FTC Returning $436,000 to Consumers Scammed in Non-Existent Money-Lending Scheme

On February 17, the FTC announced that it is mailing checks to 2,031 consumers who lost money as part of a business opportunity scheme that cheated consumers out of more than $7 million. The compensation follows a 2013 complaint filed by the Commission focused on 20 individuals and eight companies who, according to the Commission’s allegations, “falsely claimed consumers would earn up to $3,000 per month by referring small businesses to the defendants to obtain an average loan or cash advance of $20,000, and that they could operate a profitable business from their home.”  The defendants were charged with engaging in unlawful conduct by: (i) falsely claiming consumers would earn substantial income; (ii) repeatedly calling consumers who told them not to call, often times using obscenities and threats, as well as calling numbers listed on the National Do Not Call Registry; and (iii) failing “to provide specific information to help consumers evaluate a business opportunity…and making earnings claims without substantiation,” in violation of the FTC’s Business Opportunity Rule.

The FTC obtained judgments and settlements in 2015 totaling over $7.3 million, and banned 18 defendants from similar telemarketing activities.

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CFPB Seeks Comments on New Initiative Intended to Increase Transparency in Student Loan Servicing Market

On February 16, the CFPB announced a request for comments on an information collection plan titled “Student Loan Servicing Market Monitoring.” The proposed plan will collect student loan data from the largest student loan servicers in order to provide the Bureau “with a broader and deeper look into the student loan market, with a focus on key areas that might put consumers . . . at risk.” Key areas of examination will be: (i) the total size of the student loan market; (ii) borrowers who seek to repay their loans based on how much money they have (Income-Driven Repayment plans); (iii) borrowers who face the greatest risk of default; and (iv) borrowers with private student loans who experience financial distress. Comments must be submitted on or before April 17, 2017.

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CFPB Releases Second Webinar on New HMDA Rule

On February 14, the CFPB announced the availability of a second Webinar on the New Home Mortgage Disclosure Act (HMDA) Rule (amending Regulation C), a Rule that was itself finalized in late 2015 but that is predominantly not effective until January 1, 2018, or later. The new Webinar, with audio and closed-captioning over a slide-deck, focuses solely on identifiers and other “data points,” including the race and ethnicity of an applicant or borrower, which must be collected under the New HMDA Rule. In August 2016, the CFPB released an initial Webinar on the same Rule, covering a broader range of topics and without the focus on data points in the newer Webinar.

In addition, the Bureau has now made available a one-page chart to summarize the options a financial institution has for collecting and reporting ethnicity and race information under current Regulation C, Regulation C effective January 1, 2018, and the Bureau’s Official Approval Notice (issued on September 23, 2016). All of the above-mentioned resources and many more related materials (such as an unofficial transcript we prepared of the initial Webinar) can also be found in BuckleySandler’s HMDA Resource Center.

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Legislation Introduced in Both Houses Seeking to Curb Authority of the CFPB and Other Financial Regulators

On February 14, Senator Mike Rounds, a member of the Senate Banking Committee, introduced S. 365, which seeks to amend the Consumer Financial Protection Act of 2010 to bar the transfer of funds from the Board of Governors of the Federal Reserve System to the CFPB. The bill also would require the CFPB to turn over all penalties it obtains to the United States Treasury. Sen. Rounds also reintroduced the “Taking Account of Institutions with Low Operation Risk (TAILOR) Act” (S. 366)–a bill intended to ease regulatory burden on local banks and credit unions. Specifically, the TAILOR Act would require financial regulators to take into consideration the risk profile and business models of individual financial institutions and tailor those regulations accordingly. The TAILOR Act also would require regulators–including the OCC, the Fed, the FDIC, the NCUA and the CFPB–to conduct a review of all regulations issued since the 2010 passage of the Dodd-Frank Act and revise any regulations that do not conform to the TAILOR Act’s requirements. In addition, the regulatory agencies would be required to provide an annual report to Congress outlining the steps they have taken to tailor their regulations.

On February 15, Senator David Perdue (R-Ga.), along with Sens. John Barrasso (R-Wyo.), John Boozman (R-Ark.), Ted Cruz (R-Tex.), Steve Daines (R-Mont.), Mike Enzi (R-Wyo.), Joni Ernst (R-Iowa), John Hoeven (R-N.D.), Johnny Isakson (R-Ga.), Ron Johnson (R-Wis.), John Kennedy (R-La.), Mike Lee (R-Utah), Rand Paul (R-Ky.), Marco Rubio (R-Fla.), and Thom Tillis (R-N.C.), have introduced legislation S. 387 to amend the Consumer Financial Protection Act so that the CFPB would be subject to the regular appropriations process.

Senator Ted Cruz and Representative John Ratcliffe also introduced legislation in their respective chambers that would abolish the CFPB. The pair of bills–S. 370  and H.R. 1031–would “eliminate the Consumer Financial Protection Bureau by repealing title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the Consumer Financial Protection Act of 2010.” As explained by Senator Cruz in a joint press release, the proposed legislation would give “Congress the opportunity to free consumers and small businesses from the CFPB’s regulatory blockades and financial activism, which stunt economic growth.”

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House Financial Services Committee Chairman Called for End of CFPB; Senate Banking Committee Ranking Member Responds

In a February 10 blog post, House Financial Services Committee Chairman Jeb Hensarling called for the abolition of the CFPB, and recommended that the President “immediately fire CFPB Director Richard Cordray.” Specifically, Rep. Hensarling expressed his belief that the CFPB is “arguably the most powerful, least accountable agency in U.S. history,” and his concern that the agency “defines its own powers and can launch investigations without cause, imposing virtually any fine or remedy, devoid of due process.” For these reasons, Rep. Hensarling  stated  he believes that “even with good policy, the CFPB would still be unconstitutional.” Ultimately, he argued that the CFPB “must be functionally terminated,” which he said could be achieved by ending the Bureau’s funding through a reconciliation bill.

The same day, Senate Banking Committee Ranking Member Sherrod Brown issued a statement responding to Rep. Hensarling’s proposal to abolish the Dodd-Frank Act. Senator Brown’s response noted, among other things, that “71 percent of Americans approve of the [CFPB]’s mission,” and that “[t]he Hensarling proposal would transform the Bureau from an effective watchdog into a toy poodle.”

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