CFPB Proposes Interpretive Rule Characterizing Earned Wage Access Products as Loans
Sheppard, Mullin, Richter & Hampton LLP Blog
by A.J. Dhaliwal, Mehul Madia and Sherwin Root
6h ago
On July 18, the CFPB proposed a new interpretive rule that would characterize earned wage access (“EWA”) products as extensions of credit and subject to the Truth in Lending Act and Regulation Z. Under the interpretive guidance, both the “tipping” function on EWA products, and the “expedited funds delivery fee” would be treated as finance charges, and would require the creditor to make the disclosures required for unsecured extensions of credit under Regulation Z. However, an employer-sponsored program which is provided at no cost to the employee (i.e., without what the CFPB has deemed a ..read more
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New Florida Law Overhauls Consumer Finance Loan Interest Rate Requirements
Sheppard, Mullin, Richter & Hampton LLP Blog
by A.J. Dhaliwal, Mehul Madia and Maxwell Earp-Thomas
6h ago
Florida recently enacted H1347, revising the state’s criteria for what constitutes usurious consumer loans.  The Florida Consumer Finance Act prohibits charging an interest rate of more than 18% per year on a loan of $25,000 or less. The new law revises the current rules for certain exceptions to this 18% cap. The updated exceptions change the maximum interest rates that lenders can charge on different portions of a loan, depending on the amount borrowed. Here is how the new limits work: For the first $10,000 borrowed. The interest rate can be up to 36%. For the portion of the ..read more
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Pennsylvania Amends Data Protection Requirements with Revised Breach Notification Act
Sheppard, Mullin, Richter & Hampton LLP Blog
by A.J. Dhaliwal, Mehul Madia and Skylar Stoudt
6h ago
On June 28, Pennsylvania took a significant step to enhance its data protection framework by updating the Breach of Personal Information Notification Act through the enactment of SB 824. This new legislation revises the older 2005 law and places a stronger emphasis on the security of digital data. It also introduces more stringent guidelines for notifying consumers and relevant authorities following a data breach. Under the new law, if a data breach affects more than 500 Pennsylvania residents, entities are required to notify both the impacted individuals and the Pennsylvania Attorney Gen ..read more
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CFPB Wins Big Reversal in Illinois Redlining Lawsuit
Sheppard, Mullin, Richter & Hampton LLP Blog
by A.J. Dhaliwal and Mehul Madia
6d ago
On July 11, the Seventh Circuit Court of Appeals reversed a lower court’s decision dismissing a CFPB action against an Illinois-based mortgage lender and its owner for violations of the Equal Credit Opportunity Act.  In 2020, the Bureau brought suit against the lender alleging that company employees regularly made statements on a company-sponsored radio program that would discourage black prospective applicants from applying for a mortgage. The radio program, hosted by the company’s owner and a senior loan officer, was in a format often referred to as “long-form commercial advertisement ..read more
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CFPB Proposes Revamped RESPA Mortgage Servicing Rules
Sheppard, Mullin, Richter & Hampton LLP Blog
by A.J. Dhaliwal, Mehul Madia and Maxwell Earp-Thomas
6d ago
On July 10, the CFPB announced proposed rules for mortgage servicers, aimed at helping homeowners avoid foreclosures. The new rules, which would modify RESPA and Regulation X’s existing mortgage servicing framework, are designed to streamline the process for obtaining mortgage assistance, and incentivize servicers to prioritize borrower aid over foreclosure. The current rules that govern mortgage servicing were developed in response to the severe spike in foreclosures following the 2008 financial crisis. These rules in many cases require adherence to more rigid timing requirements. F ..read more
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Latest CFPB Supervisory Highlights Focuses on Servicing and Debt Collection Practices
Sheppard, Mullin, Richter & Hampton LLP Blog
by A.J. Dhaliwal, Mehul Madia and Celene Gayle*
2w ago
On July 2, the CFPB released its Summer 2024 Supervisory Highlights, which focused on the servicing and collection of consumer debt. The report shared key findings from recent supervisory examinations of auto and student loan servicing companies and debt collectors. In addition, the report highlighted issues with deposit and prepaid accounts, with a focus on medical credit card practices. Significant findings include the following: Auto loan servicing. The CFPB found that auto loan servicers engaged in unfair acts or practices by failing to auto-debit consumers’ final payments via their autop ..read more
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FTC Files Action Against Student Debt Relief Enterprise
Sheppard, Mullin, Richter & Hampton LLP Blog
by A.J. Dhaliwal and Mehul Madia
2w ago
On June 28, the FTC announced it had filed an action in federal court against a California-based student debt relief enterprise for deceptive practices, including unlawfully obtaining advance fees for debt relief, and pretending to be affiliated with the Department of Education for engaging new customers. The U.S. District Court for the Central District of California entered a temporary restraining order on June 24 against the defendants. According to the complaint, the defendants deceived low-income borrowers into paying hundreds of dollars for services that were “made up, not as described, o ..read more
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Federal Reserve Board Issues Cease and Desist Order Against Banking-As-A-Service Provider
Sheppard, Mullin, Richter & Hampton LLP Blog
by A.J. Dhaliwal and Mehul Madia
2w ago
On June 14, the Federal Reserve Board (Fed) released a cease and desist order against an Arkansas-based banking-as-a-service (BaaS) provider for compliance and risk management failures. As part of the order, the bank is prohibited, without prior approval, from (i) establishing any new fintech partners, subsidiaries, business lines, products, programs, services, or program managers, or (ii) offer new products, programs, or services to an existing fintech partner, program manager, or subsidiary. According to the Fed, its examination found risk management deficiencies with the bank back in August ..read more
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CFPB Extends Compliance Deadline for Section 1071 Rule
Sheppard, Mullin, Richter & Hampton LLP Blog
by A.J. Dhaliwal and Mehul Madia
2w ago
On June 25, the CFPB released a formal action to extend the compliance deadlines for its Section 1071 small business lending rule (previously discussed here, here, and here). Once issued, the rule was challenged in the United States District Court for the Southern District of Texas and stayed pending the Supreme Court’s decision in CFPB v. CFSA. After the Bureau prevailed at the Supreme Court, the federal court ordered the Bureau to extend the compliance deadline to compensate for the stay.  Under the new rule, the deadlines are extended out 290 days. Accordingly, the new dates ..read more
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Supreme Court Strikes Down Chevron: What Now?
Sheppard, Mullin, Richter & Hampton LLP Blog
by Moorari Shah, A.J. Dhaliwal and Mehul Madia
2w ago
On June 28, the United States Supreme Court overturned a decades-old precedent, Chevron v. Natural Resources Defense Council, Inc., 467 U. S. 837, a ruling that instructed judges about when they could defer to federal agencies’ interpretations of law in rulemaking. In Loper Bright Enterprises v. Raimondo, the Court held that the Administrative Procedure Act “requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority.”  Chevron had applied a two-step approach to interpreting federal statutes. First, courts had to ..read more
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