Like most industries today, consumer finance services businesses are being significantly impacted by the novel coronavirus (COVID-19). Troutman Sanders and Pepper Hamilton have developed a dedicated COVID-19 Resource Center to guide clients through this unprecedented global health challenge. We regularly update this site with COVID-19-related news and developments, recommendations from leading health organizations, and tools that businesses can use free of charge. Please be on the lookout for a new date of our next CFS webinar, to be held the week of April 27.

To help you keep abreast of relevant activities, below is a breakdown of some of the biggest COVID-19-driven events at the federal and state levels to impact the consumer finance services industry this past week:

Federal Activities

State Activities

Privacy and Cybersecurity Activities

Federal Activities:

  • The Consumer Financial Protection Bureau and the Federal Housing Finance Agency announced a joint initiative known as the Borrower Protection Program, through which they will share servicing information during the COVID-19 national emergency. For additional information, click here.
  • Federal lawmakers urged the United States Department of the Treasury to shield consumers’ Coronavirus Aid, Relief, and Economic Security Act (CARES Act) stimulus funds from debt collection. The bipartisan letter urged Treasury Secretary Steven Mnuchin to take immediate action because “the CARES Act direct payments are at risk of being seized by debt collectors.” The letter asks that the Treasury extend protections afforded to Social Security, Supplemental Security Income, and other federal payments to include CARES Act direct payments. For more information, click here. Sen. Sherrod Brown (D-Ohio) and Sen. Elizabeth Warren (D-Mass.) asked members of the American Bankers Association to “publicly commit that they will not offset their customers’ stimulus payments to pay for any fees, charges, or allegedly past due debts.”
  • Major financial institution trade organizations sent a joint letter to the four congressional leaders, suggesting that they revise the CARES Act to treat recovery funds as subject to the federal regulations governing the garnishment of federal benefits, noting that the use of direct deposits allow funds to “be coded to contain an exemption identifier.”
  • A class action filed on April 12 by an aggrieved small business owner against Frost Bank is one of the first in a potential wave of litigation. In the United States District Court for the Southern District of Texas, Edward Scherer challenges Frost Bank’s lending practices which, according to Scherer, prevent qualifying small businesses from obtaining federal funding under the CARES Act. Scherer alleges that he owns a small business that is eligible for a Paycheck Protection Program (PPP) loan under the CARES Act and the Small Business Administration’s loan program. Scherer alleges that Frost Bank added a “self-declared criterion” and refused to accept PPP loan applications unless the small business applicant had an established business checking account with Frost Bank as of April 1, 2020. For more information on this case and similar cases to come, click here.
  • The Supreme Court of the United States announced on Monday, April 13, that, as a result of the COVID-19 emergency, it would hear oral argument by telephone in a number of key cases remaining in the Court’s October 2019 Term. Among these cases is Barr v. American Association of Political Consultants, which will be argued on May 6 and centers on the constitutionality of the debt collection exemption to the Telephone Consumer Protection Act. For more information about the Supreme Court schedule and Barr, click here and here.
  • The CFPB announced a new interpretive rule that makes it possible for consumers to receive certain pandemic-relief payments through newly-issued prepaid accounts rather than paper checks. The interpretive rule is designed to “ensure that consumers can receive these payments in a fast, secure, and efficient manner.” For further analysis on this rule, click here.
  • Lenders receiving loan applications pursuant to the PPP have raised questions regarding the Equal Credit Opportunity Act (ECOA). PPP lending is subject to the ECOA’s general prohibitions against unlawful discrimination and the requirement to provide notice of credit decisions and adverse action. For more information on how to treat loan applications submitted under the PPP, click here.
