Mortgage Lenders & Servicers

Author Stephen R. Covey has written, “Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall.”[1] With the first quarter in full swing, community banks are preparing proxy statements, finalizing annual meeting agendas, and marshaling items for board attention. Now is the perfect time for bank directors to consider whether their bank’s ladders are leaning against the right walls. Below we discuss five corporate governance and regulatory issues that recently have been receiving particular attention from regulators and investors, selected based on statements by federal banking regulators, corporate governance consultants and experts (such as Institutional Shareholder Services, or ISS), institutional investors, and the SEC. Each of these issues merits board-level attention and direction.

  1. Cybersecurity

Given the potential costs to customers, companies, and shareholders of failures in cybersecurity, regulators and investors of all stripes are concerned with how boards oversee cybersecurity risk. Day-to-day implementation and maintenance of cybersecurity measures may be a matter for a bank’s management and IT staff. However, robust cybersecurity is also a product of top-down board focus that requires director engagement, knowledge and training, as well as an innovative and flexible approach to corporate governance.

Because of that, cybersecurity continues to be a supervisory priority for the federal banking regulators. In particular, the FDIC has identified enhanced oversight of bank cybersecurity as one of its top performance challenges for 2019.[2] The OCC has also designated cybersecurity and operational resiliency as one of five key risk areas for its 2019 bank supervision operating plan.[3] In light of the supervisory attention given to cyber incidents and the importance of banks to the U.S. financial system, federal banking regulators have indicated that they expect cybersecurity discussions to be elevated from the IT room to the board room. In response, one bank holding company has come up with a novel solution – Ohio-based Huntington Bancshares recently established a “Significant Events Committee” to be responsible for responding to cybersecurity threats.[4] This committee solves the problem of divergent oversight responsibilities and skill sets by bringing together into a single body Huntington’s CEO, lead director, chairs of the audit, risk and technology committees and a “lead cyber director.” While this particular solution may not work for every financial institution, it is a thoughtful response to cybersecurity risk oversight and demonstrates a flexibility and innovation in corporate governance that other community banks should strive to emulate.

Given that the degree of risk posed by, and frequency of, cybersecurity threats will almost certainly not diminish in the future, we do not expect the regulatory focus on board engagement with the topic to wane, either.

  1. Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) Compliance

In December 2018, the federal banking agencies issued a joint statement encouraging depository institutions to explore innovative approaches to both meet their BSA/AML compliance obligations and to further strengthen the financial system against illicit financial activity.[5] Such approaches include the use of innovative technologies (e.g., artificial intelligence) to help banks identify and report money laundering, terrorist financing, and other illicit financial activity. The joint statement reflects an interagency supervisory focus on corporate governance and enterprise-wide risk management of BSA/AML obligations. In effect, the federal banking agencies are opening the door to early engagement on this issue to promote a better understanding of these approaches, as well as provide a means to discuss supervisory expectations regarding compliance and risk management. Boards that begin internal discussions with senior management on innovative BSA/AML compliance now will be better positioned to meet the federal banking regulators’ expectations.

It is important to note that, in issuing the joint statement, the Federal Reserve stated that “[t]he joint statement does not alter existing BSA/AML legal or regulatory requirements, nor does it establish new supervisory expectations. The Agencies will not advocate a particular method or technology for banks to comply with BSA/AML requirements.”[6] While not establishing new requirements, the joint statement does clearly invite financial institutions to consider innovative approaches to discharging compliance functions.

  1. Current Expected Credit Loss Methodology

As bank directors already know, the final deadline for implementation of the new current expected credit losses (“CECL”) methodology is less than a year away.[7] The looming target is generating industry-wide concern – so much so that it was the subject of a recent roundtable discussion involving members of Congress and the federal regulatory agencies, among other participants.[8] Because of the anticipated impact of CECL implementation, the FDIC has emphasized bank director and senior executive engagement prior to full implementation.[9] To that end (and sooner rather than later), senior bank executives should educate directors on CECL methodology, explain how it differs from the to-be-replaced incurred loss methodology, and develop reasonable and supportable forecasts for board review and approval.[10] It is also recommended that boards and senior management conduct a cost-benefit analysis to determine whether the bank is better served by using a third-party consultant to aid implementation of CECL ahead of the deadline.

