Earlier this week New York Attorney General Eric Schneiderman sent a letter to select state legislators adding his backing to the creation of a licensing regime in New York for student loan servicing, similar to what has been emerging in state legislatures across the country over the past two years.

The letter provides express support for Governor Cuomo’s 2019 Executive Budget Proposal, which calls for, among other things, establishment of a Student Loan Ombudsman at the Department of Financial Services. As described in an outline summarizing the proposal:

The Governor will advance a comprehensive plan to further reduce student debt that includes creating a Student Loan Ombudsman at the Department of Financial Services; requiring all colleges annually provide students with estimated amounts incurred for student loans; enacting sweeping protections for students including ensuring that no student loan servicers or debt consultants can mislead a borrower or engage in any predatory act or practice, misapply payments, provide credit reporting agencies with inaccurate information, or any other practices that may harm the borrower; and prohibiting the suspension of professional licenses of individuals behind or in default on their student loans.

Draft legislation in line with this proposal appears in Senate Bill S7508 and Assembly Bill A9508. Last year, Assembly Bill A8862 was introduced (establishing “the student loan borrower bill of rights to protect borrowers and ensure that student loan servicers act more as loan counselors than debt collectors”) and is currently in committee in the New York State Senate.

As we’ve previously noted, California, Connecticut, the District of Columbia, and Illinois have already enacted similar laws, and we have been closely tracking pending legislation in other states, including Ohio, Missouri, New Jersey, Virginia, and Washington. This is a trend that shows no signs of abating, and adoption in New York could serve as an additional catalyst as more states take up the issue.

On February 14, 2018, the United States House of Representatives passed the TRID Improvement Act of 2017, H.R. 3978, by a vote of 245 to 171.  The bill would amend the manner in which title insurance premiums are disclosed under the TILA/RESPA Integrated Disclosure (TRID) rule.

Under title insurance price structures in many states, when a consumer purchases both an owner’s title insurance policy and lender’s title insurance policy at the same time, a discount is offered on the price of the lender’s title insurance policy.  Nevertheless, when the consumer will purchase both an owner’s title insurance policy and lender’s title insurance policy, the TRID rule requires that the amounts disclosed for the owner’s title insurance policy premium and lender’s title insurance policy premium be determined as follows:

Lender’s Title Insurance Premium:  The premium for the lender’s policy based on the full premium rate (i.e., without regard to any discount offered by the title insurer).

Owner’s Title Insurance Premium:  The result of adding the full owner’s title insurance premium and discounted premium for the lender’s policy, and subtracting the premium for the lender’s policy based on the full premium rate.

Industry members have objected to the required disclosure approach because it deviates from the manner in which the actual premium amounts are charged.

The bill would amend language in the Real Estate Settlement Procedures Act (RESPA) to require the itemization of “all actual charges” and not just the itemization of “all charges.”  The bill also would amend RESPA to require that ‘‘Charges for any title insurance premium disclosed on [the TRID rule] forms shall be equal to the amount charged for each individual title insurance policy, subject to any discounts as required by State regulation or the title company rate filings.’’. Thus, the bill would not permit the current approach to the disclosure of title insurance premiums under the TRID rule, and would require that the amounts disclosed for title insurance reflect the actual premium charges, including any discounts.

Forty-three Democrats joined Republications in passing the bill.

By a vote of 245-171, the House passed H.R. 3299, the “Madden fix” bill (whose official title is the “Protecting Consumers’ Access to Credit Act of 2017.”)  In Madden, the Second Circuit ruled that a nonbank that purchases loans from a national bank could not charge the same rate of interest on the loan that Section 85 of the National Bank Act allows the national bank to charge.

The bill would add the following language to Section 85 of the National Bank Act: “A loan that is valid when made as to its maximum rate of interest in accordance with this section shall remain valid with respect to such rate regardless of whether the loan is subsequently sold, assigned, or otherwise transferred to a third party, and may be enforced by such third party notwithstanding any State law to the contrary.”

The bill would add the same language (with the word “section” changed to “subsection” when appropriate) to the provisions in the Home Owners’ Loan Act, the Federal Credit Union Act, and the Federal Deposit Insurance Act that provide rate exportation authority to, respectively, federal and state savings associations, federal credit unions, and state-chartered banks.  (A Senate bill with identical language was introduced in July 2017 by Democratic Senator Mark Warner.)

