On April 5, 2021, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule that seeks to amend Regulation X to assist borrowers affected by the COVID-19 emergency. Last week, the CFPB warned mortgage services of the coming wave of foreclosures when existing forbearance agreements come to an end. That warning included a directive that mortgage servicers need to be ready to handle the expected increase of loss mitigation requests by mortgage borrowers. The information released by the CFPB last week suggest that as many as 3 million consumers are behind on their mortgages.

The CFPB’s proposed rule to amend Regulation X (mortgage servicing rule) would:

• Give borrowers more time by providing “a special pre-foreclosure review period” that would generally prohibit servicers of mortgage loans from starting foreclosure until after December 31, 2021. In essence, it would modify the 120-day rule to be a temporary blanket prohibition on starting a foreclosure because of a mortgage delinquency until after December 31, 2021.
• Allow for streamlined loan modification options to borrowers with COVID-19 related hardships based on the evaluation of an incomplete application. 
• Keep the consumers informed of their options by changing the required servicer communications to consumers. 

Please note that this proposed rule to the mortgage servicing rules would apply only to mortgage loans secured by a borrower’s principal residence. Further, the proposed changes would apply only to large servicers but the CFPB is seeking comments on whether it should extend to small servicers. The proposed effective date of these changes is August 31, 2021. The CFPB is accepting public comments on the proposed rule through May 10, 2021.

SVL is working to put together a virtual event to go through this proposed rule in detail. We anticipate having further information on the virtual event later this week. In the meantime, if you have questions, please contact a lawyer at SVL.

Yesterday, the United States Supreme Court issued a long-awaited ruling in the case of Facebook, Inc. v. Duguid. This was an appeal out of the Ninth Circuit and involved the Telephone Consumer Protection Act of 1991 (TCPA). In particular, this case involved the definition of an “automatic telephone dialing system” (ATDS). Many in the consumer credit industry hoped that this case would restore some limits to the definition given by the Federal Communication Commission’s (FCC) previous ruling that defined an ATDS to include any modern telephone system.

The Court held that an ATDS under the TCPA is a device that “must have the capacity either to store a telephone number using a random or sequential number generator, or to produce a telephone number using a random or sequential number generator.” The case centered on the reading of the TCPA statute and its definition of an ATDS. Furthermore, the case turned on whether the clause “using a random or sequential number generator” modifies the two verbs that precede it (“store” and “produce”). The Court adopted the position that the clause modifies the two verbs. As such, for a creditor to be subject to the TCPA, it must use a random or sequential number generator that either stores or produces telephone numbers. Unfortunately, the Court did not address the term “capacity,” which is another part of the statutory definition that has caused litigation.

This limiting definition of an ATDS should help to reduce future litigation under the TCPA. How much this will limit future litigation remains uncertain. Credit Unions must remain careful and comply with the other provisions of the TCPA, which remain in effect, including respecting consumer’s revocation of consent.

Should you have question on how this ruling impacts your practices or procedures, please contact a lawyer at SVL.

On February 25, 2021, the Federal Housing Finance Administration (FHFA), an independent federal agency that oversees Fannie Mae and Freddie Mac, announced that it is extending its moratorium on residential foreclosures through June 30, 2021. The extension is in line with the extension of the moratorium for federally backed residential mortgages (loans insured by HUD, VA and USDA) that was announced earlier this month by the Biden Administration. As with the extension on federally backed loans, the FHFA moratorium was scheduled to expire on March 31, 2021.

In addition to extending the moratorium on foreclosures, FHFA is also offering an additional 3-month forbearance, which is in addition to the 3-month extension that was announced earlier this year. This will enable borrowers to be in a forbearance for 18 months, and possibly defer the 18-months of payments until maturity or the loan is refinanced.

If you have any questions or concerns about these moratoriums, or any other matters related to creditor’s rights, please do not hesitate to reach out to one of the attorneys at Sorenson Van Leuven, PLLC.

