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The Consumer Financial Protection Bureau (CFPB) has reached a settlement in its lawsuit against law firm Forster & Garbus, LLP for illegal debt-collection practices, according to a CFPB press release. If approved by the court, the proposed settlement would prohibit Forster & Garbus from filing any new lawsuit against a consumer unless it has specific documents supporting the debt and certifies that an attorney reviewed those documents. The order would also require the company to dismiss any pending lawsuit where it cannot satisfy these requirements. Forster & Garbus would also be required to pay a penalty of $100,000, which would be deposited into the CFPB’s victims relief fund. In 2019, the CFPB sued Forster & Garbus alleging that, from 2014 through 2016, fewer than a dozen attorneys at Forster & Garbus filed more than 99,000 debt-collection lawsuits, while having documents to support only a fraction of those debts. The CFPB further alleges that Forster & Garbus falsely represented to consumers that attorneys were meaningfully involved in preparing and filing the lawsuits, violating the Fair Debt Collection Practices Act’s (FDCPA) prohibition against collecting debts by using false, deceptive, or misleading representations and the Consumer Financial Protection Act’s (CFPA) prohibition against deceptive acts and practices.

The Biden administration today released a detailed plan that will make it easier for student-loan holders to wipe out their debts using income-driven repayment plans, the Wall Street Journal reported. The proposed rule from the Education Department is a key step in overhauling the $1.6 trillion federal loan program that has left millions with ballooning debts. The administration first announced the change in August when it unveiled its plan to cancel up to $20,000 in student debt for qualifying borrowers. The Supreme Court plans next month to take up a challenge to that broader debt-forgiveness, which is frozen after being blocked by lower courts. Income-driven repayment plans were designed to help lower earners borrow for college, but few have been able to use them effectively because of technical problems and onerous amounts of income-verification paperwork. If enacted, the proposed changes would provide qualifying borrowers with significantly more-generous options that could leave them debt-free sooner, while paying off only a fraction of their total loan balances. To prevent student-debt balances from ballooning in the future, the administration plans to halve, to 5% from 10%, the amount of discretionary income borrowers must pay each month on their undergraduate loans if they are enrolled in an income-driven repayment plan. Borrowers with incomes below 225% of the federal poverty line wouldn’t have to make monthly payments on their loans. The administration estimated that that level corresponds to an individual income of less than roughly $30,600 annually or any borrower in a family of four who makes less than about $62,400 a year.

The Federal Reserve said yesterday that total consumer credit rose $28 billion in November, down only slightly from the $29.1 billion gain in the prior month, MarketWatch.com reported. That translates into a 7.1% annual rate, up/down from a revised 7.4% gain in the prior month. Revolving credit, like credit cards, rose 16.9% in November after a 10.3% gain in the prior month. Nonrevolving credit, typically auto and student loans, rose 3.9% down from a 6.5% growth rate in the prior month. This category of credit is much less volatile. The Fed’s data does not include mortgage loans, which is the largest category of household debt. Consumer credit has been growing consistently between $24 billion and $30 billion per month for the last seven months.

Student borrowers in the U.S. are struggling to keep up with other kinds of debt even while college payments are frozen, and a surge in delinquencies is likely if the government’s debt-relief plan fails, according to a new study, Bloomberg News reported. Among borrowers who’d be eligible for President Joe Biden’s forgiveness plan, which is mired in a Supreme Court challenge, there’s been a “stark increase” in delinquencies on credit cards and auto loans during recent quarters, economists at the Federal Reserve Bank of New York wrote in a paper. “These missed payments suggest that some federal student loan borrowers are having trouble meeting their monthly debt obligations even though student loan payments are not required,” the New York Fed analysts wrote. “We expect these delinquency patterns to worsen if federal student loan payments resume without relief.” In that case, there’ll also likely be an increase in defaults and delinquencies on the student loans themselves, which could “potentially surpass pre-pandemic levels,” according to the New York Fed. About 15% of student borrowers were behind on their debt before the COVID crisis hit in March 2020, and the government announced a moratorium on repayments.

The Consumer Financial Protection Bureau (CFPB) and the New York State Office of the Attorney General yesterday sued a predatory auto lender, Credit Acceptance Corporation, for misrepresenting the cost of credit and tricking its customers into high-cost loans on used cars, according to a CFPB press release. The joint complaint alleges that, among other things, Credit Acceptance hides costs in loan agreements and sets consumers up to fail. The complaint also alleges that Credit Acceptance violated New York usury limits and other consumer and investor protection laws. The lawsuit seeks to force Credit Acceptance to stop its illegal practices, reimburse harmed consumers, pay back wrongfully earned gains, and pay a penalty.

The Consumer Financial Protection Bureau (CFPB) is ordering Wells Fargo Bank to pay more than $2 billion in redress to consumers and a $1.7 billion civil penalty for legal violations across several of its largest product lines, according to a CFPB's press release. The bank’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes. Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank. Wells Fargo also charged consumers unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts. Under the terms of the order, Wells Fargo will pay redress to the over 16 million affected consumer accounts, and pay a $1.7 billion fine, which will go to the CFPB's Civil Penalty Fund, where it will be used to provide relief to victims of consumer financial law violations.

State governments are trying to beef up their energy-assistance programs as rising heat costs strain more residents across the U.S. this winter, the Wall Street Journal reported. Minnesota and New York are tapping federal funds to provide enhanced benefits for their states’ programs. New Hampshire passed legislation that gives additional help to lower-income households using funds from its budget surplus. And in Connecticut, utility providers are giving ratepayers $10 monthly credits to help offset rising costs and providing discounts to low-income households. Heating costs for homes using natural gas are expected to rise 25% this winter compared with the previous winter, according to the U.S. Energy Information Administration. Households heated by oil are expected to pay 45% more compared with last year. Prices have been driven higher this year largely due to the disruption in energy markets caused by Russia’s invasion of Ukraine and increasing demand for fossil fuels, said Mark Wolfe, executive director of the National Energy Assistance Directors Association. Congress has set aside $4.5 billion for heating assistance this winter through the Low Income Home Energy Assistance Program. That is up from the more than $3 billion allocated annually pre-pandemic.

More than three dozen attorneys general from red and blue states on Wednesday asked the Supreme Court to agree to decide the constitutionality of the Consumer Financial Protection Board’s (CFPB) funding structure, The Hill reported. The separate coalitions of Republican and Democratic state AGs urged the court to take up the case for sharply contrasting reasons. Led by West Virginia, a group of 16 red states want the justices to affirm a lower-court decision that said the CFPB’s funding structure usurps Congress’s power over appropriations. “Attaching the spending power directly to Congress — including power over agencies’ budgets — makes the federal government more accountable to the States,” the Republican attorneys general said in an amicus brief. A blue-state brief signed by Washington, D.C., New York and 20 other states backs the Biden administration’s request that the Supreme Court reverse the lower court ruling. The CFPB, which enforces consumer financial laws, was formed by the Dodd–Frank Wall Street reform law after the 2008 financial crisis and receives its funding, which totaled around $596 million last year, from the Federal Reserve.