Alston & Bird Consumer Finance Blog

Debt Collection

CFPB and FTC Amicus Brief Signals Stance on “Pay-to-Pay” Fees under FDCPA

By ,

What Happened?

On February 27, the Consumer Finance Protection Bureau (CFPB) and the Federal Trade Commission (FTC) filed an amicus brief in the 11th Circuit case Glover and Booze v. Ocwen Loan Servicing, LLC arguing that certain convenience fees charged by mortgage servicer debt collectors are prohibited by the Fair Debt Collection Practices Act (FDCPA).  This brief comes on the heels of an amicus brief Alston & Bird LLP filed on behalf of the Mortgage Bankers Association (MBA).  In its brief, the MBA urged the 11th Circuit to uphold the legality of the fees at issue.

While litigation surrounding convenience fees has spiked in recent years, there is no consensus on whether convenience fees violate the FDCPA.  Federal courts split on the issue, as there is little guidance at the circuit court level, and the issue before the 11th Circuit is one of first impression.  Consequently, the 11th Circuit’s ruling could significantly impact what fees a debt collector is permitted to charge, both within that circuit and nationwide.

Why is it Important?

Convenience fees or what the agencies refer to as “pay-to-pay” fees are the fees charged by servicers to borrowers for the use of expedited payment methods like paying online or over the phone.  Borrowers have free alternative payment methods available (e.g., mailing a check) but choose to pay for the convenience of a faster payment method.

Section 1692f(1) of the FDCPA provides that a “debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt,” including the “collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law.”  The CFPB and FTC argues that Section 1692f(1)’s prohibition extends to the collection of pay-to-pay fees by debt collectors unless such fees are expressly authorized by the agreement creating the debt or affirmatively authorized by law.

First, the agencies contend that pay-to-pay fees fit squarely with the provision’s prohibition on collecting “any amount” in connection with a debt and that charging this fee constitutes a “collection” under the FDCPA.  Specifically, the agencies attempt to counter Ocwen’s argument that the fees in question are not “amounts” covered by Section 1692f(1) because the provision is limited to amounts “incidental to” the underlying debt. They argue that fees need not be “incidental to” the debt in order to fall within the scope of Section 1692f(1). In making this point, the agencies claim the term “including” as used is the provision’s parenthetical suggests that the list of examples is not an exhaustive list of all the “amounts” covered by the provision.  Further, the agencies attempt to counter Ocwen’s argument that a “collection” under the FDCPA refers only to the demand for payment of an amount owed (i.e., a debt). They argue that Ocwen’s understanding of “collects” is contrary to the plain meaning of the word; rather, the scope of Section 1692f(1) is much broader and encompasses collection of any amount , not just those which are owed.

Next, focusing on the FDCPA’s exception for fees “permitted by law,” the agencies contend that a fee is not permitted by law if it is authorized by a valid contract (that implicitly authorizes the fee as a matter of state common law). The agencies suggest if such fees could be authorized by any valid agreement, the first category of collectable fees defined by Section 1692(f)(1)—those “expressly authorized by the agreement creating the debt”—would be superfluous. Lastly, the Agencies argue neither the Electronic Funds Transfer Act nor the Truth in Lending Act – the two federal laws Ocwen relies on in its argument – affirmatively authorizes pay-to-pay fees.

What Do You Need to Do?

Stay tuned. The 11th Circuit has jurisdiction over federal cases originating in Alabama, Florida, and Georgia. Its ruling is likely to have a significant impact on whether debt collectors may charge convenience fees to borrowers in those states, and it could be cited as persuasive precedent in courts nationwide.

CFPB Amicus Brief in FDCPA Case Signals Its Stance on Liability for False Statements

By

A&B Abstract:

On January 2, the Consumer Finance Protection Bureau (“CFPB” or “Bureau”) filed an amicus brief in Carrasquillo v. CICA Collection Agency, Inc. in support of Plaintiff-Appellant Carrasquillo. The brief challenges the District Court’s interpretation of the Fair Debt Collection Practices Act (“FDCPA”) in relation to a debt collector’s intent when making potentially incorrect statements.

