The CFPB has issued a policy statement concerning COVID-19 considerations that will be relevant to how the CFPB chooses to exercise its supervisory and enforcement authority regarding compliance with the Fair Credit Reporting Act and Regulation V, especially in light of the CARES Act.

The CFPB states that it “understands that the current crisis impacts the financial well-being of consumers and poses operational challenges for consumer reporting agencies and furnishers, including staffing challenges, that could temporarily impede their ability to timely comply with their statutory and regulatory consumer reporting obligations.”  The policy statement is intended to “inform [CRAs] and furnishers of the Bureau’s flexible supervisory and enforcement approach during this pandemic regarding compliance with the [FCRA] and Regulation V.”  The CFPB also states that it “intends to consider the circumstances that entities face as a result of the COVID-19 pandemic and entities’ good faith efforts to comply with their statutory and regulatory obligations as soon as possible.”

The CFPB gives the following “examples of the flexibility [it] intends to provide in the consumer reporting system”:

  • In contrast to legislation that has been introduced calling for credit reporting to be halted in response to the COVID-19 pandemic, “the Bureau encourages [furnishers] to continue furnishing information despite the current crisis.”  The Bureau also references the CARES Act section that amends the FCRA to require a furnisher that makes an accommodation with respect to one or more payments on a credit obligation or consumer account that was not already delinquent to continue to report the account as current if the consumer fulfills the terms of the accommodation.  It then observes that many furnishers will be offering payment accommodations either as required by the CARES Act or voluntarily and that such accommodations “will avoid the reporting of delinquencies resulting from the effects of COVID-19.”  The Bureau affirms its support for “furnishers’ voluntary efforts to provide payment relief” and indicates that it does not intend to cite in an exam or take enforcement action against “those who furnish information to [CRAs] that accurately reflects the payment relief measures they are employing.”  This presumably means that although the FCRA, as amended by the CARES Act requires a furnisher to continue to report an account as current when a consumer fulfills the terms of an accommodation, the Bureau will not fault a furnisher for reporting accurate information that reflects the accommodation (such as the amount of a reduced payment or that no payment was made).
  • With regard to the FCRA’s required timeframes for a CRA or furnisher to investigate a consumer’s dispute, the CFPB states that it is aware that some CRAs and furnishers “may face significant operational disruptions that pose challenges for them in investigating consumer disputes [within the timeframes],” such as “significant reductions in staff, difficulty intaking disputes, or lack of access to necessary information.”  The CFPB states that it will consider a CRA’s or furnisher’s “individual circumstances” and that it does not intend to cite in an exam or bring an enforcement action against a CRA or furnisher “making good faith efforts to investigate disputes as quickly as possible, even if dispute investigations take longer than the statutory framework.”  It also reminds CRAs and furnishers that they can take advantage of “statutory and regulatory provisions that eliminate the obligation to investigate disputes by credit repair organizations and disputes they reasonably determine to be frivolous or irrelevant” and indicates that the CFPB will “consider the significant current constraints on furnisher and consumer reporting agency time, information, and other resources in assessing if such a determination is reasonable.”  (Despite the supervisory or enforcement relief offered by the CFPB, CRAs and furnishers could still face consumer litigation alleging FCRA violations based on compliance failures that occur in the wake of the COVID-19 pandemic.  However, we are hopeful that the CFPB’s policy statement will be helpful in defending a claim that a violation of the dispute investigation timeframes was willful, giving rise to statutory damages.)

While the policy statement is certainly welcomed by CRAs and furnishers, members of the consumer financial services industry face similar operational challenges as a result of the COVID-19 pandemic in complying with numerous other statutory and regulatory requirements for which the CFPB examines them for compliance and as to which the CFPB has enforcement authority.  We hope the CFPB intends to also be flexible in its supervisory and enforcement practices regarding such other requirements and will soon provide additional guidance to industry.

 

In our examination of two recent OCC BSA/AML consent orders, one with a bank and another with an individual in-house professional, we review the OCC’s allegations underlying the orders and how the OCC focuses on the core pillars of BSA/AML compliance when choosing to pursue enforcement.  We also discuss the takeaways for boards and management of financial institutions when accepting higher-risk customers, including digital currency exchanges, and what the AML liability risk is for individuals – including how such risk can be minimized, and the inherent tension between the interests of institutions and their executives and compliance officers.  Finally, we discuss how the use of third-party consultants and advisors regarding AML compliance can be a double-edged sword for financial institutions and individuals facing downstream enforcement actions.