Today, February 16, 2021, President Biden announced that the current moratorium on foreclosures for federally backed mortgages (loans insured by HUD, VA and USDA) is extended through June 30, 2021. The moratorium on federally back loans, which has been in place since March 2020 and extended on several occasions, was scheduled to expire on March 31, 2021.

In addition to extending the moratorium on foreclosures, the Biden Administration is also extending the forbearance enrollment period on federally backed loans through June 30, 2021. They are also providing an additional six-month forbearance for those borrowers that entered into a forbearance on or before June 30, 2020.

Last week, the Federal Housing Finance Administration (FHFA), an independent federal agency that oversees Fannie Mae and Freddie Mac, announced that it was extending the moratorium on foreclosures through March 31, 2021. In addition, they are now offering an additional forbearance extension of up to three months, for a total of fifteen months.

If you have any questions or concerns about these moratoriums, or any other matters related to creditor’s rights, please do not hesitate to reach out to one of the attorneys at Sorenson Van Leuven, PLLC.

On Thursday, January 14, 2021, the Supreme Court issued a ruling in City of Chicago v. Fulton, that holds “mere retention of property does not violate the [automatic stay in] §362(a)(3)”. Unlike in Florida, the other states in the 11th Circuit (Georgia, Alabama) require a vehicle which is repossessed but not yet sold, prior to the filing of bankruptcy, to be returned to the debtor.

This ruling looks to change this imposition on creditors; however, the Court left a lot of room for debtors to still challenge the retention of held property. They explicitly did not decide whether the turnover obligation in §542 would still require the creditor to return a vehicle in this specific situation, or whether or not §362(a)(4) and (a)(6) would apply as well. Either way, this is a step in the right direction for creditors.

If you have any questions on this ruling or any other bankruptcy matter, please do not hesitate to reach out to one of the attorneys at the Sorenson Van Leuven Law Firm.

On Friday, December 18, 2020, the Consumer Financial Protection Bureau (CFPB) issued a Final Rule that implements certain disclosure requirements for consumers under the Fair Debt Collection Practices Act (FDCPA). This Rule has been expected since an announcement by the CFPB in October when it released its Final Rule on debt collection communications.

The new Rule takes effect on November 30, 2021. The Rule requires debt collectors to provide an initial detailed disclosure about the consumer’s debt and rights in debt collection. This communication must go out prior to any collection activity or within five days of the initial communication from the debt collector. These disclosures serve to provide the consumer with certain information about the debt, information about consumer protections provided by applicable law, and information on how the consumer can respond. The Rule provides a model form for the initial disclosures.

The initial disclosures are required by a debt collector even when the consumer is deceased, if the initial communication regarding the debt occurs after the consumer’s death. In the case of a deceased consumer, the debt collector must provide notice to “a person who is authorized to act on behalf of the deceased consumer’s estate.” However, the initial disclosure is not required if the first act of the debt collector is to file a proof of claim in a bankruptcy proceeding.
In addition to the initial communication requirements, the Rule requires debt collectors to take certain steps to disclose the existence of a debt to a consumer before reporting information to a consumer reporting agency. Finally, the Rule prohibits debt collectors from making threats to sue, or from suing, consumers on time-barred debts.

Unlike the Rule on debt collection communication, this Rule is expected to have limited impact on creditors, such as Credit Unions, collecting their own debts. However, the Rule will impact any third-party debt collectors the Credit Union uses, including lawyers who collect on consumer debts. My firm has already begun analyzing the Rule to determine how its procedures and process will need to change to comply with the new Rule. A full copy of the new Rule can be found here.

Should you have questions about the new Rule, please do not hesitate to contact a lawyer at SVL.

As has always been the case, Fannie Mae and Freddie Mac provide an exception to this moratorium for properties that are deemed to be abandon or vacant. If this is the case, the servicer may initiate and continue with a foreclosure. Otherwise, new foreclosure cases may not be filed, nor may the servicer and law firm move for entry of a final judgment, hold a foreclosure sale or seek to evict a tenant.