  1. Board Oversight and Director Quality

Over the past few years, banks and other companies have been confronted with numerous reputation-damaging incidents – think of the cascade of troubles faced by Equifax as just one example. These scandals continue to play out in the media, on stock exchanges, and in the minds of customers.[11] Board oversight (or lack thereof) is often seen as a dominant factor and, consequently, investors and regulators expect directors to understand how the culture of the bank or the company contributed to the problem. One recent example shows how far regulatory authorities are willing to go: a recent Federal Reserve cease-and-desist order against a bank holding company expressly conditioned future bank growth on the satisfaction of governance and risk management goals (including board oversight) and was accompanied by the announced replacement of four board members.

Boards have a duty to shareholders to ensure that their members possess sufficient skills, experience, and judgment to serve the company.[12] In part because traditional board oversight functions are scrutinized more than ever, governance advocates, proxy advisors and institutional investors want measurable ways to assess director competence and ensure quality board oversight.[13] As a result, many boards (whether exchange-listed or not) now conduct regular director evaluations. Rather than seeing this as a burden on directors’ time, boards should view the evaluation process as an opportunity to assess strengths, identify areas for improvement, and discover areas where new skills and perspectives can be brought to bear in support of the company and the board oversight function. Boards may want to consider a multi-faceted evaluation process that includes some or all of the following steps: (i) one-on-one discussions with each director and the chair of the nominating committee; (ii) internal nominating committee review of director self-evaluations; (iii) nominating committee report to the full board; (iv) group discussions of issues raised by the self-evaluations, particularly with respect to the bank’s risk management framework; (v) development and incorporation of feasible action items; and (vi) post-action follow up and feedback in the subsequent year’s assessment program.

  1. Board Diversity

More and more investors and proxy advisors emphasize board diversity as a key issue for 2019. For example, in response to a recent ISS policy survey, 82% of investor respondents surveyed considered it problematic if there were no female directors on a company’s board (note: this compares to 69% of investors respondents surveyed in 2017).[14] Investors generally prefer to engage with companies on board diversity, but they are not hesitant to wield their proxy votes to press for change. Consequently, many public companies have seen voting support for nominating committee chairs that lack gender diversity fall.[15] This puts board nominating committees in the hot seat – both with respect to gender and other diversity characteristics. We anticipate this will continue throughout 2019 and have no reason to think that bank boards will be spared.[16]

It is interesting to note that the views of directors and investors converge when it comes to board diversity. According to a 2018 survey of over 700 public company directors, most directors believe a diverse board is beneficial for a company.[17] The overwhelming majority of directors surveyed also believe that diversity brings unique perspectives to the boardroom, enhances board performance, and improves relationships with investors.[18] In this environment, we recommend bank directors consider ways to: (i) stay apprised of shareholder views on board diversity; (ii) formalize board commitment to diversity in governance guidelines and nominating committee charters; (iii) develop networks to find diverse board candidates; and (iv) develop new director orientation/mentoring programs for first-time women and minority board members. It is also useful for the board to combine diversity discussions with its consideration of board refreshment/change management – both at the board level and the ranks of senior management (which is also a focus area for the federal banking regulators).

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Banking is essentially a business of assuming and managing risk – and it is up to the board to ensure effective risk governance. With the end of the first quarter in sight, we recommend that directors review these five points to determine if they are comfortable with their bank’s current approach or, alternatively, whether adjustments are needed to navigate the changing risk landscape. Otherwise, as Yogi Berra said, “if you don’t know where you’re going, you might wind up someplace else.”