Click here to listen to the podcast.   For more information on BSA/AML compliance, visit Money Laundering Watch, a blog on which members of Ballard Spahr’s White Collar Defense/Internal Investigations Group regularly report on BSA/AML developments.

Pennsylvania’s Attorney General Josh Shapiro announced this week that his office has launched “PA CARE Package,” a consumer relief program for PA consumers impacted by the COVID-19 pandemic.

The program is intended to implement and expand on the consumer protections provided by the federal CARES Act.  The press release issued by the PA AG’s Office describes the program as a partnership between the PA AG’s Office and banks and financial institutions in PA to offer additional assistance to PA consumers affected by the COVID-19 pandemic.  To commit to the program, financial institutions and banks must offer the following assistance to affected PA consumers:

  • Expansion of small and medium business loan availability
  • 90-day grace period for mortgages (at least)
  • 90-day grace period for other consumer loans such as auto loans
  • 90-day window for relief from fees and charges such as late fees, overdraft fees
  • Foreclosure, eviction, or motor vehicle repossession moratorium for 60 days
  • No adverse credit reporting for accessing relief on consumer loans

The PA AG’s Office has created a webpage to provide information about the program.

We think the PA AG’s Office deserves praise for launching a voluntary program that’s a “win-win-win”– an economic win for consumers who are in desperate need of financial assistance due to no fault of their own and a public relations win for banks and other lenders as well as for the PA AG.

 

 

The CFPB has published a request for information (RFI) in today’s Federal Register seeking comments and information to assist its Taskforce on Federal Consumer Financial Law.  Comments on the RFI must be received by June 1, 2020.

The CFPB created the Taskforce in October 2019 to examine ways to harmonize and modernize federal consumer financial laws.  The Taskforce is charged with examining the existing legal and regulatory environment for consumers and financial services providers and making recommendations to the Bureau’s leadership for improving consumer financial laws and regulations, with a focus on harmonizing, modernizing, and updating the enumerated consumer credit laws, and their implementing regulations.

The RFI seeks information on which areas of the consumer financial services market are functioning well and which might benefit from regulatory changes, particularly those where a change in the rules would provide the greatest marginal benefits relative to the marginal costs.  It contains a series of questions about the markets for consumer financial products and services, with a special interest in the following markets: automobile financing (credit or lease); credit cards; credit repair; consumer reporting; first-party and third-party debt collection; debt settlement; deposit accounts (checking or savings); electronic payments; money transfers; mortgage origination and servicing; prepaid cards; small-dollar loans (installment, payday, vehicle title loans); student loans and servicing.

The questions are divided into the following sections:

  • Expanding access.  The questions explore potential obstacles to financial inclusion.  Question topics include short-term, small dollar credit, use of alternative data, and the disparate impact theory.
  • Consumer data.  The questions explore current and future-looking topics regarding the protection and use of consumer data.  Question topics include FCRA and GLBA protections of consumers’ personal information, FCRA provisions concerning information accuracy, state data breach laws, and use of consumer data by fintech companies.
  • Regulations.  The questions focus on the regulations that the CFPB writes and enforces.  Question topics include areas of significant regulatory ambiguity or uncertainty and the need  for regulatory changes to address new products and services.
  • Federal and state coordination. The questions focus on the costs and benefits of having multiple federal agencies with supervisory or enforcement authority with respect to financial institutions.  Question topics include the appropriateness of cooperation by the agencies in areas of shared jurisdiction, potential changes to shared-jurisdiction framework, and costs and benefits to consumers and financial institutions of overlapping enforcement authority.
  • Improving consumer protections. The questions address overall performance of consumer protection.  Question topics include effectiveness of disclosures and the CFPB’s determination of appropriate remedies for violations.

 

On March 26, the CFPB issued three policy statements designed to provide flexibility to banks and financial services companies to allow them to focus on responding to customers in need during the COVID-19 pandemic.

