CFPB – Page 5 – Consumer Financial Services Watch

The CFPB on MSAs: Consider Yourself Warned

Oct 09 2015

By: Holly Spencer Bunting, Phillip L. Schulman

Settlement service providers have been begging the Consumer Financial Protection Bureau (“CFPB”) for regulatory guidance regarding marketing services agreements (“MSAs”) under Section 8 of the Real Estate Settlement Procedures Act (“RESPA”). Yesterday, they got it − sort of. After months of the industry deciphering enforcement actions in an attempt to gauge whether the CFPB believes MSAs between settlement service providers are legal under RESPA, the CFPB issued Compliance Bulletin 2015-05 (“Bulletin”) regarding “RESPA Compliance and Marketing Services Agreements.” But, the Bulletin neither answers the legality question nor provides clear guidelines on what can and cannot be done in an MSA. Rather, the Bulletin, as stated by the CFPB, “describe[s] the substantial risks posed by entering into [MSAs].” It is safe to say this is not the kind of guidance the industry was looking for.

The CFPB Gives Student Loan Servicers Bad Grades in New Report (Card)

Oct 06 2015

By: Steve Kaplan, Elyse Schoenfeld*, and Tori Shinohara
*Ms. Schoenfeld is not admitted in D.C. She is supervised by Melanie Brody, a member of the D.C. Bar.

On September 29, 2015, the CFPB issued a 151-page report that details perceived problems with student loan servicing practices and provides insight into the CFPB’s agenda for changes to the student loan industry. The report signifies increased efforts by the CFPB to address issues in student loan servicing and suggests that servicers will be subject to increased scrutiny in the future.

The report details comments the CFPB received in response to its May 2015 public inquiry seeking input on and recommendations for improving student loan servicing practices. The CFPB received more than 30,000 public comments from individual consumers, state attorneys general and banking regulators, trade associations, and other organizations. The report highlights comments on a host of problems borrowers are facing, including lost paperwork and payment processing errors, difficulties in correcting servicing errors, and issues accessing affordable repayment options or alternatives to avoid default. Commenters also responded to queries regarding the similarity of the problems facing the student loan servicing industry to issues in the mortgage market after the financial crisis, and suggested that the reforms made to mortgage practices could inform future changes to student loan servicing.

Some Lessons from the CFPB’s Springstone Enforcement Action

Aug 25 2015

Last week, the Consumer Financial Protection Bureau (CFPB) announced a settlement with Springstone Financial, LLC, for deceptive practices related to enrolling consumers in deferred-interest credit products. Springstone administered a health-financing program through which consumers could finance various medical treatments, including dental treatments. Consumers could apply for credit either through Springstone’s website or at their medical provider’s office. In the case of the latter, the health care providers’ staff — who were trained and monitored by Springstone — would provide consumers with application materials and assist them in filling out the application before submitting it to Springstone on consumers’ behalf. The CFPB’s claim centered on these providers. “In some cases,” according to the CFPB, dental staff allegedly told consumers that the deferred-interest product was a no-interest loan and failed to mention that a 22.98 percent interest rate would apply from the date of the loan if the loan balance was not paid in full by the end of the promotional period. The CFPB found these practices deceptive and determined that more than 3,200 consumers “may have been” affected by them. As a result, Springstone was ordered to provide $700,000 in restitution to the 3,200 consumers who ended up paying deferred interest on a loan they applied for with a health-care provider’s assistance. The CFPB did not assess a civil money penalty.

Against the Tide: A New Take on RESPA’s Section 8(c)(2) Safe Harbor by the CFPB

Aug 05 2015

By: Irene C. Freidel, Brian M. Forbes, Matthew N. Lowe

Grab a flotation device – the final decision recently issued by Director Richard Cordray of the Consumer Financial Protection Bureau (“CFPB”) in the administrative enforcement proceedings against PHH Corp. (“PHH”) has rocked the boat for the real estate settlement services industry as portions of the decision run directly counter to decades of legal precedent, and the prior writings and Policy Statements issued by the Department of Housing and Urban Development (“HUD”) – the federal agency previously tasked with interpreting the federal Real Estate Settlement Procedures Act (“RESPA”) and enforcing its provisions. As K&L Gates summarized in its June 22, 2015 Alert, the decision addresses a number of topics, including Director Cordray’s interpretation of several provisions of the federal RESPA. And while many of the CFPB’s views and interpretations attempt to expand the scope of RESPA’s reach and are subject to criticism, one of the most significant developments is Director Cordray’s conclusion that Section 8(c)(2) of RESPA is not the type of safe harbor that has long been widely accepted.

