On October 17, the CFPB Student Loan Ombudsman (Ombudsman) released a report on student loan complaints related to debt collection and servicing issues submitted to the CFPB between September 1, 2015 and August 31, 2016. During the period covered in the report, the CFPB received approximately 5,500 private student loan – and 2,300 debt collection – related complaints. Following an August 18 CFPB report that focused primarily on student loan complaints regarding income-driven repayment (IDR) plans, the Ombudsman’s recently issued report emphasizes alleged breakdowns in the “rehabilitation” process: “The majority of borrowers who cure a default and seek to enroll in IDR do so by first rehabilitating their defaulted debt. Read more…
I. Overview of the CFPB’s Final Prepaid Rule
On October 5, 2016, the Consumer Financial Protection Bureau (Bureau) issued a final rule (Prepaid Rule) amending Regulations E and Z to extend consumer protections to prepaid card accounts. The new protections include pre-acquisition disclosures, error resolution rights, and periodic statements. In addition, prepaid card accounts that include a separate credit feature are subject to some of Regulation Z’s credit card provisions, including an ability-to-repay requirement. Prepaid card issuers are also required to submit to the Bureau and to post to their websites any new and revised prepaid card account agreements. In this alert we summarize key provisions of the Prepaid Rule except those provisions that apply only to payroll and government benefits prepaid cards, which will be covered in a separate alert.
II. Effective Date
The Prepaid Rule’s effective date is October 1, 2017, however, the effective date for posting prepaid card account agreements is October 1, 2018. Heeding concerns about burden, the Bureau stated that the Prepaid Rule does not require financial institutions to pull and replace prepaid account access devices or packaging materials that were manufactured, printed, or otherwise produced in the normal course of business prior to October 1, 2017. Instead, financial institutions must provide consumers with notice of certain changes in terms and updated initial disclosures, in certain circumstances.
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Questions regarding the matters discussed in this Alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.
On October 11, the CFPB issued a consent order to a Virginia-based federal credit union to resolve allegations that its debt collection activities were unfair and deceptive in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. According to the CFPB’s consent order, the credit union failed to implement adequate compliance controls and employee training on debt collection communications. The credit union’s actions involved employees who sent letters to “hundreds of thousands” of consumers containing various misrepresentations regarding the handling of consumer debt. The consent order alleged that these debt collection letters falsely threatened legal action, wage garnishment, and contacting servicemembers’ commanding officers for failure to remit payments. The consent order also noted that the same threats were made via telephone. The CFPB further contends that the credit union (i) sent approximately 68,000 letters misrepresenting the credit consequences of falling behind on a loan, alleging that members would “find it difficult, if not impossible, to obtain additional credit because of [their] present unsatisfactory credit rating” (internal quotations omitted); and (ii) restricted consumers’ electronic account access and electronic accounts services – without providing adequate notice – once their accounts became delinquent. Pursuant to the consent order, the credit union must (i) pay $23 million in consumer redress; (ii) pay a $5.5 million civil money penalty; and (iii) establish a comprehensive compliance plan regarding its policies and procedures on consumer debt collection communications and electronic account restrictions.
On October 12, the CFPB issued an updated version of its small entity compliance guide on the Know Before You Owe TILA-RESPA Integrated Disclosure (TRID) Rule. The updated TRID compliance guide incorporates guidance from CFPB webinars on various topics, including (i) record retention; (ii) Loan Estimate and Closing Disclosure requirements, including format and delivery; (iii) good faith standards and determinations; (iv) disclosures related to seller-paid costs; and (v) construction loans. The newly released TRID compliance guide replaces the CFPB’s July 2015 guide. The CFPB also issued a separate revised guide for completing the Loan Estimate and Disclosure forms.
On October 13, the CFPB announced various senior leadership changes. John Coleman will now serve as the CFPB’s Deputy General Counsel for Litigation and Oversight in the Legal Division. Coleman joined the CFPB in November 2010 and has since served as Assistant General Counsel for Litigation and as Senior Litigation Counsel. Additional leadership changes include Stacy Canan serving as Assistant Director for the Office for Older Americans, and Sonya White serving as Deputy General Counsel for General Law and Ethics in the Legal Division.