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[1] Stephen R. Covey, The Seven Habits of Highly Effective People: Powerful Lessons in Personal Change (1989), page 101.

[2] See FDIC Office of Inspector General, Top Management and Performance Challenges Facing the FDIC, at p. 3 (Feb. 14, 2019), available here.

[3] See OCC, Press Release NR 2018-104, OCC Releases Bank Supervisory Operating Plan for Fiscal Year 2019 (Sept. 25, 2018), available here.

[4] See Jake Lowary, BankDirector.com, “Will More Banks Form this Uncommon Board Committee?” (Feb. 22, 2019), available here.

[5] See Joint Statement on Innovative Efforts to Combat Money Laundering and Terrorist Financing (Dec. 3, 2018), available here.

[6] Id.

[7] See Board of Governors of the Federal Reserve System, FAQs on the New Accounting Standard on Financial Instruments—Credit Losses, No. 4 (updated Sept. 6, 2017), available here.

[8] A CECL Roundtable Meeting held in Washington, D.C. on September 4, 2018 included several members of Congress with their staff, the Federal Reserve, the FDIC, the OCC, the SEC, the Conference of State Banking Supervisors, the Financial Accounting Standards Board, and various regional and community banks, among others (Federal Reserve staff summary available here.)

[9] See FDIC Atlanta, Regional Regulatory Conference Call – CECL Implementation Status Update 2018, p. 9 (Sept. 27, 2018), available here.

[10] Id. at pp. 9-10.

[11] For the first time in five years, consumer confidence in the banking industry fell in 2018. See Rob Garver, American Banker, “Banker Reputations Fall for First Time in Five Years: 2018 Survey” (June 28, 2018), available here.

[12] The value of board assessment has not been lost on exchanges either. For example, the New York Stock Exchange requires that corporate boards of its member conduct an annual self-evaluation. See e.g., NYSE Listed Company Manual at §§ 303A.04 and 303A.07, available here.

[13] See generally, Davis and Whitehill, The Council of Institutional Investors, “Board Evaluation Disclosure,” (Jan. 20, 2019), available here.

[14] See ISS 2018 Governance Principles Survey (Sept. 18, 2018), available here. However, 37% of those respondents felt their concerns could be mitigated if the company disclosed its policy or approach for increasing board diversity.

[15] According to ISS data, the median level of support was 91.3% in 2018, down from 94.2% in 2017 and 96.6% in 2016. Id.

[16] For example, ISS has announced that it will start recommending against nominating committee chairs of all-male boards in 2020. See ISS U.S. Proxy Voting Guidelines at p. 12 (Dec. 6, 2018), available here.

[17] See PwC 2018 Annual Corporate Directors Survey (Oct. 2018), available here.

[18] Id.

The FTC issued a press release last week seeking comment on proposed changes to two rules under the Gramm-Leach-Bliley Act of 1999 (the “GLBA Act”) to increase data security for financial institutions and better protect consumers. 

The Commission has sought comment on the Safeguards Rule and the Privacy Rule under the GLBA Act. The Safeguards Rule, which went into effect in 2003, requires financial institutions to develop and maintain a comprehensive data security program. The FTC’s proposed amendment to this Rule will require U.S. financial institutions to encrypt all customer data. It will also require financial institutions to use multifactor authentication to access customer data and implement controls to prevent unauthorized access to customer information. To encourage compliance, the amendment will require companies to submit periodic reports to their board of directors regarding the fulfillment of these directives. 

Under the Privacy Rule, which went into effect in 2000, financial institutions are required to inform customers about their information-sharing practices and allow customers the right to opt out of the sharing of their information with third parties. The passage of the Dodd-Frank Act in 2010 transferred the majority of the FTC’s rulemaking authority for the Privacy Rule to the Consumer Financial Protection Bureau, leaving the FTC authority over certain motor vehicle dealers. The FTC’s proposed amendment to the Privacy Rule includes clarification about the application of the Rule’s privacy notice requirements to motor vehicle dealers. 