The House passed the bill despite strong Democratic opposition, with only 16 Democrats voting for the bill and 170 voting against.  As a result, the bill is expected to face an uphill battle in the Senate even though it can be passed with only 60 votes.

While adoption of a “Madden fix” would eliminate the uncertainties created by the Second Circuit’s Madden decision, it would not address a second source of uncertainty for some loans that are made by banks with substantial marketing and servicing assistance from nonbank third parties and then sold shortly after origination. These loans have been challenged by regulators and others on the theory that the nonbank marketing and servicing agent is the “true lender,” and therefore the loan is subject to state licensing and usury laws.  In November 2017, a bipartisan group of five House members introduced a bill (H.R. 4439) that is intended to address the “true lender” issue.



The CFPB has issued a request for information that seeks comment on its supervision program.  Comments on the RFI will be due no later than 90 days after it is published in the Federal Register, which the CFPB expects to occur on February 20.  (The CFPB’s three prior RFIs described below have 60-day comment periods.)

The new RFI represents the fourth in a series of RFIs announced by Mick Mulvaney, President Trump’s designee as Acting Director.  In the new RFI, the CFPB seeks comment on all aspects of its supervision program but lists the following 12 topics that represent “a preliminary attempt by the Bureau to identify elements of the Bureau processes related to its Supervision Program that may be deserving of more immediate focus.”

These topics are:

  • Timing, frequency, and scope of supervisory process
  • Timing, method or process used by the CFPB to collect information and documents from a supervised entity before it begins an examination
  • Type and volume of information and documents requested in examination information requests
  • Effectiveness and accessibility of the CFPB Supervision and Examination Manual
  • Efficiency and effectiveness of onsite examination work
  • Effectiveness of Supervision’s communications when potential violations are identified, including the usefulness and content of a potential action and request for response (PARR) letter
  • Clarity, organization, and quality of communications that report the results of supervisory activities
  • Clarity of matters requiring attention (MRA) and the reasonableness of timing requirements to satisfy MRAs
  • Process for appealing supervisory findings
  • Use of third parties by supervised entities to conduct assessments specified in MRAs or assess the sufficiency of completion of an MRA
  • Usefulness of the CFPB’s Supervisory Highlights to share findings and promote transparency
  • Manner and extent to which the CFPB can and should coordinate its supervisory activity with federal and state supervisory agencies

The CFPB’s first RFI, which has a March 27, 2018 comment deadline, seeks comment on the CFPB’s processes surrounding civil investigative demands and investigational hearings.  The second RFI, which has a comment deadline of April 6, 2018, seeks comment on how the CFPB can improve its administrative adjudication processes.  The third RFI, which has a comment deadline of April 13, 2018, seeks comment on how the CFPB can improve its enforcement processes.

In its press release announcing the fourth RFI, the CFPB stated that the next RFI in the series will be issued next week and will address the CFPB’s external engagement processes.  The press release also stated that the CFPB anticipates issuing RFIs on the following topics in the coming weeks:

  • Complaint Reporting
  • Rulemaking Processes
  • Bureau Rules Not Under §1022(d) Assessment (§1022(d) requires the CFPB to conduct an assessment of  a significant rule no later than five years after the rule’s effective date.)
  • Inherited Rules (Rules for which Dodd-Frank transferred authority from another federal agency to the CFPB)
  • Guidance and Implementation Support
  • Consumer Education
  • Consumer Inquiries

The CFPB’s newly-released strategic plan for fiscal years 2018-2022 reflects the restrained approach to the CFPB’s exercise of its authority previously outlined by Mick Mulvaney, President Trump’s designee as CFPB Acting Director.

In his message introducing the strategic plan, Mr. Mulvaney stated:

If there is one way to summarize the strategic changes occurring at the Bureau, it is this: we have committed to fulfill the Bureau’s statutory responsibilities, but go no further.  Indeed, this should be an ironclad promise for any federal agency; pushing the envelope in pursuit of other objectives ignores the will of the American people…[and] also risks trampling upon the liberties of our citizens, or interfering with the sovereignty or autonomy of the states or Indian tribes.  I have resolved that this will not happen at the Bureau.”

Perhaps a visible indicator of Mr. Mulvaney’s restrained approach is the length of the final strategic plan as contrasted with the CFPB’s draft strategic plan issued for comment in October 2017.  While the draft plan was 34 pages long, the final plan consists of 15 pages.

