Washington Update

Bankruptcy News Briefs 7/19

What’s Happening in Midweek News?

Big Changes to West Virginia Debt Collection Laws Now in Effect

How New Credit Reporting Guidelines May Impact Consumers…and Lenders

Automatic Stay Does Not Preclude Criminal Restitution Collection

CFPB ignores request from OCC to postpone arbitration rule

Poll: Voters Support CFPB, Strict Financial Regulation

The economy has improved but money worries persist

Debt collector must face suit for accessing credit report

Second Circuit Holds that Contractually-Given Consent Cannot be Revoked Under TCPA

Consumers Making Less Than $40K Per Year Worried About Paying Off Debt

What kind of financial shape is your state in?

Annual bankruptcy filing total could approach 800K

Free of debt — with regrets

1,600 lawsuits filed in Colorado courts against students delinquent on school loans

Third Circuit Confirms That One Call Is All for TCPA Violation

District Court Confirms That Text Messages Completing Consumer-Initiated Transaction Are Not Telemarketing

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Washington Update

Krista DAmelio gives you the latest update from Washington! Stay informed about significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks with NACBA. Read it today!

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Save the Date for the 2018 NACBA Annual Convention on April 19-22 at the Sheraton in Downtown Denver!

 

Find out What’s Happening in DC in NACBA’s Washington Update -July 14th

Krista D’Amelio keeps NACBA members informed about significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks in our Washington Update.

On The Hill On Wednesday, July 12, 2017, the House Financial Services Committee held a hearing titled: “Monetary Policy and the State of the Economy”. The witness list included the Honorable Janet Yellen, Chair of the Board of Governors of the Federal Reserve System. In her testimony, Yellen described an economy that appears generally strong, with continued job gains and low unemployment, but that is affected by stubbornly low inflation. During the hearing, House members pressed Yellen on how the Federal Reserve would roll back its balance sheet, the central bank’s role in ensuring full employment and her views on bank supervision. One point of interest came during Full Committee Chairman Jeb Hensarling’s (R-TX) round of questioning. He asked whether the Federal Reserve would ever buy student loans, to which Yellen answered she was unsure about student debts, but can confirm the purchase of Treasury and Agency Securities. Hensarling continued to probe on whether the Federal Reserve has any plans to buy student loans because if the reserve did, it could conceivably forgive student loans of current graduates.

In The Agencies On Monday, July 10, the Consumer Financial Protection Bureau (CFPB) announced a new rule to ban companies from using mandatory arbitration clauses to deny groups of people their day in court. Many consumer financial products like credit cards and bank accounts have arbitration clauses in their contracts that prevent consumers from joining together to sue their bank or financial company for wrongdoing. The CFPB’s rule restores consumers’ right to file or join group lawsuits. By so doing, the rule also deters companies from violating the law. Under the rule, companies can still include arbitration clauses in their contracts, but companies subject to the rule may not use arbitration clauses to stop consumers from being part of a group action. The rule also makes the individual arbitration process more transparent by requiring companies to submit to the CFPB certain records, including initial claims and counterclaims, answers to these claims and counterclaims, and awards issued in arbitration.

OTHER On Wednesday, July 12, 2017, NACBA along with 55 other coalition groups led by The Institute for College Access and Success (TICAS), sent a letter to U.S. Secretary of Education Betsy DeVos strongly opposing the delay, dismantling, or weakening of the gainful employment regulations finalized in October 2014 and the “borrower defense to repayment” and college accountability regulations finalized in November 2016. In the letter, it was argued that the existence of a new rulemaking process provides no basis for the Department to refuse to implement and enforce the current regulations in the interim. If the Department wishes to alter current regulations, it must do so through negotiated rulemaking, not unilaterally outside the processes established by Congress. Please email Krista D’Amelio to obtain a final copy of the letter.

Feedback should be directed to Krista.DAmelio@NACBA.com

NACBA’s Washington Update

Krista D’Amelio, NACBA’s Director of Government Affairs & Communication gives you the lastest and  most significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks in this week’s Washington Update.