The FTC has also sought to increase the scope of the definition of “financial institution” in both Rules to include so called “finders” – entities that charge a fee to connect consumers who are looking for loans to lenders. The director of the FTC’s Bureau of Consumer Protection, Andrew Smith, commented that these proposals “are informed by the FTC’s almost 20 years of enforcement experience” and reflect the Commission’s desire to exercise rulemaking authority “to keep up with marketplace trends and respond to technological advancements.” 

The FTC will soon publish notices seeking comment on these proposed changes in the Federal Register, with comments to be received for 60 days after publication. 

Troutman Sanders will continue to monitor the FTC’s proposed amendments to the Gramm-Leach-Bliley Act and other issues related to data security for financial institutions.

The attorneys general of all 50 states as well as the District of Columbia, Puerto Rico, the Virgin Islands, and Guam have offered their support to pending legislation, the Telephone Robocall Abuse Criminal Enforcement and Deterrence (“TRACED”) Act, aimed at significantly reducing robocalls.  The support was in the form of a letter sent by the AGs on March 5 to the U.S. Senate Committee on Commerce, Science, & Transportation.

In their letter, the AGs assert that the legislation takes “meaningful steps to abate the rapid proliferation of these illegal and unwanted robocalls.”  The AGs explain that their support for the bill is based on the fact that robocalls and telemarketing calls are currently the number one source of consumer complaints at many of their offices, as well as at both the Federal Communications Commission and the Federal Trade Commission.  Further, the letter points out that the total number of robocall complaints has risen by over one million in each of 2016 and 2017.

The state AGs also applaud the TRACED Act’s requirement that voice service providers participate in the call authentication framework and offer their support of its timely enactment.  The letter explains that because the hardware and software required to make robocalls is easy to obtain, is relatively inexpensive, enables “mass-dialing of thousands of calls for pennies,” and allows telemarketers to fake or “spoof” Caller ID information, virtually anyone can send millions of illegal robocalls and frustrate law enforcement with just a computer, inexpensive software (such as an auto-dialer and spoofing programs), and an internet connection.  The TRACED Act gives voice service providers between 12 and 18 months from its enactment to establish and implement a call authentication framework.  The AGs support this short implementation timeframe, as they believe it will greatly reduce the number of unwanted robocalls calls to consumers.

The state AGs conclude by offering their support of the Interagency Working Group established by the legislation, and encourage the Working Group to consult and coordinate with them given their years of experience bringing enforcement actions against illegal telemarketers and robocallers.

The attorneys general of all 50 states as well as the District of Columbia, Puerto Rico, the Virgin Islands, and Guam have offered their support to pending legislation, the Telephone Robocall Abuse Criminal Enforcement and Deterrence (“TRACED”) Act, aimed at significantly reducing robocalls.  The support was in the form of a letter sent by the AGs on March 5 to the U.S. Senate Committee on Commerce, Science, & Transportation.

In their letter, the AGs assert that the legislation takes “meaningful steps to abate the rapid proliferation of these illegal and unwanted robocalls.”  The AGs explain that their support for the bill is based on the fact that robocalls and telemarketing calls are currently the number one source of consumer complaints at many of their offices, as well as at both the Federal Communications Commission and the Federal Trade Commission.  Further, the letter points out that the total number of robocall complaints has risen by over one million in each of 2016 and 2017.

The state AGs also applaud the TRACED Act’s requirement that voice service providers participate in the call authentication framework and offer their support of its timely enactment.  The letter explains that because the hardware and software required to make robocalls is easy to obtain, is relatively inexpensive, enables “mass-dialing of thousands of calls for pennies,” and allows telemarketers to fake or “spoof” Caller ID information, virtually anyone can send millions of illegal robocalls and frustrate law enforcement with just a computer, inexpensive software (such as an auto-dialer and spoofing programs), and an internet connection.  The TRACED Act gives voice service providers between 12 and 18 months from its enactment to establish and implement a call authentication framework.  The AGs support this short implementation timeframe, as they believe it will greatly reduce the number of unwanted robocalls calls to consumers.

