As previously reported, the CFPB proposed to delay the mandatory compliance date for the new general qualified mortgage (QM) rule that amends the Regulation Z ability to repay/QM rule from July 1, 2021 to October 1, 2022. Comments on the proposal were due by April 5, 2021.

Currently, for applications received before July 1, 2021, lenders may originate loans using the original 43% debt-to-income (DTI) ratio QM loan, the new general QM loan based on an APR limit, and the temporary QM loan based on a loan being eligible for sale to Fannie Mae or Freddie Mac, which is commonly referred to as the “GSE Patch”. Of the three types of QM loans, only the new general QM loan would be available for applications received on or after that date. If the mandatory compliance date of the new general QM rule is extended to October 1, 2022, all three QMs loans could be originated for applications received before that date.

In January 2021 the Preferred Stock Purchase Agreements (PSPAs) regarding Fannie Mae and Freddie Mac were amended. Pursuant to the amendments, with regard to the original 43% DTI ratio QM loan, the new general QM loan based on an APR limit, and the GSE Patch QM loan, as of July 1, 2021 Fannie Mae and Freddie Mac could only purchase new general QM loans. In view of the CFPB proposal to extend the mandatory compliance date for the new general QM loan to October 1, 2022, there was an issue regarding whether the PSPAs would be further amended to continue to provide for the purchase of original 43% DTI ratio QM loans and GSE Patch QM loans after July 1, 2021, if the CFPB finalized the proposed extension.

On April 8, 2021, Fannie Mae issued Lender Letter 2021-09 and Freddie Mac issued Bulletin 2021-13, to provide for the purchase of new general QM loans, and not the original 43% DTI ratio QM loans or GSE Patch QM loans, for applications received on or after July 1, 2021. If this position remains in place, even if the CFPB extends the mandatory compliance date of the new general QM rule beyond July 1, 2021, as a practical matter many lenders will no longer originate 43% DTI ratio QM loans or GSE Patch QM loans for applications received on or after July 1, 2021.

After looking at how the decision narrows the technology covered by the Telephone Consumer Protection Act’s automatic telephone dialing system definition, we discuss its implications for TCPA litigation going forward, including do-not-call and prerecorded call claims and the intersection with debt collection claims, and for regulatory compliance when making calls for telemarketing or lead generation, as well as possible Congressional responses to the decision.

Dan McKenna, Practice Group Leader of Ballard Spahr’s Consumer Financial Services Litigation Group, hosts the conversation, joined by Mark Furletti, Co-Chair of the firm’s Consumer Financial Services Group, and three partners in the firm’s Consumer Financial Services Litigation Group: Stefanie Jackman, Jenny Perkins, and Joel Tasca.

Click here to listen to the podcast and view the recording transcript.

The CFPB announced that it has entered into a consent order to settle the CFPB’s allegations that a debt collector, Yorba Capital Management, LLC (Yorba), and its owner, Daniel Portilla, Jr., violated the Consumer Financial Protection Act and that Yorba violated the Fair Debt Collection Practices Act.  The consent order permanently bans both Yorba and Mr. Portilla from the debt collection business and orders Yorba and Mr. Portilla to pay consumer redress of $860,000 and a civil money penalty.  However, due to the respondents’ limited financial resources, the order suspends full payment of the $860,000 judgment upon their payment of a $2,200 civil money penalty.

The consent order sets forth the CFPB’s conclusions that Yorba and Mr. Portilla engaged in deceptive conduct in violation of the CFPA’s UDAAP prohibition and that Yorba engaged in conduct that violated the FDCPA provisions prohibiting a debt collector from threatening to take action it did not intend to take and using false representations and deceptive means to attempt to collect debts based on the following CFPB findings:

  • Yorba mailed letters to consumers titled “Litigation Notice” that (1) contained a  “Case no.” and a case caption similar to what would be found in a court filing and statements threatening to file suit against a consumer if the consumer did not pay the amount indicated, (2) contained statements implying that some form of legal action had already been commenced against the consumer, and (3) made representations about the consequences to the consumer if Yorba were to commence a lawsuit and obtain a judgment.
  • Yorba and Mr. Portilla did not employ law firms or lawyers, did not file lawsuits against consumers to collect debts, and had no intention of suing consumers or taking other legal action.

In its press release, the CFPB referred to the consent order as its “latest action against collectors that have used false threats to collect debts” and described consent orders entered into 2018 and 2019 under former Director Kraninger’s leadership that involved claims of false threats.  With both Acting Director Uejio and Director-nominee Rohit Chopra having identified unlawful debt collection practices as a CFPB priority target, debt collectors should expect even greater scrutiny from the CFPB in 2021.

