Consumer Financial Services Watch – Page 17 – News and developments related to consumer financial services, litigation, and enforcement.

Certain Compliance Risks in Marketplace/Peer-to-Peer/Online Lending

Feb 10 2016

The tragic terrorist shootings in San Bernardino on December 2, 2015 shed light on serious risks associated with online marketplace lending. The attackers obtained $28,500 from an online marketplace lender under a pretext, but then allegedly used the funds to reimburse their arms dealer. This apparent link between the money lent and the mass murders led public officials to re-examine the risks associated with this new and increasingly popular method of lending.

Online marketplace lending represents a chance for investors to realize greater returns and for borrowers to refinance expensive debt and pay less interest, as technology and peer-to-peer matching/evaluation greatly reduces the overhead of the business model. Given both the widespread interest in and the potential for the misuse of such online lending platforms, federal and state lawmakers and regulators are increasing scrutiny of the industry.

CFPB and DOJ Take Further Action Against Indirect Auto Lenders

Feb 04 2016

Following an investigation by the Consumer Financial Protection Bureau (“CFPB”) and the Department of Justice (“DOJ”), a captive indirect auto lender agreed on February 2, 2016, to change its pricing policies and compensation systems to limit dealer discretion and financial incentives to mark up interest rates for auto purchases.

VA Issues QM FAQs, Focuses on IRRRLs

Jan 29 2016

On May 9, 2014, the Department of Veterans Affairs (“VA”) issued an Interim Final Rule defining which VA-guaranteed loans would be “qualified mortgages” or “QMs” for the purposes of the Truth in Lending Act’s (“TILA”) ability-to-repay requirements. With its recent release of Circular 26-13-3, the VA has now clarified the application of that rule through FAQs focusing largely on Interest Rate Reduction Refinance Loans (“IRRRLs”). These loans are VA streamlined refinances, which generally allow for reduced income verification for eligible veterans’ loans. IRRRLs represent a small sliver of mortgage lending in the United States, but their treatment under VA’s Interim Final Rule has presented significant problems for some lenders.

CFPB Takes Action Against Another Buy-Here Pay-Here Used Car Dealer

Jan 28 2016

On Thursday, January 21, 2016, the CFPB entered into a consent order with a small buy-here pay-here used car dealer. This is the third CFPB settlement against a buy-here pay-here dealer. The settlement resolves allegations that the dealer inaccurately disclosed finance charges to consumers in violation of the Truth in Lending Act (“TILA”) and the prohibition on deceptive acts or practices, and engaged in abusive sales practices.

Will Assignee Liability Increase as FTC Seeks Comments on the Holder Rule?

Jan 26 2016

The “Adam’s Rib” of assignee liability ̶ the “Holder Rule” issued by the Federal Trade Commission (“FTC”) in 1976 ̶ is up for review. Imposing liability on innocent purchasers of consumer credit loans for the legal violations of the originating creditors has long been a controversial issue in the capital markets. The FTC is seeking public input as it reviews the Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses, commonly known as the Holder Rule. Although the Rule has not garnered significant attention over its 40-year existence, industry members should consider commenting by the February 12 deadline. Changes to the Holder Rule, including the scope and types of claims and defenses that can be asserted against a holder, could have a material impact on the market. The Consumer Financial Protection Bureau can also enforce the Holder Rule against covered institutions.

Your Money Is No Good Here: U.S. Supreme Court Holds That an Unaccepted Rule 68 Offer of Complete Relief Does Not Moot an Individual’s Claims, but Questions Remain

Jan 25 2016

By: Andrew C. Glass, Gregory N. Blase, Jennifer J. Nagle, Jeremy M. McLaughlin, Matthew N. Lowe

On January 20, 2016, the United States Supreme Court issued its decision in Campbell-Ewald Co. v. Gomez regarding Rule 68 offers of judgment. The Court held that a defendant cannot moot a case by merely offering complete relief to a plaintiff but left unanswered whether a defendant may do so by actually providing complete relief. Nor did the Court reach the question of whether a plaintiff can continue to seek to represent a putative class when his or her individual claims are mooted before a class is certified.

To read the full alert, click here.

Splitting the Baby — CFPB Pursues Aggressive Statute of Limitations Argument but Effectively Concedes Limits to Its Authority

Jan 22 2016

Last month, we wrote about how the Consumer Financial Protection Bureau’s (CFPB) administrative enforcement action against Integrity Advance might signal that the agency believes it can pursue claims of unfair and deceptive conduct without regard to either the statute of limitations or the effective date of the Dodd-Frank Act. In a brief made public yesterday, the CFPB revealed its hand when it filed its opposition to Integrity Advance’s motion to dismiss. In its brief, the CFPB indeed asserted that its administrative enforcement authority is not limited by any statute of limitations. But the CFPB did not seek to pursue its claims for conduct that occurred before the July 21, 2011 effective date of Dodd-Frank.

Step by Step: Stricter Requirements for Class Certification Inch Closer to Legislative Enactment

Jan 21 2016

By: Brian M. Forbes, Jennifer J. Nagle

Just over 10 years after the passage of the federal Class Action Fairness Act (“CAFA”), Congress is again considering further legislative reform to class action litigation. Among other reforms, CAFA opened additional avenues for defendants to remove class action litigation to federal court (often viewed by the defense bar as a more favorable venue than state court) and placed additional limitations on class-wide settlements. Now, legislative attention is being paid to class actions that are certified absent a showing of common injury among all class members. On January 8, 2016, the U.S. House of Representatives passed the Fairness in Class Action Litigation and Furthering Asbestos Claim Transparency Act of 2016 (“the Act” or “H.R. 1927”). If enacted into law, H.R. 1927 would represent a significant change to the standard that a class action plaintiff must satisfy for a court to certify his or her proposed class.

To read the full alert, click here.

CashCall Revisited (Again): The CFPB’s Continued Federalization of State Law

Jan 04 2016

Last August, we wrote about the Consumer Financial Protection Bureau’s (CFPB) complaint against NDG Financial Corp. and how it represented a continuing evolution of the CFPB’s theory that certain state law violations might be predicates for federal law claims of unfair, deceptive, and abusive conduct (UDAAP). We refer to this as the “CashCall theory,” because the CFPB first articulated this novel approach to UDAAP enforcement in its complaint against CashCall, Inc. In December, the CFPB took two more steps down this road.

TRID/KBYO Rule: The CFPB Tries to Calm Lender Fears

Dec 30 2015

On December 29, 2015, CFPB Director Richard Cordray responded to MBA President and CEO David Stevens’ desperate plea for clarity to address what the MBA claimed is a significant rejection by large aggregators and investors of correspondent lending channel loans for minor or technical TRID errors. In its December 21, 2015 letter to Director Cordray, Mr. Stevens noted that these minor and technical errors include “issues with the alignment or shading of forms, rounding errors, time stamps with the wrong time zone, or check boxes that are improperly completed on the LE.” The MBA feared that without some clarity from the CFPB disruption and liquidity issues would overwhelm the mortgage markets.