Background:

Section 1692e of the Fair Debt Collection Practices Act (“FDCPA”) provides that “[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt.”  The statute creates a private right of action for consumers to sue debt collectors who break the law by lying or providing wrong information while collecting a debt.

The Carrasquillo Case:

The Carrasquillo case originated in September 2019, when the Plaintiff-Appellant initiated bankruptcy proceedings.  Defendant CICA Collection Agency had been engaged to collect an alleged debt from the Plaintiff-Appellant.  In October 2020 (during the pendency of the bankruptcy proceedings), CICA mailed a letter stating that such debt was “due and payable,” and that the Plaintiff-Appellant could be sued if the debt was not paid.  The letter did not acknowledge the pending bankruptcy proceeding.

In October 2021, the Plaintiff-Appellant sued the Defendant in the District Court for the District of Puerto Rico, alleging that the letter violated the FDCPA, for, among other grounds, making a false statement (given the operation of the automatic stay under 11 U.S.C. § 362).

CICA filed a Motion to Dismiss, arguing that it did not know Carrasquillo filed for bankruptcy because it had not received notice of the bankruptcy proceeding.  Therefore, CICA argued, it did not intentionally make a false statement, and should not be subject to liability.  The District Court granted CICA’s Motion to Dismiss, agreeing that the FDCPA did not intend to punish unintentional false statements.  The Plaintiff-Appellant appealed to the First Circuit.

The Amicus Brief:

In its brief, the CFPB argued that Section 1692e’s prohibition against the use of “any false, deceptive, or misleading representation” extends to the provision of wrong information. Thus, the FDCPA allows a consumer to sue a debt collector for providing wrong information that the collector should have known was wrong – such as, the CFPB argues, CICA’s claim that it could sue to collect debt from a consumer who had filed for bankruptcy.

Intent:

The CFPB’s primary contention is that intent is not a factor in determining liability under the law.  The Bureau supports this by emphasizing that elsewhere in the FDCPA, Congress described as an example of a violation “communicating or threatening to communicate to any person credit information which is known or which should be known to be false.” (Emphasis added.) Section 1692e indicates that these examples are provided “[w]ithout limiting the general application of the foregoing [statement]…” Accordingly, the Bureau argues, debt collectors cannot “stick their heads in the sand and claim ignorance” to avoid liability from incorrect statements – regardless of whether such statements were intentional.

Compliance Procedures:

In its brief, the CFPB also argues that debt collectors must show that they have procedures in place designed to prevent unintentional mistakes (such as that that the Defendant claims occurred in the Carrasquillo matter). Section 1692k of the FDCPA protects a debt collector from liability if the violation “resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” (Emphasis added.)  By the terms of that provision, the Bureau argues, “it is not enough for a debt collector to merely show that its conduct was unintentional to avoid liability; rather, it must also show that the violation was the result of a ‘bona fide error’ and that the collector maintained ‘procedures reasonably adapted to avoid’ that error.”

Takeaways:

If the appellate court rules for the Plaintiff-Appellant, favoring the CFPB’s argument, debt collectors will need to revisit their compliance procedures to ensure they do not accidentally make false statements to consumers.

The CFPB’s brief also highlights its ideal enforcement position regarding the FDCPA, which would include a zero-tolerance policy for debt collectors making false statements (barring a bona fide error which the debt collector would have the obligation to prove).

Oh Snap! CFPB Sues Fintech Company under CFPA and TILA

By

A&B Abstract:

On July 19, 2023, the Consumer Financial Protection Bureau (CFPB) sued a Utah-based fintech company and several of its affiliates (the Company) for allegedly deceiving consumers and obscuring the terms of its financing agreements in violation of the Consumer Financial Protection Act (CFPA), the Truth in Lending Act (TILA), and other federal regulations.

The Allegations

The Company provides lease-to-own financing, through which consumers finance purchases from merchants though the Company’s “Purchase Agreements,” and, in turn, make payments back to the Company.  The Company allegedly provides the merchants with advertisement materials and involves them heavily in the application and contracting process.