On April 1, 2021, the FDIC’s final rule issued in December 2020 revising its brokered deposits regulation became effective.  The full compliance date for the final rule is January 1, 2022.  The rule established a new framework for analyzing whether deposits made through deposit arrangements qualify as “brokered deposits” and amended the methodology for calculating the interest rate restrictions that apply to less than well capitalized insured depository institutions.

The FDIC issued a new Financial Institution Letter (FIL-23-2021) last week in which it announced that, to facilitate implementation of the final rule, it has added a Brokered Deposits webpage to the Banker Resource Center on its website.  The information on the webpage about the final rule includes filing instructions for the notice requirement and application process established by the final rule.

The final rule excludes from the definition of  a “deposit broker” agents or nominees whose primary purpose is not the placement of funds with IDIs (Primary Purpose Exception) and identifies 14 specific business relationships as meeting the Primary Purpose Exception (Designated Exceptions).  It created an application process that an agent or nominee that does not meet one of the Designated Exceptions can use to seek a written determination from the FDIC that a specific deposit-placement arrangement qualifies for the Primary Purpose Exception.  The final rule also requires a third party relying on either of two Designated Exceptions (referred to as the “25 percent test” and the “enabling transactions test”) to provide written notice to the FDIC.  The FDIC indicated in its announcement that it plans to make available a listing of entities that have submitted notices.

The new Brokered Deposits webpage also includes “Questions and Answers Related to the Brokered Deposits Rule” (which the FDIC intends to periodically update), a Small Entity Compliance Guide, and national rates and rate caps (applicable to less than well capitalized institutions).


The CFPB issued a proposal today that would extend by 60 days the effective date of Part I and Part II of its final debt collection rule issued in, respectively, October 2020 and December 2020.  Comments on the proposal will be due no later than 30 days after the date it is published in the Federal Register.

The debt collection rule (Parts I and II) is scheduled to take effect on November 30, 2021.  The CFPB’s proposal would extend the effective date to January 29, 2022.

In addition to requesting comment on whether to extend the final rule’s effective date and whether 60 days is the appropriate amount of time for an extension, the CFPB requests comment on whether it would facilitate implementation to retain the November 30 effective date for some or all of the final rule’s safe harbors.  In its discussion, the CFPB observes that to the extent the final rule establishes a safe harbor from liability for certain conduct, or a presumption that certain conduct complies with or violates the rule, those safe harbors and presumptions will not take effect until the effective date.  Accordingly, as an example of the information it seeks, the CFPB asks for comment on the costs and benefits of allowing debt collectors to obtain a safe harbor by using the CFPB’s model validation notice as of November 30 even if the final rule does not otherwise take effect until January 29, 2022.

To explain why it has issued the proposal, the CFPB points to the disruption caused by the COVID-19 pandemic.  It indicates that, due to this disruption, an extension to allow stakeholders additional time to review and implement the final rule may be warranted.

While the CFPB does not suggest in its discussion of the proposal that it may also consider substantive changes to the rule, that remains a possibility.  For example, we would not be surprised if consumer advocates argue that the CFPB should not only reconsider the final rule’s effective date in light of the pandemic but should also consider whether the pandemic’s effects warrant reconsideration of certain substantive provisions of the final rule.  A delay in the effective date may create more opportunity for the Bureau to propose substantive changes to the rule.


The California Department of Financial Protection and Innovation (DFPI) announced last week that it has entered into a consent order that permanently bars James Berry and any company he owns or controls from soliciting customers for Property Assessed Clean Energy (PACE) financing and seeking future enrollment as a solicitor for PACE programs.  In its press release about the consent order, the DFPI highlighted its reliance on the new California Consumer Financial Protection Law (CCFPL) for its authority to take enforcement action against the individual and his companies.

Since the CCFPL became effective on January 1, the DFPI has moved quickly to exercise its new jurisdiction and authority.  The CCFPL gave the DFPI new rulemaking and enforcement authority over “covered persons” relating to unlawful, unfair, deceptive, or abusive acts and practices and defines the term “covered persons” expansively to include many entities that previously were not subject to DBO oversight or oversight by a primary regulator.  After announcing on January 19 that is had launched an investigation into multiple debt collectors, the DFPI announced on January 27 that it had signed memorandums of understanding with five earned wage access companies.  Those announcements were followed in February by the DFPI’s issuance of an invitation for stakeholders to provide input on rulemaking to implement the CCFPL and the announcement that it had launched an investigation into whether student-loan debt-relief companies operating in California are engaging in illegal conduct under the CCFPL and Student Loan Servicing Act.