More significantly, the differences between Mr. Mulvaney’s views on how the CFPB should exercise its authorities and the views of former CFPB Director Cordray are reflected in the final plan’s description of the CFPB’s goals, objectives, and strategies.  Both plans list the five purposes for which the CFPB is authorized to exercise its authorities as set forth in Section 1021 of Dodd-Frank.  However, unlike Mr. Cordray’s draft plan which described the CFPB’s goals and objectives more expansively than the purposes listed in Section 1021, Mr. Mulvaney’s final plan closely tracks the five purposes in two of the plan’s three strategic goals and five of its strategic objectives.

Other differences include:

  • Emphasis on reducing regulatory burden.  To attain the CFPB’s first goal of “ensur[ing] that all consumers have access to markets for consumer financial products and services,” one of the CFPB’s primary objectives is to “regularly identify and address outdated, unnecessary, or unduly burdensome regulations in order to reduce unwarranted regulatory burdens.”  While the identification of such regulations was included the draft plan’s list of how Dodd-Frank authorizes the CFPB to exercise its authorities, it was not one of the draft plan’s objectives.
  • Emphasis on increased transparency in rulemaking and cost-benefit analysis. Another of the CFPB’s primary objectives for attaining its first goal is to “ensure that markets for consumer financial services and products operate transparently and efficiently.”  Among the CFPB’s strategies for achieving that objective is to “pursue an efficient, transparent, and inclusive approach to developing or revising regulations” and “carefully evaluate the potential benefits and costs of contemplated regulations.”  The draft plan called for “an efficient and evidence-based approach to developing new regulations and evaluating and revising existing regulations.”  While the draft plan noted by way of background that the CFPB assesses the costs and benefits of potential or existing regulations, it did not include conducting cost-benefit analyses among the CFPB’s strategies for achieving its objectives.
  • In what might be read as veiled criticism of the CFPB’s approach under former Director Cordray, the CFPB’s objectives and strategies in the final plan for attaining its third goal of “fostering operational excellence” include “safeguard[ing] the Bureau’s information and systems” and “align[ing] resources to mission and promote budget discipline.”  In addition, in describing how the CFPB will achieve its mission and vision, the plan states that the CFPB will act “with humility and moderation.”

The CFPB’s strategic plan is required by the Government Performance and Results Act of 1993 (GPRA) and the GPRA Modernization Act of 2010.  These laws require every federal agency to issue a new strategic plan by the first Monday in February following the year in which the term of the President commences.  Accordingly, since President Trump’s term began in January 2017, the CFPB was required to issue its new strategic plan by February 5, 2018.  In a blog post yesterday, Professor Jeff Sovern suggested that, in light of his “temporary” status, it is “weird” that Mr. Mulvaney has created a strategic plan.  As Acting Director, Mr. Mulvaney was fulfilling the CFPB’s statutory duty by issuing a final new strategic plan.

Professor Sovern also suggested that it was improper for Mr. Mulvaney to replace former Director Cordray’s strategic plan.  (Presumably, the plan that Professor Sovern thinks Mr. Mulvaney improperly replaced is Mr. Corday’s draft plan rather than his FY 2013-2017 plan.)  An OMB circular that provides guidance to federal agencies on strategic planning states that a strategic plan should reflect “Administration priorities or other emerging factors.”  Thus, it is entirely appropriate for the strategic plan issued by Mr. Mulvaney to reflect the priorities of the Trump Administration rather than those of the Obama Administration (as were reflected in Mr. Cordray’s plan).

Finally, it should be noted that Mr. Mulvaney’s plan provides no specifics about existing or potential future regulations or enforcement or supervisory initiatives.



On February 8, 2018 the United States House of Representatives passed The Mortgage Choice Act, H.R. 1153, to revise the definition of “points and fees” for purposes of the Regulation Z ability to repay/qualified mortgage requirements and high-cost mortgage loan requirements.  Although a voice vote was held on February 7, Chairman of the House Financial Services Committee Jeb Hensarling demanded a roll call vote.  The roll call vote was 280 to 131.

The Act would amend the definition of “points and fees” for purposes of the requirements to exclude charges for title examinations, title insurance or similar purposes regardless of whether the title company is affiliated with the creditor.  Currently for such charges to be excluded from points and fees the title company must not be an affiliate of the creditor.  The Act also would make a conforming change to exclude escrowed amounts for insurance from points and fees.  Currently escrowed amounts for taxes are excluded from points and fees.

