Consumer finance news and regulatory trends


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

Regulatory developments


OCC publishes Community Reinvestment Act assessments. The OCC has published its performance reviews under the Community Reinvestment Act for 15 domestic banks, federal savings associations and federal insured branches of foreign banks. These assessments rank establishments on a scale ranging from outstanding, satisfactory, in need of improvement to substantial non-compliance.

Federal financial regulators extend comment period on use of artificial intelligence in banking. Federal financial regulators have extended the comment period for their request for information on the use of artificial intelligence by financial institutions. The request is aimed at obtaining information on how financial institutions are using artificial intelligence in their fraud prevention, customer service, credit, underwriting and other operations. The request is also aimed at obtaining information on how institutions will address challenges related to the development, adoption and management of artificial intelligence. The extended comment period gives the public until July 1, 2021 to respond to the request.

Acting FTC President Slaughter responds to the United States Chamber of Commerce’s opposition to restoring the FTC’s enforcement authority under Section 13 (b). Acting FTC President Rebecca Kelly Slaughter submitted a letter to the Senate Committee on Commerce, Science and Transportation reaffirming the need for Congress to restore the FTC’s ability to use Section 13 (b) of the FTCA to seek financial compensation in consumer protection actions. This comes after the Supreme Court ruling in AMG Capital Management, LLC v. FTC, which ruled that section 13 (b) did not authorize the Commission to seek, or a court to grant, fair monetary relief such as restitution or restitution in an enforcement action under the FTCA. Letter from Acting President Slaughter emphasizes that the FTC’s ability to seek compensation from consumers is necessary to protect consumers by providing a source of compensation and deterring future FTCA violations by disgorging violators of their earnings ill-gotten. For more information on the Supreme Court decision in AMG Capital, see the May issue of this newsletter.

CFPB publishes report on consumer use of payday loans, auto securities and pawn shops. The CFPB released a new report in its Making Ends Series which found that consumers who use a payday loan, car title, and / or pawnshop within a year still often use this type of loan an year later. The report noted that many users had difficulty accessing credit and a majority had poor or very bad credit scores. Three-quarters of users said they experienced a significant income or expense shock and had difficulty paying a bill; these shocks were generally larger than other sources of credit or savings available. The CFPB said that for some consumers these loans may be part of a larger and more complex debt portfolio to cope with the hardships.

Senate passes Congressional Review Act resolution overturning OCC’s final “real lender” rule. The Senate passed a resolution under the Congressional Review Act to overturn the OCC’s final “true lender” rule. This rule provided a clear test for when a national bank or federal savings association was considered the “real lender” for a loan when it partnered with a fintech or other non-bank company. The resolution now passes to the House of Representatives.


California DFPI is hiring several new experts to help form new divisions within the department. The California DFPI has announced several new executive hires. DFPI hired Christina Tetreault, former director of financial policy at Consumer Reports, to lead the Office of Financial Technology and Innovation; Suzanne Martindale, former senior policy advisor and legislative director for Western States at Consumer Reports, to lead the consumer financial protection division; and Brian Gould of the California State Treasurer’s Office to head the Ombuds Office.

New York passes legislation protecting consumers’ COVID-19 stimulus payments from debt collectors. New York has passed legislation protecting consumers’ 2019 federal coronavirus disease (COVID-19) relief payments from garnishment by collection agents, including stimulus payments, tax refunds, rebates and tax credits. The law includes an exception for garnishment and collection of child and spousal support payments as well as collection in situations involving fraud. Under the new law, any attempt to enforce a pecuniary judgment against an individual’s bank account must be accompanied by a notice to the debtor under section 5222 of the New Civil Practice Act. York and the rules that the debtor can recover any unduly received COVID-19 relief payment. .

Enforcement measures


CFPB Announces $ 615,000 Settlement with California Auto Lender for Unfair Practices. The CFPB announced a consent order with an auto loan finance company for illegally charging consumers interest on late payments. The CFPB alleged that the company, which manages subprime auto loans issued to it by car dealerships, required its customers to obtain “loss and damage insurance” to supplement their insurance coverage. Without informing consumers, the company allegedly charged interest on late payment of fees for such loss and damage insurance. The company reportedly charged approximately 5,800 accounts receivable a total of $ 565,813 in interest on these late payments over a five-year period. The consent order requires the company to (i) reimburse or credit all such interest payments to its customers, along with a civil fine of $ 50,000, and (ii) cease charging interest on payments in delay without making appropriate disclosures to clients regarding the existence of interest and how it accrues.

CFPB Announces $ 1.1 Million Settlement With Rideshare Lender And CEO Over Deceptive Loan And Deposit Products. The CFPB announced a consent order with a lender and its CEO based on allegations the company distorted the risks and rewards associated with short-term, high-interest personal loans to drivers working with carpooling. The CFPB alleged that the company deceptively marketed loans as having an APR of 440% when in fact the loans had an APR of around 975%. In addition, these loans were primarily funded by consumer investments, and the company falsely told consumer depositors that the return on investment would be 15% APY and that deposits would be made to FDIC insured accounts. In many cases, the deposited funds were loaned to borrowers at rates that violated Florida’s criminal usury law, rendering the loan uncollectible. The consent order requires the company to reimburse approximately $ 1 million in consumer deposits and interest payments and pay a civil fine of $ 100,000. The company will also be permanently banned from engaging in deposit collection activities and making misleading statements to consumers.

CFPB announces a $ 7.7 million settlement with an abusive debt settlement company. The CFPB announced a consent order with a debt settlement company for UDAP and Telemarketing Selling Rule (TSR) violations regarding charging customers illegal upfront fees. The CFPB alleged that the company (i) charged a fee to consumers before making at least one payment to a creditor under a settlement agreement, (ii) charged a fee to consumers although it did not ‘negotiated no settlement and (iii) was charging higher fees than agreed in its consumer contracts. The consent order would impose a $ 7.7 million judgment against the company, which will be stayed if the company pays aggrieved consumers $ 5.4 million, and prohibits the company from engaging in the alleged practices illegal and deceptive.

The FTC announces a $ 24.5 million settlement with the operators of the student loan debt relief program for abusive practices. The FTC has announced a consent order with a group of debt settlement companies for UDAP, TSR and TILA violations over a student loan debt relief program. The FTC alleged that the defendants (i) charged illegal upfront fees, (ii) misled consumers into believing the fees were for their student loans, and (iii) violated disclosure requirements in soliciting clients for high interest loans to pay these fees. Under the terms of the settlement, defendants are permanently banned from the debt relief industry and will be subject to enhanced compliance reporting. Additionally, the defendants will only be required to pay $ 11,500 on the $ 24.5 million judgment due to inability to pay, the remainder of which will be suspended pending settlement.


New York DFS announces $ 1.8 million settlement with life insurance companies for cybersecurity breaches. The DFS announced a consent order against two state-licensed life insurance companies based on their violations of the DFS cybersecurity regulations. Specifically, companies reportedly failed to implement reasonably equivalent or more secure multi-factor authentication or access control approved in writing by the companies’ information security officer, as required by regulation. Despite this, the two companies falsely certified their compliance with the regulation for 2018. These substandard cybersecurity policies have reportedly led to attacks that have resulted in the exposure of thousands of sensitive, non-public and non-public personal data.

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