According to the CFPB, the Company’s advertising and servicing efforts were deceptive.  As part of its marketing efforts, the Company allegedly provided its merchant partners with display advertisements that featured the phrase “100 Day Cash Payoff” without further explanation of the terms of financing.  Consumers who received financing from the Company reasonably believed they had entered into a 100-day financing agreement, where their automatically scheduled payments would fulfill their payment obligations after 100 days.  But, in fact, consumers had to affirmatively exercise the 100-day early payment discount option, and if they missed the deadline pay significantly more than the “cash” price under the terms of their Purchase Agreements.  Additionally, as part of its servicing efforts, the Company allegedly threatened consumers with collection actions that it does not bring.

From the CFPB’s perspective, these efforts constituted deceptive acts or practices under the CFPA.  The marketing efforts were deceptive because the Company’s use of this featured phrase was a (1) representation or practice; (2) material to consumers’ decision to take out financing; and (3) was likely to mislead reasonable consumers as to the nature of the financing agreement, while the servicing efforts were deceptive because the Company threatened actions it does not take.

The CFPB also alleges that the Company’s application and contracting process was abusive.  The Company allegedly designed and implemented a Merchant Portal application and contracting process that frequently resulted in merchants signing and submitting Purchase Agreements on behalf of consumers without the consumer’s prior review of the agreement.  Further, the Company relied on merchants to explain the terms of the agreements but provided them with no written guidance for doing so.  And as part of the process, the Company required consumers to pay a processing fee before receiving a summary of the terms of their agreement and before seeing or signing their final agreement.

Altogether, the CFPB views these acts and practices as abusive under the CFPA because they “materially interfered” with consumers’ ability to understand the terms and conditions of the Purchase Agreements.

Lastly, the CFPB alleges that the Company’s Purchase Agreements did not meet TILA and its implementing Regulation Z’s disclosure requirements.  On this point, the CFPB is careful in alleging that the Purchase Agreements are not typical rent-to-own agreements to which TILA does not apply.  Rather, the CFPB alleges they are actually “credit sales” because the agreements permitted consumers to terminate only at the conclusion of an automatically renewing 60-day term, and only if consumers were current on their payment obligations through the end of that term.

Takeaways

This suit serves as a good reminder to every lending program to: (i) have counsel carefully vet all advertisements to ensure that they are not inadvertently deceptive or misleading to consumers; (ii) ensure that the mechanics of its application process facilitate rather than interfere with consumers’ ability to understand the terms and conditions; and (iii) consult with counsel regarding whether their agreements are subject to TILA and Regulation Z’s disclosure requirements.

Consumer Finance State Roundup

By

The pace of legislative activity can make it hard to stay abreast of new laws.  The Consumer Finance State Roundup is intended to provide a brief overview of recently enacted measures of potential interest.

Since our last update, the following eight states have enacted measures of potential interest to Consumer Finance ABstract readers:

  • Connecticut:  Effective October 1, 2023, Senate Bill 1033 (2023 Conn. Pub. Acts 126) makes various revisions to the Connecticut General Statutes, including mortgage licensing and mortgage servicing statutes.  First, the measure amends licensing requirements under Section 36a-486 (b)(1) to add provisions to prohibit licensed mortgage lenders, mortgage correspondent lenders, mortgage brokers, or mortgage loan originators from using services of a lead generator, unless the lead generator is: (a) licensed under Section 36a-489, or (b) exempt from licensure pursuant to Section 36a-486(5).  (The measure makes corresponding amendments to Section 36a-498e, which addresses prohibited acts.) Second, the measure amends Section 36a-719, which relates to mortgage servicer licensure, to remove requirements relating to in-person (full-time) operations and the geographic location of a qualified individual or branch manager of a mortgage servicer.
  • Connecticut:  Effective October 1, 2023, House Bill 6688 (2023 Conn. Acts 45) (Reg. Sess.)) amends foreclosure mediation and mortgage release provisions of the Connecticut General Statutes.  First, the measure amends Section 49-31o to require a mortgagee that agrees to modify a mortgage pursuant to the Ezequiel Santiago Foreclosure Mediation Program to send the modification of mortgage to the mortgagor for execution at least 15 business days prior to the first modified payment due date under the modification.  The mortgagee (or mortgagee’s attorney) may satisfy this requirement by delivering the modification to: (a) the mortgagor, or (b), if the mortgagor is represented by an attorney, to both the mortgagor and that attorney. Second, the measure amends Section 49-8 to require the mortgagee or a person authorized by law to release the mortgage, to executive and deliver, or cause to be delivered, to the town clerk of the town in which the real estate is situated or, if so requested in writing by the mortgagor or designated representative of the mortgagor, to the mortgagor or the designated representative of the mortgagor.  Third, the measure amends Section 49-8a to require a mortgagee to accept, as payment tendered for satisfaction or partial satisfaction of a mortgage loan, either one of the following forms of payment:  i) a bank check; ii) a certified check; iii) an attorney’s clients’ funds account check; iv) title insurance company check, v) wire transfer; or vi) any other form of payment authorized under federal law.
  • Illinois:  Effective January 1, 2024, House Bill 2325 (Public Act 103-0156) amends the Residential Mortgage License Act of 1987 (“RMLA”) to permit remote work by mortgage loan originators (MLOs), provided that:
    • The RMLA licensee must have in place written policies and procedures for the supervision of MLOs working from a remote location.
    • The licensee must provide MLOs working remotely with access to company platforms and customer information, which access must be in accordance with licensee’s comprehensive written information security plan.
    • An MLO working remotely may not have any in-person customer interaction at their residence, unless that residence is a licensed location.
    • An MLO working remotely must not maintain any physical records at the remote location.
    • An MLO working remotely must keep customer interactions and conversations with consumers confidential and must comply with all federal and state privacy and security requirements (including applicable provisions of the Gramm-Leach Bliley Act and the FTC’s Safeguards Rule).
    • An MLO working remotely must have secure access to the licensee’s system when working from a remote location, such as accessing by utilizing a cloud-base system, vpn, or other compatible system to ensure secure connectivity.
    • The RMLA licensee must ensure that security updates, patches or alterations to security of all devices used at a remote location are installed and maintained.
    • The licensee must be able to remotely lock or erase company-related contents from any device or can otherwise remotely limit all access to a company’s secure systems.
    • The NMLSR record of an MLO working remotely must designate the principal place of business as the mortgage loan originator’s registered location, unless the MLO chooses another licensed branch office as a registered location.

Illinois:  Effective June 9, 2023, Senate Bill 201 (Public Act 103-0061) amends the Mortgage Foreclosure Article of the Code of Civil Procedure (735 Ill. Comp. Stat. 5/1 et seq.).  First, the measure amends provisions related to the delivery of notice of foreclosure and publication of the notice on the county or municipality’s website.  Second, effective until June 1, 2025, the measure adds Section 5/15-1515 to: (a) address the COVID-19 emergency sealing of court file when a foreclosure action is filed with the court; and (b) clarify what actions occurred within the “COVID-19 emergency and economic recovery period.”  The new section applies to any foreclosure action relating to: (a) “residential real estate” (as defined in Section 15-1219); or (b) real estate improved with a one- to six-unit dwelling, for “families living independently of each other in which the mortgagor is a natural person landlord renting the dwelling units, even if the mortgagor does not occupy any of the dwelling units as the mortgagor’s personal residence.”