First, in two separate policy statements, the CFPB announced that it is postponing certain industry data collection deadlines. Specifically, the Bureau will not expect quarterly information reporting by certain mortgage lenders under the Home Mortgage Disclosure Act (“HMDA”) and Regulation C, but institutions should continue collecting and recording HMDA data in anticipation of making their annual submission. Similarly, the CFPB will not expect reporting of certain information related to credit card and prepaid accounts under the Truth in Lending Act, Regulation Z and Regulation E.

In those policy statements, the CFPB indicated that it “does not intend to cite in an examination or initiate an enforcement action against any institution” that fails to submit these data according to the established reporting schedules, but added that institutions should continue gathering the required data in anticipation of making future submissions. The Bureau said it would provide more information at a later date about resuming regular reporting.

Second, on the same date, the CFPB issued a “Statement on Bureau Supervisory and Enforcement Response to COVID-19 Pandemic” announcing changes to the Bureau’s supervisory activities to account for operational challenges at regulated entities. The guidance reiterates the CFPB’s prior guidance encouraging financial institutions to work constructively with borrowers and other customers affected by the COVID-19 crisis to meet their financial needs. The guidance further states that the Bureau will work with financial institutions to schedule examinations and other supervisory activities in a manner that will minimize disruption and burden. The CFPB encourages “prudent efforts undertaken in good faith” that are designed to meet the needs of customers and borrowers. Toward that end, the Bureau will consider the circumstances that entities may face as a result of the COVID-19 pandemic when conducting examinations, supervisory activities, and in determining whether to take enforcement actions in the future.

The guidance can be found below:

Statement on Supervisory and Enforcement Practices Regarding Quarterly Reporting Under the Home Mortgage Disclosure Act

Statement on Supervisory and Enforcement Practices Regarding Bureau Information Collections for Credit Card and Prepaid Account Issuers

Statement on Bureau Supervisory and Enforcement Response to COVID-19 Pandemic

We have been closely following a lawsuit challenging a 2019 Nevada amendment that relates to the treatment of spousal credit history during the credit application process. Senate Bill 311, which went into effect on October 1, 2019, allows an applicant for credit with no credit history to request that the creditor treat the applicant’s credit history as identical to that of the applicant’s spouse during the marriage.

The lawsuit, filed the same day the amendment went into effect, was brought by the American Financial Services Association, the Nevada Credit Union League, and the Nevada Bankers Association, and named as defendants the Commissioner of the Financial Institutions Division of the Nevada Department of Business and Industry and the Nevada Attorney General. Since last reported on the case, the trade groups filed their first amended complaint on February 12. On March 24, the defendants filed a motion to dismiss the first amended complaint in which they make two primary arguments.

First, the defendants argue that the case is not ripe for adjudication, stating that the plaintiffs “do not allege facts supporting a well-founded fear of an enforcement action.” A similar argument was made in the defendants’ motion to dismiss the initial complaint. In support of this position, the defendants emphasize an apparent absence of concrete actions affecting the plaintiffs since Senate Bill 311 went into effect: “Months have gone by since the law became effective. Plaintiffs do not allege that they have received one request from a consumer under the law. Plaintiffs do not allege that they are the subject of any actual enforcement action or even the threat of one. Plaintiffs have not articulated actual hardships with specific facts.”

Second, the defendants restate an argument made in their earlier motion to dismiss that Nevada Attorney General Aaron Ford is not a proper party to the suit, taking the position that the plaintiffs’ have not “point[ed] to factual allegations where General Ford has indicated he intends to bring any action under Section 3 against them or their members.”

We will continue to provide updates on this case as it progresses.

How will regulatory agencies like the CFPB, FTC, and State Attorneys General react to the consumer financial impacts of COVD-19?  What kinds of consumer litigation may be spurred by the crisis?

On Monday, April 6, 2020, from 12:00 p.m. to 1:00 p.m. ET, Ballard Spahr will hold a webinar, “Consumer Financial Regulatory and Litigation Fallout from the COVID-19 Crisis.”  Our special guest speakers will be Richard Cordray, former Director of the Consumer Financial Protection Bureau and author of the recently-published book “Watchdog,” and John Roddy, Partner at Bailey & Glasser and prominent plaintiffs’ class action lawyer.

The webinar is open to Ballard Spahr clients, prospective clients, and other persons invited by Ballard Spahr.  To register, click here.

