Banking Law

U.S. House of Representatives Votes to Override OCC True Lender Rule

By Arthur J. Rotatori, Robert W. Savoie, and Sarah Edwards, McGlinchey Stafford, PLLC

The U.S. House of Representatives on June 24th voted 218 to 208 to repeal the Office of the Comptroller of the Currency’s (OCC) “True Lender” rule under the Congressional Review Act (CRA).  The OCC published the rule last year to eliminate challenges regarding when a loan is actually made by a federally-chartered bank, instead of a non-bank partner that takes assignment of the loan shortly after origination. The True Lender rule adopted a simple bright-line test that said that if the national bank was the named lender in the loan documentation, the national bank was the true lender notwithstanding any other factor, such as whether the bank held the predominant economic interest in the loan. As the Senate adopted its own CRA resolution to overturn the rule on May 11th, the measure now goes to the White House, where President Joe Biden is expected to sign it.

Consumer Finance 

Federal Agencies, Enterprises Extend Foreclosure Moratoriums Again, Encourage Borrowers to Seek Forbearance

By Sanford Shatz, McGlinchey Stafford, PLLC

On the eve of the June 30, 2021 expiration date for all federal pandemic moratoriums, the Federal Government extended its foreclosure and eviction moratoriums, and encouraged delinquent borrowers to seek forbearance and other relief. The White House issued a Fact Sheet on June 24, 2021, announcing the extension of the moratoriums and other federal actions to help borrowers and tenants.

Three federal agencies who make, guarantee, and insure mortgage loans (the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the Department of Agriculture (USDA)’s Rural Development Department) and two federal enterprises who purchase and securitize mortgages (Fannie Mae and Freddie Mac), extended their moratoriums on foreclosures and foreclosure-related evictions through July 31, 2021. In addition, the CDC extended its order temporarily halting residential evictions to prevent the further spread of COVID-19. Because the moratoriums vary in breadth and scope, servicers are cautioned to review the guidance before proceeding with any aspect of the foreclosure or eviction process.

HUD, the VA, and the USDA will encourage borrowers to seek forbearance through September 30, 2021, and Fannie Mae and Freddie Mac will continue to offer forbearance to their eligible borrowers. In July, the federal agencies will announce additional steps to help their borrowers explore payment reduction options that will enable more homeowners to stay in their homes.

The White House reminded the country that the American Rescue Plan provided an additional $21.5 billion for Emergency Rental Assistance that can be used by renters to cover arrears and make landlords whole. The Administration urged state and local courts to participate in eviction diversion efforts, enforce the 30-day eviction notice requirement on federally-backed properties, enforce the fair housing act, and increase outreach to vulnerable tenants, and announced that it will convene a summit for immediate eviction prevention plans.

HUD Repeals 2020 Affirmatively Furthering Fair Housing Rule, Reinstates 2015 Rule

By Devin P. Leary-Hanebrink, McGlinchey Stafford, PLLC

On June 10, 2021, the Department of Housing and Urban Development (HUD) published an interim final rule restoring certain definitions and certifications to its regulations implementing the Fair Housing Act’s Affirmatively Furthering Fair Housing (AFFH) obligations. The rule’s effective date is July 31, 2021. In connection with this rule, HUD is also soliciting public comments so it can review feedback before the effective date. Comments are due July 12, 2021.

The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) states: “It is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States.”  For HUD, this policy extends to its administration of programs and activities related to housing and urban development in a manner that affirmatively furthers the purposes of the Fair Housing Act. Additionally, Congress and the courts have repeatedly stated that the AFFH obligations impose a duty not only on HUD but also on its program grantees and recipients to affirmatively further the purposes of the Fair Housing Act.