Under the California Financing Law, the DFPI regulates PACE programs by licensing PACE program administrators that administer PACE programs on behalf of, and with the consent of, public agencies.  A PACE administrator enrolls and oversees PACE solicitors and solicitor agents who market PACE products to property owners and facilitate PACE program applications processed by the administrator.  One of Mr. Berry’s companies had been enrolled as a PACE solicitor and Mr. Berry had been enrolled as a PACE solicitor agent for that company.  Both the enrolled company and Mr. Berry were disenrolled by the administrator.  In addition to using the disenrolled company to advertise and solicit customers, Mr. Berry used another company that had never been enrolled as a solicitor to advertise PACE financing and solicit customers for such financing.  According to the DFPI, Mr. Berry not only used an unenrolled company to advertise and solicit customers, but also misled consumers by engaging in unfair and deceptive marketing practices that offered “no-cost” government-funded PACE projects and made it appear that the unenrolled company was a California government agency or affiliate.

In its press release, the DFPI states that, before the CCFPL’s enactment, Mr. Berry and his companies would have fallen outside of the DFPI’s regulatory oversight because it did not have the authority to bring enforcement actions against unenrolled individuals or companies.  However, the CCFPL prohibits “covered persons” from engaging in unfair, deceptive, or abusive practices and authorizes the DFPI to enforce that prohibition.  A “covered person” includes “[a]ny person that engages in offering or providing a consumer financial product or service to a [California resident],” or their affiliate or service provider.



The Illinois Department of Financial and Professional Regulation (DFPR) has issued Predatory Loan Prevention Act Frequently Asked Questions (PLPA).  The PLPA became effective on March 23, 2021, the day it was signed into law by Governor Pritzker.  The DFPR also issued a “Notice Regarding the Consumer Reporting Database and the Predatory Loan Prevention Act” (Notice).

The PLPA extended the 36% “all-in” Military Annual Percentage Rate finance charge cap of the federal Military Lending Act  to “any person or entity that offers or makes a loan to a consumer in Illinois” unless made by a statutorily exempt entity.  (The bill containing the PLPA also amended the Illinois Consumer Installment Loan Act (CILA) and the Payday Loan Reform Act (PLRA) to apply this same 36% MAPR cap.)

FAQs.   The FAQs expressly state that the PLPA does not impact contracts lawfully entered into before March 23, 2021.  Such contracts continue to be effective and the lender can continue to service them.  In addition to confirming the PLPA’s March 23 effective date, the FAQs address the following topics:

  • Rate cap and APR calculations
  • Fees
  • Payday and title-secured loans after the PLPA
  • State database reporting
  • PLRA and CILA licensure
  • Surrender of license
  • Examination

Notice.  Prior to enactment of the PLPA, only lenders making certain higher-cost loans with annualized rates above 36% were required to report loan information to a state database administered by Veritec.  The PLPA now requires all licensed lenders, regardless of the rate charged, to pay Veritec fees for each loan and report information about the loan to the database.  Because the PLPA became effective immediately and Veritec onboarding typically takes several months, Illinois lenders initially faced the Catch-22 of either violating the amended law or ceasing all lending operations.  To address this dilemma, the Notice provides that the DFPR “does not intend to take adverse supervisory or enforcement action for violations of reporting requirements” under applicable Illinois law until further notice.



While much attention has been paid to the “new CFPB’s” plans to make fair lending a top priority, the fair lending practices of financial institutions supervised by the federal banking agencies are also likely to face greater scrutiny under the Biden Administration.

In its Consumer Compliance Supervisory Highlights, the FDIC describes several matters involving fair lending that were identified during consumer compliance examinations conducted in 2020 and referred to the DOJ because the FDIC concluded that it had reason to believe that the creditor had engaged in a pattern or practice of discrimination.  The matters consist of:

  • A lending program in which the bank was originating unsecured loans thorough third party partners that operated a website through which applicants could apply for a loan directly.  FDIC examiners found that the underwriting criteria included the prohibited bases of age and the receipt of public assistance.
  • The use of credit-scoring models developed by a third party to offer unsecured lines of credit.  One model scored younger applicants more favorably than elderly applicants and also scored applicants less favorably if their application indicated that they were on maternity leave.  Another model assigned less favorable credit scores based on whether the applicant relied on public assistance income as compared to employment income.
  • A policy that provided a different pricing method for married joint applicants than for unmarried joint applicants.  For married applicants, the bank’s policy directed loan officers to use the highest credit score of the twoapplicants to price the loan.  For unmarried applicants, loan officers were directed to use the primarily applicant’s credit score, with the primary applicant considered to be the person listed first on the credit application.  FDIC examiners identified unmarried co-applicants who received less favorable pricing than similarly-situated married applicants because of the bank’s policy.


