Consumer Financial Protection Bureau Reporter

CFPB proposes revisions to 2013 mortgage rules
The Consumer Financial Protection Bureau is proposing to make adjustments to its final 2013 mortgage rules, most of which took effect in January 2014. The revisions to the rules are intended to ensure access to credit. The bureau said that the changes are in response to concern over origination and servicing issues. The proposed rule appeared in Report No. 137, May 5, 2014.

New guide will help implementation of integrated disclosure rule
The Consumer Financial Protection Bureau has published new guidance intended to help assist institutions in complying with the bureau’s Truth in Lending Act-Real Estate Settlement Procedures Act integrated mortgage disclosure rule. The bureau said the guidance, the TILA/RESPA Integrated Disclosure Rule Small Entity Compliance Guide, highlights issues that loan originators may want to consider when implementing the rule, but indicates that the guidance also may be helpful to settlement service providers, software providers, secondary market participants, and other firms that serve as business partners to creditors. The guide is reproduced at ¶24-022.

CFPB complements integrated disclosure guidance with instructions on forms
The Consumer Financial Protection Bureau has developed a companion piece to its Small Entity Compliance Guide on the Truth in Lending Act/Real Estate Settlement Procedures Act integrated disclosure rule. The new guidance is a roadmap to completing the integrated Loan Estimate and Closing Document forms that the bureau believes will be of assistance to institutions as they strive to meet the rule’s effective date of Aug. 1, 2015. The guidance can be found at ¶24-023.

Bank of America agrees to $772 million in settlements over credit card add-on practices
Bank of America, N.A., has agreed to pay $727 million in consumer relief to settle charges that its marketing of credit card payment protection plans was deceptive and that it enrolled consumers in identity theft protection programs without their consent, the Consumer Financial Protection Bureau has announced. BofA also has agreed to pay a $20 million civil penalty, which will go to the bureau’s Civil Penalty Fund. While it agreed to the CFPB consent order, BofA did not admit any wrongdoing. The consent order and related documents are at ¶200-370.

CFPB proposes extra time for implementing remittance rule disclosures
The Consumer Financial Protection Bureau is proposing amendments to its international money transfer rule that would provide federally insured institutions, such as banks and credit unions, with additional time to provide exact disclosures in certain cases. The proposal would extend a temporary provision that permits insured institutions to estimate certain pricing disclosures pursuant to section 1073 of the Dodd-Frank Act. The proposed amendments are at ¶300-190.

CFPB sees steep rise in consumer complaints in 2013
The Consumer Financial Protection Bureau 2013 Consumer Response Annual Report reveals that the bureau’s consumer complaint volume nearly doubled from 91,000 complaints received in 2012 to 163,700 complaints received in 2013, an 80-percent increase. The report outlines both the complaints received by the bureau and the issues the CFPB is addressing with consumers. The CFPB’s Consumer Response report is at ¶200-367.

Federal Banking Law Reporter

Supreme Court to decide TILA mortgage rescission time limit
The U.S. Supreme Court has granted a petition for review by consumers who were attempting to rescind a mortgage loan refinancing transaction based on a claim that the lender failed properly to make disclosures required by the Truth in Lending Act. According to the U.S. Court of Appeals for the Eighth Circuit, the consumers’ right to rescind expired when they failed to file suit to enforce their rescission demand within three years of the loan closing. The petition for review in Jesinoski v. Countrywide Home Loans, Inc., Dkt.13-684, was granted on April 28, 2014. This story is in Report No. 2567, May 1, 2014.

Large banks to be subject to enhanced leverage standards
The Board of Directors of the Federal Deposit Insurance Corporation and Federal Reserve Board both have approved final rules that will strengthen leverage ratio standards for large, interconnected U.S. banking organizations. The final rules will apply to any U.S. top-tier bank holding company with at least $700 billion in total consolidated assets or at least $10 trillion in assets under custody (covered BHC) and any insured depository institution (IDI) subsidiary of these BHCs. At the time the rule was issued, news reports indicated that the following eight banking organizations would be subject to the supplementary leverage requirements: JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp., Wells Fargo & Co., Goldman Sachs Group Inc., Morgan Stanley, Bank of New York Mellon Corp., and State Street Corp. The final rule is at ¶153-102.

