On October 11, 2023, President Biden, Federal Trade Commission (FTC) Chair Lina Khan, and Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra announced the latest developments in the government’s efforts to tackle junk fees. Junk fees are hidden, surprise fees imposed on customers without clear disclosure.[1] The CFPB and FTC have taken several measures to crack down on junk fees since early 2022, including:

  • On January 26, 2022, the CFPB issued a request for information regarding fees that consumers believed to be covered by a baseline price, unexpected fees, and fees that seemed too high or unclear.[2]
  • On March 23, 2023, the FTC proposed a “click to cancel” provision requiring sellers to make it easier for consumers to cancel their recurring subscriptions and memberships.[3]
  • On June 22, 2022, the CFPB issued an advance notice of proposed rulemaking to address excessive credit-card late fees. [4] On February 1, 2023, the CPFB issued a proposed rule limiting and capping late fees.[5]
  • On June 29, 2022, the CFPB issued an advisory opinion affirming that “pay-to-pay” fees that are not authorized by the original loan violate the Fair Debt Collection Practices Act (FDCPA). “Pay-to-pay” fees are those that are imposed on consumers who want to make a payment in a particular way.[6]
  • On July 23, 2022, the FTC proposed a rule to ban junk fees and bait-and-switch tactics for car buyers.[7]
  • On October 20, 2022, the FTC published an advance notice of proposed rulemaking to crack down on junk fees, seeking comments on unnecessary charges, unavoidable charges, and surprise charges.[8]
  • On October 26, 2022, the CFPB issued guidance stating that imposing surprise bounced-check or overdraft fees are likely to be unfair and unlawful.[9]
  • On October 11, 2023, the CFPB published a Supervisory Highlights special edition covering junk fees in the areas of bank accounts, auto-loan servicing, and remittances that were identified during CFPB examinations between February and August 2023. The CFPB claims to have recovered and is refunding $140 million back to impacted customers.[10]

Earlier this week, the CFPB released an advisory opinion on fees related to consumers requesting information on products and services, and the FTC proposed a new rule banning hidden fees and bogus fees.

Continue Reading The FTC and CFPB Announce New Rules to Tackle Junk Fees

Much has been written about the Consumer Financial Protection Bureau’s recent “Policy Statement on Abusive Acts or Practices,”[1] in which the Bureau analyzed the prohibition on abusive conduct in the Consumer Financial Protection Act of 2010 (CFPA). In response to the statement’s publication in the Federal Register, comments were submitted by banks, credit unions, debt collectors, and others.[2] But the Bureau’s policy statement should be of particular interest to another class of persons: real-estate agents who participate in joint ventures with mortgage or title companies.

Continue Reading Real-Estate Agents Who Participate in Joint Ventures Should Be Wary of the CFPB’s Recent Policy Statement on Abusive Conduct

In the wake of Silvergate’s collapse, Silicon Valley Bank entering receivership and another bank following in SVB’s footsteps, startups and other companies directly affected by these events are struggling to manage their payroll and other obligations while credit facilities are frozen. Although depositors likely will be fully protected and most businesses can expect to avoid the brunt of this banking crisis, some employers still may face tough decisions.

Read on to learn about state and federal law considerations and recommended next steps for employers.

In December 2022, California’s new commercial lending disclosure law and complementary regulations went into effect, leading the way for other states to follow.

The new California law imposes disclosure requirements in commercial lending transactions. While this is not new for consumer lenders that are accustomed to complying with the Truth in Lending Act, this is uncharted territory in the commercial lending space. Like the federal Truth in Lending Act, the new California law is meant to provide prospective borrowers with an opportunity to see a concise summary of the obligation’s terms in an easy-to-read format. Ideally, this allows a prospective borrower to take the terms offered by two or more lenders and compare them, side by side, to determine the best offer.

Continue Reading California Leads the Way on Commercial Lending Disclosures

The Financial Crimes Enforcement Network (FinCEN) has recently issued an alert cautioning all financial institutions regarding potential investments in the U.S. commercial real estate (CRE) sector, by or on behalf of sanctioned Russian elites, oligarchs, their family members, and entities through which they act. This alert complements sustained efforts of the U.S. government, in response to Russia’s war against Ukraine, to isolate sanctioned Russian persons from the international financial system. It highlights specific vulnerabilities to sanctions evasion in the CRE sector, which may be exploited by Russian elites or their proxies, and is based on a recent review of Bank Secrecy Act (BSA) reporting. It also provides financial institutions with guidance on identifying potential red flags and typologies of sanctions-evasion activities.

Continue Reading FinCEN Alert Highlights Potential U.S. Commercial Real Estate Investments by Sanctioned Russian Elites and Their Proxies

On December 15, 2022, the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a lengthy Notice of Proposed Rulemaking to implement beneficial ownership information (“BOI”) access and safeguards provision of the Corporate Transparency Act (“CTA”) (the “Access NPRM”).  The Access NPRM provides a framework by which authorized recipients may access BOI, providing different tiers of access for agencies and financial institutions who may seek this information in connection with anti-money laundering efforts.

Continue Reading FinCEN Issues Notice of Proposed Rulemaking on Access to Beneficial Owner Information

On Oct. 28, the U.S. Court of Appeals for the Fourth Circuit vacated and remanded for reconsideration a district court order certifying a class of mortgage borrowers. The decision, which relies on the U.S. Supreme Court’s decision in TransUnion LLC v. Ramirez, provides further ammunition for the argument that all putative class members must have a demonstrable injury in order to recover damages in a class action.

Read on for analysis of this decision and implications for future class actions.

On October 13, 2022, the Board of Governors of the Federal Reserve System (“Board”) announced multiple enforcement actions against former employees of several financial institutions because the former employees made false statements to obtain economic injury disaster loans and grants from the U.S. Small Business Administration (“SBA”) or paycheck protection loans from SBA-approved lenders.  The loans and grants were made available to small businesses who were suffering from the impact of COVID-19 and needed emergency financial assistance authorized by the Coronavirus Aid, Relief, and Economic Security (P.L. 116-136, the “CARES Act”). 

Continue Reading Federal Reserve Exercises Broad Disciplinary Authority to Sanction Former Bank Employees Who Committed PPP Loan Fraud

The Consumer Financial Protection Bureau’s recent guidance on withholding transcripts from students with debts revealed that the CFPB is using a broad definition of “private education loan” that may apply to the practices of some not-for-profit schools. Additionally, while the CFPB characterized this practice as “abusive,” its analysis suggests that these practices may also be “unfair,” meaning that the Federal Trade Commission, states, and other regulators may also have authority to address them.

Read on for details about this development and important takeaways for schools with in-house lending programs.

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network, the National Credit Union Administration, and the Office of the Comptroller of the Currency (collectively the “Agencies”) issued a Joint Statement on July 6, 2022, reminding banks[1] of the “risk-based approach to assessing customer relationships and conducting customer due diligence (CDD).”  The Joint Statement reminds banks that the Agencies consider a blanket approach of assessing customer risk, based solely on the type of customer (e.g., casino, auto dealer, etc.), to be inappropriate.  Specifically, the Joint Statement urges financial institutions not to simply ascribe the same level of risk to all customers of a particular type. Rather, banks must use a risk-based approach that evaluates the specific customer at issue when creating customer profiles and when establishing and maintaining customer relationships.  Further, the Joint Statement expresses a preference for enhanced monitoring rather than exiting customer relationships as part of de-risking.[2]

Continue Reading Bank Regulators Remind Financial Institutions Not to Take a One-Size Fits All Approach to Assessing AML Risks from Customer Relationships