This interim final rule repeals HUD’s 2020 Preserving Community and Neighborhood Choice (PCNC) final rule, which was implemented just last August, and reinstates relevant provisions promulgated by HUD under its 2015 AFFH final rule. With this change, HUD’s objectives are twofold: (i) withdraw the PCNC final rule, which HUD finds confusing and inconsistent with the statutory obligations of AFFH; and (ii) reinstate definitions that are consistent with AFFH obligations and restore AFFH program certifications that incorporate these more appropriate definitions. In reviewing the PCNC final rule, HUD determined it “did not interpret the AFFH mandate in a manner consistent with statutory requirements, HUD’s prior interpretations, or judicial precedent.” HUD also believes the PCNC final rule did not appropriately follow notice-and-comment rulemaking procedures.

Consistent with this interim final rule, HUD is restoring the guidance and resources previously available to grantees and recipients under the 2015 AFFH final rule (including the AFFH Rule Guidebook and AFFH Data and Mapping Tool) until it can finalize updated regulations. At a later date and through a separate rulemaking, HUD will solicit comments on how to amend the 2015 AFFH final rule.

CFPB Acting Director Uejio Publishes Blog Post on Racial Injustice in Consumer Finance Markets

By Eric Mogilnicki and Graves Lee, Covington & Burling LLP

On June 2, 2021 Bureau Acting Director Dave Uejio published a video and blog post discussing racial inequities in the consumer finance context.  In particular, he pointed to racially disproportionate economic effects of the COVID-19 pandemic, including the unequal distribution of consumer relief measures.  Uejio stated that, “[a]s Acting Director of the Consumer Financial Protection Bureau, my top priorities are to take bold and swift action to address issues of pervasive racial injustice and the long-term economic impacts of the COVID-19 pandemic on consumers,” and further indicated that “[i]t is my intent that the CFPB use all of our tools and authorities to protect and fight for fairness and equity.”  This focus on issues of racial justice has been a theme of the leadership of Acting Director Uejio, including his very first public statement after assuming the Acting Director role in January 2021.

CFPB Issues Interpretive Rule on Its Authority to Resume MLA Examinations

By Eric Mogilnicki and Lucy Bartholomew, Covington & Burling LLP

On June 16, 2021 the Bureau announced an interpretive rule that sets forth the CFPB’s explanation for reversing course on the issue of whether the Bureau has the authority to examine supervised institutions for risks related to violations of the Military Lending Act (“MLA”).  The MLA caps the interest rate at 36% for certain loans provided to military borrowers, among other restrictions. 

In laying out its statutory authority to conduct these examinations, the Bureau draws on the Dodd-Frank Act’s authorization for the Bureau to “conduct examinations of supervised nonbanks for the purposes of assessing and detecting ‘risks to consumers.’ ” According to the Bureau, “the risks to active-duty servicemembers and their dependents from conduct that violates the Military Lending Act (MLA) fall squarely within that category.”  The Bureau also argues that the Dodd-Frank Act authorizes it to examine large banks for consumer risks that are “associated” with consumer financial activities regulated under other federal laws, including the Truth in Lending Act.

The Bureau’s new interpretive rule follows former Director Kathy Kraninger’s decision to discontinue MLA-related examination activities.  At the time, Director Kraninger indicated that Congress did not specifically confer examination authority on the Bureau with respect to the MLA.  In the press release for the interpretive rule, the Bureau’s new leadership made clear that the Bureau did not find the prior administration’s logic persuasive, and, as a result, the Bureau would resume its MLA-related examination activities.  The commentary accompanying the interpretive rule also questioned Director Kraninger’s reading of the law more generally, indicating that it results in “an unworkable gap in bureau examinations that can otherwise only be potentially filled by the formal enforcement process,” which, in turn, “leads to wasteful inefficiencies for both the bureau and supervised institutions.”