As we reported previously, last year the House passed the Financial CHOICE Act.  The Act included the same amendments to the “points and fees” definition, but was never enacted into law.  Prior bills including the same amendments have suffered the same fate.

The focus now shifts to the Senate.  Because the Mortgage Choice Act would amend Dodd-Frank provisions, that can pose difficulty for Senate passage.  With 52 Democrats joining with Republicans to pass the Act, this may indicate that the Act has a greater chance of success than Financial CHOICE Act.  No Democrats voted for the Financial CHOICE Act, and that Act included more sweeping Dodd-Frank changes than the narrow changes included in the Mortgage Choice Act.

Identical bills have been introduced in the New York Assembly (A08938) and Senate (S07294) that would direct the New York Department of Financial Services (DFS) to issue a report on online lending by July 1, 2018.

The bills are intended to amend legislation signed into law by New York Governor Cuomo on December 29, 2017 (S6593A) that created a seven-person task force to study online lending and issue a report by April 15, 2018 containing specified information.  The task-force members are to consist of three individuals appointed by the Governor, two members appointed by the Temporary President of the Senate, and two members appointed by the Speaker of the Senate.

The bills would eliminate the task force and provide that the report is to be prepared by the DFS “in consultation with stakeholders, including online lenders, consumers and small businesses.”  The information in the DFS report must include the following:

  • An analysis of online lenders presently operating in New York, including “the common means and methods of their operations, and business,” lending practices of the online lending industry, including disclosure practices, interest rates and costs charged, the primary differences between online lending products and services and those offered by traditional lending institutions, the risks and benefits of products offered by online lenders, and the forms of credit that would be available to borrowers in the absence of online lending opportunities;
  • The types and availability of credit products for individuals and businesses;
  • An analysis of  available data regarding complaints, actions and investigations related to online lenders; and
  • A survey of existing state and federal laws and regulations that apply to online lending and the impact of such laws and regulations on consumers and access to online lenders.



The FTC has filed a lawsuit in a California federal district court against three interrelated student loan debt relief companies and the individual who is their majority owner for alleged violations of Section 5 of the FTC Act and the Telemarketing Sales Rule (TSR).  The TSR implements the Telemarketing and Consumer Fraud and Abuse Act.  While the CFPB appears to be embarking on a new strategic path in 2018 that will result in less aggressive enforcement, the lawsuit demonstrates that the FTC is continuing to target the debt relief industry for compliance with consumer protection statutes.  According to the FTC’s press release, the lawsuit represents the eighth action the FTC has taken in “Operation Game of Loans,” the FTC’s enforcement initiative targeting deceptive student loan debt relief scams.

The FTC alleges that the defendants violated Section 5 and the TSR by engaging in conduct that included the following:

  • Sending mailers to consumers representing they were eligible for federal programs that would permanently reduce their loan payments to a fixed, lower amount or result in total loan forgiveness.  The FTC alleges these representations were deceptive in violation of Section 5 and material misrepresentations in violation of the TSR because while the Department of Education and state government agencies administer loan forgiveness and discharge programs, none of those programs guarantee a fixed, reduced monthly payment for more than one year, and most consumers are not eligible because of the programs’ strict eligibility requirements.
  • Representing that consumers’ monthly payments were being applied to their loan balances.  The FTC alleges that this representation was deceptive in violation of Section 5 and a material misrepresentation in violation of the TSR because the defendants were charging consumers a monthly fee unrelated to their student loans that purportedly gave consumers access to various discounts and other benefits.
  • Charging an advance fee for enrollment in a “financial education” program.  The FTC alleges that this fee violated the TSR advance fee prohibition.

The FTC’s complaint seeks consumer redress and injunctive relief.

Five amicus briefs have been filed in the U.S. Court of Appeals for the D.C. Circuit in support of Leandra English.  Ms. English has appealed the district court’s denial of her preliminary injunction motion in her action seeking a declaration that she, rather than Mick Mulvaney, has the legal right to serve as CFPB Acting Director.