Fed extends Volcker Rule compliance deadline for CLOs
The Federal Reserve Board is using its discretion under the Dodd-Frank Act to give banking organizations an additional two years to bring their investments in collateralized loan obligations into compliance with the Volcker Rule. The Fed described CLOs as securitization vehicles backed predominantly by commercial loans. Banking entities will have until July 21, 2017, to bring their ownership interests in and sponsorship of CLOs into compliance with the statute. The two one-year extensions apply only to CLOs in place as of Dec. 31, 2013, that do not qualify for the exclusion in the final rule for loan securitizations. This story is in Report No. 2564, April 10, 2014..

Consumer Credit Guide

Debt collector’s notice need not “parrot” statutory language to be in compliance
Although a debt collector’s written notice to a consumer did not utilize the exact statutory language of the federal Fair Debt Collection Practices Act (FDCPA) by informing the consumer of his right to dispute the validity of an alleged debt within 30 days of—as opposed to after—receipt of the notice, the notice still complied with the FDCPA. The U.S. Court of Appeals for the Sixth Circuit determined that the two different prepositions essentially operated “interchangeably” in the setting and conveyed the same meaning; the collector’s validation notice would not mislead a “reasonable but unsophisticated consumer.” Wallace v. Diversified Consultants, Inc. (6th Cir.), ¶52,579.

Debt collector’s incomplete offer of judgment did not “moot” lawsuit
Since a debt collection company’s offer of judgment to a consumer did not adequately address the consumer’s request for actual damages for alleged violations of the federal Fair Debt Collection Practices Act (FDCPA), the offer did not fully satisfy the consumer’s demand for relief and did not render her FDCPA claims “moot.” In refusing to dismiss the consumer’s lawsuit for lack of subject matter jurisdiction, the Fifth Circuit determined that an “actual case or controversy” existed. Also, the court emphasized that whether the consumer stated a plausible claim for actual damages was a different inquiry not before the court on appeal. Payne v. Progressive Financial Services, Inc. (5th Cir.), ¶52,580.

Consumer’s fair credit reporting claim barred as untimely
Although a consumer alleged that a financial services company obtained his credit report without a permissible purpose or his consent in violation of the federal Fair Credit Reporting Act (FCRA), the U.S. Court of Appeals for the Fifth Circuit ruled that the consumer’s claim was barred by the FCRA’s two-year statute of limitations. The Fifth Circuit determined that, under the FCRA’s “discovery rule,” the limitations period begins to run when a claimant discovers facts that give rise to a claim, not—as the consumer contended—when a claimant discovers that those facts constitute a legal violation. Mack v. Equable Ascent Financial, LLC (5th Cir.), ¶52,583.
State law barred claims against bank for oral promise not to foreclose

Although a married couple claimed that a bank orally misrepresented that it would postpone a mortgage foreclosure sale of their home while they pursued a loan modification, the U.S. Court of Appeals for the Eighth Circuit ruled that the homeowners’ claims were barred by the Minnesota Credit Agreement Statute. In affirming the dismissal of the homeowners’ common-law claims against the bank for negligent misrepresentation and equitable estoppel, the Eighth Circuit determined that the homeowners could not avoid the foreclosure sale of their home under Minnesota law. Bracewell v. U.S. Bank National Association (8th Cir.), ¶52,582.

State Law Update

Arizona: Legislation enacted in Arizona enhances the loan powers of licensed consumer lenders by, among other things, modifying the finance charge structure for consumer lender loans and increasing the loan origination fee cap. Analysis appears in Report No. 1191, April 29, 2014.