  •  Maine:  Effective September 28, 2023, Senate Paper 449/Legislative Document 1080 (2023 Me. Laws 258) requires supervised lenders or mortgage loan servicers to notify mortgagors of their right to cancel or terminate private mortgage insurance (“PMI”) under the federal Homeowners Protection Act of 1998 (“HOPA”).  Specifically, this measure adds new Section 9-315 to Title 9-A of the Maine Revised Statutes (under the Maine Consumer Credit Code), which:
    • Requires a supervised lender, or a mortgage loan servicer acting on behalf of a supervised lender, must provide an annual written statement to the mortgagor that discloses: (a) the mortgagor’s rights under HOPA to cancel or terminate their PMI; and (b) the address and telephone number that the mortgagor may use to contact the supervised lender or mortgage loan servicer to determine whether the mortgagor may cancel the PMI;
    • Defines the terms “private mortgage insurance” and “residential mortgage transaction”;
    • Incorporates by reference HOPA’s annual notice requirement for a residential mortgage transaction; and
    • Applies to PMI created or renewed, and to residential mortgage transactions entered into, on or after the measure’s effective date.
  • Missouri:  Effective August 28, 2023, Senate Bill 101 amends the Missouri Revised Statutes to add provisions related to lender-placed insurance.  First, the measure’s provisions apply to any insurer or any insurance producer involved in lender-placed insurance, who must comply with all requirements set forth under new Section 379.1859.  Second, the measure requires that lender-placed insurance coverage amounts and premium amounts be based on the replacement cost value of the property, as calculated under new Section 379.1855.  Further, the measure requires that if any replacement cost coverage provided by the insurer is in excess of the unpaid principal balance on the mortgage loan, that excess must be paid to the mortgagor.  Third, the measure adds new Section 379.1857, which prohibits an insurer or an insurance producer from engaging in conduct including: (a) issuing lender-placed insurance if the entity or an affiliate thereof owns, performs servicing for, or owns the servicing right to, the mortgage property; or (b) compensating a lender, insurer, investor, or servicer, including through the payment of commissions, for lender-placed insurance policies issued by the insurer. Fourth, the measure adds new Section 379.1861 to require: (a) lender-placed insurance to be set forth in an individual policy or certificate of insurance; and (b) proof of coverage to be delivered by mail to the mortgagor’s last known address, or delivered in person.
  • New Hampshire:  Effective June 20, 2023, House Bill 520 (2023 N. H. Laws 89) amends provisions related to escrow accounts maintained by licensed nondepository mortgage bankers, brokers, and servicers.  First, the measure amends Section 397-A:9, IV of the New Hampshire Revised Statutes to provide that nondepository licensees that require the maintenance of a mortgagor’s escrow account for loans on single family homes secured by real estate mortgages on property located in New Hampshire must pay interest on moneys held in such account, so as to be consistent with interest rates credited by depository entities.   Second, the measure makes the same amendment to the Depository Bank ACt.  Both types of entities must pay interest on escrow accounts at six-month intervals (beginning April 1 and October 1) “at a rate of not less than the National Deposit Rate for Savings Accounts as published … by the Federal Deposit Insurance Corporation” in January (for the April adjustment) or July (for the October adjustment).
  • Nevada:  Effective October 1, 2023, Senate Bill 276 (2023 Nev. Stat. 534) amends the collection agencies provisions in Chapter 559 of the Nevada Revised Statutes.  First, the measure requires a collection agency to display certain information on its website.  Second, the measure requires a collection agency to maintain: (a) its license number issued by the Commissioner pursuant to Section 649.135; and (b) the certificate identification number of the certificate issued to the entity’s compliance manager under Section 649.225.  Third, the measure sets forth the conditions collections agents must satisfy in order to conduct activity from a remote location.  Specifically, a collection agent engaging in remote work must sign a written agreement that it will:
    • maintain data concerning debtors in a confidential manner, and refrain from printing or otherwise reproducing such data into a physical record while working from the remote location;
    • read and comply with (a) the entity’s security policy, and (b) any policy to ensure the safety of the equipment of the collection agency that the collection agent is authorized to use;
    • review a description of the work that the collection agent is authorized to perform from the remote location and only perform work included in that description;
    • refrain from disclosing to a debtor that the collection agent is working from a remote location or that the remote location is a place of business of the collection agency;
    • authorize the employer to monitor the collection agent’s remote activities (including without limitation, by recording any calls to and from the remote location relating to collection activities); and
    • refrain from conducting any activities related to his or her work with the collection agency with a debtor or customer in person at the remote location.

Further, the measure requires a collection agent working remotely to complete a program of training regarding compliance with applicable laws and regulations, privacy, confidentiality, monitoring, security, and any other issue relevant to the work the collection agent will perform from the remote location.  A collection agent engaged in remote work must work for the collection agency under direct oversight and mentoring from a supervisor for at least seven days.  Finally, the measure requires a collection agent who works from a remote location to comply with any applicable federal or state laws (e.g., the Fair Debt Collection Practices Act).

