Top Story Lending Related

The Consumer Financial Protection Bureau has announced it has issued an order against BloomTech and its CEO, Austen Allred, for deceiving students about the cost of loans and making false claims about graduates’ hiring rates. The CFPB found that —

• BloomTech and Allred falsely told students the school’s “income share” agreement contracts were not loans, when in fact the agreements were loans carrying an average finance charge of around $4,000
• BloomTech and Allred lured prospective enrollees with inflated promises of job-placement rates as high as 86 percent, when the company’s internal metrics showed placement rates closer to 50 percent and in some cases as low as 30 percent.

The Bureau's consent order permanently bans BloomTech from all consumer-lending activities and bans Allred from any student-lending activities for ten years. The CFPB is also ordering BloomTech and Allred to cease collecting payments on income share loans for graduates who did not have a qualifying job, eliminate finance changes for certain agreements, and allow students the option to withdraw without penalty. BloomTech and Allred must also pay over $164,000 in civil penalties, which will be deposited in the CFPB’s victims relief fund.

The CFPB's press release states that BloomTech is a for-profit vocational school that is headquartered in San Francisco and owned primarily by Allred and various Silicon Valley venture-capital funds. Allred founded the company as the Lambda School in 2017, and rebranded it as BloomTech or the Bloom Institute of Technology in 2022. BloomTech operates short-term, typically six-to-nine-month training programs in areas such as web development, data science, and backend engineering. Since 2017, BloomTech originated at least 11,000 income share loans, with most of BloomTech students funding their tuition with these loans. Under almost all these loans, students who earn more than $50,000 in a related field are required to pay BloomTech 17 percent of their pre-tax income each month until they make 24 payments or hit a “cap” of $30,000 in total payments.

The Social Security Administration has published [89 FR 27472] a notice of a revision in the upper transactions limit to the upper subscription tier for the electronic Consent Based Social Security Number (SSN) Verification (eCBSV) service, to become effective for subscription payments made on or after April 22, 2024.

The top tier subscriber, making more than 25 million inquiries a year, will pay an annual fee of $8.25 million.

The CFPB has published in today's Federal Register two Consumer Financial Protection Circulars previously posted to its website.

• Adverse Action Notification Requirements and Proper Use of Sample Forms [89 FR 27361], released on the CFPB's website on September 19, 2023
• Deceptive Marketing Practices about the Speed or Cost of Sending a Remittance Transfer [89 FR 27357], released on the CFPB's website on March 27, 2024

The Federal Trade Commission has posted a consumer alert concerning scammers taking advantage of news coverage of student loan forgiveness programs.

Scammers have called consumers to say they are affiliated with Federal Student Aid (FSA) or the Department of Education, and that they are following up on the consumer's eligibility for a new loan forgiveness program. They may even have information about the consumer's loan, including the balance or account number. But they are looking for two things -- upfront fees, which are illegal, and information like the consumer's FSA ID login information, which can be used by the scammer to cut the consumer off from their loan servicer or steal the consumer's identity.

In a related press release, the FTC announced that Marco Manzi, the ringleader of a student loan debt relief scam, will be permanently banned from the debt relief industry and is required to turn over assets as part of a settlement with the Commission.

The Federal Housing Finance Agency has announced it will host a Federal Home Loan Bank (FHLBank) and Community Development Financial Institution (CDFI) Symposium in Washington, D.C., on Thursday, June 20, 2024.

The Symposium follows a recommendation in FHFA’s ​​​FHLBank System at 100: Focusing on the Future report ​that calls for increased FHLBank engagement with mission-oriented members, and will feature representatives from both CDFIs and the FHLBanks discussing topics that include:

• FHLBank membership and programs
• Appropriately measuring risk in CDFI lending
• Innovative FHLBank and CDFI products and partnerships

This in-person event will be hosted at FHFA Headquarters at 400 7th Street, S.W., Washington, D.C. An option to attend virtually will also be available.

The Financial Stability Board yesterday reported that its Regional Consultative Group for Europe met Thursday in Dublin.

