Top Story Lending Related

Yesterday, the CFPB announced it had released an advisory opinion and research report on a form of home seller financing that is often referred to as contract for deed.

Under contract-for-deed deals, the seller agrees to turn over a home’s deed only after the buyer completes a series of payments. During the contract term, the borrower often carries the responsibilities of homeownership, including repairs, property taxes, and improvements. The deals often have little oversight, and investment groups and other sellers can set a series of traps that leave buyers in unlivable homes, on the hook for tax liens and expensive repairs, and at risk of losing their down payments and homes. The advisory opinion affirms that federal home lending rules and laws cover contracts for deed and provide key consumer protections. In yesterday’s report, the CFPB traces the history of contract-for-deed lending. The CFPB has found that these products often target Black, Hispanic, immigrant, and religious communities.

The CFPB's opinion holds that these contracts are in fact covered by the federal Truth in Lending Act. This law imposes certain requirements on larger sellers – often investment groups – such that they must assess borrowers' ability to repay loans, provide informative and accurate disclosures, and limit or avoid balloon payments.

PUBLICATION UPDATE: Published at 89 FR 68086 on 8/23/2024.

The CFPB also issued a Consumer Advisory on Contracts for Deed.

The CFPB yesterday announced it had filed a proposed order to resolve its lawsuit against Daniel A. Rosen, Inc., d/b/a Credit Repair Cloud and Daniel A. Rosen, its CEO, for providing substantial assistance or support to credit repair businesses that charge illegal advance fees to consumers. The proposed order, if entered by the court, would impose a $2 million civil penalty against Rosen and a $1 million civil penalty against Credit Repair Cloud. The order would also require the company and Rosen to take steps to ensure credit repair companies using Credit Repair Cloud stop charging consumers illegal advance fees.

On September 20, 2021, the Bureau filed a lawsuit against Credit Repair Cloud — a Los Angeles, California, company that since at least 2013 has provided an “all-in-one solution” for people to start their own credit repair businesses — and its owner and CEO, Daniel Rosen. On January 7, 2022, the Bureau filed an amended complaint. The Bureau alleged that Credit Repair Cloud and Daniel Rosen violated the Telemarketing Sales Rule by providing substantial assistance to credit repair businesses that violated the Telemarketing Sales Rule’s advance-fee prohibition. Specifically, the Bureau alleged that Rosen and Credit Repair Cloud encouraged the credit repair businesses that use their services — including Credit Repair Cloud’s trainings, materials, and software — to telemarket and charge unlawful advance fees. The Bureau further alleges that Rosen and Credit Repair Cloud knew or consciously avoided knowing that these credit repair businesses were telemarketing their services and charging consumers unlawful advance fees. The Bureau also alleges that by violating the Telemarketing Sales Rule, Credit Repair Cloud and Daniel Rosen violated the Consumer Financial Protection Act of 2010.

The Treasury Department has announced that Treasury, the CFPB, and the FTC have taken actions to address unfair and deceptive consumer acts and practices in the residential solar power sector. Treasury, CFPB, and FTC released Consumer Advisories warning the public on how to spot potential unfair and deceptive practices and encouraging consumers to file complaints of suspicious behavior to FTC, CFPB, and state consumer protection offices.

Treasury, CFPB, and FTC, along with the Departments of Energy and Housing and Urban Development, also announced an interagency partnership with the goal of coordinating efforts to prevent predatory practices. The new partnership will foster greater communication and collaboration between the agencies and better protect consumers from bad actors.