On The Hill On June 8 the House Subcommittee on Regulatory Reform, Commercial and Antitrust Law held a hearing titled “A Time to Reform: Oversight of the Activities of the Justice Department’s Civil, Tax and Environment and Natural Resources Divisions and the U.S. Trustee Program”. The hearing hear testimony from two witness panels. The first witness panel included: Clifford White III, Director of the U.S. Trustee Program, David Hubbert, Acting Assistant Attorney General Tax Division, Jeffrey Wood, Acting Assistant Attorney General Environment and Natural Resources Division, and Chad Readler, Acting Assistant Attorney General Civil Division. The second witness panel included President of Public Citizen Robert Weissman, Esq., Partner of Baker & Hostetler LLP Andrew Grossman, Esq., Partner of Foley and Lardner LLP Cleta Mitchell, Esq., and Manager of Election Law Reform Initiative, Senior Legal Fellow at the Heritage Foundation Hans von Spakovsky, Esq. In his testimony, Director Clifford White provided the Subcommittee an update on the facts and observations of the Trustee Program and highlighted matters of special importance to the bankruptcy system. Members of NACBA’s Legislative Committee submitted questions to the Subcommittee at the request of the House Judiciary Committee.

Senator Jack Reed (D-RI) and Senator Sherrod Brown (D-OH) reintroduced the Military Consumer Enforcement Act, S. 1389, on June 21st. The bill would allow the Bureau of Consumer Financial Protection to provide greater protection to servicemembers.The bill’s other co-sponsors include: Sens. Jon Tester (D-MT), Richard Blumenthal (D-CT), Tim Kaine (D-VA), Tammy Duckworth (D-IL.), Elizabeth Warren (D-MA), Tammy Baldwin (D-WI), Al Franken (D-MN), Amy Klobuchar (D-MN), Chris Van Hollen (D-MD) and Catherine Cortez-Masto (D-NV).

IN THE AGENCIES On Tuesday, June 20th U.S. Secretary of Education Betsy DeVos appointed A. Wayne Johnson, a former executive in the financial-services industry, to run the $1.3 trillion federal student loan portfolio. The position of chief operating officer of federal student aid has been vacant since May when James W. Runcie resigned, saying he couldn’t in “good conscience” lead the agency while it was facing rising scrutiny from the Trump administration about its management of the lending programs. Dr. Johnson worked in senior management at Visa and Deloitte before starting his own company, which captures credit-card transactions in real time and alerts card holders to better manage their accounts.

FROM THE INTEREST GROUPS Americans for Financial Reform and National Consumer Law Center issued separate statements on June 14th that condemns the decision of Education Secretary Betsy DeVos to abandon the victims of predatory colleges by delaying the update to the Borrower Defense rule, and creating two new negotiated rulemakings to re-do and likely dismantle both the Borrower Defense and Gainful Employment rules.

OTHER A recent Consumer Report analysis found the Affordable Care Act (ACA) to be a major reason for the decline in personal bankruptcy filings. The report reveals that since 2010, personal bankruptcy filings have dropped by about 50%. Experts say some of that is due to an improved economy and laws passed in 2005 that make it harder to declare bankruptcy. CR’s reporting found that the ACA’s provisions for mandatory coverage of pre-existing conditions and against annual and lifetime payout caps has helped consumers —especially Americans with serious medical issues— avoid bankruptcy.

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NACBA’s Washington Update IX

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This is the latest update from Washington, designed to keep NACBA members informed about significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks.  Feedback should be directed to mthompson@hastingsgroup.com.

