News and Trends in Consumer Credit Regulation

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

Regulatory developments

Federal

CFPB is delaying the mandatory compliance date for the general final rule on qualifying mortgages. The CFPB issued a final rule extending the mandatory compliance date for the General Qualified Mortgage (QM) Final Rule from July 1, 2021 to October 1, 2022. The final rule also clarifies the general definitions of QM loans available to creditors for applications received on or after of March 1, 2021. but before October 1, 2022. It does not make any other change to the general definition of the QM loan. The CFPB also said it would consider at a later date whether to initiate further regulation to reconsider other aspects of the general definition of the QM loan.

CFPB issues clarification on tenant rights under eviction moratorium. The CFPB issued a provisional final rule clarify tenants’ rights under the CDC’s moratorium on evictions. The rule requires debt collectors to provide tenants with clear and visible written notice of their rights under the eviction moratorium prior to an eviction for default on rent, which must be provided in writing; phone calls or electronic notifications, such as text messages or emails, are prohibited. The rule further clarifies that failure to provide notice is a violation of the FDCPA, that debt collectors are prohibited from distorting a tenant’s rights or protections under the eviction moratorium, and that tenants have a private right of action. The CFPB also said this rule does not preclude more protective state laws. The rule comes into effect on May 3, 2021.

The CFPB proposes a postponement of the date of entry into force of the new debt collection rules. The CFPB issued a Notice of proposed regulations to delay the date of entry into force of two final rules issued under the FDCPA to the end of 2020 which were to come into force on November 30, 2021. The October 2020 rule addressed behavior that could be considered misrepresentation harassment, abusive, false or deceptive communications with consumers related to debt collection. The December 2020 rule concerned disclosures to be made to a consumer during collection communications and prohibited the threat of litigation on prescribed debts. Additionally, the December 2020 rule required debt collectors to disclose the existence of a debt to the consumer before reporting the debt to a consumer reporting agency. The CFPB proposes to extend the effective date by 60 days, until January 29, 2022, to give responders affected by the pandemic additional time to review and implement the rules.

FTC calls on Congress to restore enforcement power. The FTC recently testified before Congress, asking it to pass legislation that would revive the FTC’s ability to seek restitution and restitution of profits in civil enforcement actions under the Federal Trade Commission Act (FTCA) . This comes after the United States Supreme Court released its notice in AMG Capital Management, LLC v FTC, which ruled that Section 13 (b) of the FTCA does not authorize the FTC to seek, or a court to grant, equitable pecuniary relief such as restitution or restitution of profits. In light of the ruling, the FTC called on Congress to pass legislation overturning the court’s ruling by AMG Capital Management and restore those powers. FTC public statement available here.

FTC corrects staff guidelines on incumbent rule. The FTC issued a Note correct old staff guidelines regarding the application of the FTC Business Regulatory Rule regarding Preservation of Consumer Claims and Defenses – also known as the Cardholder Rule, which governs credit agreements to the consumption for financing the retail purchase of consumer goods or services arranged by the seller. The owner’s rule prohibits the use of credit terms that would compel consumers to pay creditors if the seller’s conduct did not allow the seller to be paid. Previous guidance from FTC staff stated that the cardholder rule did not apply to transactions over $ 25,000. However, as the new staff note points out, there is no such monetary limitation in the text of the incumbent’s rule. As a result, the FTC will now apply the cardholder rule to transactions over $ 25,000.

Enforcement actions

Federal

CFPB announces upcoming action regarding unauthorized withdrawals from consumer accounts by the mortgage manager. The acting director of the CFPB issued a declaration committing to take immediate action to process and remedy the actions of a mortgage manager who allegedly made unauthorized and duplicate withdrawals from hundreds of thousands of mortgage creditors’ accounts, resulting in overdraft and overdraft charges other damage.