Consumer advocates often contend that Congress should prohibit arbitration agreements with class action waivers because servicemembers and other consumers need class actions to effectuate their statutory rights.  However, a report issued by the Government Accountability Office (GAO) to Congress last month contains data that refutes that argument.

The GAO report studied the impact of mandatory arbitration agreements on claims by servicemembers under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) and the Servicemembers Civil Relief Act (SCRA).  The USERRA generally provides protections for individuals who voluntarily or involuntarily leave civilian employment to perform service in the uniformed services.  The SCRA generally provides protections for servicemembers on active duty, including reservists and members of the National Guard and Coast Guard called to active duty.  In particular, the GAO report examined (1) the effect that mandatory arbitration has on servicemembers’ ability to file claims under the USERRA and the SCRA, and (2) the extent to which data are available to determine the prevalence of mandatory arbitration clauses and their effect on servicemembers claims.

The GAO report concluded that existing data was insufficient to answer these specific questions definitively and that data on the outcome of specific claims pursued through arbitration were “limited.”  Nevertheless, the data that it did uncover shows that servicemembers can effectuate their USERRA and SCRA rights in an individual arbitration.  The report discussed instances in which arbitrations administered by the Financial Industry Regulatory Authority “specifically enforced servicemembers’ rights under USERRA.”  In one case, the arbitrators awarded $172,000 to a servicemember who pursued a USERRA claim against his employer.  The arbitrators also found the employer liable for the servicemember’s attorneys’ fees and costs, totaling over $262,000, as well as the costs of administering the arbitration, totaling more than $36,000.  In another case, the arbitrators ruled against a servicemember’s claim under the USERRA but assigned the costs of the arbitration to the employer, specifically citing USERRA’s protections against fees and costs.

The GAO report also shows that arbitration clauses do not preclude servicemembers from pursuing many USERRA and SCRA claims administratively, without the need for class actions.  The report stated that “mandatory arbitration clauses have not prevented DOJ [Department of Justice] from initiating lawsuits against employers and other businesses under USERRA or SCRA” and that
“[s]ervicemembers may also seek administrative assistance from federal agencies, and mandatory arbitration clauses have not prevented agencies from providing that assistance.”  Indeed, administrative remedies may benefit servicemembers even more than class actions because any recovery by the DOJ is not diminished by the 33% or more in attorneys’ fees typically siphoned off by private class counsel.

The report cites a case in which  the DOJ filed a lawsuit against and reached a settlement with a mortgage company, requiring it to pay $2.35 million for allegedly foreclosing on the houses of 17 servicemembers without court orders in violation of the SCRA.  It also cited another case in which the DOJ reached a settlement with an automobile lender in which the company agreed to pay $9.35 million for illegally repossessing over 1,100 vehicles in violation of the SCRA.  Moreover, according to the report, DOJ has filed 109 USERRA lawsuits and favorably resolved 200 USERRA complaints through consent decrees or private settlements, and DOJ officials said that none of the employers compelled a servicemember into arbitration.

The effectiveness of these administrative remedies strongly undercuts the argument of the plaintiffs’ bar that class actions are necessary to effectuate servicemembers’ statutory rights.  The GAO report notes that in addition to the DOJ, the Department of Defense and the Department of Labor also “often help informally resolve claims for servicemembers by educating employers and companies about servicemembers’ rights,” enabling the servicemembers to avoid legal proceedings altogether.

The data in the GAO report strongly supports the industry’s positions that (1) individual arbitration is more beneficial than class action litigation, and (2) administrative remedies can be sufficient to protect consumers’ statutory rights, without the need for class actions.  In its 2015 empirical study of consumer arbitration, the Consumer Financial Protection Bureau found that the consumer’s average recovery in arbitration was $5,389.  By contrast, settlement class members received a mere $32.35, while their lawyers recovered a staggering $424,495,451.  Similarly, a November 2020 study by the U.S. Chamber Institute for Legal Reform found that consumers are more likely to win in arbitration than in court, consumers receive higher awards in arbitration than in litigation, and consumer arbitration is faster than litigation.

The GAO’s preliminary data should be heeded by Congress as it weighs possible legislative or regulatory measures that would prohibit or restrict the use of class action waivers in consumer arbitration and employment agreements.  In considering such measures, Congress should be mindful not to throw the baby out with the bathwater.

Yesterday, in a unanimous decision, the U.S. Supreme Court limited the reach of the Telephone Consumer Protection Act by narrowing what technology qualifies as an Automatic Telephone Dialing System.  In the wake of this development, members of Ballard Spahr’s Consumer Financial Services Group recorded a conversation that breaks down and analyzes what the Court’s decision in Facebook v. Duguid means for those in the financial services industry.

Click here to listen to the conversation.