  • As a result of COVID-19, business leaders have faced myriad unexpected dangers (and sometimes opportunities) that require attention and quick decisions under exceptionally stressful and rapidly evolving conditions. How directors may best discharge their fiduciary duties in this extraordinary environment will depend on the particular circumstances that they face, and they should seek counsel to help guide them through a given situation. For a general list of actions that directors can be taking, click here.
  • The Association of Credit and Collection Professionals International CEO Mark Neeb issued a letter to Treasury Secretary Mnuchin. The letter addressed claims from consumer advocacy organizations that debt collectors would garnish stimulus fund checks issued under the CARES Act, stating that: “This narrative is inaccurate and shows a clear misunderstanding of the garnishment process and the work of the debt collection industry in general.” Neeb said, “Furthermore, it creates a harmful and unwarranted concern for consumers that financial institutions and the debt collection industry are specifically targeting these funds, which could reverse the positive trend of decreasing the number of unbanked consumers during this time of financial uncertainty for the country.” Neeb noted that it is important that federal and state policies do not restrict communication with consumers at this time, especially due to the unwarranted concerns about stimulus check garnishment. He outlined ACA members’ commitment to assisting consumers and training and hardship programs that are in place. For more information, click here.
  • The National Creditors Bar Association (NCBA) released the following statement supporting the exemption of CARES Act stimulus payments from garnishment:Consumers are faced with many challenges as they deal with the unprecedented coronavirus pandemic and the resulting state of emergency. In response, Congress enacted the CARES Act to “provide emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic” and provides for stimulus payments to be dispersed to the public. While the CARES Act does not explicitly designate these payments as exempt from garnishment, the NCBA believes that these funds should be treated similarly to other government payments that are exempt from garnishment (e.g., social security, disability, and veterans’ benefits). NCBA already has and will continue to encourage its members to lead in identifying, offering, and utilizing existing hardship policies and extending hardship accommodations, including the cessation of garnishments, to any consumer who is adversely affected by the current health crisis.  As the CARES Act authorizes the Treasury Department to issue “regulations or other guidance as may be necessary to carry out the purposes of” the Act, NCBA supports the Treasury Department to establish regulations that would allow banks to preclude these much needed stimulus payments from any form of garnishment. The NCBA is committed to ensuring that the much-needed emergency assistance be utilized exclusively by the country’s most vulnerable in their time of need.
  • The Receivables Management Association International (RMAI) delivered a letter to Treasury Secretary Mnuchin in support of recent efforts to ensure that direct funds distributed to households through the CARES Act are not subject to collection as part of resolving outstanding receivables. RMAI voiced support for formal protections for the “recovery rebates” provided by the CARES Act and for the Treasury issuing rules and guidance with respect to these funds. Given the acute and significant financial hardship that many households are facing due to the COVID-19 crisis, RMAI asserts that recovery rebates (of up to $1,200 per qualifying individual and up to $2,400 per qualifying household, as well as an additional $500 per dependent child) should not be subject to garnishment or other compulsory methods of recouping funds for the repayment of valid debts. The same day, RMAI also advised its members to avoid seeking federal stimulus funds as a potential source of payment on outstanding consumer obligations. Specifically, to the degree that the federal stimulus funds are ascertainable, RMAI advised members to avoid soliciting those funds or otherwise attaching those funds for the purposes of satisfying a debt or money judgment.

