Top Story Lending Related

The Federal Reserve has posted the Minutes of the Federal Open Market Committee held on April 30 and May 1, 2024.

The CFPB this morning issued an interpretive rule that confirms that Buy Now, Pay Later (BNPL) lenders are credit card providers. Accordingly, BNPL lenders must provide consumers some key legal protections and rights that apply to conventional credit cards. These include a right to dispute charges and demand a refund from the lender after returning a product purchased with a BNPL loan. The CFPB launched its inquiry into the rapidly expanding BNPL market more than two years ago and continues to see consumer complaints related to refunds and disputed transactions.

Under the rule, BNPL lenders will be required to:

• Investigate disputes
• Refund returned products or canceled services
• Provide periodic billing statements

The interpretive rule is applicable 60 days after its May 31, 2024, publication at 89 FR 47068 in the Federal Register (Effective date July 30, 2024). While the CFPB states that Administrative Procedures Act does not require it, the Bureau is opting to collect comments on the rule and may make revisions after reviewing any feedback. Comments will be accepted on the rule through August 1, 2024.
Update: Federal Register publication information and effective date have been added. References to a "proposal" have been removed; the interpretive rule was issued to become effective as published, but may be revised after the CFPB reviews the feedback it receives.

The Conference of State Bank Supervisors, which owns and operates the NMLS, is inviting comments on proposed 2025 NMLS fee changes affecting both state licensing and federal registration of mortgage loan originators. Comments are due by Monday, July 22, 2024, at 5 p.m. EDT.

The NMLS will conduct a virtual town hall discussion on the proposal on Thursday, June 13, at 1 p.m. EDT. Registration in now open for the event. Webinar space is limited, but a recording will be made available.

FDIC FIL-25-2024, issued yesterday, provides guidance to help financial institutions and facilitate recovery in areas of Massachusetts affected by severe storms and flooding September 11–13, 2023. The areas included in the declared disaster include Worcester and Bristol counties in Massachusetts.

The CFPB on Monday reported it had taken action against Western Benefits Group for charging illegal advance fees for student loan debt relief and misrepresenting to consumers that advance fees would go toward paying down their loans. The CFPB found Western Benefits also misrepresented that it was affiliated with and endorsed by the Department of Education, and that the company would help consumers consolidate student loans, lower consumers’ monthly student loan payments, or obtain loan cancellation.

The Bureau found that since 2016, Western Benefits Group’s practices caused approximately 5,970 consumers a total of approximately $974,590 in harm, reflecting the total fees they paid, less any refunds.

The CFPB is ordering Western Benefits to permanently cease operations and pay a $400,000 penalty to be deposited in the CFPB’s victims relief fund. The order also rescinds all existing agreements with consumers.

Western Benefits Group is reportedly a nonbank telemarketer headquartered in Pleasanton, California, that has offered debt relief services since at least 2016.

In January 2016, Western Benefits began to market, sell, and administer student loan debt relief services to consumers. Western Benefits used lead generators to increase its inbound telemarketing calls. The lead generators marketed debt relief services to consumers through email marketing campaigns and web campaigns.

• Consent Order against Western Benefits Group, LLC

The FDIC on Friday announced a settlement with Bank of England, England, Arkansas, for violations of Section 5 of the Federal Trade Commission Act (Section 5), the Real Estate Settlement Procedures Act (RESPA), the Fair Credit Reporting Act (FCRA), and the Home Mortgage Disclosure Act (HMDA). The bank has stipulated to the issuance of an Order to Pay Civil Money Penalty (CMP) in the amount of $1.5 million. In addition, nine former employees of the Bank of England have stipulated to individual enforcement actions. Based on the FDIC’s findings, the bank made $1.9 million in remediation to over 900 harmed consumers.

Section 5 prohibits banks from engaging in unfair or deceptive acts or practices. The FDIC determined that the bank, through one of its loan production offices (LPOs), violated Section 5 by misrepresenting to consumers that they would be able to skip multiple loan payments when refinancing a Department of Veterans Affairs (VA) mortgage loan. The FDIC also determined that loan officers’ or LPO’s misrepresented to consumers their relationship with the VA. Bank of England was also fined $129,800 in October 2021 for similar deceptive activity alleging a relationship with the VA.

The FDIC also determined that the bank failed to provide consumers with firm offers of credit and required disclosures as required by the FCRA, and the bank failed to report accurate data on its 2021 loan application register in violation of HMDA.