Senate Probes Bureau Efforts to “Sideline” Senior CFPB Employees

By Eric Mogilnicki and Lucy Bartholomew, Covington & Burling LLP

On June 17, 2021 Senator Pat Toomey (R-PA), Ranking Member of the Senate Banking Committee, sent a letter to Acting Director Uejio asking for information about “unusual and possibly unlawful actions to push out top-level career civil servants at the CFPB in order to fill those civil service positions with hand-picked loyalists.” The requests were based on a recent article published in Government Executive, which reported that, in recent months, the CFPB has been offering separation incentives and launching investigations into career senior executives in an effort to sideline them.  The report indicates that the Bureau has targeted about half a dozen of the highest ranked non-political staffers at the Bureau, including associate directors and members of the Senior Executive Service.  In criticizing these efforts, Senator Toomey expressed concern that the Bureau’s efforts “may have been undertaken to provide the administration’s nominee for Director of the CFPB, Rohit Chopra, with the opportunity to hire a hand-picked team of loyalists for senior positions in the event that he is confirmed.”  The letter requests information about any steps taken to “push out, replace, or encourage” career CFPB employees to leave their posts, and any records related to these efforts.

CFPB Announces Spring 2021 Rulemaking Agenda

By Eric Mogilnicki and Wilson Parker, Covington & Burling LLP

On June 11, 2021 the Bureau announced its Spring 2021 Regulatory Agenda and its Spring Unified Agenda of Regulatory and Deregulatory Actions.  

The Bureau included three already-completed items on the agenda: extensions of the compliance date for QM provisions under Regulation Z; amendments to Regulation X to help borrowers impacted by COVID-19 be evaluated for loss mitigation before the initiation of foreclosure proceedings; and an extension of the effective date of the final rules implementing the Fair Debt Collection Practices Act.  

The Bureau also described the following regulatory activities planned for the future:

  • a Notice of Proposed Rulemaking for the Section 1071 small business lending rule, expected September 2021;
  • continued consideration of comments received through the Section 1033 electronic consumer financial data Advanced Notice of Proposed Rulemaking;
  • continued engagement surrounding the Property Assessed Clean Energy (“PACE”) financing rule;
  • work on an interagency rulemaking with the prudential regulators covering standards for Automated Valuations Models;
  • continued work on a rulemaking to address the anticipated expiration of the LIBOR index, to which many consumer financial products are tied; and continued review of existing regulations and market monitoring.

Nevada Passes Law Regulating Consumer Motor Vehicle Leases

By Erik Kosa, Hudson Cook, LLP

Effective October 1, 2021, a new Nevada law will begin regulating consumer motor vehicle leases. Nevada AB 298 imposes a number of disclosure and notice requirements on such leases and sets forth late fee limitations, a single document requirement, and default limitations. The new law imposes certain disclosure requirements for such leases, which include the obligation to:

  • identify and itemize the goods to be sold or services furnished;
  • state that default on the part of the lessee is only enforceable if the consumer is 30 or more days late or the prospect of payment is significantly impaired;
  • provide a notice to the consumer that failure to perform may result in repossession; and
  • contain terms regarding residual value, early termination, and default charges in language prescribed by the new law.

Late fees will be limited to $15 or 8 percent of any installment amount in default for more than 10 days.

The new law will be codified at N.R.S. §§ 100.095 et seq.

U.S. Supreme Court Rules Certain Class Members Do Not Have Standing to Sue under FCRA

By Erica Kramer, Webb McArthur and Jennifer Sarvadi, Hudson Cook, LLP

“No concrete harm, no standing,” said the U.S. Supreme Court today in TransUnion v. Ramirez.

In a narrow 5-4 decision, the U.S. Supreme Court clarified the requisite harm to satisfy Article III standing in a case arising under the Fair Credit Reporting Act. Examining both the claims of the named plaintiffs generally, but also the claims necessary to establish standing for class members, the Court explained that, “[e]very class member must have Article III standing in order to recover individual damages[,]…must maintain their personal interest in the dispute at all stages of litigation[,]…and must demonstrate standing for each claim that they press and for each form of relief that they seek….” The Court made clear that a plaintiff must have suffered a “physical, monetary, or cognizable intangible harm traditionally recognized” in the common law to establish standing, and distinguished between the right to bring an action, here granted by statute, and the concrete harm required to establish constitutional standing to bring the cause of action.