State Activities:

  • A group of attorneys general from 21 states, the District of Columbia, and Puerto Rico sent a letter to the CFPB Director requesting that the CFPB immediately withdraw its guidance regarding credit reporting during the COVID-19 pandemic and “resum[e] vigorous oversight of consumer reporting agencies and enforcement of the FCRA.” For more information, click here.
  • New York legislators reached an agreement with private student loan servicers to provide financial relief to borrowers. The agreement supplements the federal CARES Act by extending protections to over 300,000 New Yorkers with private student loans or commercial loans under the Federal Family Education Loan Program. For more information, click here.
  • The Massachusetts Attorney General issued on Tuesday the latest in a series of orders regarding debt collection in the face of the COVID-19 outbreak. This guidance is aimed at protecting the relief payments that many Americans expect to receive in coming weeks thanks to the CARES Act. For more information, click here.
  • 47 states, including Delaware (the most popular United States jurisdiction of organization for companies), the District of Columbia, Puerto Rico and the U.S. Virgin Islands have adopted the Uniform Electronic Transactions Act, which works in conjunction with the Electronic Signatures in Global and National Commerce Act to ensure the validity of digital contracts and electronic signatures under both federal and state laws. For more information, click here.
  • New York’s Department of Financial Services announced temporary regulatory relief to New York-chartered financial institutions, stating that “[d]uring the disaster emergency and for 60 days thereafter, New York chartered financial institutions may conduct required meetings virtually[.]” Click here to see the full announcement.
  • The Governor of Washington issued an emergency proclamation temporarily prohibiting the garnishment of wages and other income to collect judgments, and the accrual of post judgment interest on such judgments for consumer debt throughout Washington State. “Consumer Debt” is defined in Washington code section RCW 6.01.060(2) as: “[A]ny obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes.” According to the proclamation, the definition of consumer debt includes medical debt. The proclamation will remain in effect until 11:59 p.m. on May 14, 2020. For more information, click here.
  • The Wisconsin Department of Financial Institutions (DFI), which is empowered to administer the Wisconsin Consumer Act, issued a warning to third-party debt collectors couched in terms of “Emergency Guidance on Prohibited Debt Collection Practices.” In addition to the sharp warning, the guidance document included a letter issued by the DFI regarding impermissible pre-crisis calls and a copy of the Act. For more information, click here
  • The Governor of Illinois recently issued an executive order aimed at protecting its citizens from loss of income and wages experienced during the COVID-19 emergency and other actions which threaten to undermine their financial security, housing security, and stability. To this end, under the authority vested in his position, the Governor proclaimed during the duration of the COVID-19 emergency that the following actions are prohibited practices: the service of a garnishment summons, the service of a wage deduction summons, or a citation to discover assets on a consumer debtor or consumer garnishee. For more information, click here.
  • The Ohio Attorney General issued a statement indicating that CARES Act payments are exempt from attachment, garnishment, or execution under existing Ohio law. For more information, click here
  • The Connecticut Department of Banking extended its no-action memorandum to address branch licensing issues considering temporary mitigation actions that licensees needed to take to continue business due to COVID-19 through May 31, 2020. The department’s no-action position concerns the requirement that Connecticut’s Consumer Credit Licensees conduct licensable activity from branch office locations. Licensees that meet the criteria in the memorandum may temporarily work from a home location. For more information, click here.
  • The Nebraska Attorney General Peterson issued a statement that “any attempt or threat by a creditor or a debt collector to garnish or attach funds provided through the CARES Act, if that property would have otherwise been exempt under Nebraska law, will be considered an unfair trade practice in violation of Nebraska’s Consumer Protection Act.” For more information, click here.
  • States continue to expand and weigh in on how their governments will conduct “the public’s business” in the public eye, despite increasing precautions with regard to public meetings. Click here for more analysis.

Privacy and Cybersecurity Activities:

  • The Federal Trade Commission released guidance for increasing privacy and data security while videoconferencing over the internet. For more information, click here.
  • The FTC highlighted the Bureau of Consumer Protection’s latest reports analysis, providing a glimpse into the increase of COVID-19-related scams. The report shows an uptick in scam calls, emails, texts, ads, and offers online referencing COVID-19. To view the latest report from the Bureau of Consumer Protection, click here.
  • The FTC and the International Consumer Protection and Enforcement Network launched two new interactive dashboards detailing consumer reports relating to international fraud and scams. The first provides data on cross-border complaints submitted by consumers to econsumer.gov. The second focuses on data from international reports submitted to the FTC’s Consumer Sentinel Network.
  • The Cybersecurity and Infrastructure Security Agency released an updated version of the Essential Critical Infrastructure Workers guidance. This new guidance aims to provide clarity around a range of positions needed to support essential functions during the COVID-19 pandemic. Click here to read more.
  • Law360 recently published Troutman Sanders’s article discussing the use of smartphone applications to combat COVID-19 by informing users of potential exposure to the virus. The article highlights several core privacy principles that every app developer should keep in mind when producing such services.