The state AGs conclude by offering their support of the Interagency Working Group established by the legislation, and encourage the Working Group to consult and coordinate with them given their years of experience bringing enforcement actions against illegal telemarketers and robocallers.

On March 1, the Consumer Financial Protection Bureau released a report concerning mortgages made to members of the U.S. armed forces and veterans purchasing a first home.  It is part of a series of quarterly reports the CFPB will issue focusing on consumer credit trends.  This Quarterly Consumer Credit Trends report highlights trends among first-time homebuying servicemembers from 2006 through 2016 and compares them with trends of first-time homebuying non-servicemembers.  Some of the key trends found by the CFPB are the following:

  • Servicemembers increased their reliance on U.S. Department of Veterans Affairs guaranteed home loans by 33% between 2007 and 2009, equaling 63% of servicemembers using VA mortgages by 2009.  While the report identified a comparable trend of non-servicemembers increasing their reliance on government-sponsored loans going into 2009, non-servicemembers decreased their reliance on government-sponsored loans thereafter.  Servicemember reliance on VA mortgages continued to increase and was at 78% as of 2016.
  • The increased use of VA mortgages by servicemembers reflected a larger decrease in use of conventional loan products between the years of 2006 and 2009 by all consumers, both servicemember and non-servicemember.  At their peak during the years of 2006 through 2009, conventional mortgages served 60% of servicemembers and 90% of non-servicemembers.  As of 2016, conventional loans only served 13% of servicemembers.  Non-servicemembers’ use of conventional mortgages dropped to 41% as of 2009 but increased to 60% by 2016.
  • The median VA mortgage amount among servicemembers “increased in nominal dollars from $156,000 in 2006 to $212,000 in 2016.”  This figure closely follows a similar increase in the median amount that non-servicemembers have borrowed using conventional mortgages.  The report notes, however, that the median loan amount of Federal Housing Administration (“FHA”) and U.S. Department of Agriculture (“USDA”) mortgages among servicemembers grew more slowly.
  • During 2006 and 2007, servicemembers with nonprime credit scores experienced early delinquencies (a mortgage 60 days or more delinquent within a year of origination) on VA mortgages at a rate between 5% and 7%, while collectively all nonprime FHA and USDA mortgages (for both servicemembers and non-servicemembers) experienced early delinquencies reaching 13%.  After 2009, early delinquencies among nonprime VA mortgages originated in 2016 dropped to just above 3%.  Conversely, conventional mortgages dropped below 2% and FHA and USDA mortgages dropped to 5% (for both servicemembers and non-servicemembers).
  • Delinquency rates for active duty servicemembers with nonprime credit scores were found to be lower than their veteran counterparts.  No such distinction in delinquency rates existed between active duty and veterans when the servicemembers had prime credit scores.

Troutman Sanders will continue to track trends in the mortgage industry as they are published by the CFPB.

Requiring an employee or consumer to submit any dispute to binding arbitration as a condition of employment or purchase of a product or service is commonly referred to as “forced arbitration.”  Many times, the employee or consumer is required to waive their right to sue or to participate in a class action lawsuit.  Critics argue that these arbitration agreements disempower the middle class and some in Congress have taken notice.

Last Thursday, Congressman Jerrold Nadler (D-N.Y.) and Sen. Richard Blumenthal (D-Conn.) announced a package of bills at a press conference that could end the practice of forced arbitration.

“One of the systems that is truly rigged against consumers and workers and the American people is our current system of forced arbitration,” Blumenthal said while introducing the Forced Arbitration Injustice Repeal Act.  Under the bill, companies would no longer be able to enforce arbitration agreements in consumer, employment, civil rights, or antitrust disputes.  The Democrats also introduced the Ending Forced Arbitration of Sexual Harassment Act which would eliminate arbitration in disputes that involve sexual harassment.