CFPB announces $ 140,000 settlement against reverse mortgage lender for deceptive direct mail advertising. The CFPB announced a consent order with a reverse mortgage lender for violations of Regulation N (Mortgage Advertising Laws and Rules) in connection with a direct mail advertising campaign. The CFPB alleged that the lender sent advertisements to hundreds of thousands of older borrowers which denoted the costs, benefits and risks of obtaining a reverse mortgage through the lender. Further, the CFPB alleged that these advertisements incorrectly represented that the consumer had an existing relationship with the lender and that the consumer had been pre-approved for specific loan amounts when they were not. The consent order also requires the lender to implement a compliance plan that will include an individualized and affirmative review of all future advertising models to comply with federal consumer finance laws. An in-depth analysis of this regulation is available here.

The CFPB and the New York attorney general are filing a lawsuit to seize the assets of debt collectors concealed in the settlement agreement. The CFPB and the New York Attorney General have filed a complaint to recover assets that would have been transferred and concealed by the operators of a now closed debt collection transaction. Under a 2019 settlement agreement with the CFPB and the New York attorney general, the company was banned from the debt collection industry and ordered to pay $ 60 million in redress and penalties to consumers. To date, the company has not made any payment under this judgment. The CFPB and the New York attorney general are now seeking to recover assets they say were fraudulently transferred and concealed, including a $ 1.6 million New York home owned by one of the operators.

CFPB Announces $ 1.3 Million Settlement With Abusive Debt Settlement Company. The CFPB filed a consent order with a debt settlement company for violations of UDAP and Telemarketing Selling (TSR) rules for allegedly taking advantage of consumers and charging illegal fees. The CFPB alleges that the company has marketed itself as an independent debt settlement company that helps consumers negotiate with creditors, but has led consumers to unfavorable settlements with and take out loans from affiliated lenders without disclosing the relationship. The CFPB also alleged that the company failed to disclose and obtained consumer authorization for the settlement fee in violation of the TSR. The consent order also requires the company to cease engaging in any debt settlement activity involving creditors with which the company is affiliated and to implement enhanced compliance monitoring and reporting requirements. An in-depth analysis of this regulation is available here.

CFPB announces $ 1 million settlement with debt collector for deceptive practices. The CFPB announced a consent order with a debt collector for UDAP and FDCPA violations regarding misrepresentation and threats made against consumers. The CFPB alleged the company harassed thousands of consumers by falsely threatening legal action it did not intend to take, falsely accusing consumers of committing crimes and claiming to wrongly that consumers would be arrested for pressuring them to pay off their debts. The consent order also permanently prohibits the business and its owner from engaging in the debt collection business.

FTC Announces $ 9.8 Million Settlement With Merchant Cash Advance Company for Unfair and Deceptive Practices. The FTC announced a regulation with a merchant cash advance company and its principals for violations of the UDAP regarding its automatic withdrawal practices. The FTC alleged that the defendants took money from small business bank accounts without authorization and deceived them about the amount of funding the businesses would receive as well as other features of its fundraising products. Under the settlement, defendants are prohibited from misleading consumers about the terms of their funding and are prohibited from making bank withdrawals from consumers’ bank accounts without the express informed consent of consumers. This regulation is notable for the FTC’s application of the Consumer Protection Act to small business loans. More detailed coverage of this regulation is available here.

state

California DFPI Reaches Deal With Online Web Development School Based On Misleading Claims About Student Debt. The California DFPI has entered into a regulation deal with a San Francisco-based web development school based on allegedly misleading language contained in deferred tuition agreements in violation of California’s new consumer financial protection law. The DFPI alleged that the agreements, under which students would only start paying tuition at the school after graduating and starting to earn a salary, contained the false statement that deferred tuition fees were a “qualified student loan.” . . subject to the “discharge limitations” in bankruptcy proceedings. Under the regulations, the school will be required to (i) notify students that the discharge provisions are false and (ii) retain the services of a third party consultant to review the school’s contracts in order to ensure compliance with applicable laws and undergo a review of its marketing materials. to ensure that they are not likely to mislead consumers.


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