As has always been the case, Fannie Mae and Freddie Mac provide an exception to this moratorium for properties that are deemed to be abandon or vacant. If this is the case, the servicer may initiate and continue with a foreclosure. Otherwise, new foreclosure cases may not be filed, nor may the servicer and law firm move for entry of a final judgment, hold a foreclosure sale or seek to evict a tenant.

If you have any questions or concerns regarding this latest moratorium or any other matters related to COVID-19, please do not hesitate to reach out to one of the attorneys at the Sorenson Van Leuven Law Firm.

On Friday, October 30, 2020, the Consumer Financial Protection Bureau (CFPB) issued a final rule to implement the Fair Debt Collection Practices Act. This rule focuses on debt collection communications and gives guidelines on what is considered harassment, false or misleading representations, and unfair practices. This new final rule will take effect one year from the date of publication in the Federal Register.

The rule is aimed at third-party debt collectors and debt buyers (firms or companies that buy defaulted debt). The rule is not directly applicable to creditors who are collecting their own debts. However, the rule would apply to third-party debt collectors hired by a creditor. Furthermore, the rule addresses the use of technology in debt collection, including email and text messages. The rule provides guidance on the use of these technologies, offers clarification on what type of behavior constitutes harassment, provides guidance to creditors on best practices, and gives guidance on how to avoid harassment claims.

In helping to clarify what behavior constitutes harassment, the rule places a limit of seven calls by a debt collector within a week to a consumer and states no calls are to be made to a consumer during the week after the debt collector has a telephone conversation with the consumer. Additionally, the rule grants a consumer the right to limit or prohibit communication through a particular medium. The rule states a debt collector shall not communicate with a consumer who provides notice in writing that he or she refuses to pay the debt. The rule also requires that the consumer apply payments on multiple debts in accordance with the consumer’s directions.

In the press release, the CFPB indicated that it intends to release a second debt collection final rule in December 2020. The second final rule will focus on consumer disclosures. A full copy of the rule, including all applicable commentary can be found here.

SVL intends to provide more details on the rule in a future virtual educational event. Additional details will be released in the next week or two. Should you have questions about the rule, please do not hesitate to contact a lawyer at SVL.

On October 13, 2020, the CFPB published its Consent Order with Nissan Motor Acceptance Corporation (“NMAC”). The Consent Order identifies the following violations of law by NMAC: (1) wrongful repossessions of vehicles despite agreements with consumers; (2) repossession agents failing to return personal property unless the consumer paid fees; (3) depriving consumers from making payments by phone through a lower cost option; and (4) making deceptive statements in its agreement to modify consumer’s auto loans. Under the Consent Order, NMAC will pay civil penalties of $4,000,000.00, plus damages to consumers that is yet to be determined.

The wrongful repossession violations arose in this matter because NMAC informed the consumer that NMAC would not repossess their vehicle if the consumer paid the delinquency under 60 days past due; consumers made a promise to pay and the date of the promise had not yet passed; or entered into an extension agreement with the consumer but violated the agreement. According to the Consent Order, NMAC repossessed hundreds of vehicles where the loan was less than 60 days past due; the consumer either had kept a promise to pay or made a promise to pay in the future and that future date had not yet passed; or repossessed after an agreed extension with the consumer. The CFPB found these actions by NMAC to be unfair acts and practices in violation of Federal law.

As you consider this Consent Order, evaluate whether your policies and procedures are clear enough to avoid a wrongful repossession claim. For instance, is your staff trained to avoid making misrepresentations about when repossession will start? Do you audit accounts to make sure that policies and procedures are being followed by your staff? Clearly, NMAC failed to take these steps and evaluate its repossession procedures.