Obviously, the big news out of Washington continues to be the election results.  NACBA members who joined us for the November 18 webinar, “The 2016 Election: What Now?,” heard NACBA leaders and our representatives in Washington answer the questions about what to expect in 2017 from the Administration, Congress and the courts.  We are planning to issue a special report in the next few weeks, after we learn more about the Cabinet and priorities of the Trump Administration and Congress.  Our report will focus not only on what to expect from the White House come January, but also the key agencies of interest to NACBA — Department of Justice, Consumer Financial Protection Bureau, and the Department of Education — as well as the leadership and key committees in Congress.

Continue reading for non-election news out of Washington this week.

ON THE HILL The 114th Congress has unofficially come to a close, but our elected officials are still at work.  Sen. Elizabeth Warren (D-MA) and Rep. Elijah Cummings (D-MD) are broadening their investigation of the Wells Fargo scandal to examine whether Prudential Financial insurance products were also charged to the bank’s customers without their knowledge.  In a December 13, 2016 letter to Prudential’s CEO, the two Democrats asked for documents related to the bank’s sales of Prudential insurance. They requested the information and a briefing by January 13, 2017.

The action came after three former Prudential (PRU) employees alleged that Wells Fargo employees signed up customers for a low-cost Prudential life insurance policy without their knowledge or permission.  The three former PRU employees filed a Dodd-Frank whistleblower complaint with the SEC alleging they were retaliated against after uncovering the misconduct.

IN THE AGENCIES Fannie Mae and Freddie Mac announced a program to aid homeowners who are behind on their mortgage payments.  The Flex Modification loan program will begin in January 2017 and replaces the Home Affordable Modification Program (HAMP), a foreclosure-prevention policy that’s set to expire at the end of this year. Loan servicers have until October 2017 to implement the program.

The new loan modification guidelines are expected to expand the population of homeowners eligible for lower monthly payments, short sales and other alternatives to foreclosure, according to Fannie Mae.

The Government Accountability Office (GAO) has released a report documenting the consequences that the Department of the Treasury’s practice of garnishing Americans’ social security payments has on student loan borrowers in default. The number of older Americans defaulting on education loans has steadily increased in recent decades, as many have returned to college or co-signed loans for family members. Unpaid debt has resulted in the government garnishing the benefits of 114,000 people age 50 and older in the past year, more than half of whom were receiving Social Security disability rather than retirement income.  The report found that for more than two-thirds of borrowers whose monthly benefit was below the poverty line, the money deducted from their Social Security benefits was enough only to pay fees and interest, so the amount of the debt was not even reduced. The report also found that of older student loan borrowers with a Social Security offset, 43% had held their loans for 20 years or more and 80% had held their loans for 10 years or more.  Although there are rules designed to protect a portion of the recipient’s benefits, the dollar amount protected has not changed since 1996, and leaves a borrower with only $750/month ($9,000/year) to live on.

MORE FROM CFPB  The Bureau released a report raising new concerns about costly fees and risky features that can be attached to certain college-sponsored accounts. The report comes after analysis of roughly 500 marketing deals between the schools and large banks found that many deals allow for risky features that can lead students to rack up hundreds of dollars in fees per year. The report also examines trends in the school-sponsored credit card market. The CFPB also issued a bulletin today reminding colleges and universities they are required to publicly disclose marketing agreements with credit card companies.  The campus banking report is available at here.

Both the Director of the CFPB and the head of the FHFA have expressed their intent to finish out their terms at their respective agencies.  Richard Cordray “has no plans” to leave the top job at the CFPB, the agency said. “Director Cordray was confirmed by a bipartisan group of 66 senators to serve a term until July 2018 and has no plans to step down,” CFPB Communications Director Jen Howard said in an email.  Mel Watt, the FHFA head overseeing Fannie Mae and Freddie Mac, will serve out the remaining two years of his term after President-elect Donald Trump takes office.  Watt made his intent clear during a recent meeting with agency staff, according to people familiar with that gathering who confirmed the remarks Friday. His term expires in January 2019.

FROM THE INTEREST GROUPS U.S.PIRG has released a report titled “Big Banks, Big Overdraft Fees” that concludes that “overdraft fees are a major source of consumer pain, since they are borne disproportionately by Americans with few financial resources” but, that the CFPB is working to protect consumers from unfair overdraft fees.” A copy of the report is available here.