In her opening appeal brief, Ms. English relies primarily on the argument that the provision of the Federal Vacancies Reform Act (FVRA) that authorizes the President to temporarily fill a vacancy in an executive agency position requiring confirmation is superseded by the provision in the Consumer Financial Protection Act (CFPA) that provides the CFPB Deputy Director “shall…serve as acting Director in the absence or unavailability of the Director.”  Ms. English also argues that appointing Mr. Mulvaney as the CFPB Acting Director is inconsistent with the CFPA’s mandate that the CFPB be an “independent” agency.

Except as noted below, the amici that filed the five amicus briefs in support of Ms. English’s appeal also filed amicus briefs in the district court in support of her motion for a preliminary injunction.  The amici consist of the following:

  • Consumer Financial Regulation Scholars.  Amici consist of a group of 20 academics described as “scholars on financial regulation and consumer finance who regularly study the legal underpinnings of the [CFPB].”  The “scholars” listed on the amicus brief filed in the D.C. Circuit include 10 individuals who were not listed on the amicus brief filed in the district court.
  • Current and former Democratic members of Congress.  Amici consist of a group of 26 current and former Representatives and Senators described as “sponsors of Dodd-Frank [who] participated in drafting it, serve or served on committees with jurisdiction over the federal financial regulatory agencies and the banking industry, currently serve in the leadership, or served in the leadership when Dodd-Frank was passed.”  12 of the current and former Democratic members who joined the amicus brief filed in the district court are not listed on the amicus brief filed in the D.C. Circuit.
  • Democratic State Attorneys General.  Amici consist of the attorneys general of 16 states and the District of Columbia.  The Pennsylvania AG, who joined the amicus brief filed by the Democratic state AGs in the district court, is not listed on the amicus brief filed in the D.C. Circuit.
  • Consumer advocacy groups.  Amici consist of 10 nonprofits who are described as “consumer organizations that protect and defend the rights of consumers through education, advocacy, policy, research, and litigation.”
  • Peter Conti-Brown.  Professor Conti-Brown is an Assistant Professor at the Wharton School of the University of Pennsylvania who is described as “a scholar of the structure, history, and evolution of financial regulatory institutions, including especially the U.S. Federal Reserve System.”

In their amicus briefs filed in the D.C. Circuit, the amici rely on the same primary arguments that they made in their district court briefs.  The primary argument made by the Consumer Financial Regulation Scholars, the current and former Democratic members of Congress, and the Democratic state AGs is that the CFPA succession provision supplants the FVRA and provides the sole means for temporarily filling a vacancy in the position of CFPB Director until Senate confirmation of a new Director.

The amicus brief filed by the consumer advocacy groups does not directly discuss the FVRA and CFPA provisions and instead focuses on the public interest prong of the preliminary injunction standard.  The groups argue that a preliminary injunction “will serve the public interest by enabling the CFPB to pursue its statutory mission and maintain its independence during the course of this litigation.”  Professor Conti-Brown argues that even if the FVRA applies, “President Trump does not have the legal authority to appoint a White House official to lead the CFPB.”  (As we previously commented, we find no support in the FVRA for Professor Conti-Brown’s argument.  Mr. Mulvaney, as OMB Director, serves in an office to which he was appointed by the President and confirmed by the Senate.  As such, he satisfies the FVRA’s criteria for whom the President can appoint to fill a vacancy.  Nothing in the FVRA would disqualify someone who satisfies such criteria from being appointed by the President to serve as CFPB Acting Director because he or she is a “White House official.”)

Earlier this week, Mick Mulvaney, President Trump’s designee as CFPB Acting Director, announced that he has appointed Kirsten Sutton Mork as CFPB Chief of Staff.  Ms. Sutton Mork has been serving as staff director of the House Financial Services Committee under Chairman Jeb Hensarling.  We previously blogged about Mr. Hensarling’s announcement that Ms. Sutton Mork had been named CFPB Chief of Staff.

Mr. Mulvaney’s announcement states that Ms. Sutton Mork was a member of Mr. Hensarling’s staff during House Financial Services Committee, House, and conference committee consideration of the Dodd-Frank Act and “is intimately familiar with the Bureau’s statutory mission and obligations.”

The CFPB’s former Chief of Staff was Leandra English, who was appointed Deputy Director by former Director Cordray only hours before his resignation became effective at midnight on November 24, 2017.  Ms. English is currently appealing the district court’s denial of her motion for a preliminary injunction in her action challenging President Trump’s appointment of Mr. Mulvaney as CFPB Acting Director.