The second issue involves repossession agents holding personal items left in the vehicle and refusing to return such personal items unless the consumer paid a fee or costs. The issue of holding personal property and refusing to release it unless fees and costs are paid was previously addressed by the CFPB in earlier guidance. The CFPB found this practice to be an unfair acts and practices in violation of Federal law.

Note that NMAC was guilty as the result of the actions of its repossession agents. Again, ask yourself: do you know what your repossession agents are doing and whether they complying with the law? How do they handle personal property found inside repossessed collateral? The answers to these questions are important if you wish to avoid violating applicable law.

The third issue involves disclosures of fees and advising consumers of all their options when making payments by phone. NMAC charged different fees depending on whether the payment by phone was by electronic check or in-network debit card versus credit card payments or out-of-network debit-card payments. The CFPB found that none of the consumer disclosures contained information about the fees for the telephonic payments or the price differences between the available options. Furthermore, the CFPB found that consumers were not made aware of the cost of such fees nor informed about the difference of the fees. Again, the CFPB found that these practices violated Federal law.

You should ask yourself here: what disclosures are given to members regarding fees related to pay by phone? Are there written disclosures as well as verbal disclosures? What do our policies or procedures provide? Are staff properly trained on what is required as far as disclosures?

Finally, the CFPB found that NMAC violated Federal law by engaging in deceptive acts related to loan extension agreements. The extension agreement in place contained the following language:

As a condition of you making this request, you represent that you have not filed and agree that you will not file for bankruptcy protection within 120 days after the date of this correspondence, and that any extension is contingent upon the absence of any such filing. If you should so file for bankruptcy protection, then this agreement is void for misrepresentation, and we may seek repayment of the extended payments as originally scheduled and may deem such payment to be in default.

The CFPB found that this language created an impression that consumers could not file bankruptcy. The CFPB found that the agreement to waive an individual’s right to file bankruptcy is void as against public policy.

Ask yourself: has our extension and workout documentation been reviewed by an attorney? Is there anything in the documentation which could be deemed a misrepresentation or deceptive act?

This Consent Order is a good reminder to review your repossession policies and procedures to make sure your Credit Union is not engaging in similar behavior. In addition, you want to make sure your staff is properly trained and that there is some appropriate auditing of staff to make sure those policies and procedures are being followed. We work with our clients to review their policies and procedures, to train their staff and to help them audit their staff work to find problems and fix them before a regulatory or consumer lawyer discovers the issues.

If you have questions about the Consent Order or questions about your own practices as they relate to the Consent Order, please do not hesitate to contact me or another lawyer at SVL.

We want to make you all aware that Governor Ron DeSantis allowed the foreclosure and eviction moratorium in Florida to expire. As you will recall, the Governor issued an executive order in April 2020 that placed a moratorium on all foreclosures and evictions in Florida. This moratorium was extended several times by further executive orders, with his latest order scheduled to expire at 12:01 A.M. on October 1, 2020. By allowing this moratorium to expire, any limitations on residential and commercial foreclosures in Florida are eliminated. What this means for you is that with the exception of any Fannie Mae or Freddy Mac loans you can proceed with foreclosures, including a foreclosure sale on all residential and commercial foreclosures. As you will recall, Fannie Mae and Freddie Mac extended the moratorium on their loans through December 31, 2020. An exception to the Fannie Mae and Freddie Mae moratorium is where the property is clearly vacant or abandon.

The expiration of this moratorium by the Governor also allows residential evictions to continue. However, please keep in mind that the CDC published an Agency Order on September 4, 2020, that can place a moratorium on certain residential evictions. For the tenant to be eligible for the moratorium, and thus protected from an eviction, they must submit an affidavit to the Court setting forth various information about the impact of COVID-19.

If you have any questions or concerns about the lapsing of the moratorium and the CDC Order, or any other matters related to creditor’s rights, please do not hesitate to reach out to one of the attorneys at Sorenson Van Leuven, PLLC.