The private student loan industry is making a push to expand its role in the Department of Education’s growing $1.3 trillion portfolio of federal student loans.  A main lobbying group for the industry, the National Council of Higher Education Resources, wrote a letter this week to President-elect Donald Trump’s transition team, making a series of proposals that included a bold plan to auction off some of the existing portfolio of federal loans to private investors. You can read a copy of the letter here.

Washington Update VIII

This is the latest issue of our weekly update from Washington, designed to keep NACBA members informed about significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks.  Feedback should be directed to Maureen Thompson.

Obviously, the big news out of Washington is the election results.  NACBA members who joined us for the November 18 webinar, “The 2016 Election: What Now?,” heard NACBA leaders and our representatives in Washington answer the questions about what to expect in 2017 from the Administration, Congress and the courts.  We are planning to issue a special repot next week after President-Elect Trump announces his full roster of cabinet picks.  We will focus not only on what to expect from the White House come January, but also the key agencies of interest to NACBA: Department of Justice, Consumer Financial Protection Bureau, and the Department of Education, as well as the leadership and key committees in Congress.

Continue reading for non-election news out of Washington this week.

ON THE HILL Congress remains focused on Wells Fargo.  Senator Sherrod Brown (D-OH) – ranking member on the Senate Banking Committee – and Representative Brad Sherman (D-CA)– a member of the House Financial Services Committee – introduced legislation that will give Wells Fargo customers who were victims of a fraudulent account scheme their day in court. Wells Fargo is using the forced arbitration clauses it tucked away in the fine print of contracts customers signed when they opened legitimate accounts to block them from suing over the fraudulent accounts.  Read more about the bill here.

Senator Mike Enzi (R-WY), chairman of the Senate Budget Committee reacted to a General Accountability Office (GAO) report on the cost of Department of Education’s Income Driven Repayment (IDR) plans for student loans (see “In the Agencies) by harshly criticizing the Department, which is responsible for calculating the cost of the program.  “This Administration has been manipulating the terms of the student loan program without the consent of Congress, while shirking its statutory duty to carefully assess the cost impact of those changes,” Enzi said in a statement. “It will be crucial to consider updates to the Federal Credit Reform Act because Congress is not receiving credible, transparent cost data under the existing statute, as this report suggests.”

A group of 21 current and former members of Congress filed an amicus brief in support of the Consumer Financial Protection Bureau’s (CFPB) petition filed with the D.C. Circuit seeking a rehearing of its decision in CFPB v PHH Corporation.  Read the brief here.

IN THE AGENCIES The Government Accountability Office (GAO) released a report critical of the Department of Education’s approach to estimating the cost of income-based student loan repayment plans, which allow borrowers to make student loan payments based on how much they make.  According to the GAO report, these plans will cost more than twice as much as the Education Department expected them to.  The Education Department’s approach to estimating the costs of the repayment plan “do not ensure reliable budget estimates,” the GAO report says.   You can read the report here.

The Education Department responded to the GAO report, saying it “generally concurs” with the findings, but noted that “the decisions made (and critiqued in this report) were based on existing staff and systems resources available, assessed impact, and consideration for conservatism.”  “The lifecycle of a student loan is exceedingly complex, with a multitude of projection paths and outcomes,” the department’s response said. “Estimating the federal cost of student loans is a task we take very seriously, and we are constantly seeking to enhance and refine our cost estimation models.”

On November 18, the CFPB petitioned the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) for an en banc review of PHH v. CFPB. The petition, which was expected, argues that this case represents “what may be the most important separation-of-powers case in a generation.” You can read the petition here.