We will discuss these questions and other issues with our guests and the leaders of Ballard Spahr’s Consumer Financial Services Group.  The issues we will discuss include:

  • How we expect regulatory agencies to react to the current crisis
  • Industry practices or borrower harms that regulators will be interested in
  • Operational areas that may be impacted by working remotely
  • The impact on private and governmental consumer litigation, including class actions
  • What steps the financial services industry should take to reduce exposure to litigation and government enforcement initiatives
  • UDAAP and fair lending issues
  • Forbearances, loan modifications and credit reporting
  • Scams, phishing, and how they will impact consumer finance companies

To listen to our recent podcast in which Mr. Cordray was our special guest, click here.  Our recent blog posts concerning the COVID-19 crisis that involve issues of particular interest to the consumer financial services industry are available here.

 

 

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes the following key provisions that affect financial institutions and regulation of financial institutions:

Section 4003 – Emergency Relief and Taxpayer Provisions

Section 4003 of the CARES Act generally authorizes the Treasury Secretary to make loans, loan guarantees, and other investments in support of eligible businesses, States, and municipalities that do not, in the aggregate, exceed $500,000,000,000 and provide the subsidy amounts necessary for such loans, loan guarantees, and other investments in accordance with the provisions of the Federal Credit Reform Act of 1990, including not more than: (a) $25,000,000,000 for passenger carriers and other eligible businesses; (b) $4,000,000,000 for cargo air carriers; (c) $17,000,000,000 for businesses critical to maintaining the national security; (d) $454,000,000,000 and any amounts available that are not used as provided under sections (a) through (c) to make loans and loan guarantees to, and other investments in, programs or facilities established by the Board of Governors of the Federal Reserve System for the purpose of providing liquidity to the financial system that supports lending to eligible businesses, States, or municipalities by purchasing obligations or other interests directly or on the secondary market or making loans, including secured loans.

In entering into an agreement to make loans or make loan guarantees, the Secretary must determine that (a) the applicant is an eligible business for which credit is not reasonably available at the time of the transaction; (b) the intended obligation by the applicant is prudently incurred; (c) the loan or loan guarantee is sufficiently secured or is made at a rate that (i) reflects the risk of the loan or loan guarantee; and (ii) is to the extent practicable, not less than an interest rate based on market conditions for comparable obligations prevalent prior to the outbreak of COVID–19; (d) the duration of the loan or loan guarantee is as short as practicable and in any case not longer than 5 years; (e) the agreement limits stock buybacks; (f) the agreement limits dividends; (g) the agreement provides that, until September 30, 2020, the eligible business shall maintain its employment levels as of March 24, 2020, to the extent practicable, and in any case shall not reduce its employment levels by more than 10 percent from the levels on such date; (h) the agreement includes a certification by the eligible business that it is created or organized in the United States or under the laws of the United States and has significant operations in and a majority of its employees based in the United States; and (i) for purposes of a loan or loan guarantee to passenger airlines, cargo carriers and businesses critical to the maintenance of the national security, the eligible business must have incurred or is expected to incur covered losses such that the continued operations of the business are jeopardized, as determined by the Secretary.

Section 4003 of the Act also directs the Secretary to establish a program to provide low-interest loans for eligible businesses (including nonprofit organizations) with between 500 and 10,000 employees.  Although these loans do not need to require repayment for at least six months, recipients must certify that (a) the company intends to maintain at least 90 percent of their current workforce; (b) the company will not pay dividends or repurchase stock (or other equity securities); (c) the company will not outsource or offshore jobs during the loan period or two years thereafter; (d) the company will not abrogate existing collective bargaining agreements with labor unions; and (e) the company will remain neutral in any current or future union organizing effort.  No entity currently engaged in a bankruptcy proceedings is eligible for the program.

Section 4004 – Limitation on Certain Employee Compensation

Section 4004 of the CARES Act requires recipients of a loan or loan guaranty from the date of execution of the agreement to one year after retirement of the obligation if the agreement provides that (a) no officer or employee of the eligible business whose total compensation exceeded $425,000 in calendar year 2019 (other than an employee whose compensation is determined through an existing collective bargaining agreement entered into prior to March 1, 2020) (i) will receive total compensation which exceeds, during any 12 consecutive months of such period, the total compensation received by the officer or employee from the eligible business in calendar year 2019; or (ii) will receive severance pay or other benefits upon termination of employment with the eligible business which exceeds twice the maximum total compensation received by the officer or employee from the eligible business in calendar year 2019; and (b) no officer or employee of the eligible business whose total compensation exceeded $3,000,000 in calendar year 2019 may receive during any 12 consecutive months of such period total compensation in excess of the sum of (i) $3,000,000; and (ii) 50 percent of the excess over $3,000,000 received by the officer or employee from the eligible business in calendar year 2019.

