The United States District Court for the District of Maryland recently denied a mortgage servicer’s motion to dismiss a putative class action claim pursuant to the Real Estate Settlement Procedures Act (RESPA) § 2605(g), providing insight as to what is required to state a claim for statutory damages with respect to alleged mishandling of escrow accounts.
Mortgage Lending, Servicing + Banking
Idaho Bankruptcy Court Holds that Later-Recovered Assets Revert to Borrower Absent Plan Provision to the Contrary
What happens to funds recovered by the trustee after the final plan payment is made in a chapter 13 case? According to the U.S. Bankruptcy Court for the District of Iowa, absent a plan provision providing otherwise, those funds revert to the debtors.
Rhode Island and Minnesota Latest States with Bills Opting Out of Federal Banking Law Allowing Interest Rate Exportation
On February 12, ten Rhode Island senators introduced S 2275, a bill proposing to opt Rhode Island out of §§ 521-523 of the Depository Institutions Deregulation and Monetary Control Act (DIDMCA). On February 13, HF 3680 was introduced in Minnesota, proposing to opt-out of DIDMCA expressly as to non-credit card forms of credit. These legislative efforts to opt-out of DIDMCA, coupled with the influx in recent “true lender” legislation, seem to show a coordinated effort to restrict bank-model lending.
Illinois Introduces Third-Party Dental Financing Bill
On February 6, a bill was introduced to the Illinois House of Representatives seeking to amend the Illinois Dental Practices Act to add provisions related to third-party financing for dental services.
Department of Education Cancels $5B More in Unpaid Student Loans
The U.S. Department of Education (ED) recently announced the approval of an additional $4.9 billion in student loan forgiveness for 73,000 individuals. The relief was provided through several modifications to the income-driven repayment (IDR) forgiveness and Public Service Loan Forgiveness (PLSF) programs. To date, the Biden Administration has forgiven $136.6 billion in student loans for more than 3.7 million borrowers.
Troutman Pepper Publishes 2023 Consumer Financial Services Year in Review and A Look Ahead
We are pleased to share our annual review of regulatory and legal developments in the consumer financial services industry. With active federal and state legislatures, consumer financial services providers faced a challenging 2023. Courts across the country issued rulings that will have immediate and lasting impacts on the industry. Our team of more than 140 professionals has prepared this concise, yet thorough analysis of the most important issues and trends throughout our industry. We not only examined what happened in 2023, but also what to expect — and how to prepare — for the months ahead.
NCUA Announces Supervisory Priorities for 2024
On January 23, the Chairman of the National Credit Union Administration (NCUA) released a letter outlining its supervisory priorities for the new year. While the organization acknowledged that the credit union system had remained largely stable during 2023, it observed growing signs of financial strain on balance sheets. Specifically, the “rise in interest rate and liquidity risks resulted in an increase in the number of composite CAMELS code 3, 4, and 5 credit unions. Inflation and interest rates are affecting household budgets, which could lead to an increase in credit risk in future quarters.”
Supreme Court to Decide Whether District Courts Have the Discretion to Dismiss Cases Subject to Arbitration
Recently the U.S. Supreme Court granted the petition for certiorari in Smith v. Spizzirri, which presents the question of whether § 3 of the Federal Arbitration Act (FAA) requires district courts to issue a stay pending arbitration or allows courts the discretion to dismiss the suit when all claims are subject to arbitration.
Washington D.C. Introduces Legislation Attacking Fintech-Bank Partnership Lending by Opting Out of DIDMCA and Codifying a “True Lender” Test
Late last month, Councilmember Kenyan R. McDuffie introduced B 25-0609, entitled the Protecting Affordable Loans Amendment Act of 2023, that proposes to opt the District of Columbia out of sections 521-523 of the Depository Institutions Deregulation and Monetary Control Act (DIDMCA). Sections 521-523 of DIDMCA empower state banks, insured state and federal savings associations, and state credit unions to charge the interest allowed by the state where they are located, regardless of where the borrower is located and regardless of conflicting state law (i.e., “export” their home state’s interest-rate authority). But another section of DIDMCA (section 525), permits states to opt out of sections 521-523 via legislation. If the bill passes, the District will join Colorado, discussed here, Iowa and Puerto Rico as the only jurisdictions currently opting out.
CFPB and DOJ File Lawsuit Against Housing Developer/Lender Over Targeting Hispanic Borrowers with Alleged False Statements and Predatory Loans
On December 20, the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ) filed a complaint in a Texas federal court against Colony Ridge Development, LLC (Colony Ridge), its affiliates, and Loan Originator Services, a Texas mortgage company, for allegedly operating an illegal land sales scheme and targeting tens of thousands of Hispanic borrowers with false statements and predatory loans. Specifically, the complaint alleges Colony Ridge sells flood-prone land without water, sewer, or electrical infrastructure, and that the company sets borrowers up with loans they cannot afford. The complaint alleges that defendants engaged in unlawful discrimination by targeting Hispanics in violation of the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA). In addition, the complaint alleges violation of the Dodd-Frank Act’s prohibition on unfair, deceptive or abusive acts or practices (UDAAP), and a variety of violations of the Interstate Land Sales Full Disclosure Act.