CashCall Revisited: The CFPB’s Evolving Theory of Abusiveness

Aug 05 2015

In 2013, the CFPB filed a complaint against CashCall, Inc. and others, alleging that their conduct in collecting on payday loans that allegedly violated certain states’ usury and/or licensing requirements constituted unfair, deceptive and abusive acts and practices (UDAAPs) under federal law. Late last week, the CFPB struck again, filing suit against NDG Financial Corp. and others, making similar claims. The complaint against NDG, however, both expands the list of states where the CFPB alleges that collecting on a usurious and/or unlicensed payday loan is a UDAAP and changes the theory of abusiveness upon which the CFPB relies.

DOJ and CFPB Settle Discriminatory Mortgage Pricing Case with Wholesale Lender

Jun 01 2015

By: Melanie Brody, Anjali Garg

On May 28, 2015, the DOJ and the CFPB filed a complaint and proposed consent order against Provident Funding Associates (Provident) alleging that the mortgage lender violated the Fair Housing Act and ECOA by charging African American and Hispanic borrowers higher broker fees than it charged white borrowers. To resolve these claims, Provident will pay $9 million to approximately 14,000 borrowers who allegedly paid higher interest rates and/or fees for mortgages between 2006–2011. The agencies did not impose a civil money penalty against Provident.

Kristie Kully to speak at NBI Seminar: What the CFPB and FTC Need You to Know—RESPA/TILA, FDCPA and More

May 12 2015

Kristie Kully will participate as a speaker in the National Business Institute Seminar: What the CFPB and FTC Need You to Know—RESPA/TILA, FDCPA, and More, May 14–15, 2014. Kristie will be speaking at the following sessions: “Loan Estimates Under the New Rules,” “Closing Disclosures—Changes You Need to Know,” and “Loan Originator Compensation: What You Need to Know—NOW.”

CFPB Targets Pre-Dispute Arbitration Agreements in Consumer Financial Services Contracts in New Report to Congress

Mar 16 2015

By: Andrew C. Glass, Robert W. Sparkes, Roger L. Smerage

In the wake of the Great Recession, numerous federal government actors have sought to limit, and in some cases, eliminate, the inclusion of pre-dispute arbitration agreements in consumer financial services contracts. For instance, in 2010, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), Congress amended the federal Truth-in-Lending Act to prohibit the use of pre-dispute arbitration provisions in residential mortgage contracts and home-equity line-of-credit agreements. See 15 U.S.C. § 1639c(e)(1). Now, acting pursuant to a mandate provided by the Dodd-Frank Act, see 12 U.S.C. § 5518(a), the Consumer Financial Protection Bureau (“CFPB”) has joined the hunt. On March 9, 2015, the CFPB issued a report to Congress that appears to put the use of such agreements in all consumer financial services agreements – including credit card, checking account, and payday loan agreements – in the agency’s cross-hairs.

CFPB to Section 8 of RESPA: Will You Be My Valentine?

Feb 16 2015

By: Holly Spencer Bunting, Phillip L. Schulman

The love affair continues between the Consumer Financial Protection Bureau (“CFPB”) and enforcement under Section 8 of the Real Estate Settlement Procedures Act (“RESPA”). On February 10, 2015, the CFPB announced a consent order with NewDay Financial, LLC (“NewDay” or the “Company”) involving alleged violations of the referral fee prohibitions under Section 8 of RESPA and deceptive marketing practices. Specifically, the CFPB alleges that NewDay paid “lead generation” fees to an unnamed veterans’ organization and a third-party company for the endorsement of the Company and referral of the organization’s veteran members to NewDay for mortgage financing. While the Company neither admitted nor denied the CFPB’s findings, the CFPB assessed a $2 million civil money penalty under the consent order. The facts as described in the consent order do not involve a typical marketing services agreement or lead generation agreement, but the consent order makes clear that endorsements of a company expressed through direct mail and email advertisements are considered to be referrals by the CFPB.

To read the full alert, click here.

“Start Spreading the News”: Recent New York Regulations Impact Debt Collection and Default Servicing

Jan 07 2015

By: Steven M. Kaplan, Gregory N. Blase, Christopher E. Shelton

Last month, the New York Department of Financial Services (“DFS”) finalized a regulation with a number of novel requirements affecting debt collection (including servicing delinquent loans) in New York. Previously, debt collection in New York was subject to (1) relatively limited requirements set by New York statute and several municipal ordinances, and (2) the federal Fair Debt Collection Practices Act (“FDCPA”). While parts of the new DFS regulation are modeled on the FDCPA, other requirements depart drastically from the federal framework. Areas of novel regulation include disclosures to consumers regarding statutes of limitations and charged-off debts, as well as restrictions on sending emails to consumers. The Consumer Financial Protection Bureau (“CFPB”) is drafting a debt collection regulation to supplement the FDCPA, and it remains to be seen whether the New York regulation becomes a bellwether of changes at the federal level or by other states.

To read the full alert, click here.

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