Section 4008 – Debt Guaranty Authority

Section 4008 of the CARES Act authorizes the Federal Deposit Insurance Corporation (FDIC) to establish a debt guarantee program to guarantee the debt of solvent insured depository institutions and depository institution holding companies.  Pursuant to such program, noninterest-bearing transaction accounts may be treated as a debt guarantee program, provided that any such program shall include a maximum amount of debt that is guaranteed.  This section further extends to the National Credit Union Administration (NCUA) the authority to increase to unlimited the share insurance coverage it provides on any noninterest-bearing transaction accounts to federally insured credit unions.  All such programs shall terminate not later than December 31, 2020.

Section 4009 – Temporary Government In The Sunshine Act Relief

Section 4009 of the CARES Act provides the Board of Governors of the Federal Reserve System (Board) temporary relief from the restrictions imposed by the Government in the Sunshine Act (5 U.S.C. section 552b) (Sunshine Act) with respect to the conduct of its meetings.  The Sunshine Act provides that, subject to specific exemptions, every portion of every meeting of an agency must be open to public observation.  This Section permits the Chairman of the Board to determine that unusual and exigent circumstances exist, under which circumstances the Board may conduct meetings without regard to the requirements of the Sunshine Act.  This relief shall expire on the earlier of the termination date of the National Emergency or December 31, 2020.

Section 4010 – Temporary Hiring Flexibility

Section 4010 of the CARES Act grants temporary hiring flexibility to the Secretary of Housing and Urban Development, the Securities and Exchange Commission and the Commodity Futures Trading Commission to recruit and appoint candidates to fill temporary and term positions within their agencies upon a determination by their respective agency heads that such expedited procedures are necessary to respond to the COVID-19 outbreak.  Such permission shall expire on the earlier of the termination date of the National Emergency or December 31, 2020.

Section 4011 – Temporary Lending Limit Waiver

Section 4011 of the CARES Act grants a temporary lending limit waiver to nonbank financial companies and temporarily permits the Comptroller of the Currency to exempt any transaction from lending limit requirements upon the Comptroller’s determination that such exemption is within the public interest.  The waiver and authority granted by this section shall expire on the earlier of the termination date of the National Emergency or December 31, 2020.

Section 4012 – Temporary Relief For Community Banks

Section 4012 of the CARES Act provides temporary relief to financial institutions that elected to be subject to the Community Bank Leverage Ratio pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).  The Community Bank Leverage Ratio has been described as a regulatory “off ramp” for community banks that wanted to comply with a simplified capital calculation instead of being subject to a Tier 1 Risk-Weighted Assets Ratio and a Total Risk Weighted Assets Ratio.  Pursuant to the EGRRCPA, Bank regulators had announced the Community Bank Leverage Ratio at 9% of Total Assets.  This section of the CARES Act lowers the ratio to 8% and grants a qualifying community bank that falls below the Community Bank Leverage Ratio shall have a reasonable grace period to satisfy it.  The period of time for the lower ratio is from the date banking regulators issue an interim rule through the sooner of the termination date of the National Emergency or December 31, 2020.

Section 4013 – Temporary Relief For Troubled Debt Restructurings

Section 4013 of the CARES Act provides a temporary relief to financial institutions (including credit unions) from GAAP as relates to troubled debt restructurings. Relief is provided for restructurings from March 1, 2020 to the earlier of December 31, 2020 or 60 days after termination of the national emergency.  This section suspends the requirements of GAAP for any loan modification related to the COVID-19 pandemic.  The relief is applicable for the term of the loan modification, but solely with respect to any modification, including a forbearance arrangement, an interest rate modification, a repayment plan, and any other similar arrangement that defers or delays the payment of principal or interest, that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019; and does not apply to any adverse impact on the credit of a borrower that is not related to the COVID–19 pandemic.