According to Nadler, the goal of these proposals is to help workers and consumers obtain justice.  “All Americans deserve their day in court,” Nadler said.  “We make a mockery of this principle when we allow individuals to be forced to take their claims to private arbitration.”

These lawmakers aim to reverse the Supreme Court’s ruling in Epic Systems Corp. v. Lewis – that employers may require employees to settle collective disputes in individual arbitration, thereby barring them from banding together in class-action lawsuits against employers.  Justice Neil Gorsuch wrote the decision for the majority.  The ruling was a contentious 5-4 decision along party lines.

Blumenthal believes that the bills will pass because Democrats have a majority in the House of Representatives.  However, it is unclear whether these bills are dead-on-arrival in the Republican-controlled Senate.  Furthermore, it appears unlikely that President Trump will sign a bill reversing the decision written by his first nomination to the Supreme Court.  Therefore, it appears that, notwithstanding the present legislation, the enforceability of arbitration provisions is here to stay for the time being.

Troutman Sanders will continue to monitor and report on important developments involving the changing landscape of arbitration.

The Supreme Court agreed to hear a consumer’s appeal from the Third Circuit’s ruling that his claims under the Fair Debt Collection Practices Act were time-barred despite being brought within one year of discovering the violation.  The circuits have been split on whether the one-year statute of limitations under the FDCPA begins to run when an alleged violation takes place or when it is discovered.  The split has caused a lot of uncertainty about potential liability under the FDCPA and, on February 26, the Supreme Court granted certiorari in a case squarely presenting the issue.

We previously reported on Kevin Rotkiske v. Paul Klemm, et al., No. 16-1668 (3d Cir. May 15, 2018).  There, Kevin Rotkiske sued Paul Klemm, claiming that a judgment obtained by Klemm against Rotkiske in 2009 violated the FDCPA.  However, Rotkiske did not file his FDCPA claims until 2015 – five years outside of the FDCPA’s one-year statute of limitations.  In response to Klemm’s motion to dismiss, Rotkiske asserted that his FDCPA claims were timely because he did not find out about the judgment until 2014.  The trial court dismissed Rotkiske’s claims and he appealed.

The Third Circuit affirmed the dismissal and held that the plain language of the statute controls.  In particular, the FDCPA requires that actions for violations of the statute must be brought “within one year from the date on which the violation occurs.”  15 U.S.C. § 1692k(d).  Although the language leaves no room for argument, the plaintiff’s bar has claimed over the years that the discovery rule should apply.  The Fourth Circuit and the Ninth Circuit have agreed.  On the other hand, the Eighth Circuit, Eleventh Circuit, and now Third Circuit have rejected this reading of the statute and have held that the one-year statute of limitations begins to run from the time of the alleged violation, not its discovery.

In his petition to the Supreme Court, Rotkiske argued that the result reached by the Third Circuit was unjust and “absurd.”  In response, Klemm emphasized that courts could prevent any unfairness by applying the doctrine of equitable tolling in FDCPA cases involving a defendant’s fraudulent or concealed conduct which would effectively stop the statute of limitations from accruing until the violation is discovered.

It is hoped that a Supreme Court decision in this case will bring long-awaited certainty to the issue of the FDCPA’s statute of limitations.

A federal court in Pennsylvania recently awarded summary judgment in favor of a consumer who brought a suit under the Fair Debt Collection Practices Act against a collection agency. The plaintiff alleged, and the Court agreed, that the collection letter misleadingly indicated that a dispute could be made by phone, despite the letter’s inclusion of the statute’s debt validation language indicating that disputes must be in writing.

A copy of the ruling in Coulter v. Receivables Management Systems can be found here.

The plaintiff, Joshua Coulter, failed to pay a bill from a healthcare facility where he had received treatment, instead believing that his insurance would cover the bill.  The account was ultimately placed with the defendant collection agency, Receivables Management Systems (“RMS”). The following language from the RMS letter formed the basis for Coulter’s FDCPA claims:

Our records indicate that despite our client’s numerous requests for payment you have allowed your account to become seriously PAST DUE. Your payment of this balance, however, will allow us to cease further collection action against you.