More from the CFPB… the CFPB has taken action against B&B Pawnbrokers, Inc. for deceiving consumers about the actual annual cost of its loans. In a lawsuit filed in federal court, the CFPB alleged that B&B Pawnbrokers broke the law by misstating the charges associated with pawn loans. The CFPB’s lawsuit seeks to end B&B Pawnbrokers’ illegal practices, get restitution for the consumers it harmed, and impose penalties. You can read the lawsuit here.

In good news for consumers, the Internal Revenue Service (IRS) aims to include as many homeowners as possible in a taxable-income exclusion set to expire at the end of the year.

According to Notice 2016-72, the IRS will accept debt reduction modifications as long as the borrower receives a trial offer by the sunset of the Home Affordable Modification Program, set for Dec. 30, 2016. The program was created to encourage banks to lower monthly mortgage payments to help homeowners stave off foreclosure after the subprime mortgage crisis.  “This is trying to capture as many people as possible in the folks that can benefit from that tax assistance,” Sarah Bolling Mancini, of counsel at the National Consumer Law Center Inc., told Bloomberg BNA Nov. 28.

The IRS guidance focuses on the programs that allow homeowners to reduce the principal balance on their loans, not programs that just reduce interest rates or stretch repayment terms, Mancini said.  Homeowners must receive a trial period plan from their bank before Jan. 1, 2017, but don’t need to complete the plan or enter into a permanent version before the deadline, the IRS said. Typically, a bank will send out a letter saying a homeowner is approved for a trial plan, and the homeowner must then make a trial payment for the next three months before a permanent version will be offered, Mancini said.

FROM THE INTEREST GROUPS A group of 10 consumer advocacy organizations has also filed an amicus brief in support of the Consumer Financial Protection Bureau’s (CFPB) petition filed with the D.C. Circuit seeking a rehearing of its decision in CFPB v PHH Corporation.  Read the brief here.

OTHER For easy access, here is a link to the CFPB Ombudsman’s webpage. There you will find their 2016 Annual Report, which you may find informational as well as a useful as a resource.

Washington Update VI

Get Caught Up on What’s Happening In Washington! Read Today’s Washington Update VI

This is the latest issue of our weekly update from Washington, designed to keep NACBA members informed about significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks.

ON THE HILL Wells Fargo settled with regulators for $185 million after its employees were found to have opened some 1.5 million bank accounts and applied for almost 600,000 credit cards that may not have been authorized by customers, but as promised, the Senate investigation continues.  Senators Warren, Sanders, Markey and Hirono sent a letter to accounting firm KPMG asking for an explanation as to why its audits of Wells Fargo failed to uncover the cross-selling misconduct.  The senators asked KPMG a series of questions, including whether the firm has faced disciplinary action from the Public Company Accounting Oversight Board (PCAOB) related to Wells Fargo audits. KPMG has until Nov. 28 to reply.

The special inspector general for the Troubled Asset Relief Program (TARP) is proposing to make it easier to charge bank executives when fraudulent activity occurs at their institution.  Christy Goldsmith Romero, in SIGTARP’s quarterly report to Congress, recommends that Congress require senior bank officials to sign an annual certification that they have done their due diligence to determine that there is no criminal conduct or civil fraud happening at their institution.

The White House called on Congress to rethink its approach to rebuilding the hobbled mortgage market and offered, for the first time, a set of principles for housing reform.

Affordability and access to credit, especially for middle-income Americans and minorities, must provide the foundation of any new system, the White House said. The White House went on to say that revamping the arcane infrastructure of the global mortgage market, which has challenged policymakers since the 2008 housing collapse, should take a backseat.  The request is laid out by Treasury advisers Antonio Weiss and Karen Dynan and can be read here.

IN THE AGENCIES  In a speech given at a major payments and financial technology industry conference (Money 20/20) in Las Vegas, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray called for consumers to have more control over their financial data.  “Consumers should be able to access this information and give their permission for third-party companies to access this information as well.” The CFPB director added that his bureau is “gravely concerned by reports that some financial institutions are looking for ways to limit, or even shut off, access to financial data rather than exploring ways to make sure that such access, once granted, is safe and secure.”  You can read Director Cordray’s speech here.