  • Nevada:  Effective and January 1, 2024, Senate Bill 355 (2023 Nev. Stat. 527) amends the Mortgage Companies and Mortgage Loan Originators Law (Chapter 645B of the Nevada Revised Statutes) to permit remote operations, among other provisions.  Specifically, the measure adds a new section under which a mortgage company may authorize its employees to conduct mortgage business at a remote location, provided that the entity:
    • has adopted written policies and procedures for the supervision of its employees working at a remote location to ensure that each employee complies with all statutory and regulatory requirements applicable to remote operations;
    • exercises reasonable control and supervision over the activities of its mortgage loan originators; and
    • has adopted a comprehensive written plan for its security and information systems of the mortgage company and any information collected and maintained by the mortgage company regarding customer data, must contain specific provisions for cybersecurity and use of secure connection (i.e. VPN) that meets the criteria specified in the measure, while working from the remote location.

Second, the measure amends Section 645B.080 relating to require a mortgage company to keep and maintain complete and suitable records of all mortgage transactions made by its employee at a remote location in accordance with the requirements established by the Commissioner of Mortgage Lending by regulation.

  • North Carolina:  Effective October 1, 2023, Senate Bill 331 (2023 N. C. Sess. Laws 61) amends the North Carolina Consumer Finance Act (“CFA”).  First, the measure Section 53-165 of the General Statutes by removing the term “cash advance” and definitions for “amount financed” “electronic payment”, “loan amount”, and “servicing loans”.  Second, the measure amends Section 53-166 by increasing the amount that a licensee can lend to a borrower from $15,000 to $25,000.  Third, the measure amends Section 53-168 to:
    • increase application fees for consumer finance licensees from $250 to $500;
    • permit a licensee to post its license on its website; and
    • require at least 30 days’ notice to the Commissioner of Banks for any proposed transfer of a CFA license.

Fourth, the measure amends Section 53-173 to require that interest be computed on the unpaid portion of the amount financed (rather than the principal balance or principal amount).  Fifth, the measure amends Section 53-177 to:

    • increase late fees from $15 to $18;
    • permit a licensee to apply a borrower’s most recent payment to the oldest installment due;
    • prohibit a licensee from collecting more than one late fee per installment owed, whether a partial or full payment was made;
    • permit the collection of late fees on installment payment past due for 10 days or more if the licensee places the borrower in default;
    • permit a licensee to include late payment fees on installment payments past due 10 days or more of the amount of a loan that is refinanced;
    • permit a licensee to include late fees for installment payments past due for 10 or more days in the final balance when a loan reaches maturity; and
    • permit a licensee to assess a deferral charge for each moth of the remaining loan term on each installment owed after the date of deferral.

Sixth, the measure amends Section 53-184 by requiring licensees to:  (a) maintain separate loan ledgers and accounts related to the making and collecting of loans under the CFA; (b) allocate expenses monthly according to generally accepted accounting principles; and (c) retain all required books and records for a period of two years after the last transaction. The amended section also outlines the books and records (general ledger, loan documents, judgements, repossessions) that a licensee must keep.

Rhode Island:   Effective June 14, 2023, companion measures House Bill 5761 (2023 R. I. Pub. Laws 75) and Senate Bill 163 (2023 R. I. Pub. Laws 76) removed the July 1, 2023, sunset date for provisions of the Rhode Island General Statutes requiring a mediation conference coverage prior to mortgage foreclosure.

Consumer Finance State Roundup

By

The pace of legislative activity from this year’s current session can make it hard to stay abreast of new laws.  The Consumer Finance ABStract’s “Consumer Finance State Roundup” is intended to provide a brief overview of recently enacted measures of potential interest.  For this first installation, we are including additional measures enacted during the current legislative session that will take effect in short order:

During this current legislative session, the following five states have enacted measures of potential interest to Consumer Finance ABstract readers:

  • Arkansas:  Effective July 31, 2023, House Bill 1439 (2023 Ark. Acts 325) amends the Fair Mortgage Lending Act to clarify the sponsorship process and amend licensing requirements.  First, the measure defines the term “[s]ponsor” to mean “a mortgage broker or mortgage banker licensed under [the Act] that has assumed the responsibility for and agrees to supervise the actions of a loan officer or transitional loan officer.”  Second, the measure clarifies that the termination of a sponsorship of a loan officer or transitional loan officer license under the Act extinguishes the right of that individual to engage in any mortgage loan activity.  Finally, the measure amends provisions related to renewal of a loan officer license to change a license status from “approved-inactive” to “approved” so long as, prior to the loan officer license termination, a licensed mortgage broker or mortgage banker meets certain requirements.

