

The trend of states increasing privacy protections for consumers continues to gain momentum throughout the country. Nevada is the most recent example and enacted new legislation to enhance privacy protections for its residents. This amendment to existing online privacy and data protection laws, Senate Bill 220 (S.B. 220), will be effective on October 1, 2019. Read more >>

Compliance Management, State Regulatory
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