Director Cordray also delivered remarks at the Consumer Advisory Board meeting in Washington, DC.  His remarks addressed the issues people encounter when they are paying back debt, and more specifically, the debt collection market and the student loan servicing market.  You can read his remarks here.

The U.S. Department of Education announced final regulations to protect student borrowers against misleading and predatory practices by postsecondary institutions and clarify a process for loan forgiveness in cases of institutional misconduct.  Read the full press release from the Department of Education here.  Reaction to the new regulations is unfolding, with at least one publication (Bloomberg analysis) suggesting that the new regulations will make seeking student debt relief more difficult.

FROM THE INTEREST GROUPS  In a letter to the CFPB, the Consumer Bankers Association (CBA) told regulators that its members have changed or are changing contracts for private student-loan customers to ensure that loans in good standing aren’t placed in default because a co-signer has died or filed for bankruptcy.  The changes address the regulators’ criticism of the banks’ practice known as “auto-defaults.” The system causes surprise defaults for borrowers when the status of co-signers changes even when the borrowers’ themselves have met their payment obligations.  You can read the CBA’s press release here.

The Mortgage Bankers Association has stepped up political pressure for housing reform.  The group will launch an inside-the-beltway campaign in January to promote the stability and transparency of the home loan industry.  They also will call on the incoming president to appoint a housing director to coordinate policy across multiple agencies and local state and federal governments. “Someone who works in the White House, someone with the authority of a direct report to the new president,” MBA President David Stevens said in a speech at the group’s annual meeting in Boston. “It’s the only way to untangle the confusion and imbalances. It’s the only way to avoid the housing crisis to come.”

Read all the Washington Updates in NACBA News

Washington Update V

Issue five of our weekly update from Washington, designed to keep NACBA members informed about any significant and relevant activity on the part of Congress, regulatory agencies and interest groups/think tanks.

ON THE HILL As noted in previous updates, Congress is on an extended leave and most members are focused on the upcoming election.  However, there is an update on Wells Fargo.  CEO John Stumpf, who faced outraged questioning from both sides of the aisle in committee hearings held in both the House and the Senate, has stepped down as chairman and chief executive officer.  Lawmakers from both sides of the aisle responded to the news with pledges that they will continue pursuing the investigation into Wells Fargo following revelations last month that it opened more that 2 million accounts without customers’ authorization.  Mr. Stumpf will be replaced by Tim Sloan, who was chief operating officer at Wells Fargo.

IN THE AGENCIES An appellate court overturned the Consumer Financial Protection Bureau’s (CFPB) $109 million fine against mortgage company PHH Corp. and called the agency “unconstitutionally structured.”  The CFPB had fined PHH for referring customers to insurers who purchased reinsurance from a PHH subsidiary, a practice the agency likened to illegal kickbacks. PHH sued, saying the agency had overstepped its authority.  “The director enjoys more unilateral authority than any other officer in any of the three branches of the U.S. government, other than the president,” wrote the three-judge panel of the U.S. Court of Appeals for the District of Columbia.  “This is a case about executive power and individual liberty,” the court wrote. “Because of their massive power and the absence of presidential supervision and direction, independent agencies pose a significant threat to individual liberty and to the constitutional system of separation of powers and checks and balances.”

The court underscored what it called “the important but limited real-world implications” of the decision. The agency will continue to operate, but the president will now have the authority to remove its director at will. The court decision can be read here.  The CFPB has not yet decided if it will appeal the decision.  In the meantime, congressional opponents of the CFPB believe the ruling will boost their efforts to rein in the agency and undercut its independence.

FROM THE INTEREST GROUPS In a letter to Sen. Chuck Schumer (D-NY), the presumed Democratic Leader in the next Congress, several progressive groups have asked him to avoid letting the Banking Committee become too cozy with the financial industry in the next Congress.  At issue are concerns that the committee’s contingent of moderate Democrats might grow.