Treasury Resources:

• Consumer Solar Awareness website
• Solar Consumer Advisory
• Before You Buy Solar Panels
• Before You Sign a Solar Lease
• Before You Sign A Power Purchase Agreement
• Before You Sign A Solar Subscription

FTC Resources:

• Consumer: How To Avoid Getting Burned
• Business: Don't Waste Your Energy On a Solar Scam

CFPB Resources:

• Issue Spotlight
• Consumer Advisory

Our quick look this morning at the Federal Reserve Board's archive of Community Reinvestment Act evaluations revealed that the Reserve Banks released 21 evaluations last month. We congratulate The Northwestern Bank (Chippewa Falls, Wisconsin), State Street Bank and Trust Company (Boston, Massachusetts), and Vista Bank (Dallas, Texas) on their Outstanding ratings. The remaining eighteen banks received Satisfactory ratings.

The Federal Trade Commission has announced that, as a result of a Federal Trade Commission lawsuit, the owners and operators of a sprawling credit repair operation known as Financial Education Services (FES) will end the practices that the FTC alleged created a pyramid scheme and also violated the Credit Repair Organizations Act. In addition, the proposed court orders [see Case Timeline HERE] include substantial monetary penalties.

The FTC first filed suit against the FES scheme in May 2022, alleging that the company preyed on consumers with low credit scores by luring them in with the false promise of an easy fix and then recruiting them to join a pyramid scheme selling the credit repair services to others, costing them millions of dollars.

The proposed settlements in the case will lead to more than $12 million being turned over to the FTC for use in providing refunds to affected consumers, as well as conduct prohibitions against the defendants.

The FDIC has issued a list of 54 state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA).

One of the banks — Farmers Bank & Trust, Great Bend, Kansas, received a rating of "needs to improve." Fifty-one banks received ratings of "satisfactory." We congratulate two banks — Stock Yards Bank & Trust Company, Louisville, Kentucky, and First Federal Bank of Kansas City, Lees Summit, Missouri — on their "outstanding" ratings.

The OCC has released a list of 27 Community Reinvestment Act performance evaluations that became public during July 2024. Of the 27 evaluations, one is rated substantial noncompliance, 20 are rated satisfactory, and six are rated outstanding.

The Lemont National Bank, Lemont, Illinois, received the substantial noncompliance rating.

Outstanding ratings were awarded to—

• Black Hills Community Bank, National Association, Rapid City, South Dakota
• Eastern Savings Bank, FSB, Hunt Valley, Maryland
• First National Bank, Fort Pierre, South Dakota
• Home Savings and Loan Association of Carroll County, F.A., Norborne, Missouri
• Queensborough National Bank & Trust Company, Louisville, Georgia
• Sterling Federal Bank, F.S.B., Sterling, Illinois

The NCUA yesterday reported it issue2 two prohibition orders in July barring individuals from participating in the affairs of any federally insured depository institution. The orders were issued to:

• Jose Prado-Valero, a former employee of Financial Center First Credit Union in Indianapolis, Indiana, after finding that he engaged in an elaborate fraud to share credit union members’ personal information with non-members who fraudulently withdrew members’ funds, in exchange for a portion of the proceeds of the fraud. Valero pleaded guilty to a one-count information in federal court in April 2024.
• Tracy H. Thibodeau, a former employee of Vermont VA Federal Credit Union in White River Junction, Vermont, after finding that, as a branch manager of the credit union, she fraudulently obtained a personal Vermont VA FCU credit card and exempted herself from credit limits, late fees, interest payments, and making minimum monthly payments, defrauding the credit union of $137,170. She subsequently pleaded guilty to a charge of bank fraud in federal court.

FDIC FIL-50-2024, issued yesterday, lists steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Missouri affected by severe storms, straight-line winds, and flooding from May 19 to May 27, 2024.

FIL-51-2024, also issued yesterday, lists steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Kentucky affected by severe storms, straight-line winds, tornadoes, landslides, and mudslides from May 21 to May 27, 2024.

A notice was posted yesterday on the Department of Defense's Military Lending Act (MLA) website announcing a scheduled update to version 5.21 is scheduled for Thursday, August 8, 2024. Due to the update, the MLA website will not be available from 6:00 p.m. until 9:00 p.m. PDT (9:00 p.m. until midnight EDT) on August 8.