 

  • Arkansas:  Effective July 31, 2023, Senate Bill 321 (2023 Ark. Acts 360) amends provisions of the Arkansas Code relating to collection agencies.  Among other provisions, the measure amends Section 17-24-101 to clarify that the term “collection agency” means any person or entity that “(1) Engages in the collection of delinquent accounts, bills, or other forms of indebtedness owed or due or asserted to be owed or due to another; (2) Uses a fictitious name or any name other than its own to collect their own accounts receivable; (3) Solicits claims for collection; or (4) Purchases and attempts to collect delinquent accounts or bills.”

 

  • Montana:  Effective July 1, 2023, House Bill 30 (2023 Mont. Laws 4) amends the Montana Mortgage Act (“Act”) to adopt prudential standards for non-bank mortgage servicers and allow remote work for mortgage loan originators (“MLOs”), among other provisions.  First, the measure establishes capital and liquidity requirements for servicers. Second, the measure requires certain entities (that are “covered institutions”) to establish and maintain corporate governance standards, including for internal and external audits and risk management.  Third, the measure amends the definition of “mortgage servicer” to add the servicing of forward mortgages and home equity conversion mortgages or reverse mortgages for receiving payments. Fourth, the measure requires a licensee under the Act to have one MLO serve as a designated manager responsible for mortgage origination activity across the entire entity;.  Finally, the measure requires a licensee under the Act to file a written report with the Department of Administration within 15 business days after learning of a cybersecurity incident affecting business operations or potentially exposing personal information of customers.  For a detailed summary analysis on the measure’s provisions addressing remote work by MLOs, please see our previous post.

 

  • North Dakota:  Effective August 1, 2023, Senate Bill 2090 amends the North Dakota Code with respect to the licensing of residential mortgage lenders and money brokers.  First, the measure enacts a new Chapter 13-12 of the North Dakota Century Code to address the licensing of residential mortgage lenders.  Under current law, mortgage lender licensing falls within the scope of the money broker statutes in Chapter 13-04 of the Code.  Second, the measure provides that any residential mortgage lender that holds a valid North Dakota money broker license as of August 1, 2023, will not be required to obtain a residential mortgage lender license under new Section 13-12-03 until December 31, 2023.

 

  • Ohio:  Effective December 29, 2023, Senate Bill 131 (2022 Ohio Laws 156) amends mortgage (and other industry) licensing standards to address license reciprocity requirements.  Under the Ohio Residential Mortgage Lending Act (Ohio. Rev. Code § 1322.01 et seq.), the measure provides for an applicant to obtain a registration for a mortgage lender or broker or a license for a mortgage loan originator (“MLO”) by reciprocity under Section 1322.10 or Section 1322.21, respectively, of the Ohio Revised Code if the applicant: (i) holds a license or certificate of registration in another state; or (ii) has satisfactory work experience, a government certification, or a private certification (as described in that chapter) as a mortgage broker, mortgage lender, or MLO in a state that does not issue that license or certificate of registration.

 

  • Virginia:  Effective July 1, 2023, House Bill 2389 (2023 Va. Acts 573) amends provisions of the Mortgage Lenders and Mortgage Brokers Act (Va. Code Ann. § 6.2-1600 et seq.) to permit licensed mortgage lenders and mortgage brokers to allow employees and exclusive agents to work from a remote location provided that certain criteria are met.   Specifically, the measure adds to Section 6.2-1607 a list of conditions that must be met in order for a licensee’s employees to work from a remote location, including that: (a) the licensee has written policies and procedures for the supervision of employees or exclusive agents working from a remote location; (b) access to the licensee’s platforms and customer information through a VPN or comparable system, and is in accordance with the licensee’s comprehensive written information security plan; (b) no in-person customer interaction occurs at an employee’s or exclusive agent’s residence, unless such residence is an approved office; and (d) the licensee employs appropriate risk-based monitoring and oversight processes, and any employee or exclusive agent who works from a remote location must comply with the licensee’s established practice.