Section 4014 – Optional Temporary Relief For Troubled Debt Restructurings

Section 4014 of the CARES Act provides optional temporary relief to financial institutions (including credit unions) from the GAAP impacts of CECL (current expected credit loss) standards.  Specifically, this section provides that no insured depository institution, bank holding company, or any affiliate thereof is required to comply with the Financial Accounting Standards Board Accounting Standards Update No. 2016–13 (“Measurement of Credit Losses on Financial Instruments”), including the current expected credit losses methodology for estimating allowances for credit losses, during the period beginning on the date of enactment of this Act and ending on the earlier of the termination date of the National Emergency or December 31, 2020.

Section 4015 – Non-Applicability Of Restrictions On ESF During National Emergency Section 4015 of the CARES Act lifts certain restrictions of the Emergency Economic Stabilization Fund to enable Treasury to establish the Treasury’s previously announced Money Market Stabilization Fund.  This section provides that Section 131 of the Emergency Economic Stabilization Act of 2008 (12 U.S.C. 5236) will not apply during the period beginning on the date of enactment of this Act and ending on December 31, 2020, but provides that any guarantee established as a result of the application of subsection (a) shall—(1) be limited to a guarantee of the total value of a shareholder’s account in a participating fund as of the close of business on the day before the announcement of the guarantee; and (2) terminate not later than December 31, 2020.  This Section contains an appropriation clause that provides that after December 31, 2020 there is appropriated, out of amounts in the Treasury not otherwise appropriated, such sums as may be necessary to reimburse the fund established under section 5302(a)(1) of title 31, United States Code, for any funds that are used for the Treasury Money Market Funds Guaranty Program for the United States money market mutual fund industry to the extent a claim payment made exceeds the balance of fees collected by the fund.

Section 4016 – Temporary Credit Union Provisions

Section 4016 of the CARES Act increases access to the National Credit Union Central Liquidity Facility by (a) broadening the definition of the kinds of credit unions that may access the Facility to all credit unions and not only those serving “natural persons;” and (b) loosening the eligibility requirements in 12 U.S.C. § 1795e(a)(1) for those institutions to receive assistance from the National Credit Union Central Liquidity Facility.

 

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) includes the following provisions of particular interest to members of the consumer financial services industry:

Credit Reporting.  Section 4021 (Credit Protection During COVID-2019) amends the Fair Credit Reporting Act to impose new COVID-19 related reporting requirements on furnishers of information to consumer reporting agencies.  Under Section 4021, if a furnisher (for example, a financial institution that lends money to consumers) makes an accommodation with respect to one or more payments on a credit obligation or consumer account, the furnisher should continue to report the account as current if the consumer fulfills the terms of the accommodation.  However, for accounts that were already delinquent before the accommodation was made, then the furnisher is permitted to continue reporting the account as delinquent unless the consumer brings the account current.  This new reporting requirement does not apply to consumer accounts that have been charged off.  These furnisher responsibilities will apply to reporting on accommodations made to consumer accounts between January 31, 2020 until 120 days after the end of the COVID-19 national emergency.

Higher Education and Student Lending.  The CARES Act contains several provisions related to higher education, some of which pertain to student loan relief, which are described below:

  • Section 3503 (Campus-Based Aid Waivers)
    • The bill creates an exemption for institutions of higher education from matching requirements for various campus-based aid programs for academic years 2019-2020 and 2020-2021. Covered programs include Federal Supplemental Educational Opportunity Grants (SEOGs), for students deemed to have significant financial need, and the Federal Work-Study Program.  However, private for-profit institutions must still pay their share of work-study wages. Unused work-study funds can be applied to SEOGs (but SEOG funds cannot be applied to work-study programs).
  • Section 3504 (Use of Supplemental Educational Opportunity Grants for Emergency Aid)
    • Institutions of higher education may use SEOG funds to assist undergraduate or graduate students for unexpected expenses and unmet financial need, and waive the need calculation requirements under the Higher Education Act (HEA), up to the amount of the maximum Federal Pell Grant for the applicable academic year.
  • Section 3505 (Federal Work-Study During a Qualifying Emergency)
    • Students participating in the Federal Work-Study program can receive work-study wages even if they are unable to work.
  • Section 3506 (Adjustment of Subsidized Loan Usage Limits)
    • If a study does not complete a semester/term due to a qualifying emergency, loans received for that semester will not count toward the total number of terms a student is eligible to receive a subsidized Stafford loan.
  • Section 3507 (Exclusion from Federal Pell Grant Duration Limit)
    • If a study does not complete a semester/term due to a qualifying emergency, Pell Grants received for that semester will not count toward the total number of terms a student is eligible to receive such grants.
  • Section 3508 (Institutional Refunds and Federal Student Loan Flexibility)
    • Requirements applicable to institutions of higher education regarding returning HEA Title IV student aid are waived with respect to students withdrawing as a result of a qualifying emergency.  Similarly, students will not be required to return Pell Grants received.  Moreover, the bill cancels loans for a given term/semester if a student had to withdraw due to a qualifying emergency.
  • Section 3513 (Temporary Relief for Federal Student Loan Borrowers)
    • All payments on federally-held student loans (not commercially held FFELP or private student loans) are suspended through September 30, 2020.
    • During the suspension period, interest shall not accrue on federally held loans.
    • For purposes of federal loan forgiveness and loan rehabilitation programs, payments will be treated as if they were made for each month during the suspension period.
    • Suspended payments must be reported to the credit bureaus as if they were made (thus not reported using forbearance codes).
    • Involuntary collection of loans is suspended during the suspension period.
    • The Secretary of Education is given a timeline to notify borrowers.

 

On March 27, 2020, the Massachusetts Attorney General filed an emergency regulation interpreting the Massachusetts Consumer Protection Act, M.G.L.  Chapter 93A, to address certain practices by creditors and debt collectors that it has determined to be unfair and deceptive under present circumstances.  The regulation, entitled “Unfair and Deceptive Debt Collection Practices During the State of Emergency Caused by COVID-19” (940 CMR 35:00), applies to “creditors” (as defined in 940 CMR 7.03) and “debt collectors” (as defined in the emergency regulation).

The emergency regulation makes it an unfair or deceptive act or practice for creditors and debt collectors, for the 90-day period following the effective date of the regulation or until the State of Emergency expires, to:

  • initiate, file, or threaten to file any new collection lawsuit;
  • initiate, threaten to initiate or act upon any legal or equitable remedy for the garnishment, seizure, attachment, or withholding or wages, earnings, property, or funds for the payment of debt to a creditor;
  • initiate, threaten to initiate, or act upon any legal remedy for the repossession of any vehicle;
  • apply for, cause to be served, enforce, or threaten to apply for, cause to be served or enforce any capias warrant;
  • visit or threaten to visit the household of a debtor at any time;
  • visit or threaten to visit the place of employment of a debtor at any time; or
  • confront or communicate in person with a debtor regarding the collection of a debt in any public place at any time.

Further, the emergency regulation prohibits “debt collectors,” for the 90-day period following the regulation’s effective date or until the State of Emergency expires, whichever occurs first, to initiate a communication with any debtor via telephone, either in person or by recorded audio message to the debtor’s residence, cellular phone, or other telephone number provided as a personal number, provided that the debt collector is not deemed to have initiated a communication if the communication is in response to a request by the debtor for said communication.  The foregoing prohibition does not apply to communications initiated solely for the purpose of informing debtors of rescheduled court appearance dates or discussing convenient dates for same.

Because the definitions of “creditor” and “debt collector” in the emergency regulation are far from models of clarity, a number of industry members, to be conservative, are reading the prohibition on calls by “debt collectors” to also apply to creditors.  This reading is also influenced by Massachusetts’s status as one of the most aggressive consumer protection states in the country and the scope of its collection law, which is the most far-reaching state collection law applicable to creditors of any state (e.g., it requires even creditors to send debt validation notices and provide the mini-Miranda disclosure in all collection communications).  

As a result, the Massachusetts Attorney General’s Office was flooded with comments and questions from the industry last week and we now understand that it plans to issue a series of FAQs to attempt to clear up the scope and intent of the emergency regulation.  Further, the plain language of the call restrictions section should be clarified to make clear that it means what it says – the call restrictions apply only to debt collectors and not creditors.  Indeed, the National Consumer Law Center has interpreted the restrictions this way.  Hopefully, we will have more clarity early next week for everyone.  We will keep you apprised of any further developments.