If you feel that this balance may be due from your insurance carrier please contact your carrier prior to contacting the representative at the extension listed below.

Our Collection Representatives are available to work with you between the hours of 8:30 a.m. and 4:30 p.m. Mail your payment or call today.

Collection Representative: Phil Irvin Extension 3141

Federal Law requires us to inform you that:

Unless you notify this office within 30 days after receiving this notice that you dispute the validity of the debt or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within 30 days from receiving this notice, this office will: obtain verification of the debt or obtain a copy of a judgment and mail you a copy of such judgement or verification.

In ruling on the parties’ cross summary judgment motions on the issue of liability, the Court began its analysis by explaining that, even when a debt collection letter includes the required validation notice, the letter may nevertheless run afoul of the FDPCA “if it fails to effectively communicate the required notice to the consumer.” This means, among other things, that the notice “must not be overshadowed or contradicted by accompanying messages from the debt collector.”

To determine whether a validation notice is “overshadowed or contradicted,” courts apply the “legal sophisticated debtor” test.  Under that standard, the Court ultimately agreed with Coulter that, although the issue was “a close one,” the letter could reasonably be understood to instruct the consumer to raise insurance-related disputes regarding the debt by calling RMS, thereby overshadowing and contradicting the statutory dispute language included in the letter requiring that any dispute be in writing to be effective.

This case is an important reminder for persons subject to the FDCPA to review their form communications to consumers for language that could potentially be seen to “overshadow” or “contradict” the included debt validation language.

On January 29, the Consumer Financial Protection Bureau released a snapshot report of consumer complaints to provide a high-level overview of the trends in complaints it has received over the past 24 months.  The report is split into two sections – a summary of the volume of all consumer complaints received by the CFPB per state and consumer financial product type, and a highlight of mortgage-related complaints. 

The CFPB’s snapshot reveals it received 7 percent fewer consumer complaints in 2018 than in 2017.  Between November 2016 and October 2018, New Jersey ranked 7th nationwide for most consumer complaints per 100,000 residents, while New York State ranked 13th.  Ultimately, New York experienced a 5 percent decrease in the volume of consumer complaints in 2018, while New Jersey complaints decreased by 9 percent.  One of the most significant trends the CFPB observed is a 15 percent decrease in total mortgage-related complaints across the country. 

New Jersey remains a hotbed for mortgagerelated complaints, ranking 3rd among the states as measured per 100,000 residents, while New York also finished near the top at 10th.  Although New Jersey witnessed a 17 percent decrease in mortgage-related complaints, New York experienced an even more substantial 39% reduction.  

Overall, based on consumer narratives, the CFPB reported that 42 percent of mortgage-related complaints across the country arise from issues related to servicing, specifically, consumers reporting trouble during the payment process.  These complaints range from issues regarding misapplication of payments to alleged failure of servicers to issue periodic statements.

On January 31, 2019, Senator Mike Azinger introduced Senate Bill 495 to the West Virginia Legislature (referred to the Judiciary Committee). The Bill proposes amendments to the West Virginia Consumer Credit and Protection Act (“WVCCPA”), W. Va. Code § 46A-5-101, which are intended to “bring the Act in conformity with the federal Fair Debt Collection Practices Act.”

A key change proposed by Senate Bill 495 is to limit the cap on damages from violations arising under the WVCCPA to $1,000 per civil action. The current rule provides a cap on damages of $1,000 per violation.

In the context of class action lawsuits, Senate Bill 495 also proposes to limit the recovery of class members to $500,000 or one percent of the net worth of the creditor. The current rule provides a cap on damages in class actions to the greater of $175,000 per member or the total alleged outstanding indebtedness.

We will continue to monitor and report on developments in this legislation.