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Consumer finance regulatory news and trends



This regular publication by DLA Piper lawyers focuses on helping clients navigate the ever-changing consumer finance regulatory landscape.

Enforcement actions

CFPB announces $150,000 settlement with debt-relief companies for deceptive acts or practices. The CFPB announced a consent order with a debt-relief and credit-repair company and its principals for UDAAP and TSR violations concerning its marketing and sales practices. The CFPB alleged that the company (i) made false promises that its services would eliminate consumers’ credit card debt and improve their credit scores and (ii) charged illegal advance fees for debt-relief and credit-repair services. Under the terms of the settlement agreement, the defendants will be prohibited from telemarketing any consumer-financial products or services and from offering financial-advisory, debt-relief or credit-repair services.

FTC announces $18 million settlement with online lender for deceptive marketing practices. The FTC announced a consent order against an online lender for UDAAP violations concerning alleged misrepresentations in communications with loan applicants. The FTC alleged that the company, despite promising loan applicants that they would receive a specific loan amount with “no hidden fees,” charged consumers hundreds or thousands of dollars in upfront fees. Further, the company misrepresented to consumers that their loans were “on the way” and “100% backed” while knowing that many applicants would never receive a loan. The company also charged fees to consumers who cancelled automatic payments or paid off their loans. The consent order requires the lender to conspicuously and clearly disclose any prepaid, upfront or origination fees as well as the amount that borrowers will actually receive.

FTC files amended complaint adding Gramm-Leach-Bliley Act violations to enforcement action against merchant cash advance provider. The FTC filed an amended complaint against a merchant cash advance company and its principals, adding claims under the Gramm-Leach-Bliley Act (GLBA) to its earlier complaint asserting UDAP claims in connection with misrepresentation of lending terms and in collection practices. The new claim alleges that the allegedly deceptive marketing practices also constitute violations of section 521 of the GLBA, which prohibits any person from obtaining or attempting to obtain customer information of a financial institution by making false or fraudulent statements. The FTC is seeking civil monetary penalties of up to $43,792 for each violation of the GLBA.

FTC announces $28.6 million settlement with payment processors for aiding criminal student loan debt relief scam. The FTC announced a consent order with two Florida-based payment-processing companies concerning their alleged role in aiding a criminal student loan debt relief operation that scammed consumers out of $62 million. The FTC alleged that the companies and their CEO had knowingly submitted fraudulent payment processing applications to credit card and ACH processors to obtain merchant processing for the scam. The FTC’s settlement with the companies will require them to pay a monetary judgment of $28.6 million, which will be partially suspended after payments of $20,493 due to the companies’ inability to pay the full amount. Additionally, the settlement will bar the companies and their CEO from engaging in payment processing, sales and any further deceptive acts or practices.

New York DFS announces settlements with auto lenders for fair lending violations. The New York DFS announced consent orders with two companies for alleged violations of New York’s fair lending law with respect to indirect auto lending. The DFS alleged that the companies both failed to monitor dealers in their loan purchase programs, in which dealers had broad discretion to apply interest rate markups, and were found to be charging minority groups 20 to 59 basis points more than similarly situated non-Hispanic white borrowers.

Regulatory developments

CFPB issues final rule limiting foreclosures after federal moratoria are lifted. The CFPB issued a final rule that amends Regulation X of the Real Estate Settlement Procedures Act (RESPA) to protect borrowers whose loans will soon exit COVID-19 hardship forbearances. The rule includes five amendments: (i) additional procedural safeguards for borrowers with COVID-19-related hardships through January 1, 2022; (ii) permission for servicers to offer streamlined loan modifications based on the evaluation of incomplete loss mitigation applications; (iii) through October 1, 2022, obligation for servicers to discuss forbearance and homeownership counseling services if the borrower is not in a forbearance program or is nearing the end of a forbearance program; (iv) requirement for servicers to contact borrowers in COVID-19-related hardship programs based on incomplete loss mitigation applications no later than 30 days before the end of the program and inquire whether they wish to complete the application; and (v) clarification of the definition of COVID-19-related hardships. The final rule will be effective on August 31, 2021.

CFPB issues interpretive rule on Military Lending Act examinations. The CFPB issued an interpretive rule explaining the basis for its authority to examine supervised financial institutions for violations of the Military Lending Act (MLA), reversing a 2018 determination that the CFPB lacked authority to conduct MLA examinations because it was not considered a federal consumer financial law for the purposes of the Consumer Financial Protection Act (CFPA). The Bureau stated that it can conduct MLA examinations based on its general authority under the CFPA to conduct examinations for “risks to consumers,” which includes MLA compliance.

CFPB issues enforcement bulletin on post-COVID-19 credit reporting of rental and eviction information.The CFPB has issued an enforcement bulletin, stating that it intends to prioritize scrutiny of consumer reporting agencies and furnishers’ compliance with accuracy and dispute obligations under the Fair Credit Reporting Act (FCRA) and Regulation V with respect to rental and enforcement information. In addition, the CFPB expressed concern about reporting on “questionable charges and fees” in response to recent consumer complaints.

OCC issues statement on rescinding 2020 Community Reinvestment Act Rule and joint rulemaking on modernization.The OCC issued a statement that it plans to propose rescinding a rule that had been issued in May 2020 under the Community Reinvestment Act and put forward a proposal for joint rulemaking with the Federal Reserve Board and FDIC. According to Acting Comptroller Michael Hsu, this joint rulemaking would aim to strengthen and modernize the CRA “[t]o ensure fairness in the face of persistent and rising inequality and changes in banking,” which have become even more evident over the past year given the “disproportionate impacts of the pandemic on low and moderate income communities[.]”

OCC reports that mortgage performance declines in first quarter 2021. The OCC issued a report on the performance of first-lien mortgages in the federal banking system during Q1 2021. The report shows that the number of mortgages that were current and performing by the end of the quarter decreased by 2.3 percent from the previous year. Additionally, the percentage of seriously delinquent mortgages (ie, mortgages that are 60 or more days past due or are held by bankrupt borrowers whose payments are 30 or more days past due) was 4.6 percent in first quarter 2021, compared to 5.2 percent in the prior quarter and 1.4 percent a year ago. Foreclosures have increased by 5.6 percent – but have decreased by 95.8 percent compared to a year ago, due in part to COVID-19-related moratoria. Modifications have increased by 16.4 percent from the previous year, with over half of these modifications reducing borrowers’ monthly payments.

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Are Sallie Mae Student Loans Federal or Private?



When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances



Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit



Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.



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