Top Story Lending Related

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.

The Associated Press reports the U.S. Supreme Court on Thursday rejected an attack on the constitutionality of the CFPB's funding mechanism. The justices ruled 7 to 2 that the funding method prescribed in the Dodd-Frank Act does not violate the Constitution, reversing a lower court. Justice Clarence Thomas wrote the majority opinion; justices Samuel Alito and Neil Gorsuch dissented.

The case was brought by payday lenders who object to a Bureau rule that limits their ability to withdraw funds directly from borrowers’ bank accounts. It’s among several major challenges to federal regulatory agencies on the docket this term for a court that has for more than a decade been open to limits on their operations.

Unlike most federal agencies, the consumer bureau does not rely on the annual budget process in Congress. Instead, it is funded directly by the Federal Reserve, with a current annual limit of around $600 million. The federal appeals court in New Orleans, in a novel ruling, held that the funding violated the Constitution’s appropriations clause because it improperly shields the CFPB from congressional supervision. Thomas reached back to the earliest days of the Constitution in his majority opinion to note that “the Bureau’s funding mechanism fits comfortably with the First Congress’ appropriations practice.”

The SCOTUS decision reverses the judgment of the Court of Appeals for the Fifth Circuit and remands the case for further proceedings consistent with SCOTUS's opinion.

The FFIEC has made the 2024 edition of A Guide to HMDA Reporting: Getting it Right! available for download.

The OCC has reported that Acting Comptroller of the Currency Michael J. Hsu testified yesterday on the OCC's priorities before the House Committee on Financial Services.

In his testimony, Hsu discussed the OCC’s work to guard against complacency, adapt to digitalization, manage climate-related financial risk, and promote fairness in banking. He also provided an overview of the state of the federal banking system and recent key regulatory developments.

• Oral statement
• Written testimony

The CFPB yesterday announced it has distributed more than $384 million to about 191,000 consumers harmed by Think Finance, a Texas-based online lender that deceived borrowers into repaying loans they did not owe.

The funds came from the CFPB's victims relief fund, which has now distributed more than $1 billion to consumers harmed by scams, fraud, and other illegal practices. The fund is a unique tool that helps the CFPB make harmed consumer whole when lawbreakers are unable to fully compensate their victims.

In November 2017, the CFPB filed suit against Think Finance, alleging that the company deceived consumers into repaying loans they did not owe. Think Finance illegally collected on loans that were void under state laws governing interest rate caps and lender licensing requirements. The company misrepresented to consumers that they owed money on these loans, made electronic withdrawals from consumers’ bank accounts, and sent letters demanding payment.

The Department of Housing and Urban Development yesterday announced it has entered into a Conciliation Agreement with Rocket Mortgage, LLC, resolving allegations that Rocket Mortgage denied a mortgage loan application based on race because the home being purchased was located within the Tribal boundaries of a federally recognized reservation.

The agreement stems from a complaint filed by a couple applying for a mortgage to purchase a single-family home within the boundaries of the Flathead Indian Reservation in St. Ignatius, Montana. Rocket Mortgage denied the loan application. As a result, complainants allege they were forced to pay a higher interest rate and accept a loan from another lender on less-favorable terms. The agreement resolves the complaint with Rocket Mortgage. It secures $65,000 compensation for complainants, requires Rocket Mortgage to provide fair lending training to its employees, and requires Rocket Mortgage to abide by fair lending requirements for applicants seeking residential mortgage credit located within the boundaries of a Native American reservation. Additionally, Rocket Mortgage will invest at least $30,000 to provide financial support for programs that improve housing conditions, consumer financial literacy and education, outreach and homeownership education or counseling for Native Americans. Rocket Mortgage also agreed to conduct outreach through its website and social media platforms describing the company’s broad range of financing options available to eligible applicants whose loans are secured by property located within the boundaries of Native American reservations.