With respect to the FCRA, the Court found that the mere presence of inaccurate information in an internal credit file of a consumer reporting agency, if it is not disclosed to a third party, did not constitute a concrete harm that would confer standing to bring a claim against a consumer reporting agency under Section 1681e(b) of the FCRA (which requires consumer reporting agencies to maintain reasonable procedures to assure maximum possible accuracy of consumer report information). While the Court left open the possibility that plaintiffs could establish standing by way of proving a risk of future harm in concept, the Court found that the facts developed in the trial court did not demonstrate that such redressable harm had materialized or that the plaintiffs’ exposure to such risk caused some other injury.

Additionally, the Court found that where the consumer reporting agency provides information in an incorrect form, but provides the substance of information required under the file disclosure provisions of Section 1681g, plaintiffs must show how the receipt of the information in the incorrect format actually caused them harm. Absent such demonstrable harm, plaintiffs lack standing to pursue any claim.

The Court’s standing analysis has implications beyond the FCRA, including for other statutes that create a private right of action for statutory violations. Ramirez clarifies that the availability of statutory remedies alone is insufficient to establish Article III standing to sue for such remedies in federal court. Without injury-in-fact, “Congress could authorize virtually any citizen to bring a statutory damages suit against virtually any defendant who violated virtually any federal law.” As the Court explained, the matter is inherently one of separation of powers, concluding that “[t]he choice of how to prioritize and how aggressively to pursue legal actions against defendants who violate the law falls within the discretion of the executive branch not within the purview of private plaintiffs (and their attorneys).”

Employment Law

EEOC Guidance: Employers May Incentivize Covid Vaccination

By Magdalen Blessey Bickford and Camille R. Bryant, McGlinchey Stafford, PLLC

On May 28, 2021, the U.S. Equal Employment Opportunity Commission (EEOC) issued new guidance on COVID-19 vaccinations in the workplace entitled “What You Should Know About COVID-19 and the ADA, the Rehabilitation Act and other EEO laws.”

Among the salient topics considered, the EEOC confirmed that documentation regarding an employee’s test status and related health information is confidential medical information. This information must be separately and confidentially maintained in an employee’s medical file and apart from any HR file or other file an employer maintains on its employees. The guidance also provides clarifications on Americans with Disabilities Act (ADA) applications and what constitutes a direct threat in the workplace, as well as how to handle accommodations in the workplace when an employee presents that they are unable to take a vaccine due to a disability or other protected situation. The guidance also outlines several tenets that employers must follow regarding religious accommodations, pregnant employees, and an employee’s genetic information. Employers are responsible for communicating with their employees regarding compliance with these laws, ensuring supervisors and managers are fully knowledgeable on handling these issues in the workplace, and identifying employees who need these protections. Also critical, an employer should not disclose that an employee is receiving an accommodation or retaliate against any employee for requesting an accommodation. The EEOC stated that requesting confirmation of a vaccination is not a disability related inquiry under the ADA or the Genetic Information Nondiscrimination Act (GINA), and therefore an employer may offer an incentive to an employee to encourage vaccinations. The incentive should not be so large to make employees feel pressured to disclose protected health information. Lastly, an employer may offer vaccinations to the employee’s family members, but care must be made to follow the limitations imposed under GINA.

The EEOC reminded employers that the issues surrounding COVID-19 in the workplace are constantly evolving. Employers must be mindful to monitor guidances from CDC and other public health authorities, as well as EEOC publications for further legal compliance and best practices.

 Intellectual Property

U.S. Supreme Court Holds APJ Decisions Must be Subject to Director Review

By Dredeir Roberts, Business Law Fellow and General Counsel at Core States Group

On June 21, 2021 the U.S. The Supreme Court issued its opinion in the  U.S. v Artherex, Inc. case, finding that decisions delivered by Administrative Patent Judges (APJs) must be subject to review by the Director of the Patent and Trademark Office (PTO). The plaintiff challenged the constitutionality of the APJs’ appointment, seeking to invalidate all of their PTAB decisions. Sidestepping the direct challenge to their authority, the Court explained the true source of the constitutional violation was the inability to have APJ decisions reviewed by the Director of the PTO. This much-awaited decision confirms the constitutional appointments of the APJs but requires that their decisions be reviewable by the Director.



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