Idaho: Payday lenders in Idaho will soon be required to comply with newly enacted lending requirements that include loan limits based on a borrower’s income, enhanced disclosures, and extended payment options for borrowers. The requirements are part of legislation amending the Idaho Credit Code. Analysis appears in Report No. 1190, April 15, 2014.

Kentucky: Amendments to Kentucky’s consumer loan law changes the dollar-amount classifications that are used to determine the maximum finance charges that may be imposed on loans of $15,000 or less. Analysis appears in Report No. 1189, April 1, 2014.

Maine: Legislation amending Utah’s Check Cashing and Deferred Deposit Lending Registration Act enacts a number of new requirements for payday lenders that include determining a borrower’s repayment ability, expanding the use of extended payment plans, and providing a notice of default before collecting on a loan. Analysis appears in Report No. 1189, April 1, 2014.

Utah: Legislation amending Utah’s Check Cashing and Deferred Deposit Lending Registration Act enacts a number of new requirements for payday lenders that include determining a borrower’s repayment ability, expanding the use of extended payment plans, and providing a notice of default before collecting on a loan. The law is reflected beginning at Utah ¶6161.

West Virginia: Consumer credit protection legislation enacted in West Virginia aims to restrict the collection of “zombie debt”—debt for which the statute of limitations has expired—by requiring debt collectors to inform debtors of this fact. The law is at West Virginia ¶5058.

Smart Charts Highlights

Some of the latest changes reflected in Consumer Credit Smart Charts include:

• The Legislative Developments Smart Charts are updated regularly as legislation is enacted, allowing users to keep up to date without waiting for a scheduled Report. Links to legislative summaries and to full text of laws amended, repealed or added are provided. Recent updates include:
• Utah: Education Loan Garnishment Restrictions
• Virginia: Lender Flood Insurance Restrictions

Secured Transactions Guide

Timing determines the priority of conflicting security interests
A creditor that properly filed a fixture filing in Virginia to secure an obligation owed by a Pennsylvania corporation did not have a superior security interest over a bank with a competing security interest that filed a financing statement in Pennsylvania six months prior. In accordance with the UCC of Ohio, Pennsylvania, and Virginia, the bank’s security interest was superior because it was perfected prior to the creditor’s interest. Section 9-317 of the UCC provides that competing perfected security interests are ranked according to priority in time of filing or perfection. Priority is determined from the earlier of the time a filing covering the collateral is first made or the security interest is first perfected. The bank filed its financing statement in Pennsylvania six months before the creditor filed either its financing statement or its fixture filing in Virginia. Accordingly, the bank’s security interest took priority. Sturtz Machinery, Inc. v. Dove’s Industry, Inc. (N.D. Ohio), ¶56,357.

Creditor lacked leverage for reaffirmation agreement
A bankruptcy court has rejected a creditor’s reaffirmation agreement because it was not in the best interest of the debtor. In accordance with Article 9 of the Washington UCC, a lender’s superior security interest in the debtor’s automobile would already prevent the creditor from lawfully repossessing its secured collateral. The debtor, without the advice of an attorney, signed an agreement to reaffirm a debt she owed to the creditor, a retail supplier of automobile tires, that was allegedly secured by a purchase money security interest in the tires. The creditor then sought approval of the reaffirmation agreement. Section 524(c) of the Bankruptcy Code precludes courts from approving a reaffirmation agreement if it is not “in the best interest of the debtor.” Under section 9-335(d) of the Washington UCC, a creditor may not repossess tires installed on an automobile if the automobile is subject to a secured claim of a creditor that is listed on the title. The debtor’s bankruptcy schedule identified a secured claim held by a lender against the automobile. Because the creditor was not in a position where it could repossess the debtor’s tires, the reaffirmation agreement was not in the debtor’s best interest. In re Brady (Bankr. E.D. Wash.), ¶56,356.

State Law Update

Alabama: Alabama has enacted the amendments to Article 9 released by the Uniform Laws Commission (ULC) and the American Law Institute (ALI) in 2010. The amendments are in substantially the same form as proposed by the ULC and ALI and will take effect July 1, 2014. The story appeared in the Secured Transactions Guide Report Letter, Report 1167, April 22, 2014.