The nine enforcement actions against former Bank of England employees were announced in January.

The FDIC has issued FIL-24-2024 with guidance to help financial institutions and facilitate recovery in areas of Iowa affected by severe storms and tornadoes from April 26–27, 2024.

The CFPB has announced is has sued SoLo Funds, Inc., a fintech company that operates a nationwide website and mobile-application based peer-to-peer lending platform through which consumers can obtain small-dollar, short-term loans. SoLo markets its lending platform to consumers as a consumer-friendly alternative to high-cost, short-term loans.

The Bureau sued SoLo for deceiving borrowers about the total cost of loans. Despite advertising zero-interest loans or 0% APR loans, SoLo’s use of dark patterns ensures that almost every borrower pays a fee, in the form of a “tip” or “donation.” The CFPB is seeking, among other things, injunctions against SoLo to prevent future violations, monetary relief for borrowers, forfeiture of ill-gotten gains, and a civil money penalty.

According to the Bureau's complaint, Since at least 2018, SoLo has operated a digital lending platform through which consumers can obtain short-term loans. The maximum SoLo loan amount is $575, and the minimum is $20. SoLo brokers loans between consumer borrowers and investors. SoLo requests consumers pay fees to lenders and to SoLo, which the company refers to as “tips” and “donations,” respectively. SoLo services and collects on loans brokered through its platform. While SoLo claims fees paid to lenders and the company are voluntary, the CFPB alleges that is not the case. When consumers reach the part of the application that asks them to pay a fee to SoLo, consumers only see options for what percentage to give—none of the options is zero. SoLo also informs prospective lenders of the fee they will receive from a consumer to fund a loan. The result is that consumers who do not pay a fee to lenders are unlikely to get their loans funded. In fact, as of December 31, 2022, only 0.5% of funded loans did not include a fee paid to the lender by the borrower.

The CFPB alleges that SoLo has violated the Consumer Financial Protection Act and the Fair Credit Reporting Act. The company deceives borrowers about the cost of credit, uses dark patterns to trick borrowers, services and collects on loans that are void and uncollectible, and does not have procedures to assure the maximum possible accuracy of its consumer reports. The CFPB’s lawsuit against SoLo seeks a stop to alleged unlawful conduct, forfeiture of ill-gotten gains, redress payments to harmed consumers, and imposition of a civil money penalty

The CFPB has posted an update on its Small Business Lending rule under section 1071 of the Dodd-Frank Act. The rule, which amends Regulation B to require the collection and reporting of certain small business lending data on applications for credit for women-owned, minority-owned, and small businesses, was to have become effective on August 23, 2023. However, some lenders filed challenges against the rule in a federal court in Texas.

The court, on July 31, 2023, stayed the rule for certain lenders pending the Supreme Court's decision in CFPB v. CFSA [see Friday's Top Story]; on October 26, 2023, the court extended the stay to all lenders covered by the rule. In the event of a reversal in the CFSA case, the Texas court ordered the CFPB to extend the rule's compliance deadlines to compensate for the period stayed.

The CFPB now plans to issue an interim final rule to extend compliance deadlines. As 290 days have elapsed between the July 31 order and the CFSA decision on May 16, the interim final rule will extend compliance dates as follows:

• For Tier 1 institutions (highest volume lenders), the original compliance date of October 1, 2024, will be extended to July 18, 2025, and the first filing deadline will be June 1, 2026.
• For Tier 2 institutions (moderate volume lenders), the April 1, 2025, compliance date will be extended to January 16, 2026, with a first filing deadline on June 1, 2027.
• For Tier 3 institutions (smallest volume lenders), the January 1, 2026, compliance date will be extended to October 18, 2026, with a first filing deadline on June 1, 2027.

UPDATE: Updated to correct an incorrect date.

The OCC has posted a list and schedule of workshops designed to meet the needs of new directors, experienced directors, and senior management of national community banks and federal savings associations wishing to review fundamentals or get critical updates. Two series of workshops have been scheduled throughout the year:

• Basic Series, which includes Building Blocks (1.5 days in person or 3 hour virtual workshop)
• Risk Management Series, which comprises:
  • Risk Governance (1 day in person or 3 hours virtually)
  • Credit Risk (1 day in person or 3 hours virtually)
  • Operational Risk (1 day in person or 3 hours virtually)
  • Compliance Risk (1 day in person or 3 hours virtually)
  • Capital Markets (1/2 day in person)

The schedule of the workshops and online registration are available on the OCC's website.