The group discussed global and regional macroeconomic developments and their implications for financial stability. The macro-financial environment continues to be shaped by the adjustment of the global economy to high interest rates, while geopolitical factors are weighing on the outlook. Despite tight financing conditions and subdued confidence, growth in the region is projected to gradually pick up, amid a recovery in real incomes. In global financial markets, certain asset valuations remain stretched and vulnerable to adjustment in the face of adverse shocks. Members discussed sectors which warranted close monitoring, specifically the outlook for – and risks associated with – commercial real estate markets, which have been undergoing a substantial adjustment recently, due to both cyclical and structural shocks.

Members received an update on the FSB’s work priorities for 2024, including its deliverables under Brazil’s G20 Presidency. The effective implementation of its global regulatory and supervisory framework for crypto-asset activities and markets is a key focus for the FSB. Members shared their experiences in addressing regulatory challenges stemming from the cross-border and cross-sectoral nature of crypto-asset activities. They also exchanged views on preparations for new crypto-asset regulations entering into force, such as the Regulation on Markets in Crypto-assets (MiCA) in the European Union and the proposed regulatory regime for crypto-assets in the United Kingdom.

The FSB coordinates at the international level the work of national financial authorities and international standard-setting bodies and develops and promotes the implementation of effective regulatory, supervisory, and other financial sector policies in the interest of financial stability. It brings together national authorities responsible for financial stability in 24 countries and jurisdictions, international financial institutions, sector-specific international groupings of regulators and supervisors, and committees of central bank experts. The FSB also conducts outreach with approximately 70 other jurisdictions through its six Regional Consultative Groups.

The Department of Housing and Urban Development has published [89 FR 25644] a notice of its intention to competitively offer approximately 1,265 home equity conversion mortgages (HECM, or reverse mortgage loans) secured by vacant properties with an updated loan balance of approximately $346 million. The sale will consist of due and payable Secretary-held reverse mortgage loans. The mortgage loans consist of first liens secured by single family, vacant residential properties, where all borrowers are deceased, and no borrower is survived by a non-borrowing spouse.

The Secretary will prioritize up to 50 percent of the offered assets for award to nonprofit organizations or governmental entity bidders with a documented housing mission. The notice also generally describes the bidding process for the sale and certain entities who are ineligible to bid. This is the twelfth sale offering of its type and will be held on May 7, 2024.

The Federal Housing Finance Agency has reported that the agency and the Conference of State Bank Supervisors have entered into a formal agreement designed to facilitate information sharing with respect to nonbank mortgage companies.

The memorandum of understanding establishes substantive information sharing protocols between state financial regulators and FHFA, improving the ability to coordinate on market developments, identify and mitigate risks, and ultimately, further protect consumers, taxpayers, and the nation’s housing finance system.

State financial regulators are the primary regulators of nonbank mortgage companies. The FHFA is the regulator and conservator of two of the nonbank mortgage industry’s largest and most important counterparties, Fannie Mae and Freddie Mac. While each supervisory agency maintains specific authorities related to the mortgage industry, only state financial regulators have complete prudential authority over nonbank mortgage companies.

The U.S. Senate Committee on Banking, Housing, and Urban Affairs yesterday announced that Ranking Member Tim Scott has introduced a measure (Senate Joint Resolution 70) under the Congressional Review Act to overturn the CFPB's rule capping credit card late penalties. The report said that Scott's resolution has the support of Republicans on the Senate Banking Committee and from members across the Republican conference.

The House of Representatives has a similar resolution (House Joint Resolution 122) under consideration.

If the resolutions pass in both houses of Congress and the surviving measure is signed by President Biden (or the president's veto is overturned by both houses), the CFPB's rule will be vacated and the Bureau would not be permitted to issue a similar rule affecting credit card late fees.

The CFPB's rule, which is also being challenged in the courts, carries an effective date of May 14, 2024.

The Department of Veterans Affairs has published [89 FR 25142] a final rule to rename and clarify certain loss-mitigation terms used in the VA's regulations. The VA is making these changes to align the names and definitions with their general use in the housing finance industry and believes that these revisions will help avoid confusion and enable servicers and veterans to address loan defaults more quickly and effectively.

The rule, which amends the VA's “Loan Guaranty” regulation at 38 C.F.R. Part 36, will become effective on May 10, 2024.