Indiana: Indiana has amended its procedures for the enforcement of self-service storage facility liens to allow for notice of default and sale by email and provide for alternative methods of advertising the sale. The amended law also permits an owner to have a motor vehicle or watercraft towed from the facility if the renter fails to remedy the default. The law appears at Indiana, ¶430.

Michigan: Michigan has amended its self-service storage facility lien provisions to provide owners with alternatives to foreclosure and protect owners from any resulting liability. The amended law also allows for a limit on the value of property that may be stored in a unit and permits facility owners to charge a reasonable late fee. The law appears at Michigan ¶430.

Mississippi: Certificate of title provisions relating to insurance settlements for damaged vehicles have been revised to ensure that repair shops and lienholders are included in the insurance settlement. If there is not a total loss, and there are one or more lienholders shown in the policy or confirmed in writing by the insured before the loss, an insurer paying a claim must add as a payee on the check the name of the business or other entity repairing the automobile or the name of the lienholder or lienholders, in addition to the name of the insured.  The law appears at Mississippi, ¶580.

Virginia: Virginia has amended its requirements for enforcing written contracts, deeds, or other bills of sale against lienholders and third parties not parties thereto in order to clarify that the requirements do not apply to any security interest in goods under the Uniform Commercial Code, except as provided in Section 9-302 of the Virginia UCC. The law appears at Virginia, ¶1136.

West Virginia: West Virginia has amended Article 9 of the Uniform Commercial Code to provide that records of mortgage that serve as financing statements covering as-extracted collateral or timber to be cut will remain effective until the mortgage is satisfied, released, or is otherwise terminated as to the real property. Financing statements generally expire five years after the date of filing. The law appears at West Virginia, ¶R825.

Financial Privacy Law Guide

“Called party” under TCPA is current subscriber
Addressing for the first time the meaning of “called party” under the Telephone Consumer Protection Act (TCPA), the United States Court of Appeals for the Eleventh Circuit determined that it means the current subscriber. The court reversed and remanded the lower court’s grant of summary judgment to State Farm in a case accusing the company of robocalling a cell phone subscriber’s housemate for a bad debt. Osorio v. State Farm Bank (11 Cir.) at ¶100-652.

U.S. Chamber of Commerce praises privacy notice bill
The U.S. Chamber of Commerce has expressed its strong support for a bill that would amend the annual privacy notification requirements under the Gramm-Leach-Bliley Act to alleviate the “burden and expense” of mailing redundant privacy notices. In a letter to one of the bill’s original co-sponsors, Sen. Sherrod Brown (D-Ohio), the organization applauded the “Privacy Notice Modernization Act of 2013” (S. 635) as “the type of smart regulatory reform that benefits both the customers and the firms who serve them.” This story is in Report No. 154, April 17, 2014.

Iowa: Recently enacted legislation that expands Iowa’s current security freeze protections will require consumer reporting agencies (CRAs) to implement the placement of security freezes for specified protected consumers upon request. Protected consumers covered by the legislation (H.B. 2368) include individuals who are under the age of 16, incapacitated, or for whom a guardian or conservator has been appointed. Also, the scope of Iowa’s data breach law has been expanded in several ways, including extending its coverage to protect certain information on paper, as well as information in digital form. Iowa’s law now provides that any person who owns or licenses computerized data that includes personal information concerning an Iowa resident must notify the resident if there has been a breach of the security of that information. This story is in Report No. 154, April 17, 2014.

South Carolina: Legislation that expands South Carolina’s current security freeze protections will require consumer reporting agencies (CRAs) to implement the placement of security freezes for specified protected consumers upon request. Protected consumers covered by the legislation (S.B. 148) include individuals who are under the age of 16, incapacitated, or for whom a guardian or conservator has been appointed. This story is in Report No. 154, April 17, 2014.