Latest Lender Regulatory Changes YOU Need to Know

This regular publication by DLA Piper lawyers focuses on helping clients navigate the ever-changing consumer finance regulatory landscape.

Enforcement actions


CFPB files complaint against debt buyers for debt-placement practices. The Consumer Financial Protection Bureau (CFPB) filed a complaint in the US District Court for the Western District of New York against a group of New York-based companies and their principals for unfair, deceptive or abusive acts or practices (UDAAP) and Fair Debt Collection Practices Act (FDCPA) violations in connection with buying and placing debts with third-party debt collectors. The CFPB alleged that the companies, which collectively managed more than $8 billion in debt, (i) intentionally disregarded red flags from compliance staff that their third-party collectors were engaged in deceptive and abusive debt-collection practices, such as making false threats of arrest, jail time or lawsuits if consumers did not pay and (ii) intentionally increased the amount of business with such companies.

CFPB announces inquiry into “buy now, pay later” credit providers. The CFPB has issued a series of orders to five companies offering “buy now, pay later” (BNPL) credit in an effort to gather information on the risks and benefits of this type of lending. The CFPB expressed concern that (i) this type of lending could lead to the accumulation of large amounts of debt by unqualified consumers with subprime credit histories, (ii) BNPL lenders may not be adequately applying consumer protection laws and (iii) it needed to better understand BNPL lenders’ data collection, behavioral targeting and data monetization practices. A sample copy of the CFPB’s order to BNPL lenders is available here.

FTC announces $675,000 settlement and permanent ban against merchant cash advance provider for deceptive marketing and abusive collection practices. The FTC announced a stipulated order with a New York-based merchant cash advance lender for alleged unfair and deceptive acts and practices (UDAP) and Gramm-Leach Bliley Act (GLBA) violations. The FTC alleged that the lender misrepresented the terms of loans issued to small businesses, made unauthorized withdrawals from customer accounts and engaged in unlawful collection practices, including the illegal use of confessions of judgment and threatening customers with physical violence.

FTC announces settlement with mortgage analytics firm for data security violations. The FTC announced a settlement with a Texas-based mortgage analytics firm for alleged violations of the GLBA Safeguards Rule. The FTC alleged that the firm hired an outside vendor to perform text recognition scanning on mortgage documents, most of which included sensitive consumer data. The vendor stored these documents on an unsecure server without any protections to block unauthorized access. The server was allegedly accessed in an unauthorized manner dozens of times. The settlement will require the firm to bolster its data security protections and oversight of vendors to ensure compliance with the Safeguards Rule.

FTC announces $12 million settlement and permanent ban against debt collectors for phantom debt collection. The FTC announced a settlement with several South Carolina-based debt collection companies and their principal for alleged Fair Debt Collection Practices Act (FDCPA) violations. The FTC alleged that the defendants used threats of imminent legal action to collect payments for consumer debts that were not real or that the companies had no right to collect. In addition to the monetary judgment, which is partially suspended due to inability to pay, the defendants are required to surrender numerous assets, including bank accounts, investment accounts and real estate owned by the companies or their principal.

FTC announces $500,000 settlement with payment processor for assisting in fraudulent student loan relief scheme. The FTC announced a stipulated order with a Washington-based payment processor for alleged violations of the Telemarketing Sales Rule (TSR). The FTC alleged that the payment processor knowingly processed approximately $31 million in payments for a student loan debt relief company that was charging illegal upfront fees from borrowers, during which the payment processor ignored multiple red flags including high return rates and multiple company name changes. The order also permanently bans the payment processor from processing any future payments relating to “Debt Relief Services,” including, but not limited to, the student loan-related debts.


California DFPI announces settlement with auto lender for loan marketing and servicing violations. The California DFPI announced a consent order with an auto lender for alleged violations of the California Fair Access to Credit Act’s interest rate cap of approximately 36 percent. The DFPI alleged that the lender was unlawfully partnering with an out-of-state bank in order to circumvent the interest rate cap. The consent order (i) prohibits the lender from marketing or servicing automobile title loans worth less than $10,000 with interest rates greater than 36 percent in the State of California over the next 21 months and (ii) prohibits the lender from making any loans available through a state-chartered bank partner until September 2023, unless there is an intervening change in the law or regulation that would otherwise permit it to do so.


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